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Posts Tagged ‘recession’

Are Recessions Like Prison Camps or Baby-sitting Co-ops?

Tim Harford, who writes the Financial Times‘s “Undercover Economist” column, has appeared on our blog many times. This guest post is part of a series adapted from his new book The Undercover Economist Strikes Back: How to Run or Ruin an Economy. 

Robert A. Radford studied economics at Cambridge University, and worked at the International Monetary Fund. In between, he spent half the war in a German prison camp, and on his release wrote an article, “The Economic Organization of a P.O.W. Camp.” It gives a surprising insight into economic recessions.

The building blocks of the P.O.W. camp economy were parcels of food and cigarettes that the prisoners received from the Red Cross. These parcels were standardized—everybody got the same, beyond the occasional package from home. Occasionally, the Red Cross received bumper supplies, or ran short; in those circumstances everybody enjoyed a surplus or a shortage. Naturally enough, while prisoners had equal rations, they did not have identical preferences. The Sikhs didn’t have much use for their rations of beef or razor blades, for example; the French were desperate for more coffee; the English wanted more tea.


A Silver Lining to Unemployment?

Friday’s labor-force data brought liberal outcries, and a comment from Ben Bernanke, that the drop in labor-force participation indicates unemployment is really much higher, and the economy in worse shape, than the 7.3 percent unemployment rate might indicate.  It is true that participation for men is at a postwar low and has decreased by 3-1/2 percentage points since the 2007 cyclical peak; and women’s participation stopped rising in 1999 and has fallen by 2 percentage points since the peak.

Is this so bad? Yes, if labor-force leavers are desperate to work and just get discouraged.  But perhaps no; perhaps it has taken the Great Recession to get Americans to realize that we shouldn’t be working harder than people in other rich countries and should be enjoying more leisure.  If this is so, perhaps there’s a silver lining in what so many people view as the economic doldrums of the last three years.


Does Child Abuse Rise During a Recession?

How do economic conditions affect the incidence of child abuse?  While researchers have found that poverty and child abuse are linked, there’s been no evidence that downturns increase abuse.  A new working paper (PDF; abstract) by economists Jason M. Lindo, Jessamyn Schaller, and Benjamin Hansen “addresses this seeming contradiction.” Here’s the abstract, with a key finding in bold:

Using county-level child abuse data spanning 1996 to 2009 from the California Department of Justice, we estimate the extent to which a county’s reported abuse rate diverges from its trend when its economic conditions diverge from trend, controlling for statewide annual shocks. The results of this analysis indicate that overall measures of economic conditions are not strongly related to rates of abuse. However, focusing on overall measures of economic conditions masks strong opposing effects of economic conditions facing males and females: male layoffs increase rates of abuse whereas female layoffs reduce rates of abuse. These results are consistent with a theoretical framework that builds on family-time-use models and emphasizes differential risks of abuse associated with a child’s time spent with different caregivers.


It's Crowded at the Top (Ep. 125)

Our latest podcast, “Crowded at the Top,” presents a surprising explanation for why the U.S. unemployment rate is still relatively high. (You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript.)

It features a conversation with the University of British Columbia economist Paul Beaudry, one of the authors (along with David Green and Benjamin Sand) of a new paper called “The Great Reversal in the Demand for Skill and Cognitive Tasks“:


Raghuram Rajan on the Recession

In Foreign Affairs, Raghuram Rajan (who’s appeared on this blog before) writes about the causes and lessons of the Great Recession:

In fact, today’s economic troubles are not simply the result of inadequate demand but the result, equally, of a distorted supply side. For decades before the financial crisis in 2008, advanced economies were losing their ability to grow by making useful things. But they needed to somehow replace the jobs that had been lost to technology and foreign competition and to pay for the pensions and health care of their aging populations. So in an effort to pump up growth, governments spent more than they could afford and promoted easy credit to get households to do the same. The growth that these countries engineered, with its dependence on borrowing, proved unsustainable.


