- Trump’s Manchurian Trade Policy - Paul Krugman
- Trump is enabling a predatory economy - Helaine Olen
- Is GDP Overstating Economic Activity? - FRBSF
- Interview of Gabriel Zucman - ProMarket
- Cultural proximity and loans - Microeconomic Insights
- The Uniqueness of the Cointegrating Vector - Dave Giles
- Central Bank Digital Currency and monetary policy - Bank Underground
- Why central banks should stabilize the stock market - Roger Farmer
- Nominal wages are not real wages, and why it matters in the UK - mainly macro
- The euro must be made more robust to rival the dollar - FT
Thursday, May 31, 2018
Tuesday, May 29, 2018
From an Economic Letter at the FRBSF:
Is GDP Overstating Economic Activity?, by Zheng Liu, Mark M. Spiegel, and Eric B. Tallman: Two common measures of overall economic output are gross domestic product (GDP) and gross domestic income (GDI). GDP is based on aggregate expenditures, while GDI is based on aggregate income. In principle, the two measures should be identical. However, in practice, they are not. The differences between these two series can arise from differences in source data, errors in measuring their components, and the seasonal adjustment process.
In this Economic Letter, we evaluate the reliability of GDP relative to two alternatives, GDI and a combination of the two known as GDPplus, for measuring economic output. We test the ability of each to forecast a benchmark measure of economic activity over the past two years. We find that GDP consistently outperforms the other two as a more accurate predictor of aggregate economic activity over this period. This suggests that the relative weakness of GDI growth in recent years does not necessarily indicate weakness in overall economic growth.
Discrepancies between GDP and GDI
What drives the discrepancies between GDP and GDI is not well understood. The source data for the components that go into GDP and GDI are measured with errors, which may lead to discrepancies between the two. Further discrepancies can arise because those different components are adjusted for seasonality at different points in time (see, for example, Grimm 2007).
The differences between these two series can be large. For example, in the last two quarters of 2007, inflation-adjusted or “real” GDI was declining whereas real GDP was still growing. The year-over-year growth rate of GDP exceeded that of GDI by almost 2.6 percentage points. Over long periods, however, final measures of growth in GDP and GDI tend to yield roughly equivalent assessments of economic activity. Since 1985, real GDP grew at an average annual rate of about 3.98%, while real GDI grew at a similar average rate of 4.02%.
Since late 2015, the two series have diverged, with real GDP growth consistently exceeding real GDI growth (Figure 1). The differences in growth are significant in this period. For example, if we used GDI growth to assess overall economic activity since July 2015, then the size of real aggregate output by the end of 2017 would be $230 billion smaller than if GDP growth were used. This divergence between the two sends mixed signals regarding the strength of recent economic activity.
Mixed signals from GDP and GDI growth
Source: Bureau of Economic Analysis.
Evaluating GDP, GDI, combination
Researchers often debate which of these series measures economic activity more accurately. Nalewaik (2012) argues that GDI outperforms GDP in forecasting recessions. GDI does appear to exhibit more cyclical volatility than GDP. One reason may be that GDI is more highly correlated with a number of business cycle indicators, including movements in both employment and unemployment (Nalewaik 2010). On the other hand, the Bureau of Economic Analysis has resisted this conclusion, arguing that GDP is in general based on more reliable source data than GDI is (Landefeld 2010).
To evaluate the relative reliability of GDP versus GDI for measuring economic output, we compare their abilities to forecast a benchmark measure of economic activity. We focus on the Chicago Fed National Activity Index (CFNAI) as the benchmark, since it is publicly available. The CFNAI is a monthly index of national economic activity, generated as the common component of 85 monthly series in the U.S. economy. These underlying series include a wide variety of data covering production and income, employment and unemployment, personal consumption and housing, and sales and orders. The CFNAI has been shown to help forecast real GDP (Lang and Lansing 2010). We use the CFNAI as a benchmark activity indicator to evaluate the relative forecasting performances of GDP and GDI and their combinations. Since the discrepancy between these two series has persisted for several years, we focus on the final releases of the GDP and GDI series.
Some have argued that, because the GDP and GDI series contain independent information, it may be preferable to combine the two series into a single more informative activity indicator. One series that uses such a combination is the Philadelphia Fed’s GDPplus series, which is a weighted average of GDP and GDI, with the weights based on the approach described by Aruoba et al. (2016). As a weighted average, GDPplus indicates activity levels between the two individual series. We therefore also consider the forecasting performance of the GDPplus series over this period of extended discrepancy between reported GDP and GDI growth.
