Not Aged Well

Things that have not aged well. Hassett was not an excellent choice for Chairman of the CEA: Mark M. Zandi, Justin Wolfers, & al. (2017): Letter in Support of the Nomination of Kevin Hassett to be Chairman of the Council of Economic Advisers https://medium.com/@hassett.economists.letter/letter-in-support-of-the-nomination-of-kevin-hassett-to-be-chairman-of-the-council-of-economic-78c483f9821b: ‘Dr. Hassett has a record of serious...

Bankruptcy Law and the Pandemic

Mary and I wrote an op-ed about the possibility of using bankruptcy law to reduce the economic impact of the pandemic that was published by the Washington Post's Made by History.We found out this morning that we won the first in a series of prizes that the Stanton Foundation is awarding for applied history articles related to the pandemic.

Measuring Employment between Monthly Surveys

The Employment Situation Report by the Bureau of Labor Statistics comes only monthly.  It measures only the seven-day week (or, with the establishment survey, pay period) including the 12th of the prior month, which means that this month four very interesting weeks will be skipped and that the report on that April week will not be released until May 8. Three data sources provide employment information on at least one of the missing four...

Announcing the US-China Trade Policy Working Group

Concerned about where the US-China trade relationship is going, we recently formed a “US-China Trade Policy Working Group.” Yang Yao, Jeff Lehman and I are co-conveners. Other members are Meredith Crowley, Robert Howse, Jiandong Ju, Feng Lu, Justin Yifu Lin, Eric Maskin, and Rob Staiger. We released our statement today. The statement is signed by 27 additional economists and legal scholars, including Philippe Aghion, Kaushik Basu, Robert...

ND Wages and Unemployment Benefits

There are lots of stories around unemployment benefits and the good or bad aspects of the policy enacted through the CARES act, specifically an additional $600 in benefits per week. Why that dollar value in particular? There was an intent to make it more of a locally based number, but that quickly became an intractable problem that would delay, arguably needlessly, necessary aid. As a result the legislation used more of a national average...

The Hill: “White House to forgo summer economic forecast amid COVID-19, breaking precedent”

That’s from an article today: The White House will not release an updated round of economic projections this summer, breaking from precedent as the U.S. faces its deepest downturn since the Great Depression, two administration officials familiar with the decision confirmed to The Hill on Thursday. The Council of Economic Advisers (CEA), the internal White House economic team, will not release the typical midsummer review of its initial...

Kalecki on the Political Aspects of Full Employment

Michal Kalecki 1899 - 1970Sam Levey reminded me of Kalecki's 1943 article on the political aspects of full employment. This a very interesting and thought-provoking paper. I enjoyed it enough to offer my critique of it.The paper starts by taking as given what Kalecki calls the doctrine of full employment. The basic idea is that the private sector, left to its own devices, is prone to Keynesian aggregate demand failures (see here for...

More Thoughts on a Better Income Support System for the Next Crisis

This post was written by Mike Veall of the Department of Economics at McMaster University. I appreciated the comments on my earlier post, where I suggested that a small monthly Basic Income system would have the advantage of being able to be scaled-up in a crisis. Incenting participation in the tax/transfer system is responsive to the work of Anna Cameron, Lindsay Tedds, Jennifer Robson and Saul Schwartz pointed out by Frances even though...

The virus picks us off unevenly, and an efficient response must recognise that

The virus picks us off unevenly, and an efficient response must recognise that It is the end of the beginning: lockdowns after the first wave of coronavirus are being tentatively lifted. It is not a step we are taking with any great confidence of success. Rather, we’re easing the lockdowns because we can’t bear to wait any longer. That will mean some difficult decisions ahead, in particular about how we look out for each other in a world...

How Economists and Sociologists See Racial Discrimination Differently

Economists tend to see discrimination as based on actions of individuals, who in turn are interacting in markets and society. However, sociologists do not feel the same compulsion as economists to build their theories on purposeful decision-making by individuals: "Sociologists generally understand racial discrimination as differential treatment on the basis of race that may or may not result from prejudice or animus and may or may not be...

