This week’s news from the Commerce Department is that real GDP grew at a 3.5% annualized rate in the 3rd quarter of 2009, which is the best quarterly growth rate in two years. And some economists, including the National Bureau of Economic Research’s (NBER’s) Jeffrey Frankel, are saying the recession probably ended sometime this summer. Meanwhile, a poll of MSNBC readers finds that 82% think the recession is still raging, 9% think the economists are right, and 9% don’t know. (Yes, online polls are unscientific, but earlier, professional surveys I’ve seen of the public also found them to be more pessimistic about the economy than the experts.)
Are the economists that obtuse, or is the public that dumb? Even if one’s preferred is answer is “Both,” I think the split is due to two different definitions of “recession.” The NBER and the economics profession define a recession as a general period of economic decline, whereas I bet most people define it as a weaker-than-usual economy. I would argue for throwing the word out altogether when discussing the economy.
- Use “contraction” to denote a period of actual decline, just as the 1929-33 collapse was called the Great Contraction.
- Use “depression” to denote a period of economic weakness, just as 1929-early 1941 was the Great Depression. I argued in March that we were in a depression, but if “depression” sounds too harsh because people associate it with the Great Depression, then say “slump.”
Right now, the different professional and public definitions of “recession” (just as with “money” and “investment”) just makes economists seem that much more out of touch.