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Job contagion

April 4, 2020 2 comments

from David Ruccio

contagion

source

Read more…

Maths and economics

April 4, 2020 Leave a comment

from Lars Syll

Many American undergraduates in Economics interested in doing a Ph.D. are surprised to learn that the first year of an Econ Ph.D. feels much more like entering a Ph.D. in solving mathematical models by hand than it does with learning economics. Typically, there is very little reading or writing involved, but loads and loads of fast algebra is required. Why is it like this? …

ecoOne reason to use math is that it is easy to use math to trick people. Often, if you make your assumptions in plain English, they will sound ridiculous. But if you couch them in terms of equations, integrals, and matrices, they will appear more sophisticated, and the unrealism of the assumptions may not be obvious, even to people with Ph.D.’s from places like Harvard and Stanford, or to editors at top theory journals such as Econometrica …

Given the importance of signaling in all walks of life, and given the power of math, not just to illuminate and to signal, but also to trick, confuse, and bewilder, it thus makes perfect sense that roughly 99% of the core training in an economics Ph.D. is in fact in math rather than economics.

Douglas L. Campbell

Indeed.

No, there is nothing wrong with mathematics per se.

No, there is nothing wrong with applying mathematics to economics. Read more…

Unemployment in US and UK ‘may be worse than in Great Depression’

April 3, 2020 2 comments

from today’s Guardian

Unemployment in Britain and the US could surpass the levels reached during the 1930s Great Depression within months as the coronavirus crisis crushes the global economy, a former Bank of England official has warned.

In a stark forecast as job losses mount around the world, David Blanchflower, professor of economics at Dartmouth College in the US and a member of the Bank’s interest rate-setting monetary policy committee during the 2008 financial crisis, said unemployment was rising at the fastest rate in living memory.

Writing in the Guardian, the economist said UK unemployment could rapidly rise to more than 6 million people, around 21% of the entire workforce, based on analysis of US job market figures that suggest unemployment across the Atlantic could reach 52.8 million, around 32% of the workforce.

“There has never been such a concentrated business collapse. The government has tried to respond but it has no idea of the scale of the problem it is going to have to deal with. We make some back-of-the-envelope calculations and they are scary,” he said.

Health expenditure as a percentage of GDP

April 3, 2020 4 comments

Corona: a positive agenda

April 3, 2020 2 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…

Good reasons to become a Keynesian

April 3, 2020 4 comments

from Lars Syll

Until [2008], when the banking industry came crashing down and depression loomed for the first time in my lifetime, I had never thought to read The General Theory of Employment, Interest, and Money, despite my interest in economics … I had heard that it was a very difficult book and that the book had been refuted by Milton Friedman, though he admired Keynes’s earlier work on monetarism. I would not have been surprised by, or inclined to challenge, the claim made in 1992 by Gregory Mankiw, a prominent macroeconomist at Harvard, that “after fifty years of additional progress in economic science, The General Theory is an outdated book. . . . We are in a much better position than Keynes was to figure out how the economy works.”

adaWe have learned since [2008] that the present generation of economists has not figured out how the economy works …

Baffled by the profession’s disarray, I decided I had better read The General Theory. Having done so, I have concluded that, despite its antiquity, it is the best guide we have to the crisis … Read more…

Active cases, recovered cases and deaths

April 2, 2020 1 comment

“It’s a lose-lose” for workers

April 2, 2020 1 comment

from David Ruccio

It’s now an almost daily occurrence: Donald Trump starring in the White House pandemic briefings, flanked by business executives—from Walgreens, CVS, Target and a host of laboratory, research, and medical-device corporations—to form a mutual admiration society.* The various scientists, public-health experts, and emergency personnel, the ones people want to hear from, are accorded third rank.

And American workers are nowhere to be seen—or heard—even when, as on 24 March, Trump decided to speak for them as wanting nothing more than “to get back to work.”

The fact is, while millions and millions of workers have been furloughed or laid off in recent weeks, waiting desperately to receive financial assistance, many more continue to be forced to have the freedom to labor for their employers on a daily basis. They leave their families and venture out—too many with no alternative but to expose themselves to the risks of the pandemic during their commute on public transportation—and then submit to even more risks on their jobs, with little in the way of protection, as some of their fellow workers contract COVID-19. Read more…

Chicago economics — in praise of superficiality

April 2, 2020 Leave a comment

from Lars Syll

igTo observe that economics is based on a superficial view of individual and social behaviour does not seem to me to be much of an insight. I think it is exactly this superficiality that gives economics much of the power that it has. Its ability to predict human behaviour without knowing very much about the make up and lives of the people whose behaviour we are trying to understand.

Robert Lucas

The purported strength of Chicago — New Classical — macroeconomics is that it has firm anchorage in preference-based microeconomics, and especially that the decisions are taken by inter-temporal utility maximizing ‘forward-looking’ individuals.

To some of us, however, this has come at too high a price. The almost quasi-religious insistence that macroeconomics has to have microfoundations — without ever presenting neither ontological nor epistemological justifications for this claim — has put a blind eye to the weakness of the whole enterprise of trying to depict a complex economy based on an all-embracing representative actor equipped with superhuman knowledge, forecasting abilities and forward-looking rational expectations.

That anyone should take that kind of stuff seriously is totally and unbelievably ridiculous. Or as Robert Solow has it: Read more…

Daily death tolls

April 2, 2020 3 comments

The shape of the recovery: Those who tell don’t know

April 1, 2020 4 comments

from Dean Baker

There have been a number of pieces in major news outlets telling us what the recovery will look like from this recession. Most have been pretty negative. The important thing to know about these forecasts is that the people making these forecasts don’t have a clue what they are talking about.

