economics Archives - Page 8 of 50 - Stable Genius Liberal

Why Poor People Stay Poor

I once lost a whole truck over a few hundred bucks. It had been towed, and when I called the company they told me they’d need a few hundred dollars for the fee. I didn’t have a few hundred dollars. So I told them when I got paid next and that I’d call back then. It was a huge pain in the ass for those days. It was the rainy season, and I wound up walking to work, adding another six miles or so a day to my imaginary pedometer. It was my own fault that I’d been towed, really, and I spent more than a couple hours ruing myself. I finally made it to payday, and when I went to get the truck, they told me that I now owed over a thousand dollars, nearly triple my paycheck. They charged a couple hundred dollars a day in storage fees. I explained that I didn’t have that kind of money, couldn’t even get it. They told me that I had some few months to get it together, including the storage for however long it took me to get it back, or that they’d simply sell it. They would, of course, give me any money above and beyond their fees if they recovered that much. I was working two jobs at the time. Both were part time. Neither paid a hundred bucks a day, much less two. I wound up losing my jobs. So did my husband. We couldn’t get from point A to point B quickly enough, and we showed up to work, late, either soaked to the skin or sweating like pigs one too many times. And with no work, we wound up losing our apartment. It’s amazing what things that are absolute crises for me are simple annoyances for people with money. Anything can make you lose your apartment, because any unexpected problem that pops up, like they do, can set off that Rube Goldberg device.

Conspicuous Consumption? Yes, but It’s Not Crazy

One common claim is that the wealthy routinely violate the economist’s law of demand. A bedrock principle of economic rationality, this law holds that as the price of a good rises, consumers buy less of it. Many analysts, however, portray the rich as people who lust after what are known as “Veblen goods” — commodities whose sales actually increase when their prices rise

The Business Tycoons of Airbnb

Getting ahead on Airbnb is much more simple: just sign multiple leases in desirable locations. Of course, that requires upfront investment and financial savvy. But once it’s up and running, an Airbnb rental network can become seriously lucrative. One operation of 272 listings booked $6.8 million in revenue from 2010 through June of this year, according to the attorney general. The economic forces at play are similar to what the French economist Thomas Piketty discusses in his recent blockbuster book, ‘’Capital in the Twenty-First Century,‘’ only in miniature. In a slow-growth economy, Piketty argues, wealth delivers better returns than labor, so those with wealth to invest in things (like, for example, rent-earning apartments) will tend to get wealthier; those without probably won’t. Listing a spare room on Airbnb might keep you current on your always-climbing Manhattan rent, but real entrepreneurship (as always) requires real dough.

AirBnB is literally a platform for wealthy people to engage in rent seeking.

In Front Of Your Macroeconomic Nose

at this point we’ve been at the zero lower bound for six years; we’ve seen a 400 percent rise in the monetary base without a takeoff in inflation; we’ve seen record peacetime deficits go along with record low long-term interest rates. Liquidity trap economics aren’t a speculative hypothesis at this point, they’re the world we’ve been living in for years. How can that go unnoticed?

It’s not unnoticed. There is plenty of people who noticed. But since the truth isn’t the right wing approved talking point, it isn’t being talked about.

Inequality Is Bad For Income Growth Of the Poor (But Not For That of the Rich)

The average state-level Gini coefficient in the US over the entire 50-year period is 0.43, with a standard deviation of 0.04. Now if a state’s level of inequality were reduced by four Gini points (about one standard deviation of the average) keeping everything else equal, the rate of growth of the very poor (people at the fifth or tenth percentile of income distribution) would increase by 0.9% per capita per annum (pc pa) on average. Since the incomes of the very poor on average grew by 0.8% pc pa, such a reduction in inequality wouldmore than double their growth rate on average. At the other end of the spectrum, the same decrease in inequality would reduce the growth rate of the rich (the top 5%) by 0.3% per capita annually. The rich’s average growth rate over the past half-century was 2% pc pa, so their growth would be cut by about one seventh.

Worth a read.

The Wisdom of Peter Schiff

what Schiff says very clearly is that according to his worldview, rolling the printing presses should cause inflation (by the normal definition) even in a depressed economy, and that high unemployment should in fact make inflation higher, not lower. He has that exactly right: the central dispute is between those who see depressions as the result of inadequate demand, implying that inflation will fall and that printing money does nothing unless it boosts employment, and those who see depressions as the result of maladapation of resources or something — anyway, something on the supply side — who predict that running the printing presses will lead to runaway inflation. How could you test those rival views? Why, how about having a huge slump, to which central banks respond with aggressive monetary expansion? And that is, of course, the test we’ve just run. And everywhere you look, inflation is low, verging on deflation. So we’ve just run the Schiff test — and his brand of economics, by his own criteria, loses with flying colors. And that goes for just about all anti-Keynesian doctrines: we ran as close to a clean experiment as you’re ever going to get, and the answer is no.

