Must-Read: : Is the Great Recession Really Over?:
Starting the recession in a below- median 2007-2009-employment-shock area caused workers to be 1.0 percentage points less likely to be employed in 2014….
This enduring impact holds even when controlling for current local unemployment rates, which have converged across space. The results demonstrate limits to U.S. local labor market integration and suggest hysteresis effects culminating in labor force exit.
Should Reads:
Must-Read: John Quiggin: Do Climate Skeptics Exist?:
June 2016 was the hottest month globally since records began in 1880, and marks the fourteenth record month in a row.
For the great majority of people who’ve been following scientific findings on climate, there’s no great surprise there. There is very strong evidence both for the existence of a warming trend due mainly to emissions of carbon dioxide, and for the occurrence of a peak in the El Nino/Southern Oscillation index. Combine the two, and a record high temperature is very likely. But suppose you were a strongly sceptical person, who required more evidence than others to accept a scientific hypothesis, such as that of of anthropogenic climate change. Presumably, you would treat the evidence of the last couple of years as supporting the hypothesis. Perhaps this supporting evidence would be sufficient that you would regard the hypothesis as confirmed beyond reasonable doubt, perhaps not, but either way, you would be more favorably inclined than before. And, if you were a public commentator, willing to state your views honestly, you would say so.
Does such a sceptic exist? I haven’t seen one, although I follow the debate fairly closely. In fact, in the 25 years or so in which I’ve been following the issue, I can only recall one instance of someone described as a “sceptic” changing their view in the light of the evidence[, Richard Muller]. And of course, his fellow sceptics, who’d been promising that his research would reveal massive errors in the temperature record, immediately decided that he’d never really been one of them. In any case, while Muller was and remains a scientific sceptic, he’s no longer a climate sceptic. Operationally, it’s clear that the term “climate sceptic” means someone whose criteria for convincing evidence are those set out by the Onion…. As far as I can see… the world population of genuine climate sceptics is [now] zero.
Must-Read: : What’s the Problem With Protectionism?:
The next president will not be a committed free trader.
The presumptive Democratic nominee, Hillary Clinton, is at best a lukewarm supporter of freer trade, and of the Trans-Pacific Partnership in particular. Her Republican counterpart, Donald Trump, is downright hostile to trade deals that would throw open US markets. Breaking with modern Republican tradition, Trump envisages a 35% tariff on imported cars and parts produced by Ford plants in Mexico and a 45% tariff on imports from China. Economists are all but unanimous in arguing that the macroeconomic effects of Trump’s plan would be disastrous….
Consider the following thought experiment. President Trump signs a bill slapping a tariff on imports from China. This shifts US spending toward goods produced by domestic firms. It puts upward pressure on US prices, which is helpful when there is a risk of deflation.
But then President Xi Jinping retaliates with a Chinese tariff, which shifts demand away from US goods. From the standpoint of American consumers, the only effect is that imports from China (now subject to tax) and their US-produced substitutes are both more costly than before. Under normal circumstances, this would be an undesirable outcome. But when deflation looms, upward pressure on prices is just what the doctor ordered…. I want to be clear: there are other, better ways of raising prices and stimulating economic activity in liquidity-trap conditions. The obvious alternative to import tariffs is plain-vanilla fiscal policy–tax cuts and increases in public spending. Still, the point… is important…. Those seeking a cure for the current malaise of ‘secular stagnation’–slow growth and sub-2% inflation–shouldn’t claim too much for the beneficial macroeconomic effects of trade agreements. And they shouldn’t invoke the old saw that Smoot-Hawley caused the Great Depression, because it didn’t. False claims, even when made in pursuit of good causes, do no one any good…
Must-Read: : Rethinking Capitalism:
In Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth… some of the world’s leading economists propose new ways of thinking about capitalism….
Joseph Stiglitz, Chief Economist of the Bank of England Andy Haldane, Professor William Lazonick, Professor Carlota Perez, Mazzucato and many others…. Today’s deep economic problems reflect the inadequacies of orthodox economic theory and the failure of policies informed by it… fiscal and monetary policy, financial markets and business behaviour, inequality and privatisation, and innovation and environmental change. The authors set out alternative economic approaches which better explain how capitalism works, why it often doesn’t, and how it can be made more innovative…
Must-Read: Rex Nutting: Manufacturing Output Has Doubled in Three Decades:
The number of jobs in the manufacturing sector has declined by about 5 million since 2000, falling from 17.3 million at the turn of the century to 12.3 million in 2015… only 8.7%…. Retail, health care, professional and business services, and leisure and hospitality services now employ more workers than manufacturing does….
[But] gross output of U.S. manufacturing industries–counting products produced for final use as well as those used as intermediate inputs–totaled $6.2 trillion in 2015, about 36% of U.S. gross domestic product, nearly double the output of any of the other big sectors: professional and business services, government and real estate…. Manufacturing companies also account for about 77% of what the private sector spends on research and development each year. If it weren’t for manufacturing, there would be very little innovation in the United States…. Today, U.S. factories produce twice as much stuff as they did in 1984, but with one-third fewer workers….
