The Economics Thread

[VorZakone]

because economics isn't a science, it's an art discipline. It has numbers and equations, but they are used almost exclusively in an ideological/"soft science" setting.

Perhaps I mis-explained myself but that's not my point. I know economics isn't an exact science.

But surely everybody's concerns or input can be accounted for so nobody can say "you cherrypicked your data!". Well, provide your dataset then and let's add it to the research.

 

[Andrew~]

So what’s everyone’s plan given the BoE is now considering negative interest rates?

 

[Cheimoon]

because economics isn't a science, it's an art discipline. It has numbers and equations, but they are used almost exclusively in an ideological/"soft science" setting.

I know it's pedantic, but I would rather classify economics as a social science - given that anything economic exists only in its societal context. And I suppose it's nothing new to say (@VorZakone) that a lot of the contradiction comes from which social factors are taken into account when considering an economic model / theory / and so on. In part, this can be political; but from what I've been reading, an issue is also that economists can be fairly dogmatic in their methodological approach. For example, a lot of market theory presumes the existence of the perfect market, while in reality, markets are never perfect, due to government intervention and due to people and companies making choices that do not correspond to the model's expectations (because they do not have perfect knowledge, perfect intelligence, and/or unbiased reasoning). I can't remember which book I was reading that went into this fairly often; but this is apparently quite the issue (weird as it might seem).

First, there are certainly not "lots" of 22-year-olds making 150K+. That would, at the very least, place them in the top 1% if not closer to the top 0.1% (this data only goes as low as 27-year-olds). Of that exceptionally rare group the overwhelming majority are some athletes (NBA, NFL, world football), actors, and musicians. You'll also find the fake "self-mades" who were gifted a chunk of start-up capital from their families who also bequeathed them a network of important connections. Additionally, many of the most valued talents are nowhere near to making money at that age (for instance, future surgeons are just beginning med school then they have multi-year residencies then elite Fellowship training).

It's a complete myth that somehow progressive taxes would "hinder technical innovation". That's that myth propagated by the far-right that is just false and completely unsupported by evidence. In fact, most innovations comes out of individuals that don't even make 150K and have signed away by NDA their rights to innovations made at their company (see Google, 3M). People that actually study innovation find that it derives from intrinsic motivation:

"So how do organizations effectively cultivate innovation? The knee-jerk reaction may be to simply pay individuals to engage in innovative behavior, but many businesses can’t quite kindle innovation with the monetary incentives to foster ambition and professional growth.4 In fact, initially paying individuals to participate in innovative activities may even be counterproductive.5 Instead, innovation is a creative outlet with its own set of inherent rewards. That is, innovation is intrinsically motivated"
https://www2.deloitte.com/content/dam/Deloitte/tr/Documents/human-capital/Nothing-For-Money.pdf

So this entire line of arguing is just fallacious and untrue. Progressive income tax, when done right, is not even remotely the problem holding back class mobility. For that see this article from the Atlantic that I've linked a dozen times because it breaks down all the structural factors that actually prevent class mobility in the US.
https://www.theatlantic.com/magazine/archive/2018/06/the-birth-of-a-new-american-aristocracy/559130/

Second, I've never seen anyone that argues for much greater progressive taxation argue for "50% tax on 150K. Here is what people (like myself) actually advocate for:

• Complete re-tiering of the outdated tax brackets. We need about 4-5 more tax brackets ABOVE 500K. Corporate executives, hedge fund managers steal a living where their compensation is completely divorced from their actual ability to perform (see execs taking home millions in pay despite their company going bankrupt). I would personally say 32% is too much taxes for someone making 150K but someone making 2M a year should be paying over 50% in taxes (and Cheimoon already explained how progressive taxation works). Corporate execs making 20M a year should be paying 60-70% in taxes.
• Completely revamping earned income vs. unearned income. The cap on unearned income (from investments, old money, etc) is 15%. It is absurd that people like Mitt Romney for example paid less in tax percentage than everyone I know making under 100K.

Damn, you should have properly tagged me! I'm only noticing this now and you've got some interesting references there.

I was reading, btw, that the top income bracket in the US had a much higher tax percentage in the 50s, which really only plummeted to current levels just below 40% in the 80s. This Wikipedia section also shows that (scroll down to the table). Personally, I see no objection to returning to a 70/80/90% tax for the top bracket. (To repeat my point elsewhere for others: that percentage would not apply to a person's full income. Each bracket's percentage only applies to the part of the income earned within that specific tax bracket.) There is simply no need for any person to make that much money (what's lost that's important?), and a lot of need for the state to have the revenue to properly organize the welfare state.

 

[WPMUFC]

I know it's pedantic, but I would rather classify economics as a social science - given that anything economic exists only in its societal context. And I suppose it's nothing new to say (@VorZakone) that a lot of the contradiction comes from which social factors are taken into account when considering an economic model / theory / and so on. In part, this can be political; but from what I've been reading, an issue is also that economists can be fairly dogmatic in their methodological approach. For example, a lot of market theory presumes the existence of the perfect market, while in reality, markets are never perfect, due to government intervention and due to people and companies making choices that do not correspond to the model's expectations (because they do not have perfect knowledge, perfect intelligence, and/or unbiased reasoning). I can't remember which book I was reading that went into this fairly often; but this is apparently quite the issue (weird as it might seem).

i agree, when i wrote soft science/arts, that was my brain having a good old fart moment, economics is a social science. I agree with the entire paragraph overall as well.

 

[Cheimoon]

i agree, when i wrote soft science/arts, that was my brain having a good old fart moment, economics is a social science. I agree with the entire paragraph overall as well.

