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What Yellen didn’t say

October 21, 2014 Leave a comment

from David Ruccio

MJ-inequality

 

source

The other day, I reported that Fed chair Janet Yellen said a great deal about existing levels of economic inequality at the Conference on Economic Opportunity and Inequality in Boston. Read more…

Political economy of Ebola

October 17, 2014 1 comment

from David Ruccio

Back in August, James Surowiecki observed that the lack of an Ebola treatment was disturbing but predictable.

When pharmaceutical companies are deciding where to direct their R. & D. money, they naturally assess the potential market for a drug candidate. That means that they have an incentive to target diseases that affect wealthier people (above all, people in the developed world), who can afford to pay a lot. They have an incentive to make drugs that many people will take. And they have an incentive to make drugs that people will take regularly for a long time—drugs like statins.

This system does a reasonable job of getting Westerners the drugs they want (albeit often at high prices). But it also leads to enormous underinvestment in certain kinds of diseases and certain categories of drugs. Diseases that mostly affect poor people in poor countries aren’t a research priority, because it’s unlikely that those markets will ever provide a decent return. So diseases like malaria and tuberculosis, which together kill two million people a year, have received less attention from pharmaceutical companies than high cholesterol. Then, there’s what the World Health Organization calls “neglected tropical diseases,” such as Chagas disease and dengue; they affect more than a billion people and kill as many as half a million a year. One study found that of the more than fifteen hundred drugs that came to market between 1975 and 2004 just ten were targeted at these maladies. And when a disease’s victims are both poor and not very numerous that’s a double whammy.

Unfortunately, the best solution Surowiecki could offer was to reward companies for creating substantial public-health benefits by offering prizes for new drugs. Read more…

Jean Tirole

October 14, 2014 8 comments

from David Ruccio

One story that can be told about today’s announcement is the Royal Swedish Academy of Sciences’ own explanation: that French economist Jean Tirole has been awarded the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2014 because he “has clarified how to understand and regulate industries with a few powerful firms.”

The other story is: Tirole has shown how much the real world of capitalism—industries that are dominated by a few firms that have extensive market power, which can charge prices much higher than costs and block the entry of other firms—differs from the fantasy taught in countless introductory courses in economics: a world of perfectly competitive firms, which have no negative effects on society and which therefore don’t need to be regulated.

In addition, Tirole (in “Intrinsic and Extrinsic Motivation,” an article with Roland Bénabou, published in the Review of Economic Studies) has challenged a central tenet of neoclassical economics, that individuals always respond positively to managerial supervision and incentives. He has demonstrated, instead, that both close supervision and monetary rewards can often times backfire, especially in the long run: they can undermine intrinsic motivations, thus explaining why workers find behavioral punishments and rewards both alienating and dehumanizing.

Last year, the Academy tried to have it both ways, offering the Prize to both Eugene Fama and Robert Schiller. This year, the message is both clearer and yet unspoken: the neoclassical model of perfect competition and individual incentives bears no relation to the kinds of capitalism that exist anywhere in the world.

And the policy implication: we’ll all be better off if we take over the large firms and let workers run them for society’s benefit.

Categories: New vs. Old Paradigm

Real median income of working-age American families 1975-2013 (chart)

October 13, 2014 Leave a comment

from David Ruccio

70467-swa-income-figure-2b-real-median-income-2-epi

There are two periods to focus on in this recently updated chart of the real median income of working-age American families: Read more…

The Great Wage Slowdown in the USA

October 8, 2014 1 comment

from David Ruccio

weekly earnings

Read more…

Categories: income redistribution

The median net worth in the United States is, in real terms, lower today than it was in 1989.

October 7, 2014 1 comment

from David Ruccio

median net worth

The median net worth in the United States is, in real terms, lower today than it was in 1989.  Read more…

Behind the unemployment headlines in the US (4 charts)

October 5, 2014 2 comments

David Ruccio

I often explain to students, when I’m teaching economic models, they have to look at what’s happening behind the blackboard—all the implicit mechanisms that allow the models to work as they do.

By the same token, we have to ask, what’s going on behind the unemployment headlines?

The headlines today all trumpet the number of new jobs added in September (248,000), such that the official unemployment rate fell for the first time since August 2008 to below 6 percent (5.9 percent, to be exact).

