NFP & the QE Counter-Factual

One of the analytical errors I seem to constantly come across is what I call the non-result result.

It goes something like this: If you do X, and there is no measurable change, X is therefore ineffective.

The problem with this analysis is the lack of a control group, If you are testing a new medication to reduce tumors, you want to see what happened to the group that did not get the tested therapy. Perhaps their tumors grew and metastasized. Hence, no increase in tumor mass or spreading is considered a very positive outcome.

This seems to get loss in the debate over QE. The debate — either ignorantly or disingenuously — makes claims such as “Look how few jobs have been created, and look how high unemployment is.”

Understanding this logic, and lacking a control group, we must employ a counter-factual. The question one should be asking is “How many less jobs would have been created?;  How much higher would unemployment be?”

As someone who was strongly against the bailouts, this puts me in the odd position of defending the Fed against silly criticisms. But if we are not intellectually honest about our policies, how can we ever understand, critique and improve them?

Hence, a weak or strong NFP should raise the question “What would it have been without QE? Based on that, can we determine when might this policy be unwound?


September Employment Situation out in one hour at 8:30 am


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