To confirm the accuracy of our approach, we repeated our investigation with two alternative series constructed using methodologies similar to the CFNAI. The first alternative is an aggregate economic activity index (EAI) we constructed by extracting the common components of 90 underlying monthly time series. The EAI covers a broader set of monthly indicators than the CFNAI, since we also include information from goods prices and asset prices.
The second alternative indicator we considered is an activity index constructed by Barigozzi and Luciani (2018), which we call the BL index. Like our index, the BL index includes price indexes and other measures of labor costs. The authors base their estimates on the portions of GDP and GDI that are driven by common macroeconomic shocks under the assumption that they have equivalent effects on GDP and GDI. This restriction implies that deviations between GDP and GDI are transitory, and that the two series follow each other over time.
The EAI and the BL index are both highly correlated with the CFNAI and thus yielded similar conclusions. We describe the source data and our methodology for constructing the EAI as well as the analysis using both it and the BL index in an online appendix.
To examine the relative performances of GDP, GDI, and GDPplus for forecasting the CFNAI, we first estimate an empirical model in which the CFNAI is related to four lagged values of one of these measures of aggregate output. Ideally, we would have used the full sample of postwar data in our model, but there are some structural breaks in the data related to factors such as changes in the monetary policy regime since the mid-1980s and the Great Moderation that make this challenging. We therefore choose to focus on the sample starting from the first quarter of 1985 in this discussion; our results using the full sample are similar, as we report in the online appendix.
To examine how well each of the measures of aggregate output are able to forecast the CFNAI, we estimate the model using the sample observations up to the end of 2015, the period before GDP and GDI diverged. Once we determine the estimated coefficients that describe each relationship, we use those values to estimate forecasts for the period when discrepancies developed, from the first quarter of 2016 to the end of 2017. We then calculate the prediction errors, measured by the root mean-squared errors, for each measure of aggregate output. The smaller the prediction error, the better the forecasting performance.
In addition to examining the forecasting performance of GDP, GDI, and GDPplus for predicting the CFNAI economic activity indicator, we also examined their forecasting performance for the unemployment rate as reported by the Bureau of Labor Statistics.
Figure 2 displays the prediction errors from 2016 to 2017 for each of the alternative output measures—GDP, GDI, and GDPplus—estimated from our model for CFNAI and unemployment. For ease of comparison, we normalize the prediction errors from the model with GDP to one. The figure shows that the prediction errors over this period based on the GDP series are substantively lower than those based on GDI or GDPplus. This finding holds true not just for these proxies for economic activity but also for our EAI and the BL index (see the online appendix). Moreover, formal statistical tests of forecasting performance indicate that the forecasts based on GDP are significantly better than those based on GDI or GDPplus at the 95% confidence level. This result suggests that, in recent periods, GDP has been a more reliable independent indicator of economic activity than either GDI or GDPplus.
GDP outperforms GDI, GDPplus in predicting activity
Note: Figure shows prediction errors with GDP indexed to 1.
While GDP and GDI are theoretically identical measures of economic output, they can differ significantly in practice over some periods. The differences between the two series have been particularly pronounced in the past two years, when GDP growth has been consistently stronger than GDI growth. Based on this observation, some analysts have claimed that GDP might be overstating the pace of growth and that GDI, or some combination of GDP and GDI, should be used to evaluate the levels and growth rate of economic activity.
To evaluate the validity of this claim, we compared the relative performances of GDP, GDI, and a combined measure, GDPplus, for forecasting the CFNAI, which we use as a benchmark measure of economic activity over the past two years. We find that GDP consistently outperforms both GDI and combinations of the two, such as GDPplus, in forecasting aggregate economic activity during the past two years. In this sense, GDP is a more accurate predictor of aggregate economic activity than GDI over this period. Therefore, the relative weakness of GDI growth observed in recent years does not necessarily indicate weakness in overall economic growth.
Zheng Liu is a senior research advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco.
Mark M. Spiegel is a vice president in the Economic Research Department of the Federal Reserve Bank of San Francisco.
Eric B. Tallman is a research associate in the Economic Research Department of the Federal Reserve Bank of San Francisco.
Aruoba, S. Boragan, Francis X. Diebold, Jeremy Nalewaik, Frank Schorfheide, and Dongho Song. 2016. “Improving GDP Measurement: A Measurement-Error Perspective.” Journal of Econometrics 191(2), pp. 384–397.
