Kauffman Economic Outlook A QUARTERLY SURVEY OF ...
Kauffman Economic Outlook A QUARTERLY SURVEY OF LEADING ECONOMICS BLOGGERS THIRD QUARTER
www.kauffman.org
2011
Kauffman Economic Outlook A QUARTERLY SURVEY OF LEADING ECONOMICS BLOGGERS in partnership with Palgrave’s Econolog.net
Third Quarter, 2011
TIM KANE Senior Scholar Ewing Marion Kauffman Foundation
July 2011
www.kauffman.org
Kauffman Economic Outlook—2011 Q3
INTRODUCTION This paper reports the results of a survey of top economics bloggers. The survey was conducted in mid-July 2011 by soliciting input from top economics bloggers as ranked by Palgrave’s Econolog.net. While many (around 50 percent) of the respondents have participated in all quarterly surveys, the results across quarters are not directly comparable. Core questions that recur each quarter and topical questions submitted by participating bloggers were designed in coordination with a distinguished board of advisors, which includes:
Robert X. Cringely . . . . . . . . . . . . . . . . . .I, Cringely Laurie Harting . . . . . . . . . . . . . . . . . . . . .Palgrave’s Econolog Paul Kedrosky . . . . . . . . . . . . . . . . . . . . .Infectious Greed Lynne Kiesling . . . . . . . . . . . . . . . . . . . . .Knowledge Problem Donald Marron . . . . . . . . . . . . . . . . . . .DMarron.com Mark Perry . . . . . . . . . . . . . . . . . . . . . . .Carpe Diem Wade Roush . . . . . . . . . . . . . . . . . . . . . .Xconomy.com Allison Schrager . . . . . . . . . . . . . . . . . . .Free Exchange Nick Schulz . . . . . . . . . . . . . . . . . . . . . . .Enterprise Blog Yves Smith . . . . . . . . . . . . . . . . . . . . . . .Naked Capitalism Alex Tabarrok . . . . . . . . . . . . . . . . . . . . .Marginal Revolution Mark Thoma . . . . . . . . . . . . . . . . . . . . . .Economist’s View
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Kauffman Economic Outlook—2011 Q3
The Kauffman Foundation is dedicated to the idea that entrepreneurship and innovation drive economic growth. Naturally, this technology of blogging is a fascinating one, both for its effect on the economic research frontier, but also as an innovation in its own right. A survey of so many high-profile participants offers a unique opportunity for discussion, and this survey should be viewed as one way of summarizing some of the insights of the community of economics bloggers.
KEY FINDINGS THE ECONOMY Economics bloggers seem even more pessimistic in their outlook on the U.S. economy than they have been so far in 2011, with 95 percent who believe overall conditions are mixed, facing recession, or in recession. For an economy in which growth is the norm, 44 percent of respondents think that the U.S. economy is worse than official statistics indicate, and only 7 percent believe it is better. When asked to describe the economy using five adjectives, “uncertain” remains the most frequently used term.
POLICY RECOMMENDATIONS Although the panel is largely nonpartisan, an almost two-thirds majority of top economics bloggers believes the government is too involved in the economy. The top policy recommendations (selected from a small set of choices) remain for the government to “reduce regulatory burdens and fees on new firm formation,” and “approve trade agreements with South Korea, Colombia, and Panama” with more than 88 percent support. A new policy floated this quarter is a requirement for the Congressional Budget Office (CBO) to account long-term liabilities in its budget assessment, favored by 88 percent of respondents. More than half of the participants support an extension of the debt limit without conditions, and just thirty-six favor an amendment to the Constitution that would constrain federal expenditures. However, two key budgetary policies were favored by 57 percent of the panel: (1) capping tax credits and deductions per household, and (2) converting Medicare to a premium support program. The results seem to confirm the nonpartisan makeup of the respondent pool.
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Kauffman Economic Outlook—2011 Q3
SURVEY RESULTS The Kauffman Economic Outlook includes core questions that will recur each quarter and one-time-only topical questions. Core questions focus on two areas, and are presented in the following charts and tables: the performance of the U.S. economy and policy assessments and recommendations. Finally, there are topical questions provided by economics bloggers themselves, which are not categorized.
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Kauffman Economic Outlook—2011 Q3
U.S. E C ONO MI C P E R F O R MA N C E How do you assess the overall condition of the U.S. economy right now? 100% 90% 80% 70% 60%
55%
50% 40%
33%
30% 20% 10% 0%
0%
Strong and growing
7%
5%
Strong with uncertain growth
Mixed
Facing recession
Weak and recessing
[Kauffman Economic Outlook—2011 Q3]
How do you assess the overall condition of the U.S. economy right now? (open text response)
[Kauffman Economic Outlook—2011 Q3]
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No respondents (0 percent) believe the economy is “strong and growing,” as overall opinion has shifted slightly and seems to be declining since last quarter. Three respondents (5 percent) believe the economy is “strong with uncertain growth.” Fifty-five percent (thirtytwo respondents) say conditions are “mixed.” There were nineteen respondents who believe the economy is “facing recession” (33 percent), with four respondents believing the economy is “weak and recessing” (7 percent).
Kauffman Economic Outlook—2011 Q3
U.S. E C ONO MI C P O L I C Y Is the U.S. economy doing better or worse than official government statistics show? 49%
50%
44%
Skepticism about official statistics remains the rule among economics bloggers. Skepticism is more intense than last quarter. However, weak employment data would seem to confirm that official statistics are getting it right. Regardless, 7 percent of our panel thinks the U.S. economy is doing better than official statistics indicate.
