Wednesday, August 23, 2017
Tuesday, August 22, 2017
Monday, August 21, 2017
fascism and economic anxiety; centrists
Sunday, August 20, 2017
Saturday, August 19, 2017
Inherent Vice
Was it possible, that at every gathering--concert, peace rally, love-in, be-in, and freak-in, here, up north, back east, wherever--those dark crews had been busy all along, reclaiming the music, the resistance to power, the sexual desire from epic to everyday, all they could sweep up, for the ancient forces of greed and fear?
― Thomas Pynchon, Inherent Vice
Moon the Klan
Molly Ivins:
Our Texas freedom-fighters have been prone to misbehavior ever since. A recent Ku Klux Klan rally in Austin produced an eccentric counter- demonstration. When the fifty Klansmen appeared (they were bused in from Waco) in front of the state capitol, they were greeted by five thousand locals who had turned out for a “Moon the Klan” rally. Citizens dropped trou both singly and in groups, occasionally producing a splendid wave effect. It was a swell do.I was there and participated!
Friday, August 18, 2017
Thursday, August 17, 2017
Wednesday, August 16, 2017
Baffler on "Goodbye, Pepe"
Goodbye, Pepe by Angela Nagle
Similarly, leftists who opposed Hillary Clinton or have stressed the role of “economic anxieties” of downwardly mobile whites in the rise of the Trumpian right may start catching flak for excusing and thus enabling Nazis. Indeed, if any of the great historians of the Nazi period wrote their books today, they’d be denounced for larding their accounts with such interpretive context, as they all did, because context has now been reclassified as blame-shifting.
Dylan Matthews Foppish Vox Hipster
Trump's idea that jobs will solve racism is just wrong by Dylan Matthews
It’s not a totally implausible theory, that the country becomes more tolerant during economic booms and that white Americans become more racially prejudiced during recessions or stagnation.
But the evidence for the theory is mixed at best. In many cases, it’s hard to see much correlation between objective economic conditions and the status of race relations.
Who Were the Counterprotesters in Charlottesville?
Who Were the Counterprotesters in Charlottesville?
In Charlottesville, about 20 members of a group called the Redneck Revolt, which describes itself as an anti-racist, anti-capitalist group dedicated to uniting working-class whites and oppressed minorities, carried rifles and formed a security perimeter around the counterprotesters in Justice Park, according to its website and social media.
The group, which admires John Brown, a white abolitionist who led an armed insurrection in 1859, issued a “call to arms” on its website: “To the fascists and all who stand with them, we’ll be seeing you in Virginia.”
The scholar and activist Cornel West told the newscast “Democracy Now!” that anti-fascists saved his life and the lives of other nonviolent clergy members in Charlottesville. “We would have been crushed like cockroaches were it not for the anarchists and the anti-fascists,” he said on the show. “You had police holding back and just allowing fellow citizens to go at each other.”
The group, which admires John Brown, a white abolitionist who led an armed insurrection in 1859, issued a “call to arms” on its website: “To the fascists and all who stand with them, we’ll be seeing you in Virginia.”
The scholar and activist Cornel West told the newscast “Democracy Now!” that anti-fascists saved his life and the lives of other nonviolent clergy members in Charlottesville. “We would have been crushed like cockroaches were it not for the anarchists and the anti-fascists,” he said on the show. “You had police holding back and just allowing fellow citizens to go at each other.”
Tuesday, August 15, 2017
common owndership argument and fully automated luxury gay space communism
Common Ownership And The New Antitrust Movement by Matt Bruenig
The Simple Clean Route on Corporate Tax Reform by Dean Baker
Add a social wage to be distributed from the corporate tax fund.
NGDP monetary policy rule.
Larry Summers.
NGDP monetary policy rule.
Larry Summers.
Sunday, August 13, 2017
Heather Heyer
Heather Heyer
"economic anxiety," liberals and Trump voters
Economic Anxiety Didn’t Make People Vote Trump, Racism Did by Sean McElwee and Jason McDaniel
Can we finally kill off the zombie lie? Trump’s voters mostly weren’t the “white working class” by CHAUNCEY DEVEGA
Financial Insecurity and the Election of Donald Trump by Diana Elliott and Emma Kalish
Saturday, August 12, 2017
Elizabeth Warren at Vox
Elizabeth Warren fires back at centrist Democrats by Jeff Stein
Yes, the system is rigged – and if you don’t feel like anyone in politics is doing anything to un-rig it, well, that’s how a lot of folks who should have been with us last November wound up voting for Donald Trump.
Barkley Rosser on financial crisis
The Financial Crisis Tenth Anniversary by Barkley Rosser
3) In terms of the behavior of the Fed at the time of the crash, there had been some preparations for it, mostly by people at the New York Fed, and indeed the various alternative entities the Fed rolled out temporarily after the hard crash were cooked up in advance by them. However, the most important thing the Fed did remains widely unknown and unadvertised, although I have posted on it previously, and it has been publicly reported on, it not on front pages anywhere ever. That would be the half a trillion dollar save the Fed did for the European Central Bank, taking a bunch of very bad assets onto the Fed balance sheet, which were then gradually and quietly rolled off over the next six months to be replaced by Mortgage Backed Securities. The euro was crashing, and the ECB was facing the threat that both BNP Paribas and Deutsche Bank were in danger of failing. This was the immediate danger that could have led to a full blown global financial crash of a 1931 level or worse. This save was probably the most important thing the Fed did to keep the crisis from bringing about another Great Depression, although it remains not well known, partly because both the Fed and the ECB did not want it advertised. A good account of this can be found in Neil Irwin’s book, _The Alchemists_.
