National Bureau of Economic Research

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National Bureau of Economic Research
AbbreviationNBER
Founded1920;103 years ago (1920)
Founder Wesley Clair Mitchell
Type Nonprofit organization
Location
Leader James M. Poterba
Revenue (2015)
$33,263,297 [2]
Expenses (2015)$33,988,867 [2]
Website nber.org

The National Bureau of Economic Research (NBER) is an American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community". [3] The NBER is well known for providing start and end dates for recessions in the United States.

Contents

Many chairpersons of the Council of Economic Advisers were previously NBER Research Associates, including the former NBER president and Harvard Professor, Martin Feldstein. The NBER's president and CEO is James M. Poterba of MIT.

History

The NBER was founded in 1920. Its first staff economist, director of research, and one of its founders was American economist Wesley Clair Mitchell. He was succeeded by Malcolm C. Rorty in 1922.

The Russian American economist Simon Kuznets, a student of Mitchell, was working at the NBER when the U.S. government recruited him to oversee the production of the first official estimates of national income, published in 1934.

In the early 1940s, Kuznets's work on national income became the basis of official measurements of GNP and other related indices of economic activity. [4] The NBER is currently located in Cambridge, Massachusetts with a branch office in New York City.

Research

The NBER's research activities are mostly identified by 20 research programs on different subjects and 14 working groups. The research programs are: Aging, Asset Pricing, Behavioral/Macro, Capital Markets and the Economy, Children, Corporate Finance, Development of the American Economy, Economics of Education, Economic Fluctuations and Growth, Energy and the Environment, Health Care, Health Economics, Industrial Organization, International Finance and Macroeconomics, International Trade and Investment, Labor Studies, Law and Economics, Monetary Economics, Political Economy, Productivity, and Public Economics. [5] From this research come the NBER's Working Papers.

Conferences

The NBER convenes over 120 meetings each year at which researchers share and discuss their latest findings and launch new projects. The Summer Institute, a collection of nearly 50 smaller meetings, is held annually in July. [6]

Notable members

Winners of the Nobel Memorial Prize in Economic Sciences

(In descending chronological order and by last name)

Council of Economic Advisers (CEA) Chairs

(In descending chronological order)

Other notable members

(In alphabetical order by last name)

Funding

According to the NBER, they are funded by grants from government agencies, private foundations, by corporate and individual contributions, and by income from the NBER's investment portfolio. The largest donators currently are the National Institute of Health, the National Science Foundation, the Social Security Administration, and the Alfred P. Sloan Foundation. [7] In 2015, NBER's annual revenue was about $33 million.

Policy impact

In a 2010 report by the University of Pennsylvania, the NBER was ranked as the second most influential domestic economic policy think tank (the first was the Brookings Institution). [8]

Recession markers

The NBER is also known for its start and end dates of US recessions. The NBER is claimed by some to serve the role as an arbiter of whether the U.S. is in a recession or not. [9] The origins of this role can be traced to the 1960s when the Commerce Department began publishing a digest that relied on NBER's analysis of the business cycle. [9] The recession markers are made by the Business Cycle Dating Committee, whose eight members are selected by the president of the NBER. The eight members tend to be highly distinguished economists. [9] The committee's meetings are held on the third floor of NBER's headquarters. [9] The meetings are neither publicized nor on a fixed schedule. [9] The board's decisions are not always unanimous, but the disagreements within the committee tend not to be about the presence of a recession; rather they are about the specific start and end points of the recession. [9]

The NBER uses a broader definition of a recession than commonly appears in the media. A definition of a recession commonly used in the media is two consecutive quarters of a shrinking gross domestic product (GDP). In contrast, the NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales". [10] Business cycle dates are determined by the NBER dating committee. Typically, these dates correspond to peaks and troughs in real GDP, although not always so. [11]

The NBER prefers this method for a variety of reasons. First, they feel by measuring a wide range of economic factors, rather than just GDP, a more accurate assessment of the health of an economy can be gained. For instance, the NBER considers not only the product-side estimates like GDP, but also income-side estimates such as the gross domestic income (GDI). Second, since the NBER wishes to measure the duration of economic expansion and recession at a fine grain, they place emphasis on monthly—rather than quarterly—economic indicators. Finally, by using a looser definition, they can take into account the depth of decline in economic activity. For example, the NBER may declare not a recession simply because of two quarters of very slight negative growth, but rather an economic stagnation. [12] However, they do not precisely define what is meant by "a significant decline", but rather determine if one has existed on a case by case basis after examining their catalogued factors which have no defined grade scale or weighting factors. The subjectivity of the determination has led to criticism and accusations committee members can "play politics" in their determinations. [13]

Though not listed by the NBER, another factor in favor of this alternate definition is that a long term economic contraction may not always have two consecutive quarters of negative growth, as was the case in the recession following the bursting of the dot-com bubble. [12] For example, a repeated sequence of quarters with significant negative growth followed by a quarter of no or slight positive growth would not meet the traditional definition of a recession, even though the nation would be undergoing continuous economic decline.