40% 30% 20% 10%
7%
0% Better
Same
Worse [Kauffman Economic Outlook—2011 Q3]
Is the U.S. federal government too involved in the U.S. economy? 80% 70% 60%
61%
50% 40% 30%
23%
20%
16%
10% 0% Yes
Mixed / about right
No
[Kauffman Economic Outlook—2011 Q3]
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A large majority (61 percent) of economics bloggers believe the U.S. government is too involved in the economy, almost four times more than those who hold the opposite view. This response is noteworthy given the balanced and largely nonpartisan identification of respondents.
Kauffman Economic Outlook—2011 Q3 U.S. ECONOMIC POLICY
What are the prospects for the following over the next three years? (In the U.S. unless stated otherwise)
Decreasing strongly
Decreasing
Increasing
Increasing strongly
Projecting three years ahead, economics bloggers expect global output to rise faster than anything else. A significant difference from the previous reports is that only 50 percent of respondents anticipate employment growth in the United States, where previously 70 percent had anticipated growth. Opinion remains split about expectations of higher poverty and inequality levels, and expectations of higher annual deficits and the top marginal tax rate are a depressing surprise.
Global output Top marginal tax rate Interest rates (real) Inflation Employment Budget deficit (annual) GDP per capita Poverty Stock market Corporate tax rate -40%
-20%
0
20%
40%
60%
80%
[Kauffman Economic Outlook—2011 Q3]
Decreasing Decreasing strongly
About the same
Increasing
Increasing strongly
Global output
2%
10%
17%
59%
12%
Top marginal tax rate
0%
2%
35%
61%
2%
Interest rates (real)
0%
5%
33%
54%
7%
Inflation
0%
2%
37%
56%
5%
Employment
0%
21%
29%
47%
3%
Budget deficit (annual)
2%
26%
24%
41%
7%
GDP per capita
0%
20%
32%
46%
2%
Poverty
0%
9%
47%
40%
4%
Stock market
3%
14%
43%
34%
5%
Corporate tax rate
0%
19%
61%
19%
0%
Corporate tax rate
0%
26%
54%
19%
0%
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3 U.S. ECONOMIC POLICY
The U.S. federal government should... (select one or more) Strongly Disagree
Disagree
Agree
Strongly Agree
When asked to evaluate a variety of policy proposals, the top recommendation was to approve trade agreements with South Korea, Colombia, and Panama, with 90 percent in agreement (60 percent agreeing strongly). Eighty-eight percent also favor approval of a reduction of regulatory burdens and fees on new firm formation. The panel also supported the adoption of extending the debt limit without conditions (55 percent).
Approve trade agreements with South Korea, Colombia, and Panama Require CBO to account long-term liabilities in annual budget assessments Reduce regulatory burdens and fees on new firm formation Convert Medicare to a personal premium support program Cap tax credits & deductions per household Extend the debt limit without conditions Adopt a Constitutional amendment requiring annual expenditures not exceed the real average revenues of the previous 7 years -100% -75% -50%
-25%
0
25%
50%
75%
100%
[Kauffman Economic Outlook—2011 Q3]
Strongly Disagree
Disagree
Agree
Strongly Agree
Approve trade agreements with South Korea, Colombia, and Panama
3%
7%
29%
60%
Require CBO to account long-term liabilities in annual budget assessments
5%
7%
48%
40%
Reduce regulatory burdens and fees on new firm formation
5%
7%
33%
55%
Convert Medicare to a personal premium support program
19%
24%
34%
22%
Cap tax credits & deductions per household
7%
36%
38%
19%
Extend the debt limit without conditions
17%
28%
29%
26%
Adopt a Constitutional amendment requiring annual expenditures not exceed the real average revenues of the previous 7 years
36%
28%
22%
14%
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3 U.S. ECONOMIC POLICY
What is your sense of the conditions that exist for the following: Very Good
60%
Good
Fair
Bad
Very Bad
50%
In every category of business, conditions right now are rated as “fair, bad, or very bad” by more than 69 percent of respondents, with venture and angel capital being the least bad of them all at only 69 percent, while bank lending to individuals is rated 90 percent negative.
40% 30% 20% 10% 0% Entrepreneurs
Venture & Angel capital
Bank lending to businesses
Bank lending to individuals
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3
OTHE R TOPI C A L Q U ES T IO N S FR OM PARTIC IPATING BLO GGERS Nick Schulz (Enterprise Blog) asked and many bloggers answered: What is a realistic long-run growth rate for annual real per capita GDP in the United States?
2%
0%: a steady state of zero growth
18%
1%: decelerate from low-hanging fruit era
44%
2%: modern average trend 3%: acceleration
14%
4%+: singularity
4%
V%: highly variable between 1-3%
14%
X%: this cannot be predicted
5%
0
10%
30%
20%
40%
50%
Looking beyond the macroeconomy’s cyclical fluctuations, almost half of respondents (44 percent) expect U.S. growth to return to the steady 2 percent annual rate, with roughly equal numbers expecting 1 percent slower (18 percent) and faster (14 percent). If one includes the 14 percent of respondents who anticipate a variable growth rate in the 1−3 percent range, it’s safe to say there is a consensus expectation for the longrun trends to essentially continue. Two respondents expect growth to accelerate, an idea popularized as approaching a “singularity” in science fiction, while one respondent anticipates complete stagnation.
[Kauffman Economic Outlook—2011 Q3]
Ryan Avent (Free Exchange) asked: Over the next decade, what share of the U.S. fiscal consolidation should be accomplished through revenue increase?
