02 Dec 2008

Why No One Takes Economists Seriously

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In a recent post, I tried to explain the undeniable fact that many laypeople act as if they are entitled to their views on the economy, in a way they would never dream of doing with regard to, say, quantum physics or heart surgery. A CNBC news story from today sheds light on this phenomenon:

The US economy slipped into recession in December 2007 [one year ago!!–RPM], the National Bureau of Economic Research announced Monday, marking the official begining [sic] of the economic downturn.

The NBER—a private, nonprofit research organization—said its group of academic economists who determine business cycles met and decided that the US recession began last December.

By one benchmark, a recession occurs whenever the gross domestic product, the total output of goods and services, declines for two consecutive quarters. The GDP turned negative in the July-September quarter of this year, and many economists believe it is falling in the current quarter at an even sharper rate.

But the NBER’s dating committee uses broader and more precise measures, including employment data. In a news release, the group said its cycle dating committee held a telephone conference call on Friday and concluded that the 73-month economic expansion had ended. The previous expansion of the 1990s lasted 120 months.

Many Wall Street financial institutions already had declared that the US recession began in December 2007, when there was a sharp increase in the US unemployment rate.

The last two recessions have been so short—about eight months—that the NBER’s official prenouncement [sic] came after the downturn had actually ended.

In November 2001, for instance, the group said the recession had begun in March of that year. History would later show the recession ended in November of 2001.

What’s been confusing for economists this time around is that a contraction in gross domestic product—what laymen consider a key recession indicator—did not happen until the third quarter of this year.

I guess I should give the climate scientists a break…

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