7 ms·

Why We're Probably in For a Long Recession

81 points by robg 18y ago

nihilocrat 18y ago
Good to see Nate Silver produce interesting forecasting data post-election. I was afraid he would disappear into nothingness after his fifteen minutes of fame.
- mixmax 18y ago
  I can only second that, and add that it's good to see some competent forecasting. Far too often the media simply extend existing data into the future and call it a trend.
hardik 18y ago
Long term trends in macroeconomic indicators are not the estimates that can be used in these exceptional times. Moreover, the author is talking about median values of change, there could have been much bigger numbers at the tail ends, and all it takes (mathematically at least) is couple of big numbers to zoom the economic closer to its state few years back.
deleted 18y ago
[deleted]
- natrius 18y ago
  Everybody thinks this is a recession, so no need to worry.
- baguasquirrel 18y ago
  What does that have to do with the article? Does it change the reality of people feeling this way? During the market panics we had in the fall, you could say that it was an overreaction, but if you look at where housing prices and debt have been historically, I think you will see that the economic factors driving this are very real.
  - hardik 18y ago
    I am contesting the basis that author is using to predict a "sticky recession" in particular and "sticky economies" in general. Median is really not the right measure to look at in these times, it gives no indication whatsoever about the parameter values in the extreme ends.
snewe 18y ago
I don't trust forecasts without standard errors. Using the smaller 1987 - 2005 data implies less precise forecasts, so that last graph needs some caveats.
- jacoblyles 18y ago
  I don't trust macroeconomic forecasts at all, however I think this article contains an interesting and valuable hypothesis.
- brfox 18y ago
  Yeah, he should run a couple thousand simulations like he did with the election and see the range of values. I agree that it is far fetched to make those long waves based on only the last two recessions.
jonmc12 18y ago
One theory about this effect is called the Jobless Recovery - http://en.wikipedia.org/wiki/Jobless_recovery http://en.wikipedia.org/wiki/Jobless_recovery Part of this theory is that recession forces companies to automate jobs in order to increase productivity. The net effect is that these genre of jobs are lost forever. So, instead of these jobs being replaced when the economy is expanding, the economy must wait for new jobs types to be created in order to experience employment growth. Subsequently, one could make the argument that business owners will experience faster growth than the employment rate. Marshall Brain has an interesting speculative piece called 'Robotic Nation' regarding this theory: http://marshallbrain.com/robotic-nation.htm http://marshallbrain.com/robotic-nation.htm
- ryanwaggoner 18y ago
  Marshall's description of the coming problem is an interesting read, though I think he's definitely painting the worst possible picture to support his thesis. What's more troubling to me than the problem he describes is his solution, which basically boils down to giving $25k / year to every citizen of the US from a "central fund" that we fund through: - advertising on everything from our money to our bridges - taxes, taxes, and more taxes. we tax everything from email to carpool lanes to "excess" salaries and profits My favorite had to be his diatribe about executive pay: When an executive makes $20 million per year, the money does not materialize out of thin air. It comes from consumers in the form of higher prices that they pay for everything that they purchase. For an executive to make $20 million per year, a company has to overcharge consumers for the products they purchase from the company. It is not as though the $20 million paid to the executive appears out of thin air -- it comes from consumers in the form of higher prices. An "extreme income" tax simply takes that excess compensation and returns it back to consumers, where the money originally came from. What an ignorant and simplistic view of our economic system. To me, this is clearly a case of the cure being much worse than the disease.
  - jcl 18y ago
    Marshall is considering an distant future economy where, essentially, only executives get paid; all low-wage jobs have been automated away. For such an economy to function, you'd need an "extreme income tax" to redistribute wealth. Otherwise, the executives would be making ultra-cheap products that no average person could buy, because he wouldn't have a salary to afford it.
bjoernw 18y ago
"Forecasting" got us into this mess. By thinking we can predict the future by looking at the past we have taken way too much risk and are paying the price right now. Now people look at past events to "forecast" where we will be in the future? Seems odd. Just because 3 curves show a similar correlation does not mean the 4th has to follow the same trend. We need to learn from mistakes.
kqr2 18y ago
Nate has been writing about the economy lately and receiving criticism that he's just a "baseball" guy, but in fact he has a degree in economics from University of Chicago and so is as qualified (or even more so) than most pundits out there. http://en.wikipedia.org/wiki/Nate_Silver http://en.wikipedia.org/wiki/Nate_Silver
justindz 18y ago
I have created reminders in my PIM to check this post again in late June of this year and May of next year. It's fun to speculate and debate this, but I'll be extra interested to check back on this and see which, if either, of the models proves to be more accurate. What is lacking in a lot of these macro-economic discussions is the presentation of evidence that any of them are correct or incorrect based on past historical events. It may be out there, and I just don't hear people talk about it. Leads would be awesome. My fear is that it's all so complex you can't get beyond loose correlation. If we have a rebound this year or next, even if it's the stimulus, how will we know? Could it have been that almost all of the money was a complete waste, but the green industry investments hit out of the park? I'm really out of my area here :-)