0% 25%
50%
50%
21%
5%
75% 100%
For many years, conventional wisdom held that fiscal balance would and should be achieved through an even mix of tax increases and spending cuts. However, economics bloggers strongly favor a mix that favors spending cuts. Indeed, more favor consolidation to focus entirely on spending cuts (23 percent of respondents) than those who favor a fifty-fifty mix (21 percent).
23%
0%
0
10%
20%
30%
40%
50%
60%
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3 OT H E R TO P I C A L Q U E S T I O N S F R O M PA RT I C I PAT I N G B L O G G E R S
Amol Agrawal (Mostly Economics) asked: Did fiscal policy expansion in 2009, particularly ARRA (“the stimulus”), mitigate or alleviate the impact of the crisis?
Much less than 1
19%
Less than 1
28%
Equal to 1
30%
Greater than 1
21%
Much greater than 1
2%
0
10%
30%
20%
40%
50%
[Kauffman Economic Outlook—2011 Q3]
Chris Masse (Midas Oracle) asked: Have Robin Hanson, Justin Wolfers, and James Surowiecki been exaggerating the usefulness of the prediction markets? Yes
36%
No
36%
Don’t Know
As an example, in early 2010 Robin Hanson wrote on his blog, “Prediction markets aren’t about emphasizing ordinary Joes over credentialed big shots; they are about emphasizing whomever tends to be right. Simple opinion averages maybe be reasonable indicators of crowd wisdom, but they have too little of the forum-ness of letting self-selected expert teams come to dominate.” The response to this question was perfectly balanced, with 36 percent answering yes and another 36 percent answering no. We would not have predicted that.
28%
0
10%
30%
20%
40%
50%
[Kauffman Economic Outlook—2011 Q3]
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Assessment of the 2009 fiscal stimulus bill that was passed by a partisan majority of Democrats in the House and Senate and signed into law early in the Obama administration has proven controversial as the recovery was weaker than expected. However, defenders of stimulating aggregate demand argue that, absent the stimulus, the recession would have been worse or possibly tipped into an outright depression. Agrawal’s question frames the judgment on a technical description of the “multiplier,” which is the estimate of how much government spending trickles down into the economy. A multiplier “equal to one” means the spending added no boost to aggregate demand, but also did no harm, meaning it had a neutral effect. Seventy-seven percent of respondents believe the stimulus had a neutral or negative effect (a multiplier equal to or less than one), with most believing the multiplier was actually less than one (47 percent). Only 23 percent of respondents believe the multiplier was greater than one.
Kauffman Economic Outlook—2011 Q3 OT H E R TO P I C A L Q U E S T I O N S F R O M PA RT I C I PAT I N G B L O G G E R S
Dean Baker (Beat the Press) asked: Should the U.S. unemployment insurance program be restructured with one or more of the following proposals? One idea is for the government to subsidize a short-time week as is done in Germany (paying a firm to retain workers by cutting hours 20 percent and wages nearly 10 percent for everyone). Another idea is to push back initial eligibility from the first day of unemployment so that benefits are paid only after day thirty but extended for a longer period. A final idea is to phase out benefits in order to curtail the end-of-benefits job search spike. Yes
50%
No
Don’t Know
A plurality of 47 percent of respondents does not support a short-time subsidy, and just 33 percent do. Similarly, 33 percent favor (and 41 percent oppose) pushing back the initial eligibility date for unemployment insurance. The most popular reform, with support from 47 percent of respondents, is a phaseout of benefits, with 31 percent opposed. In general, there was no consensus here, unfortunately.
40% 30% 20% 10% 0% Subsidize short-time
Push back initial eligibility
Phase out benefits [Kauffman Economic Outlook—2011 Q3]
Craig Newmark (Newmark’s Door) asked: There is widespread speculation that the U.S. government will attempt to break up or attempt to regulate Google. What will happen? What should happen? Will the FTC file suit against Google? Yes
54%
No
46% 0
20%
60%
40%
80%
Should the government file suit?
(i.e. Is Google monopolizing or otherwise violating U.S. antitrust law?)
Yes
Economics bloggers have a very cynical view of the FTC investigation of the Internet search firm, Google. 100% A majority (54 percent) believe the government actually will file suit against Google, yet 93 percent believe the suit lacks merit.
7%
No
93% 0
20%
60%
40%
80%
100%
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3 OT H E R TO P I C A L Q U E S T I O N S F R O M PA RT I C I PAT I N G B L O G G E R S
Menzie Chinn (EconBrowser) asked: Do you agree with the following statements about the advent of bloggers relative to the period when newspaper columnists dominated? Strongly Disagree
Disagree
Agree
Strongly Agree
All respondents but one agree or strongly agree that the speed of research diffusion has accelerated thanks to blogging. And 82 percent strongly agree (96 percent agree overall) that the level of public disclosure regarding economic theory and economic policy has improved. Large but less intense majorities also agree that blogging has helped debunk bad ideas more efficiently and weakened the role of traditional “infomediaries.”
