Author Archive

European (un)employment in times of Corona: hard won gains down the drains

January 8, 2021 Leave a comment


Eurostat has recently published new data on EU unemployment. It’s going down again. Which seems good. But there is more to this than meets the eye. To be counted as ‘unemployed’ one has to have no ‘gainful employment’ and to be actively seeking for a job. People who give up seeking are not counted as unemployed. Neither are people leaving the labor market. And people are giving up seeking as well as leaving the labor market… Read more…

Christmas, Greece, 2020

December 25, 2020 1 comment

Merry Christmas and a happy…

December 24, 2020 4 comments

An inquiry into the intercourse of nations (or: no more shadowy prices)

December 2, 2020 2 comments

To locate an item in three dimensional space one needs three coordinates. The same holds, in my view, to locate the position of a nation in the multidimensional space of ‘broad prosperity’. We need a multitude (Two? Three? Four?) of axes to do this, one for every dimension. Prosperity is not just a monetary item. And even when one of the axes of this space surely will have ‘money’ as its central unit, other axes like the social one need their own axis. Alas, however, economists sometimes want to reduce the multi-dimensional nature of ‘broad prosperity’ to a monetary variable, putting a (shadow)price on everything, surreptitiously assuming that (market)prices are a precise gauge of ‘utility’. The ridiculous nature of the endeavors to put a price upon everything will be shown using a ridiculous, albeit logically correct, example. Reduction of the social realm to the monetary realm might go like this: Read more…

Immigration EU 2019 edition

November 28, 2020 Leave a comment

Immigration is a hotly debated issue in the EU. To be more precise: immigration from the ‘south’ is hotly debated. Immigration from the East is much more important and increasing. Some facts:

Read more…

Let the vaccinations begin…

November 27, 2020 3 comments

Let’s start to vaccinate as many people as possible as soon as possible. This will, together with other technological solutions like air purifiers, UV-C lamps as well as large scale fast testing, enable us to escape the cycle of alternating lock downs. It will also enable us to at least pursue a policy of total eradication of Covid-19. Lock downs work – for a while. They can buy us time. But the economic, social and psychological consequences are immense and we will have to rely as much as possible on other means. Vaccinations are one of our best weapons in this fight. Read more…

Hours worked, EU and UK Covid-19 edition.

October 15, 2020 Leave a comment


Measuring the labor market and understanding labormarket data has recently been more of a challenge than usual. Read more…

The Theil inequality index: a flexible tool for the modern political economist

October 14, 2020 Leave a comment

Contrary to the Gini-index, the Theil inequality index enables us to directly tie estimates of inequality to the class and ownership structure of a society. As such, it’s an indispensable tool for the political economist, requiring a-priori knowledge of political economic theory but also an inductive reading of the sources and the situation. So, why is the Gini and not the Theil index often the economists inequality metric of choice? 

The Gini-index is an often used metric to estimate inequality. As such, it is highly useful. But for the political economist it has a fundamental drawback. It does matter if people are rich or poor and it does show the extent of differences in income or wealth. But it doesn’t matter if people are laborers or a capitalists, teachers of ‘precarious workers’, landowners or farmers, men or a women or black or white. The Gini-index can be used to measure but not to analyze inequality in a direct, metric consistent way. The are metrics, like the Theil index, which do enable this. Even then, economists have come to use exactly the Gini index (and not the Theil index) as their favorite tool for the measure inequality. Why? Branco Milanovic has some interesting ideas: Read more…

Can we reopen primary schools? Iceland data suggest: yes (they didn’t close them in the first place)

April 18, 2020 7 comments


  1. Mortality and prevalence of Corona.

Iceland tests a lot and has some of the best, most complete and representative, data on Corona infections (graph above, which is consistent with comparable data for Iceland from surveys, h/t Jesse Frederik) and seems to have come to grips with Corona, for the moment. What do these data tell us about the prevalence and mortality rate of Corona? Read more…

Corona: a positive agenda

April 3, 2020 7 comments

The eight hour working day was a long standing aim of organized labor. For decades it seemed unattainable. ‘International competition’ often was a main reason why countries stubbornly refused to introduce it. But from 1915 on and starting in Uruguay it suddenly spread all over the world. Within a few years, in many countries the six day eight hour working week had become the new normal.

Corona won’t end the world. After World War I and despite the Spanish flu many countries rapidly bounced back to prosperity. The introduction of the eight hour day did not prevent this in any way! Too much of this prosperity was based upon flimsy finance the productive capacity was available – while more robust ways to finance investment are of course possible.  Prosperity never is the problem even when flimsy finance, long working hours or unsustainable methods of production might be.