Friday, August 11, 2017
Thursday, August 10, 2017
agnotology
In 1979, a secret memo from the tobacco industry was revealed to the public. Called the Smoking and Health Proposal, and written a decade earlier by the Brown & Williamson tobacco company, it revealed many of the tactics employed by big tobacco to counter “anti-cigarette forces”.
In one of the paper’s most revealing sections, it looks at how to market cigarettes to the mass public: “Doubt is our product since it is the best means of competing with the ‘body of fact’ that exists in the mind of the general public. It is also the means of establishing a controversy.”
This revelation piqued the interest of Robert Proctor, a science historian from Stanford University, who started delving into the practices of tobacco firms and how they had spread confusion about whether smoking caused cancer.
...
Wednesday, August 09, 2017
4 depressing charts that show why many Americans don’t feel the economy has recovered by Pedro Nicolaci da Costa
Expectations are everything, especially in economics.
That’s why a distinct lack of progress in a few basic measures of economic progress, particularly relative to pre-crisis expectations, has left many Americans questioning how much they have personally benefitted from the economic recovery.
A new report from the Roosevelt Institute, a liberal think tank in Washington, highlights a number of ways in which "the recovery since 2009 is, in a sense, a statistical illusion."
The study finds the nation’s total economic output, its gross domestic product, "remains about 15% below the pre-recession trend, a larger gap than at the bottom of the recession." The first chart below shows that lag, while the second offers insights into just how badly the crisis dented expectations about the future.
Strong employment gains in recent months have brought the jobless rate down to a historically-low 4.3%. However, this decline has not been accompanied by rising incomes or consumer prices, generally associated with a sustainable economic boom. Some Federal Reserve policymakers have found this trend puzzling, while many labor economists point to underlying weaknesses in the job market, including high levels of underemployment and long-term joblessness, as drags on income.
Stagnant wages amid rising profits have meant that the wage share in US national income has fallen from 63% to 57% in the last 15 years, according to the report.
"It is impossible for the wage share to ever rise if the central bank will not allow a period of 'excessive' wage growth," writes J.W. Mason, who authored the report. "A rise in the wage share necessarily requires a period in which wages rise faster than would be consistent with longterm macroeconomic stability."
In other words, if Fed officials tighten monetary policy at the first sign of wage increases, they will never allow the imbalances that have built up, including deep income disparities, to be torn down. Average hourly earnings rose just 2.5% on a yearly basis in July, nothing to write home about and certainly not enough to begin the ground lost over the last decade and more.
Business investment, which is key to long-run economic growth, has also been dismal during the now eight-year expansion.
"There is no precedent for the weakness of investment in the current cycle. Nearly ten years later, real investment spending remains less than 10% above its 2007 peak," Mason writes.
"This is slow even relative to the anemic pace of GDP growth, and extremely low by historical standards. In the three previous [economic] cycles lasting that long, real investment spending had increased anywhere from 30% to 80%. Even shorter cycles saw substantially greater investment growth." Roosevelt 3 investment growth Roosevelt Institute
Finally, Mason looks at whether the economy is at risk of running hot, generating inflation, which central bank officials cite to justify interest rate increases. The Fed has raised interest rates three times since December 2015 to a range of 1% to 1.25%.
"On the contrary, we argue, while a myopic focus on one or another data series might support a story of binding supply constraints, the behavior of the economy as a whole is much more consistent with a situation of depressed demand—an extended recession," the report concludes.
"The overall picture also makes it unclear what actual danger is posed by overheating in the conventional sense. Most of the obvious costs of overheating — higher inflation, higher interest rates, a rising wage share — would be desirable under current circumstances."
Expectations are everything, especially in economics.
That’s why a distinct lack of progress in a few basic measures of economic progress, particularly relative to pre-crisis expectations, has left many Americans questioning how much they have personally benefitted from the economic recovery.
A new report from the Roosevelt Institute, a liberal think tank in Washington, highlights a number of ways in which "the recovery since 2009 is, in a sense, a statistical illusion."
The study finds the nation’s total economic output, its gross domestic product, "remains about 15% below the pre-recession trend, a larger gap than at the bottom of the recession." The first chart below shows that lag, while the second offers insights into just how badly the crisis dented expectations about the future.
Strong employment gains in recent months have brought the jobless rate down to a historically-low 4.3%. However, this decline has not been accompanied by rising incomes or consumer prices, generally associated with a sustainable economic boom. Some Federal Reserve policymakers have found this trend puzzling, while many labor economists point to underlying weaknesses in the job market, including high levels of underemployment and long-term joblessness, as drags on income.
Stagnant wages amid rising profits have meant that the wage share in US national income has fallen from 63% to 57% in the last 15 years, according to the report.