The speed of research diffusion has accelerated
The level of public discourse regarding economic theory and economic policy has improved
Bad ideas are debunked more efficiently
The role of infomediaries (media, think tanks) between policymakers and economic experts has weakened -25%
0
25%
50%
75%
100%
[Kauffman Economic Outlook—2011 Q3]
Strongly Disagree
Disagree
Agree
Strongly Agree
The speed of research diffusion has accelerated
0%
2%
12%
86%
The level of public discourse regarding economic theory and economic policy has improved
0%
4%
14%
82%
Bad ideas are debunked more efficiently
0%
14%
53%
33%
The role of infomediaries (media, think tanks) between policymakers and economic experts has weakened
0%
21%
45%
34%
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3 OT H E R TO P I C A L Q U E S T I O N S F R O M PA RT I C I PAT I N G B L O G G E R S
Mike “Mish” Shedlock and Claus Vistesen (Mish’s Global Economic Analysis and Alpha.Sources) asked: What is the likelihood of the following occurring sometime before the end of 2012? The Euro still exists through 2014
Confidence in the Euro is stunningly low, with 32 percent believing it will not exist in 2014. While this is a minority opinion, it is a serious signal of weakness. Opinion is split 47−53 on whether Greece will abandon the Euro within the next eighteen months. Likewise, 23 percent believe there will be a collapse of the U.S. Treasury prices. While 56 percent believe Obama will be reelected, only 29 percent believe that 99 percent of U.S. troops will leave Iraq. A third of respondents predict a double-dip recession before the end of 2012.
68%
Obama is re-elected
56%
Greece abandons the Euro
47%
U.S. recession
35%
99% of U.S. troops leave Iraq
29%
Collapse of U.S. Treasury prices
23%
U.S. unemployment rate dips below 7 percent
21%
U.S. Medicare is coverted to premium support
16% 0
20%
60%
40%
80%
100%
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3
METHODOLOGY & PANEL SELECTION Invitations were sent to nearly 200 top economic bloggers, most of whom were on the Palgrave’s Econolog.net December 2010 rankings (its methodology is described at http://econolog.net/stats.php). Some blogs with multiple authors have more than one respondent in the panel. For example, both James Hamilton and Menzie Chinn, co-bloggers at EconBrowser.com, are participants, as are Tyler Cowen and Alex Tabarrok, co-bloggers at Marginalrevolution.com. The panel includes a total of fifty-eight respondents. The panels from previous quarters are not directly comparable to this quarter’s panel. Roughly half of all bloggers participated in all quarters, so comparisons between the results have a large margin of error. The policy of the Kauffman Economic Outlook is that survey panelists and their blog names will be released, but all individual responses and comments will remain anonymous. A list of participants is included in the appendix. Panelists were asked to describe their political affiliation, with the intent being to show whether the panel has an ideological bias. We find that, among those who answered this question, 41 percent consider themselves Independent/Other, with 12 percent Democrat and 7 percent Republican. The last question asked economics bloggers to described their occupations and backgrounds. These responses were not exclusive (meaning respondents could select one or more). Nearly half are university professors, about one-fourth are former or current entrepreneurs, one-fifth are investors, and nearly half have a PhD in economics.
Please describe yourself (check all that currently apply) University professor/lecturer
47%
Entrepreneur (current or former)
22%
Investor
14%
Professional journalist
12%
Economics PhD
43%
JD
7%
MBA
5%
Registered Democrat
12%
Registered Republican
7%
Independent/Other
41%
0%
10%
20%
30%
40%
50%
60%
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3
APPENDIX LIST OF RESPONDENTS Individual responses will not be released, but names and/or blogs of the participants in the Kauffman Economic Outlook include: Amol Agrawal, Mostly Economics Pedro Albuquerque, Incentives Matter Ryan Avent, Free Exchange Dean Baker, Beat the Press Joshua Barro, PublicSectorInc.com David Beckworth, Macro and Other Market Musings Taggert Brooks, A Random Walk Bryan Caplan, EconLog Menzie Chinn, EconBrowser Bill Conerly, Businomics Jeff Cornwall, The Entrepreneurial Mind Robert Cringely, I, Cringely Atanu Dey, Atanu Dey Arthur Diamond, artdiamondblog.com Craig Eyermann, Political Calculations Eric Falken, Falkenblog Will Franklin, WILLisms Daniel Gross, Yahoo! Finance GYSC, Economic Disconnect James Hamilton, EconBrowser Robin Hanson, Overcoming Bias Ken Houghton, Angry Bear Tim Iacono, The Mess That Greenspan Made Tim Kane, Growthology.org Stephen Karlson, Cold Spring Shops Paul Kedrosky, Infectious Greed Arnold Klingf, EconLog Drea Knufken, Business Pundit Richard Langlois, Organizations and Markets Robert Lawson, Division of Labour Robert Litan, Growthology.org
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Kauffman Economic Outlook—2011 Q3
APPENDIX LIST OF RESPONDENTS (continued) Steve Malanga, Real Clear Markets Michael Mandel, Mandel on Innovation and Growth Geoffrey Manne, Truth on the Market Donald Marron, dmarron.com Chris F. Masse, MidasOracle.org Jeff Miller, A Dash of Insight Michael Munger, Kids Prefer Cheese Craig Newmark, Newmark’s Door Matt Nolan, The Visible Hand in Economics Michael Panzner, Financial Armageddon Mark Perry, Carpe Diem James Picerno, The Capital Spectator E.J. Reedy, Data Maven at Kauffman.org Wade Roush, Xconomy Felix Salmon, Felix Salmon Andrew Samwick, Capital Gains and Games Frederic Sautet, Coordination Problem Allison Schrager, Free Exchange Nick Schulz, Enterprise Blog Mike Shedlock, Mish’s Global Economic Trend Analysis Amity Shlaes, The Forgotten Man, CFR Gordon Smith, The Conglomerate Daniel Sokol, Antitrust and Competition Policy Blog Alex Tabarrok, Marginal Revolution Mark Thoma, Economist’s View Claus Vistesen, Alpha.Sources Steve Waldman, Interfluidity Robert Waldmann, Angry Bear David Weman, A Fistful of Euros John Whitehead, Environmental Economics Glen Whitman, Agoraphilia David Zetland, Aguanomics.com