Barigozzi, Matteo, and Matteo Luciani. 2018. “Do National Account Statistics Underestimate U.S. Real Output Growth?” Board of Governors FEDS Notes, January 9.
Grimm, Bruce T. 2007. “The Statistical Discrepancy.” Bureau of Economic Analysis Working Paper 2007-01, March 2.
Landefeld, J. Steven. 2010. “Comments and Discussion: The Income- and Expenditure-Side Estimates of U.S. Output Growth.” Brookings Papers on Economic Activity, Spring, pp. 112–123.
Lang, David, and Kevin J. Lansing. 2010. “Forecasting Growth Over the Next Year with a Business Cycle Index.” FRBSF Economic Letter 2010-29 (September 27).
Nalewaik, Jeremy J. 2010. “The Income- and Expenditure-Side Estimates of U.S. Output Growth.” Brookings Papers on Economic Activity, Spring, pp. 71–106.
Nalewaik, Jeremy J. 2012. “Estimating Probabilities of Recession in Real Time Using GDP and GDI.” Journal of Money, Credit, and Banking 44, pp. 235–253.
Opinions expressed in FRBSF Economic Letter do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.
- Trump’s Manchurian Trade Policy - Paul Krugman
- Actually, the U.S. Can Afford Welfare - Justin Fox
- The Economics of Disintegration of the Greenland Ice Sheet - NBER
- Germany's Prosperity: How Stable are the Foundations? - Tim Taylor
- Core Design Principles for a Central Bank Digital Currency - Bank Underground
- The “accounting view” of money: money as equity - All About Finance
- News Values - Economic Principals
- Great Recession: New Car Buyers Hold Cars Longer on Hold - St. Louis Fed
- The carbon bubble and the pricing of bank loans - VoxEU
Sunday, May 27, 2018
Does economics matter?: Does economics matter? I ask because I suspect I would understand political debate better if I realized that it doesn’t.
Everybody tends to over-rate the importance of their profession: it’s part of deformation professionelle. Lawyers over-rate the importance of the law, artists of the arts and so on. Maybe economists do the same. Perhaps we should realize that most people who are interested in politics just aren’t interested in economics.
If we adopt this perspective, a lot falls into place. ...
Saturday, May 26, 2018
David Glasner at Uneasy Money:
Neo- and Other Liberalisms: Everybody seems to be worked up about “neoliberalism” these days. A review of Quinn Slobodian’s new book on the Austrian (or perhaps the Austro-Hungarian) roots of neoliberalism in the New Republic by Patrick Iber reminded me that the term “neoliberalism” which, in my own faulty recollection, came into somewhat popular usage only in the early 1980s, had actually been coined in the early the late 1930s at the now almost legendary Colloque Walter Lippmann and had actually been used by Hayek in at least one of his political essays in the 1940s. In that usage the point of neoliberalism was to revise and update the classical nineteenth-century liberalism that seemed to have run aground in the Great Depression, when the attempt to resurrect and restore what had been widely – and in my view mistakenly – regarded as an essential pillar of the nineteenth-century liberal order – the international gold standard – collapsed in an epic international catastrophe. The new liberalism was supposed to be a kinder and gentler — less relentlessly laissez-faire – version of the old liberalism, more amenable to interventions to aid the less well-off and to social-insurance programs providing a safety net to cushion individuals against the economic risks of modern capitalism, while preserving the social benefits and efficiencies of a market economy based on private property and voluntary exchange. ...
Barbara Biasi and Petra Moser at VoxEU:
Effects of copyrights on science: Summary Copyrights grant publishers exclusive rights to content for almost a century. In science, this can involve substantial social costs by limiting who can access existing research. This column uses a unique WWII-era programme in the US, which allowed US publishers to reprint exact copies of German-owned science books, to explore how copyrights affect follow-on science. This artificial removal of copyright barriers led to a 25% decline in prices, and a 67% increase in citations. These results suggest that restrictive copyright policies slow down the progress of science considerably.
Friday, May 25, 2018
- Turmoil for Turkey’s Trump - Paul Krugman
- The ‘suprasecular’ stagnation - VoxEU
- A Rescue Plan for a Jobs Crisis in the Heartland - Glaeser, Summers, Austin
- E-autocracy: Surveillance and propaganda in Chinese social media - VoxEU
- Monetary Policy and the Crosswinds of Change - Charles Evans
- Google and Facebook’s “Kill Zone” - ProMarket
- The declining share of manufacturing jobs - VoxEU
- Improved financial regulation deters misconduct - EurekAlert!
