This thoughtful piece in the Economist examines the prospects for technological unemployment and a continuation of the trend by which income gains go to owners of capital. Economists have conventionally rejected this idea but recent trends in developed countries – the failure of US wages to grow for 4 decades – suggest that economic theory [...]
Steve Koukoulas points out in Business Spectator that the final budget of the Gillard Government was the most contractionary since 1971. The deficit was 1.7% lower in real terms than in the previous year. (Recall that the stance of fiscal policy is measured by the change in the deficit not its level). Government spending fell [...]
The Commonwealth Budget to be presented tonight has been subject to more hysterical overreaction than any I can remember. The forecast deficit of $12b – $18b is around 1% of Australia’s GDP, Australian economic growth is forecast by the IMF to be around 3% in 2013 a slight slowdown from the previous year but forecast [...]
I feel dislocated from much contemporary macroeconomics because I think much of it is measurement without theory. There are not credible theoretical stories to unambiguously back up many modern macroeconomic claims. Reinhart and Rogoff two of the big name deficit-hawks in macroeconomics got a huge amount of macroeconomic data covering many countries – emerging and [...]
Bob Gregory is interviewed by my colleague Jan Libich on some issues in modern macroeconomics. Definitely worth a listen. Jan has a string of such interviews with other economists as well which you can see on YouTubes here and on iTunes here.
It is mainly during the last 300 years that sustained economic gains to certain people have occurred. For the most part these people were living in industrializing Western-style, market-based economies. From the longer-term historical perspective of human existence over 50,000 years this sustained, broad-based economic progress has been a relatively short-lived aberration.
In Melbourne last night Nobel Laureate Dale Mortensen gave a talk “After the Great Recession: Recovery or Stagnation”. After discussing his flow model of unemployment which essentially links levels of employment to numbers of job offers he moved to more familiar grounds. Mortensen argued that job mismatches (unemployed construction workers trying to get jobs in [...]
Warwick McKibbin in today’s AFR argues that Australia is in danger of mimicking the worst economic policies available by pursuing the European approach. He cites specifically the attempt to use a carbon pricing scheme to control greenhouse gas emissions, continued protectionist support for the car industry and an excessive reliance on redistributionist policies together with [...]
Martin Feldstein is by no means a radical economist. He advised President Reagan and is a former President of the NBER. But even he warns of the peril implicit in the failure to distinguish structural from cyclical deficits in the European economies. Moreover, this failure seems implicit in the stance of the European Central Bank. [...]
Joe Stiglitz nicely summarises the current US macroeconomic dilemma. (HT BR). Modern events confirm that monetary policy failings could not have caused the Great Depression. Policies seeking to avoid such failings – policies to expand the money supply to induce private investment did not work then and have evidently not worked now. Enhanced massive fiscal [...]
Gavyn Davis in the Financial Times points out that the cost to the US economy of the GFC-inspired continuing Great Recession is $5900b or about 41% of annual GDP once the divergence between actual and potential GDP is accounted for. The effects of other issues on US output are, by comparison, always trivial.
Some may wonder if Thomas Sargent has made a lasting contribution to economics. The Nobel Prize Committee thought so but I don’t and neither does John Kay. Novel ideas such as rational expectations provided fodder for a lengthy cohort of PhD students employed in the model-building industry (I started early on) and it still feeds [...]
That’s what the IMF says and that repeats my earlier claims (and those of all sensible macroeconomists). Increased personal savings, savings by firms and pressure on governments around the world to reduce deficits are driving a situation that replicates events that ocurred during the Great Depesssion of the 1930s. Too little demand due to excessive [...]
John Lancaster in the London Review of Books gets it right. It is self-evidently good for an individual who is in excessive debt to cut back spending, less good for a single nation to adopt this stance and downright dangerous for the developed countries as a whole to do so. The Lancaster article expresses this [...]
I’ve got to admit my macroeconomics is rusty. I got my PhD in this area but have worked almost entirely in applied microeconomics ever since.
I am worried however about the current debt ceiling outcome in the US mainly because, on the basis of long-held views, I am an old-fashioned Keynesian It does not make [...]
I was pleased today that the value of my paltry stock portfolio rose with the announcement of a predicted agreement to increase the US public debt constraint. The move involves a forward commitment to substantially cut government spending and not to raise taxes. It seems like a fairly comprehensive Republican victory.
But it is a [...]
My colleague Dr Jan Libich recorded an interview with Professor Eric Leeper today that I attended. The interview went for about an hour and is recorded in YouTubes. First is part of the interview here and then then an interview with Jan here. An interesting approach to providing teaching material for macroeconomic students.
Leeper was [...]
This short piece in Foreign Affairs by Alan Blinder is as good a statement as I have seen on the state of the US economy:
“The majority of Americans can be forgiven for believing — as they do — that the U.S. economy is still in a recession when it’s not. The economy is certainly [...]
Joseph Stiglitz is warning of a double dip recession in Europe because governments are becoming overly concerned with their deficits. Europe has similar fears but emphases weaknesses in US private sector housing demand that they some claim call for an increased US fiscal stimulus.
Equity markets around the world – including Australia – are tipping [...]
Several of the Fairfax newspapers ran this op ed by Laurence Kotlikoff. The linked version is superior to the local version because of the valuable IMF hyperlinks it contains. The stalling of the US recovery is no news to anyone who watches international equity markets. The bloodbath over the last few days reflects these fears [...]