Chris
06-18-2016, 11:28 AM
So what is the cause?
One Economic Sickness, Five Diagnoses (http://www.nytimes.com/2016/06/19/upshot/one-economic-sickness-five-diagnoses.html?_r=0)
Economists, like physicians, sometimes confront a patient with an obvious problem but no obvious diagnosis. That is precisely the situation we face right now.
Let’s start with the problem.
There is no simple way to gauge an economy’s health. But if you had to choose just one statistic, it would be gross domestic product. Real G.D.P. measures the total income produced within an economy, adjusted for the overall level of prices.
Here is the sad fact: Over the last decade, the growth rate of real G.D.P. per person has averaged just 0.44 percent per year, compared with the historical norm of 2.0 percent. At a rate of 2.0 percent, incomes double every 35 years. At a rate of 0.44 percent, it takes about 160 years to double.
https://i.snag.gy/oSQf14.jpg
It may be tempting to blame the Great Recession of 2008-9 for the paltry 10-year growth rate. Indeed, this recession was a deep one.
Yet the explanation for the poor long-run performance is not that simple. The recession of 1982 was also a deep one. The unemployment rate peaked at 10.8 percent in 1982, compared with a peak of 10 percent in 2009. But by the first quarter of 1989, as Ronald Reagan was leaving the White House, the 10-year growth rate was up to 2.1 percent.
The difference: The 1982 recession was followed by a robust recovery, whereas the recession of 2008-9 has been followed by a meager one.
So what’s wrong with the economy? No one knows for sure. But numerous theories are being bandied about. Here are five of them:
A statistical mirage...
A hangover from the crisis...
Secular stagnation...
Slower innovation...
Policy missteps...
One Economic Sickness, Five Diagnoses (http://www.nytimes.com/2016/06/19/upshot/one-economic-sickness-five-diagnoses.html?_r=0)
Economists, like physicians, sometimes confront a patient with an obvious problem but no obvious diagnosis. That is precisely the situation we face right now.
Let’s start with the problem.
There is no simple way to gauge an economy’s health. But if you had to choose just one statistic, it would be gross domestic product. Real G.D.P. measures the total income produced within an economy, adjusted for the overall level of prices.
Here is the sad fact: Over the last decade, the growth rate of real G.D.P. per person has averaged just 0.44 percent per year, compared with the historical norm of 2.0 percent. At a rate of 2.0 percent, incomes double every 35 years. At a rate of 0.44 percent, it takes about 160 years to double.
https://i.snag.gy/oSQf14.jpg
It may be tempting to blame the Great Recession of 2008-9 for the paltry 10-year growth rate. Indeed, this recession was a deep one.
Yet the explanation for the poor long-run performance is not that simple. The recession of 1982 was also a deep one. The unemployment rate peaked at 10.8 percent in 1982, compared with a peak of 10 percent in 2009. But by the first quarter of 1989, as Ronald Reagan was leaving the White House, the 10-year growth rate was up to 2.1 percent.
The difference: The 1982 recession was followed by a robust recovery, whereas the recession of 2008-9 has been followed by a meager one.
So what’s wrong with the economy? No one knows for sure. But numerous theories are being bandied about. Here are five of them:
A statistical mirage...
A hangover from the crisis...
Secular stagnation...
Slower innovation...
Policy missteps...