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I actually find it hard to understand why Schumpeter wrote "For any revival which is merely due to artificial stimulus leaves part of the work of depressions undone and adds, to an undigested remnant of maladjustment, new maladjustment of its own which has to be liquidated in turn, thus threatening business with another crisis ahead." Of all the major economists of the period, he had the most dynamic view of the economy and understood the importance of change and innovation. How could he not have noticed how much investment was unsuccessful? The vice-like hold of the strangling idea of global equilibrium seems very hard to escape, even by the most insightful.
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There is also the very important misunderstanding about "creative destruction" itself. It is the creation that does the destruction NOT the other way around. You didn't need to get rid of the horses in order for the automobiles to replace them. There is one sense in which it does work the other way around, but it is completely missed by the "maladjustment" paradigm. Cheap resources (labour, used machines, rental properties, interest rates) enable experiments that otherwise might not be undertaken. So EXPERIMENTAL start-ups may be encouraged, which may result in innovative advances. The payoff may be still decades away. Deciding that "maladjustment" is a bad thing is in fact 100% wrong, we can't know in advance what will work and what not, risk and uncertainty are the key issues here.
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New Deal Democrat, well I'm not particularly convinced that it is a good measure. Problems 1. The length of time, a shallow recession means a short recovery 2. Labour supply, a rapidly growing labour force will increase the total wage increase (and the total GDP growth) without implying anything about the relative state of the economy.
Toggle Commented Jun 12, 2015 on Links for 06-12-15 at Economist's View
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What is absolutely the worst thing about general equilibrium analysis is that allows charlatans to mislead the general public who don't think in terms of general equilibrium. For instance, people who argue that regulations cost jobs. In general equilibrium terms this is nonsense - at worst regulations cost wages, not jobs. But people can't handle thinking in terms of whole system adjustments and think only in terms of local effects - i.e. a particular regulation costing particular jobs in a particular industry. General equilibrium allows ceteris paribus arguments to be made and taken seriously, whereas if the conversation was in terms of consistent flows (of jobs constantly being created and destroyed and changes in those flows and what guides those changes) people would get a more realistic picture of regulation often creating more value than it costs.
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Just a general comment - general equilibrium thinking is a real problem in analysing these sort of issues. Using general equilibrium analysis (rather than disequilibrium dynamics) leads to very misleading conclusions when considering these sort of issues. I increasingly see general equilibrium as the original sin in economics. It needs to thrown down and trampled in the dust like busts of Saddam.
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Benedict@Large If you drop the "at full employment" assumption, and assume that investment is driven by final demand (world wide), and growth is driven by investment, maybe you can understand. But yes currency manipulation is a negative for employed workers in the manipulating country and tends to have a deflationary impact in the country providing the manipulated currency (which is A REALLY BAD THING at the ZLB).
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I wonder if transaction costs and survival bias are involved in the calculations here. How much does it actually cost to follow the index, and are losses on shares falling out of the index accounted for. "$1 invested in 1947 in a value-weighted portfolio of equities traded on major exchanges would have increased 100-fold (in 1947 dollars)," - i.e. $10,000 dollars invested in 1947 .... would be worth §1,000,000 in 1947 dollars today. So where are all the millionaires? How can so many people have done so badly? (Note very few of the shares in the portfolio in 1947 would still be in the portfolio today.)
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I'll just post AGAIN a link to I think the definitive take down of equality of opportunity as a goal. http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2006/10/against_equalit.html Basically, 1. It is not feasible 2. It is not enough.
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It seems to me that one of the defining features of the modern Republican party is hypocrisy. I'm sure it must be in their party constitution somewhere. (Something about public utterances should be ignored in private dealings or such.) As Paul Krugman has pointed out several times, they don't even seem to understand what the word means. (Seeming to think it means that rich, well educated people can't want policies that don't actually help them.) Maybe there is a simple explanation for this phenomenon but I think it is not obvious.
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Larry, I don't quite see how the "small government" scheme and the "post-work" schemes are related here. It seems to me, that there is a relationship but it works in the wrong direction for you (since wealth is more concentrated than income and in a post-work world wealth is the main determinant of ability to consume, MORE not less redistribution is called for). But nobody is working through it - least of all you.
