"Measuring Economic Policy Uncertainty"

Location Date: 
March 12, 2013

We all know that the democratic process that we cherish can create less than optimal economic growth. Politicians can be counted on to manufacture policy uncertainty and for the first time a group of economists have devised an index (www.policyuncertainty.com) to measure the levels of that uncertainty.

Yesterday, the Fraser Institute awarded the annual Addington Prize in Measurement to a trio of economists from Stanford University and the University of Chicago for their groundbreaking research measuring economic policy uncertainty. In honour of Raymond Addington, former chairman of the Fraser Institute Board of Trustees, the Addington Prize in Measurement recognizes a person or team who has developed a new, interesting, and important concept in public policy, exemplifying the Institute’s motto: If it matters, measure it.

Nicholas A. Bloom (Professor of Economics, Stanford University), Steven J. Davis (William H. Abbott Professor of International Business and Economics, University of Chicago Booth School of Business) and Scott R. Baker (Ph.D. candidate, Stanford University) received the award, which comes with a $10,000 prize, for their paperMeasuring Economic Policy Uncertainty. Co-published through the National Bureau of Economic Research, this report develops the first rigorous analytical framework for measuring the extent and impact of economic policy uncertainty in the United States. The authors have since expanded their work to include Canada, Europe, China and India.

Professor Bloom explains their research in the fully video: http://www.youtube.com/watch?v=o4ERGDcv0F4 

“Baker, Bloom, and Davis conclude that U.S.-based economic policy uncertainty surged upward since 2008 and remains extremely high today, hindering recovery from the recession,” said Stephen Easton, chair of the Fraser Institute’s Addington Centre for the Study of Measurement.“Their research serves as a sober warning about the short- and long-term consequences of economic policy uncertainty, which foreshadows declines in economic growth and employment.”

I am going to add this index to my list of favorite behavioral and sentiment indices in order to better manage money. Please Click Here to get a better idea about how one can incorporate this useful information into your thinking.

Jim McGovern

P.S. As a Trustee of the Fraser Institute, please check out the great work this world class think tank produces at www.fraserinstitute.org.