A pair of bank economists predict only a mild loss of production due to y2k.
Why do economists ignore y2k's threat to the social order? Because they believe that all economic effects take place "at the margin." Economists move from this accurate assessment to a hypothetical world in which individual economic changes are marginally important to the system as a whole. These changes do not move in one direction: toward the destruction of the economic order. Economists see all economic change as moving toward equilibrium, a hypothetical realm which they believe has real-world effects. They assume that market-generated changes can produce chaos. They believe that individual decisions will almost always compensate for minor systemic fluctuations. In short, no big problem.
They do not acknowledge the possibility systemic threats short of nuclear war ("exogenous causation"). They do not admit that developments fostered by the free market's profit system and extended by the free market could crash the world economy -- and civilization, if the power grids go down and stay down. They see the free market economy as indestructable. For economists, the modern division of labor is not the problem; it is the cure . . . for everything.
Because y2k calls this assumption into question, economists dismiss it without looking at the evidence of the domino effect: systemic changes for which there are no system-wide solutions.
This is from the Dayton BUSINESS NEWS (April 20).
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Year 2000 bug is not likely to hurt the U.S. economy
Even though American governments and businesses may pay up to $240 billion fixing the Year 2000 bug, the entire cost is unlikely to send the U.S. economy into a tailspin, said two economists with the Chicago-based Harris Bank and its parent company the Bank of Montreal.
"Using the most pessimistic assumptions available, the programming expenses will not impact growth in the economy's overall costs by more than 0.3 percentage points between 1996 and 1999," said Tim O'Neill, chief economist for Harris Bank.
According to the study, the only way a recession or sustained economic downturn could occur as a result of the Year 2000 problem is if one or more of the following happens: a sharp downturn in consumer or business income; reduced foreign demand for U.S. products, a rise in interest rates and disruptions that inhibit companies from producing goods and services or noncompliance by a major U.S. industry.
Rick Egelton, deputy chief economist for Harris Bank/Bank of Montreal, said businesses and governments can incur two types of costs from the Year 2000 bug: The programming costs to solve the problem and the costs associated with failure to fix the problem.
Companies that do not address the Year 2000 problem could face errors including replacing computer equipment, billing errors and delayed payrolls. Government organizations could see their tax collection system shut down or problems with the delivery of government checks.
Failure to prepare for the Year 2000 bug could cause financial problems for some companies, Egelton said.
"Widespread bankruptcies are unlikely, but the potential for bankruptcy exists among firms that delay financing a programming solution," Egelton said. "At the very least, they can expect to pay significantly higher costs than companies that got an early start on solving the problem."