The Myth of the Macroeconomy
By Arnold Kling
Does that sound like a good book title? The theme would be that treating the economy as if it were a single individual that sometimes spends less and works less is a simplification that does more harm than good.
This past weekend, I went to my home town for a high school reunion. In the process, I saw a number of reminders that not everyone is experiencing the same economy these days.
For one thing, the plane on Friday to St. Louis included a number of Baltimore Ravens fans. I could tell they were not from the top ten percent of the income distribution. When did it become common for the non-rich to fly to road games? I guess the advent of Southwest Airlines means that flying is no longer a luxury. But I felt like somebody did not get the memo that we are in a recession.The reunion was well attended. About half the people came from out of town. Nobody seemed to be suffering from economic distress. Moreover, many of us have children in their late twenties, and everybody’s kid seemed to have a good job. One classmate’s kid had already made his first million, selling a business that had a popular i-phone app.
Now, there is going to be selection bias at a reunion. People who became alcoholics or otherwise messed up their lives are not as likely to show up.
Even more important, this was Clayton, Missouri. Is there another community in the country that has such a well-defined top spot in the regional status hierarchy? Every other metro area with which I am familiar is more multi-polar. If you played “family feud” and said “Name the most prestigious community for an affluent family to live in the DC metro area,” there would be points for Georgetown, Potomac, and Fairfax. For the St. Louis metro, they might have to stop after Clayton.
It seems to me that the central focus in Clayton is the high school. Clayton is its own school district, and yet the high school has only about 800 students. I do not recall families showing off materially. The status symbol was to own a house in this school district. (I was the only one I knew who lived in an apartment.)
People thought that the schools themselves were responsible for the high achievements of their graduates. In fact, when I moved the
ire in 7th grade, the administrators were so certain that I could not have received a comparable education anywhere else that they put me into remedial classes, a decision which was an educational absurdity. Thus, I had an early opportunity to see–and to see through–the myth of school quality.
So I’m not saying that my weekend experience of “Dude, where’s the recession?” is indicative of any broad trend. But it does remind us that there is a lot of variation around the average.
What proportiont of the country has gotten through the last three years reasonably unscathed? (I’m not going to worry about people who spilled their lattes on the newspaper when the stock market had a bad day.) Has it been 10 percent? 20 percent? 60 percent? 80 percent?
There are multiple escalators in the economy. At any one point in time, some people are on up escalators, and some people are on down escalators. From 1970 to 2000, I think that cohort data would tell you that many more families rode escalators up than rode them down. From 2000 to today, my guess is that the proportion riding up escalators has not been as high.
Maybe that is what a recession is. Not a macroeconomic accident in which all of us suddenly decided to spend less and consequently have been unemployed more. But a period in which the up escalators are less crowded and the down escalators have more people than usual.