A roundup of economic news from around the Web.
- Stimulus Effects: The nonpartisan Congressional Budget Office estimates the effects of the stimulus (the American Recovery and Reinvestment Act). “CBO estimates that in the fourth quarter of calendar year 2009, ARRA added between 1.0 million and 2.1 million to the number of workers employed in the United States, and it increased the number of full-time-equivalent (FTE) jobs by between 1.4 million and 3.0 million. Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers. CBO also estimates that real (inflation-adjusted) gross domestic product (GDP) was 1.5 percent to 3.5 percent higher in the fourth quarter than would have been the case in the absence of ARRA.”
- Way Out?: Writing for the Financial Times, Martin Wolf is gloomy about the global economic outlook. “I do not agree that monetary policy mistakes were responsible for all of this. But they played a role. In any case, all this had to end. Now, after the implosion, we witness the extraordinary rescue efforts. So what happens next? We can identify two alternatives: success and failure. By success, I mean reignition of the credit engine in high-income deficit countries. So private sector spending surges anew, fiscal deficits shrink and the economy appears to being going back to normal, at last. By failure I mean that the deleveraging continues, private spending fails to pick up with any real vigour and fiscal deficits remain far bigger, for far longer, than almost anybody now dares to imagine. This would be post-bubble Japan on a far wider scale. Unhappily, the result of what I call success would probably be a still bigger financial crisis in future, while the results of what I call failure would be that the fiscal rope would run out, even though reaching the end might take longer than worrywarts fear. Yet the big point is that either outcome ultimately leads us to a sovereign debt crisis. This, in turn, would surely result in defaults, probably via inflation. In essence, stretched balance sheets threaten mass private sector bankruptcy and a depression, or sovereign bankruptcy and inflation, or some combination of the two.”
- Price Tag Taste: On Psychology Today, Daniel R. Hawes looks at how our brains trick us into equating price with quality. “To get at this relation between price and taste experience, the researchers first made sure the experiment participants were always given information of a wine’s supposed price. They did this by presenting the wines for the experiment in bottles that were clearly identified by their supposed retail prices of ($5 to $90). What they also did, was refill the wines in such a way that each participant would have to taste the same wine twice; once from a bottle that was supposedly expensive (e.g. $90) and once from a bottle that had a much lower price tag (e.g.$10). Every participant was therefore led to believe that he or she was tasting five different wines, when indeed he or she was only tasting three different wines; two of them twice. The first set of results is striking, albeit possibly what you would expect: The expert wine tasters remained oblivious to the researcher’s manipulations and were not able to tell that they were tasting only three, instead of five, wines. Also, when tasting the same wine, the participating wine tasters systematically reported superior taste for the wine that came out of the $90 bottle, in contrast to the wine that came from the $10 bottle.”
Compiled by Phil Izzo