If you flip a perfectly fair coin, it will come up heads five times in a row about three percent of the time. Without replication, you have no way of knowing whether the outcome was unlikely happenstance or whether you’re dealing with a magic coin. And you wouldn’t wager on the outcome of future coin flips without knowing whether the phenomenon you observed was real, or just a statistical fluke.
When it comes to the “evidence” demonstrating the magic of the Keynesian Multiplier, what we see, in fact, is merely careful curation of statistical flukes on a grand scale over decades. Economist Ryan Murphy, who runs a project called govtmultiplier.com that attempts to catalog scholarly measurements of the Keynesian Multiplier, has categorized and analyzed 128 papers on the subject. Only four papers even attempt to include this kind of statistical test, and none of these validate the original results, meaning simply that none of them prove the Keynesian Multiplier actually leads to more dollar-for-dollar economic growth. And this is after these models are ginned up to make their theory look as good as possible. If attempts to employ macroeconomics purport to be science, they must boldly make predictions about the future, not rummage around for convenient data from the past. But no peddler of the Keynesian Multiplier has been able to make demonstrable predictions borne out by the test of time.
Whenever we hear commentary about the top or bottom income quintiles, or the top or bottom X% by income, or the top 400 taxpayers, a common assumption is that those are static, closed, private clubs with very little turnover – once you get into a top or bottom quintile, or a certain income percentile, or the top 400, you stay there for decades or life.
But reality is very different – people move up and down the income quintiles and percentile groups throughout their careers and lives. The top or bottom 1/5/10%, just like the top or bottom quintiles, are never the same people from year to year, because there is constant, dynamic turnover as we move up and down the income categories. As the new IRS data show, almost three out of every four members of the ever-changing, dynamic “Fortunate 400″ over the last 19 years were only “members” of that group for a single year.
Sam Staley reviews Interstellar. (I saw the movie and enjoyed it.)