Jay Leno Is Smarter than Most Economists

Disturbing Trend for Once Prestigous Discipline

From Political Irony we have this quip from Jay Leno

“According to the Wall Street Journal, economic experts now fear there may be a second recession. A second recession? When did the first one end?”

and here is what The Dismal Political Economist said a few days ago on the same subject:

Here are the specifics of how the study of economics that has failed America and is continuing to fail.

1. The Definition of Recession is Too Narrow.  Although they deny it, the NBER (for some reason given the status as the arbiter of defining a recession) is credited with defining a recession as two consecutive quarters of negative economic growth.  Consequently, in the economics profession the recession ended in June, 2009.  This is patently ridiculous.

A recession should be defined in terms of unemployment, the most critical variable on any economic structure.  A recession should be defined as lasting as long as the unemployment rate is above the full employment rate plus a modest cushion (for statistical error)  for a six month period.  We would propose a cushion of 25%. So if the full employment unemployment rate were 4.8%, a recession would be described as any six month period in which the unemployment rate exceeded 4.8% + 25% of 4.8% or 6.0%. 

This is not just playing with words.  Defining a recession in this manner would cause government and politicians to focus much more closely on the economy in general and the unemployment rate in particular.  Policy is driven by perception.  If the economy is perceived to be in a recession policy will be driven to end that recession.  In the 2012 election Democrats will try to convince voters that the economy has largely recovered.  Republicans will try to convince them that it has not.  Neither side will argue for what policy is needed to go forward.  If both sides were forced to acknowledge that the U. S. was still in recession the debate would shift more towards policy, where the debate should be.

Economics, when you are getting bested by Jay Leno it's time to go back to the books, study up and get back in the game.