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www.kauffman.org
www.kauffman.org
2011
Kauffman Economic Outlook A QUARTERLY SURVEY OF LEADING ECONOMICS BLOGGERS in partnership with Palgrave’s Econolog.net
Third Quarter, 2011
TIM KANE Senior Scholar Ewing Marion Kauffman Foundation
July 2011
www.kauffman.org
Kauffman Economic Outlook—2011 Q3
INTRODUCTION This paper reports the results of a survey of top economics bloggers. The survey was conducted in mid-July 2011 by soliciting input from top economics bloggers as ranked by Palgrave’s Econolog.net. While many (around 50 percent) of the respondents have participated in all quarterly surveys, the results across quarters are not directly comparable. Core questions that recur each quarter and topical questions submitted by participating bloggers were designed in coordination with a distinguished board of advisors, which includes:
Robert X. Cringely . . . . . . . . . . . . . . . . . .I, Cringely Laurie Harting . . . . . . . . . . . . . . . . . . . . .Palgrave’s Econolog Paul Kedrosky . . . . . . . . . . . . . . . . . . . . .Infectious Greed Lynne Kiesling . . . . . . . . . . . . . . . . . . . . .Knowledge Problem Donald Marron . . . . . . . . . . . . . . . . . . .DMarron.com Mark Perry . . . . . . . . . . . . . . . . . . . . . . .Carpe Diem Wade Roush . . . . . . . . . . . . . . . . . . . . . .Xconomy.com Allison Schrager . . . . . . . . . . . . . . . . . . .Free Exchange Nick Schulz . . . . . . . . . . . . . . . . . . . . . . .Enterprise Blog Yves Smith . . . . . . . . . . . . . . . . . . . . . . .Naked Capitalism Alex Tabarrok . . . . . . . . . . . . . . . . . . . . .Marginal Revolution Mark Thoma . . . . . . . . . . . . . . . . . . . . . .Economist’s View
-1-
Kauffman Economic Outlook—2011 Q3
The Kauffman Foundation is dedicated to the idea that entrepreneurship and innovation drive economic growth. Naturally, this technology of blogging is a fascinating one, both for its effect on the economic research frontier, but also as an innovation in its own right. A survey of so many high-profile participants offers a unique opportunity for discussion, and this survey should be viewed as one way of summarizing some of the insights of the community of economics bloggers.
KEY FINDINGS THE ECONOMY Economics bloggers seem even more pessimistic in their outlook on the U.S. economy than they have been so far in 2011, with 95 percent who believe overall conditions are mixed, facing recession, or in recession. For an economy in which growth is the norm, 44 percent of respondents think that the U.S. economy is worse than official statistics indicate, and only 7 percent believe it is better. When asked to describe the economy using five adjectives, “uncertain” remains the most frequently used term.
POLICY RECOMMENDATIONS Although the panel is largely nonpartisan, an almost two-thirds majority of top economics bloggers believes the government is too involved in the economy. The top policy recommendations (selected from a small set of choices) remain for the government to “reduce regulatory burdens and fees on new firm formation,” and “approve trade agreements with South Korea, Colombia, and Panama” with more than 88 percent support. A new policy floated this quarter is a requirement for the Congressional Budget Office (CBO) to account long-term liabilities in its budget assessment, favored by 88 percent of respondents. More than half of the participants support an extension of the debt limit without conditions, and just thirty-six favor an amendment to the Constitution that would constrain federal expenditures. However, two key budgetary policies were favored by 57 percent of the panel: (1) capping tax credits and deductions per household, and (2) converting Medicare to a premium support program. The results seem to confirm the nonpartisan makeup of the respondent pool.
-2-
Kauffman Economic Outlook—2011 Q3
SURVEY RESULTS The Kauffman Economic Outlook includes core questions that will recur each quarter and one-time-only topical questions. Core questions focus on two areas, and are presented in the following charts and tables: the performance of the U.S. economy and policy assessments and recommendations. Finally, there are topical questions provided by economics bloggers themselves, which are not categorized.
-3-
Kauffman Economic Outlook—2011 Q3
U.S. E C ONO MI C P E R F O R MA N C E How do you assess the overall condition of the U.S. economy right now? 100% 90% 80% 70% 60%
55%
50% 40%
33%
30% 20% 10% 0%
0%
Strong and growing
7%
5%
Strong with uncertain growth
Mixed
Facing recession
Weak and recessing
[Kauffman Economic Outlook—2011 Q3]
How do you assess the overall condition of the U.S. economy right now? (open text response)
[Kauffman Economic Outlook—2011 Q3]
-4-
No respondents (0 percent) believe the economy is “strong and growing,” as overall opinion has shifted slightly and seems to be declining since last quarter. Three respondents (5 percent) believe the economy is “strong with uncertain growth.” Fifty-five percent (thirtytwo respondents) say conditions are “mixed.” There were nineteen respondents who believe the economy is “facing recession” (33 percent), with four respondents believing the economy is “weak and recessing” (7 percent).
Kauffman Economic Outlook—2011 Q3
U.S. E C ONO MI C P O L I C Y Is the U.S. economy doing better or worse than official government statistics show? 49%
50%
44%
Skepticism about official statistics remains the rule among economics bloggers. Skepticism is more intense than last quarter. However, weak employment data would seem to confirm that official statistics are getting it right. Regardless, 7 percent of our panel thinks the U.S. economy is doing better than official statistics indicate.