And it isn’t just the US economy. The same experiment was run across Europe and in Japan. Schiff’s theory is zero for twelve. In no economy did we get results they his theory would demand.

Goldman Sachs’ Merry-Go-Round of Metal

We are living in a golden age of market manipulation. Never have so few been able to control so much in such an opaque system.

On the phenomenon of bullshit jobs

It’s as if someone were out there making up pointless jobs just for the sake of keeping us all working. And here, precisely, lies the mystery. In capitalism, this is precisely what is not supposed to happen. Sure, in the old inefficient socialist states like the Soviet Union, where employment was considered both a right and a sacred duty, the system made up as many jobs as they had to (this is why in Soviet department stores it took three clerks to sell a piece of meat). But, of course, this is the sort of very problem market competition is supposed to fix. According to economic theory, at least, the last thing a profit-seeking firm is going to do is shell out money to workers they don’t really need to employ. Still, somehow, it happens. While corporations may engage in ruthless downsizing, the layoffs and speed-ups invariably fall on that class of people who are actually making, moving, fixing and maintaining things; through some strange alchemy no one can quite explain, the number of salaried paper-pushers ultimately seems to expand, and more and more employees find themselves, not unlike Soviet workers actually, working 40 or even 50 hour weeks on paper, but effectively working 15 hours just as Keynes predicted, since the rest of their time is spent organizing or attending motivational seminars, updating their facebook profiles or downloading TV box-sets.

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Even more perverse, there seems to be a broad sense that this is the way things should be. This is one of the secret strengths of right-wing populism. You can see it when tabloids whip up resentment against tube workers for paralysing London during contract disputes: the very fact that tube workers can paralyse London shows that their work is actually necessary, but this seems to be precisely what annoys people. It’s even clearer in the US, where Republicans have had remarkable success mobilizing resentment against school teachers, or auto workers (and not, significantly, against the school administrators or auto industry managers who actually cause the problems) for their supposedly bloated wages and benefits. It’s as if they are being told “but you get to teach children! Or make cars! You get to have real jobs! And on top of that you have the nerve to also expect middle-class pensions and health care?”

Don’t always agree with Graeber, but this is worth a read.

The Art of Not Working at Work

One Swedish bank clerk said he was only doing 15 minutes’ worth of work a day. Under these circumstances, feigned obedience and fake commitment become so central to working that a deviation from those acts can result in embarrassment for everyone. As she recalls: “One day, in the middle of a meeting on motivation, I dared to say that the only reason I came to work was to put food on the table. There were 15 seconds of absolute silence, and everyone seemed uncomfortable.

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According to repeated surveys by Salary.com, not having “enough work to do” is the most common reason for slacking off at work. The service sector offers new types of work in which periods of downtime are long and tougher to eliminate than on the assembly line: A florist watching over an empty flower shop, a logistics manager who did all his work between 2 and 3 p.m., and a bank clerk responsible for a not-so-popular insurance program are some examples of employees I talked with who never actively strived to work less.

I swear this is half the people who work in IT. I remember hearing a manager talking about an employee that watched nearly 20 hours of youtube video a week for over a six month period. When you factor other net time, it might about 75% of any given week doing non-work.

Then there are whole chunks of organizations that don’t do anything useful. An 11 person group that tracked data that was rarely ever requested because the same data was availably on the web for free much easier.

Why are there so many workers who don’t actually useful work?

The takeaway from six years of economic troubles? Keynes was right.

Countries that took emergency measures to reduce public borrowing have mostly suffered weaker growth, as in the case of Britain from 2010 to 2012, Japan this year and the United States after the 2013 “sequester” and fiscal cliff deal. In more extreme cases, such as Italy and Spain, fiscal tightening has plunged them back into deep recession and aggravated financial crises. Meanwhile countries that ignored their deficit problems, as in the United States for most of the post-crisis period, or where governments decided to downplay their fiscal tightening plans, as in Britain this year or Japan in 2013, have generally done better, both in terms of economics and finance.

But this is the key quote:

Monetarism overturned the Keynesian fiscal consensus that prevailed from the 1930s to the 1970s, by introducing one simple assumption into the models that guided governments and central banks. The case for Keynesian fiscal stimulus in deep recessions was simply assumed away by asserting that interest rates could always be reduced sufficiently to stimulate private investment, discourage private savings and so restore growth. As a result, the private sector as a whole would never suffer for long from a shortfall in spending. Therefore government borrowing would never be needed to balance inadequate private demand.

As a result of these assumptions, interest rate decisions by central banks came to be seen as the only effective tool of macroeconomic management, while fiscal policy was relegated to a microeconomic supporting role. Tax structures and public spending levels were seen as supply-side issues influencing incentives and resource allocation, but the demand impact of government borrowing was largely ignored. Whether government borrowing expanded or contracted, interest rates would rise or fall to offset the Keynesian demand effects. Independent central bankers would manage macroeconomic demand with monetary policy, leaving governments to set taxes and spending plans to achieve political or supply-side objectives.

Worth a read.