Summers Humbly Assigns Numerical Odds To Unknowable Future

I often wonder if there’s a place for humor in the world anymore.

People still like jokes, but the Trump years killed satire and even a cursory scroll through Twitter proves Americans no longer understand, let alone appreciate, anything other than vacuous sarcasm. Dry humor is out. Irony has been degraded by the widespread adoption of Whataboutism. The public thinks wry is a kind of bread. Sardonic is anything that smells like sardines.

It’s a lamentable state of affairs. There was a time when you couldn’t write satire unless you were actually clever. These days, every American is Peter Griffin staring at the cartoon in the The New Yorker.

This is an ongoing process. Every week, Americans get incrementally less intelligent. As a consequence, flagrant farce works its way inward from the fringes until it permeates everything we read, irrespective of how ostensibly respectable the source.

Witness Bloomberg’s latest article documenting the weekly musings of Larry Summers.

Summers is, as I never tire of reminding folks, a paid “contributor” to Bloomberg. I emphasize the paid part not because I think there’s something untoward or dishonest about the arrangement. (I don’t.) Rather, I think there’s something absurd about Summers demanding compensation to hold a relatively short, weekly Zoom call with David Westin. Again, I’m not suggesting there’s anything wrong with it. (There isn’t.) Summers is entitled to receive the going market rate for his idle musings. I’m just suggesting it’s silly. And I’m not the only one who thinks so.

In any event, this week, Summers regaled Westin with a critique of the Fed’s communications strategy. Seemingly without so much as a polite nod to the irony inherent in Summers chiding someone else for hubris, he told Bloomberg that “an approach that is much more recognizing of uncertainty and carries with it much more humility is the right way forward for monetary policy.”

But that wasn’t the punchline. The comedic gold was the juxtaposition between, on one hand, Summers’s emphasis on the necessity of being humble in the face of unknowable outcomes and, on the other, the precision with which he proceeded to forecast the very same outcomes.

“None of us know the future and so confident statements about what’s going to happen by public officials… often turn out to be embarrassing,” Summers declared.

Now contrast that with the following direct quote from Bloomberg’s coverage of their own coverage (i.e., an article documenting their television programming):

Asked on Bloomberg Television’s “Wall Street Week” with David Westin for his estimates on the balance of risks for the US, Summers gave the following odds:

  • 10% to 15% for the economy to work out well
  • 50% to 55% for inflation to run for a while above 2%
  • 30% to 35% for policy makers having to force the economy to “turn down more than we want” by tackling inflation

In case the joke isn’t obvious, it’s not clear what the difference is between Summers assigning mathematical (albeit subjective) odds to unknowable outcomes (complete with a 5% margin for error) and the Fed forecasting growth, inflation and unemployment via the summary economic projections.

How is Summers being more “recognizing of uncertainty” than the Fed is in the SEP which, you’re reminded, contains medians, central tendencies and ranges?

Summers told Westin that “the odds have gotten a bit more tilted to inflation than I thought.” How is that more humble than Jerome Powell saying (repeatedly) that inflation pressures are proving more persistent than he and the Committee imagined?

If anything, Summers is being more presumptuous than Powell by going on television and assigning numerical odds to outcomes which, by his own admission, aren’t amenable to “confident statements.” If a reporter asked Powell during a post-FOMC meeting press conference to assign odds the way Summers did, he (Powell) would surely refuse, citing the need to be humble in the face of uncertainty. If the media persisted, he’d point them to the SEP.

I don’t expect anyone to find this as funny as I do. Bloomberg certainly missed the joke. “[Summers] said Fed officials needed to be ‘much more careful’ than they had been in recent years when making pronouncements about the economy,” Simon Kennedy wrote.

The headline on Kennedy’s article read: “Summers Sees Just a 15% Chance of US Economy Working Out Well.” The summary bullet points were: “Ex-Treasury chief puts 50%-55% odds of inflation over 2%” and “There’s a 35% chance of the economy slumping, Summers says”.

RIP irony.

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11 thoughts on “Summers Humbly Assigns Numerical Odds To Unknowable Future

  1. Yeah, I saw the interview too. It was nauseating.

    When watching Summer spew his “knowledge” to the masses, I find it’s important to remember he’s the person who is so incompetent that he nearly bankrupted Harvard University despite its $30 billion endowment, a truly trumpian level of incompetence.

    1. Did he? Any good reference on that?

      I thought his spell at the Treasury in the 90s was enough to show his irrelevance/inability/unwillingness to lean against the status quo/the winds of history/Reaganism/the Washington consensus…

      1. The Harvard Annual Financial reports from his time as President and the years subsequent. You have to read between the lines a bit because they couldn’t publicly say what really happened with any specific detail.

        I have learned to never underestimate institutional incompetence. That said, I believe Harvard is one of the best run institutions in the country. They just brought in a bad leader.

      1. Of course, that happens less than it should. When I was in the third year of my doctoral program my committee chair and a couple other academics founded a new association in the field of finance, The Financial Management Association, with a new journal called “Financial Management.” What set this group apart was that it was made up of 50% academics and 50% practitioners. Half of the articles in the new journal were written by practitioners, something that was simply not done by others. Even the academics who published in the new journal spoke to the needs of practitioners. One of the landmark articles in the first number of the new journal was the introduction by David Hertz of Monte Carlo simulation as a powerful tool for various analytic chores in finance. My first big piece of research was a study of the techniques fixed income portfolio managers used when investing their capital inflows. What I found out was how badly these real world investment managers wanted the academics to know how the real world worked and why. My articles from this study were published quickly and widely disseminated. The real world needs to be heard from.

  2. As more evidence of the loss of humor, see the interview the Atlantic did with a founder of the Babylon Bee, the conservative answer to The Onion. It’s almost as bad as Fox News brief attempt to create a conservative alternative to the Daily Show. I’m surprised The Onion has soldiered on given the difficulty of satirizing a world that has jumped the satirical shark.

  3. Summers is very intelligent but seems to be falling a bit short on the wisdom front. I saw a Nial Ferguson column lauding his outlook and denigrating the Fed and Biden. Biden and the Fed may have been to loose with fiscal and monetary policy for this crisis, but there was no way to know that beforehand- and it is easier to pull back stimulus than add to it later if it falls short. I thought Ferguson’s column was extremely arrogant. Powell has said all along that if the Fed needs to taper more quickly, and by implication riase rates the Fed can and will do that. As for inflation, I would rather worry about that, than mass homelessness, soup lines and vast misery.

  4. as people age and transition into retirement / semi retirement we still have a need to feel and remain “relevant.”
    As long as people are willing to pay Summers money, expect to hear more provocative statements and / or tones from him…

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