"It is impossible for the wage share to ever rise if the central bank will not allow a period of 'excessive' wage growth," writes J.W. Mason, who authored the report. "A rise in the wage share necessarily requires a period in which wages rise faster than would be consistent with longterm macroeconomic stability."
In other words, if Fed officials tighten monetary policy at the first sign of wage increases, they will never allow the imbalances that have built up, including deep income disparities, to be torn down. Average hourly earnings rose just 2.5% on a yearly basis in July, nothing to write home about and certainly not enough to begin the ground lost over the last decade and more.
Business investment, which is key to long-run economic growth, has also been dismal during the now eight-year expansion.
"There is no precedent for the weakness of investment in the current cycle. Nearly ten years later, real investment spending remains less than 10% above its 2007 peak," Mason writes.
"This is slow even relative to the anemic pace of GDP growth, and extremely low by historical standards. In the three previous [economic] cycles lasting that long, real investment spending had increased anywhere from 30% to 80%. Even shorter cycles saw substantially greater investment growth." Roosevelt 3 investment growth Roosevelt Institute
Finally, Mason looks at whether the economy is at risk of running hot, generating inflation, which central bank officials cite to justify interest rate increases. The Fed has raised interest rates three times since December 2015 to a range of 1% to 1.25%.
"On the contrary, we argue, while a myopic focus on one or another data series might support a story of binding supply constraints, the behavior of the economy as a whole is much more consistent with a situation of depressed demand—an extended recession," the report concludes.
"The overall picture also makes it unclear what actual danger is posed by overheating in the conventional sense. Most of the obvious costs of overheating — higher inflation, higher interest rates, a rising wage share — would be desirable under current circumstances."
DeLong jumps the shark
Should-Read: IMHO, the smart PGL does good here... by DeLong
What's the difference? 15 versus 10 percent? Suggesting we close the 15-10 percent output gap isn't promising "unicorns and rainbows." Well it is a big ask regarding the current Democratic Party. Maybe that's partly why Hillary lost to Trump.
What's the difference? 15 versus 10 percent? Suggesting we close the 15-10 percent output gap isn't promising "unicorns and rainbows." Well it is a big ask regarding the current Democratic Party. Maybe that's partly why Hillary lost to Trump.
Tuesday, August 08, 2017
Fully Automated Luxury Gay Space Communism
The Simple Clean Route on Corporate Tax Reform by Dean Baker
A Progressive Way to End Corporate Taxes by Dean Baker
Instead of taxes, make corporations give the government stock by Dean Baker
Modification
Shares go into a public fund that distributes the yearly dividends as a social wage based on hours worked perhaps
Uncle gets to keep zero
A Zero gravity credit system is the lynch pin
financial crisis 10 years on: turn into the curve
Looking Back: The Financial Crisis Began 10 Years Ago This Week by Schoenholtz and Cecchetti
The Fed blew it
everything EMichael writes is to exculpate the Democrats from blame nothing is ever their fault.
Monday, August 07, 2017
Sunday, August 06, 2017
remember to read "business bad for business"
Business Is Bad for Business by Andrew Elrod
tight labor markets bad for profits? Goldman Sachs warnings.
Marshall Steinbaum:
Exactly. As @JWMason1 has shown, corporations are pumping cash out to shareholders, rather than sucking it in for investment.
Gavin Wright paper
Joan Robinson on labor market and productivity gains
Cambridge capital controversy
tight labor markets bad for profits? Goldman Sachs warnings.
Marshall Steinbaum:
Exactly. As @JWMason1 has shown, corporations are pumping cash out to shareholders, rather than sucking it in for investment.
1:35 PM - 6 Aug 2017
Gavin Wright paper
Joan Robinson on labor market and productivity gains
Cambridge capital controversy
Some members of the Marxian school argue that even if the means of production "earned" a return based on their marginal product, that does not imply that their owners (i.e., the capitalists) created the marginal product and should be rewarded. In the Sraffian view, the rate of profit is not a price, and it is not clear that it is determined in a market. In particular, it only partially reflects the scarcity of the means of production relative to their demand. While the prices of different types of means of production are prices, the rate of profit can be seen in Marxian terms, as reflecting the social and economic power that owning the means of production gives this minority to exploit the majority of workers and to receive profit. But not all followers of Sraffa interpret his theory of production and capital in this Marxian way. Nor do all Marxists embrace the Sraffian model: in fact, such authors as Michael Lebowitz and Frank Roosevelt are highly critical of Sraffian interpretations, except as a narrow technical critique of the neoclassical view. There are also Marxian economists, like Michael Albert and Robin Hahnel, who consider the Sraffian theory of prices, wages and profit to be superior to Marx's own theory.
Anti-Trust
Oligopolies help create inflation via rent extraction and cost-push inflation. Competition makes inflation lower and the Fed's job easier.
Currently overseas competition keeping inflation down. Charles Evans.
Currently overseas competition keeping inflation down. Charles Evans.
billionaire benefactors
In Weary Wisconsin Town, a Billionaire-Fueled Revival
In Kalamazoo, Mich., a group of well-to-do town “elders” pay for every public school student in town to go to college. And Columbus, Ind., has become an architectural mecca thanks to the support of J. Irwin Miller, whose family made its riches manufacturing engines.