40% 30% 20% 10%
7%
0% Better
Same
Worse [Kauffman Economic Outlook—2011 Q3]
Is the U.S. federal government too involved in the U.S. economy? 80% 70% 60%
61%
50% 40% 30%
23%
20%
16%
10% 0% Yes
Mixed / about right
No
[Kauffman Economic Outlook—2011 Q3]
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A large majority (61 percent) of economics bloggers believe the U.S. government is too involved in the economy, almost four times more than those who hold the opposite view. This response is noteworthy given the balanced and largely nonpartisan identification of respondents.
Kauffman Economic Outlook—2011 Q3 U.S. ECONOMIC POLICY
What are the prospects for the following over the next three years? (In the U.S. unless stated otherwise)
Decreasing strongly
Decreasing
Increasing
Increasing strongly
Projecting three years ahead, economics bloggers expect global output to rise faster than anything else. A significant difference from the previous reports is that only 50 percent of respondents anticipate employment growth in the United States, where previously 70 percent had anticipated growth. Opinion remains split about expectations of higher poverty and inequality levels, and expectations of higher annual deficits and the top marginal tax rate are a depressing surprise.
Global output Top marginal tax rate Interest rates (real) Inflation Employment Budget deficit (annual) GDP per capita Poverty Stock market Corporate tax rate -40%
-20%
0
20%
40%
60%
80%
[Kauffman Economic Outlook—2011 Q3]
Decreasing Decreasing strongly
About the same
Increasing
Increasing strongly
Global output
2%
10%
17%
59%
12%
Top marginal tax rate
0%
2%
35%
61%
2%
Interest rates (real)
0%
5%
33%
54%
7%
Inflation
0%
2%
37%
56%
5%
Employment
0%
21%
29%
47%
3%
Budget deficit (annual)
2%
26%
24%
41%
7%
GDP per capita
0%
20%
32%
46%
2%
Poverty
0%
9%
47%
40%
4%
Stock market
3%
14%
43%
34%
5%
Corporate tax rate
0%
19%
61%
19%
0%
Corporate tax rate
0%
26%
54%
19%
0%
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3 U.S. ECONOMIC POLICY
The U.S. federal government should... (select one or more) Strongly Disagree
Disagree
Agree
Strongly Agree
When asked to evaluate a variety of policy proposals, the top recommendation was to approve trade agreements with South Korea, Colombia, and Panama, with 90 percent in agreement (60 percent agreeing strongly). Eighty-eight percent also favor approval of a reduction of regulatory burdens and fees on new firm formation. The panel also supported the adoption of extending the debt limit without conditions (55 percent).
Approve trade agreements with South Korea, Colombia, and Panama Require CBO to account long-term liabilities in annual budget assessments Reduce regulatory burdens and fees on new firm formation Convert Medicare to a personal premium support program Cap tax credits & deductions per household Extend the debt limit without conditions Adopt a Constitutional amendment requiring annual expenditures not exceed the real average revenues of the previous 7 years -100% -75% -50%
-25%
0
25%
50%
75%
100%
[Kauffman Economic Outlook—2011 Q3]
Strongly Disagree
Disagree
Agree
Strongly Agree
Approve trade agreements with South Korea, Colombia, and Panama
3%
7%
29%
60%
Require CBO to account long-term liabilities in annual budget assessments
5%
7%
48%
40%
Reduce regulatory burdens and fees on new firm formation
5%
7%
33%
55%
Convert Medicare to a personal premium support program
19%
24%
34%
22%
Cap tax credits & deductions per household
7%
36%
38%
19%
Extend the debt limit without conditions
17%
28%
29%
26%
Adopt a Constitutional amendment requiring annual expenditures not exceed the real average revenues of the previous 7 years
36%
28%
22%
14%
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3 U.S. ECONOMIC POLICY
What is your sense of the conditions that exist for the following: Very Good
60%
Good
Fair
Bad
Very Bad
50%
In every category of business, conditions right now are rated as “fair, bad, or very bad” by more than 69 percent of respondents, with venture and angel capital being the least bad of them all at only 69 percent, while bank lending to individuals is rated 90 percent negative.
40% 30% 20% 10% 0% Entrepreneurs
Venture & Angel capital
Bank lending to businesses
Bank lending to individuals
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3
OTHE R TOPI C A L Q U ES T IO N S FR OM PARTIC IPATING BLO GGERS Nick Schulz (Enterprise Blog) asked and many bloggers answered: What is a realistic long-run growth rate for annual real per capita GDP in the United States?
2%
0%: a steady state of zero growth
18%
1%: decelerate from low-hanging fruit era
44%
2%: modern average trend 3%: acceleration
14%
4%+: singularity
4%
V%: highly variable between 1-3%
14%
X%: this cannot be predicted
5%
0
10%
30%
20%
40%
50%
Looking beyond the macroeconomy’s cyclical fluctuations, almost half of respondents (44 percent) expect U.S. growth to return to the steady 2 percent annual rate, with roughly equal numbers expecting 1 percent slower (18 percent) and faster (14 percent). If one includes the 14 percent of respondents who anticipate a variable growth rate in the 1−3 percent range, it’s safe to say there is a consensus expectation for the longrun trends to essentially continue. Two respondents expect growth to accelerate, an idea popularized as approaching a “singularity” in science fiction, while one respondent anticipates complete stagnation.
[Kauffman Economic Outlook—2011 Q3]
Ryan Avent (Free Exchange) asked: Over the next decade, what share of the U.S. fiscal consolidation should be accomplished through revenue increase?
0% 25%
50%
50%
21%
5%
75% 100%
For many years, conventional wisdom held that fiscal balance would and should be achieved through an even mix of tax increases and spending cuts. However, economics bloggers strongly favor a mix that favors spending cuts. Indeed, more favor consolidation to focus entirely on spending cuts (23 percent of respondents) than those who favor a fifty-fifty mix (21 percent).