Ah! That explains - I was scratching my head there a little, yeah.

 

[oneniltothearsenal]

I know it's pedantic, but I would rather classify economics as a social science - given that anything economic exists only in its societal context. And I suppose it's nothing new to say (@VorZakone) that a lot of the contradiction comes from which social factors are taken into account when considering an economic model / theory / and so on. In part, this can be political; but from what I've been reading, an issue is also that economists can be fairly dogmatic in their methodological approach. For example, a lot of market theory presumes the existence of the perfect market, while in reality, markets are never perfect, due to government intervention and due to people and companies making choices that do not correspond to the model's expectations (because they do not have perfect knowledge, perfect intelligence, and/or unbiased reasoning). I can't remember which book I was reading that went into this fairly often; but this is apparently quite the issue (weird as it might seem).


Damn, you should have properly tagged me! I'm only noticing this now and you've got some interesting references there.

I was reading, btw, that the top income bracket in the US had a much higher tax percentage in the 50s, which really only plummeted to current levels just below 40% in the 80s. This Wikipedia section also shows that (scroll down to the table). Personally, I see no objection to returning to a 70/80/90% tax for the top bracket. (To repeat my point elsewhere for others: that percentage would not apply to a person's full income. Each bracket's percentage only applies to the part of the income earned within that specific tax bracket.) There is simply no need for any person to make that much money (what's lost that's important?), and a lot of need for the state to have the revenue to properly organize the welfare state.

I should have! It's no surprise there was no response. It's a shame that conservatives often spout a lot of misinformed takes then when presented with evidence that counters their beliefs they run away and never change their misinformed beliefs.

 

[Cheimoon]

Since this is the economics thread, I thought maybe I could raise a general question, and see if people can help me understand this better. I.e.: how are shares good for companies after they have been issued. I understand how they are useful mechanism to raise money, and in that sense better than loans as you don't get to deal with the interest rates, risking losing your company if you can't pay an installment, and so on. But shouldn't it be preferable to a company to try and buy back shares (kinda like paying back a loan) once they can? It gives them back control (especially since shareholders tend to be very focused on the short term), they can stop paying dividend, and it stops them from being subject to the vagaries of the market. I know that total stock value factors into total company worth, which in turn factors into a company ability to take loans etc; but isn't that minor compared to the advantages of buying back as many shares as possible? (To me, there is also a wider societal advantage, as the stock market is a weird combination between a house of cards and a casino, with undue influence on the 'real' economy. But companies won't care about that, I imagine.)

I am probably wrong here, since buying back stocks is uncommon, so I'd like to find out what I'm missing and understand this better.

I should have! It's no surprise there was no response. It's a shame that conservatives often spout a lot of misinformed takes then when presented with evidence that counters their beliefs they run away and never change their misinformed beliefs.

It was anyway a fairly odd take. I mean, in no way are starters with a $150k salary typical for the American job market, and I have never before seen it suggested that high salaries incite innovation; that's normally linked rather to job circumstances, I thought.

 

[NotThatSoph]

I know it's pedantic, but I would rather classify economics as a social science - given that anything economic exists only in its societal context. And I suppose it's nothing new to say (@VorZakone) that a lot of the contradiction comes from which social factors are taken into account when considering an economic model / theory / and so on. In part, this can be political; but from what I've been reading, an issue is also that economists can be fairly dogmatic in their methodological approach. For example, a lot of market theory presumes the existence of the perfect market, while in reality, markets are never perfect, due to government intervention and due to people and companies making choices that do not correspond to the model's expectations (because they do not have perfect knowledge, perfect intelligence, and/or unbiased reasoning). I can't remember which book I was reading that went into this fairly often; but this is apparently quite the issue (weird as it might seem).

If you remember the book I'd appreciate a tag, because in my experience (not that I'm an expert or anything) this is more an outside looking in view. It's very possible that perfect competition is sometimes assumed where it shouldn't be, in fact I'm certain that's true, but the extent that it happens I suspect is very exaggerated (most research papers I read it's not even relevant). People talk a lot about how economists are influenced by their politics, and that's true, but exactly because economics is so relevant to politics and people's daily lives you end up with a lot of people having some pretty strong opinions about economics as an academic discipline without necessarily being aware of what's going on. For instance, no economic model or theory assumes that agents have perfect knowledge, intelligence or that they are unbiased. What's likely happening here is that economists famously assume that people are rational. And people aren't rational, at least not all the time, so that sounds very suspect, but in typical academic fashion economic rationality doesn't mean what anyone else would call rationality. Being rational in an economic sense means that your preferences are complete and transitive, nothing more exiting than that. Meaning that if you're presented with two choices, you're able to tell me which one you prefer (or that they're equally good), and that if you prefer choice A over B, and B over C, then you also prefer A over C. And rationality isn't a set assumption either, necessarily, see behavioural economics but also in a lot of other settings that assumption is relaxed.

Have you heard of the spherical cow? It's making fun of physicists's tendency to simplify. However, the issue with what the physicist is doing isn't that he's simplifying, it's that he's simplifying something that's not appropriate. When we are talking about the milk production of actual cows, then it's pretty relevant that cows aren't spherical, and neither do they exist in a vacuum. They'd die, actually. But, in other situations that simplification doesn't matter, it just makes it easier, so it's fine.