81 points by robg 18y ago

Good to see Nate Silver produce interesting forecasting data post-election. I was afraid he would disappear into nothingness after his fifteen minutes of fame.

mixmax 18y ago
I can only second that, and add that it's good to see some competent forecasting. Far too often the media simply extend existing data into the future and call it a trend.

hardik 18y ago

Long term trends in macroeconomic indicators are not the estimates that can be used in these exceptional times. Moreover, the author is talking about median values of change, there could have been much bigger numbers at the tail ends, and all it takes (mathematically at least) is couple of big numbers to zoom the economic closer to its state few years back.

deleted 18y ago

[deleted]

natrius 18y ago
Everybody thinks this is a recession, so no need to worry.
baguasquirrel 18y ago
What does that have to do with the article? Does it change the reality of people feeling this way? During the market panics we had in the fall, you could say that it was an overreaction, but if you look at where housing prices and debt have been historically, I think you will see that the economic factors driving this are very real.
- hardik 18y ago
  I am contesting the basis that author is using to predict a "sticky recession" in particular and "sticky economies" in general. Median is really not the right measure to look at in these times, it gives no indication whatsoever about the parameter values in the extreme ends.

snewe 18y ago

I don't trust forecasts without standard errors. Using the smaller 1987 - 2005 data implies less precise forecasts, so that last graph needs some caveats.

jacoblyles 18y ago
I don't trust macroeconomic forecasts at all, however I think this article contains an interesting and valuable hypothesis.
brfox 18y ago
Yeah, he should run a couple thousand simulations like he did with the election and see the range of values. I agree that it is far fetched to make those long waves based on only the last two recessions.

jonmc12 18y ago

One theory about this effect is called the Jobless Recovery - http://en.wikipedia.org/wiki/Jobless_recovery http://en.wikipedia.org/wiki/Jobless_recovery Part of this theory is that recession forces companies to automate jobs in order to increase productivity. The net effect is that these genre of jobs are lost forever. So, instead of these jobs being replaced when the economy is expanding, the economy must wait for new jobs types to be created in order to experience employment growth. Subsequently, one could make the argument that business owners will experience faster growth than the employment rate. Marshall Brain has an interesting speculative piece called 'Robotic Nation' regarding this theory: http://marshallbrain.com/robotic-nation.htm http://marshallbrain.com/robotic-nation.htm

ryanwaggoner 18y ago
Marshall's description of the coming problem is an interesting read, though I think he's definitely painting the worst possible picture to support his thesis. What's more troubling to me than the problem he describes is his solution, which basically boils down to giving $25k / year to every citizen of the US from a "central fund" that we fund through: - advertising on everything from our money to our bridges - taxes, taxes, and more taxes. we tax everything from email to carpool lanes to "excess" salaries and profits My favorite had to be his diatribe about executive pay: When an executive makes $20 million per year, the money does not materialize out of thin air. It comes from consumers in the form of higher prices that they pay for everything that they purchase. For an executive to make $20 million per year, a company has to overcharge consumers for the products they purchase from the company. It is not as though the $20 million paid to the executive appears out of thin air -- it comes from consumers in the form of higher prices. An "extreme income" tax simply takes that excess compensation and returns it back to consumers, where the money originally came from. What an ignorant and simplistic view of our economic system. To me, this is clearly a case of the cure being much worse than the disease.
- jcl 18y ago
  Marshall is considering an distant future economy where, essentially, only executives get paid; all low-wage jobs have been automated away. For such an economy to function, you'd need an "extreme income tax" to redistribute wealth. Otherwise, the executives would be making ultra-cheap products that no average person could buy, because he wouldn't have a salary to afford it.

bjoernw 18y ago

"Forecasting" got us into this mess. By thinking we can predict the future by looking at the past we have taken way too much risk and are paying the price right now. Now people look at past events to "forecast" where we will be in the future? Seems odd. Just because 3 curves show a similar correlation does not mean the 4th has to follow the same trend. We need to learn from mistakes.

kqr2 18y ago

Nate has been writing about the economy lately and receiving criticism that he's just a "baseball" guy, but in fact he has a degree in economics from University of Chicago and so is as qualified (or even more so) than most pundits out there. http://en.wikipedia.org/wiki/Nate_Silver http://en.wikipedia.org/wiki/Nate_Silver

justindz 18y ago

I have created reminders in my PIM to check this post again in late June of this year and May of next year. It's fun to speculate and debate this, but I'll be extra interested to check back on this and see which, if either, of the models proves to be more accurate. What is lacking in a lot of these macro-economic discussions is the presentation of evidence that any of them are correct or incorrect based on past historical events. It may be out there, and I just don't hear people talk about it. Leads would be awesome. My fear is that it's all so complex you can't get beyond loose correlation. If we have a rebound this year or next, even if it's the stimulus, how will we know? Could it have been that almost all of the money was a complete waste, but the green industry investments hit out of the park? I'm really out of my area here :-)