- Long Horizon Uncovered Interest Parity, Updated - Econbrowser
- Minutes of the Federal Open Market Committee, May 1-2, 2018 - FRB
- Can Credit Tightening Spur Social Unrest? Evidence from 1930s China - ProMarket
Wednesday, May 23, 2018
- Why a Trade War With China Isn’t “Easy to Win” - Paul Krugman
- The Future Fortunes of R-star: Are They Really Rising? - John Williams
- Congress Approves First Big Dodd-Frank Rollback - The New York Times
- US Hurricane Clustering: A New Reality? - Bank Underground
- Argentina: Sustainable, Yes, Perhaps, with Adjustment - Brad Setser
- How the Unfettered Fed Flattened the Phillips Curve - WSJ
- Anatomy of a trade collapse: The UK, 1929-33 - VoxEU
- What’s the Matter With Europe? - Paul Krugman
- The “accounting view” of money: money as equity - All About Finance
Monday, May 21, 2018
- Monopsony, Rigidity, and the Wage Puzzle (Wonkish) - Paul Krugman
- Does the New Keynesian Model Have a Uniqueness Problem? - NBER
- The Old Allure of New Money - Robert Shiller
- Bitcoin, Vollgeld, and popular views of money - VoxEU
- The /Other/ Russia Story - Economic Principals
- When quotas reduce discrimination - VoxEU
- Monopsony in online labour markets - VoxEU
- Shining a light on PPP measurement - VoxEU
- China Now Has a Trade Deficit - Tim Taylor
- A Bad Deal on Currency (with Korea) - Brad Setser
- Making Unelected Power Legitimate - Cecchetti & Schoenholtz
- Economic Predictions with Big Data: The Illusion of Sparsity - Liberty Street
- Did China Just Bribe Trump to Undermine National Security? - Paul Krugman
- Nominal Wage Rigidities and the Path of Wage Growth - José Mustre-del-Río
- How the media and politicians dumb down economics - mainly macro
- What the Microsoft Antitrust Case Taught Us - The New York Times
- Freeing Econ 101: Beyond the Grasp of the Invisible Hand - Behavioral Scientist
- The populism backlash: An economically driven backlash - VoxEU
- Trump and the G.O.P. Show the Wrong Way to Cut Red Tape - New York Times
Thursday, May 17, 2018
- America’s Dismal Turning Point - Paul Krugman
- Don’t Fall for Employers’ Whining About a ‘Skills Gap’ - Bloomberg
- Trump lags behind his predecessors on economic growth - Brookings
- Monetary policy and inequality: A new channel - VoxEU
- Nominal Wage Rigidities and the Future Path of Wage Growth - Kansas City Fed
- The Bankrupt Ideology of Business School - The New Republic
- Will the Paris Agreement Help or Hinder Cooperation among Nations? - Robert Stavins
Wednesday, May 16, 2018
- Economics trails the sciences in attracting a diverse student mix - Mary Daly
- Rethinking Stigler’s Theory of Regulation: Regulatory Capture or Deregulatory Capture? - ProMarket
- Just Saying Yes to Drug Companies - Paul Krugman
- On neoliberalism - Stumbling and Mumbling
- Do larger health insurance subsidies benefit patients or producers? - Microeconomic Insights
- Companies Can't Hold the Line on U.S. Wages Much Longer - Tim Duy
- Structural change and the productivity slowdown - VoxEU
- Cryptocurrencies, Digital Currencies, and Distributed Ledger Technologies - Lael Brainard
- G.O.P. Insists Making Poor People Work Lifts Them Up. Where’s the Proof? - NYTimes
- The US Petroleum Trade Balance - Econbrowser
- The effects of legalising undocumented immigrants - VoxEU
- The current economy and the outlook - FRBSF
Monday, May 14, 2018
- What’s Good for Pharma Isn’t Good for America - Paul Krugman
- Cryptocurrencies’ challenge to central banks - VoxEU
- We can't ignore climate change - Pyndyck and Stock
- Finance and the Blockchain: A Primer - Cecchetti & Schoenholtz
- The “accounting view” of money: money as equity - All About Finance
- How the broadcast media created mediamacro - mainly macro
- The Future of Reliable News - Economic Principals
- Interviews: Dow, Harcourt, Goodhart, Lawson, Nelson, Chang - Tim Taylor
- The paradox of markups, part 2 - Growth Economics
- Ireland Exports its Leprechaun - Brad Setser
Friday, May 11, 2018
- The Death of Acceleration (Wonkish) - Paul Krugman
- Fiscal policy remains in the stone age - mainly macro
- It's a (low inflation) trap! - Antonio Fatas
- Initial Coin Scams - Nouriel Roubini
