Talk:Recession

possible copyright violations, Great Depression text

I removed several sections from this page. Most of it was because text on the page included passages that seemed to be lifted entirely from [1] and [2], which I'm pretty sure are copyrighted materials (howstuffworks.com has a copyright notice at the bottom of its pages, at the very least) and as such are possible copyright violations. In particular, information about 2 different definitions of what a recession is and information regarding how governments attempt to shift a nation's economy out of a recession was removed.

There was also a lengthy discussion about the Great Depression that was out of place on this page. This has been removed to here, and if anyone wants to place it in the correct location (I suggest merging it into Great Depression if it isn't simply duplicated information from there). It follows:

Australia not in a "technical recession"

There's been a lot of hoop-la lately about how, contrary to all predictions, Australia is the only OECD nation not in a recession. That's how the government put it, and it seems simple enough: either a country is in a recession, or it's not. It comes directly from the widely accepted definition of "recession". However, ever since, everyone's been talking about how Australia's not in a "technical recession". The subtext seems to be "Well, we really are in a recession, and everyone knows it, but just not in a recession according to the definition of 'recession' ". If that's the case, just what precisely is the "real" definition of recession that nobody has spelled out but everyone seems to agree on? -- JackofOz (talk) 03:22, 10 June 2009 (UTC)

“. . . the recession, broadly defined as a period in which there is some fall in the level of the indicator of economic activity (or rise in the case of the unemployment rate).” --Reserve Bank of Australia (http://www.rba.gov.au/PublicationsAndResearch/StatementsOnMonetaryPolicy/Boxes/1997/1997_05_1_box.pdf) DOR (HK) (talk) 04:30, 11 June 2009 (UTC)

Thanks. So, why does the Reserve Bank use that broad definition, when the government and others use a more precise definition: "Two quarters of negative growth"? -- JackofOz (talk) 08:26, 11 June 2009 (UTC)

For the same reason newspaper articles have headlines: to get the gist of the message across, quickly and in a way that is easily understood, but not necessarily in full accuracy. DOR (HK) (talk) 07:12, 12 June 2009 (UTC)

I havn't checked it but isn't that publication really old? What does the Australian Reserve Bank base its policy decisions on? If it's growth, surely they would use a more precise definition of recession. If the only purpose of the definition is to communicate to a lay audience, anyone would use a broad definition. Zain Ebrahim (talk) 08:40, 12 June 2009 (UTC)

DOR, that's the exact point I'm getting at. Just what is the gist of the message in this case? If those who use the term "technical recession" (in the sense of acknowleding Australia's not in one) are referring to generally difficult and challenging economic conditions, then by that frame of reference we could be said to be in a "non-technical recession" virtually 100% of the time, because times have been tough, one way or another, since Adam was a boy. But surely it can't be as broad as that. They must be referring to some specific condition or combination of conditions that, implicitly, constitutes this unspoken "non-technical recession". Or is it just a case of monkey-hear-monkey-do: one journo says "Australia's not in a technical recession", and all the others just tag along because it's become the trendy thing to say at the moment? Or am I making too much of this, and is it perhaps simply a case of superfluous, redundant, unnecessary, tautological wording, something that journos are not entirely unfamiliar with? -- JackofOz (talk) 11:44, 12 June 2009 (UTC)

In my experience, the use of the term "technical recession" is almost always because there does not yet exist data showing two subsequent quarters of contraction (although, whether should that be Q-Q or year-on-year has never been clear). And, I believe governments use a very general description ("broad weakness" or "widespread loss of momentum") as their official definitions. Bottom line is there is no one definition across jurisdictions, and newspapers don't bother to understand that. DOR (HK) (talk) 10:20, 14 June 2009 (UTC)

