The Numbers Game with Russ Roberts -- The Economic Recovery (Part 1)

According the National Bureau of Economic Research, the US economy recovered from the recession at the beginning of the summer of 2009. Yet the recovery has been disappointing when compared to other recoveries. In this episode of the Numbers Game, John Taylor of Stanford University talks with host Russ Roberts about the nature of the recovery. How does it compare historically to other recoveries? How can we measure the pace of the recovery? The conversation ends with a discussion of possible explanations for why the recovery has been disappointing.

1) What is potential GDP? (0:52)
2) The economy never catches back up to trend (2:38)
3) The 1981 recession (3:16)
4) Is there a correct or potential level of GDP? (4:45)
5) A look at past recoveries (6:13)
6) Friedman and the Plucking Model (8:10)
7) A look at real growth rates in recoveries (8:59)
8) Employment and the recovery (10:20)

LINKS TO DATA & PAPERS REFERENCED -

1. 2008-09 and 1981-1982 Recession & Recovery Charts:
Real GDP (GDPC1) downloaded from FRED 7/13/12, taken from BEA.gov - http://research.stlouisfed.org/fred2/...
Potential GDP (GDPPOT) downloaded from FRED 7/13/12, taken from CBO.gov - http://research.stlouisfed.org/fred2/...

2. 1907-08 and 1893-94 Recession & Recovery Charts:
GDP data from NBER, compiled by Nathan Balke and Robert Gordon with adjustments by John Taylor for comparability with earlier charts -http://www.nber.org/data/abc/ Potential GDP calculations by John Taylor using a Hodrick-Prescott trend.

3. The Plucking Model Working Paper:
The "Plucking Model" of Business Fluctuations Revisited by Milton Friedman Working Papers in Economics, E-88-48 -- Hoover Institution, Stanford University
http://hoohila.stanford.edu/workingpa...

4. Growth Rate of Real GDP Chart:
Growth Rate calculated from Real GDP (GDPC1) downloaded from FRED 7/13/12, taken from BEA.gov - http://research.stlouisfed.org/fred2/...

5. Change in the Percentage of the Population that is Working Chart:
Employment-Population Ratio (EMRATIO) downloaded from FRED 7/13/12, taken from BLS.gov - http://research.stlouisfed.org/fred2/...

Click the following link to view "The Economic Recovery (Part 2)"
http://www.youtube.com/watch?v=ooUboh...

• Category

  News & Politics

[Joel Hallet]

When will part 2 be released? This is fantastic!

[HooverInstitution]

Part 2 will be released on Monday, October 15. Thank you.

[Russ Roberts]

John Taylor (and others) use the 1981 recession for comparison because it it the only economic downturn since WWII that is anything like this one, particularly measured by unemployment.

We will talk briefly about balance sheet issues in Part II.

[Pwecko]

The recovery is disappointing? What recovery?

[Tom Kilworth]

John Taylor looks like Newt Gingrich in the cartoon

[shakaama]

yay white guys and formulas :( can i get away from formulas... uggg, studying for my CFA. So anyway, I question, seriously the notion of a potential GDP. [in fact I question all projected formulas] I think it is disingenius to say, "had it been not for X, we'd be at Y"

It's like those that trade based on historical trends on the same days of the year, you might as well be a celtic druid, in my opin.

This economy is not recovering because there has been no correction. failures need to fail.

[DrCruel]

The unionized government employee income recovery?

[Craig Jones]

Are all recessions and recoveries the same? Are there not different kinds of recessions and recoveries? Marxists used to claim -- when there were a lot of them around -- that each crisis in capitalism picks up where the last crisis left off, which meant that we should expect each crisis to be worse than the previous. But it's the first question I'm really interested in, because this video seems to suggest that recessions are essentially similar one to another.

[polvotierno]

potential real GDP is not dependent on total labor and capital available. This is an error. It is dependent on the portion of the total capacity of labor and capital available to the economy considering constraints. The difference is great. One has to understand the constraints in order to calculate potential real GDP. And potential real GDP is actually much lower than shown in the video.

[MrConservative608]

Sorry that I prejudged. I saw the 2nd video.

[MrConservative608]

It may be just a coincidence but it is amazing that this video by the Hoover Institute does not talk compare the potential GDP in the Great Depression when Herbert Hoover was president. In my study of history Herbert Hoover was a liberal Republican president that caused or made worse the Great Depression with the Hawley - Smoot Tariff Act of 1930 & raised taxes on the top rate to 63% with the Revenue Act of 1932 as well as doubling the corporate & estate tax.

[Eric Cooper]

ReasonTv brought me here. Thanks.

[cr1138]

so, we could get 1893 chart, but not 1974 chart?

[Brandon Holsey]

I am so thankful for this channel!! I hope it is still here for my children (if I ever have any).