The What if?… study on the effects of RU energy ban (below) was published on 7 March, 2 weeks after the start of this atrocious war.
A long-ish thread on (a) how incredible that is, and (b) how it’s been under-utilised by the policymakers. 1/20
A long-ish thread on (a) how incredible that is, and (b) how it’s been under-utilised by the policymakers. 1/20
https://twitter.com/kuhnmo/status/1500937765814517774
2/20 Just let that sink in: *2 weeks* into this war, German policymakers had on their desks a concise, lucid and detailed study of the economic effects of a policy tool (energy ban) that could actually make a difference in this war.
3/20 A tool that would not only reverse the mistaken policies that brought us to this point but would actually use the leverage we have (yes, EU’s addiction to Russian energy is a double-edged sword – a sword one can use to hit Putin hard).
4/20 But this study is incredible not just because of the timing, but because it is *extremely* well thought-through and deep:
> It lays out the Germany energy landscape very effectively
> Considers multiple scenarios of a ban, erring on the side of “worst case”
> It lays out the Germany energy landscape very effectively
> Considers multiple scenarios of a ban, erring on the side of “worst case”
5/20
> To calculate the aggregate effects of a ban, it uses multiple approaches, with state-of-the-art model at the core, cross-checked with simpler, intuitive framework
> To calculate the aggregate effects of a ban, it uses multiple approaches, with state-of-the-art model at the core, cross-checked with simpler, intuitive framework
6/20
> The state-of-the-art model incorporates input-output linkages across 30 sectors – in other words, it models explicitly supply chains and cascading effects
> Takes seriously parameter uncertainty
> Includes analysis of distributional effects, not just aggregates
> The state-of-the-art model incorporates input-output linkages across 30 sectors – in other words, it models explicitly supply chains and cascading effects
> Takes seriously parameter uncertainty
> Includes analysis of distributional effects, not just aggregates
7/20 And all of that in 2 weeks! Seriously, this is astonishing.
Over the subsequent weeks pretty much all of the criticisms I have seen were actually answered in the paper.
Over the subsequent weeks pretty much all of the criticisms I have seen were actually answered in the paper.
8/20 E.g. “It’s not about aggregate 0.5-3% GDP numbers but about: supply chains / particular industries / distributional impact” – ehm OK, that’s all in there! You must have missed it when reading the paper?
9/20 The point I have not seen anyone make is that it should be *any policymaker’s dream* to be getting a paper written by *the top experts in the world* on *one the most important decisions of your career* right when you need it.
10/20 For free, right there, with no delay.
I know that would be my dream if I was a policymaker.
I know that would be my dream if I was a policymaker.
11/20 Ofc you don’t need to agree with the analysis – fine if you have a better one. But if you don’t, you should use this great work to inform your (ultimately political – and that’s fine) decision.
12/20 Isn’t this why states invest in education and human capital? Isn’t it our advantage over Putin??
13/20 Instead, a month into this war, according to NYT, Germany’s position going into leaders’ summit is that an energy ban would hurt Germany more than it would hurt Russia.
For real??
For real??
14/20 The problem here is that a fundamentally *political* decision is justified with economic gut feelings. This is *not* OK. At least have the guts to say: we do not WANT to do this, although we know we easily CAN.
15/20 Don’t say you can’t because it’s just *NOT TRUE*. You have the best analysis you could ask for. You are not making decisions in the dark here.
Yes, uncertainties are there (and in both directions!). But there are always uncertainties when making policy.
Yes, uncertainties are there (and in both directions!). But there are always uncertainties when making policy.
16/20 Have we seen any alternative analysis? Any alternative quantifications? I don’t think so. Why? I do not think it is because it is impossible to cook up a higher impact number. You probably could, with some dubious assumptions.
17/20 The real reason is that NO NUMBER exists that justifies the current policy stance. The only way to justify it is to repeat phrases about “poverty”, “deindustrialization” and “incalculable risks”. But these don’t mean anything, it’s just a fig leaf.
18/20 Historians will know that leaders had access to high quality analysis and they chose to ignore it. History will recognize the scary economic rhetoric used to justify a political choice.
19/20 I expect that, unless we see a change of stance, history will judge these decisions harshly.
20/20 In any case, kudos and huge thanks to the authors of this excellent paper, for the analysis and your engagement on these urgent, life-and-death issues 🙏
@BachmannRudi @DBaqaee @christianbaye13 @kuhnmo @andreasloeschel @ben_moll @APeichl #KarenPittel @MSchularick @kuhnmo
@BachmannRudi @DBaqaee @christianbaye13 @kuhnmo @andreasloeschel @ben_moll @APeichl #KarenPittel @MSchularick @kuhnmo
#EconTwitter - we often complain there isn't enough positive feedback in our profession. This thread above has some 👆😊
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