Right. Bottom line is that if one uses the word "technical" in relation to recession, one should make it clear exactly which definition one's referring to, because there's more than one. I should add that I'm not an economist's bootlace, I'm just trying to understand just exactly what it is that they're talking about. It seems, as ever, that economics is far from an exact science, and words mean whatever the speaker wants them to mean. Thanks for your forbearance. -- JackofOz (talk) 22:49, 14 June 2009 (UTC)

Regarding the definition of a recession:

The definitions that exists in introductory textbooks and on numerous web pages are accurate but not precise definitions. I would categorize definitions on a scale of ever increasing precision. The most precise definition requires a purely mathematical, and somewhat complex, formula. The least precise, though still accurate, definition is that of a period of declining economic activity. (I would like to point out that I am using very accurate and precise definitions for the words "accurate" and "precise". I have included the definitions below. An inaccurate definition, of recession, would be completely useless and not fall on the scale I am defining.) The definition then gets increasingly more precise by adding such measurable quantities, such as GDP and unemployment, to the definition.

As it is now January of 2012, I would like to call attention to the graph at http://www.bea.gov/faq/index.cfm?faq_id=1004&searchQuery=&start=0&cat_id=0. I would also like to call attention to http://www.nber.org/cycles/recessions_faq.html. The blue shaded area of the graph indicates the recession as defined by the NBER. The graph presents the GDP from annual revisions. The recession faq provides some more accurate, though still imprecise definition of how the NBER determined the recession as indicated by the blue shaded area.

It cannot be inferred that the blue shaded area was determined by using the GDP data on the graph. The faq, provided by the NBER, indicates that they used much more than just the GDP information for determining the recession.

Just examining the graph, it is notable that the blue shaded area begins after two consecutive quarters of declining GDP activity. It then ends after either a) two consecutive quarters of increasing GDP activity or b) when the GDP has returned to the level that it was at when the recession began. There is insufficient information to determine the precise formula that the NBER uses to make their final determination.

The problem with determining if there has been a recession is that of "drawing a line in the sand", so to speak. Exactly where that line is drawn becomes the issue. To say, "a period of declining economic activity" is accurate, but not precise enough to draw the line. Defining the exact placement of that "line in the sand" can be accomplished by asking a layman, asking and averaging a group of layman, asking an expert, asking a committee of experts or by some precise mathematical formula. On a scale, from accurate but imprecise to accurate and precise, a mathematical formula would be the most accurate and precise.

I have not found any indication of a formula as used by the NBER, though one might exist. They may not publish it so as to retain a status of "expert". It may be proprietary. It may be that they just don't want to get into some public argument over the definition. It is, though, not necessary that a formula, of "objective" measures, be used. For example, in electrical engineering standards, there is something called "flicker". Flicker is the flickering of lighting as a result of other electrical equipment that shares the same circuit. It is one of those "you know it when you see it" things. Flicker can cause headaches, even trigger epileptic seizures. The technical definition of the flicker standard defines an acceptable rate of flicker along with the devices for measuring it. The acceptable rate was determined by sticking people in a room and adjusting the flicker until they said it really annoyed them. This sample then determined the point where the line was drawn in the sand, the measurable quantities and formula that determines if there is any flicker. Flicker isn't a binary quantity that suddenly appears, it gets progressively worse. Declining economic activity is similar in that it declines more or less and lasts for long or short periods of time. The definition of a recession depends on how much for how long.

The definition of a recession is also one of rate of change. Like speed, flicker, and other measurements of rate of change, an instantaneous measurement may not be physically possible. To determine rate of change requires making two measurements at two different times. The speedometer on our car is , through some physical mechanism, able to give us an instantaneous measurement. Decreasing or increasing GDP cannot be determined until some time after the economic activity has occurred. And, of course, as time passes, the process of collecting the data provides ever increasing precision in the measurements.