23%
0%
0
10%
20%
30%
40%
50%
60%
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3 OT H E R TO P I C A L Q U E S T I O N S F R O M PA RT I C I PAT I N G B L O G G E R S
Amol Agrawal (Mostly Economics) asked: Did fiscal policy expansion in 2009, particularly ARRA (“the stimulus”), mitigate or alleviate the impact of the crisis?
Much less than 1
19%
Less than 1
28%
Equal to 1
30%
Greater than 1
21%
Much greater than 1
2%
0
10%
30%
20%
40%
50%
[Kauffman Economic Outlook—2011 Q3]
Chris Masse (Midas Oracle) asked: Have Robin Hanson, Justin Wolfers, and James Surowiecki been exaggerating the usefulness of the prediction markets? Yes
36%
No
36%
Don’t Know
As an example, in early 2010 Robin Hanson wrote on his blog, “Prediction markets aren’t about emphasizing ordinary Joes over credentialed big shots; they are about emphasizing whomever tends to be right. Simple opinion averages maybe be reasonable indicators of crowd wisdom, but they have too little of the forum-ness of letting self-selected expert teams come to dominate.” The response to this question was perfectly balanced, with 36 percent answering yes and another 36 percent answering no. We would not have predicted that.
28%
0
10%
30%
20%
40%
50%
[Kauffman Economic Outlook—2011 Q3]
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Assessment of the 2009 fiscal stimulus bill that was passed by a partisan majority of Democrats in the House and Senate and signed into law early in the Obama administration has proven controversial as the recovery was weaker than expected. However, defenders of stimulating aggregate demand argue that, absent the stimulus, the recession would have been worse or possibly tipped into an outright depression. Agrawal’s question frames the judgment on a technical description of the “multiplier,” which is the estimate of how much government spending trickles down into the economy. A multiplier “equal to one” means the spending added no boost to aggregate demand, but also did no harm, meaning it had a neutral effect. Seventy-seven percent of respondents believe the stimulus had a neutral or negative effect (a multiplier equal to or less than one), with most believing the multiplier was actually less than one (47 percent). Only 23 percent of respondents believe the multiplier was greater than one.
Kauffman Economic Outlook—2011 Q3 OT H E R TO P I C A L Q U E S T I O N S F R O M PA RT I C I PAT I N G B L O G G E R S
Dean Baker (Beat the Press) asked: Should the U.S. unemployment insurance program be restructured with one or more of the following proposals? One idea is for the government to subsidize a short-time week as is done in Germany (paying a firm to retain workers by cutting hours 20 percent and wages nearly 10 percent for everyone). Another idea is to push back initial eligibility from the first day of unemployment so that benefits are paid only after day thirty but extended for a longer period. A final idea is to phase out benefits in order to curtail the end-of-benefits job search spike. Yes
50%
No
Don’t Know
A plurality of 47 percent of respondents does not support a short-time subsidy, and just 33 percent do. Similarly, 33 percent favor (and 41 percent oppose) pushing back the initial eligibility date for unemployment insurance. The most popular reform, with support from 47 percent of respondents, is a phaseout of benefits, with 31 percent opposed. In general, there was no consensus here, unfortunately.
40% 30% 20% 10% 0% Subsidize short-time
Push back initial eligibility
Phase out benefits [Kauffman Economic Outlook—2011 Q3]
Craig Newmark (Newmark’s Door) asked: There is widespread speculation that the U.S. government will attempt to break up or attempt to regulate Google. What will happen? What should happen? Will the FTC file suit against Google? Yes
54%
No
46% 0
20%
60%
40%
80%
Should the government file suit?
(i.e. Is Google monopolizing or otherwise violating U.S. antitrust law?)
Yes
Economics bloggers have a very cynical view of the FTC investigation of the Internet search firm, Google. 100% A majority (54 percent) believe the government actually will file suit against Google, yet 93 percent believe the suit lacks merit.
7%
No
93% 0
20%
60%
40%
80%
100%
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3 OT H E R TO P I C A L Q U E S T I O N S F R O M PA RT I C I PAT I N G B L O G G E R S
Menzie Chinn (EconBrowser) asked: Do you agree with the following statements about the advent of bloggers relative to the period when newspaper columnists dominated? Strongly Disagree
Disagree
Agree
Strongly Agree
All respondents but one agree or strongly agree that the speed of research diffusion has accelerated thanks to blogging. And 82 percent strongly agree (96 percent agree overall) that the level of public disclosure regarding economic theory and economic policy has improved. Large but less intense majorities also agree that blogging has helped debunk bad ideas more efficiently and weakened the role of traditional “infomediaries.”
The speed of research diffusion has accelerated
The level of public discourse regarding economic theory and economic policy has improved
Bad ideas are debunked more efficiently
The role of infomediaries (media, think tanks) between policymakers and economic experts has weakened -25%
0
25%
50%
75%
100%
[Kauffman Economic Outlook—2011 Q3]
Strongly Disagree
Disagree
Agree
Strongly Agree
The speed of research diffusion has accelerated
0%
2%
12%
86%
The level of public discourse regarding economic theory and economic policy has improved
0%
4%
14%
82%
Bad ideas are debunked more efficiently
0%
14%
53%
33%
The role of infomediaries (media, think tanks) between policymakers and economic experts has weakened
0%
21%
45%
34%
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3 OT H E R TO P I C A L Q U E S T I O N S F R O M PA RT I C I PAT I N G B L O G G E R S
Mike “Mish” Shedlock and Claus Vistesen (Mish’s Global Economic Analysis and Alpha.Sources) asked: What is the likelihood of the following occurring sometime before the end of 2012? The Euro still exists through 2014
Confidence in the Euro is stunningly low, with 32 percent believing it will not exist in 2014. While this is a minority opinion, it is a serious signal of weakness. Opinion is split 47−53 on whether Greece will abandon the Euro within the next eighteen months. Likewise, 23 percent believe there will be a collapse of the U.S. Treasury prices. While 56 percent believe Obama will be reelected, only 29 percent believe that 99 percent of U.S. troops will leave Iraq. A third of respondents predict a double-dip recession before the end of 2012.
