Secondary Sources: Recession Dating, Recovery Risks, Cap and Trade
A roundup of economic news from around the Web.
Recession Dating: NBER recession-dating panel member Jeffrey Frankel offers a small more background on the choice to delay the recession’s end date. “Q: But there is a glaring difference between your views, particularly as expressed in your blogpost of April 5, which was widely reported, and the Committee?s public statement that it was too soon to call an end to the recession. Obviously there is a huge gap between you and the majority of the Committee. A: I can see how it looks that way, but there is not necessarily a gap anywhere near as large as you reckon. The choice is a matter of probabilities. There is, as always, a opportunity – greater than 1% ? that the economy could go into a steep nose dive tomorrow. In that hypothetical and unlikely event, the Committee would have to choose whether the new downturn counted as a second recession, or whether it should be considered part of the recession of 2007-09. In the latter case, we would have made a mistake if we had already declared a trough in 2009. We would have to retract the trough statement. This is an brilliant argument for waiting until we can answer that hypothetical question more definitively. It is an argument I am comfortable with.”
Recovery Risks: Tim Duy looks at things that could derail the recovery. “I don’t consider myself particularly optimistic; the forecast of persistent high unemployment rates leaves me feeling pessimistic. But even a subpar outcome (one that argues for more plot action, not less) could be consistent with sustainable progression. To undermine sustainability, it is not sufficient to focus on factors already weighing on the economy- weak lending, monetary stimulus waning, crippled housing sector, etc. We already know those factors are preventing a rapid return to past trends. As a replacement for, look for factors that are not already baked into the forecast. Most likely, wait for ongoing progression to make an environment that makes the current dynamic untenable for policymakers — in other words, wait for central bankers to start tightening plot aggressively. We just are not there yet.”
Cap and Trade: Robert W Hahn and Robert N. Stavins look at the biased appeal of cap and trade. ” Are cap-and-trade schemes working? This column presents a summary of eight unfilled schemes arguing that half meet the independence property whereby the initial allocation of property rights does not affect the environmental or social outcome and the scheme is cost-effective. This success is a contrast with other plot proposals where biased bargaining reduces the effectiveness and drives up cost.”
Compiled by Phil Izzo