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Household wealth trends in the United States, 1962-2013

December 16, 2014 Leave a comment

from David Ruccio

mean-median-net worth

The chart comes from Ed Wolff’s latest, “Household Wealth Trends in the United States, 1962-2013: What Happened over the Great Recession?”—another in a growing list of investigations into the declining fortunes of the American middle-class. Read more…

In the USA the already huge wealth gap between whites and non-whites is growing. (2 graphs)

December 13, 2014 Leave a comment

from David Ruccio

FT_14.12.11_wealthGap2

Read more…

Transforming economics education

December 9, 2014 3 comments

from David Ruccio

After the crash of 2008, in the midst of the Second Great Depression, students around the world have been calling for radical changes in the way economics is taught. They know that the discipline of economics, today as in the past, includes more than neoclassical economics—but, for the most part, students are not being exposed to concepts and methods other than those of neoclassical economic theory.

There are, of course, a handful of departments where non-mainstream theories have been developed and taught, alongside and in addition to neoclassical (and, for that matter, traditional Keynesian) economics. In the United States, in terms of Ph.D.-granting institutions, they include the University of Massachusetts at Amherst (where I received my degree), American University, the University of Missouri-Kansas City, the University of Utah, and New School University.

As Aaron Steelman recognizes, that handful also once included the University of Notre Dame. But that is no longer the case, since the current Department of Economics advertises itself as as purely neoclassical department.

Unfortunately, Steelman gets the history wrong. Read more…

Categories: Economics Curriculum

Black Friday madness

December 2, 2014 1 comment

from David Ruccio

fredgraph

Black Friday has apparently become a spectator sport for the leisure class, who look forward to watching videos of shoppers brawling for discounted items from the safety of their own homes. A reality-show Hunger Games, if you will. Read more…

Piketty wars: episode III—revenge of the Right

November 28, 2014 4 comments

from David Ruccio

20140104_FNC089

In episode I of Piketty wars, Harvard University Press published Capital in the Twenty-First Century. In episode II, the reviews of Piketty’s book, by liberal mainstream economists, were generally positive. Now, in episode III, the Right can be found on their Invisible Hand ship, launching a series of attacks against Piketty.* Read more…

Conspicuously consume this!

November 26, 2014 1 comment

from David Ruccio

More than a century ago, Thorstein Veblen’s presented his theory of conspicuous consumption (as part of his Theory of the Leisure Class)—an idea that is as applicable today, in the midst of the Second Gilded Age, as it was then.*

But not for Robert Frank, who reduces Veblen’s theory to so-called Veblen goods, which is the idea that demand for some goods increases as prices go up, thus contradicting the usual neoclassical presumption of downward-sloping demand. Frank’s view is this is evidence of craziness—and the super-rich aren’t crazy.

OK, they’re not crazy. But that’s not what Veblen argued. His theory was that, in modern times, in a system of private property and industrial production, all income groups are caught up in “invidious distinction” and “pecuniary emulation.” Read more…

Categories: The Economy

Economics in crisis (2 graphs)

November 25, 2014 1 comment

from David Ruccio

fredgraph

Cornelia Strawser, in response to Brad DeLong, notes the importance of the declining labor share in U.S. national income.* She then poses a series of questions that, in her view, should be “raised in the academy and in public discourse”: Read more…

America’s decade of declining real wages

November 22, 2014 1 comment

from David Ruccio

MFG-wages

“We allow our fellow Americans to be exploited for the benefit of corporate greed and unnecessary wars. This nation has become an embarrassment.” That’s how tintin from the Midwest responded to the news that many factory jobs today pay far less than what workers in almost identical positions earned in the past.

Perhaps even more significant, while the typical production job in the manufacturing sector paid more than the private sector average in the 1980s, 1990s and early 2000s, that relationship flipped in 2007, and line work in factories now pays less than the typical private sector job. That gap has been widening — in 2013, production jobs paid an average of $19.29 an hour, compared with $20.13 for all private sector positions.

In addition, according to a new study by the National Employment Law Project [pdf], wages in U.S. manufacturing are not keeping up with inflation. Read more…

US corporations holding $2.1 trillion in cash overseas

November 17, 2014 5 comments

from David Ruccio

According to NBC news [ht: db], U.S. corporations are for the first time holding more than $2 trillion overseas, a sixfold increase over the past 12 years.

That total is now greater than the amount held within the United States, which totals just under $1.9 trillion.

fredgraph

Read more…

Categories: Uncategorized

Abraham Lincoln and the road to despotism

November 14, 2014 2 comments

from David Ruccio

Wall Quotes - Abraham Lincoln - Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed

It is a glaring omission in his otherwise remarkable discussion of the relationship between Karl Marx and Abraham Lincoln, An Unfinished Revolution, that Robin Blackburn neither discusses nor does he include the text of Lincoln’s First Annual Message to Congress(the equivalent of what we refer to today as the president’s State of the Union) , of 3 December 1861.

Composed at least in part as an answer to Jefferson Davis’s President’s Message of 18 November, in which Davis decries the actions of a president turned despot and celebrates the slave South’s “unconquerable will to be free,” Lincoln responds as follows: Read more…

Categories: Uncategorized

Philanthropy in the age of growing inequality

November 6, 2014 3 comments

from David Ruccio

Graph-1_ag-grants-by-region

Many of my well-intentioned students are in awe of Bill Gates. He’s a rich guy, a successful businessman, who is giving away a large portion of his income to help solve the world’s economic and social problems through the Bill and Melinda Gates Foundation. What could be more admirable? Read more…

Categories: inequality

Youth aged 15 to 24 not in education, employment or training – league table 41countries

October 31, 2014 Leave a comment

from David Ruccio

According to UNICEF, the latest crisis of capitalism has hit 15-24 year olds especially hard, with the number of young people who are not participating in education, employment, or training rising dramatically in many countries. In the European Union 7.5 million young people (almost equal to the population of Switzerland) were classified as NEET in 2013—nearly a million more than in 2008.

The largest absolute increases were in Croatia, Cyprus, Greece, Italy, and Romania, all with relative changes of around 30 per cent or higher.

Of the OECD countries that are not in the European Union, the United States saw the largest increase in the NEET rate (from 12 to 15 percent), followed by Australia (9.9 to 12.2 percent).  Here is the chart: Read more…

Categories: The Economy

Roaring 1980s, 1990s, 2000s, and 2010s (2 graphs)

October 29, 2014 5 comments

from David Ruccio

saezfig1

In the United States, we’ve witnessed a return of the Roaring Twenties—for the past three and a half decades.

As Emmanuel Saez and Gabriel Zucman show, the share of wealth (defined as total assets, including real estate and funded pension wealth, net of all debts) held by the top 0.1 percent of families is now almost as high as it was in the late 1920s. Read more…

Fred Lee RIP

October 26, 2014 1 comment

from David Ruccio

I just received word that Frederic S. Lee, who taught Post Keynesian economics at the University of Missouri-Kansas City for the past fourteen years, died last night. I first met Fred when he was at Roosevelt University, and we had been in touch (at conferences and presentations as well as through his articles and books on heterodox economics) many times since.

Here’s Fred’s autobiography: Read more…

Categories: Uncategorized

What Yellen didn’t say

October 21, 2014 4 comments

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…

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