September 03, 2008
The skin cream Phil Gramm needs

You want to see some bullish signs on the economy? Yes, there is the 2nd quarter 3.3% GDP growth. Now jobless claims have fallen for three straight weeks. A million more people have health insurance than a year ago. Oil is down to around a hundred bucks again, with much pressure to continue falling from both fundamental and bubble-like forces. Gasoline futures (October) are now at $2.73 a gallon, which is still up 33% on the year but still somehow doesn't look bad. Even corn prices are falling.

These are all good signs for the survival of the "great moderation" phenomenon, of which Phil Gramm was possibly thinking when he said this recession is in our heads. The great moderation describes the general decrease in economic volatility over recent decades. Ben Bernanke has a well known speech on this. The NBER business cycle data show that recessions have become less frequent, of shorter duration, and not as severe. Unemployment is at 5.7% for July. Not so bad, some would say.

Perhaps it's no surprise then, to see a new womens facial cream with a price tag of---ahem---one thousand dollars. Sold in 1.7 ounce containers, La Prairie's Platinum Rare is a skin cream that is infused with real platinum. (Shh. Don't tell the Chinese or Indians, else the price of platinum will really skyrocket!). Like cosmetic surgery, isn't a high-end, superior good like this supposed to be procyclical. With a greater demand elasticity, shouldn't these goods be the first to go when consumers are tightening belts? Yet revenues on cosmetic surgeries in 2007 were up 8% to over $13 billion.

I'm not saying there aren't bad things going on. But one of them is how much mental stock people put into whether we're "in a recession" or not. And hey! Where is the paper on the macro effects of cosmetic surgery? I just hope boob jobs are leading rather than lagging indicators.

Posted by Edward J. Lopez at 03:59 PM in Economics

The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith

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