Saturday, August 05, 2017
DSA
9 questions about the Democratic Socialists of America you were too embarrassed to ask by Jeff Stein
DSA has certainly been a beneficiary of the Dirtbag Left and its iconoclastic rage; Chapo Trap House frequently directs its guests to support the socialist organization, and its founders are in Chicago for the DSA convention. Mother Jones called the podcast a “gateway drug” for democratic socialism, and DSA’s leaders recognize that’s correct. Even if DSA won’t adopt Chapo’s insult-humor shtick in its official platform, it’s hard to imagine that some of its beliefs won’t seep in some way into the organization through new membership.
Chapo’s “dirtbag” politics have alarmed other left-leaning writers. In an essay for the New Republic, Jeet Heer warned against what he called its “dominance politics” as counterproductive to building a coalition with center-left Democrats.
But in an interview last year, Chapo Trap House co-host Matt Christman countered that Donald Trump had captured the “transgressive thrill of defying the cultural expectations of the elite,” and that the left would be wise to reclaim it. Incisive put-down humor, he suggested, isn’t just useful for amassing a podcast following; it could also be helpful to an ascendant left-wing politics.
“The gonad element of politics is now totally owned by the right. All the left has now is charts and data. You cannot motivate people with charts and data and lecturing,” Christman said. “If we’re going to win, we cannot allow [right-wing provocateur] Milo Yiannopoulos and all of these carnival-barking Nazis to have all of the fucking fun.”
Friday, August 04, 2017
Kocherlakota
How a Fed inflation hawk changed his mind by Anna Saphir
Colleagues put it simply: he cares about on-the-ground data, and he knows how to listen.
That much was clear in August when Kocherlakota, who turns 49 on Friday, donned a pair of jeans and took his board's nine directors on a tour of the booming oil fields of North Dakota.
In a 14-hour, 300-mile bus trek, they visited a fracking rig, a pipeline, a workers' camp, and a natural gas plant. They heard locals speak of life in the heart of the U.S. energy boom.
"His style is to let everybody else do the talking and he listens intently," said Lawrence Simkins, one of the board members and president of Montana-based Washington Cos, a privately owned transportation and equipment firm.
As the bus maneuvered truck-clogged roads, Kocherlakota got into a discussion with another director about the mental health toll on workers separated for months on end from their families.
jinxed
Game of Thrones, People of Earth, Jeremy Corbyn, weird Twitter, Trumpcare fails, Mueller impanels grand jury. Feeling better.
Thursday, August 03, 2017
Chappelle; Econospeak circles the drain
Dave Chappelle: Trump is “a bad DJ at a good party” by Constance Grady
Chappelle also said the small Ohio town where he lives is a "Bernie Sanders island in a Trump sea." "A subversive, weird place." Colbert responded "The Austin of Ohio." Chappelle: "But with none of the money and fun stuff to do at night."
The Output Gap per the Gerald Friedman Defenders by Econospeak
Chappelle also said the small Ohio town where he lives is a "Bernie Sanders island in a Trump sea." "A subversive, weird place." Colbert responded "The Austin of Ohio." Chappelle: "But with none of the money and fun stuff to do at night."
Friedman scandal
Why are big-shot liberal economists hippie-punching Bernie Sanders? by Ryan Cooper (February 16, 2016)
Tuesday, August 01, 2017
Vox speculation on Game of Thrones
Game of Thrones season 7: Cersei Lannister is about to get a rude awakening
There is something in the previews, along with Jon Snow back in the north. Beric Dondarrion lights up his flame sword.
With Casterly Rock’s defenses, the Unsullied should be able to last long enough for Dany and her dragons to come swooping in and save the day. Since Euron doesn’t know about the sewer system, the Unsullied should be able to hold him off in time for some dragon-fueled reinforcements or to prepare a retreat.I think Daenerys is going to attack King's Landing or Jaime's army with dragons and Dothraki. She's done with holding back.
Meanwhile, it’s unclear what Jaime’s army is planning to do or where it’s going to go after plundering Highgarden. Perhaps they’ll team up with Euron to take back Casterly Rock.
There is something in the previews, along with Jon Snow back in the north. Beric Dondarrion lights up his flame sword.
Monday, July 31, 2017
Sunday, July 30, 2017
Friday, July 28, 2017
Mason/Roosevelt report
What Recovery?
Josh Bivens references Blanchard and Leigh (2013) and Fatas and Summers (2015)
Mason references DeLong and Summers (2012) among many others.
Josh Bivens references Blanchard and Leigh (2013) and Fatas and Summers (2015)
Mason references DeLong and Summers (2012) among many others.
Thursday, July 27, 2017
Wednesday, July 26, 2017
Lebowski
"Your revolution is over Mr. Lebowski. Condolences. The bums lost. My advice to you is to do what your parents did! Get a job, sir. The bums always lose! Do you hear me Lebowski?!? The bums will always lose!"
Tuesday, July 25, 2017
Trump and Yellen
Cohn and Yellen Are Among Trump’s Contenders to Lead Fed
“I like her; I like her demeanor. I think she’s done a good job,” he said. “I’d like to see rates stay low. She’s historically been a low-interest-rate person.”
poductivity slump by Neil Irwin with JW Mason, Covert on skills
The Central Contradiction of the Democrats’ “Better Deal” by Bryce Covert
Maybe We’ve Been Thinking About the Productivity Slump All Wrong by Neil Irwin
July 25, 2017
American businesses are doing a terrible job at making their workers more productive.
