Defining Recessions; Mis-defining NBER
Here’s another of those articles that look so embarrassing one year later:
Can you imagine an article that insinuates that the government, not an independent academic commission, was the more objective arbiter of data? That argued we should let the pols decide when recessions start and end?
Insane, right?
Let’s go to our WTF were you thinking file:
“But what exactly is a recession? The popular definition is two consecutive quarters of economic contraction. But NBER provides a little more room for judgment with its definition of “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real gross domestic product, real income, employment, industrial production, and wholesale-retail sales.” Justice Potter Stewart might have had more succinct wording than NBER: “I know it when I see it.”
Why not let the federal government be the arbiter of when we are in a recession? After all, the federal government collects and disseminates economic data, and by all accounts quite credibly.
WTF planet do you live on buddy? I would bet that the majority of savvy knowledgable watchers of markets and economic releases would laugh their arses off at the phrase: “by all accounts quite credibly.”
I am not sure what the author was trying to prove, but pretty much everything in this article is shite . . .
>
Source:
What NBER Does: The ‘R-Word’
HAROLD FURCHTGOTT-ROTH
NY Sun, August 14, 2008
http://www.nysun.com/opinion/the-r-word/83840/?print=2053278121
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August 13th, 2009 at 5:10 pm
After 1984, there were no more recessions, Winston said. Minitruth confirmed that growth continued uniformly.
August 13th, 2009 at 5:27 pm
You are only as strong as your weakest link. Given that the NBER relies almost exclusively on Federal statistics agencies, the credibility of both are questionable. I’ll give the NBER points for integrity, which the Feds will never match.
PS: I’m out fishing next week. I’m traveling all the way to Michigan for this. I expect to see what a recession really looks like but leaving the capital. I suspect a lot of us sling shots from our big city perches and never really see how things are in the REAL America.
That’s why I like to hear Bruce’s reports.
August 13th, 2009 at 5:35 pm
@matt: I was in MI all last week (Leelanau County, nice area) and I can tell you that the economy is pretty grim, even in that highly desirable area. “For Sale” signs everywhere, even on many waterfront places, and they’re not moving even at reduced, relatively “affordable” prices. Drove through Central/Upper WI and the U-P (Upper Peninsula) down through Traverse City and it seems pretty grim there too, for the most part. At first glance, all looks fairly normal but you gotta give a good hard second and third look and underneath the cracks are getting bigger.
August 13th, 2009 at 5:42 pm
matt-
walleye? northern? musky?
and make sure you take a quick look see at Detroit-
great deal on homes I understand
August 13th, 2009 at 6:51 pm
@Manny:
I have a friend who is an attorney who is thinking about picking up some property in Michigan. Maybe he’ll get a good deal. He’s leaving D.C. – sick of the crazies in this city. My brother and his family live in a city called Trenton, which I think is near Detroit. He picked up a nice place for a good price in 2008. He has described a similar story to yours in Eastern MI – pretty grim.
@call me ahab:
I’m going for some northen with my brother. If they’re not biting, I’m going to sit back and drop some lines in for perch (my preferred eating fish) with a beer always in reach.
August 13th, 2009 at 7:13 pm
i’m thinkin’ just from BR’s summary that this is a right wing nut cheerleader – you know the ones we love
then, i read the chaps name and i’m thinking brit, what with the hyphenated last name, althougth not particularly anglo-saxon sounding
in any case, then i look at the media outlet – ok, whatev’
August 13th, 2009 at 7:20 pm
matt-
for perch- i use a weight- a worm- drop it to the bottom- and wait-
usually use it for bait fish though- but your right- good all by its lonesome- if big enough to mess with
August 13th, 2009 at 7:45 pm
Word of the day:
DEPRESSION,
Definition:that which they all understand but refuse to actknowledge.
antonym: “The pie in the sky:” something that appears near and bright and vast, but ends up fading and fancyfull.
August 13th, 2009 at 8:07 pm
One last word: Little Guy. It really sucks being a little guy. Definition: he/she who knows what is happening, but knows the big guy doesn’t give a fuck.
