ANSWERING YESTERDAY’S QUESTION.

ANSWERING YESTERDAY’S QUESTION (COMMENT). Lee Bryant took on the question that I repeated yesterday, commenting here that “I think the occasional big downturn has to happen,” and adding that he had thought that back before he had studied economics. My brother Elmer commented last fall that “Crashes are not unprecedented” and gave four examples of crashes in the last 20 years. And yet most people were surprised by the downturn. I was one of them. I will answer the question for myself. Even before the Great Moderation, I tended to think of the economy as following a path and being bumped from that path by occasional exogenous events, each event having its own explanation. No cycles. And I assumed that booms and busts would be infrequent and mild. I am modifying my views.

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2 Responses to ANSWERING YESTERDAY’S QUESTION.

  1. Annalisa says:

    If downturns happen roughly every 3 to 5 years (taking your estimate of a crash every 3 years in a previous post and Uncle Elmer’s example of 4 crashes in 20 years), then they must be small enough downturns that we don’t get too worried, right? Because the worry over the state of affairs the past 6 months is more worry than I’ve ever seen in my life. It reminds me of the worry that spurred people to buy gas masks after the terrorist events of September 2001 (the parents of a high school classmate of mine did this) and stockpile food for Y2K. Only this time, people are worried about stuff they never gave a crap about before (I bet half of them never spoke the phrase “our economy” before it started going downhill) and barely understand what is going on. But I can’t be too harsh; I barely understand what is going on either.

  2. Mary Jane Schaefer says:

    A case of Black Swans perhaps? Who knew there were so many? Not to mention the coukcoos overseeing our “protected” economy.

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