2012-08-01

Cochrane on the Economy

Somehow or another, John H. Cochrane's excellent economics blog continually goes overlooked in the economics blogosphere. He consistently writes analysis of a quality and seriousness found on few other blogs; yet, the "heavy hitters" seem to prefer nitpicking posts by Matt Yglesias and Ryan Avent. Even non-economist Ezra Klein seemingly gets more real estate in the economics world than Cochrane.

Personally, I find this flabbergasting.

Take this morning's round of posts, for example. Every morning, I ritualistically read my shortlist of economics blogs (which is actually not so short) like other people read the newspaper. I like to know what's going on out there, what's being discussed. Tyler Cowen and Scott Sumner were discussing articles at The Financial Times. Kurt Schuler and Jonathan Finegold Catalan were still discussing Milton Friedman. The always-excellent David Henderson was discussing an old issue of Reason magazine.

Great posts, all of them. But flying right under the radar was John H. Cochrane's excellent analysis of the US macroeconomy. Here is a post so current, so well-written, so easy-to-understand that it ought have been published as an op-ed in a major national newspaper (as many of Cochrane's previous analyses have been). He lays out the numbers, provides some analysis, takes a stand, builds a consensus, and leaves the details to be hashed-out by additional commentary. 

...And yet, the economics blogosphere is silent.

When people discuss the various failures of the field of economics in light of the current state of the economy, they usually indict "failures to predict" or "failures to correctly prescribe." I think complete silence in light of a thought-provoking macroeconomic analysis is also worth indicting. But who am I, anyway? Just a Schmo who reads the papers.

Here's Cochrane's conclusion:
The trends are an economists' horror movie. Real GDP seems not to be recovering at all -- no period of swift growth to go back to a trend. We seem stuck at 2.4% growth forever. The CBO is giving up on us too. Employment will not recover as a fraction of population until the economy recovers. We seem stuck at low employment forever. And now we seem headed to a 1970s productivity slowdown as well.

I don't view this as contentious, outside of Presidential politics. Paul Krugman thinks the economy is pretty awful too.

What to do? If only it were so simple as to have the Fed print up another two trillion dollars, or have the Treasury borrow another $5 trillion and blow it on stimulus boondoggles. We're stuck in sclerotic growth, and to everyone but a few die-hard extremists, that means growth-oriented policies are the only way out.
Like me, Cochrane believes in making the regulatory regime better for businesses, so that they can get back to being productive, and he also believes in a low-tax regime that markets and individuals really seem to enjoy. Also like me, he favors limited government spending.

He is closer to being a classic monetarist than I am... Or is he? I'm an economist in transition right now. I'm not sure where my views will ultimately end up. I have been a fan of Austrian economics for a while, but that sub-field is mired in a stagnation of ideas, so I have been trying to expand my horizons a bit. I wait to see where that eventually leads me...