I’ve gotten a number of emails from readers asking if I think we’re headed for a double-dip recession. (In case you aren’t familiar, a double-dip recession is, well, exactly what it sounds like, and that link is an interesting overview of different recession types. I now have a new set of balloon animal shapes if nothing else, since my Phillips curve balloon animal is less than impressive.) The short answer is that I don’t know- my economic magic 8 ball keeps coming back with “outlook hazy,” and I don’t know whether that means to ask again later or I should take that as my answer. What I will say is that successful economic stimulus requires restored confidence in the economy, since people aren’t going to start spending (demand side) and companies aren’t going to start investing (supply side), unless they believe that the economy is going to stop being crappy. Call me crazy, but it doesn’t seem like we’ve gotten there.
I pride myself on being able to admit when I can’t predict something with certainty, largely because I think that there should be more transparency regarding how sensitive economic models are to their underlying assumptions and how arbitrary those underlying assumptions are. (I think business nerds would refer to such transparency as a “sensitivity analysis.”) Businessweek apparently does not share this mindset, as evidenced by an article I came across entitled “Treasuries Showing 12% Chance of Double Dip Recession.” Really, Businessweek? You’re sure the real probability isn’t 11 percent? How about 13 percent? It’s things like this that make economists get made fun of. For example:
Q: How can you tell economists have a sense of humor?
A: They use decimal points.
Sigh. There is, however, at least one economist who really does have a sense of humor and likes to talk about double-dip recessions. I present to you the latest from Merle Hazard:
Is it just me, or does all of this double-dip talk make you want an ice cream cone also?