Monday, April 4, 2011

Missing Data and Missing Research

John Taylor, a distinguished economist at Stanford, observes that there is a strong relationship between investment and unemployment and suggests that "the anti-business sentiment coming out of Washington" has been keeping investment down.  Paul Krugman replies that investment is low simply because the market is bad--unemployed people don't buy much.  The stuff about business being spooked by what the government is doing or saying is "just politically motivated mythology."

This is an old issue, one that's been debated since at least the 1930s, so you'd think that people would have collected data.  I did a search and to my surprise found very little.  The only data I found for the United States that covered a significant period is the NFIB Optimism Index, which has been collected since the 1970s.  Changes between 1979 and 2009 can be found in this report.  It would be pretty straightforward to look at the relations among investment, the optimism index, and government policy, but I couldn't find any research that tries to do that. 

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