Boom and bust
Some comments on your April 2001 article on the business cycle: I think your statement that, "It's just that no one had ever seen the opportunity to make that much money that quickly, and so everyone tried it," may be true only if you are talking about business history for the past generation. There's nothing new here. There are plenty of examples in economic/business history of people becoming irrationally optimistic about business ventures. Take, for instance, the early days of the railroad's expansion west or the automobile industry at the time of Henry Ford's innovations in manufacturing. Although people's confidence does have some impact on the economy, the business cycle is far more complicated than that.

Trying to talk people out of a recession is very similar to trying to talk people into making irrational investments in the dot-com industry.

Owen Flagel

Slight correction
Long-time Palm device/Visor user here to say thanks for the pep talk on the economy in this months editorial. I agree with all the points you made about what people, especially those in the media, should do to help "get over it."

I would, however, like to point out one rather large violation of your own advice that appeared in the editorial in the form of a gross mathematical error, and I quote:

"...and hoping I've gotten my math right, we're talking about $76 billion or so that's not flowing into the economy."

As even you questioned your own calculations here, it hopefully comes as no surprise that they are indeed wrong. You see, the $76 billion figure is based on the dubious assumption that when each of the 76,529 people was layed off, they earned no income for a full 12 month period. Although I haven't checked the statistics (and enough time hasn't elapsed anyway), I'm sure that a rather large percentage of those people either will or already have been rehired elsewhere. So, the missing variable in your calculation is the average length of unemployment for these folks, which almost certainly is less than 12 months.

Just thought I'd take your advice and share the good news with you!

Regards,
Kevin Pettitt
Contractor/Notes Developer
Ernst & Young, http://www.ey.com

Editor-in-Chief David Gewirtz responds
Kevin, very valid point. That's why I write editorials, and I'm neither an economist nor an accountant. Presumably, the right way to do this sort of estimate is figure out the average unemployment expectancy and factor that into the calculation. However, no matter how you rework, it, the numbers are moderately immoderate.

Off by 10
Good article, but 76 thousand (people laid off) x $100 thousand (salary each)= $7600 million (lost income) or $7.6 billion, not $76 billion.

As u can tell, I work for PriceWaterhouse, an accounting firm. I'm an economist, so I always "double check the numbers." Anyway, wish I got some of those $100 million stock options. I live in Washington DC, and MicroStrategy (at http://www.microstrategy.com) has been fun to watch ($330 to $5 in one year). Keep up the good work.

Steven R Williams
PriceWaterhouse, http://www.pwcglobal.com