Monday, 5 June 2023

"Why do you care about recessions?"

"Why do we care about recessions? ...
    "I think I know why we care about recessions. Recession are generally associated with lousy labor markets. The high unemployment of the 1930s was such a severe social problem that it put macroeconomics on the map as an important field of inquiry...
    "[But] I’ll tell you who cares about recessions—dumb people who believe that words have magical powers. 'If only I could convince you that this is a recession!' Yawn.
    "It’s not that I think you are wrong; it’s that I don’t care. Japan had a bunch of recessions in the 2010s. Do I care? No, none of them showed up in the labour market....
    "It’s incredibly uninteresting to see a slow growth economy alternate between slightly positive quarters and slightly negative quarters.
    "The entire world is now becoming more like Japan, with ever slower trend GDP growth rates. In the future, there’ll be lots more of these 'recessions' with booming labour markets.
    "This is why the 'Will there be a recession?' debate is so dumb. I don’t care whether the [country] experiences a recession; I’m simply not interested. The interesting question is whether the [country] will experience the sort of recession that we experienced in the past, where the unemployment rate always rose by at least 2 percentage points.
    "Now that’s an interesting question. [And equally interesting to me is the question: why is all the world now full of slow-growth economies?]"
~ Scott Sumner, from his post 'Why Do You Care About Recessions?'

1 comment:

twr said...

I guess it's another sign that GDP is a terrible measure of economic productivity.