Wage cuts

A decision by the Fed to cut its interest rate target is usually expansionary.Falling market interest rates are usually a bad sign, an indication that money is too tight, and getting tighter.A decision by a firm to cut wages is usually expansionary for employment.Falling aggregate wage rates are usually a bearish indicator, a sign that money is too tight.Most people have trouble wrapping their mind around these seeming contradictions.The...

Stansbury and Summers respond on worker bargaining power, and more on monopsony

Both to my earlier points and to some other discussions, here is the link.  Here is one excerpt related to a point I had not understood in the paper proper: 5. If corporate profits are so high, how is this consistent with the persistently low demand postulated by Summers’ “secular stagnation” hypothesis? Secular stagnation as we think of it is the product of a rising gap between the desire to save and the desire to invest (which, in an IS-LM...

A government without common sense, and with class arrogance

Recently the Prime Minister urged workers and employers to use their ‘good solid British common sense’ to decide what was safe with the recent relaxation of the lockdown. Which prompts an obvious question (thanks @SuffolkJason). What has happened to the government’s common sense in dealing with coronavirus? When you see a pandemic sweeping China and with every chance of it coming to the UK, isn’t it common sense to prepare for that possibility...

The Worst Jobs Day Ever

Driven by the COVID-19 shutdown, April marked the greatest job loss in American history. The unemployment rate skyrocketed to 14.7 percent, and employers cut 20.5 million jobs. Those figures are heart-wrenching. But as awful as they are, they do not fully capture workers’ hardships. To be counted as unemployed, people must be available for work and actively seeking it. With schools closed, job opportunities withering, and social distancing the...

Monetary Finance in the Age of Corona Virus: MMT and the Green New Deal

The world is going through a remarkable transformation in the aftermath of an unprecedented shut down of economies all over the globe. Before the crisis there was already significant debate about how to pay for the costs associated with the transition to a low carbon environment. That debate has intensified as treasuries and central banks ...

Ethiopia’s Unconventional COVID-19 Response

Instead of implementing a national lockdown like most other governments, including in Africa, Ethiopia initiated other essential measures in January, well ahead of most developed countries. And its success so far illustrates how African countries can tackle the pandemic effectively despite tight resource constraints. ADDIS ABABA – To the surprise of many, African governments have responded...

On the Economics of Not Dying

America is now engaged in a vast, dangerous experiment. Although social distancing has limited the spread of the coronavirus, it is far from contained. Yet despite warnings from epidemiologists, much of the country is moving to open up for business as usual.You might think that such a momentous move would come with elaborate justifications — that politicians pushing an end to social distancing, from Donald Trump on down, would at least try to...

Why Kevin Williamson is wrong about poverty and bad behavior

I recently wrote a post at Bloomberg Opinion arguing that "bad behavior" - drug use, violence, single parenthood, and idleness - is not the main cause of poverty in advanced nations. As evidence, I cited the country of Japan, which has extremely low rates of drug use, violence, single parenthood, and idleness, and yet which has a poverty rate almost as high as that of the U.S., and significantly higher than those of wealthy European...

Real Business Covid

There are lots of different models of business cycles because there are lots of different kinds of business cycles.If a downturn stems from something in the real economy, rather than something messed up on the monetary side or in finance, we need to think about Real Business Cycle models. What are the stylised facts of the current mess, at least for NZ?Massive negative technological shock across a broad range of sectors meaning that existing...

Consumer spending during unemployment: evidence from US bank account data

Summary Unemployment insurance (UI) benefits provide an important financial cushion for the many people who lose their jobs, helping to stabilize their consumer spending while they look for new work opportunities. But is the typical duration of UI benefits in the United States of six months the appropriate length of time – or might some people be better off with a longer period, perhaps...