After Corona, countries can bounce back, once again. Of course, we have to introduce measures like job guarantees and the like during the ordeal and finance these in a sustainable way – which for the time being might well be by printing money instead of issuing debt! Be aware: I did not write: ‘printing unlimited amounts of money’ or ‘competitive printing of money by states of the USA or Eurozone countries’. But for the time being printing money to the tune of 20% of GDP per year might not do any harm even when, this time is different, I do agree with Ted Sargent there has to be a credible exit strategy. Which, by the way, also is the MMT stance. If there is one school of thought which does not promote unlimited money printing it’s MMT! Read more…

Corona is like the flu. The Spanish one.

March 28, 2020 7 comments

Yesterday, the number of Corona deaths in Italy rose to 919. In one day. According to Eurostat,  the 2018 total Italian death tally was 633,000. Which translates to on average 1,734 deaths a day meaning that the level of Corona deaths was over half of the ‘normal’ amount of deaths. Already. Despite the lock down. Dear people: this is much worse than a bad flu. And it is as bad as the Spanish flu. Which is supposed to have killed, around 1919,  about 50,000,000 people. FYI: the latest estimate of the number of casualties of the Spanish flu in Italy sets this number at 466.000 in the 1918-1920 period. With 919 deaths a day – Italy will get there. The silver lining: China and South Korea do have it under control. It is possible.

Yesterday’s number of deaths in Italy was of course a record. But with Corona, every day witnesses new records. The world wide number of Corona deaths has been increasing with 10 to 14% A DAY for two weeks now, almost quintupling in this period (from 687 to 3,271 a day). Yeah.

And it’s not just Italy which is at risk. As we’ve all seen, this enemy has the capacity to overwhelm medical systems not in months but in weeks. The Netherlands (which, thanks to neoliberal ‘lean and mean’ changes has a medical system did with very limited redundant physical hospital capacity) already tries to outplace patients to Germany… And they are still not tracking and tracing, the only successful policy thus far. Read more…

A million Corona tests a day. In the short run.

March 25, 2020 3 comments

The news is as bad as it can be. Our most dependable indicator, people dying from Corona, suggest an exponential rate of growth of over 10%. Per day. Actually: 14%.  In a little over 2 weeks, 20.000 people will die. At least. Per day. If we do nothing.

The news is as good as it can be. High biotech companies are developing fast track tests at an unbelievable rate while the government offices which (rightly) have to approve these are working around the clock to do this. Korea will soon export 300.000 tests a week. That’s not enough to meet global demand. But if humankind has become good at anything it is at producing incredible amounts of stuff at an incredible speed. Tests, ventilators, masks – these will come. A million tests a day is feasible. And needed.

But other news is dire. Efficient production chain kind of thinking in the medical sector means that supplies of beds, ventilators, nose swabs and whatever have already run out. We will produce these, production of masks and ventilators is already ramped up. Are these ‘just in time’ stocks a market failing? No, they are a government failing (albeit not in Asian countries which learned from SARS). In many countries, like Brasil and the USA, the ‘takers and looters’ have taken command. BAD!

What we need is of governments guiding the way, paying costs while at the same time taking care of moral hazard and racketeering and taking care of public health tracking and tracing measures and companies doing what they do best: producing stuff. As some Asian countries show: this can be done.

Costs of owner occupied houses should be in the price index. But in the right way.

February 6, 2020 1 comment


The ECB rightly wants to pay more attention to costs of ‘owner occupied houses’ (OOH) when it comes to inflation. Statisticians often use ‘imputed rents’ to do this. The ECB shouldn’t do this but should look at actual costs of owners of houses. Read more…

Unemployment: the concept and its measurement

January 2, 2020 2 comments

Fred employment

Two days ago I posted ‘The macro economic graph of the decade‘. The comments were highly interesting and may be summarized as: “what does ‘headline’ unemployment measure anyway”. About this:

  1. Headline of ‘U-3’ unemployment only captures a part of labor slack and is designed to capture only part of total slack. It can however be supplemented with other unemployment measurements which are designed to measure additional slack, like underemployed workers or discouraged workers.
  2. But there are reasons to assume that it systematically underestimates what it tries to measure.

Read more…

The Macro economic graph of the decade

December 31, 2019 4 comments


Source: eurostat.

What did the last decade teach us about (macro-)economics? The graph above is clear:

* ‘Drunk driving’ financial crises do happen and cast a long shadow. Read more…

Twinkle, twinkle through 365 nights – on one battery!