Astounding Fact of the Day

More evidence of the relationship between the housing market and the overall economy:

Construction makes up less than 5 percent of employment but accounts for more than 40 percent of the large swings in the job-filling rate during and after the Great Recession.

That’s from “Recruiting Intensity During and After the Great Recession,” by Steven J. Davis, R. Jason Faberman, and John C. Haltiwanger (abstract; PDF).

 


The Slightly-Bright Side for Boomers in the Recession

A new working paper (full version here) by Alan L. Gustman, Thomas L. Steinmeier, and Nahid Tabatabai examines the impact the Great Recession has had on the wealth and income of Baby Boomers nearing retirement. It finds, somewhat surprisingly, that their aggregate wealth decreased very little over the past few years:

The retirement wealth held by those ages 53 to 58 before the onset of the recession in 2006 declined by a relatively modest 2.8 percentage points by 2010. … Very few in the population nearing retirement age have experienced multiple adverse events. Although most of the loss in wealth is due to a fall in the net value of housing, because very few in this cohort have found their housing wealth under water, and housing is the one asset this cohort is not likely to cash in for another decade or two, there is time for their losses in housing wealth to recover.


At Least One Labor Measure Was Up During the Recession

Productivity, that is. One factor was the trimming of deadwood; the other seems to be old-fashioned harder work. From a new working paper by Casey Mulligan (emphasis added):

During the recession of 2008-9, labor hours fell sharply, while wages and output per hour rose. Some, but not all, of the productivity and wage increase can be attributed to changing quality of the workforce. The rest of the increase appears to be due to increases in production inputs other than labor hours. All of these findings, plus the drop in consumer expenditure, are consistent with the hypothesis that labor market “distortions” were increasing during the recession and have remained in place during the slow “recovery.” Producers appear to be trying to continue production with less labor, rather than cutting labor hours as a means of cutting output.


Changing Youth Migration Patterns: So Long New York, Hello… Portland?

A new blog post from William H. Frey, senior fellow at the Brookings Institution, takes a look at the migration patterns of American youth, and the cities that attract the “cool” crowd. In the last few years, the rough economy has put the brakes on mobility, which has declined to its lowest levels since World War II. Young adults in particular have stopped moving around. Still, like always, there are those 20 and 30 somethings who remain mobile. But, in recent years their list of destinations has begun to change. Frey writes:

While young people are moving less than before, it is interesting to see where those who did move went. Heading the list are Denver, Houston, Dallas, Seattle, Austin, Washington D.C., and Portland. The top three areas and our nation’s capital, arguably, fared relatively well economically during the recession. But all seven are places where young people can feel connected and have attachments to colleges or universities among highly educated residents.


Forgive Student Loans? Worst Idea Ever.

There’s an argument going around right now that forgiving the country’s student loan debt would have a stimulative effect on the economy. This online petition by Signon.org, an offshoot of Moveon.org, has nearly 300,000 signatures. Its basic argument is this:

Forgiving the student loan debt of all Americans will have an immediate stimulative effect on our economy. With the stroke of the President’s pen, millions of Americans would suddenly have hundreds, or in some cases, thousands of extra dollars in their pockets each and every month with which to spend on ailing sectors of the economy. As consumer spending increases, businesses will begin to hire, jobs will be created and a new era of innovation, entrepreneurship and prosperity will be ushered in for all.


Physical Activity During the Recession: More Voluntary Exercise, Less Exertion

Last month, we wrote about data pulled from the American Time Use Survey (ATUS), examining how Americans spend their lost work hours during the recession. While 32% of foregone work hours were spent watching TV and sleeping (not great, though sleeping is helpful), 15% of that time went to “other leisure,” among which, there is “listening to music” and “being on the computer,” as well as “exercise and recreation.”
Two new studies (both coauthored by Dhaval M. Dave of Bentley University) drill further into that ATUS data to paint a more complete picture of our exercise and physical activity habits, and ultimately, what impact they have on our health. The first finds that during the recession, we engage in more voluntary exercise, but have less exertion. Part of this has to do with the difference between exercise and physical activity — the latter is seen as the healthier of the two. (Better to walk to work everyday than do sit-ups twice a week.) With the loss of work, comes a loss of physical activity — particularly with the types of jobs we’ve lost.


