Economists are a gloomy bunch these days. Here, for example, is an excerpt from the  National Association of Business Economics’ latest survey:

 A full 38% of respondents expect U.S. real GDP to be lower in 2009 than in 2008, and 79% expect growth of less than 1%. Only one respondent expects growth of more than 3% in 2009. Ninety percent of survey panelists said their forecast for 2009 became more pessimistic between July and October, compared to only 2% who said they became more optimistic.

University of Chicago economist Casey Mulligan thinks the consensus is far too pessimistic. In an NBER working paper and on his blog, Supply and Demand (in that order), Mulligan makes the case that the housing bust isn’t all bad for the economy.

He argues that if we were over-investing in housing — something on which almost everyone would now agree — then freeing up resources for non-residential investment must be a good thing. Furthermore, the loss of housing and stock-market wealth will force some Baby Boomers to delay retirement and remain in the work force. That may not be good for those Baby Boomers, but it does increase potential economic growth. In this blog post, Mulligan explains why his forecast differs from that of most economists:

Where we disagree is on business investment. They make a big deal about banks’ (supposed) not lending. I emphasize that investment resources have been freed up from the housing and consumption sectors and are now available for business investment.
They claim that employment will fall markedly. I emphasize that baby boomers will delay their retirements — which has the opposite effect.

The NBER paper, co-authored with Chicago colleague Luke Threiner, quantifies his predictions:

Absent a significant intermediation shock, our approach predicts greater employment and GDP. 3-4 percent above the previous trend is a rough estimate of the amount of the short run effect; seven percent is a rough estimate of the long run effect.

Of course, if you believe that the credit crunch amounts to “a significant intermediation shock,” you may find Mulligan’s theoretical arguments less compelling.