In the New York Times September 14 2018 in an article – We’re Measuring The Economy All Wrong, the writer of the article David Leonhardt complains that despite strong gross domestic product data (GDP) most people don’t feel it. The writer of the article argues that,
The trouble is that a handful of statistics dominate the public conversation about the economy despite the fact that they provide a misleading portrait of people’s lives. Even worse, the statistics have become more misleading over time.
According to the accepted rules of thumb, recessions are about at least two quarters of negative growth in real gross domestic product (GDP). Recessions, according to this way of thinking, are seen as something associated with the so-called strength of the economy. The stronger an economy is the less likely it is to fall into a recession. The major cause of recessions is seen as various shocks, such as a sharp increase in the price of oil or some disruptive political events, or natural disasters or a sudden fall in consumer outlays on goods and services. Obviously then, if an economy is strong enough to cope with these shocks then recessions can be prevented, or at least made less painful. For instance, a well-managed company with a well-managed inventory is likely to withstand the effects of various shocks versus a poorly managed company.
Severity of a recession and the strength of the economy
We suggest that recessions are not about two quarters of negative growth in real GDP, or declines in various economic indicators as such. They are also not about successful inventory management. We would suggest that recessions are not about how resilient an economy is to various external and internal shocks.
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