December 24, 2019 1 comment

Merry christmas and a happy new year! And a picture of an off the shelf heart shaped 2018 Christmas adornment which managed to twinkle 365/24/7 (even when not very bright) on one off the shelf battery, showing the power and the glory of modern contemporary off the shelf led and battery technology. Let’s embrace and welcome the next 365. And dump the last remaining 19th century technology totally outdated short lived energy wasting heat squandering incandescent light bulbs before the next year starts, making 2020 a happy place in advance.
Read more…

The problem with ‘Divisia’ money

December 23, 2019 Leave a comment

According to some economists, ‘Divisia money’ is, as a monetary aggregate, a superior and neoclassical alternative to the more often used M2 or M3 ‘single sum’ aggregates. But looking at such money aggregates in isolation prevents economists from analyzing monetary developments using the integrated and statistically coherent Flow of Funds framework which ties the growth of money to the growth of credit. Divisia money is not a sound alternative. The Flow of Funds are.


The graph shows that aggregate lending data are much more indicative of the growth of financial vulnerabilities and booms and busts than data on money. Read more…

The EU Green New Deal. Fallen fruit first. And now.

December 15, 2019 8 comments

from Merijn Knibbe

The EU has announced a ‘Green Deal‘.  Good. But at this moment, this only a plan for a plan. But there’s no time to waste. So, what to do while we wait? Let’s unleash the economists’ neurotic obsession with efficiency! Identify ‘fallen fruit’, energy gobbling activities which shouldn’t have been there in the first place. And get rid of it. Three examples, non of which requries massive investment or path breaking research:

Media boxes. Problem: extreme stand by use. Solution: waiting for Netflix (for a few seconds). Almost every household has a media box, nowadays. And we literally can’t wait to see Netflix. Which means that these boxes are on ‘stand by’ which uses lots of energy.

In the case of Ziggo media boxes: 56 Watt. Suppose that 100.000.000 households in the EU have such a box this translates to 5.600 Mega Watt or twice the capacity of the largest coal fired power station in the world. How to do this: charge Ziggo and comparable companies (which own the mediaboxes, have a very good administration of these and are able to remote controle them!) with ten Euro per year per Watt (maximum use in standby mode). Use the money to lower VAT on labor hours charged by repair companies (including dentists and car repair and maintenance, the largest sectors of these). Read more…

Financialization, home ownership edition

December 11, 2019 2 comments

Recent research has emphasized the negative effects of finance on macroeconomic performance and even cautioned of a “finance curse.” As one of the main drivers of financial sector growth, mortgages have traditionally been hailed as increasing the number of homeowners in a country. This article uses long-run panel data for seventeen countries between 1920 (1950) and 2013 to show that the effect of the “great mortgaging” on homeownership rates is not universally positive. Increasing mortgage debt appears to be neither necessary nor sufficient for higher homeownership levels. There were periods of rising homeownership levels without much increase in mortgages before 1980, thanks to government programs, purchasing power increases, and less inflated house prices. There have also been mortgage increases without homeownership growth, but with house price bubbles thereafter. The liberalization of financial markets might after all be a poor substitute for more traditional housing policies.

That’s from Sebastian Kohl. Housing policies of course also include policies aimed at affordable rents.

Are low interest rates ‘fair value’?

October 28, 2019 1 comment

The next post is by Pierre Fouchet from HPC is interesting on different levels. First, interest rates are low and it shows that medium run changes in these rates can to quite some extent be ‘explained’ by a cocktail of:  economic variables, price setting by central banks and expectation variables (mind that the model is straightforward but the variables aren’t!). This, however, does not explain why USA rates are quite a bit higher than (in this case) German rates, even when inflation, growth and unemployment in the USA and Germany is not too different. Second, it’s an example of investigating Keynes’ ‘beauty contest‘ (what do others expect expectations to be) and Soros’ ‘reflexivity‘ (expectations may be dead wrong but do influence markets so people follow them as they are paid to make short term gains) as well as possibly a weak version of the rational financial markets idea (whenever ideas like this become common knowledge  you can’t exploit them anymore). Third, rates like these are used to set interest rates used to discount future pension liabilities of pension funds. These liabilities stretch six to seven decades into the future. The model shows that todays’ low rates, which lead to a quite high calculated present value of future liabilities and hence to less favorable calculated funding of pensions, are partly driven by short term upswings and downswings of the business cycle. Millions of people risk having lower pensions now or in ten or twenty years time because we’re now in a downswing, or at least we expect to be in a downswing. That sure is an example of reflexivity – and of a kind we do not need. Read more…