3 ms·

Listen Carefully for Hints of the Next Global Recession

45 points by Osiris30 11y ago

jusben1369 11y ago
"Beliefs and stories passed on by thousands of individuals are important factors, maybe even the main ones, in determining big shifts in the economy." We've known this all the way back to Keynes. That's why he wanted the government to step in and pick up the slack created by individual consumers creating a self fulfilling prophecy of cutting back their own spending by 10% in preparation for a possible bad economy. Not only would the government spending help offset reduced consumer spending but the knowledge, within the broad population, that the government would do this would reduce fear of a recession and thus reduce the recession inducing behavior.
- deleted 11y ago
  [deleted]
- matt_wulfeck 11y ago
  That logic only makes sense to me if I start with the presumption that the market should only ever go up ever.
shostack 11y ago
I don't know how to measure this, but I'd be curious what impact all of these news outlets writing doom and gloom actually have. I'll bet it is quite a lot. There is a very palpable sense of people wanting the economy to collapse, and I'll bet a lot of it is spite from renters who are having their rents jacked, and being completely priced out of even entry-level homes in many markets. They can't get a fair shake at things, so they want to watch things burn. Not to say that I entirely blame that mentality, but I'm just very curious what tangible impact that has and how to measure it from a quantitative standpoint. Are there any good sentiment analysis tools for this sort of thing and correlating it with the market/economies?
- dforrestwilson 11y ago
  There is no magic formula but here's an example using negative rates in Denmark: http://www.bloomberg.com/news/articles/2016-05-01/world-s-longest-negative-rate-experiment-shows-perversions-ahead http://www.bloomberg.com/news/articles/2016-05-01/world-s-lo...
carsongross 11y ago
Beliefs and stories passed on by thousands of individuals are important factors, maybe even the main ones, in determining big shifts in the economy. This sort of ooga-booga is why it's almost impossible to take economists very seriously. Any sort of study with pretensions to scientific rigor (look at all that fancy math!) that, at the end of the day, falls back on something like animal spirits, deserves quite a bit of mockery.
- dforrestwilson 11y ago
  Sorry can you explain where his analysis is wrong? He's not advocating for investing based upon animal spirits. He's explaining that it does exist and is a problem. Do you not believe that financial bubbles or manias occur?
- oli5679 11y ago
  It is worth noting that a majority of economists are studying narrower and more tractable problems than predicting business cycles/asset prices. Take a look at Al Roth's work on matching markets (useful for organising more efficient organ donation or school attendance systems) or Jim Heckman's work on policy evaluation (useful for measuring the impact of educational policy on lifetime earnings children. http://www.economist.com/blogs/freeexchange/2015/06/alvin-roths-new-book http://www.economist.com/blogs/freeexchange/2015/06/alvin-ro... http://www.sciencedirect.com/science/article/pii/0304407685901393 http://www.sciencedirect.com/science/article/pii/03044076859...
  - __derek__ 11y ago
    > a majority of economists are studying narrower and more tractable problems than predicting business cycles/asset prices This is a good point: macro and micro are rather different beasts, especially when it comes to the "science" question.
- gahahaha 11y ago
  Turns out the fancy math mania among economists didn't help us leading up to and during the great recession. We should now go back and pick up again the lessons learned after the Great Depression (like Keynes' Animal spirits). Math and models are still important (they are in fact essential, without them we can't think clearly or rigorously enough) but they and their interpretations have to take into account the complexity of human nature to a greater extent, not rely on a simplistic and almost non-existent homo economicus.

45 points by Osiris30 11y ago

"Beliefs and stories passed on by thousands of individuals are important factors, maybe even the main ones, in determining big shifts in the economy." We've known this all the way back to Keynes. That's why he wanted the government to step in and pick up the slack created by individual consumers creating a self fulfilling prophecy of cutting back their own spending by 10% in preparation for a possible bad economy. Not only would the government spending help offset reduced consumer spending but the knowledge, within the broad population, that the government would do this would reduce fear of a recession and thus reduce the recession inducing behavior.

deleted 11y ago
[deleted]
matt_wulfeck 11y ago
That logic only makes sense to me if I start with the presumption that the market should only ever go up ever.

shostack 11y ago

I don't know how to measure this, but I'd be curious what impact all of these news outlets writing doom and gloom actually have. I'll bet it is quite a lot. There is a very palpable sense of people wanting the economy to collapse, and I'll bet a lot of it is spite from renters who are having their rents jacked, and being completely priced out of even entry-level homes in many markets. They can't get a fair shake at things, so they want to watch things burn. Not to say that I entirely blame that mentality, but I'm just very curious what tangible impact that has and how to measure it from a quantitative standpoint. Are there any good sentiment analysis tools for this sort of thing and correlating it with the market/economies?

dforrestwilson 11y ago
There is no magic formula but here's an example using negative rates in Denmark: http://www.bloomberg.com/news/articles/2016-05-01/world-s-longest-negative-rate-experiment-shows-perversions-ahead http://www.bloomberg.com/news/articles/2016-05-01/world-s-lo...

carsongross 11y ago

Beliefs and stories passed on by thousands of individuals are important factors, maybe even the main ones, in determining big shifts in the economy. This sort of ooga-booga is why it's almost impossible to take economists very seriously. Any sort of study with pretensions to scientific rigor (look at all that fancy math!) that, at the end of the day, falls back on something like animal spirits, deserves quite a bit of mockery.

dforrestwilson 11y ago
Sorry can you explain where his analysis is wrong? He's not advocating for investing based upon animal spirits. He's explaining that it does exist and is a problem. Do you not believe that financial bubbles or manias occur?
oli5679 11y ago
It is worth noting that a majority of economists are studying narrower and more tractable problems than predicting business cycles/asset prices. Take a look at Al Roth's work on matching markets (useful for organising more efficient organ donation or school attendance systems) or Jim Heckman's work on policy evaluation (useful for measuring the impact of educational policy on lifetime earnings children. http://www.economist.com/blogs/freeexchange/2015/06/alvin-roths-new-book http://www.economist.com/blogs/freeexchange/2015/06/alvin-ro... http://www.sciencedirect.com/science/article/pii/0304407685901393 http://www.sciencedirect.com/science/article/pii/03044076859...
- __derek__ 11y ago
  > a majority of economists are studying narrower and more tractable problems than predicting business cycles/asset prices This is a good point: macro and micro are rather different beasts, especially when it comes to the "science" question.
gahahaha 11y ago
Turns out the fancy math mania among economists didn't help us leading up to and during the great recession. We should now go back and pick up again the lessons learned after the Great Depression (like Keynes' Animal spirits). Math and models are still important (they are in fact essential, without them we can't think clearly or rigorously enough) but they and their interpretations have to take into account the complexity of human nature to a greater extent, not rely on a simplistic and almost non-existent homo economicus.