Here’s Heather Long’s explanation for the state of the economy from her Washington Post column:
The most plausible explanation of all is that the pandemic and subsequent recovery were so unusual that the normal rules of economics don’t apply. Demand surged for everything from toaster ovens to used cars. Supply chains could not keep up. Prices spiked. Now, there’s a right-sizing. Goods inflation has come down for most items (even for eggs) as demand has subsided. The question is whether services inflation for travel, restaurants, entertainment, insurance and deliveries will follow.
It’s reasonable after a fashion to think that the phrase “the normal rules of economics don’t apply” has actual meaning. If it means anything it means that people don’t have preferences, don’t pursue their incentives, and behavior is completely unpredictable. And yet everywhere I go, on a daily even hourly basis, I see almost exactly the opposite. I see people buying things when they’re on sale, stopping their cars when the traffic light turns red (unless they think they can get away with running it), and picking Coke over the store brand of cola.
On the other hand I think it’s completely plausible, when the measured numbers are 10% or the reported numbers, to wonder if the calculations are completely reliable.
I think I’ve been saying for over a year now that the economy is weird. Historical patterns and economic models don’t match well with what we are seeing, so I think epistemological humility is in order.
I agree that “epistemological humility is in order”. She’s doing the opposite, the effective equivalent of saying that because clocks run a fraction of a second faster on satellites than they do on the ground that the laws of physics don’t apply.
Nothing is really different. Human nature has not suddenly changed.
Ms Long suffers from the arrogance of believing she has a unique insight.
In a sense nothing is different at all. People keep making predictions that turn out wrong and people offer explanations that dont fit reality. Some people really want us to be n a recession but the numbers dont support it. Which reminds me that some people here were predicting blackouts in Europe and people freezing to death. Didnt happen and gas prices have been back down to 2021 levels for a couple of months. Some of that has been due to mild weather but most of it due to increasing LNG, more solar and wind and some conservation. All the tut-tutting about how the EU was going to end up using lots of coal?
“For all the talk of a coal rebound in Europe, by the fall the continent as a whole was generating less power from coal than it had the previous fall, before the invasion — and the 26 coal plants which were reactivated to deal with the crisis have been operating at only 18 percent capacity on average.”
Steve