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kaleberg
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Wow, someone must have touched a nerve. They probably came out in favor of fiscal stimulus. We're comparing one theory that argues that the multiplier is negative against one tht argues that it is positive and could be large, especially under current circumstances. Somehow or another disagreement on the exact size of that multiplier seems to dominate the discussion. Does Bernie Sanders have long nose hair? That discussion can go on for weeks. Higher taxes on the extremely wealthy, maybe a sentence every few years. Economists can go on and on about the precise fiscal multiplier for pages as if that debate matters. Meanwhile, the current theory guiding our economic policy gets the sign wrong, and isn't it a pity about fiscal stimulus multiplier having the right sign but possibly slightly too low a magnitude. Yup, someone touched a nerve.
Toggle Commented 3 days ago on On Multipliers at Economist's View
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How many Americans live in "Normal America"? If it's some place out in the sticks, odds are only a handful.
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Why would the number of fast food restaurants go down when every minimum wage worker was earning an extra $3 burger every hour? Given the prevalence of minimum wage labor in a lot of low rent areas, I'd expect higher wages to have a positive impact on the local economy. I'd expect a lot of people would switch from relatively low profit Dollar Meals to the main MacDonald's menu. I think The Onion got this right with their '07 article, 'Minimum-Wage Hike Celebrated With Name-Brand Ketchup'. For the past few decades the comedians have been more reliable analysts than the experts. http://www.theonion.com/article/minimum-wage-hike-celebrated-with-name-brand-ketch-2253
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That assumes a 0% profit margin. With a 50% profit margin, the cost of making a $3 burger would be $1.50, and the cost of labor would be 38 cents. A 19 cent increase in labor would mean about a 6% increase in price, unless the owner decided to use the increased cost of labor as an excuse to increase his own pay.
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Friedman is making a symmetry argument. We know that economies can have a downwards hysteresis with austerity leading to long term lower growth. He is arguing that a suitable opposite of austerity could lead to long term higher growth. He feels that higher growth is not impossible since we have seen economies growing more rapidly. It seems that the particular model he has chosen has its flaws, but that is no reason to argue that his overall intuition is incorrect. Right now, we have a feel good economics that appeals to the kinds of people who believe that the rich should get richer and the poor should get poorer as a result of their position in the natural order of things. They exult in punishing the impoverished and support economic policies and theories based on their justification of the present order and ongoing trends. Their theories are no more correct that Friedman's, but since they make the right people feel good, they are accepted. In physics, everyone knows that the two main theories, the standard model and general relativity, are wrong. This doesn't make them less useful. Physicists do a lot of arguing about what a correct theory would look like. They often use symmetry or some other aesthetic criterion in its development and selection. More importantly, they know, at least in general, what the theory should predict. The argument against Friedman seems to be based on a political and aesthetic loathing of any economic theory that argues that things could get better for the bottom 99%. It is possible that we are doing as well as we can, but history suggests that we are not. Perhaps his model was wrong, but in physics we would see dozens of physicists coming up with variants of his model that might explain the real world better, including many that would accept that there is upwards as well as downwards hysteresis and that historically observed higher rates of growth are not impossible in the future. Instead, we are seeing economists simply attacking him with the argument that his model is wrong based on the impossibility of economic growth for all but the upper 1% or perhaps 0.001%. The principle that higher growth rates are fundamentally impossible as expressed by Friedman's detractors is a feel good principle. It has no basis in empirical data. It has no basis in mathematics. It simply makes certain people happy and rules certain possibilities out of bounds. Maybe it is time to get rid of feel good economic theory and start taking approaches like Friedman's seriously.
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If you want to think about the productivity decline, consider that the number of hours worked (full time + part time) is roughly the same was it was in 2000. (About ~230G versus ~240G). Meanwhile the inflation adjusted GDP went from $12.5T to $16.4T. This really doesn't look like flat productivity growth to me, but I'm not an economist.
Toggle Commented 7 days ago on How History Can Help at Economist's View
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Krugman isn't jumping sharks. He's jumping blue whales. There were good historical arguments against inflation and debt fear mongering. We faced a similar situation in the 1930s and 1940s. The huge cash reserves on the sidelines did not lead to inflation. The rising government debt didn't lead to economic disaster. There are also good historical arguments that our economy could grow at 4.5% for the next decade with minimal supply constraints. We faced a similar situation in the 1950s and 1960s. We had high growth rates and a growing demand feeding expanding supply. Somehow or another Krugman seems to feel that robust economic growth is impossible and anyone arguing otherwise is simply making a personal attack. He seems to have bought into the economics of hopelessness, despite the historical record which does offer hope. As best I can tell, he and the Romers are arguing that the economy is running flat out. Anyone actually looking at the economy sees massive slack in an underutilized work force, idle capital and sparse investment opportunities. Saying that we have a lot of Americans who would work if the opportunity to do so was made available and that we have a lot of capital that could be invested if a higher rate of return was possible is not calling those who say otherwise "evil and useless".
