In the beginning there was chaos.
And the economy was without form, and void; and darkness was upon the face of the market. And the Spirit of Economists moved upon the face of the waters.
And the Economists said, “Let there be a Committee that marks the beginnings and ends of recessions.”
The year was 1978. And a think tank called the National Bureau of Economic Research created the Business Cycle Dating Committee.
And the Committee named peaks: January 1980; July 1981; July 1990; March 2001. And the Committee saw that they were good. And the Committee named troughs: July 1980; November 1982; March 1991; November 2001. And the Committee saw that they were bad.
And the economy rolled on, upward and downward and sideways. And then the Great Recession arrived. And the Committee, inactive since 2003, was called again to action.
On the day of the announcement, Dec. 1, 2008, three days after the seven men of the Business Cycle Dating Committee met telephonically, news venues reported the tidings.
“Most Americans sorely knew it already, but now it’s official: The country is in a recession, and it’s getting worse,” wired the Associated Press. “Wall Street convulsed at the news. …”
“The dollar gained against the euro and the British pound Monday after a slew of dismal economic reports and official word that the U.S. economy has been in a recession since December 2007,” reported CNNMoney.
The House-Senate Joint Economic Committee issued a release, complete with a statement from its chairman, Chuck Schumer: “It isn’t news to American families that for the last several months our economy has been in a recession, but Washington needs to act quickly to make sure this recession doesn’t get deeper or last a day longer than it has to.”
The Dow fell nearly 700 points.
ON TUESDAY, SEPT. 15, 2009, one year to the day after Lehman’s undoing, Federal Reserve Chairman Ben Bernanke, who himself once sat on the cycle-dating committee, said in a speech that the recession was likely over, from an academic standpoint at least.
That may well be true. But we won’t know for sure for sure until the committee makes a declaration.
Over the decades, the committee, by dint of its relatively early creation, its sterling reputation and the lack of competition from other think tanks or agencies, has become the unofficial official arbiter of the peaks and troughs of the U.S. economy.
Its status is strengthened by a general lack of dissension among the larger economist community. Indeed, one of the only raps against the committee is the length of time it takes to make decisions—anywhere from six to 18 months following a peak or trough. But its dawdling is understandable: It takes months, after all, for the economic indicators to align.
And the committee members are nothing if not methodically academic.
The chairman, Stanford University applied economist Robert E. Hall, didn’t respond to requests for comment. But his CV is teeming with academic laurels and citations of papers with titles like “Reconciling Cyclical Movements in the Marginal Value of Time and the Marginal Product of Labor.” He’s also the sort of academic who maintains a blog of family vacations called “Villages, Ruins & Good Food.” That blog, in turn, links to a page called “Our Cats,” featuring a video called “Kitties Frolicking,” in which the family’s two adorably well-fed house cats tussle.
Dr. Hall has chaired the committee since it started, according to Donna Zerwitz, NBER’s spokeswoman (an econ major who has worked at the Cambridge, Mass.–based National Bureau of Economic Research for 30 years and, as a result, is a de facto economist herself).
Dr. Hall; Martin Feldstein, NBER’s president emeritus and a professor at Harvard (and once President Reagan’s chief economics adviser); and Northwestern University economist Robert Gordon (who appears in his profile photo with an adorable black pup) have all served on the committee since its creation. The late University of Chicago economist Victor Zarnowitz was also an early and long-serving member (he died in February of this year). Also serving on the committee that named the recession we’re in now: MIT economist and NBER’s president, James Poterba; Berkeley’s David Romer; and Harvard economist Jeffrey Frankel, who has been on the committee since 1992. There are no current members based in the Great Recession’s birthplace, New York.
Dr. Frankel called the responsibility “fun,” though not particularly grueling. “For the first eight years, we had nothing to do,” said Dr. Frankel, the start of whose term coincided with a very long economic expansion. “I used to joke it was the perfect committee to be on.”
Except when there are devastating economic crises, and then the hibernating brain trust springs to life. And the members repair to their computers.
“Once upon a time, in the beginning of my tenure here, when we had to make a decision, we actually had a meeting where people sat down in the same room and talked and looked at pieces of paper on which there were data,” Ms. Zerwitz said. “Now, almost everything occurs via email. [Everyone] has access to the same data, which they share with each other, which Chairman Hall generates sometimes, or Bob Gordon sometimes. But they’re sharing their info either through a call, or a series of emails back and forth.”
ON SOME LEVEL, IT doesn’t much matter when a recession officially begins or ends. As Mr. Bernanke reportedly acknowledged on Tuesday, “[I]t’s still going to feel like a very weak economy for some time, as many people will still find that their job security and their employment status is not what they wish it was.”
Yet it’s not an entirely meaningless exercise, either.
“It does help to study recessions,” said Robert Frank, a Cornell economist unaffiliated with the committee. “It’s nice to know everybody’s working with a common definition.”
And, as both Drs. Frank and Frankel pointed out, controlling the definition of history, be it economic or otherwise, has political implications.
“I like to give the example of presidential candidates,” Dr. Frankel said. “If it weren’t for us, every member of a political party, if it was in office, would make assertions that the other party was in office when the recession started. That’s an example of how this sort of disciplines the debate.”
Shared definitions, in other words, allow for reasoned argument.
Speaking of which, when will the committee define the end of this ruthless recession?
Ms. Zerwitz said the committee doesn’t make predictions. Dr. Frankel, for his part, would say only that the group tends to follow this general rule: “We don’t make the call until we can ask ourselves the question: If tomorrow the economy plunged, would we call that a second recession? Or would we say that’s part of the same recession?”
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