Thoughts on a recession

Over on Econbrowser, Jim (Hamilton) keeps us updated on the economic situation in the US. He has earlier established that the US economy is in a recession; the question remains how deep the recession will be.

Now, it is not hard to imagine that the consumption level in the US is unsustainable, both in terms of the environment (that is, pollution and climate change) and scarcity of resources. The US consumption level is particularly problematic if the ideal is a more or less global common level of consumption. One may argue that some of the problems with sustainability can be solved by changing the composition of the consumption, but I think such possibilities are limited. The consumption level in the US (and in much of western Europe for that matter) may have to come down to secure a sustainable environment and global development. Would the US be forced to bear on an extensive and long lasting recession for this to happen?

I admit that the argumentation above is speculative and, even worse, vague. If one is optimistic on behalf of science and technology, for example, one may argue that in the future we can consume much more with the same resources as today, and at least some pollution problems will be solved without necessarily changing neither the level of consumption nor its composition. Also, global development will hopefully reduce the population numbers naturally, making a future global high level of consumption less severe on the resources. However, (again) ideally, each country needs to be self-sufficient in the long run, meaning that they produce at least as much as they consume; they cannot have a trade deficit. Currently, the US is running a large deficit. This is a sign that their consumption level is usustainable. It would also be interesting to see who they traded with; if a large share of their trade originates in less developed countries (and I’m afraid that it is), the situation may change when their trading partners develop.

Finally, if it turns out that the US consumption level has to fall and this treatens to put the country and its economy into a deep recession, how far will the US government be willing to go to lessen the stress?


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2 Responses to “Thoughts on a recession”

  1. Stacey Derbinshire Says:

    Where did you get your blog layout from? I’d like to get one like it for my blog.

  2. kvams Says:

    It is the standard layout here at Maybe you can download a template or something, I don’t know. I was actually planning to change it since it is the standard and thus inherently dull. I’m also afraid there are hundreds of identically blogs layoutwise. I’ve gotten compliments for the layout twice now, however, so I might change my opinion.

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