That’s good news. Employment is picking up. But, of course, that’s not the end of the story. And Tyler Durden helps us see why. Read more…

Categories: The Economy

In the US since 1949 inequality has increased with each expansion, with most gains going to the 1% (2 charts)

September 29, 2014 2 comments

from David Ruccio

inequality-recovery

Read more…

Map of the day : the world’s billionairs

September 28, 2014 1 comment

from David Ruccio

billionaires-map

This map of the world’s billionaires—all 2,325 of them (an all-time record high), with a total wealth of $7.3 trillion (which is higher than the market capitalization of all the companies that make up the Dow Jones Industrial Average)—comes from the new census by Wealth-X and UBS

Categories: The Economy

Americans have no idea how unequal the distribution of income is.

September 26, 2014 3 comments

from David Ruccio

estimatedandideal

Read more…

A problem that legions of mainstream academic economists have simply ignored (5 charts)

September 24, 2014 11 comments

from David Ruccio

P1-BM854C_OUTLO_G_20130825172704

The Wall Street Journal uses this chart to illustrate a story on a new report issued by Morgan Stanley on “Inequality and Consumption.”* Read more…

4% in 40 years

September 19, 2014 5 comments

from David Ruccio

OG-AC604_INCOME_G_20140917193034

Neil King, Jr., for the Wall Street Journal, is perplexed:

It is in many ways both the ultimate economic puzzle and the great political challenge: Why have American incomes remained so flat, for so long, and what can be done to change that?

Uh, well. Maybe it’s this, maybe it’s that. King just can’t be bothered to figure it out.

So, let’s help him out: American incomes are flat precisely because of the anti-union, free-trade, decrease-taxes, cut-social-programs, don’t-raise-the-minimum-wage policies

Strange work in a strange land

September 17, 2014 Leave a comment

from David Ruccio

Americans, as we know, work many more hours than people in other advanced countries. As it turns out, they also work many more strange hours: on weekends and at night.

strange-work-04 strange-work-05

Read more…

Categories: The Economy

Hours worked per worker in industrialized countries 1979-2013

September 16, 2014 4 comments

from David Ruccio

hours

source

Americans, as we know, are forced to have the freedom to labor more hours than do workers in other advanced countries.

Categories: Uncategorized

47 hours per week

September 12, 2014 1 comment

from David Ruccio

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According to Gallup’s latest annual Work and Education Survey [ht: db],

Adults employed full time in the U.S. report working an average of 47 hours per week, almost a full workday longer than what a standard five-day, 9-to-5 schedule entails. In fact, half of all full-time workers indicate they typically work more than 40 hours, and nearly four in 10 say they work at least 50 hours.

Read more…

Categories: Uncategorized

The wage-productivity gap in the G20 (2 graphs)

September 11, 2014 Leave a comment

from David Ruccio

productivity-wages-G20

 

Read more…

What is inflation?

September 10, 2014 5 comments

from David Ruccio

Inflation appears at first sight an extremely obvious, trivial thing. But its analysis brings out that it is a very strange thing…

One one level, inflation is extremely obvious: it’s an increase in the prices of the commodities people buy. Bread, gasoline, housing, and so on. When their prices go up, we are witnessing (and, for many, suffering) inflation. (The opposite, when prices fall, is deflation.)

Why is inflation important? Well, for most of us, our money (or nominal) incomes are eaten away by increases in prices. Therefore, over time, our real incomes are less than our nominal incomes, thus permitting us to purchase less.

Here’s an USA illustration of the difference: Read more…

Categories: Uncategorized

USA median household’s net worth fell from $106,591 to $68,839 from 2005 to 2011

September 8, 2014 1 comment

from David Ruccio

Screen_Shot_2014-08-22_at_2.15.58_PM.0

As Danielle Kurtzleben explains, Read more…

Categories: The Economy

Wages of US workers by wage percentile 1979-2013

September 2, 2014 4 comments

from David Ruccio

hourly wages-1979-2013 Read more…

Categories: The Economy

The economics of American racism (9 charts, 1960 to 2014)

August 28, 2014 3 comments

from David Ruccio

incarceration

Read more…

Categories: The Economy
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