We talked briefly about minimum wage in the labour market a while ago, so I'll go with some of what I touched upon there. If we assume perfect competition, then a minimum wage set above equilibrium wage will lower employment. If we relax that assumption and instead allow for the possibility of employers having market power, then that's no longer necessarily true. Here perfect competition is a critical assumption, so it matters what the model says about it. But, if we want to talk about the effect of a payroll tax on wages, then it doesn't matter if we assume perfect competition or not, the model will say that wages fall. Perfect competition is not a critical assumption here, and relaxing that assumption will only give us the same answer with more equations and lines.

Another example is general and partial equilibrium, where partial equilibrium is looking at a single market and treating everything else as exogeneous, while with a general equilibrium model you take into account feedback loops etc. If we use a partial equilibrium model to look at how immigration impacts wages then the result is very simple: a positive shift in labour supply increases quantum (employment) and lowers the price (wage). Done. If we use a general equilibrium models then things can change rapibly. The people immigrating share a trait with cows; they don't live in a vacuum, no matter what physicists believe. They take their wage and they spend it. They eat, they live places, they do all sorts of things, so aggregate demand increases. This increases the demand for labour, and here the feedback loop comes in (and this feedback will keep going). We're not just dealing with a positive shift in the supply of labour, we're dealing with a positive shift in demand as well. Does that change anything? Employment will still increase, but we can no longer say anything certain about what will happen to wages. Partial equilibrium analysis is a critical assumption here.

If we go back to the farmer, though, and look at what would happen to his income if we decided to help him out with a little subsidy (or an extremely large subsidy if we're talking real life), then partial or general equilibrium doesn't matter so there's no reason to bother with general equilibrium. Even more phycisist talk: Newton is sadly outdated, but for a lot of stuff that really doesn't matter. I don't need Einstein if I want to calculate the trajectory of a football, Newton will do just fine. And it turns out Einstein was wrong anyway.

 

[Man of Leisure]

I was reading, btw, that the top income bracket in the US had a much higher tax percentage in the 50s, which really only plummeted to current levels just below 40% in the 80s. This Wikipedia section also shows that (scroll down to the table). Personally, I see no objection to returning to a 70/80/90% tax for the top bracket. (To repeat my point elsewhere for others: that percentage would not apply to a person's full income. Each bracket's percentage only applies to the part of the income earned within that specific tax bracket.) There is simply no need for any person to make that much money (what's lost that's important?), and a lot of need for the state to have the revenue to properly organize the welfare state.

Just don't see this ever happening. Raising taxes won't get you elected.

 

[Cheimoon]

If you remember the book I'd appreciate a tag, because in my experience (not that I'm an expert or anything) this is more an outside looking in view. It's very possible that perfect competition is sometimes assumed where it shouldn't be, in fact I'm certain that's true, but the extent that it happens I suspect is very exaggerated (most research papers I read it's not even relevant). People talk a lot about how economists are influenced by their politics, and that's true, but exactly because economics is so relevant to politics and people's daily lives you end up with a lot of people having some pretty strong opinions about economics as an academic discipline without necessarily being aware of what's going on. For instance, no economic model or theory assumes that agents have perfect knowledge, intelligence or that they are unbiased. What's likely happening here is that economists famously assume that people are rational. And people aren't rational, at least not all the time, so that sounds very suspect, but in typical academic fashion economic rationality doesn't mean what anyone else would call rationality. Being rational in an economic sense means that your preferences are complete and transitive, nothing more exiting than that. Meaning that if you're presented with two choices, you're able to tell me which one you prefer (or that they're equally good), and that if you prefer choice A over B, and B over C, then you also prefer A over C. And rationality isn't a set assumption either, necessarily, see behavioural economics but also in a lot of other settings that assumption is relaxed.

Have you heard of the spherical cow? It's making fun of physicists's tendency to simplify. However, the issue with what the physicist is doing isn't that he's simplifying, it's that he's simplifying something that's not appropriate. When we are talking about the milk production of actual cows, then it's pretty relevant that cows aren't spherical, and neither do they exist in a vacuum. They'd die, actually. But, in other situations that simplification doesn't matter, it just makes it easier, so it's fine.

We talked briefly about minimum wage in the labour market a while ago, so I'll go with some of what I touched upon there. If we assume perfect competition, then a minimum wage set above equilibrium wage will lower employment. If we relax that assumption and instead allow for the possibility of employers having market power, then that's no longer necessarily true. Here perfect competition is a critical assumption, so it matters what the model says about it. But, if we want to talk about the effect of a payroll tax on wages, then it doesn't matter if we assume perfect competition or not, the model will say that wages fall. Perfect competition is not a critical assumption here, and relaxing that assumption will only give us the same answer with more equations and lines.

Another example is general and partial equilibrium, where partial equilibrium is looking at a single market and treating everything else as exogeneous, while with a general equilibrium model you take into account feedback loops etc. If we use a partial equilibrium model to look at how immigration impacts wages then the result is very simple: a positive shift in labour supply increases quantum (employment) and lowers the price (wage). Done. If we use a general equilibrium models then things can change rapibly. The people immigrating share a trait with cows; they don't live in a vacuum, no matter what physicists believe. They take their wage and they spend it. They eat, they live places, they do all sorts of things, so aggregate demand increases. This increases the demand for labour, and here the feedback loop comes in (and this feedback will keep going). We're not just dealing with a positive shift in the supply of labour, we're dealing with a positive shift in demand as well. Does that change anything? Employment will still increase, but we can no longer say anything certain about what will happen to wages. Partial equilibrium analysis is a critical assumption here.

