It has been interesting to me how much excited commentary has been elicited by my posts on output gaps. [0],
[1], [2], [3] I had thought the subject fairly uncontroversial, especially my reliance upon the CBO measure, which is calculated in a conventional manner, and is an object well-understood in mainstream macroeconomics (take your pick — from Hall and Papell to Mankiw). However, it’s clear that there is no such agreement in the blogosphere (which can be taken as an indicator of how dispersed beliefs are in that world). In any case, the reaction tells me that one’s belief in what determines potential GDP defines in large part how one thinks about the workings of the economy, and so I thought it useful to discuss alternative measures coming out of current academic work.

Recap

As I’ve discussed earlier (see this post), in some incarnations actual output is

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Paul Kedrosky has observed that a statistical analysis (word cloud) of the American Economic Association session titles, or even of the papers, leads to the impression that the economics profession has been relatively uninterested in the ongoing financial and economic crisis. Unfortunately, this observation misses ignores the fact that session proposals are submitted a full eleven months ahead of the ASSA meetings. Think back to January 2008, and the terms ascribed to those who warned of a severe slowdown ("alarmist", etc.), and the whole discussion is cast in a different light.

Furthermore, the correlation between scheduled paper titles and actual is, shall we say, fairly loose. In any case, the main messages of the papers are usually discussed in the context of current events.

I'll illustrate this last point by discussing the only complete session I made it to (most of my time was spend interviewing job candidates): "The