Sunday, January 20, 2008

Our Economic Future

The American Enterprise Institute's Kevin Hassett suggests that we
think of our economic future as being a road trip in a 1971 Ford Pinto. Our car might burst into flames in the next instant, there might be a truck in our lane around the bend, or we just might make it all the way to California.
Hmmm... Hassett is trying to make a valid point - economic fluctuations are not so regular as the term "business cycle" might suggest. But there isn't that much uncertainty.

US real GDP, 1947-2007 (log scale):Ford Pinto:
In fairness, it should be noted that the tendency of Ford Pintos to burst into flame may have been exaggerated. According to Wikipedia:
[A] 1991 law review paper by Gary Schwartz, argued that the case against the Pinto was less clear-cut than commonly supposed. Only 27 people ever died in Pinto fires. Given the Pinto's production figures (over 2 million built), this was no worse than typical for the time.

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