Archive for May, 2011

The American manufacturing crisis and why it matters

May 31, 2011 4 comments

from Ian Fletcher

Despite the denial chorus of the same politicians, financiers, and economists who told us prior to 2008 that our financial sector was fine, the American public is increasingly aware of the truth: American manufacturing is in a state of deep crisis. (And, as I argued in a previous article, the recent small uptick in this sector doesn’t change that fact.)

Let’s start with manufacturing employment.  Below is a chart giving the grim story of job losses in this sector. (Source.)  Read more…

Cheers/proost/zum wohl/nazdrafje/skal/sante/salud/salute/saude/kippis/okrzyki… The very first EU input-output table!

May 30, 2011 8 comments

from Merijn Knibbe

CO2 emissions induced by EU’s final use of products are estimated to be 9 tonnes per capita” –

Finally. More than sixty years after the first input-ouput tables (IO-tables) were constructed for countries like the USA and the Netherlands, Eurostat has calculated IO-tables for the entire EU and published these on May, 27. These tables are the scientific alternative to “Dynamic Stochastic General Equilibrium” models (DSGE models). Unlike these models, IO-tables are based upon: Read more…

Union Maid Does in Dominique Strauss-Kahn, the Next President of France

May 29, 2011 3 comments

from Dean Baker

One very important fact has been largely absent from the coverage of the sexual assault case against Dominique Strauss-Kahn, the former head of the International Monetary Fund (IMF) and leading candidate to be the next president of France. The hotel housekeeper who he allegedly assaulted was represented by a union.  Read more…

How To Waste Money

May 28, 2011 9 comments

from Peter Radford

Just a very quick note today. We have a long holiday weekend ahead of us here in the US. But I couldn’t pass this up.

You all remember those notorious credit default swaps?  Those nasty little, or not so little, pieces of paper that the boys and girls on Wall Street play with. Like matches near gasoline. In the right hands they appear very sensible and so, so, safe. Sometimes they end up in the wrong hands, and blow up in our faces. Read more…

We’re #82!

May 27, 2011 1 comment

from David Ruccio

The United States ranks 82 (out of 153 countries)—just behind Gabon and ahead of Bangladesh—according to the 2011 Global Peace Index.

Here are the results for the United States on the 23 indicators: Read more…

The Manufacturing Rebound is a Myth

May 26, 2011 6 comments

from Ian Fletcher

Talk of a manufacturing revival is in the air.  America has, in fact, gained a quarter-million industrial jobs (source) since the start of 2010.  Unfortunately, this is less than 15 percent of the number lost during the recession. Furthermore, after this teasing uptick, U.S. manufacturing output seems to be stalling again.  So it worth revisiting a much  denied fact I have written about before here and here: American manufacturing is in a state of profound crisis.  Read more…

Assault on the Establishment

May 25, 2011 11 comments

Below is an English translation of an article by Olaf Storbeck in today’s (26 May) Handelsblatt, the German business daily.  The original German version is here.  Also, on Storbeck’s personal website you will find in English a longer version of his Handelsblatt article, Nothing to lose but their models.  It includes longer comments from various pillars of the international economics establishment about the possible significance of economists worldwide rushing to join the World Economics Association.  And here is another article by Storbeck on the WEA, Does the American Economic Association finally get a competitor?

Handelsblatt, May 26,  2011, translated from German

Assault on the Establishment

Economists from all over the world have founded the World Economics Association – and are almost overwhelmed by people wanting to join

By Olaf Storbeck, London

The Revolution was a week late. For months, 141 economists from all corners of the earth had prepared the foundation of the “World Economics Association” (WEA). The goal is to turn the profession inside out.  First, however, technical problems with the online payment service Paypal held up the project. Then, on Monday 16, the “first genuinely international and pluralistic association for economists” was operational.

From the day it went publoic, the association was flooded with membership requests from all over the world. Read more…

Austerity or prosperity? Or: does firing teachers lead to higher exports?

May 25, 2011 3 comments

from Merijn Knibbe

About 6 months ago, Anders Aslund, IMF-economist, published an article in which he stated that Austerity was succesful, especially in the Baltics: Firing teachers and nurses and slashing government wages 35% would lead to an economic renaissance (read the article, I’m not being ironic). This leads to the question: did laying off government employees and slashing government wages by up to 35% free domestic resources for exports? At the time, he seemed to have a small point. Industrial production was increasing again, though it was still way below historical levels. Did this surge continue? Let’s look at the facts (graph 1) Read more…

Press Release: New Economics Association Attracts 3,500 Members from 110 Countries in Seven Days

May 24, 2011 8 comments

Frankfurt/London/New York, May 24, 2011

The World Economics Association (WEA) was launched on May 16, 2011. Impetus comes from the embarrassment that is felt within the economics profession for its dismal showing regarding the Global Financial Collapse, and the absence in this global age of a truly international and inclusive association of economists.  The American Economic Association and other nationally based societies of economists provide broad associations mainly for their country’s economists. The World Economics Association will do the same for the world’s community of economists, while promoting a badly needed pluralism of approaches to economic analysis. The WEA is registered as a Community Interest Company in theUK, a not-for- profit institution. Read more…

Banks, Debt, and Other Oddities

May 23, 2011 7 comments

from Peter Radford

It’s the end of a long and busy week. I have been less involved in the latest economic news largely because of other commitments. Plus everything seems to have reached an impasse.