The output of durable goods was at an all-time high in 2015, more than triple what it was in 1980 and double what it was 20 years earlier. The production of electronics, aerospace goods, motor vehicles and machinery are at or close to all-time highs. On the other hand, the production of nondurable goods is still down 7% from the peak…. The output of the chemicals, paper and printing industries are all off significantly from the pre-recession peak. And, of course, other industries have nearly disappeared. The output of the apparel industries is down more than 80% since the heydays in the 1980s, while the output of textile mills is down about 50% since 2000. Those are the factories and jobs that are really gone for good….
Refined petroleum products… are America’s top manufactured product, with a value of shipments going out the factory door of nearly $700 billion in 2014, more than four times as much as the No. 2 product: light trucks. America’s other top manufactured products are pharmaceuticals, airplanes and automobiles. Rounding out the top 10 are iron and steel, animal slaughtering, plastics, organic chemicals and petrochemicals…
Over at Project Syndicate: Which Thinkers Will Define Our Future?: BERKELEY – Several years ago, it occurred to me that social scientists today are all standing on the shoulders of giants like Niccolo Machiavelli, John Locke, Adam Smith, Alexis de Tocqueville, Max Weber, and Émile Durkheim.
One thing they all have in common is that their primary focus was on the social, political, and economic makeup of the Western European world between 1450 and 1900. Which is to say, they provide an intellectual toolkit for looking at, say, the Western world of 1840, but not necessarily the Western world of 2016. What will be taught in the social theory courses of, say, 2070? What canon – written today or still forthcoming – will those who end their careers in the 2070s wish that they had used when they started them in the late 2010s? Read MOAR at Project Syndicate
Several years ago I had a thought: it seemed to me that the social sciences we’re still standing on the shoulders of giants—thinkers like Niccolo Machiavelli, John Locke, Adam Smith, Alexis de Tocqueville, Max Weber, Emile Durkheim, and company. You can indeed see far when you stand on the shoulders of a giant. But, unless you adopt a twisty and undignified posture , you see best only in the direction that the giant is looking. And the giants of social science were all looking at the Western European world from 1450 to 1900–looking at its orders and disorders, its structures and changes, and its problems and proposed solutions.
We will very shortly be trying to understand the world of the second fifth of the 21st century. Attempting to do so using an intellectual toolkit that is really focused on 1840 or so seems hazardous. So I asked myself: what will be taught in the social theory courses of, say, 2070? What authors and what toolkits–written today or still unwritten—will those who will end their careers in the 2070s wish that they had focused on when they started their careers in the late 2010s? I started a file folder: “The Social Theory of the Late 21st Century”. I filled it with things when I found something I thought had purchase on something likely to be an important problem over the next couple of generations. I put things in. I took things out. I looked at the folder again last week. The bulk of it consisted of the writings of three people: Alexis to Tocqueville, who wrote in the 1830s and 1840s; John Maynard Keynes, who wrote in the 1920s and 1930s; and Karl Polanyi, who wrote in the 1930s and 1940s.
Now the fact that I appear to think that the cutting-edge social theory of the 2070s will then be composed of books between 125 (Polanyi’s The Great Transformation) and 235 (Tocqueville’s Democracy in America) may simply be a consequence of my own stupidities and biases. But maybe, just maybe, there is something more here.
John Maynard Keynes’s central concerns as he wrote in the 1920s and 1930s were five:
But after World War II the problems that had spurred Keynes’s concerns faded into the background. The Thirty Glorious Years after World War II allowed some to believe that they were permanently—rather than temporarily—solved. The subsequent inflation of the 1970s could be blamed on social democratic overreach, and the claim that the Thatcher-Reagan correction had been salutary and effective was highly credible to the moneyed classes that prospered thereafter, and to their tame ideologists who dominated the 1980-2010 public sphere.
But today the problems that had spurred Keynes’s concerns are back.
Karl Polanyi’s central concerns writing in the 1930s and 1940s was that a market society could indeed produce a great deal of material prosperity, but it did so by making people and the fabric of their lives puppets and playthings of mindless market forces, and that people really did not like that. The task was to grasp the prosperity that came with a market economy without suffering the risks of poverty, the destructions of enterprise, and the erosion of community and expectations that came with a market society. If the modern bourgeois order failed at this task, Polanyi warned, fascist and communist authoritarian or totalitarian forces would benefit.
Like Keynes’s problems, Polanyi’s closely-related problems faded into the background for the Thirty Glorious Years immediately after World War II. And in the subsequent Neoliberal Age the argument that the prosperity of a market society was great and worth the price paid was, again, highly credible to the moneyed class and to their tame ideologists.
But today the problems that had spurred Polanyi’s concerns are back.
