Blog - Views on the Economy and the World

Views on the Economy and the World

A blog by Jeffrey Frankel

For more information on this publication: Belfer Communications Office
For Academic Citation:Views on the Economy and the World,” Views on the Economy and the World, https://www.belfercenter.org/publication/views-economy-and-world.

324 posts

Ever since the 1960s, we have heard the cliché, “If they can put a man on the Moon, why can’t they do X?” where X is usually some goal like eliminating hunger — technologically simpler than the scientific miracle of space flight, but harder to accomplish in practice because it involves human behavior.  In 2021, the salient question is, “If we can accomplish the scientific miracle of developing vaccines capable of ending the Covid-19 pandemic that has killed millions, why can’t we convince enough people to get vaccinated?”

In lower-income countries, jabs are often limited by the availability of the vaccines.  But this is not the case with countries as fortunate as the United States, where the problem is primarily vaccine hesitancy, or even outright vaccine hostility.

One obstacle to productive public discourse and deliberation is a syndrome whereby the media, whether mainstream or otherwise, present policies in a manner that could be called “false imbalance.”  No, I don’t mean “false balance.”  False imbalance is quite different. It refers to the temptation to cast in a negative light, policies that in fact are reasonable attempts to balance competing objectives.  Examples can be drawn from health care, fiscal policy, and monetary policy.

My preceding blog post pointed out that excess mortality statistics show Covid-19 death rates to be much worse in most countries than are reported by official statistics.  In this sense, the pandemic is even worse than one thought.

But the news all around us is already depressing.  A consideration of longer-term history allows a more encouraging perspective on mortality — provided we handle the statistics properly.

Mark Twain said, “There are three kinds of lies: lies, damned lies, and statistics.”  Too often, the pandemic has unnecessarily allowed scope for the sort of popular suspicions reflected in Twain’s bon mot. Statistics are in fact a critical component of the fight against Covid-19.  Their use ranges from judging the efficacy of different vaccines to judging the performance of different governments.

 

A generation of great international economists is passing from the scene.  Richard Cooper died on December 23. An American, he was teaching his classes at Harvard until the very end. Robert Mundell, passed away on April 4.  Originally Canadian, he was a winner of the Nobel Prize in economics.  And John Williamson, on April 11. Originally British, he had been the first scholar hired by the Peterson Institute for International Economics.

It has been a year since the US and the world went into recession.  Because of its origins in the sudden pandemic, it was possible to reliably discern the advent of the recession before it was reflected in any of the standard economic statistics, which is rare.  (I hope it shocks no one to learn that economists can’t normally predict recessions.)

By the end of the second quarter of 2020, US GDP had fallen 11 %. This record plunge took the US economy from a level that is estimated to have been 1.0% above potential output at the end of 2019, to a level 10 % below potential in mid-2020.  Potential output is the level of GDP that is produced when unemployment is at its so-called natural rate, the capital stock is operating at the capacity for which it was designed, buildings have their normal occupancy rates, etc.