Kocherlakota Elaboration: An Update

As you might expect, Mark Thoma and Paul Krugman are criticizing Kocherlakota's dissent on the recent FOMC statement, and his subsequent elaboration.



Thoma accuses Kocherlakota of cherry-picking the data, then proceeds to cherry-pick. Krugman points out that the employment/population ratio is still low, but it's not so different from where it was in November 2010, which seems consistent with Kocherlakota's argument. Thoma thinks the Fed has not really committed:

Finally, this is not a rock solid commitment from the Fed. This is their view of the most likely path for the federal funds rate, they have not said this is what they will do independent of how the data evolve. All they have said is that economic conditions are likely to warrant this outcome.

I'm afraid not, Mark. As I argued here, something very dramatic will have to happen for them to go back on their word.



Finally, Krugman states this:

So this isn’t fact-based policy. The Fed dissenters are obviously looking for excuses to pursue tight policies; they’re looking at the facts only in search of support for their prejudices. As the old line goes, they’re using evidence the way a drunk uses a lamppost: for support, not illumination.

This is of course grossly insulting. He's not accusing Kocherlakota of faulty reasoning. Apparently his crime is that he has an unstated agenda, and he's picking the data to support his narrative. Actually, that's Krugman's crime. Narayana, as long as I have known him, has been honest and straightforward, even when it hurts. Whatever it is that he is thinking, he'll let you know, as I think he has done here.