Alexis de Tocqueville’s central concerns writing in the 1930s and 1940s were about the consequences of the destruction of caste—the big castes of supposedly Frankish nobles of the sword and supposedly Gallo-Roman villeins, bourgeois, and nobles of the robe; and all the little castes with all their little privileges and liberties that gave them autonomy and a measure of control over their lives—and that came, of course, with obligations attached that grew as social status declined. Tocqueville saw this ordered world of societal orders being replaced by societal democracy and formal social equality—in which everyone would be equally free, but would also be at the mercy of society. No privileges or liberties would protect you if you failed to find a counterparty in the market, or ran afoul of the tyranny of the majority, or simply sought some form of direction as you tried to decide who you were supposed to be.
Tocqueville’s concerns never went away. But in Tocqueville’s world the destruction of caste was partial only: Tocqueville wrote for white men who knew their nationality, knew what those caste memberships meant, and knew what privileges they brought. Now, however, the destruction of caste and caste privilege is taking another step forward. Who, we all now ask, are the inhabitants of Birmingham? And we are trying to deal with it and grasp the opportunities for human betterment thereby created.
So my answer is: No, we have not resolved the concerns that spurred Tocqueville, Keynes, and Polanyi to think and write. We and our successors face their problems and opportunities in a transformed and reshaped form. Mark Twain said that history rhymes. And right now it looks as though the rhyme scheme is very strict.
In macroeconomics, there’s a tendency for economists to separate the short-term and the long term. For instance, recessions don’t (or rather, shouldn’t) affect the long-term growth rate of the economy. The basis of many growth models is the idea that recessions are temporary deviations from the long-run growth potential of an economy. There might be a year of negative economic growth, but eventually gross domestic product will return to its old pre-recession trend.
But in the wake of the Great Recession, which ended seven years ago this month, U.S. GDP growth has been tepid and estimates of the potential growth rate have declined. As City University of New York economist J.W. Mason points out, most of these estimates of a decline in potential GDP are due to lower expectations for productivity growth, which make sense given the very weak U.S. productivity growth of recent years. But is this just a coincidence? Or did the recession itself actually reduce productivity growth?
A lot of thinking about productivity growth since the U.S. economy began to rebound after July 2009 is informed by research by John Fernald of the Federal Reserve Bank of San Francisco on declining total factor productivity growth. Fernald’s research shows that the productivity decline has been happening for over a decade now and predates the Great Recession. His findings show that the timing of the Great Recession and declining productivity growth is just a really unfortunate coincidence. To put it in economics jargon, the decline in productivity growth was exogenous to what was going on in the broader economy.
But it’s very possible that the decline was endogenous—and that changes in short-term demand are directly responsible for slowing productivity growth. That’s the argument of a paper by New York University economists Diego Anzoategui, Mark Gertler, and Joseba Martinez at New York University, and Diego A. Comin at Dartmouth College. The main thrust of the paper is that productivity, and therefore long-term economic growth, can be affected by companies pulling back on investment and the adoption of new technologies during recessions. This is a form of “hysteresis”— the argument that recessions can raise the long-run unemployment rate and hamper economic growth —but instead of just pushing workers out of the market, a recession pushes companies to cut back on a variety of investments amid recessions, which impacts overall productivity growth.
The economists show a positive relationship between economic expansions and the diffusion of new technologies. Furthermore, they show how business expenditures on research and development drop significantly during recessions, which also indicates a direct relationship between economic downturns and productivity growth. What’s particularly interesting is that their data shows a strong decline in research and development spending during and after the relatively short 2001 recession, which could help explain why productivity growth was declining before the Great Recession began in December, 2007. In short, the effects of the last recession were still being felt.
Of course, this paper isn’t definitive proof that productivity growth is entirely determined by demand. But it’s an indication that demand-side problems may be a part of our productivity problems. These findings show that policymakers who ignore the demand side of the U.S. economy do so at our own peril.
Must-Read: Neuronal dictatorship for speed of response, neuronal democracy for accuracy of perception and movement:
Ari Berkowitz: Is Your Nervous System a Democracy or a Dictatorship?:
For some behaviors, a single nerve cell does act as a dictator… touching a crayfish on its tail; a single spike in the lateral giant neuron elicits a fast tail-flip that vaults the animal upward, out of potential danger. These movements begin within about one hundredth of a second of the touch…. Each dictator neuron sits at the top of a hierarchy, integrating signals from many sensory neurons, and conveying its orders to a large set of subservient neurons that themselves cause muscle contractions. Such cellular dictatorships are common for escape movements, especially in invertebrates….
But these dictator cells aren’t the whole story. Crayfish can trigger a tail-flip another way too – via another small set of neurons that effectively act as an oligarchy…. This redundancy makes sense: it would be very risky to trust escape from a predator to a single neuron, with no backup–injury or malfunction of that neuron would then be life-threatening. So evolution has provided multiple ways to initiate escape. Neuronal oligarchies may also mediate our own high-level perceptions, such as when we recognize a human face.
For many other behaviors, however, nervous systems make decisions through something like Sherrington’s “million-fold democracy”… when a monkey reaches out its arm… a neuronal election in which some neurons vote more often than others…. Numerous other examples of neuronal democracies have been demonstrated. Democracies determine what we see, hear, feel and smell…
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