Type to search

AS Award #10

GB Geo-Blog

AS Award #10

I begin by apologizing to historians. You are not the only ones who play games with numbers and make absurdly silly claims. Nouriel Roubini, a professor at the NYU Stern School of Business, has earned my tenth AS Award for showing that economists also can do these things.

In an article in Wednesday’s Globe and Mail, Roubini made the outlandish suggestions “official measures of GDP may grossly overstate growth in the economy, as they don’t capture the fact that business sentiment among small firms is abysmal and their output is still falling sharply. Properly corrected for this, third quarter GDP may have been 2 per cent rather than 3.5 per cent.”

All of sudden, Roubini is an expert on national income accounting. Does he really believe that he knows better than the experts?

He also claimed: “Many of the lost jobs – in construction, finance, and outsourced manufacturing and services [what is he talking about here?] – are gone forever, and recent studies suggest that a quarter of U.S. jobs can be fully outsourced over time to other countries. Thus, a growing proportion of the work force – often below the radar screen of official statistics – is losing hope of finding gainful employment.”

He cannot be serious that the jobs lost during the recession will never return, or that large numbers of the unemployed will never find meaningful employment? In Western Europe, he might be right; but not in the United States. Obviously, he has not looked  at the dynamics of the labor market. And even if more jobs are eventually outsourced, this does not mean that many more new jobs will not be created.

While there is more that is absurdly silly in his article, I end with the following. At one point he says: “non-prime borrowers do not have much access to mortgages and credit cards. They live from paycheque to paycheque.” Later he states: “while higher-income and wealthier households have a buffer of savings to smooth consumption and avoid having to increase savings, most lower income households must save more…As a result, the household savings rate has risen from zero to 4 per cent”.

Let’s see if I get this right. On the one hand, low income Americans can barely make ends meet. On the other hand, these same people must save more, and as a result the savings rate has risen sharply. I don’t get it! And I suspect that if Roubini re-read his article, neither would he.


Leave a Comment