Month: April 2014

Lawrence Summers et al.: We haven’t done it in 15 years and Japan hasn’t done it in a generation:

Daniel Kuehn: Botched Economics of Gender by Mark Perry and Andrew Biggs in the WSJ: “Mark Perry and Andrew Biggs have a really unfortunate…

…op-ed in the Wall Street Journal yesterday perpetuating the idea that the gender pay gap is a ‘myth’…. Why[?]… Because surprise, surprise the conditional difference in means is smaller than the unconditional difference in means! I sent this letter to the editor in. It has not been published at this point:

Mark Perry and Andrew Biggs (April 7th, 2014, “The ’77 Cents on the Dollar’ Myth About Women’s Pay”) seem to confuse our ability to attribute the gender pay gap to various factors with the idea that the gap itself is a ‘myth’…. By highlighting the various determinants of pay disparities Perry and Biggs are actually confirming the existence of the gap and presenting evidence on where it originates…. We know… that many occupations are highly segregated by gender, and that large gender disparities exist in the amount of time dedicated to household work. Young women may be nominally free to major in whatever they choose, as Perry and Biggs suggest, but these choices are heavily conditioned by earlier experiences in the home and in primary and secondary school. All of these disparities are closely related to each other and to the pay gap, and they pose a real problem for those of us that value gender equity. Dismissing the gender pay disparity because it is deeply embedded with other disparities does not clarify the issue at all; it confuses the issue.

Adam Posen: Monetary Policy Normalization: Challenges for Fiscal Policy:

Must-Reads:

1. James Pethokoukis: Is the temp economy permanent?: ”
   If the US job market were undergoing some sort of major, long-lasting transformation, how would we know? Well, the data might start looking kind of weird. Maybe the labor force participation would collapse, or wages would stagnate, or job creation would shrivel. Or we might see something like a big rise in temporary workers…. So are we are headed to where Japan already is? A third of its workers are temps who are paid less, receive fewer benefits, and have less job security…. If this trend is longer-term, it argues for better education and training so workers can do the high-value things machines can’t. Government should also be careful of polices that raise hiring costs like mandating benefits or wage floors… should take a deep look at wage subsidies for lower-skilled workers…

2. Christina Romer: “After A Financial Crisis, Economic Disaster Is Not Inevitable”:

3. Gauti Eggertsson and Neil Mehrotra: A Model of Secular Stagnation: “The Japanese malaise that has by now lasted two decades and has many of the same symptoms as the U.S. Great Depression…. In Summers’ words, we may have found ourselves in a situation in which the natural rate of interest – the short-term real interest rate consistent with full employment – is permanently negative…. There has not, to the best of our knowledge, been any attempt to formally model this idea…. The goal of this paper is to fill this gap…. Successful policy actions include, among others, a permanent increase in inflation and a permanent increase in government spending…. Policies such as committing to keep nominal interest rates low or temporary government spending, however, are less powerful than in models with temporary slumps…”

4. James Pethokoukis: Is the temp economy permanent?: “If the US job market were undergoing some sort of major, long-lasting transformation, how would we know? Well, the data might start looking kind of weird. Maybe the labor force participation would collapse, or wages would stagnate, or job creation would shrivel. Or we might see something like a big rise in temporary workers…. So are we are headed to where Japan already is? A third of its workers are temps who are paid less, receive fewer benefits, and have less job security…. If this trend is longer-term, it argues for better education and training so workers can do the high-value things machines can’t. Government should also be careful of polices that raise hiring costs like mandating benefits or wage floors… should take a deep look at wage subsidies for lower-skilled workers…

Continue reading “Things to Read on the Morning of April 10, 2014” →

James Pethokoukis: Is the temp economy permanent?: “If the US job market were undergoing some sort of major, long-lasting transformation, how would we know?

Well, the data might start looking kind of weird. Maybe the labor force participation would collapse, or wages would stagnate, or job creation would shrivel. Or we might see something like a big rise in temporary workers…. So are we are headed to where Japan already is? A third of its workers are temps who are paid less, receive fewer benefits, and have less job security…. If this trend is longer-term, it argues for better education and training so workers can do the high-value things machines can’t. Government should also be careful of polices that raise hiring costs like mandating benefits or wage floors… should take a deep look at wage subsidies for lower-skilled workers…

I truly do not understand how John Plender views the world, or, rather why he sees the world he does. Can anybody help me?

John Plender: Time running out for the market riggers: “Conventional wisdom has it that the long-term global decline in real interest rates…

…owes much to an increase in the demand for safe assets. Certainly it is true that the accumulation of official reserves by excess savers in the developing world has played an important role and with the eurozone breaking into current account surplus there is now a new excess saver on the block…. At the same time the increased real return required by equity investors since the dotcom boom and the great financial crisis has reinforced a portfolio shift towards bonds, resulting in further downward pressure on yields. Yet the more striking thing about today’s markets is surely the extraordinary demand for unsafe assets…. Junk bond yields are close to record lows. Securitisation is back in fashion…. There is a slide afoot in lending standards, with a reversion to such pre-2007 bad habits as payment-in-kind notes and “cov-lite” loans….

Mexico, admittedly with a good domestic economic story to tell, managed to sell a 100-year sterling bond last month on a coupon of 5.75 per cent. At the same time the yield on Spanish and Irish sovereign five-year bonds last week fell below comparable US Treasury paper. That is quite a tribute to the power of the central banks, which have rigged the market in spectacular fashion…

Continue reading “Attempt to Start a Dialogue: Another Current of Thought I Really Do Not Understand: John Plender on Central Banks as “Market Riggers”” →

Bonnie Kavoussi sends us to Christina Romer: “After A Financial Crisis, Economic Disaster Is Not Inevitable”:

More and more these days, I find myself perturbed when I read Kenneth Rogoff. The models he uses are the models that he built and the models that seem to me to make the most sense. But I repeatedly find him making judgments about how the models apply to the real world that I cannot follow.

For today’s example…

Kenneth Rogoff: More Facts and Less Populism: “When the US Treasury recently added its voice to the chorus of critics of Germany’s chronic current-account surplus…

…it underscored the deep disagreement over what, if anything, should be done about it. The critics want Germany to increase its contribution to global demand by importing more and exporting less. The Germans view the maintenance of strong balance sheets as essential to their country’s stabilizing role in Europe…. The debate has too often been informed more by ideology than facts….

Continue reading “In Which I Am Perturbed by Kenneth Rogoff’s Even-Handed Hippie- and Austerian-Punching: Early Thursday Focus on Wednesday” →

Mark Thoma sends us to Gauti Eggertsson and Neil Mehrotra: A Model of Secular Stagnation: “The Japanese malaise that has by now lasted two decades…

…and has many of the same symptoms as the U.S. Great Depression…. In Summers’ words, we may have found ourselves in a situation in which the natural rate of interest – the short-term real interest rate consistent with full employment – is permanently negative…. There has not, to the best of our knowledge, been any attempt to formally model this idea…. The goal of this paper is to fill this gap…. Successful policy actions include, among others, a permanent increase in inflation and a permanent increase in government spending…. Policies such as committing to keep nominal interest rates low or temporary government spending, however, are less powerful than in models with temporary slumps…