Wednesday, September 7, 2011

Uncertainty One More Time

Last week, there was some debate on this blog whether the creation of policy uncertainty by this administration leading to slow economic growth was a valid criticism. Detractors argued that there's always uncertainty and so it's unfair to blame administrations for creating it. FLG countered, eventually, that the level of uncertainty or at least the perception about the level of uncertainty does vary and has an adverse effect on economic investment.

Last night, FLG was listening to Marketplace and they had a story on the economic effects of 9/11. One portion mentioned a Stanford economist's studies of economic uncertainty. Fortunately, they even provided charts.

Overall economic uncertainty spiked in 2008. It's hard to tell exactly when, but FLG assumes right around the Lehman collapse. Not too surprising.

Uncertainty in both economic and policy news coverage spiked at that same time. More interesting to FLG is that they both spiked again in late 2009-early 2010, right about the time the health care reform debate was going on. Now, some uncertainty is to be expected, but the scale of is roughly equal to spike in late 2002-early 2003 that FLG assumes is the run-up to the Iraq War.


Andrew Stevens said...

I don't know if I could define what is meant by uncertainty to Mr. Levy's satisfaction, but that graph accords with my own sense as well. So that I don't look like a talking-points-mongering Republican shill, I agree with the graph that there was less uncertainty under Clinton (post-'93) than under either Bush or Reagan. While Clinton was President, the business community was pretty sure what it was going to get in public policy terms, once the health care plan failed and it was clear Clinton wasn't going to try that one again. Both of Clinton's successors have attempted to be "transformative Presidents" (possibly because it was thrust upon them), leading to greater uncertainty.

The Ancient said...

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