economics Archives - Page 23 of 50 - Stable Genius Liberal

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OK, something did happen to fiscal responsibility; but it happened circa 1981, not circa 1961. Who was the president then? (via Sixties Madness – NYTimes.com)

How LIBOR Impacts Financial Models and Why the Scandal Matters

Matt Taibbi asks why nobody is freaking out about the LIBOR scandal, Robert Reich calls it the scandal of all scandals, and Dylan Matthews has a great explainer of the whole thing here. Abigail Field has more at Reality Check.
This can be confusing stuff, so I want to go through a very simple example of how this impacts the markets.

The right isn’t talking about it because they haven’t figured out an angle to blame this on too much regulation or taxes being to high. Once they figure out a way to claim the scandal was caused by something they oppose, they will start talking about it. Until then, enjoy this really good explanation by Mike Konczal at Rortybomb.

David Brooks Says That Mitt Romney and the Republicans Are Not Very Good at Arithmetic

Greece, Spain, and Italy have among the least developed welfare states in Europe. If someone wants to make an argument that there is some inherent problem with the welfare state model then we should look for crises in Sweden, Denmark and Germany, all states with far more generous welfare states than these Mediterranean countries. In fact, the welfare states of northern Europe are doing relatively well through the crisis, it is difficult to understand how anyone can look at the pattern of the crisis across Europe and conclude that it implies that the welfare state model has reached its end.

Dean Baker make a really good point that no one on the right will listen to. And most certainly not Mr. Brooks. But this is the kicker:

If the U.S. paid the same amount per person for health care as Denmark, Germany, or Sweden we would be looking at massive budget surpluses.

If you just look at the numbers, a better welfare state model would put us in a much better economic situation. Not that anyone on the right would consider such a thing.

Greg Mankiw’s Blog: I inspire a contest

That is very helpful. Thanks! I am always trying to find mistakes, omissions, and ambiguities in the book so I can improve the next edition. I look forward to seeing what they come up with.

Post-Keynesian MMT folks pick a fight with Mankiw and Mankiw thanks them. I’m calling round one for Mankiw.

Devaluation Is Austerity Done Right

Currency devaluation is best understood not as an alternative to austerity, but as the correct way for a debt-burdened society to implement austerity.

Why did Iceland recover and Ireland get worse? Iceland had a currency to debase. And they debased their currency enough to reset the economy and grow again. Three cheers for currency debasement. Ireland on the other hand, couldn’t debase the Euro. Like a nation on a gold standard, they had no way to make monetary policy changes to get the economy moving.

So if austerity works, shouldn’t it be the other way around? A stagnant Iceland and a booming Ireland?

Reagan Was a Keynesian

Reagan, not Obama, was the big spender. While there was a brief burst of government spending early in the Obama administration — mainly for emergency aid programs like unemployment insurance and food stamps — that burst is long past. Indeed, at this point, government spending is falling fast, with real per capita spending falling over the past year at a rate not seen since the demobilization that followed the Korean War. Why was government spending much stronger under Reagan than in the current slump? “Weaponized Keynesianism” — Reagan’s big military buildup — played some role. But the big difference was real per capita spending at the state and local level, which continued to rise under Reagan but has fallen significantly this time around.
… if you want to see government responding to economic hard times with the “tax and spend” policies conservatives always denounce, you should look to the Reagan era — not the Obama years.

The current GOP is so far removed from the GOP under Reagan it is almost unrecognizable.

Taxi Medallions: How New York’s terrible taxi system makes fares higher and drivers poorer

When New York’s Taxi and Limousine Commission held a public hearing last week to consider whether to raise taxi fares by 20 percent, cabdrivers pled poverty and passengers argued that fares are too high. Paradoxically, both groups were right.
This lose-lose scenario is only possible under the taxi medallion system, a regulatory scheme in which the right to operate a taxi is thoroughly divorced from the actual work of driving one. It’s a classic example of the perils of financialization, the process through which economic potential is turned into a liquid and leveraged asset. By converting a portion of cabbies’ future revenue into a freely tradable asset, New York, Chicago, San Francisco, and a host of other cities have created a powerful investor class, medallion owners and financiers, whose interests routinely compete with those of drivers and passengers.

Financialization also makes what should be a trivial deregulation nearly impossible as it would make the Medallion owners very upset. They would be willing to spend big bucks to prevent any attempt at deregulation.

Economic Theory Doesn’t Say That Small Business Owners Maximize Profits

to the best of my knowledge there is no economic theory that says small business owners maximize profits. Think about it from a workers’ perspective. People who work on commercial fishing operations earn a lot more money than most people with comparable levels of education. But nobody thinks it defies economic theory that America’s retail clerks don’t quit their jobs en masse to go fishing. Commercial fishing is dangerous and you have to live on a boat. All else being equal, people prefer to earn more money but they also prefer to do safe work and have the opportunity to socialize. What economic theory says is that workers maximize utility and therefore employers who want to get workers to do something that’s unusually dangerous or unusually unpleasant will have to pay a premium. A small business operator is in the same situation. She’s balancing income against other lifestyle factors, including the hours put in on the job, the pleasantness of the work, the sense of self-esteem that comes from having something to do, possibly a sentimental attachment to a particular location or certain employees. What economic theory says is that a profit maximizing small business person has to be someone with a very unusual utility function.

This can not be repeated enough. Small businesses rarely behave the way politicians describe.

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one thing I’ve noticed is that everyone on the right, and a fair number of people who should know better, basically believes that Gordon Gekko was right. Before the Gekkos came along, they assert, American business was sluggish, unproductive, and uncompetitive. Then came the LBOs and all that, and our economic energy was unleashed. As… Continue reading Untitled

Ray Dalio calls for more stimulus

We will also need fiscal stimulation by the government, which of course, is very classic. Governments have to spend more when sales and tax revenue go down and as unemployment and other social benefits kick in and there is a redistribution of wealth. That’s why there is going to be more taxation on the wealthy and more social tension. A deleveraging is not an easy time. But when you are approaching balance again, that’s a good thing.

Dalio leaves Team Friedman and joins Team Keynes.