Exploring the Eclipse of Equality

Singing (off tune) in the Rain: Selling depression in a downturn

In Uncategorized on February 17, 2010 at 9:15 am

So consider this screen shot from the website for Intrade.

Price for Will the US economy suffer a depression before the end of 2009? (Please Read Contract Rules) at intrade.com

Now I am a bit of an old fogey when it comes to predicting social phenomena, and I like to use surveys and well crafted questions that somehow get respondents to fairly query their own subjective states and report them to the researcher in a way that can be aggregated and generalized to the appropriate population. With that being said, I have been convinced that the use of the “money where your mouth is” technique that the prediction site, intrade, uses is pretty reliable stuff.  So as we consider this graph, and I read it correctly, we see that back in February or March (I am having trouble seeing which), there was a market estimate of around 50% that we would have a decline in GDP of 10% or less (that is a depression) in 2009.  I assume that the spike here is right around the point where the ARRA was passed. The estimates of the real decline from the Bureau of Economic Analysis is 2.4%. So, barring some wild adjustment to the numbers, we can say that it didn’t happen. But we should note that around the time of the new TARP bill and the stimulus, the markets were just about even on the odds of a depression. That is pretty wild.

Now, given that we were pretty comfortable with the idea that the country faced a depression ( I haven’t looked for estimates, but I assume that unemployment would have ended up somewhere north of 20% in this case) and we did not have one, why is it that the Democrats can’t seem to sell that idea to the people? This is the big question for those on both sides of the aisle, because if it is the case that the Dems really tried to sell the argument and the Republicans prevented that sale, then we should give props to the Republicans for their efforts. As far as I can see this is like selling umbrellas in a downpour for the Dems whatever Barney Frank said. As far as I can tell, the data suggest that things would have “sucked worse” without the bailout and the stimulus.

I am beginning to suspect that Republicans are simply better politicians. What I mean by that is that the Republicans are able to look at the political opportunity structure for what it is and to act on that vision strategically. The Democrats have not had that confidence since about 1965. Obama promised that after forty years in the wilderness, that progressives were ready to reach their (regularly scheduled) promised land. If the Republicans can stick to their ideological plan, they may put that off until the next window of opportunity.


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