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Source link: http://archive.mises.org/13980/hooray-the-recession-is-over/

Hooray, the Recession Is Over!

September 22, 2010 by

Just as more and more analysts are worried about the economy imploding again, the NBER announces that the recession ended back in June 2009. The whole episode underscores the crudity of mainstream economics. FULL ARTICLE by Robert Murphy

{ 18 comments }

Joshua September 22, 2010 at 8:42 am

If you believe the recession is over, I’ve got 50,000 “non-combat” troops in Iraq to sell you.

Craig September 22, 2010 at 9:55 am

I found it interesting that they used real GDI instead of real personal income because it fit the equality.

“The committee’s use of income-side measures, notably real GDI, is based on the accounting principle that the value of output equals the sum of the incomes that arise from producing the output. Apart from a random statistical discrepancy, real GDI satisfies that equality while real personal income does not.”

Hmmmm! It makes you wonder what else they chose to use to fit their equation.

Mr. Printing Press September 22, 2010 at 4:13 pm

GDI sounds a lot like the labor theory of value (value = sum of costs).

Allen Weingarten September 22, 2010 at 9:56 am

I agree with Dr. Murphy about the flaws in the ‘scientific approach’ and our need instead to proceed by logical deduction. Still, the public is often swayed by arguments employing arbitrary figures, rather than by the more complicated reasoning of the Austrian economists. I believe that to out-compete the empirical economists it is necessary to simplify our arguments, and render them briefer and more commonsensical than is usually done.

Stephen Grossman September 22, 2010 at 10:50 am

Statists typically discuss policy and short-range statistical results. I rarely hear them discussing economic law. Pro-capitalists should stress the laws of economics and their base in common human experience rather than the specialized knowledge of (arbitrarily selected and interpreted statistics. Eg, demand from government policy is not demand from production. Production causes demand, not the reverse. Resources are limited at any given time. Some effects are long-range and unintended. Shifting resources to the less productive will cause less production. Coincidences are not causes. And when pseudo-scientists like Krugman say, as he recently did, “At this time,” he should be denounced as an economic historian posing as an economist.

lester September 22, 2010 at 10:49 am

Allen Weingarten- I don’t think anyone is swayed by this though do you? that the recession ended last June?

Allen Weingarten September 22, 2010 at 4:23 pm

Lester, I agree that the public is losing respect for borrowing, over-spending, the concept of recession, and various Keynesian arguments. This provides an opportunity for Austrian economists to provide explanations that will make sense to them. My point is simply that it remains for us to do so, since we rarely hear or read of simple Austrian explanations for what is the state of the economy, why, and what to do about it.

Most people believe that the economy is in good shape if people are getting subsidies, and in poor shape when enterprises are failing. Yet if we think of a drug addict, we know that his situation is worsening when he is getting a bigger fix, and improving when he is being weaned from drugs. I recognize that Austrian economists in general, and Robert Murphy in particular, provide sound answers. Yet it seems to me that such explanations could use something akin to ‘Economics for Dummies’.

Ron Finch October 1, 2010 at 8:08 pm

I agree and I think Dr. Murphy is trying to present it as simply and clearly as possible. In the preface to “The Man Verses the State” it is stated that Nock planned a supplement to explain basic economics. I think that you need both the accurate explanation of the science and the inflammatory rhetoric. I can help with the latter. For example, in the Free Market, “the customer is always right.” When government planners steer the economy they dictate to consumers what we can have. Peoples’ preferences have changed. We do not want as many houses as we did three years ago, but the government keeps trying to get us to buy them. The central planners are preventing business making the things we want and trying to support businesses that make stuff we don’t want. I bet they are providing stimulus to save tube TV manufacturers. People want flat screens. So, I expect to see tube TV’s going into storage along side the government grain and cheese.

Tim September 22, 2010 at 10:54 am

Mr. Murphy states “I just want to point out that the NBER’s techniques implicitly justify big government.” That is what I would like to call “agenda economics” because the only reason that the NBER and others like them even exist is to provide an excuse for the totalitarians to expand their power.

noah September 22, 2010 at 12:17 pm

The NBER definition of recession is not useless if one would like to know when consecutive periods of negative growth occur, but even without the absurdity of trying to use it as a meaningful yardstick, statists will find all the excuses and justifications they need. (And most journalists will report those excuses and justifications as gospel and ignore real facts.) People who praise government intervention now will continue to do so no matter what the NBER says, and contrariwise for the other side of the argument.

weak stream September 22, 2010 at 5:56 pm

Hey, I got an idea. If we call a recession over because we have positive GDP, why don’t we just raise the deficit spending to ten trillion and call it a boom? How can we be deficit spending 10% plus turbo QE ending up with barely positive GDP and call the recession over. This is a minus 10-15% economy three years running but don’t tell anybody. It’s a secret.

El Tonno September 22, 2010 at 3:48 pm

AUSTRIANS DECLARE:

CHRISTINE O’DONNELL “PROBABLY” CAUSE FOR SECOND-EFFECT RECESSION.

Obama administration successfully revived economy in June 2009, GOPers destroy continuing at recovery during 2010.

Walt D. September 22, 2010 at 3:59 pm

You know you have a credibility problem with the average citizen when you become the butt of the first joke in Jay Leno’s monologue!

Daniel September 22, 2010 at 4:45 pm

Samuelson is a lying scumbag p.o.s.

“The planned economy of the USSR will surpass the standard of living of the United States by 1990″

Sure it will, Einstein

Samuel Wonacott September 22, 2010 at 6:01 pm

“Well, according to the way the NBER works, nobody would ever know this. Instead, “history” will record that Bernanke and Obama did indeed manage to end the awful Great Recession”

That’s a good- albeit frightening- point. The NBER’s analysis is going down in the history books and will lead to exactly the same problem in sixty years that people today have when they take the NBER’s analysis of the Great Depression at face-value. People who have no idea about the appropriate methodology in the social sciences will simply look at the NBER archives and assume that, hey, recession ended the summer of ’09 thanks to the aggressive fiscal/monetary policies of the U.S. government because that’s what the chronology seems to show.

I can just imagine people like Hayek cringing in a similar fashion back in the ’30s as the NBER was doing its thing.

Walt D. September 22, 2010 at 6:26 pm

Great … time to put in my Bugatti Veyron order before the waiting list grows too long. Time to start looking for a new yacht.

Bruce Koerber September 22, 2010 at 9:27 pm

NBER Declares End Of Recession But Forgets To Announce The Start Of The Depression!

What NBER failed to mention is that what replaced the recession when it ended was a depression. Then when you compare these ‘data’ with the 1930′s ‘data’ it shows that the recession also ended in the 1930′s followed by – you guessed it! – a depression. The declaration that the recession has ended seems true and it fits the ‘data’ because just like in the 1930′s what then begins is the depression.

Is it possible that these empirical economic numbskulls are right about the end of the recession but they just fail to mention that what follows is a depression?

Andrew September 25, 2010 at 10:07 pm

Insightful and well written article Bob, as always. Thanks!

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