If we go back to the farmer, though, and look at what would happen to his income if we decided to help him out with a little subsidy (or an extremely large subsidy if we're talking real life), then partial or general equilibrium doesn't matter so there's no reason to bother with general equilibrium. Even more phycisist talk: Newton is sadly outdated, but for a lot of stuff that really doesn't matter. I don't need Einstein if I want to calculate the trajectory of a football, Newton will do just fine. And it turns out Einstein was wrong anyway.

I was kinda hoping you'd be reading this thread. Do.you work in economics yourself? (Without meaning to try and 'out' you.)

I was looking for the book where I got my comment from, but I'm not sure now. From what I have at home, I think Anthony B. Atkinson's Inequality: What Can De Done (Cambridge MA, 2015) talks most about methods and theory, but I can't find the spot where he mentions this in particular on a quick browse-through. But maybe it was from somewhere else, or maybe I'm just mixing up what Atkinson says about a lack of engagement among economists with inequality with some other stuff I read. In any case, thanks for the detailed write-up; I'll take some time to digest all that.

(Edit: Thinking about this again though, and I'm sure I read something by an economist who was explaining why a lot of economic studies are too reductionist because of their methodological assumptions. Can't stand that I can't remember who or what book it was!)

Just don't see this ever happening. Raising taxes won't get you elected.

Oh, I know - although I don't actually quite get why. Very few people are in that tax bracket. As I've said before elsewhere, I don't get why there aren't more parties that squarely position themselves as being there for everyone earning less than the median wage, by promising to raise taxes in above-median brackets and lowering them in below-median brackets.

 

[NotThatSoph]

I was kinda hoping you'd be reading this thread. Do.you work in economics yourself? (Without meaning to try and 'out' you.)

I was looking for the book where I got my comment from, but I'm not sure now. From what I have at home, I think Anthony B. Atkinson's Inequality: What Can De Done (Cambridge MA, 2015) talks most about methods and theory, but I can't find the spot where he mentions this in particular on a quick browse-through. But maybe it was from somewhere else, or maybe I'm just mixing up what Atkinson says about a lack of engagement among economists with inequality with some other stuff I read. In any case, thanks for the detailed write-up; I'll take some time to digest all that.

(Edit: Thinking about this again though, and I'm sure I read something by an economist who was explaining why a lot of economic studies are too reductionist because of their methodological assumptions. Can't stand that I can't remember who or what book it was!)

Not at the moment, but I have some relevant education and I try to keep up to date. I also taught it to high schoolers at some point, I'm a bit nomadic when it comes to work.

It's certainly true that the engagement with inequality has been lackluster up to recent history. My opinion on this is because of some very narrow and dogmatic views on poverty (absolute living standards are what matters, relative not so much) and growth (depending on the time period we have a) incomes will converge over time [strongest claim is within countries, softer is between], b) inequality isn't harmful for growth and c) economic growth is enough to solve poverty, a sort of rising tide will lift all boats sort of thing).

If you wanted to talk about dogmatism within economics that's probably the two topics you would choose, but there has been sort of a revolution here the last ... I want to say 5-10 years but it's hard to put a date on it (edit: 5 years is too conservative). Both topics are treated much more serious by most, at least those working within the relevant subfields. I.e. within development economics there has been a much more nuanced view about what causes economic growth in poor countries (this topic has been dominated by trends. You have the Washington consensus of the 80s and 90s, where it's all about free trade and deregulation, then you had a blacklash to that when the results were mixed at best and protectionism became all the rage), and how to reduce poverty. Instead of focusing only on economic growth economic development is now the term, and economic growth is treated as a necessary but not sufficent ingredient. The reason it's necessary is that while in richer countries you can reduce poverty a lot by redistribution, in poor countries that's not possible because there's simply not enough resources to go around, so you need to grow. But it's not sufficient, both because of inequality (the increased income often doesn't reach the poorest in a meaningful way, or at least it's a proportionally low share), and increasing income is no longer recognized as enough. There are other needs to cover as well.

An early trailblazer here is Amartya Sen, who won the Nobel prize in the late 90s. Development as Freedom is his big work aimed at the popular audience, but I haven't read it myself. The absolute best book, though, both to learn about poverty and development economics (both methods and views) is in my opinion Poor Economics by Abhjit Banerjee and Esther Duflo, it's even used as a textbook in the economic development course aimed at last-year bachelor students at the university I attended, which is unusual to say the least of a book not aimed at academics (it's supplied by more technical stuff as well, but still).

 

[Cheimoon]

Not at the moment, but I have some relevant education and I try to keep up to date. I also taught it to high schoolers at some point, I'm a bit nomadic when it comes to work.

It's certainly true that the engagement with inequality has been lackluster up to recent history. My opinion on this is because of some very narrow and dogmatic views on poverty (absolute living standards are what matters, relative not so much) and growth (depending on the time period we have a) incomes will converge over time [strongest claim is within countries, softer is between], b) inequality isn't harmful for growth and c) economic growth is enough to solve poverty, a sort of rising tide will lift all boats sort of thing).

If you wanted to talk about dogmatism within economics that's probably the two topics you would choose, but there has been sort of a revolution here the last ... I want to say 5-10 years but it's hard to put a date on it (edit: 5 years is too conservative). Both topics are treated much more serious by most, at least those working within the relevant subfields. I.e. within development economics there has been a much more nuanced view about what causes economic growth in poor countries (this topic has been dominated by trends. You have the Washington consensus of the 80s and 90s, where it's all about free trade and deregulation, then you had a blacklash to that when the results were mixed at best and protectionism became all the rage), and how to reduce poverty. Instead of focusing only on economic growth economic development is now the term, and economic growth is treated as a necessary but not sufficent ingredient. The reason it's necessary is that while in richer countries you can reduce poverty a lot by redistribution, in poor countries that's not possible because there's simply not enough resources to go around, so you need to grow. But it's not sufficient, both because of inequality (the increased income often doesn't reach the poorest in a meaningful way, or at least it's a proportionally low share), and increasing income is no longer recognized as enough. There are other needs to cover as well.

