The market looked sick last week. Since it exists in a dimension in which perception equals reality, moroseness becomes its own reward. As sellers cough up positions in disappointment over a pattern of failed rallies and as market indices make a compulsive late summer run at the early April lows, there is no shortage of data or other observations to support a negative attitude. Economic growth came to a near standstill in the second quarter, and the third-quarter evidence of a bottoming and pickup is too spotty and too tentative to break the market pattern of rally and retreat. Following seven Fed easing initiatives and ahead of third-quarter earnings preannouncements, the current mood is much more "apres vous" than "follow me."

Jeff Madrick, one of the rotating economy columnists for The New York Times, did a piece on the revisions to U.S. productivity data. He noted that the rate of productivity growth between 1995 and 2000 had been "reported to have grown at nearly 2.9 percent a year," but that "the actual rate of productivity growth was, in fact, only slightly above 2.5 percent a year." Let's see: reported at nearly 2.9%; was in fact only 2.5%. The Bureau of Labor Statistics statisticians had it wrong, but now they've got it right; my confidence is restored. From these revisions, Madrick is able to conclude that there has been no "deepening computer revolution," that the rapid productivity gains of the late 1990s were "largely a result of a cyclical pickup in growth." It then follows that projections of 10-year federal budget surpluses made on the basis of an overly optimistic productivity trend "look highly dubious."

It's not easy for me to take this stuff with a straight face. I mean, to put dubious and federal budget projection in the same sentence is to commit redundancy. In an age when measurement covers the spectrum from light years to nanometers, economists can't measure productivity. They know what it is; they can define it, but they can't measure it. What anyone says about its measurement says more about that person than it does about productivity. I've begun to think of it as a sentiment indicator.

The day prior to Madrick's column, Robert Reich published one in The Wall Street Journal. This notoriously unrepentant liberal took Democrats to task for "bellyaching" about President Bush's "raid" on Social Security surpluses. The two parties have stalemated themselves into a corner of balanced budgets and "lockboxes," he claims, without regard for current economic conditions. Both then use arcane accounting conventions to generate heat for the other while avoiding the light. "Both parties," he writes, "have bought into the budget numbers racket -- a zero-sum game that confers enormous power on green eyeshade actuaries in the Congressional Budget Office, the Office of Management and Budget, the Social Security Administration and even the International Monetary Fund. Their assumptions about productivity growth, population growth, levels and rates of immigration (both legal and illegal) and mortality whir and click and spit out budgets that are either balanced (win!) or unbalanced (lose!) over arbitrary periods of time."

Reich is certainly no foe of Social Security, but he has no patience for those who would use pieties about its projected future balances to deny the use of stimulative fiscal policy that will complement the Fed's efforts to get today's economy moving again. It might surprise you that he thinks the Bush tax cuts are necessary, but it probably won't be a surprise that he thinks they were poorly designed for a stimulative purpose -- too skewed to higher income brackets.

Reich gets to a fundamental distinction between accounting and economics when he argues that if Republicans feel that tax cuts will lead to recovery and higher growth over the long term, and if Democrats are convinced that spending on infrastructure and "human capital" will do the same, then it is up to them to make their cases on the merits. Both of these are valid supply-side rationales, he says, and both make the "lockbox" mentality appear ridiculous.

Washington Post columnist David Ignatius drew a parallel that seemed to me particularly apt when he wrote that the current mood is remarkably like that which faced 1930s policymakers. Keynes' "liquidity trap" is a situation in which low interest rates lose their power to stimulate, that people -- bankers, business executives, consumers -- become so afraid of the future that they are unwilling to part with cold hard cash in hand. (Take Japan's banking system -- it's as liquid as Gatorade and intent on staying that way by not extending new credit.) Ignatius notes that the answer given by generations of Keynesians is fiscal stimulus through tax cuts or deficit spending. He and Reich would have little to argue about, but both could gang up on Madrick.

To top off a week's confusion about what numbers mean, Alan Greenspan did a disquisition on accounting for capital gains before the Kansas City Fed's annual symposium at Jackson Hole, Wyo. He cut riffs on realized and unrealized gains, the differences among such asset classes as houses and common stocks, and the distributional effects among household, business and government sectors. He concluded by saying that "accounting systems are not ends in themselves -- we construct them because they have a function in aiding our understanding of some particular aspect of a business operation at a company level or for an economy as a whole."

And then we plug in a bunch of best-guess estimates -- "it's not 2.9%; why, it's barely 2.5%" -- and extrapolate them to the nth degree and beat our opponents over their heads with their ignorance about what's going to befall them in 20 years if they don't watch out.

My bottom line is that all this learned debate about productivity and long-term projections has moved past useful discourse and into the realm of sentiment, i.e., sentiment in the sense of market psychology. As the summer winds down, it has become particularly nasty, gloomy and depressed. Because sentiment is a contrarian indicator, I'm encouraged.