Announcement of end of 2007–2009 recession

In September 2010, after a conference call with its Business Cycle Dating Committee, the NBER declared that the Great Recession in the United States had officially ended in 2009 and lasted from December 2007 to June 2009. [14] [15] In response, a number of newspapers wrote that the majority of Americans did not believe the recession was over, mainly because they were still struggling and because the country still faced high unemployment. [16] [17] [18] However, the NBER release had noted that "In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month. A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle." [19]

Related Research Articles

<span class="mw-page-title-main">Gross domestic product</span> Market value of goods and services produced within a country

Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold in a specific time period by countries. Due to its complex and subjective nature this measure is often revised before being considered a reliable indicator. GDP (nominal) per capita does not, however, reflect differences in the cost of living and the inflation rates of the countries; therefore, using a basis of GDP per capita at purchasing power parity (PPP) may be more useful when comparing living standards between nations, while nominal GDP is more useful comparing national economies on the international market. Total GDP can also be broken down into the contribution of each industry or sector of the economy. The ratio of GDP to the total population of the region is the per capita GDP.

<span class="mw-page-title-main">Recession</span> Business cycle contraction

In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending. This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale anthropogenic or natural disaster.

An economic depression is a period of carried long-term economical downturn that is result of lowered economic activity in one major or more national economies. Economic depression maybe related to one specific country were there is some economic crisis that has worsened but most often reflexes historically the American Great Depression and similar economic status that may be recognized as existing at some country, several countries or even in many countries. It is often understood in economics that economic crisis and the following recession that maybe named economic depression are part of economic cycles where slowdown of economy follows the economic growth and vice versa. It is a result of more severe economic problems or a downturn than the recession itself, which is a slowdown in economic activity over the course of the normal business cycle of growing economy.

<span class="mw-page-title-main">Business cycle</span> Intervals of expansion and recession in economic activity

Business cycles are intervals of expansion followed by recession in economic activity. These changes have implications for the welfare of the broad population as well as for private institutions. Typically business cycles are measured by examining trends in a broad economic indicator such as Real Gross Domestic Production.

<span class="mw-page-title-main">Simon Kuznets</span> American economist and statistician (1901–1984)

Simon Smith Kuznets was an American economist and statistician who received the 1971 Nobel Memorial Prize in Economic Sciences "for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and social structure and process of development."

<span class="mw-page-title-main">Arthur F. Burns</span> Chairman of the U.S. Federal Reserve from 1970 to 1978

Arthur Frank Burns was an American economist and diplomat who served as the 10th chairman of the Federal Reserve from 1970 to 1978. He previously chaired the Council of Economic Advisers under President Dwight D. Eisenhower from 1953 to 1956, and served as the first Counselor to the President under Richard Nixon from January to November 1969. He also taught and researched at Rutgers University, Columbia University, and the National Bureau of Economic Research.

<span class="mw-page-title-main">Early 2000s recession</span> Recession that occurred in the early 2000s

The early 2000s recession was a decline in economic activity which mainly occurred in developed countries. The recession affected the European Union during 2000 and 2001 and the United States from March to November 2001. The UK, Canada and Australia avoided the recession, while Russia, a nation that did not experience prosperity during the 1990s, in fact began to recover from said situation. Japan's 1990s recession continued. This recession was predicted by economists, because the boom of the 1990s slowed in some parts of East Asia during the 1997 Asian financial crisis. The recession in industrialized countries was not as significant as either of the two previous worldwide recessions. Some economists in the United States object to characterizing it as a recession since there were no two consecutive quarters of negative growth.

In economics, gross output (GO) is the measure of total economic activity in the production of new goods and services in an accounting period. It is a much broader measure of the economy than gross domestic product (GDP), which is limited mainly to final output. As of first-quarter 2019, the Bureau of Economic Analysis estimated gross output in the United States to be $37.2 trillion, compared to $21.1 trillion for GDP.

Growth Recession is a term in economics that refers to a situation where economic growth is slow, but not low enough to be a technical recession, yet unemployment still increases.

<span class="mw-page-title-main">Great Recession</span> Global economic decline from 2007 into 2009

The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country. At the time, the International Monetary Fund (IMF) concluded that it was the most severe economic and financial meltdown since the Great Depression. One result was a serious disruption of normal international relations.

<span class="mw-page-title-main">Global recession</span> Recession that affects many countries around the world

A global recession is recession that affects many countries around the world—that is, a period of global economic slowdown or declining economic output.