Eli Dourado and James Pethokoukis: How to Make America Innovate Again

To many, it seems as though America has failed to live up to its potential over the past several decades, with far less to show for its innovative efforts than one might have expected a half century ago. But the future is brimming with possibilities, and, at the very least, the COVID-19 pandemic has signaled that “It’s time to build,” as one observer recently put it. To explore why America has failed to “build” in the past — and how it may...

The Canada Emergency Response Benefit, what now? Government policy as the economy re-opens should be rules-based

We have learned from past experience that public policy proceeds through two phases during major crises: first, as one influential economist has said, “whatever it takes”; then, “Oh my God, what have we done!” The Canada Emergency Response Benefit represents the best of whatever-it-takes policy. The speed, the depth, and the sheer uncertainty of the duration and aftermath of the COVID19 crisis called for maximum flexibility in the making of...

32+ Years…

Bad ideas from Nashville politicians

Potential exam question:QUESTION:  Nashville currently has had a ban on evictions for about two months.   In about two weeks this ban will expire. Question:  What would happen if we followed Councilman Sean Parker's call for banning "Evictions ... until Davidson County's unemployment rate returns to 2.8%..." ANSWER: In the short run, it would reduce incentives for renters to pay rent in a timely manner.  This would reduce the value...

Extensions to the NGDP Gap

The monetary policy program at the Mercatus Center recently released a new measure called the NGDP gap. We created it as an alternative way to gauge the stance of monetary policy and have provided a website that will update the measure as new data become available. In this post, I will briefly summarize the NGDP Gap and then highlight a few extensions that some readers may find useful.  Summary of the NGDP Gap  As mentioned above, the NGDP...

Macroeconomic Modelling of Pandemics at Warp Speed

A pressing research issue with deep policy relevance concerns how econometric models should be adapted, changed, or modified in light of the COVID-19 pandemic.  A new Webinar series–Macroeconomic Modelling and Pandemics–has been created to examine this issue, to exchange views among researchers, and to bring more attention to the policy questions. Here is a list of topics in the series on the Hoover website, including previews of coming...

Podcast and Goodfellows

Here are links to this week's grumpy economist podcast, and Goodfellows discussion with Niall Ferguson and H.R.  McMaster. Grumpy on the careful reopening and debt. Goodfellows on Europe.Carnivorous Moose (?) 

Testing Alone is Insufficient

Testing Alone is Insufficient May 6, 2020 in covid-19, economics, Mechanism design | Tags: covid19, mechanism design, pandemic Will widely available and effective tests for COVID-19 awaken the economy from its COVID induced coma? Paul Romer, for one, thinks so. But what will each person do with the information gleaned from the test? Should we expect someone who has tested positive for the virus to stay home and someone who has tested...

Risk of Rapid Re-opening

TweetMay 11, 2020 — This interview by Associated Press is the basis of quotes in a story today: “Risk of reopening US economy too fast: A W-shaped recovery.” AP: To what extent is the push to reopen the economy making a W-shaped recovery more likely? JF: I believe that the push to reopen the economy is making a W-shaped recovery very much more likely. AP: What should we be doing to produce the best economic outcome? JF: Widespread reopening...

1Q 2020 GDP Estimate Revised Lower

Posted on 28 May 2020 Written by Rick Davis, Consumer Metrics Institute In their second estimate of the US GDP for the first quarter of 2020, the Bureau of Economic Analysis (BEA) reported that the US economy was contracting at a -5.06% annual rate, down -0.27 percentage points (pp) from their previous estimate and down -7.18pp from the prior quarter.Please share this article - Go to very top of page, right hand side, for social media...

Fund managers are long tech and growth…again

© AFP via Getty Images It’s that time of the month again for a report from the hedgie whisperers at Bank of America. Yes, the global fund manager survey has been released and not a moment too soon as the equity markets scream: “everything has returned to normal”.Two months ago when markets were in meltdown ...

Will There Be Another Oil Price War?

