Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
Upside of Inequality Unintended Consequences Oxford
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Edward Conard

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Robert Barro: The Reasons Behind the Obama Non-Recovery

Robert Barro writes in today’s WSJ:

“In our paper, “Rare Events and Long-Run Risks,” we examined macroeconomic disasters in 42 countries, featuring 185 contractions in GDP per capita of 10% or more. … On average, during a recovery, an economy recoups about half the GDP lost during the downturn. The recovery is typically quick, with an average duration around two years. … Hence, the growth rate of U.S. per capita GDP from 2009 to 2011 should have been around 3% per year, rather than the 1.5% that materialized. … Many of the biggest downturns featured financial crises.

The main U.S. policy used to counter the Great Recession was increased government transfer payments. Federal social benefits to persons as a ratio to GDP went from 8.7% in 2007 to 11.7% in 2010, then fell to 10.9% in 2015. … Unfortunately, increased transfer payments do not promote productivity growth.”

I would add: Nor do transfer payments promote increased workforce participation. As well, with a near-infinite supply of labor both in the lead-up to the crisis and after, it’s hardly surprising business hasn’t invested much in the day-to-day nitty-gritty of increasing productivity. 

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