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The Volcker recession did have one lasting effect. Before the recession, the typical house cost the typical worker 600 hours of labor. After the interest rate increase, the typical worker had to work much longer, though the rate eventually returned to about 800 hours. To afford this, women had to enter the workforce full time which led to a dramatic change in child-rearing practice and the various day care center child abuse and satanism cases.
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There are a lot of times that bullshit can be useful, especially when one draws a distinction between bullshit as in absolutely and completely false and bullshit in the sense of possibly being off by some minor factor. Diesel, for example, wanted to design a small, high efficiency engine for small businesses that couldn't afford steam engines. He was sort of a maker / idealist. As it turned out, his engines were easy to optimize in their larger versions and are now among the largest engines in use. It wasn't until the late 20th century that automotive scale diesels became practical. So, his plan was bullshit. His patent was bullshit. His anticipated efficiency was bullshit. Despite this, diesel engines power ships, generators, trucks of every size, railroads and have dozens of other applications. It might make sense to sort out the nature of Sander's and Friedman's bullshit. Just as there was an understanding that raising the minimum wage or engaging in industrial policy or cracking down on financial fraud would destroy the economy and leave us all impoverished, there is also an understanding that the economy is doing about as well as we might hope and that increased fiscal spending, more government meddling and more government benefits to those in the bottom 99% would be, at best, counterproductive. In fact, we know we can do better. Further, we know how to do better, and an awful lot of it looks an awful lot like the bullshit Sanders is spouting. If Sander's flavor of bullshit, like Diesel's flavor of bullshit, leads to serious consideration of alternate approaches to our economic future, then that bullshit is useful. I spent some of my formative years working for Nicholas Negroponte at the Architecture Machine Group. That was before he founded the Media Lab. We sold a lot of bullshit. For example, no one uses plane wave multi-touch detectors these days, but we do use multi-touch detectors. No one uses phoneme based speech synthesis. No one uses 256 slot color maps. Google Street View is not based on analog laser disk technology. It was all bullshit. It is also now considered foundational. I remember attending a speech by Buckminster Fuller and remarking on this to Professor Negroponte. He explained that Fuller was a poet, and even then I realized that he was exactly right. The geodesic dome is a novelty, but the mathematics behind it, the stress strain analysis, dominates mechanical engineering and architecture. Modern automobile bodies, for example, are just warped geodesic domes. Asking how much one's city weighs was more important than actually putting the thing on a scale. As an engineer, Fuller wasn't much, especially after the death of Starling Burgess, but he was an inspiration who opened new paths of thought. Bullshit has its uses. Another bullshit artist I was impressed with was Ted Nelson. He had this idea for global network connectivity and hyperlinks. It was bullshit, but like the bullshit I apply to my garden, it was fertile bullshit. Bullshit is often the driving force behind a lot of science and technology, and, in that, it is useful. We need poets and con-men. Bullshit can be just as important in politics. Gay marriage was bullshit just 20 years ago. Women's suffrage was bullshit for centuries. Women in combat, outside of the numerous times women showed up as warriors in actual warfare, was SJW fanfic bullshit for more than a century after someone noted that the Smith & Wesson was the great equalizer.
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I also enjoyed 'Kavalier and Clay'. It really did capture the era and the industry. The Golem played a role, but there was also The Escapist, the comic book within the novel. Of course, some of Kavalier's adventures were worthy of a comic book of their own. The Golem, though, was always a touching character. He was created by the Grand Rabbi from the mud along the bank of the river in Prague using ten (or was it twelve) letters of the alphabet. God used all 22 letters when he made man, so the Golem was always limited by that. Sometimes a touch of that shows up in modern comic book characters as well.
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It was all those Jewish writers. They picked this stuff up at Passover seders and washed it down with Manischewitz. If they missed it at Passover, they got it at Hanukah. Marvel is Old Testament stuff. (DC, in contrast, is New Testament. Pay attention at the movies.)
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A lot of business publications went anti-business in the 1980s. Mind you, if you had asked them, they would have argued that they were pro-business, just criticizing business as usual. If you look at the last 30 or so years, however, you can't help but recognize that all the free enterprise tintin schiesserei has weakened our economy and economic system rather seriously.