The shape of recovery will depend first and foremost on the extent to which the coronavirus is contained or is treatable, areas in which most of our prognosticators have zero expertise. I can think of a scenario in which we have a very robust recovery.

Suppose that in three months we have developed treatments to the point that the disease is not much more deadly than the standard u. In that case, we would look to restart the economy while trying to protect the most vulnerable segments of the population. Read more…

Common sense economics

April 1, 2020 4 comments

from David Ruccio

In the United States and around the world, governments are responding to the twin pandemics—of novel coronavirus and escalating unemployment—with massive bailouts. Not unlike what happened more than a decade ago, after the global crash of 2007-08.

But there seems to be something different this time around—not only because of the speed of both the viral contamination and the economic meltdown, but also as a reaction to the terms of the bailout that was enacted in the midst of the Second Great Depression.

Here, for example, is 

During the last crisis, the global financial catastrophe of 2008, the authorities protected corporate interests above those of ordinary people, many economists assert. Britain and the European Union bailed out financial institutions, then recovered the costs by hacking away at public services, effectively punishing laborers and taxpayers for the sins of wealthy bankers.

Just like that, with no apparent controversy, he drops in the idea that, after the last major crash, those in charge sought to safeguard corporations and neglect the interests of “ordinary people.” That was certainly the stance, in the United States, of groups like the Tea Party and Occupy Wall Street but Goodman now asserts it as a commonly held view, with a gesture to authority (“many economists assert”). Read more…

Covid-19 and the magic money tree

March 31, 2020 1 comment

from Lars Syll

What will be the lasting effects of the covid-19 pandemic? Start with the size of the state. Over the next year government debt will rise sharply, as spending jumps and tax revenues collapse. When the economy recovers, attention will turn to paying it down. “Capital and Ideology”, a new book by Thomas Piketty, shows that after the first and second world wars many governments in the West turned to heavier taxation of the incomes and wealth of the richest to achieve that goal …

treeCentral banks’ innovations will also have lasting consequences. Few economists believe that the explicit co-operation between the fiscal and monetary authorities risks creating runaway inflation … However, just as the use of quantitative easing in 2008-09 opened the door to more of the same down the road, it will become harder to make the argument that the “magic money tree” does not exist … If central banks promised to fund the government during the coronavirus pandemic, they might ask, then why shouldn’t they also fund it to launch an expensive war against a foreign enemy or to invest in a Green New Deal? Read more…

Coronavirus: upward trajectory or flattened curve?

March 31, 2020 1 comment

Here we go

March 30, 2020 3 comments

from Peter Radford

We all thought that this morning’s announcement of the new claims for jobless insurance would be shocking.  The usual scuttle in the financial markets had been that we might see numbers well over 2,000,000, but the actual number soared even beyond that.  At 3,283,000 it is difficult to articulate what this means.  To put it in some sort of perspective, the previous week had seen 282,000 new claims, and the previous all-time record high of 695,000 had been set back in the recession of 1982.

So to say we are in unprecedented territory is something of an understatement.

And yet:

Even as Congress struggles to come to grips with its responsibility there are rumblings of dissent.  The $2 trillion bailout package voted through the Senate yesterday includes a strong addition to unemployment insurance and even extends that insurance to people who work in the so-called “gig” economy.  Gig workers had previously not been qualified for unemployment insurance.  That additional help for the unemployed has drawn a typical right wing Chicago School type of reaction.  Some Senators, including Lindsey Graham and Ben Sasse, are objecting to the  provisions in the legislation that define the new benefits, on the basis that they create disincentives to work.  This is a quote from a Vox article this morning by Li Zhou: Read more…

Historic surge in US unemployment claims – 3.28m

March 30, 2020 1 comment

Country by country coronavirus case trajectories graph – 29/03, 19:00 GMT

March 30, 2020 9 comments

Coronavirus and the “replication crisis” in social science

March 30, 2020 2 comments

from an article by Nassim Nicholas Taleb and Yaneer Bar-Yam in yesterday’s Guardian

Dominic Cummings [Chief Adviser to UK Prime Minister Boris Johnson] loves to
theorise about complexity, but he’s getting it all wrong.

. . . The error in the UK is on two levels. Modelling and policymaking.

First, at the modelling level, the government relied at all stages on epidemiological models that were designed to show us roughly what happens when a preselected set of actions are made, and not what we should make happen, and how.

The modellers use hypotheses/assumptions, which they then feed into models, and use to draw conclusions and make policy recommendations. Critically, they do not produce an error rate. What if these assumptions are wrong? Have they been tested? The answer is often no. For academic papers, this is fine. Flawed theories can provoke discussion. Risk management – like wisdom – requires robustness in models.

But if we base our pandemic response plans on flawed academic models, people die. And they will.

This was the case with the disastrous “herd immunity” thesis. Read more…

Claims in USA for jobless benefits last week rose to 3.28 million from 282,000 a week earlier.

from David Ruccio

initial claims

The Labor Department on Thursday reported the number of American workers filing new claims for jobless benefits last week rose to 3.28 million from 282,000 a week earlier. Nothing in the 53-year history of the series comes close. In the worst week of 2009, when the job market was reeling, initial claims hit 665,000.

Read more…

Coronavirus deaths per million by country

March 29, 2020 1 comment