Productivity growth is the weakest it has been since the early 1980s — only 0.8 percent a year over the last half a decade, compared with 2.3 percent on average from 1947 to 2007. This is the root cause of slow growth in both G.D.P. and worker pay.
At least, that is the standard way of thinking about productivity and its relationship to the economy. In a mainstream view, productivity is a kind of magic force that helps explain rising output. New labor-saving inventions come along or new management practices are taken up that miraculously allow companies to produce more output with fewer hours of work.
You can’t really predict when and how those innovations will arrive, in this view. Henry Ford starts using a moving assembly line. Sam Walton perfects the just-in-time supply chain. Easy-to-use word processors result in fewer businesspeople whoneed secretaries. Voilà, the productive capacity of the nation rises, along with incomes and living standards.
But what if this is the wrong way of thinking about it? What if productivity growth is not so much an external force that proceeds in random fits and starts, but is rather deeply intertwined with the overall state of the economy and labor market?
It’s a chicken or egg problem: Does low productivity cause slow growth, or does slow growth cause low productivity?
The second possibility is the provocative argument of a new paper published Tuesday by the Roosevelt Institute, a liberal think tank. The paper argues that the United States economy is not actually closing in on its full economic potential and has plenty of room for continued growth — so long as the Federal Reserve doesn’t put on the brakes of the expansion prematurely.
J. W. Mason, the author of the report, argues that soft productivity growth reflects not some unlucky dearth of new innovations, but rather is a consequence of depressed demand for goods and services and a slack labor market that has depressed wages.
Maybe if the labor market were tighter and wages were rising faster, it would induce companies to invest more heavily in new labor-saving innovations.
What’s particularly interesting is that this diagnosis — though decidedly not the policy prescriptions — has some overlap with the arguments of influential conservative economists.
A recent paper published by the Hoover Institution and American Enterprise Institute argued that the productivity drought was caused by insufficient investment in capital equipment and software, and was poised to rebound. (Three of the four authors, Glenn Hubbard, John B. Taylor and Kevin Warsh, are potential candidates to be President Trump’s nominee to lead the Federal Reserve.)
And it comports with the view of some of the more sophisticated analysts of productivity trends from the business world.
For example, Marco Annunziata, the chief economist of General Electric, argues that many of the technological innovations now coming to market, like 3D printing and the use of augmented reality glasses in industrial settings, really are generating huge productivity gains where they are deployed.
But capital spending has been weak over all, and particularly weak for those more transformative innovations.
“The investment that should be most powerful in driving productivity for companies has been the weakest,” Mr. Annunziata said. “It means that all these innovations aren’t scaling. They’re only being implemented on an episodic basis, on a small scale.”
Companies, in his telling, are spending their capital budgets not on things that might cause a leap in their workers’ productivity, but on smaller projects to replace old machinery and software and make marginal efficiency gains.
What would change that? That’s what brings us back to Mr. Mason’s arguments about the interplay between demand and productivity growth.
Just maybe, if the labor market tightens and good workers are harder to find — and wages rise — that will be the impetus to get companies to consider more of those big-ticket innovations that generate productivity growth.
Consider a hypothetical (though one that isn’t actually that hypothetical right now). If your neighborhood fast food place employs 10 people during the lunch rush, with each making $10 an hour, what will happen if your state raises its minimum wage to $15?
The owner might raise prices, or accept lower profits, or close the store entirely. Or, just maybe, the owner will invest in new machinery to enable workers to do more with less. Perhaps the restaurant will be able to operate just fine with only five workers after investing in self-ordering kiosks and a hamburger-flipping robot.
There’s a term for a restaurant that can serve the same number of burgers with half as many employees, and it’s higher productivity. (While this can conjure scary notions of a work force made redundant by robots, economists see a more hopeful picture: that higher productivity enables faster economic growth and higher incomes, at the cost of some temporary disruption for the workers affected.)
In the context of the minimum wage debate, pretty much everyone agrees that this kind of response — “capital substitution,” to use the technical term — is to be expected. But there’s no reason it would happen only after a minimum-wage increase. You could imagine the same thing happening if wages rose because of market forces; that same fast food restaurant might invest in kiosks and robots if the labor market were so tight that no workers were willing to take the job for $10.
If you look at long-term patterns of productivity growth, they roughly fit this idea, that a booming job market tends to be followed by a productivity boom, and that deep recessions are followed by productivity slumps.
The strongest productivity growth in post-World War II America came in the late 1960s and early 2000s. The two periods of greatest weakness were the early 1980s and the last decade since the global financial crisis.
There are some historical roots for this argument, too. Some historians believe that the industrial revolution began in Britain instead of elsewhere because comparatively high wages for British workers prompted companies to invest in labor-saving devices.
Productivity growth is the weakest it has been since the early 1980s — only 0.8 percent a year over the last half a decade, compared with 2.3 percent on average from 1947 to 2007. This is the root cause of slow growth in both G.D.P. and worker pay.