August 13th, 2009 at 8:32 pm
“WTF planet do you live on buddy? ”
LOL! God, that line made me laugh quite hard. People just don’t get it. They have no idea how poor, and at times, slanted it all is. And the idea of politicians having a say in it. We’d never have a recession!
August 13th, 2009 at 8:53 pm
Sorry BR, you took this excerpt out of context. Actually if you read the article he kind of makes some good points, and his thesis isn’t actually that the Fed govt should make the recession call. It’s actually the opposite.
quote: “But the government cannot proclaim recessions for two reasons. First, the party out of power would assume politics would govern the announcements. Second, years would pass before the federal government would be in a position to announce a recession.”
The second point referring to the fact that so many stats are revised years down the road.
quote: “Despite pronouncements of politicians and journalists, in the absence of a major downturn the American public might wonder whether there is any importance in a concept so obscure it can only be determined months later by a small group of economists.”
This is actually a good point, IMO. We get very focused on the start and end point of the recession, but it really doesn’t matter much in any practical way. The beginning is hard to see until you’re some way past it, although there are some pretty good indications that can be seen at the time. But the real pain is yet to come. Job losses dont really pick up until you’re well into the downturn, usually.
On the other hand, the end of the recession doesn’t end the poor economic conditions that feel bad, especially as unemployment is a lagging factor. So the economic blues continues well after a recession ends. Especially in our most recent ones, and this one is undoubtedly going to be worse that way.
The other point he’s alluding to is the possible political repercussions of making the call. You do have to wonder if the NBER waited until December to avoid influencing the election; or being accused of it. I really have no idea.
August 13th, 2009 at 9:12 pm
nice pick up onlooker,
it’s really simple, if the gov called recessions, we’d never ever have one, unless of course it started at the beg. of a presidents term, in which case, the former president, as long as it was the opposite party, would be blamed.
August 13th, 2009 at 9:23 pm
OK, I guess the author does redeem himself a bit by this ending line –
“Despite pronouncements of politicians and journalists, in the absence of a major downturn the American public might wonder whether there is any importance in a concept so obscure it can only be determined months later by a small group of economists.”
ie – the determination, ex post facto, that there was a recession is of no value to any one other than a few esoteric economist
August 13th, 2009 at 10:48 pm
@matt,
I grew up on Lake Erie, fished all the time. If you can I’d go for Yellow Perch they are fun to fish for and are even better to eat, at least I think so. have fun.
August 14th, 2009 at 1:04 am
Like Onlooker, I don’t see what the problem is with the article.
You often criticize others for not doing their homework. In this case, you take a gratuitous swipe at federal statistics, but in at least two cases, your past criticisms don’t hold water– the unemployment rate methodology (still waiting for your reply from a year ago), and the birth/death adjustment (see Jeff Miller’s fine explanation at http://www.oldprof.typepad.com/).
August 14th, 2009 at 1:40 am
The New York Sun… how’s that paper coming along these days? Maybe the free market (which the Sun was always a big fan of) has rendered its own verdict.
Thanks to the moderator for letting the yellow perch crowd add their “input” to the conversation.
August 14th, 2009 at 5:42 am
For the 99 percent of the population who are not economists or Wall Street cheerleaders, recession is when unemployment is rising or stuck at a high level or when the median real wage is falling. One enormous benefit of this definition: we won’t have to hear about the “jobless” recovery or that “unemployment is a lagging indicator.”
August 14th, 2009 at 7:23 am
@ben22:
I also fished on Lake Erie as a youngster. I remember getting spreaders and a bucket full of minows. As soon as the two hooks hit the water, you had two yellow perch. Every now and then, a white bass would beat the perch to the bait.
Yeah, that’s why I said above that if I have trouble landing pike the first couple of days, I’m going to switch to something I like to eat. My brother has been to this lake before – says he caught a 14″ perch there (is that a fish story?).
August 14th, 2009 at 11:46 am
Yeah like just like the BLS birth death numbers are good. Or the CPI.