Recession Time Survey: 30% of Foregone Work Hours Spent on Sleep, Watching TV

Even after a decent jobs report earlier this month, unemployment is still over 9%. The underemployment rate? That’s 16%, and includes part-time workers who’d rather be full-time, plus people who’ve simply stopped looking for a job. So what are we doing with all that extra free time?
A new study by economists from Princeton and the University of Chicago breaks it down. The bulk of foregone market work time during the recent recession, they say, is spent on leisure.
Here’s the abstract:


The End is Nigh: Let's All Move to Barter Village!

Let’s face it: things aren’t great right now. The economy is on its back. Our political system is a mess. The South is stuck in a record-breaking drought. And Tiger Woods has apparently forgotten how to play golf. Clearly, the apocalypse is upon us.
Where to turn in such dark times? How about Barter Village. Located in a tiny castle (yes, castle) in northeast Arkansas, Barter Village is an “experimental educational project” where people who’ve been particularly hurt by the down economy can go to learn survival skills such as organic farming, sewing and, yes, bowhunting. Villagers hunt, fish and learn to dress their own game.

After providing for their own needs, Barter Village residents take their excess produce, meats, and handmade goods to the nearby castle market. Items sold there generate a meager income to help cover the costs of their stay at Barter Village. Any excess is divided evenly among the villagers to help fund their own survival community.


Odds of a Double Dip: A Sampling of Opinions. Plus, Wolfers on Twitter

So by now you’re hopefully aware that the stock market completely bombed today. As I type, the Dow is down more than 500 points, its worst day since December 2008. (Official day’s tally is -512.76) And just like that it seems, the recovery is over. Well it was fun while it lasted; kind of.
Our resident macro economic guru Justin Wolfers has come up for air from his Twitter experiment (follow him @justinwolfers) and sent over this interesting sample of recent opinions from a handful of economically savvy folks, all giving their odds of the economy entering another recession:
Larry Summers: “at least a 1-in-3 chance.”
Marty Feldstein: “now a 50 percent chance.”
Ryan Avent: “more likely than not.”
Justin Wolfers: “40% chance and peak was 4 months ago” and “The guacamole has spoken.”
Don Kohn, Vincent Reinhart, Brian Madigan: “between 20% and 40%.”
Matt Yglesias: “precisely 31.22%.”
Brad DeLong: “the odds now are 50-50.”
Christy Romer: “The risks have gone up…compared to where we were six months ago.”
Bob Hall: “We certainly are in a more vulnerable situation now.”
Jeff Frankel: “not necessarily enough to push the probability over one half.”
Jay Carney: “we do not believe that there is a threat there of a double-dip recession.”
Justin has had a busy today on Twitter. Clearly, he flipped heads this morning. Here’s a sampling of what he’s been tweeting about:


Freakonomics Quorum: Why, During a Bad Economy, Does Crime Continue to Fall?

The FBI recently announced that the number of violent crimes fell 5.5 percent in 2010, with property crimes falling 2.8 percent. This extends the dramatic reduction in crime that began in the 1990s. The Times declared that criminologists were baffled by the news, and Levitt was baffled by their bafflement:

Apparently, everyone expected crime to rise because of the weak economy, which I find strange, because there is zero evidence of any relationship between violent crime and the economy, and a relatively weak one between property crime and the economy. Plus, relative to 2009, the economy in 2010 was substantially improved.

