Call it a recession if you feel like it
Nearly three-quarters of Americans believe the economy is in recession, according to a new USA Today-Gallup poll. Commentator and economist Tyler Cowen says it might make us feel better, but it's best to leave the real definitions to the economists.
Tyler Cowen (George Mason University)
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KAI RYSSDAL: The heck with what all the experts say -- the people have spoken on the subject of whether or not we're in a recession. Three-quarters of Americans say: You bet we are. That's according to a USA Today-Gallup poll that came out this morning.
But commentator and economist Tyler Cowen says we need to define our terms.
Tyler Cowen: You've probably heard and read that the American economy is in a recession. But what exactly does that mean? In reality, the label is more of a fiction than anything else. Calling it a recession is something we do to make ourselves feel better. Naming offers a sense of control, or at least it alleviates our feelings of helplessness.
Talk of a recession is also like talk of the weather -- it creates social bonding, or it allows you to take the emotional thermometer of other people.
The formal label "recession" usually comes much later than does the recession itself. For an economist, a recession is defined by the formidable-sounding Business Cycle Dating Committee, based at the National Bureau of Economic Research, in Cambridge, Mass. This committee looks at a lot of numbers, thinks really hard, and one day announces that a recession has come.
The thing is, the committee usually doesn't render a judgment until six to nine months after the recession has started, mostly because they want to be sure. So even if a recession started in December, as most economists think, it won't be announced until May or later. These definitions are useful to academics, but no use at all to people looking for jobs or trying to start new businesses.
Today, you can bet on the question of whether a recession will come. Take a look at the online market at InTrade.com -- the obsessive can get a new and slightly different number each time they hit reload.
Lately, the betting odds of recession are running over 70 percent, and that reflects the knowledge held by the most informed market traders. If you know better, you can bet enough money and shift the odds yourself. The discourse on recessions has been democratized, and today the best source on whether a recession is coming is quite simply... you.
RYSSDAL: Tyler Cowen is Professor of Economics at George Mason University. His blog is called Marginal Revolution.
