Tag: Timothy B. Lee

Must-Read: Timothy B. Lee: Brexit Isn’t the Most Serious Threat to the EU — the Euro Is

Posted on by Brad DeLong

Must-Read: Timothy B. Lee: Brexit Isn’t the Most Serious Threat to the EU — the Euro Is: “David Beckworth makes the case that the economic woes of eurozone countries like Spain and Greece…

…can ultimately be traced back to the euro itself… other problems… made worse by the ECB’s tight-money policies…. Without reforms, eurozone countries could continue suffering from slow growth and abnormally severe recessions for decades to come. That, in turn, will fuel public resentment against the EU and increase the danger that other countries will follow the UK’s lead. And the euro isn’t just a mistake–it’s a mistake that’s going to be hard to fix. Any country that tries to leave the euro risks triggering a financial crisis. And while deeper economic integration could help to mitigate the euro’s problems, the political obstacles could be insurmountable. Brexit wasn’t great news for the future of the EU. But the common currency is likely to create much bigger headaches for European leaders in the years to come.

Must-Read: Timothy B. Lee: The Economy Just Got Its Worst Job Report in Years

Posted on by Brad DeLong

Must-Read: The way to bet is that two-thirds of the surprising component of this month’s employment report will be reversed over the next quarter or so.

Nevertheless: does anybody want to say that the Federal Reserve’s increase in interest rates last December and its subsequent champing-at-the-bit chatter about raising interest rates was prudent in retrospect? Anyone? Anyone? Bueller?

And does anybody want to say–given that the downside risks we are now seeing were in the fan of possibilities as of last December, and given that the Federal Reserve could have quickly reacted to neutralize any inflationary pressures generated by the upside possibilities in the fan last December–that the Federal Reserve’s increase in interest rates last December and its subsequent champing-at-the-bit chatter about raising interest rates was sensible as any form of an optimal-control exercise?

And we haven’t even gotten to the impact of the withdrawal of risk-bearing capacity from the rest of the world that happens in a Federal Reserve tightening cycle…

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Timothy B. Lee: The Economy Just Got Its Worst Job Report in Years: “The US economy created 38,000 jobs in May, the slowest pace of job growth in five years…

…Not only did job growth fall well short of economists’ expectations in May, the Labor Department also revised its estimates for March and April job growth downward by a total of 59,000…. One factor is the strike among Verizon workers, which cost the economy about 34,000 jobs. Those jobs should reappear in future reports…. There’s other bad news…. Over the last six months, the economy had started to reverse a years-long decline in the labor force participation rate…. But the latest report shows the economy has given most of those gains back, with the labor force participation rate falling from 63 percent in March to 62.6 percent in May…

Must-read: Timothy B. Lee: “Some thoughts on the end of economic growth”

Posted on by Brad DeLong

Must-Read: Timothy B. Lee: Some thoughts on the end of economic growth: “Technological progress in a particular industry often has diminishing returns…. Clothing is the best example…

A larger and larger fraction of the value people get from the clothing they buy… reflects social factors rather than economic ones…. A similar point can be made about food…. Most of the value of a restaurant meal comes from factors that can’t easily be improved by technology…. So families have been spending a shrinking share of their incomes on basic necessities…. During the 20th century, there was a steady stream of new inventions — cars, televisions, washing machines, refrigerators, telephones, electric lighting, personal computers, and so forth — that soaked up peoples’ growing disposable income. Over the last 30 years, this process has continued for information technology…. But outside of the IT sector, significant new inventions have been few and far between….

A century ago, rich people could spend their money on a wide variety of technological luxury goods — electric lighting, telephones, automobiles, indoor plumbing — that substantially improved their quality of life. Today, very wealthy people have private jets, but otherwise it’s hard to think of examples of major technologies that are available to them but not to Americans with more modest incomes. Instead, wealthy people spend money on… positional goods… and labor-saving services…. We’re running out of room for technological improvements in most areas of economic life, with three big exceptions: IT, medicine… transportation… energy….

We should expect a gradual slowdown in productivity growth rates…. This could be seen as a pessimistic take, but the optimistic way to think about it is that Americans in the top half of the income distribution have arrived: we’re getting pretty close to the highest level of material comfort and security that it’s possible for a human civilization to have. Our children and grandchildren probably won’t enjoy a much higher standard of living than we do, but that’s mostly because it’s hard to imagine what a much higher standard of living would look like.