Two months ago, Russia said no to Saudi Arabia's proposal for deeper oil production cuts. It was enough to start a price war that, coinciding with the Covid-19 pandemic, wiped out billions in oil revenues for both Russia and Saudi Arabia while forcing them to enact even deeper cuts than previously discussed.Some say the price war was never about Saudi Arabia and Russia. They say it was about U.S. shale. If that is accurate, what happens when...

The Worst Jobs Day Ever

Driven by the COVID-19 shutdown, April marked the greatest job loss in American history. The unemployment rate skyrocketed to 14.7 percent, and employers cut 20.5 million jobs. Those figures are heart-wrenching. But as awful as they are, they do not fully capture workers’ hardships. To be counted as unemployed, people must be available for work and actively seeking it. With schools closed, job opportunities withering, and social distancing the...

When demand for one good falls (gasoline and ethanol) leads to an increase in price for other goods (beer and soda)

See A Coronavirus Chain Reaction: Less Driving Means Less Fizz for Sodas: Carbon-dioxide output is down, as the drop in gasoline demand slows fuel production by Vipal Monga of The WSJ.I don't think I have heard of anything like this before. If the supply of carbon dioxide (an ingredient in soda and beer) falls, its price will rise. Then supply will decrease for beer and soda since the price of a resource used to make it has...

Larry Summers Interview

A lot of wisdom here.

The new tools of monetary policy

By Haowen Chen Since the 1980s, interest rates around the world have trended downward, reflecting lower inflation, demographic and technological forces that have increased desired global saving relative to desired investment, and other factors. Although low inflation and interest rates have many benefits, the new environment poses challenges for central banks, who have traditionally relied on cuts to short-term interest rates to stimulate...

Central Banking Stories to Watch in 2019

Happy New Year, everybody! 2018 has been a quiet year for my blog, but productive on other fronts, as I've kept busy with research and my family. But here are a few central bank-related stories I'm interested in following in the new year. 1. New Governor at Reserve Bank of IndiaFollowing the early exit of Governor Urjit Patel in December, Prime Minister Modi appointed the third central bank governor in just three years: Shaktikanta Das....

Republicans grouse about tax models they once supported

THEY have been at this a long time. In 1994 Republicans, newly in charge of Congress, held hearings on what would come to be called “dynamic scoring”. Bills, they said, should be evaluated using the predictive power of macroeconomic models. If the model predicts more GDP growth, then it could be inferred that the growth would produce more tax revenue. During the hearings, however, came an awkward moment. Alan Greenspan, then in charge of the...

The media cannot reform itself until it acknowledges its power

As regular readers know, I have for the last few years been banging on about the importance of the media in influencing public opinion. (It formed a key part of my SPERI/News Statesman prize lecture.) It is not a partisan point about whether the media is politically biased in a particular direction. Instead it is a claim that the media can and sometimes is profoundly important in influencing major political events. I think it is fair to say...

The Coronavirus and Lessons for Preparedness

My new Mercatus policy brief is up. It is entitled, “The Coronavirus and Lessons for Preparedness.” You can find it here.

Who were the top taxpayers in 1923?

From page 71 of Daniel Marcin’s “The Revenue Act of 1924: Publicity, Tax Cuts, Response” div{float:left;margin-right:10px;} div.wpmrec2x div.u > div:nth-child(3n){margin-right:0px;} ]]> Advertisements

The media cannot reform itself until it acknowledges its power

As regular readers know, I have for the last few years been banging on about the importance of the media in influencing public opinion. (It formed a key part of my SPERI/News Statesman prize lecture.) It is not a partisan point about whether the media is politically biased in a particular direction. Instead it is a claim that the media can and sometimes is profoundly important in influencing major political events. I think it is fair to say...

The media cannot reform itself until it acknowledges its power

As regular readers know, I have for the last few years been banging on about the importance of the media in influencing public opinion. (It formed a key part of my SPERI/News Statesman prize lecture.) It is not a partisan point about whether the media is politically biased in a particular direction. Instead it is a claim that the media can and sometimes is profoundly important in influencing major political events. I think it is fair to say...