For instance, our banks have managed to escape serious punishment for the disaster they foisted on us. Some of you are skeptics and wonder how they got away with it. My response is simple: they didn’t actually break that law. They were simply grossly – monstrously – unethical. That’s the way it is in a deregulated society. It’s what the voters kept asking for. No one seriously described the potential outcome. Had they done so, I doubt the voters would have changed their minds. After all, we are living through a period of intense  political divide within which sensible voices are easily crowded out by hysteria and outright lying.  Read more…

Strauss-Kahn’s Legacy at the IMF: Less Than Meets the Eye?

from Mark Weisbrot

Now that Dominique Strauss-Kahn has resigned from his position as Managing Director of the International Monetary Fund (IMF), it is worth taking an objective look at his legacy there. Until his arrest last week on charges of attempted rape and sexual assault, he was widely praised as having changed the IMF, increased its influence, and moved it away from the policies that – according to the Fund’s critics — had caused so many problems for developing countries in the past. How much of this is true?  Read more…

Can the Greek People Teach the ECB Economics?

May 22, 2011 1 comment

from Dean Baker

There is an old maxim that in any bureaucracy people will always rise to the level of their incompetence. This certainly seems to be the case with the European Central Bank (ECB). After totally ignoring the build-up of dangerous housing bubbles in most euro zone countries, as well as the imbalances that supported these bubbles, the ECB now seems intent on punishing the people in many of these countries for its mistakes. Read more…

What wage inflation?

from David Ruccio

Unit labor costs fell by 3.2 percent, and unit profits soared by 24.6 percent.

Felix Salmon thinks “The Fed is probably right to be worried about wage inflation.” Why?

Increases in wages are irrelevant—for employment, inflation, or anything else. What matters is what happens to unit labor costs, and therefore changes in productivity in relation to wages.  Read more…

Insider Trading and Wall Street’s [Un]Ethics

May 20, 2011 6 comments

from Peter Radford

I’m bored with debt defaults. No one seems to worry about them, so I won’t.

How about insider trading? That sounds like fun.

The much heralded Galleon case and the guilty finding against a well respected money manger has confused Wall Street. The boys and girls down there are throwing a hissy fit. How can someone with a little bit of information not be expected to try to make a buck? After all the whole point of getting those special hints, clues, and facts is to end run the market, make a fortune, preen in fancy restaurants, and retire early in order to serve the public as an official in the Treasury Department. Well, maybe not that last bit.

The point is information is the grist that makes the market work. So he, or she, who has information, has a nugget worth a great deal. Since sharing is not a gene found in these folk’s DNA, they naturally like to hoard and then deploy these nuggets to their own advantage.  Read more…

Dominique Strauss-Kahn and the IMF

May 19, 2011 14 comments

from Dean Baker

Those who hoped for serious reform of the International Monetary Fund have to be very disappointed by the allegations of sexual assault against its director, Dominique Strauss-Kahn. If the charges prove true, this will end Strauss-Kahn’s efforts at reforming an institution that is badly in need of reform.

Most people around the world do not realize the power that the IMF has in controlling their lives. In fact, in many countries the IMF’s actions probably have more impact on their well being than the decisions of their elected government. Read more…

Robert E. Lucas: money really exists!

May 19, 2011 3 comments

from Merijn Knibbe

Robert E. Lucas is discredited with being one of the most influential neo-classical economists of the past decades. His work is characterized by a rather complacent tone and a clear denial of the Real World. Did the crisis change him? Yes, and no. Together with Nancy Stokey he published a paper about the crisis. What changed?

Close reading shows that Lucas is as complacent as ever. A quote:  Read more…

Excess Corporate Saving and Excess Corporate Tax Cuts

May 18, 2011 2 comments

In the recent Canadian federal election, further reductions in the corporate income tax rate proposed by the minority Conservative government became a major campaign issue.  The federal CIT rate had already been deeply cut in recent years (from 29.2% in 2000 to just 16.5% at present).  The Conservatives wanted to take it to 15%, despite also emphasizing the need for fiscal prudence (ie. spending cuts) to address the large Canadian deficit.  [Note: provincial governments in Canada also levy CITs, which average about 10%, making the combined rate about 26.5% at present — below the weighted OECD average.] Read more…

Restricting academic freedom

from David Ruccio

Stanely Fish wants to restrict the meaning of academic freedom—and then sweep everything else under the rug.

I actually have no problem with Fish’s restricted definition of academic freedom.

The pursuit of truth is what is done in classrooms and laboratories and that is why those activities should be protected from outside interference. Truth cannot be pursued if constraints in the form of political or ideological preferences block the search for it. Other activities not in the pursuit-of-truth business merit no such protection because there is no specifically academic value to their being allowed to occur without constraint. Read more…

1396 people register as World Economics Association members in the first 24 hours.

May 17, 2011 1 comment

The launch committee for the World Economics Association had been hoping to recruit 1000 members during the first 24 hours after launch.  Instead, after 24 hours 1396 people had registered.  No one has yet had time to total up the number of countries represented, but it is clear that it is large and globally distributed.

Invitation from 141 economists to join the World Economics Association

May 17, 2011 1 comment

Dear Economists and Other Interested Scholars,

We, the 141 economists from the 40 countries listed below, invite you to join the World Economics Association which we are launching.  

Two commitments listed in our Manifesto sum up the project.  

1. To plurality. The Association will encourage the free exploration of economic reality from any perspective that adds to the sum of our understanding.  To this end, it advocates plurality of thought, method and philosophy.

8. To global democracy.  The Association will be democratically structured so as not to allow its domination by one country or one continent.

The creation of the WEA addresses an obvious gap in the international community of economists – the absence of a truly international, pluralist association. Today’s digital technology makes it feasible to close this gap quickly and cheaply through a bottom-up, grass-roots approach.  Read more…