Sábado, 13 de febrero de 2016
I know, the wisdom of crowds is often overrated – the economist Paul Samuelson once famously quipped that the stock market had predicted nine of the last five recessions. But bond markets are a bit less flighty than stocks, and also more closely tied to the broader economic outlook. (A weak economy has mixed effects on stocks – low profits but also low interest rates – while it has an unambiguous effect on bonds.) And what plunging rates tell us is that markets are expecting very weak economies, and possibly deflation for years to come, if not a full-blown crisis.
Among other things, such a world would be a very bad place to elect a member of a political party that has spent the past seven years inveighing against both fiscal and monetary stimulus, and has learned nothing from the utter failure of its predictions to come true.
Structural Humbug Revisited
Bryan Caplan, an economics professor at George Mason University, recently reported that he won a bet with fellow professor and economist Tyler Cowen over whether the unemployment rate would ever drop below 5% in the United States. It might be worth remembering the context of their bet.
When the Great Recession struck in 2008 – a demand-side shock if ever there was one – it took no time at all for a strange consensus to develop among elites to the effect that a large part of the rise in unemployment was “structural,” and that it could not be reversed simply through a recovery in demand. Workers just didn’t have the right skills, the argument went.
Many of us argued at length that this was a foolish notion. If skills were the problem, where were the occupations with rapidly rising wages? I pointed out that people used to say the same thing during the Great Depression, only to see their argument disproved when we finally got a big fiscal stimulus called World War II.
But the doctrine somehow just got stronger and stronger in elite circles, because it sounded serious and judicious, unlike the seemingly frivolous proposition that all we needed was more spending. In fact, the notion that our unemployment problem in the United States was mainly structural began to be presented as a simple fact rather than as a hypothesis most professional economists rejected.
And here we are.