At least, that is the standard way of thinking about productivity and its relationship to the economy. In a mainstream view, productivity is a kind of magic force that helps explain rising output. New labor-saving inventions come along or new management practices are taken up that miraculously allow companies to produce more output with fewer hours of work.
You can’t really predict when and how those innovations will arrive, in this view. Henry Ford starts using a moving assembly line. Sam Walton perfects the just-in-time supply chain. Easy-to-use word processors result in fewer businesspeople whoneed secretaries. Voilà, the productive capacity of the nation rises, along with incomes and living standards.
But what if this is the wrong way of thinking about it? What if productivity growth is not so much an external force that proceeds in random fits and starts, but is rather deeply intertwined with the overall state of the economy and labor market?
It’s a chicken or egg problem: Does low productivity cause slow growth, or does slow growth cause low productivity?
The second possibility is the provocative argument of a new paper published Tuesday by the Roosevelt Institute, a liberal think tank. The paper argues that the United States economy is not actually closing in on its full economic potential and has plenty of room for continued growth — so long as the Federal Reserve doesn’t put on the brakes of the expansion prematurely.
J. W. Mason, the author of the report, argues that soft productivity growth reflects not some unlucky dearth of new innovations, but rather is a consequence of depressed demand for goods and services and a slack labor market that has depressed wages.
Maybe if the labor market were tighter and wages were rising faster, it would induce companies to invest more heavily in new labor-saving innovations.
What’s particularly interesting is that this diagnosis — though decidedly not the policy prescriptions — has some overlap with the arguments of influential conservative economists.
A recent paper published by the Hoover Institution and American Enterprise Institute argued that the productivity drought was caused by insufficient investment in capital equipment and software, and was poised to rebound. (Three of the four authors, Glenn Hubbard, John B. Taylor and Kevin Warsh, are potential candidates to be President Trump’s nominee to lead the Federal Reserve.)
And it comports with the view of some of the more sophisticated analysts of productivity trends from the business world.
For example, Marco Annunziata, the chief economist of General Electric, argues that many of the technological innovations now coming to market, like 3D printing and the use of augmented reality glasses in industrial settings, really are generating huge productivity gains where they are deployed.
But capital spending has been weak over all, and particularly weak for those more transformative innovations.
“The investment that should be most powerful in driving productivity for companies has been the weakest,” Mr. Annunziata said. “It means that all these innovations aren’t scaling. They’re only being implemented on an episodic basis, on a small scale.”
Companies, in his telling, are spending their capital budgets not on things that might cause a leap in their workers’ productivity, but on smaller projects to replace old machinery and software and make marginal efficiency gains.
What would change that? That’s what brings us back to Mr. Mason’s arguments about the interplay between demand and productivity growth.
Just maybe, if the labor market tightens and good workers are harder to find — and wages rise — that will be the impetus to get companies to consider more of those big-ticket innovations that generate productivity growth.
Consider a hypothetical (though one that isn’t actually that hypothetical right now). If your neighborhood fast food place employs 10 people during the lunch rush, with each making $10 an hour, what will happen if your state raises its minimum wage to $15?
The owner might raise prices, or accept lower profits, or close the store entirely. Or, just maybe, the owner will invest in new machinery to enable workers to do more with less. Perhaps the restaurant will be able to operate just fine with only five workers after investing in self-ordering kiosks and a hamburger-flipping robot.
There’s a term for a restaurant that can serve the same number of burgers with half as many employees, and it’s higher productivity. (While this can conjure scary notions of a work force made redundant by robots, economists see a more hopeful picture: that higher productivity enables faster economic growth and higher incomes, at the cost of some temporary disruption for the workers affected.)
In the context of the minimum wage debate, pretty much everyone agrees that this kind of response — “capital substitution,” to use the technical term — is to be expected. But there’s no reason it would happen only after a minimum-wage increase. You could imagine the same thing happening if wages rose because of market forces; that same fast food restaurant might invest in kiosks and robots if the labor market were so tight that no workers were willing to take the job for $10.
If you look at long-term patterns of productivity growth, they roughly fit this idea, that a booming job market tends to be followed by a productivity boom, and that deep recessions are followed by productivity slumps.
The strongest productivity growth in post-World War II America came in the late 1960s and early 2000s. The two periods of greatest weakness were the early 1980s and the last decade since the global financial crisis.
There are some historical roots for this argument, too. Some historians believe that the industrial revolution began in Britain instead of elsewhere because comparatively high wages for British workers prompted companies to invest in labor-saving devices.
In this way of thinking about productivity, inventors and business innovators are always cooking up better ways to do things, but it takes a labor shortage and high wages to coax firms to deploy the investment it takes to actually put those innovations into widespread use.
Mr. Mason adds that this idea has some big implications for how to think about growth in worker compensation in the current economic environment. There has been a glaring contradiction around how much American workers’ wages can, or should, be rising.
“On Mondays and Wednesdays, economists argue that wages are low because robots are taking people’s jobs. On Tuesdays and Thursdays, it’s that we can’t have wages rise because productivity growth is low,” said Mr. Mason, an economist at John Jay College. “Both can’t be true.”
