20 November 2008

Recession is Good

I had this email exchange with JB.

JB: I hope that green jobs can help pull us out of this slump...
DZ: The green job thing is BS.
JB: Why do you think the "green jobs" is BS?
DZ: Because they are looking for govt subsidies.

JB: Do you think Pickens is wasting his millions on it too?
DZ: No -- he's lobbying for subsides.

JB: ...and that Congress will help our auto makers.
DZ: Huge waste of $$
JB: If any or all of the automakers fail, even more people will lose their jobs and will likely result in further tanking of the economy?
DZ: Some people will not be able to get new jobs, others will. Jobs in companies that lose money are not productive. When they use tax $$ to stay afloat, they just waste it...

JB: It's good to see oil prices down.
DZ: Nope - bad for our energy policy and move to alternative fuels. They need to raise gas taxes...

JB: What's your prediction for the economy in 2009?
DZ: Spending contraction 6-9 months; investment contraction for longer...

JB: DJIA closed below 8000 today.
DZ: People are adjusting to a different era, with different profits. It's all about sentiment and prospects. We need a good recession to shake out the bad companies. Remember that life isn't about constant increases in the DJIA.

Bottom Line: There's a reason that (honest) economists do not get elected as politicians -- they do not do well with the "people are suffering, do SOMETHING" version of life. Instead, they concentrate on what works for the whole economy, society, etc. That's not popular with voters (who want to feel that they will be taken care of) or lobbyists (who are taken care of).

4 comments:

  1. The good companies like Exxon, CPhillips, and all of big coal will not be shaken out. They will survive and they will get their subsidies too. It is only the losers like General Motors, Ford, Chrysler that will be shaken out.

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  2. Here is my misguided view on why I think recession is good (keeping in mind that I am a rabid, uninformed, idealistic environmentalist, and certainly not an economist)...one of our big problems right now is too many people consuming too much. If people aren't as affluent, they don't consume as much - so helps combat one part of the problem - no? Of course, we do need gas taxes to keep prices high enough when demand is low to encourage the adaptation strategies we need so that we aren't all out on a limb when prices shoot back up again. The trick would be to balance things a bit so we don't have superwealthy exxon execs and superstarving x-GM employees. That smacks of socialism and government handouts - but I'm not as sold on free market as most here :) Or maybe it would all work out - enough honest labor for everyone who wants it doing something that would keep bellies full - I don't know. I don't want to see anyone truly suffer because of recession, but at the same time I think most people can have a lot less money and still be dandy. Even me. And I live in a 374 square foot efficiency apartment with my partner and child (granted, I own the building...)
    Here is my question to David or whoever: do people have fewer kids when economic times are bad, or more? And does it depend on if one is rural or urban? Now that we've switched over to a majority urban world...

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  3. Michelle -- people have fewer kids when they get richer (more costly for women), when they move to cities (ditto, plus education, etc.) and when the economy sucks (e.g., Russia in the 90s).

    Interestingly, the mix shifts to girls in times of war/stress, because it's important to have more moms to make more babies. (Some people say this biological fact is behind the 4-wife policy of Islam.)

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  4. Great, so maybe recession will address the "too many people" part of it too, now that we are more urban and women are more educated/acceptable as breadwinners in this world. Although this effect may be less in parts of the developing world where the birthrate is higher anyway? But then we are the ones doing the big consuming...

    I thought it was more boys during war/stress (to replace the fighting masses or some such) but more girls does seem to make more sense. OK, I just did a google search, and my limited results seem to show the sex ratio tips to girls in times of environmental and economic stress and more boys in times of war. Hmm.

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