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From The Vault: A Lesson On Economic Indicators (And Yeah, I Went There)…

September 2nd, 2009 · 8 Comments
Follow Ups · From The Vault · Macroeconomics

A reader just emailed me the following:

I just came across this article and [thought]: “That would be perfect for the EDIWM website/facebook page.”

http://www.washingtonpost.com/wp-dyn/content/article/2009/08/30/AR2009083002761.html?nav=hcmodule

So just in case you hadn’t seen it, I thought I would send a link to you.

(Hat tip to John Harvey.) The article is from August 31, 2009 and has the title “Blue Chip, White Cotton: What Underwear Says About the Economy.” Well…it IS something that is perfect for EDIWM, which is why I wrote about it back in April! So if the WaPo can recycle stories, so can I. 🙂 The upside of this recycling is that, rather than talk about how underwear sales are declining because of a bad economy, the article above is talking about how underwear sales are starting to rebound and how this is a good sign of things to come. So, yay, I suppose? Following is what I had to say the first time…

(The original post is from April 12, 2009, and you can see it with the comments here.)

Two points:

1. I wrote earlier about how (and why) the most recent government stimulus checks were a boon to the porn industry.

2. Sam Stein recently reported on The Huffington Post about one of Alan Greenspan’s most popular wacky economic indicators: men’s underwear. The article states, among other things:

“As chairman of the Federal Reserve, Alan Greenspan was known for using quirky, proletariat metrics to judge the temperature of the economy. The most famous of these, as recounted by NPR’s Robert Krulwich in January 2008, were the sales of men’s underwear. If the economic scales dipped even the slightest, Greenspan reasoned, it was as sure a sign as any that people were truly feeling the pinch.

‘If you look at sales of male underpants it’s just pretty much a flat line, it hardly ever changes,’ Krulwich recounted after the publishing of Greenspan’s book, ‘The Age Of Turbulence.’ ‘But on those few occasions where it dips that means that men are so pinched that they are deciding not to replace underpants. And [Greenspan] said “that is almost always a prescient, forward impression that here comes trouble.”‘”

Hm. So let’s see…when the economy gets bad, stimulus checks go out, which leads to an increase in porn consumption. If the economy is really bad (or people think it is going to get really bad), less men’s underwear is purchased, though thankfully not a lot less. I’ve summarized this in a nice little diagram:

I don’t even want to think about the logistics of this.

Tags: Follow Ups · From The Vault · Macroeconomics

8 responses so far ↓

  • 1 Dave M. // Sep 2, 2009 at 4:27 pm

    Jodi,

    Which sector of the porn industry are you diagramming? If it’s the take-home video kind, I could see your bottom graph being accurate.

    However, if we’re talking about the industry in general, your diagram doesn’t reflect the different, though still unwelcome, kind of pinch strippers are going through… And I’m wondering if your diagram takes that into account.

    The Porn Bust
    http://mises.org/story/3668

  • 2 Dave M. // Sep 2, 2009 at 4:42 pm

    Turns out I remembered a relevant, but incorrect article… And before I get any comments, I don’t go out looking for economic news of this sort. It’s just sort of hard to miss when MSN/WSJ/AP report these and they appear in my news feeds, or when Mises had it splashed on its front page. :p

    Here’s the one I meant to post:

    Strip clubs feel recession’s pinch
    http://articles.moneycentral.msn.com/Investing/Extra/strip-clubs-feel-the-pinch.aspx

  • 3 econgirl // Sep 2, 2009 at 9:00 pm

    If you click the link in point 1 you will see that I am referring to online porn. Furthermore, I was specifically referring to the increase in online porn spending in response to tax rebate stimulus (poor choice of words) checks, which are typically given during economic downturns. Hope that clarifies. 🙂

  • 4 Matt // Sep 3, 2009 at 5:48 pm

    Ew, is right.

    Funny, both these and the hot waitress example seem to be relevant more for men, and our country is a slight majority of females, right? Any funny indicators to reflect them?

  • 5 Lawrence M // Sep 4, 2009 at 8:18 am

    Well the only reason you need new underwear is if you go on dates* and since you really can’t afford a date, you don’t need new underwear to watch porn.

    *There’s a distinction between clean and new underwear. You can always wash your underwear but some girls are into kinky sh!t and destroy your underwear.

  • 6 Carter // Oct 15, 2009 at 5:46 pm

    My favorite economic indicator is Ben Bernanke. You can always count on him to be absolutely wrong about everything. “The housing market is strong as ever.” CRASH…
    “The dollar is strong.” CRASH….
    “Fannie and Freddie are strong.” CRASH…
    “The economy is showing signs of recovery.” CRASH…

  • 7 econgirl // Oct 16, 2009 at 2:37 pm

    Technically, for him to be an effective indicator it would have to work the other way as well…in other words, there would have to be consistent cases where be predicted doom and gloom yet everything turned out fine. Good luck with that search for empirical evidence. =P

  • 8 Carter // Oct 16, 2009 at 3:31 pm

    Good thing economics doesn’t require the study of empirical evidence. Phew… And no, Bernanke doesn’t predict doom and gloom with the exception of telling us what will happen when we audit the Fed. That is one prediction Big Ben will get right. When the Fed is audited, the sky will fall. It just won’t be for the reasons he describes. Enjoy: http://www.youtube.com/watch?v=HQ79Pt2GNJo

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