In other words, instead of worrying so much about robots taking away jobs, maybe we should worry more about wages being too low for the robots to even get a chance.
Mr. Mason adds that this idea has some big implications for how to think about growth in worker compensation in the current economic environment. There has been a glaring contradiction around how much American workers’ wages can, or should, be rising.
“On Mondays and Wednesdays, economists argue that wages are low because robots are taking people’s jobs. On Tuesdays and Thursdays, it’s that we can’t have wages rise because productivity growth is low,” said Mr. Mason, an economist at John Jay College. “Both can’t be true.”
In other words, instead of worrying so much about robots taking away jobs, maybe we should worry more about wages being too low for the robots to even get a chance.
Monday, July 24, 2017
Sunday, July 23, 2017
Saturday, July 22, 2017
Friday, July 21, 2017
DeLong quotes Avent on the recovery
Must-Read: Ryan Avent: MAKING MONETARY POLICY GREAT AGAIN: "Obama’s response to the economic crisis... the timidity of his stimulus plan... his failure to provide broad support to struggling homeowners... his premature pivot to deficit cutting...
http://democracyjournal.org/magazine/45/making-monetary-policy-great-again/
...While Roosevelt’s New Deal programs left an indelible mark on the American economy and society, it was his decisive monetary action that saved America from continuing depression. On just his third day... Roosevelt declared a bank holiday... suspended... the... gold standard... a policy of reflation. The economic response was immediate.... Obama would not pursue any comparably radical policy.... His Administration left the hard work of rehabilitating the economy to the Federal Reserve, while the federal government turned to deficit reduction....
The decades prior to the crisis taught political leaders that economic management was the Fed’s job, one it could handle ably. Experience since the financial crisis strongly suggests that assumption was mistaken. It should not have taken six years to return the unemployment rate to the pre-crisis level, nor should so much of the reduction in unemployment have come in the form of frustrated workers leaving the labor force. American incomes should not have been allowed to fall below the pre-crisis trend, and at least some of that shortfall ought to have been made up. Most critically, now, nearly ten years after the start of the Great Recession, the economy should be far better prepared to deal with the next crisis, not trapped with interest rates stuck near zero and the labor market still signaling that more people could be put to work for longer hours at higher rates of pay.
As the Great Recession recedes into the past, the sense that urgent change in the making of economic policy is needed also fades...
Thursday, July 20, 2017
Wednesday, July 19, 2017
Chapo Trap House
Calling them the "dirtbag left" is playing into the centrist Bernie Bro meme.
The Dirtbag Left and the Problem of Dominance Politics by Jeet Heer
The Dirtbag Left and the Problem of Dominance Politics by Jeet Heer
Tuesday, July 18, 2017
Monday, July 17, 2017
Game of Thrones season 7 episode 1
What's the gift Euron Greyjoy plans to bring Cersei? Tyrion's head. A horn which controls dragons?
Does Ayra wipe out Ed Sheeran and the nice Lannister soldiers? Probably.
Doesn't really matter who leads the Karstarks and Umbers. The White Walkers are heading straight for their castles in the north east and will overwhelm them.
I read speculation that the Night King is really in the west as the Hounds saw a mountain, which are only located in the west. That means the army of the dead traveled west pretty quickly. Bran will know!
Jim Broadbent!
Spoilers below!
Previews have Yara making out with the Red Viper's widow?
New Republic discussion
Ask the Maester
Saturday, July 15, 2017
It's the Debt Stupid by Steve Roth
It's the Debt Stupid by Steve Roth
If you go further and allow that wages and prices can inflate at different rates (which you must, given recent decades), you have extremely large and changing differentials between price inflation, wage inflation, and (especially) asset-price inflation.
Thursday, July 13, 2017
Tuesday, July 11, 2017
Monday, July 10, 2017
Sunday, July 09, 2017
THE CRISIS OF POSITIVE-SUM CAPITALISM by Chris Dillow
THE CRISIS OF POSITIVE-SUM CAPITALISM by Chris Dillow
- With savings low and debt high, households might respond to higher wages by saving more. If so, we’ll not get higher aggregate demand and hence incentives to invest. There’s a warning here from the 70s. One reason why the positive-sum game broke down then was that workers saved increasing proportions of their wages.
These doubts don’t make me side with neoliberalism. They just make me think that wage-led growth is nothing like sufficient.
Medicare, Medicaid
Medicare:
In 2015, Medicare provided health insurance for over 55 million—46 million people age 65 and older and nine million younger people.[2] On average, Medicare covers about half of the health care charges for those enrolled.
"Many look to the Veterans Health Administration as a model of lower cost prescription drug coverage. Since the VHA provides healthcare directly, it maintains its own formulary and negotiates prices with manufacturers. Studies show that the VHA pays dramatically less for drugs than the PDP plans Medicare Part D subsidizes.[138][139] One analysis found that adopting a formulary similar to the VHA’s would save Medicare $14 billion a year (over 10 years the savings would be around $140 billion).[140]"
In 2015, Medicare provided health insurance for over 55 million—46 million people age 65 and older and nine million younger people.[2] On average, Medicare covers about half of the health care charges for those enrolled.
payroll tax. universal, expensive, b/c government doesn't negotiate as in other countries.
