Wednesday, September 28, 2016

on the Great Recession and the tepid recovery caused by govt (vs. the late-1970s economy and Great Depression)

Two things to know, if you're into science and economics:

The Great Recession was about as bad as the late-1970s economy (developing from LBJ through Carter) and nowhere near the Great Depression. Of course, it is politically helpful to describe the GR as the worst since the GD (and implying that they were close to each other in severity)-- to ignore the big-govt late-1960s and 1970s; to make tons of govt action seem necessary; and to mitigate political blame for a tepid economy.

The recovery from the GR was poor, even in commonly-understood terms and relying on commonly-used statistics. One big, additional problem: the govt's most popular measure of "unemployment" gas made things look better than they are-- by ignoring declining labor force participation and increased part-time work and "underemployment". (Did you know that "employment" starts at ONE hour of work per week?) As Barro notes, we got a slow recovery that did get going eventually (see: stock market) without the usual labor market effects.

All of the "stimulus" efforts-- and the (dis)incentives and uncertainty created by the ACA get the lion's share of the blame.


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