An early trailblazer here is Amartya Sen, who won the Nobel prize in the late 90s. Development as Freedom is his big work aimed at the popular audience, but I haven't read it myself. The absolute best book, though, both to learn about poverty and development economics (both methods and views) is in my opinion Poor Economics by Abhjit Banerjee and Esther Duflo, it's even used as a textbook in the economic development course aimed at last-year bachelor students at the university I attended, which is unusual to say the least of a book not aimed at academics (it's supplied by more technical stuff as well, but still).

That's also what I was getting from Atkinson: it's an underdeveloped field compared to other subfields of economics. As for poor countries, I personally rather liked Why Nations Fail by Daron Acemoglu and James Robinson. If you don't know it: it tries to come up with a sort of 'grand theory' for why certain countries stay poor, which they attribute to a lack of focus on political and economic institutions. Essentially, if those don't come first, then any attempt to properly 'build up' a state is doomed. All the same, lke any such book, I suppose it's a little single-minded. You already name a couple of other factors in your longer paragraph above; and I was reading an interview with Ha-Joon Chang the other week where he was arguing that poorer countries should be allowed to be protectionist to help kickstart their economy (which of course is frowned up currently). I quite like Ha-Joon Chang actually; he seems to make a lot of sense and proposes a sort of market-based economy that seems a lot more likeable and liveable to me. Although my liking his 23 Things about Capitalism book might say more about my level of knowledge about economics than about him.

Thanks for the reference to the Banerjee/Duflo book. I read about it when they got their Nobel. It didn't strike me then as something I wanted to read, but you're selling it better here. Looking at my list, there are actually a lot of books on economics that I should still read. I should make more time to read for that. (So what am I doing posting here? Uhm....)

 

[psychdelicblues]

 

[Grinner]

I don't see a link to the study in that article.

 

[VorZakone]

The trickle-down economics idea is something I can get so angry about. As if the wealthy will just automatically start spending more to generate output. Why would they if hoarding money is more attractive?

 

[Cheimoon]

The trickle-down economics idea is something I can get so angry about. As if the wealthy will just automatically start spending more to generate output. Why would they if hoarding money is more attractive?

I wonder if there is a single study that presents supporting data. All I ever see written about it is negative, except for people thinking it makes intuitive sense (to them).

 

[VorZakone]

Thoughts on these words from Varoufakis?

 

[VorZakone]

Thoughts on this article about wage stagnation?

https://insight.kellogg.northwestern.edu/article/wage-stagnation-in-america

 

[WPMUFC]

Thoughts on these words from Varoufakis?

In a sense, it's a completely coherent point. The use of tariffs is inherently political and can be directed to achieve the outcomes he's suggesting which are completely separate to the point of a tariff. If you can pinpoint a foreign industry that is vulnerable and you want more say over their political landscape, well....lets feck with parts of their economy. However, he cites no Trump comments, he doesn't cite any government policy wonks from the Trump government which may highlight the use of tariffs in this way. He seems more focused on his own theory.

I could easily argue that Trump's only sense of purpose in government was to be seen as popular. To achieve that, he couches his popularity to "MAGA". From that, he then associates the protection of American businesses (which can be used politically) as tied to his personal popularity. Tariffs are inherently political, tariffs create popularity in the desired arenas, this has a political positive effect and thus Trump believes he's more popular via seeking harsher tariff policy. The tariff may actually achieve nothing economically, yet politically he could be more popular.

I have no data to back this up, I have no Trump or policy wonk comments to cite. However this argument would easily be made in any serious discussions within International Political Economy academic circles, which i lived in for about 3 years I'm always weary of jumping to "BIG X" arguments as without citations they start to sound conspiratorial pretty quickly. He could be completely right, but you got to bring better analysis to the table.

Thoughts on this article about wage stagnation?

https://insight.kellogg.northwestern.edu/article/wage-stagnation-in-america

It's an "ok" article. Monopsony with absolutely laughable union power is certainly a recipe for stagnation. They also add

Despite the strength of the findings, Benmelech cautions that “whenever you have an important economic question, it is unlikely that there will be only one explanation.” Globalization, high-tech automation, and labor-market concentration are probably all influencing wage stagnation and income inequality.

The radical transformation of the global economy has ultimately focused on capital cementing political power and labour being systematically dismantled into manageable groups. I don't think the answer is solely unionisation as that can be such a narrow focus (as in a powerful union solves one problem localised but not others). In a lot of literature, there has been a continual restating that "nobody really expected political power to continually take the side of capital in times of crisis". Which has been proven time and time again during capital crises in liberal democracies. To overcome the multiple explainations given for stagnation/exploitation etc will ultimately begin with a fundamental shift away from capital being the protected class and onto the citizenry. Essentially what i'm saying is "It's poor unionisation....but also everything else".

 

[WPMUFC]

Obviously a left perspective on economics, and i think the portion on rent control is pretty lacking. However what I enjoyed overall as a theme, and summarised quite nicely in the end portion, is the inherent fear within mainstream economics that if the "science" aspect of economics (maths, formulas, graphs) are not just accepted as undeniable laws and real world examples differ from an equation, then why bother with the subject?

