Short-term vs. Long-run economics

Almost all popular coverage of the economy is very short-term, and focused on consumer spending. For example, I just went to the New York Times business section and found this article: U.S. Indexes Fall Sharply on Jobs Data. This is a typical economics article in many ways. It is well written, but read my full post to see the problems I have with it.




First, it is focused on the next few months. I consider myself a Keynesian economist, and Keynes' most famous quote arguing for the importance of short-term economic fluctuations is "In the long run, we're all dead." He argued that when, because of people's "animal spirits", business increased, there could be multiplier effects. For example, suppose people decide to buy more cars. Then car dealerships will have more money, and can go spend some of their new money on other things (maybe car parts). Then car part companies have more money, and so on, causing the entire economy to grow. Or it can work in reverse, ie. people deciding to buy less cars can cause a negative ripple through the economy. This is the Theory behind Keynesian economics, and the reason that governments spend money during recessions.

So while I agree that the short term is important, I object to the fact that nearly every single article in the news is about the next few months. Long-term changes in the economy are important, too, but do not receive much coverage.

My second objection to this article is that the implied cure for the economy is for people to spend more money. For example, here is a quote from the article: "'With car sales seen weakening further in the second quarter and consumer confidence starting to take a hit from fiscal austerity announcements, consumption prospects for the second quarter are not going to improve much,' said Marco Valli, Italian economist at UniCredit Research in Milan." Consumers in the US are already spending plenty of money, and the average American household is actually in debt. I would argue that Americans actually need to save more. While saving may hurt the economy in the short run, in the long run it will lower interest rates, making it easier to borrow money to finance education or new businesses/business expansions.