Wednesday, May 6, 2020

"Not like those bumbling polynomial people"

We ran a piece on Monday that made the point that not only ignoring the track records of clowns like Kevin Hassett, but actually putting them in positions of responsibility was a really bad idea. I wrote the post over the weekend, before this story broke.

From Josh Marshall.
One of the most depressing and least surprising developments in the last 36 hours is that the White House is apparently relying on a “cubic model” of the COVID19 epidemic prepared by White House economist Kevin Hassett to craft its crisis response. I have not seen any statisticians or epidemiologists who know precisely what “cubic” refers to the in this context – though there are some promising speculations based on simply plugging in one of the default trend lines (third degree polynomial) in Microsoft Excel. The more relevant point is that, according to The Washington Post, the model predicts the number of people dying of COVID19 in the US will fall to close to zero by May 15th – a scenario that seems all but impossible.

Here I can’t help but note a basic point. Hassett is not a health care economist, let alone someone at the crossroads of behavioral economics and epidemiologists. Indeed, his record as an economist is rather notorious.

Perhaps Hassett’s biggest claim to fame is coauthoring a 1999 book entitled Dow 36,000: Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market. The book argued that traditional metrics for evaluating stock prices were outdated and that the stock market was dramatically undervalued. The Dow, then a bit over 10,000, would rise to 36,000 over the next three to four years. These are the kinds of predictions one often hears at the top of a bull market. And indeed the market hit its peak within months of the book’s publication and continued to fall for almost the next four years. Needless to say, that was two and a half market collapses ago. 21 years later the Dow stands at 23,749, though it did approach 30,000 before the COVID19 collapse.

Just to be clear, this all happened after the Washington Post broke the story of Hassett's bungling at the beginning of the pandemic. Nothing was learned. It just got worse. On the bright side, if Hassett was able to correctly apply the trend line option, that speaks well for the easy of use of MS Office

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