Via Crossing Wall Street here's an interesting Robert-Samuelson op-ed on a puzzling aspect of the economy:
A puzzle of our time is why the economy has become increasingly stable while individual industries have become increasingly unstable. The continuing turmoil at General Motors and Ford simply reflects this more pervasive industrial instability -- also in airlines, telecommunications, pharmaceuticals and the mass media, among others. Hardly a week passes without layoffs from some major company, which is "downsizing," "restructuring" or "outsourcing." And yet, the broader economy has undeniably become more stable. Since the early 1980s, we've had only two recessions, lasting a combined year and four months and involving peak unemployment of 7.8 percent. By contrast, from 1969 to 1982, we had four recessions lasting altogether about four years and having unemployment as high as 10.8 percent.
A cottage industry of economists is cranking out studies on these questions. One intriguing theory -- completely counterintuitive -- is that the greater overall stability stems in part from the increased instability of individual industries. You would, of course, expect the opposite: As individual industries became less stable, so would the larger economy.
But the reality may be more complex. Different industries may go through cycles that are disconnected from each other, argue economists Diego Comin and Thomas Philippon of New York University. All don't rise and fall simultaneously. To simplify slightly: Housing, autos and farming might strengthen, while computers, airlines and chemicals weaken.
Interesting. This is sort of what we were getting at, with our question of the standard deviation of the market. How much do the top-line numbers (S&P, GDP, etc.) reflect what the underlying constituents are doing, and has that changed over time? My hunch, though still nobody has given helped me find the data, is that as the economy goes more global, the relationship between sectors has gotten much looser, and the dispersion of outcomes wider.
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