Answer to 9/3 Question of the Day

Yesterday, in response to arguments that a double-dip recession is imminent and a tepid jobs report, I asked:

What metric should we use to determine whether the economy is recovering?

Over the last few weeks the 24-hour news mavens have quoted all sorts of statistics to engender debate over the health of the economy. An alphabet of acronyms and abbreviations dominates every news show: GDP, CPI, CCI, RoI, BoT, GNP. A viewer is bombarded with quotes of the unemployment rate, exchange rate, consumer spending, home sales, the Dow Jones Industrial Average, NASDAQ, The S&P 500, and on, and on, and on.

In reality there is only one true measure of economic output: The gross domestic product (GDP).

The GDP is the sum of the market value for all the products and services created by an economy over a period of time. The word recession actually refers to two or more consecutive quarters of negative GDP growth. When we hear the word recession bandied about in the media it is more often than not misused.

I do not think that word means what you think it means!

According to the Bureau of Economic Analysis, the government agency that measures GDP, the economy is still growing. We are no longer in a recession and the recovery is working. Anyone who says otherwise is either 'wishcasting' or making noise ahead of the November election. We won't even know if a second recession occurs until we have two more negative quarters - in other words it will be late February 2011 before we'd know if we were in a recession.

Remember also that the jobs we shed aren't going to be jobs that we get back. Like I've said before, cars and manufactured goods are not going to be where the American people butter their bread in the future. If we don't start educating ourselves and retasking to meet the demands of the new economic realities, we will be out of work, out of our homes and hungry.

Question of the Day

Today I am going to buck all of my intentions and ask a new question before I've answered yesterday's question. Sue me.

One of my best friends in the history of my short life and in the expanse of the world was listening to good music with me tonight. We heard Pharcyde, Lyrics Born, Blackalicious, Eyedea and Eminem.

We engaged in the old debate of rap versus hip-hop. We all know that there are types of music that some people call RAP and other types of music that other people call HIP-HOP.

A nice conversation was had about whether rap and hip-hop, as forms of music, were actually able to be discerned from each-other. What do you think?

What is the difference between rap and hip-hop?

Yes, Glenn Beck is a liar

That should be obvious to anyone with a functioning cerebral cortex.

But Keith Olbermann is a turd.

And we're no less in debt, at peace or happy than we were before Glenn Beck lied and Keith Olbermann pointed it out.

The more we let the Becks and Olbermanns set the tone of the political discourse in this country, the harder it will be to get anything done.

Question of the Day 9/3

As I noted yesterday, the Obama White House seems to be considering another round of economic stimulus. While yesterday I had hoped it might come in the form of infrastructure spending and investment, it appears that if it comes to fruition it would be largely made up of tax-cuts for business owners. There are legitimate doubts if this form of stimulus will create any economic benefit.


Regardless of who you want to blame for the US's current economic misfortunes, there is a rational debate going on behind the scenes on two fronts - one, whether we are really as bad off as the media wants us to think, and two, what we can do to improve our fortunes. Whether the second dilemma is at issue depends on our answer to the first.

Today's question, then, has to do with the recovery:

What metric should we use to determine whether the economy is recovering? Jobs? GDP? The misery index? Consumer confidence?

Answer to 9/2's Question of the Day

Asked Yesterday:
Can we as a population, using elementary-school economic principles, imagine a scenario in the future where renewable energy sources may be more cost effective than fossil fuel?

We should absolutely be able to fathom that for a number of good reasons, all of which revolve around the law of supply and demand.

For those of us who don't know, the law of supply and demand states that for every product there is an equilibrium price that balances supply and demand, and this equilibrium is found at the intersection of the demand curve and the supply curve.

As supply increases, the price equilibrium will decrease. As supple decreases, the price will increase. The follow illustration shows this effect:


The current argument for fossil fuels is based on supply. There is currently a plentiful (though limited) supply of fossil fuels, especially in the United States. There isn't a compelling reason to abandon them unless we imagine our supply of fossil fuels dwindling. There is also a limited supply in renewable energy right now, driving up the costs. Simply stated, it is easy to see how in the near future the cost of the decreasing supply of using fossil fuels could exceed the cost of an increasing supply of efficient renewable energy resources.

The supply of resources like coal and oil could dry up because we run out of them. We also m,ay face a peak oil or coal situation, our ability to extract and refine non-renewable resources may no longer be able to keep pace with demand. Both would increase the cost of using fossil fuels.

As time goes on human beings will discover more efficient methods of harvesting the energy potential of the sun, the wind and other forces. This will drive down the cost of using renewable energy, increasing demand for it over fossil fuels.

Taking this into consideration, even without the efforts of environmental activists, the days of the coal and oil companies are already numbered.

It is also important that we not forget the other costs of using coal and oil combustion to fuel our vehicles and our power plants. Coal and oil are very labor intensive - renewable resources are not. Fossil fuels come with major infrastructural, environmental and health liabilities that solar, wind and hydroelectric electricity generation do not share.

Someone up there must be listening

I am convinced that somehow my little whinings must be making their way up the political echelons through osmosis, because after weeks of ranting about the need for a second stimulus based on economic and transportation infrastructure adjustments and research and development of new technological economic sectors, it seems like the Obama Administration got the same idea. I know exactly where they can spend it, too.

They should hire me to think of this stuff.

Question of the Day

The explosion of another oil rig in the gulf made me think about the monetary cost versus the actual cost of fossil fuel production. When compared to renewable energy resources, the fossil fuel industry argues for its survival by touting the cost effectiveness of burning coal, oil and natural gas.
Today's question is an easy one:

Can we as a population, using elementary-school economic principles, imagine a scenario in the future where renewable energy sources may be more cost effective than fossil fuel?