It's such a dramatic way to try and defend your examination and research of social interactions. I guess that is why so much of the academia internal mudslinging is that "economics" is embarrassed by it's social side, and always seems so desperate to be seen as akin to physics and and chemistry and not "social science".

 

[Cheimoon]

Obviously a left perspective on economics, and i think the portion on rent control is pretty lacking. However what I enjoyed overall as a theme, and summarised quite nicely in the end portion, is the inherent fear within mainstream economics that if the "science" aspect of economics (maths, formulas, graphs) are not just accepted as undeniable laws and real world examples differ from an equation, then why bother with the subject?

It's such a dramatic way to try and defend your examination and research of social interactions. I guess that is why so much of the academia internal mudslinging is that "economics" is embarrassed by it's social side, and always seems so desperate to be seen as akin to physics and and chemistry and not "social science".

I have probably said this before in this thread, but I think economics is fairly pointless if it's not approached as a social science. Without that aspect, it is separate from reality, loses its predictive or explanatory value, and is thus largely reduced to a kind of funny mathematical puzzle.

 

[berbatrick]

https://www.cnbc.com/2021/04/15/the...alued-at-100-million-in-the-stock-market.html

Time for DeliCoin

 

[VorZakone]

I was a bit surprised to find out that Ireland ranks so high in GDP per capita rankings. Is this reflected in the average citizen's lifestyle? Are Irish people living the good life?

 

[Raoul]

Pretty cool. Shows how much further renewables have to go....

 

[Rawls]

I was a bit surprised to find out that Ireland ranks so high in GDP per capita rankings. Is this reflected in the average citizen's lifestyle? Are Irish people living the good life?

GDP per capita ranking gives a misleading idea of where Ireland stands globally. Ireland gets a lot of economic activity that is counted towards GDP but makes little contribution to the real economy in all reality. Paul Krugman would have referred to this as Leprechaun Economics back in 2016, because Ireland had just posted a growth rate of something like 28%. I know for a fact that Irish government bodies sometimes use a metric called GNI* to account for the effect of the likes of aviation leasing on GDP.

This is not to say that Ireland is poor as such but the statistics would paint a false picture of life in Ireland. If I were to broadly compare it, I would say average living standards are roughly in line with Britain's, although I would contend Irish living standard are less extreme than British living standards. I'd imagine that the wealthiest places in Britain would be better off than the corresponding places in Ireland, but I'd also imagine that the poorest parts of Britain are worse off than the poorest parts of Ireland. However, this is just my very rough impression of things and I could be wrong on Britain having worse inequality than Ireland.

 

[Abizzz]

Pretty cool. Shows how much further renewables have to go....

Very nice animation. While I agree with your sentiment it has to be said that on that scale renewables were practically 0 as recently as 20 years ago. At least it's visible when being displayed on the same scale now, and given the explosion of oil ~100 years ago there's reason for hope (even if I don't yet believe it's going to happen as fast).

 

[Raoul]

Very nice animation. While I agree with your sentiment it has to be said that on that scale renewables were practically 0 as recently as 20 years ago. At least it's visible when being displayed on the same scale now, and given the explosion of oil ~100 years ago there's reason for hope (even if I don't yet believe it's going to happen as fast).

Agreed. The scale at which renewables are used will only soar in the future, which will be driven by technology and environmental considerations.

 

[VorZakone]

Was wondering what our residents economists think about Keynesian economics?

 

[WPMUFC]

Was wondering what our residents economists think about Keynesian economics?

At the most basic, internet forum level of discussion, Keynesian economics is the counterpoint to utter batshit crazy economics which argues that markets are magic, have no flaws and should be left alone no matter the consequences to resolve economic problems and bring about full-employment. Keynes, and by extension those that follow/build in his footsteps in contemporary economics, rightly argue, imo, that the answer to recessions and depressions can come from intervention in the market and the government can have a legitimate and positive role in economic stabilisation.

Keynesian economics biggest contribution, imo, is to successfully highlight that macroeconomics can be influenced positive and negatively by markets and governments (particularly that governments can actually prove to be a huge positive force and correct market failures) and these influences can be felt the whole way down the chain (aggregate demand). However, i'd also argue that in today's monetary/fiscal policy landscape, Keynesian economics has been used as a catchall term. Where Keynesians would lean on careful economic policy crafted by expert policymakers in conjunction with academics to intervene to stabilise or boost aggregate demand, or some entrenched unemployment, one could conclude what we have had is a small amount of "careful economic policy crafted by expert policymakers" and many years (decades) of haphazard monetarist/classical economics damaging those inital Keynesian interventions. Thus potentially tying Keynesian to damaging economic effects when in fact monetarist/classical policy is damaging the economy.

At the end of the day, Keynesian economics does seem to provide some theoretical underpinnings as to why we see certain results in economics. However, like economics as a whole, imo, and as we've seen in the discussion on this thread, economics is not a hard science. It is a social science and no amount of equations, models, maths will ever create a "unified theory of economics". It's all about, essentially, trying to understand why social systems act or produce the results they do. So far, Keynesians have had a pretty good run.

 

[Brwned]

I thought this was a useful perspective on US economic priorities and discussions. Obviously written from a liberal perspective with complete conviction, but with some recognition of the negative trade-offs that come with those priorities, rather than the usual demonisation of the opposition.

This is the conversation about poverty that we don’t like to have: We discuss the poor as a pity or a blight, but we rarely admit that America’s high rate of poverty is a policy choice, and there are reasons we choose it over and over again. We typically frame those reasons as questions of fairness (“Why should I have to pay for someone else’s laziness?”) or tough-minded paternalism (“Work is good for people, and if they can live on the dole, they would”). But there’s more to it than that.

