An inevitable post-GFC slump?

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Cochrane points out the inconsistency between the US administration’s growth forecasts for a strong recovery and those who defend them from criticism over the economy’s under performance by noting that post crisis recoveries are always weak.

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If it were so obvious / inevitable, why did the Administration’s own forecasts assume ‘normal’ post recession growth?

7 comments

  1. Cochrane is a goose.

    for one thing no-one imagined the States and local government would cut jobs so much.

    Just remember if this sector created jobs like they did when St Reagan of Paradise was Prez the Unemployment rate would be falling towards 6% and we would be talking about rate rises.

    They didn’t assume a ‘normal’ recovery and like many underestimated how severe the recession was.

  2. Cochrane might just engender some respect if only he would do a mea culpa on his performance.

    Originally he was stating fiscal policy could not do anything. That was when he confused an accounting identity with a behavioural relationship.

    sometime later he recanted and said fiscal policy did indeed work.
    I recall Noah smith having a lot of fun about that not to mention Kruggers.

    He isn’t the only academic whose reputation has been greatly diminished by the GFC

    1. Post links into the comments! I’d be happy to see them.

      FWIW, I like both Krugman and Cochrane. Krugman is Keynesian and reminds me how the short run works, and Cochrane is Classical and reminds me that in the long run the only thing that matters is productivity.

    1. He may well have, but surely that’s the Classical proposition — that when all the short runs are over, and we are not worrying about resource utilisation, that the only thing that matters is the efficiency with which we have allocated our resources?

      Even IF Cochrane did say that fiscal policy is impotent – and i agree that if he did he is wrong in the short run – the point remains that unless the fiscal authority uses the resources more efficiently, that it makes us poorer in the long run.

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