Time for a New 'Pessimism Index'?

Mark Marich

At the beginning of 2011, PDE checked in on the monthly Small Business Optimism Index to find that small business owners were “stubbornly cautious.” Fast-forward to the midpoint of the year--in the dog days of summer—and the feelings haven’t seemed to change at all.

According to the latest figures from the National Federation of Independent Businesses (NFIB), optimism dropped for the fifth straight month and is rapidly approaching 2009 levels.

“Given the current political climate, the protracted debate over how to handle the nation’s debt and spending, and the now this latest development of the debt downgrade, expectations for growth are low and uncertainty is great,” said NFIB Chief Economist Bill Dunkelberg. “At the two year anniversary of the expansion, the Index is only 3.4 points higher than it was in July 2009. And considering the confidence-draining performance of policy makers, there is little hope that Washington will stop hemorrhaging money and put spending back on a sustainable course. Perhaps we might begin referring to the ‘Small-Business Pessimism Index’ from now on.”

The silver lining in those January 2011 figures was that small business owners expected better business conditions in six months. Unfortunately, that glimmer of hope for the future has faded significantly—with the six-month forecast dropping 25 percentage points in the latest figures.

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RE: Time for a New Pessimism Index

Tomasz said...

e28098Numerous factors citbronute to the acceptability of ideas. To a very large extent, of course, we associate truth with convenience e28094 with what most closely accords with self-interest and personal well-being or promises best to avoid awkward effort or unwelcome dislocation of life. . But perhaps most important of all, people approve most of what they best understand. As just noted, economic and social behavior are complex, and to comprehend their character is mentally tiring. Therefore we adhere, as though to a raft, to those ideas which represent our understanding.e28099 (Galbraith, J. K. 1958. e28098The Concept of Conventional Wisdome28099, The Affluent Society. 4th Edition London: Penguin 1991)Also what is the research message because that will influence how it might be received? Is it confirming existing approaches? In which case it will be welcome but not very useful. Or is it suggesting that a different approach is needed? Because then it might be useful but is unlikely to be used because it is very unwelcome. I suggest that, while it might be expected that those responsible for policy would like to know whether their policy is working or not, in practice what they want research to tell them is that their policy is working. Again to quote Galbraith: e28098The skeptic is disqualified by his very tendency to go brashly from the old to the new. Were he a sound scholar, he would remain with the conventional wisdom.e28099I realise that I have focused mainly on the research-policy divide, because it is the one of which I have most experience. In the case of practitioners, and especially small business owners, they probably want so many different things that I done28099t think we are going to find a single way of bridging the gap. We will probably have to look at each individual case on its merits.Sorry if that was not what you wanted.RegardsSimon