Wednesday, November 14, 2007

API Commissions CRA to Write Macroeconomic Nonsense

Karen Matusic and Robert Dodge of API, which is the national trade association that represents all aspects of America’s oil and natural gas industry, boosts:

Energy legislation pending in Congress likely would have significant adverse effects on the economy and consumers – including nearly 5 million lost jobs and $1 trillion in lost economic output, according to a report released today by API. The study, prepared by CRA International and commissioned by API, found that the combined effect of seven legislative proposals would restrict the supply of energy available to the U.S. economy and would likely increase the cost of energy supplies to consumers and businesses.


The CRA report goes well beyond this by claiming that by 2030, the effect of this bill would be to: (1) reduce aggregate employment by 4.9 million relative to baseline; (2) reduce GDP by 4 percent of $1 trillion relative to baseline; and (3) lead to reductions in both consumption and investment.



Who knew CRA was in the business of macroeconomic modeling? I did find this presentation. NEEM seems to rely on CRA’s expertise in the energy sector whereas MRN focuses on the macroeconomic impacts of some policy change. The MRN stands for Multi-Regional National Model. The designer of MNR appears to be Thomas F. Rutherford who appears to be a professor of “Environmental and Resource Economics” and not a macroeconomist. So maybe we can forgive him and CRA for not understanding that the aggregate demand effects of policy changes are not generally believed to last for a couple of decades even in the most Keynesian of models.

It would appear that the API and CRA have put forth a rather nonsensical analysis to trick us into believer that changes in energy policies will lead to a prolonged recession.

2 comments:

Anonymous said...

I trust that it does not come as a surprise to anyone reading these comments and postings that "expert" professional opinion and full fledged written "studies" are available for sale from a host of academics, journalists, pundits, and anyone else representing the public relations industry in this country. I doubt that the cost of commissioning such a study, which may be little more than a dossier of selective reports reflecting what the authors intended to demonstrate, is all that significant. Poor research is so much less expensive to conduct. Of course, no research is even less costly, so don't go looking for any significant adherence to pricipled science when reading studies carried out by "think" tanks. I've often wondered what they think about in those bought and paid for nitches of knowledge.

Martin Langeland said...

"what they think about"
Skullduggery?
Some years ago our town was attempting to build a new sewage treatment plant. The mayor wanted a conventional system with secondary treatment and an incinerator. The progressive faction wanted wetlands which would give tertiary treatment not only for the town but also for the county's agricultural waste. After one community meeting I attempted to lobby the mayor. His response was that the wetlands would require a pump to get the sewage over a hill. The pump would cost a million dollars! He said the sum as if it were an amount of real money.
Trick is the incinerator, which would not be needed, cost $7 mil. So politics demands misdirection which too many experts are all too willing to provide.
--ml