Tags: shiller | recovery

Shiller: Thinking Our Way into Recovery

By    |   Tuesday, 24 Nov 2009 12:48 PM

Aside from fiscal stimulus and government bailouts, the economic recovery that appears under way may be based on little more than self-fulfilling prophecy, says Yale economist Robert Shiller, co-founder of the Case-Shiller housing index.

Shiller points out that the mere thought that the recession is ending builds confidence and encourages consumers to start spending again, generating visible signs of recovery.

"The notion isn't as farfetched as it may appear," Shiller writes in The New York Times.

“As we all know, recessions generally last no more than a couple of years,” he points out, and the current recession began almost two years ago.

“According to the standard schedule, we’re due for recovery,” Shiller says.

“Given this knowledge, the mere passage of time may spur our confidence, though no formal statistical analysis can prove it.”

The idea of regular “business cycles” began to take root in the 1920s, Schiller notes, and grew as people became more interested in psychology.

“Recessions. . . implied timetables that mark their expected end,” he says.

“A diagnosis of a recession can be shrugged off as something from which you will recover, as though your doctor had just diagnosed an illness as a common cold.”

The Associated Press reports that economy grew at a 3.5 percent pace in the third quarter, a strong signal that the economy is entering a recovery phase from the worst recession since the Great Depression.

However, the pace of the recovery is expected to be slow because of high unemployment and tight credit.

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Aside from fiscal stimulus and government bailouts, the economic recovery that appears under way may be based on little more than self-fulfilling prophecy, says Yale economist Robert Shiller, co-founder of the Case-Shiller housing index.Shiller points out that the mere...
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Tuesday, 24 Nov 2009 12:48 PM
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