It is true, of course, that some might use a guaranteed income to play video games or melt into Netflix. But why are they the center of this conversation? We know full well that America is full of hardworking people who are kept poor by very low wages and harsh circumstance. We know many who want a job can’t find one, and many of the jobs people can find are cruel in ways that would appall anyone sitting comfortably behind a desk. We know the absence of child care and affordable housing and decent public transit makes work, to say nothing of advancement, impossible for many. We know people lose jobs they value because of mental illness or physical disability or other factors beyond their control. We are not so naïve as to believe near-poverty and joblessness to be a comfortable condition or an attractive choice.

Most Americans don’t think of themselves as benefiting from the poverty of others, and I don’t think objections to a guaranteed income would manifest as arguments in favor of impoverishment. Instead, we would see much of what we’re seeing now, only magnified: Fears of inflation, lectures about how the government is subsidizing indolence, paeans to the character-building qualities of low-wage labor, worries that the economy will be strangled by taxes or deficits, anger that Uber and Lyft rides have gotten more expensive, sympathy for the struggling employers who can’t fill open roles rather than for the workers who had good reason not to take those jobs. These would reflect not America’s love of poverty but opposition to the inconveniences that would accompany its elimination.

Nor would these costs be merely imagined. Inflation would be a real risk, as prices often rise when wages rise, and some small businesses would shutter if they had to pay their workers more. There are services many of us enjoy now that would become rarer or costlier if workers had more bargaining power. We’d see more investments in automation and possibly in outsourcing. The truth of our politics lies in the risks we refuse to accept, and it is rising worker power, not continued poverty, that we treat as intolerable. You can see it happening right now, driven by policies far smaller and with effects far more modest than a guaranteed income.

Hamilton, to his credit, was honest about these trade-offs. “Progressives don’t like to talk about this,” he told me. “They want this kumbaya moment. They want to say equity is great for everyone when it’s not. We need to shift our values. The capitalist class stands to lose from this policy, that’s unambiguous. They will have better resourced workers they can’t exploit through wages. Their consumer products and services would be more expensive.”

For the most part, America finds the money to pay for the things it values. In recent decades, and despite deep gridlock in Washington, we have spent trillions of dollars on wars in the Middle East and tax cuts for the wealthy. We have also spent trillions of dollars on health insurance subsidies and coronavirus relief. It is in our power to wipe out poverty. It simply isn’t among our priorities.

“Ultimately, it’s about us as a society saying these privileges and luxuries and comforts that folks in the middle class — or however we describe these economic classes — have, how much are they worth to us?” Jamila Michener, co-director of the Cornell Center for Health Equity, told me. “And are they worth certain levels of deprivation or suffering or even just inequality among people who are living often very different lives from us? That’s a question we often don’t even ask ourselves.”

But we should.

 

[VorZakone]

I'm getting tired from governments trying to fix symptoms instead of the root causes. Where I live the government is loosening lending standards for home-buyers to help them in the unfortunately expensive housing market. But watchdogs and academics say this is highly risky and could lead to these buyers getting buried in debt in the future while also amplifying rising housing prices.

Governments need to start incentivizing building more housing.

 

[Carolina Red]

Where I live the government is loosening lending standards for home-buyers to help them in the unfortunately expensive housing market. But watchdogs and academics say this is highly risky

It is what helped create the 2008 housing market crash.

(Yay looks like the 5th* economic crash in my lifetime is gonna happen before I’m 40!)



*I think, it’s hard to keep up

 

[VorZakone]

It is what helped create the 2008 housing market crash.

(Yay looks like the 5th* economic crash in my lifetime is gonna happen before I’m 40!)



*I think, it’s hard to keep up

When I was reading about it the 2008 crash crossed my mind too. It'll be really interesting to see what this all leads to...

 

[711]

I'm getting tired from governments trying to fix symptoms instead of the root causes. Where I live the government is loosening lending standards for home-buyers to help them in the unfortunately expensive housing market. But watchdogs and academics say this is highly risky and could lead to these buyers getting buried in debt in the future while also amplifying rising housing prices.

Governments need to start incentivizing building more housing.

You're absolutely right, it's supply that's the problem.

The thing is that governments know they can engineer an immediate boost to economic activity by stimulating house buying, with all the additional spending that goes with that. It's short termism at it's worst, but that's Thatcher's legacy still, forward planning is a dirty concept, market forces rule, and the next next 12 months is all it's about.

 

[berbatrick]

https://jacobinmag.com/2021/08/unemployment-benefits-cut-congress/

Reporting on studies of employment in US states that did and did not make drastic cuts in unemployment allowance.

The states that cut benefits the earliest had the lowest payroll growth among the four groups. The states that cut benefits in late June and early July led the pack, but the states that are scheduled to cut benefits in early September are only a slight tick behind them. Overall, the states that cut benefits during or before the survey period saw their payrolls grow by 1.14 percent between May and July. The states that did not cut benefits during this period saw their payrolls grow by 1.09 percent. This 0.05 percentage point difference is not significant.

The lack of any aggregate increase in job growth in the states that cut UI should be surprising at first. These were extreme cuts that threw half the people off the UI rolls in one fell swoop while cutting the incomes of those remaining on the rolls by $300 per week ($15,600 per year). Surely, it seems, at least some people who saw their benefits cut became so desperate that they managed to find a job that they would not have otherwise gotten if they were still receiving benefits. So why do we see no payroll growth?

