This 4 and 1/2 years of sub-2% growth (on average) occurred during a period of rapidly falling unemployment, and above trend employment growth
The implications for productivity growth are terrible. Supposedly, firms got rid of their ZMP workers during the recession. Are we saying that subsequently they were hired back???
Again, I do not trust data that treats the entire economy as a GDP factory. If I had to bet, I would go with the Goldman Sachs view that inflation is over-stated, which means that real GDP growth has been under-stated.
Or hired into different firms with depreciated organizational capital.
Coincidentally, I ran across an essay (http://breakingsmart.com/season-1/a-new-soft-technology/) today that references a book review by you (http://www.aei.org/publication/gdp-and-measuring-the-intangible/) about the limits of summarizing the economy via GDP. The entire essay series (http://breakingsmart.com/season-1/) seems very good, though I haven’t read the whole thing yet.
Thanks for the heads up, Shmuale! Let me know if you find some things particularly insightful in the essays. Just glancing, I did not see anything strikingly original there.
The problem with saying inflation is overstated is why would it be overstated any more recently than in the past. It may be eluding us now, but why would it be eluding us anymore than in the past? I don’t think ‘free’ really cuts it. Anything falling in price should leave more money to be spent on other things, so why isn’t it showing up? Even if it shows up in asset prices, sales of those should lead to more spending by someone.
There is the what is different now issue. At some point compunding makes it hard to stay hidden.
And then, if something is different, maybe the “free” is a workaround to high costs and lower revenues in the new normal. Maybe the workers had to be rehired at lower wages to compensate for lower revenues and higher costs.
Technology isn’t deflation and we don’t know if it is mostly cause or effect.
Btw, in what way is inflation over-stated? And by that way, was it under-stated prior to the great recession?
Inflation overstated? And to what extent?
GDP understated? To what power?
I think inflation as measured on the industrial consumption level is low. Commodity prices are clear on this. On the public consumption level, inflation is high. Rents, fuel prices, food prices, healthcare, all are rising.
I’d like to believe that GDP is higher than it is stated. That, at least, leaves room for creative adjustment from the current ZIRP which, as I believe Sumner alludes to the notion that a rate rise might actually be good for GDP growth going forward. But if you are correct that GDP is understated, and perhaps that is the Fed’s view as well, then, it is a win-win as rates will rise regardless this fall.
Unfortunately, this will do little to the inflation paid by the average person. It’s hard to know what distortion will occur when you alter (or distort) the current distortion.