{"id":2757,"date":"2008-07-20T08:13:26","date_gmt":"2008-07-20T08:13:26","guid":{"rendered":"http:\/\/scienceblogs.com\/principles\/2008\/07\/20\/its-the-stupid-economy\/"},"modified":"2008-07-20T08:13:26","modified_gmt":"2008-07-20T08:13:26","slug":"its-the-stupid-economy","status":"publish","type":"post","link":"http:\/\/chadorzel.com\/principles\/2008\/07\/20\/its-the-stupid-economy\/","title":{"rendered":"It’s the Stupid Economy"},"content":{"rendered":"

Kevin Drum is pondering the economy<\/a>:<\/p>\n

\n

A few days ago, in passing, I remarked that I was impressed (surprised?) by the ability of our economy to absorb so much catastrophe in such a short time without things being even worse than they are. What accounts for this?<\/p>\n<\/blockquote>\n

He goes on to quote part of a proposed answer (“foreign capital,” basically), which Brad DeLong has in more detail<\/a>. Other versions of the same basic question have popped up a few other places, as well.<\/p>\n

My personal guess at an answer is pretty much in line with my recent reading<\/a>: the good times were never all that good for the population as a whole, so it’s not terribly surprising to me that the bad times haven’t been that bad, yet. To a large degree, I think that the standard measures people use when talking about “the economy” have become decoupled from the actual economy of people in stores buying things.<\/p>\n

<\/p>\n

I mean, we have a system for measuring unemployment that shows a decrease in the unemployment rate when people get discouraged and stop looking for work, we have a stock market that goes up on bad news<\/a>, and we’ve had several years of strong economic growth in which real wages have been constant or declined slightly.<\/p>\n

These do not give me a great deal of confidence that whatever they’re talking about in economic news stories has any useful relation to reality. Or at least, it doesn’t have any relation to the reality experience by people not in the target demographic of the Wall Street Journal<\/cite>.<\/p>\n

I started thinking this way something like ten years ago, when people kept marvelling that the dotcom boom wasn’t producing any inflation. The explanation seemed pretty obvious to me– the wealth generated by the bubble was largely in the form of stocks and the like, which ordinary people do not use to buy bread and milk, but wealthier people use as collateral to buy houses and cars and boats, whose prices were shooting up dramatically It got “explained” as some sort of arcane result of Greenspan’s brilliance, or some such, though, and I haven’t really seen any economic explanations of things since then that made any more sense.<\/p>\n

So, my take on the current lack of complete catastrophe is this: the recent economic growth has mostly been confined to a fairly narrow segment of the population, that happens to be the segment who write, buy, and read articles and books about the economy. As a result, the extent of general prosperity was grossly overstated, and assumed to be general.<\/p>\n

The current collapse has also hit that segment really hard, leading to overstated doomsaying. Things haven’t actually gotten much worse for people outside the WSJ demographic, though, mostly because they had never gotten all that good in the first place.<\/p>\n

Now, there are factors in the current crises that may end up affecting the general public to a much greater degree– rising fuel prices chief among them. And if the idiocy of the financial classes really does manage to start taking down major banks on a large scale, things could get bad in a general sense.<\/p>\n

But those are still in the future. The current round of “catastrophe” has been a catastrophe for a relatively small number of people whose influence over the general economy is vastly overstated. And over-measured, using current economic tools.<\/p>\n

Until someone starts coming up with some better measures of what’s really going on, though, this will continue to appear mysterious.<\/p>\n","protected":false},"excerpt":{"rendered":"

Kevin Drum is pondering the economy: A few days ago, in passing, I remarked that I was impressed (surprised?) by the ability of our economy to absorb so much catastrophe in such a short time without things being even worse than they are. What accounts for this? He goes on to quote part of a… Continue reading It’s the Stupid Economy<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"1","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28],"tags":[],"class_list":["post-2757","post","type-post","status-publish","format-standard","hentry","category-politics","entry"],"_links":{"self":[{"href":"http:\/\/chadorzel.com\/principles\/wp-json\/wp\/v2\/posts\/2757","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/chadorzel.com\/principles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/chadorzel.com\/principles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/chadorzel.com\/principles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"http:\/\/chadorzel.com\/principles\/wp-json\/wp\/v2\/comments?post=2757"}],"version-history":[{"count":0,"href":"http:\/\/chadorzel.com\/principles\/wp-json\/wp\/v2\/posts\/2757\/revisions"}],"wp:attachment":[{"href":"http:\/\/chadorzel.com\/principles\/wp-json\/wp\/v2\/media?parent=2757"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/chadorzel.com\/principles\/wp-json\/wp\/v2\/categories?post=2757"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/chadorzel.com\/principles\/wp-json\/wp\/v2\/tags?post=2757"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}