The first step towards answering this question is to shift away from the aggregate picture and focus our analysis only on people who were receiving unemployment benefits prior to the cuts. When you focus exclusively on those people, you do see some additional success at finding jobs. Not much, but some.

in a recent Arin Dube analysis of the Current Population Survey, we see that around 25 percent of people moved from unemployed to employed in the last month in states that hadn’t cut benefits. In states that had cut benefits, the same number was around 31 percent. The difference is within the margin of error

These findings raise an obvious question: if people who experienced unemployment benefit cuts are finding jobs at a slightly higher rate than those who didn’t, then why don’t we see this reflected in the aggregate job numbers? The logical answer to this is that this extra job finding is coming at the expense of other jobseekers who are not on UI and who would have otherwise been hired for the the same job.

This is called job rationing, and Dube finds support for this conclusion in his analysis of the CPS. Specifically, if you look at the percentage of people who moved from not-in-labor-force (NILF) to employed across the two groups of states, it is a mirror image of the graph above.

In total, then, these unemployment benefit cuts are only slightly increasing job finding among those who used to receive the benefits, and that job finding is coming entirely at the expense of other jobseekers. We did not increase employment. We just slightly changed the composition of it while dramatically reducing incomes and spending among the unemployed population.

 

[berbatrick]

Yes. Government benefit schemes to protect workers during the pandemic mean that they can make an equivalent wage for staying home doing nothing. They are supposed to end in October and if they do then we'll likely see the labour market for food service in British Colombia (and elsewhere) pick up again and this isolated local event will become a non-story.

FYI the initial benefits in Canada were $2000 a month tax free (until income tax time) and the current benefits can be as high as $1200 a month taxed at a marginal 10% rate. People who normally earn minimum wage are going to stay home for that money.

https://jacobinmag.com/2021/08/unemployment-benefits-cut-congress/

Reporting on studies of employment in US states that did and did not make drastic cuts in unemployment allowance.

In total, then, these unemployment benefit cuts are only slightly increasing job finding among those who used to receive the benefits, and that job finding is coming entirely at the expense of other jobseekers. We did not increase employment. We just slightly changed the composition of it while dramatically reducing incomes and spending among the unemployed population.

 

[Vidyoyo]

https://jacobinmag.com/2021/08/unemployment-benefits-cut-congress/

Reporting on studies of employment in US states that did and did not make drastic cuts in unemployment allowance.

So if I follow, cutting social security incentivitised job hunting ever so slightly but it may have only increased competition amongst those same job hunters, with only a few winning?

It'd be interested to see the long-term data, not to mention the quality of jobs they got and how the wages/security measure against social security payments, etc.

 

[VorZakone]

Who knew eh? A good sounding policy with negative consequences! But the policy sounded so good! When all politicians do is chase votes, they'll come up with the next good sounding policy that results in worse situations. It's also only trying to patch wounds instead of trying to tackle the fundamental cause: why are this many people on flexible contracts in the first place?

(this took place in the Netherlands)

At least 77,000 people on flexible work contracts have lost their jobs since parliament backed new legislation aimed at reducing reliance on temporary contracts in May 2019, according to ABN Amro research. Some were replaced by freelancers, and women, youngsters and the low-skilled have been hardest hit, the research shows. Legislation known as the Labour Market in Balance law (WAB) came into effect in January 2020 and was supposed to make it more attractive for employers to take on permanent staff.

The WAB made it some 5% more expensive for employers to use temporary contracts and cut unemployment benefit premiums for permanent staff. It also made it more expensive to sack temporary workers. But instead, employers used the run-up period before the law came into effect to ditch temps and replace some of them with self-employed workers.

The impact has been particularly hard on sectors such as childcare, hospitality and home nursing, where costs are crucial, researcher Kamalika Patra told the Telegraaf. ‘An increase in costs, such as making temporary contracts more expensive, is difficult to cover in sectors where the margins are small,’ she said. ‘So then you get fired.’ In particular, companies which used flexible contracts to fill temporary shortages of labour have started using freelancers instead, Patra said.

Read more at DutchNews.nl:

https://www.dutchnews.nl/news/2021/09/mass-sackings-followed-new-rules-on-temporary-contracts/

 

[Cheimoon]

Who knew eh? A good sounding policy with negative consequences! But the policy sounded so good! When all politicians do is chase votes, they'll come up with the next good sounding policy that results in worse situations. It's also only trying to patch wounds instead of trying to tackle the fundamental cause: why are this many people on flexible contracts in the first place?

(this took place in the Netherlands)



https://www.dutchnews.nl/news/2021/09/mass-sackings-followed-new-rules-on-temporary-contracts/

Neoliberalism has really had free reign in the Netherlands far too much since the 80s. In that sense, the 'purple' governments of the 90s weren't at all the great moments in Dutch politics that they were made out to be; they were when the left really sold out on its leftist economic principles.

Anyway, a big study was done last year or two years ago, which highlighted these problems and proposed a number of far-reaching plans that would seriously change the dynamics of the Dutch labour market for the better (i.e., worker rights and equity). The then-government decided to do nothing with that so it could become a discussion topic at the next elections instead, which was fair enough; except that the discussion didn't happen and the study now seems all but forgotten about. And anyway, with Rutte in charge, nothing visionary is ever to be expected. He's a caretaker in spirit above anything else.

 

[VorZakone]

Anyone know what the metric is called which measures the percentage of monthly income freely available for consumption or saving? So after all fixed expenses are accounted for such as rent/mortgage, internet, gas, water and electricity.

EDIT: I think I found it. Would this be it?
https://www.investopedia.com/terms/d/discretionaryincome.asp