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By the way the argument made before that interest paid is a tax deduction for landlords is a good one. One wonders if the whole "tax efficiency" of debt financing (as against equity) is an issue that needs closer scrutiny (not to mention my view that interest INCOME should only be taxed after allowing for inflation). Perhaps we should do something similar for debt financing - real interest rates should not be a valid deduction - only that part related to compensating for inflation. Question - in the US are dividends free from company profits tax (although subject to income tax) or not?
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One thing to remember is that in the German constitution, the deficit is limited to the amount of public investment. (i.e. You are only allowed to issue debt, if you invest in public assets.)
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One way to start reform, that might work politically is to cap the deduction rather than eliminate it. At least the democrats could do that.
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Yes we should get rid of it, but the main problem is to do this you need a bi-partisan agreement to make a long term phased change (because the existing arrangements are locked into land prices). If the USD had a political system like Germany's, with the chance of occasionally ending up with a major party coalition allowing major reforms, such a prospect might be possible. But hyper-polarised two party politics simply won't allow it. But it seems lots of intelligent people (Owen Paine, Bruce Wilder for two) think the political system doesn't matter. I think it does, I think the ONLY way forward for the US is to form a party whose sole purpose is political reform (and promises to disband when it is achieved). The US democracy is broken, time to fix it.
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With regards the loose ends in physics (cosmic expansion, dark matter etc), I'm inclined to be sceptical as regards the data. Quite simply we really don't know what might distort our understanding of data coming from cosmic distances. We can only verify local data independently. Data from cosmic sources has to interpreted using heroic assumptions. We can speculate all we like, but we should always remain humble as to what we actually know.
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... Which if he actually looked at productivity trends he might have noticed. I REALLY, REALLY dislike this sort of non-scientific (i.e. not data based) editorialising.
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"From the economy's perspective, the flexibility of workers seeking their highest rents and the flexibility of firms to seek better matches for their needed skills mean greater productivity—not to mention growth—all around." WHAT - where did that come from. Up above he was talking about less investment in training workers. Maybe, just maybe there is a trade off between short term allocative efficiency and long term technical efficiency?
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Mention Fed and interest rates and all sorts of funny ideas come to the surface! What seems lacking in all this discussion is the issue of currency interdependence - the Fed isn't just setting rates for the USA, it is in a sense a central bank for the world economy. I would prefer that it wasn't, but it is. So long as the rest of the world keeps sucking up dollars, the Feds ability to control what happens in the US will be reduced.
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Look, the answer to this one is easy. If it is not empirically supported it is not science. It is philosophical speculation.
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I have a suggestion. Why don't governments do a deal with the private sector. They will train people for them. Seriously, the public sector will employ (mostly younger) people at somewhat lower wages with low progression rates, but offer them training in general business skills. As these workers become more skilled they will leave government and work in the private sector, relieving the "skills shortage" (to the extent that it actually exists). Of course this would mean that some privatisation would have to be reversed. This is the way the world used to look in the 70s and 80s. Young plummers were trained by the water board, computer programmers in the public service and (in Australia the GIO - government insurance office). It also meant there was a "public option" keeping competition honest. It may have resulted in some inefficiency (but so does competition in general as many wilfully ignore) but the overall benefit to productivity might well be worth it.
Toggle Commented Jun 3, 2015 on 'Stabilizing Wage Policy' at Economist's View
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Better still JUST MONETARIZE THE DEBT when AT OR NEAR THE ZERO LOWER BOUND.
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Why isn't the use of individual agent based dynamic modelling included here - after big data and new data, big computer power? Economic forecasting needs to realise it's future looks like weather forecasting. General equilibrium has got to go!
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First of all we need to develop target metrics that value economic security and resilience. Feast and famine means starvation, it is not for humans. Merely measuring exchange is not sufficient.
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pgl ???? You don't think the USD is overvalued? As Procopius says the concentration on depreciation is odd.
Toggle Commented May 29, 2015 on IMF profile of Hélène Rey at Economist's View
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It is time this system was ended. I find it strange that they concentrate on depreciation though. I thought the problem with the US dollar, was that it is too high (hence the deficit). Notice also, the distributive consequences - all the gains (asset appreciation and low interest rates), go to rich. The costs (of an overvalued currency) to workers (lower real wages).
Toggle Commented May 29, 2015 on IMF profile of Hélène Rey at Economist's View
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