<span class="mw-page-title-main">Christina Romer</span> Economist

Christina Duckworth Romer is the Class of 1957 Garff B. Wilson Professor of Economics at the University of California, Berkeley and a former chair of the Council of Economic Advisers in the Obama administration. She resigned from her role on the Council of Economic Advisers on September 3, 2010.

<span class="mw-page-title-main">Depression of 1920–1921</span> Sharp deflationary recession

The Depression of 1920–1921 was a sharp deflationary recession in the United States, United Kingdom and other countries, beginning 14 months after the end of World War I. It lasted from January 1920 to July 1921. The extent of the deflation was not only large, but large relative to the accompanying decline in real product.

Recession shapes or recovery shapes are used by economists to describe different types of recessions and their subsequent recoveries. There is no specific academic theory or classification system for recession shapes; rather the terminology is used as an informal shorthand to characterize recessions and their recoveries. The most commonly used terms are V-shaped, U-shaped, W-shaped, and L-shaped recessions, with the COVID-19 pandemic leading to the K-shaped recession. The names derive from the shape the economic data – particularly GDP – takes during the recession and recovery.

The Economic Cycle Research Institute (ECRI) based in New York City, is an independent institute formed in 1996 by Geoffrey H. Moore, Anirvan Banerji, and Lakshman Achuthan.

In any technical subject, words commonly used in everyday life acquire very specific technical meanings, and confusion can arise when someone is uncertain of the intended meaning of a word. This article explains the differences in meaning between some technical terms used in economics and the corresponding terms in everyday usage.

The Great Recession in the United States was a severe financial crisis combined with a deep recession. While the recession officially lasted from December 2007 to June 2009, it took many years for the economy to recover to pre-crisis levels of employment and output. This slow recovery was due in part to households and financial institutions paying off debts accumulated in the years preceding the crisis along with restrained government spending following initial stimulus efforts. It followed the bursting of the housing bubble, the housing market correction and subprime mortgage crisis.

Historically, the United States economy has performed better on average under the administration of Democratic presidents than Republican presidents since World War II. The reasons for this are debated, and the observation applies to economic variables including job creation, GDP growth, stock market returns, personal income growth and corporate profits. The unemployment rate has fallen on average under Democratic presidents, while it has risen on average under Republican presidents. Budget deficits relative to the size of the economy were lower on average for Democratic presidents. Ten of the eleven U.S. recessions between 1953 and 2020 began under Republican presidents.

References

  1. "Contact the NBER". National Bureau of Economic Research. 2022. Retrieved January 17, 2022.
  2. 1 2 "National Bureau of Economic Research Inc" (PDF). Foundation Center. Retrieved August 22, 2018.
  3. "History of the NBER". The National Bureau of Economic Research.
  4. Carson, Carol (1975). "The History of the United States National Income and Product Accounts: The Development of an Analytical Tool". Review of Income & Wealth. 21 (2): 153–181. doi:10.1111/j.1475-4991.1975.tb00687.x.
  5. "Major NBER Programs". The National Bureau of Economic Research.
  6. "NBER Conferences". NBER Conferences. Retrieved September 14, 2021.
  7. "Support & Funding".
  8. McGann, James G. (2010). "The global "go-to think tanks" 2011. The leading public policy research organizations in the world". TTCSP Global Go to Think Tank Index Reports. doi:10.4324/9780203838273. ISBN   9780203838273 . Retrieved November 24, 2019.
  9. 1 2 3 4 5 6 "The 8 economists who decide if the U.S. is in a recession". Washington Post. ISSN   0190-8286 . Retrieved July 28, 2022.
  10. "National slowdown dims New England economic outlook". The Boston Globe. May 30, 2008.
  11. "The NBER's Recession Dating Procedure". The National Bureau of Economic Research.
  12. 1 2 "The NBER's Business Cycle Dating Procedure: Frequently Asked Questions". The National Bureau of Economic Research.
  13. Maggs, John (April 19, 2010). "Who Decides When The Recession Ends?". National Journal . Archived from the original on April 23, 2010.
  14. "Recession 'over,' but the mood is glum". Buffalo News. September 27, 2010.
  15. "Economist who called recession's end sees recovery". Investment News. September 28, 2010.
  16. "CNN Poll: Nearly three-fourths say recession not over". CNN. September 26, 2010.
  17. "Meaning of word 'recession' varies". Delmarva News. September 28, 2010.[ permanent dead link ]
  18. "Editorial: Too early to say recession has run its course in U.S." The Daily Republic. September 28, 2010. Archived from the original on May 17, 2013.
  19. "Business Cycle Dating Committee, National Bureau of Economic Research". National Bureau of Economic Research. September 20, 2010.