Thursday, December 17, 2009

An Optimistic but Convincing Scenario by Alan Blinder

I didn't post yesterday, but here are some items (the first three from The Wall Street Journal) that I hope will make up for it.

First, this opinion piece was in yesterday's edition of The Wall Street Journal (free content at this writing). Princeton economist and former Federal Reserve Vice-chairman Alan Blinder makes an interesting case for an improving economy. He does say that he's purposely looking for a rosy scenario, and reasons for concern remain. The outlook is plausible and worth dissecting with your classes. I think this could be used to help students analyze positive vs. normative economics in analysis.

What do you think? Too rosy? Possible but not probable? Or possible enough to keep looking for further hints?

1 comment:

Gene Hayward said...

I teach Micro in the spring and with all that is going on with "reform" I believe the concept of "Dead Weight Loss" is going to have more relevence in my class this year relative to any previous year. The uncertainty created by a sagging Aggregate Demand on current consumption by C + I, may be coming to an end, but then it seems we have to worry about the uncertainty on the supply-side with the torrent (too strong a word?) of re-regulation of the economy that is coming down the pikk---healthcare mandates, banking/financial sector reform, Cap and Trade, etc. What is a small and medium-sized business to do/think? Perhaps some of the DWL is postive (less banking/financial services shenanigans "at the margin") to muck up the system, but I am afraid it will cut deeper than those businesses at the margin and seep into viable, sustainable business that just need a little longer time horizon to mature. I just sense that the Micro concept of DWL is going to intersect with the Maco concept of Natural Rate of Unemployment. Seems to me that there is going to be an invitable increase in the NRU. If you contract the margin, where are those workers going to go, in the short term? I hope I am wrong! As I tell my students when they ask me a question I dont know the answer to, "I am just a high school teacher who plays a would-be economist from 8:00am to 4:00pm, how should I know???" :)