There are over seven million businesses in the US. A survey or sampling process takes time and, if the GDP calculations are done in parallel with the data collection, the estimate will continue to become more and more precise as more data is collected. One can imagine a group of individuals collecting the data and entering it into a database with a marque on the wall presenting the up-to-date GDP value and error level. As time passes, the GDP value gets closer and closer to it's real number while the error level gets closer and closer to zero. When the survey finally includes the last business, it becomes a census, the GDP value is absolutely determined, and the error is zero. If we look back at that graph, for the 2009 recession, we see four annual revisions, each subsequently more precise. Simultaneously, the same process is occurring with unemployment numbers and other economic activity measures, all of which are used to determine if and when a recession occurred. Still, everyone wants to know now, not a year from now, if we are in a recession. So the NBER has to provide an answer as soon as possible but not so soon that they might have to retract their statement. Nobody wants to hear, "well, we thought it was but we got better info and it turns out it wasn't one, it just looked like it." This kind of ruins credibility.

I hope this helps provide a precise framework that explains why there are multiple definitions for "recession". One is simply that we would like to have a "rule of thumb" to make a judgment without waiting for the NBER or having to resort to some complex formula. An accurate, though imprecise, definition gives us some idea. A recession is not a binary event. It is a period of time of some magnitude on a scale. At some point, though, we would like a line drawn in the sand. The term "recession" may be part of some legislation, as a trigger. It then requires a precise definition that isn't open to interpretation by whomever the legislation applies to. And, of course, at some point, we need an expert to just tell us simply if we are or are not in a recession. The president of the United States doesn't want to hear, "it depends on what you mean by 'declining economic activity'". Action, by others, is a binary event. People do or don't do. A check is written or not written. So, while changing economic activity is a process of a continuous scale, it has to interface to behavior, which is a binary process.

Regarding "accurate" and "precise", I like to imagine a speedometer. A speedometer needle might swing wildly, up and down, yet do so about the exact speed of the vehicle. This is accurate but imprecise. It might hold steady at exactly 40 mph though the car is actually going 55 mph. This is precise but inaccurate. --Dogsinlove (talk) 16:08, 8 January 2012 (UTC)

Jobless recovery coming up?

I read somewhere that there may be a jobless recovery coming up. This led me to create the following:

| image = Typicalbusyoffice20050109.jpg | image_width = 250px | image_caption = | regnum = Earthia | phylum = Human activity | classis = Civilization | ordo = Society | familia = Society | subfamilia = Economia | genus = Jobus | species = Openius | binomial = Jobus openius | binomial_authority = Wile E. Coyote }}</ref>

What a waste of space. DOR (HK) (talk) 01:11, 5 October 2009 (UTC)

Predictors

If sharp declines in the stock market are followed, half of the time, by recessions, then why haven’t we also included as a reliable predictor flipping a coin and having it land on tails? The other predictors in this section are much too vague to be useful. DOR (HK) (talk) 01:11, 5 October 2009 (UTC)

Hmm... care to think through the logic of that one and try again? You got the probability statements all wrong. 50% of airplanes that lose their engine subsequently crash. Would you conclude that a coin toss is therefore a predictor of a plane crash? --JayHenry (talk) 01:42, 5 October 2009 (UTC)

Half the time that Event A occurs, Event B occurs. 50:50 odds.

Half the coins end up tails. 50:50 odds. DOR (HK) (talk) 06:27, 7 October 2009 (UTC)

Yes, the probability of a coin coming up heads is the same as the probability of a recession following a stock crash. How often do we have stock crashes and how often do we have coin tosses? Were it the case that a coin toss only occurs every seven years or so, then it would of course be significant if they were followed 50 percent of the time by recession. If event B follows event A 50% of the time that's an extremely notable outcome, especially, as in this case, where event A is fairly rare. --JayHenry (talk) 23:28, 7 October 2009 (UTC)

