I ask that only liberals answer this post since I don’t want to get the liberal perspective mixed up with the conservative/libertarian perspective. Libertarians generally believe that the economy is good only when it puts massive amounts of profit in their pockets this very minute. They measure economic health with profit and only with profit. For this reason I don’t want the input of libertarians on this issue.
The textbook definition of recession measures economic output relative to previous economic output in the immediate past. By 1936 the U.S. GDP was once again as large as it was in 1928. The economy had grown enough since the Crash of ’29 to no longer be in a recession, but unemployment was still high, consumer incomes were still low and the country was still in the Great Depression. The GDP of 1936 was measured relative to 1935 and 1934, but not 1928 so the health of the economy appeared to be better in 1936 than it actually was relative to a time when it was even better. Using the textbook definition of recession gives a false idea of what the economy is really like.
I am trying to devise an economic index that can measure the health of the economy by taking into consideration things other than just how much money there is. What factors should I put in the index to account for the social impact of the economy (the economy may be good if profits are up, but then the economy may be bad if wages or real income is down)? I am thinking of something that will measure the health of the economy the way we measure inflation with the consumer price index, i.e., prices at the moment are up or down a percentage of what they were in a baseline year. To use my index you would find a year when the economy was “healthy” and compare all other years to it.
The textbook definition of recession measures economic output relative to previous economic output in the immediate past. By 1936 the U.S. GDP was once again as large as it was in 1928. The economy had grown enough since the Crash of ’29 to no longer be in a recession, but unemployment was still high, consumer incomes were still low and the country was still in the Great Depression. The GDP of 1936 was measured relative to 1935 and 1934, but not 1928 so the health of the economy appeared to be better in 1936 than it actually was relative to a time when it was even better. Using the textbook definition of recession gives a false idea of what the economy is really like.
I am trying to devise an economic index that can measure the health of the economy by taking into consideration things other than just how much money there is. What factors should I put in the index to account for the social impact of the economy (the economy may be good if profits are up, but then the economy may be bad if wages or real income is down)? I am thinking of something that will measure the health of the economy the way we measure inflation with the consumer price index, i.e., prices at the moment are up or down a percentage of what they were in a baseline year. To use my index you would find a year when the economy was “healthy” and compare all other years to it.