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It's telling that maternity leave simply vanished in her discourse. It's not as if all that many of us did not have mothers.
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It's not clear our economy could handle the growth that going back to a 90% marginal rate would cause.
Toggle Commented Apr 13, 2016 on For an Inheritance Tax at Economist's View
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That $3K would only be taxed when you sell. At least that's how the law works now. (Of course your property taxes might go up, but that's another story.) If debt is forgiven, you are taxed on that under current law. This is an issue with student loan and mortgage forgiveness plans. Putting money in a savings account merely creates a bailment. There would be no tax. The money doesn't change ownership any more than parking your car in a lot means you have to buy it back when you leave.
Toggle Commented Apr 13, 2016 on For an Inheritance Tax at Economist's View
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I forgot another obvious ecological problem, the rise of an economic monoculture. When every developed society is taking an approach similar to every other developed society, it is harder for innovations to arise due to peculiar local circumstances. This is exacerbated by free trade which allows a brute force approach rather than forcing the development of an indigenous solution. e.g. Why develop gasoline engines if coal is a cheap import?
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There's no mention of wage stagnation. High wages lead to increased productivity. Even in the 1930s TFP was rising because wages had not fallen as far as prices. Labor was expensive, as it was in 18th century England or the post-colonial US. In fact, the US was almost a laboratory experiment with cheap labor in the south and expensive labor in the north. We can still see the results of this with new industries being developed in the blue states while red states compete on resources and cheap labor. There is no mention of the obvious ecological causes. Business innovation, like biological innovation, is driven by the creation of new niches. In biology these might be things like new lakes, climate change, new chemical pathways, or massive fires. In business there are new forms of property, new areas of subsidy, resource discoveries, new product categories, tighter regulations or increased wages. There isn't an explicit mention of government industrial policy, though I think this was largely covered by the overall collection. We know there is a particular path to industrial development that has worked and still works, even if it is ideologically repugnant to conventional wisdom. There is also no explicit mention of material feminism in which unpaid work traditionally done by women is moved into the marketplace. Any feminist scholar would expect this to lead to lower productivity growth as this work is generally not valued or paid enough to encourage investing in efficiency. This is, however, covered at least in part by the overall collection.
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One should add that the introduction of labor provision firms in general has exacerbated this problem. In the hotel industry, for example, the people at the desk work for the hotel management company, not the hotel company. The people who clean the rooms work for a commercial cleaning company, again, not for the hotel company. This is increasingly common. Even in higher paying fields like engineering, the engineers often work for some consultancy or integrator, rather than for the firm requiring the engineering. Basically, these firms have taken the place of unions, and instead of fighting for higher wages for the people doing the work, they fight for higher profits for the management and owners of the labor providing company.
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In the cold light of morning, I have to agree with you.
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In other words, efficiency is a political metric. The whole 12 million variables thing is a red herring.
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I've actually noticed Amazon offering me better deals when I'm logged in as opposed to anonymous. They know a sucker when they see one.
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Xi doesn't have a choice. Either he lets local power centers and their related corruption sap China or he slaps down the local power centers and accepts the weakness that this generates. It's not as if he has a third path. There just aren't enough alternate power centers in China and China has an awful knowledge of what happens when the central government collapses. This is the same problem the USSR had, though China is culturally more business oriented than Russia ever was which has made some difference. In fact, it is the same problem that the US has. Luckily, we have a lot more power centers, the feds, the states, the big corporations, individual billionaire, and we have various limits, checks and balances. So far, whenever things have started tilting too far in one direction or another, we've managed to pull back. This is harder to do when the system is more efficient and less chaotic. Most engineers knows and understands this tradeoff. (e.g. Claude Shannon formalized it for computing.) The lessons are applicable in other fields as well. Whenever I think about the Xi I remember the taunt from "The Road to Wigan Pier": ‘I wouldn’t care to have your job.’
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It was a Honda automobile. Someone rear ended us and slightly crumpled the "rear body pan". This was a safety issue with the crumple zone, so it couldn't just be banged out. Our body shop thought they had located a spare in New Jersey, but it had been damaged in storage. I think the general rule is five years of support, though I gather California demands seven.
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I'm not sure that the internet is where all the consumer surplus is being captured. After all, if you can buy it on the internet, you can shop around for it on the internet. This has actually led to narrower variation in pricing. I used to use all kinds of search engines like mysimon, shopping.google and one for comparing book prices. Now I find that the various vendors have already done those searchers and that their prices have converged. Every so often I can do a bit of cherry-picking, but this is less common than it was. Which site I shop on these days is more about discovery, convenience and other features.
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Wow, that really shows what government can do when it sets its mind to it.
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