To take an example outside of economics, consider that heart attacks are followed 17% of the time by death. Conveniently, that's about 1 and 6, the same odds as a die. I'm sure it's obvious to you that heart attacks do indicate risk of death (which is why if you see someone having a heart attack, you call an ambulance), while rolling a die does not (you probably do not call the ambulance when you're playing Craps). We can choose to roll a die at any time. The odds of dying at any random time are not one and six. We can flip a coin at any time. The odds of a recession at any random time are not 50:50. Every doctor in the world (indeed, I think everyone intuitively) understands that a heart attack poses significant mortality risk, just as everyone who has carefully considered the probability will understand that a stock crash presents a noteworthy recession risk. --JayHenry (talk) 23:36, 7 October 2009 (UTC)

Housing bubble

Let's avoid a revert war. Votes, please, on whether the US housing bubble was a defining feature of this latest recession. DOR (HK) (talk) 02:15, 7 May 2010 (UTC)

I would agree that there's an important relationship, but since the housing bubble preceded (and only partially overlapped) the period of recession (in the USA), and since the end of the bubble triggered economic problems that fed into the recession, I'd stay well away from any phrasing that implies a relationship where the recession is a "parent" and the housing bubble is a "child"! :-)

But shouldn't all this be covered in Late-2000s recession anyway? This Recession article covers recessions generally. To the extent that the US housing bubble is a defining feature of one particular recession, shouldn't it be explored in the article on that particular recession?

bobrayner (talk) 02:47, 7 May 2010 (UTC)

I'd agree that it's a defining feature of the latest recession. As bobrayner points out, though, this article is not specifically about the latest recession, but about recessions in general. The recent US housing bubble is clearly not a defining feature of recessions in general. Even housing bubbles in general would not be; recessions in different times and places have had quite diverse features. --Avenue (talk) 14:49, 14 May 2010 (UTC)

Agree with both bobrayner and Avenue per above. Any discussion of US housing bubble should be in Late-2000s recession, not in this article. LK (talk) 04:31, 15 May 2010 (UTC)

I think it's appropriate to have a few sentences on the housing bubble and its relationship to the current recession. The current recession is a significant ones in terms of timing (recent/current) and scale (largest in years). Most people agree that the housing bubble played a significant role in the recession, not just in the US, but in those countries that invested in derivatives tied to US real estate. Also, many countries had their own housing bubble during the same time period (Ireland/Spain). It's completely appropriate to discuss the current recession and its most likely cause in an article about recessions in general. I really don't understand the agrument against this.--Bkwillwm (talk) 04:42, 15 May 2010 (UTC)

This discussion was prompted by my removal of Category:Terms and concepts of the 2000s United States housing bubble (since renamed Category:United States housing bubble) from this article, and DOR (HK)'s reversion of that removal. Categories should generally only be applied where they reflect a defining feature of the article's topic. I'm arguing against this article remaining in that category, not against including a brief section on the 2000s bubble (which I agree seems appropriate). --Avenue (talk) 09:22, 15 May 2010 (UTC)

Unnecessary additions

I can't see what this has to do with the article: Economist Robert J. Shiller wrote that the term "...refers also to the sense of trust we have in each other, our sense of fairness in economic dealings, and our sense of the extent of corruption and bad faith. When animal spirits are on ebb, consumers do not want to spend and businesses do not want to make capital expenditures or hire people."< ref>WSJ-Robert Shiller-Animal Spirits Depend on Trust-January 2009</ ref> DOR (HK) (talk) 13:27, 20 June 2010 (UTC)

Psychology is a significant influence or cause of recessions and how we get out of them. When folks are confident in the future, they spend. When they are worried, they save. I think the Shiller quote nicely captures the concept.Farcaster (talk) 22:10, 20 June 2010 (UTC)

I agree it is a great quote for an article about behavioral economics, but this one is about recessions. Not really all that useful here, IMHO. DOR (HK) (talk) 01:43, 2 August 2010 (UTC)

Merger Proposal

Contraction (economics) has almost no content and this page covers the exact same subject. Nothing to complicated to explain. LWG ^talk 02:26, 4 October 2011 (UTC)