68%
Obama is re-elected
56%
Greece abandons the Euro
47%
U.S. recession
35%
99% of U.S. troops leave Iraq
29%
Collapse of U.S. Treasury prices
23%
U.S. unemployment rate dips below 7 percent
21%
U.S. Medicare is coverted to premium support
16% 0
20%
60%
40%
80%
100%
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3
METHODOLOGY & PANEL SELECTION Invitations were sent to nearly 200 top economic bloggers, most of whom were on the Palgrave’s Econolog.net December 2010 rankings (its methodology is described at http://econolog.net/stats.php). Some blogs with multiple authors have more than one respondent in the panel. For example, both James Hamilton and Menzie Chinn, co-bloggers at EconBrowser.com, are participants, as are Tyler Cowen and Alex Tabarrok, co-bloggers at Marginalrevolution.com. The panel includes a total of fifty-eight respondents. The panels from previous quarters are not directly comparable to this quarter’s panel. Roughly half of all bloggers participated in all quarters, so comparisons between the results have a large margin of error. The policy of the Kauffman Economic Outlook is that survey panelists and their blog names will be released, but all individual responses and comments will remain anonymous. A list of participants is included in the appendix. Panelists were asked to describe their political affiliation, with the intent being to show whether the panel has an ideological bias. We find that, among those who answered this question, 41 percent consider themselves Independent/Other, with 12 percent Democrat and 7 percent Republican. The last question asked economics bloggers to described their occupations and backgrounds. These responses were not exclusive (meaning respondents could select one or more). Nearly half are university professors, about one-fourth are former or current entrepreneurs, one-fifth are investors, and nearly half have a PhD in economics.
Please describe yourself (check all that currently apply) University professor/lecturer
47%
Entrepreneur (current or former)
22%
Investor
14%
Professional journalist
12%
Economics PhD
43%
JD
7%
MBA
5%
Registered Democrat
12%
Registered Republican
7%
Independent/Other
41%
0%
10%
20%
30%
40%
50%
60%
[Kauffman Economic Outlook—2011 Q3]
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Kauffman Economic Outlook—2011 Q3
APPENDIX LIST OF RESPONDENTS Individual responses will not be released, but names and/or blogs of the participants in the Kauffman Economic Outlook include: Amol Agrawal, Mostly Economics Pedro Albuquerque, Incentives Matter Ryan Avent, Free Exchange Dean Baker, Beat the Press Joshua Barro, PublicSectorInc.com David Beckworth, Macro and Other Market Musings Taggert Brooks, A Random Walk Bryan Caplan, EconLog Menzie Chinn, EconBrowser Bill Conerly, Businomics Jeff Cornwall, The Entrepreneurial Mind Robert Cringely, I, Cringely Atanu Dey, Atanu Dey Arthur Diamond, artdiamondblog.com Craig Eyermann, Political Calculations Eric Falken, Falkenblog Will Franklin, WILLisms Daniel Gross, Yahoo! Finance GYSC, Economic Disconnect James Hamilton, EconBrowser Robin Hanson, Overcoming Bias Ken Houghton, Angry Bear Tim Iacono, The Mess That Greenspan Made Tim Kane, Growthology.org Stephen Karlson, Cold Spring Shops Paul Kedrosky, Infectious Greed Arnold Klingf, EconLog Drea Knufken, Business Pundit Richard Langlois, Organizations and Markets Robert Lawson, Division of Labour Robert Litan, Growthology.org
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Kauffman Economic Outlook—2011 Q3
APPENDIX LIST OF RESPONDENTS (continued) Steve Malanga, Real Clear Markets Michael Mandel, Mandel on Innovation and Growth Geoffrey Manne, Truth on the Market Donald Marron, dmarron.com Chris F. Masse, MidasOracle.org Jeff Miller, A Dash of Insight Michael Munger, Kids Prefer Cheese Craig Newmark, Newmark’s Door Matt Nolan, The Visible Hand in Economics Michael Panzner, Financial Armageddon Mark Perry, Carpe Diem James Picerno, The Capital Spectator E.J. Reedy, Data Maven at Kauffman.org Wade Roush, Xconomy Felix Salmon, Felix Salmon Andrew Samwick, Capital Gains and Games Frederic Sautet, Coordination Problem Allison Schrager, Free Exchange Nick Schulz, Enterprise Blog Mike Shedlock, Mish’s Global Economic Trend Analysis Amity Shlaes, The Forgotten Man, CFR Gordon Smith, The Conglomerate Daniel Sokol, Antitrust and Competition Policy Blog Alex Tabarrok, Marginal Revolution Mark Thoma, Economist’s View Claus Vistesen, Alpha.Sources Steve Waldman, Interfluidity Robert Waldmann, Angry Bear David Weman, A Fistful of Euros John Whitehead, Environmental Economics Glen Whitman, Agoraphilia David Zetland, Aguanomics.com
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