We spent an entire chapter in Freakonomics exploring the factors that do and do not seem to have brought down the rate of violent crime in the U.S. In short, factors that matter include: number of police; number of prisoners; changes in drug markets; and the availability of abortion. And those that don’t seem to much matter: the economy; innovative policing strategies; most gun laws; capital punishment; and demographics.
There is of course no reason for anyone to have complete confidence in the arguments we presented, even if they were more empirical than most arguments about crime. Still, as Levitt said in the excerpt above, it is surprising that so many people seem wedded to the view that the economy drives violent crime even when the evidence supports the contrary.
So, given the amount of bafflement on the issue, it seemed like a good time to convene a Freakonomics Quorum.


Experts Continue to Express Amazement at Declining Crime

It was like the 1990s all over again when the FBI released the latest crime statistics last week. Violent crime fell by five percent; property crime fell three percent. Those are the sorts of crime declines that were commonplace in the 1990s.
But what was really reminiscent of the 1990s was the way the media covered it. The New York Times is a perfect example. For starters, the set of criminologists who give quotes in the story are the exact same criminologists who were called upon by the Times each year in the 1990s to assess the latest numbers: James Alan Fox, Alfred Blumstein, and Franklin Zimring. (You may remember James Alan Fox as the portent of doom in the abortion and crime chapter of Freakonomics.)
And these experts are just as puzzled by the recent crime drop as they were 20 years ago. “Remarkable,” says James Alan Fox. “Striking,” says Blumstein.


The New GDP Data Is Bad. The Hidden Data Behind It Is Worse

This morning the Bureau of Economic Analysis (BEA) released its latest estimates of GDP. And there’s bad news, hidden in the details. Most analysts are focused on the fact that GDP growth in the first quarter of this year was unrevised, remaining at 1.8%. But they’re focused on the wrong number.
National accounting aficionados know that hidden beneath the headline number is an alternative estimate of GDP. This alternative is often called GDP(I), because it is based on income data, rather than spending data. And GDP(I) is actually a more reliable estimate. Unfortunately, this more accurate indicator tells us that GDP grew by only 1.2%. That’s bad news.


Music of the Great Recession

What happens when you match two guitar-playing economics students and a deep recession? Recession Sessions, an entire album of economics-themed songs by Ryan Stotland and Kyle Thompson-Westra, a.k.a. The Bull and the Bear. The two met at Tufts and now make music in the “financial folk” genre, with songs including “Central Banker’s Dilemma” and “Main Street Venting Blues.” Here are a few lines from “Dear Fiscal, Love Monetary”:

We’ll always be the heads of our nation
Can’t you see the way we killed stagflation
I never ever thought that I’d have this much fun
As when I watched you bring the rate down to one


Mistrust and the Great Recession

Four years ago, 75% of Americans said that they had confidence in financial institutions or banks. Following the financial crisis, that number has fallen dramatically, to 45%. This well-earned public mistrust may be yet one more factor retarding the recovery of the financial sector, and possibly the broader economy. Survey data also show that trust in government is also currently . . .


What Is Going on With Marriage?

You’ve probably heard the latest marriage narrative: With the recession upon us, young lovers can’t afford to marry. As appealing as this story is, it has one problem: It’s not true.


Insights From the Fall Meeting of the Brookings Panel on Economic Activity

The Brookings Panel on Economic Activity is pretty much my favorite conference each year. (It better be! I took over running the Panel with David Romer in early ’09.) I’ve found that the best way to keep growing as an economist is to embrace any opportunity to be the dopiest guy in a very smart room, and this latest meeting was no disappointment. I’ve been meaning to write about it for a couple of weeks, but time kept getting away from me. So I decided to try something different-I popped into the video studio to chat about some of the new findings presented at the Panel. Here are the highlights.


You Say Recovery, I Say Potato

My latest Marketplace commentary returns to a topic I touched on earlier this week: the fact that when economists talk about a “recovery” being underway they are talking about something completely different than when Joe Public says he’s waiting for the “recovery” to begin.