Medicaid cost, care
Saturday, July 08, 2017
Socialize Finance by J.W. Mason
Socialize Finance by J.W. Mason
"We already live in a planned economy. Why not make it a democratic one?"
Thursday, July 06, 2017
David Frum interviews Edward Luce
“Western liberalism is under siege”
Frum:
Frum:
Let's talk about some of the drivers of the changing of society. I see three. You talk a lot about two, and less about the third.
The first is this giant question about the future of work — what is happening to the economic situation of people who don't own capital or have internationally traded skills.What an odd way of putting it. Isn't it the job of the Fed to keep unemployment low?
Wednesday, July 05, 2017
Franc thoughts on Bond Vigilantes by Krugman
Franc Thoughts on Bond Vigilantes
by Paul Krugman
NOVEMBER 23, 2012 12:48 PM
Suzy Khimm writes about the contrast between what financial industry honchos say worries them and what financial markets seem to be saying. The honchos declare that failure to reach a Grand Bargain would
spark a damaging loss of confidence in the U.S. government’s fiscal prospects, a run on Treasury bonds, and a spike in interest rates.
But the bond markets are saying what me worry, with long-term rates at near-record lows.
What Khimm doesn’t note, however, is that the problem with bond vigilante scare tactics runs even deeper than that — because it’s actually quite hard to tell a story in which a loss of confidence in U.S. bonds hurts the real economy. Why wouldn’t it just drive down the dollar, and thereby have an expansionary effect?
Yes, I know, Greece — but Greece doesn’t have its own currency. What’s the model under which a country that does have its own currency and borrows in that currency can experience a slump due to an attack by bond vigilantes? Or failing that, where are the historical examples?
The closest I can come to anything resembling the danger supposedly lurking for America is the tale of France in the 1920s, which emerged from World War I burdened by large debt, and which did in fact face an attack by speculators as a result. Yet the French story does not, if you look at it closely, offer any support to the deficit scare talk we keep hearing.
So, France did indeed have a big debt problem. Here’s debt as a percentage of GDP, from the IMF debt database:
[graph]
How did France achieve that big drop in debt after 1925? Basically by inflating it away.
And markets sort of saw that coming. This study (pdf) by the Bank of France show medium-term interest rates (black line) rising substantially for much of the 1920s, before dropping off sharply:
[graph]
It’s important to note, however, that France wasn’t a depressed economy in the 1920s, and therefore didn’t look much like America today:
[chart]
Meanwhile, the really big effect was a sharp depreciation of the franc, which made France highly competitive and strengthened the economy:
[chart]
But what about the brief but nasty slump in 1927? That wasn’t caused by spiking interest rates; it was, instead, caused by fiscal austerity, by the measures taken to stabilize the franc.
So even when we look at the closest thing I can find to the scenario the deficit scolds want us to fear, it doesn’t play out at all as described.
It’s quite remarkable: our policy discourse remains largely dominated by fears of an event that the fear-mongers can’t explain in theory, and for which they can offer no historical examples in practice.
by Paul Krugman
NOVEMBER 23, 2012 12:48 PM
Suzy Khimm writes about the contrast between what financial industry honchos say worries them and what financial markets seem to be saying. The honchos declare that failure to reach a Grand Bargain would
spark a damaging loss of confidence in the U.S. government’s fiscal prospects, a run on Treasury bonds, and a spike in interest rates.
But the bond markets are saying what me worry, with long-term rates at near-record lows.
What Khimm doesn’t note, however, is that the problem with bond vigilante scare tactics runs even deeper than that — because it’s actually quite hard to tell a story in which a loss of confidence in U.S. bonds hurts the real economy. Why wouldn’t it just drive down the dollar, and thereby have an expansionary effect?
Yes, I know, Greece — but Greece doesn’t have its own currency. What’s the model under which a country that does have its own currency and borrows in that currency can experience a slump due to an attack by bond vigilantes? Or failing that, where are the historical examples?
The closest I can come to anything resembling the danger supposedly lurking for America is the tale of France in the 1920s, which emerged from World War I burdened by large debt, and which did in fact face an attack by speculators as a result. Yet the French story does not, if you look at it closely, offer any support to the deficit scare talk we keep hearing.
So, France did indeed have a big debt problem. Here’s debt as a percentage of GDP, from the IMF debt database:
[graph]
How did France achieve that big drop in debt after 1925? Basically by inflating it away.
And markets sort of saw that coming. This study (pdf) by the Bank of France show medium-term interest rates (black line) rising substantially for much of the 1920s, before dropping off sharply:
[graph]
It’s important to note, however, that France wasn’t a depressed economy in the 1920s, and therefore didn’t look much like America today:
[chart]
Meanwhile, the really big effect was a sharp depreciation of the franc, which made France highly competitive and strengthened the economy:
[chart]
But what about the brief but nasty slump in 1927? That wasn’t caused by spiking interest rates; it was, instead, caused by fiscal austerity, by the measures taken to stabilize the franc.
So even when we look at the closest thing I can find to the scenario the deficit scolds want us to fear, it doesn’t play out at all as described.
It’s quite remarkable: our policy discourse remains largely dominated by fears of an event that the fear-mongers can’t explain in theory, and for which they can offer no historical examples in practice.
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