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Reality Check

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Everything is relative, of course — but Jeff Jacoby’s Boston Globe [2] column of July 23rd offers evidence that Phil Gramm is correct that our economy today isn’t as gruesome and foreboding as many pols and pundits proclaim it to be.  Here’s a clip (citing, you’ll notice, the important work of my colleague [3] — and EconLog [4]‘s — Bryan Caplan):

Voices of reason keep trying to point out that conditions are not
nearly as bad as they were the last time consumers were this
despondent. That was in May 1980, during the final year of the Carter
administration, when the "misery index" – the sum of the inflation and
unemployment rates – hit an excruciating 21.9. Inflation was then at
14.4 percent; unemployment was 7.5 percent. The numbers today are 5 and
5.5 respectively.

But voters don’t want to be told to buck up.
When former senator Phil Gramm, an economic adviser to John McCain,
said last week that America had "become a nation of whiners" and
described the current slowdown as a "mental recession," the backlash
was immediate. McCain repudiated Gramm’s remarks and quickly issued a
statement assuring voters that he "travels the country every day
talking to Americans who are hurting, feeling pain at the pump, and
worrying about how they’ll pay their mortgage."

Well, that’s
politics. Politicians who want to get elected genuflect to what Bryan
Caplan, in "The Myth of the Rational Voter" calls the pessimistic bias:
the "tendency to overestimate the severity of economic problems and
underestimate the (recent) past, present, and future performance of the
economy."

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