- Let Them Eat Trump Steaks - Paul Krugman
- Inflation, globalisation, and competition - VoxEU
- The Double Standard of America’s China Trade Policy - Dani Rodrik
- Job Guarantee: Marxist or Keynesian? - Stumbling and Mumbling
- Estimating Aggregate Fiscal Multipliers from Local Data - FRB Richmond
- Some Economic Effects of US Import Restraints - Tim Taylor
- Disaggregating the Fall in China's Current Account Surplus - Brad Setser
- More From Your Horseshoe Crab Blood Economics Leader - Tim Taylor
- Beauty contests and the term structure - VoxEU
Wednesday, May 09, 2018
- Gnawing Away at Health Care - Paul Krugman
- May 1968 and inequality - Thomas Piketty
- The paradox of markups - Growth Economics
- Tax evasion and inequality - VoxEU
- The yield curve and the stock market - VoxEU
- Explaining Germany’s exceptional recovery: A new eBook - VoxEU
- Forecasts of the Lost Recovery - Liberty Street Economics
- TReagan's Policies: Supply-Side Miracle or Keynesian Stimulus? - Econbrowser
- Globalisation, government popularity, and the Great Skill Divide - VoxEU
- Economic policies for tectonic change - FT
Monday, May 07, 2018
- Unnatural Economics (Wonkish) - Paul Krugman
- The Destruction of the Republican Party - J. Bradford DeLong
- A very simple model of too much city - Nick Rowe
- How Futures Trading Changed Bitcoin Prices - FRBSF
- Banking the Masses: 2018 Edition - Cecchetti & Schoenholtz
- Corporate Profit Margins at Risk From Rising Input Prices - Tim Duy
- It’s not just monopoly and monopsony - EPI
- Making (some) sense of cryptocurrencies - VoxEU
- State of the union - gender equality - Women in Economics at Berkeley
- The threat of secular stagnation has not gone away - Larry Summers
- CA’s Crude Oil Production and its Climate Change Policies - Robert Stavins
- How to spot fraudulent economic arguments - mainly macro
- How to represent the interests of future generations now - VoxEU
- Black Unemployment Is at an All-Time Low, But ... - Bloomberg
- What the boss wants to hear ... - Understanding Society
- After the Next Recession - Economic Principals
- Is the economy overheating? - Econbrowser
Friday, May 04, 2018
From the NBER Digest. "Two studies suggest that an increase in employers' monopsony power is associated with lower wages.":
Employer Concentration and Stagnant Wages: Stagnant wages and a declining share of labor income in GDP in recent decades have spawned a number of explanations. These include outsourcing, foreign competition, automation, and the decline of unions. Two new studies focus on another factor that may have affected the relative bargaining position of workers and firms: employer domination of local job markets. One shows that wage growth slowed as industrial consolidation increased over the past 40 years; the other shows that in many job markets across the country there is little competition for workers in specific job categories.
In Strong Employers and Weak Employees: How Does Employer Concentration Affect Wages? (NBER Working Paper No. 24307), Efraim Benmelech, Nittai Bergman, and Hyunseob Kim analyzed county-level census data for industrial firms for the period 1977 to 2009 to study the impact of employer concentration on wages in local labor markets. By focusing on manufacturing, they were able to control directly for worker productivity. The researchers found that, although there was substantial cross-sectional and time series variation in concentration, average local-level employer concentration increased between 1977-81 and 2002-9, based on the Standard Industrial Classification four-digit code for industry groups. Their measure of concentration is the Herfindahl-Hirschman Index (HHI), which is defined as the sum of the squares of the employment shares for all of the firms in a given industry. The employment-weighted mean value of this index rose from 0.698 to 0.756 during the study period, an increase of 5.8 percent. Forty percent of the plant-year observations were associated with manufacturing facilities in counties dominated by just a few firms. The researchers found a negative relationship between employer concentration and wages; it was twice as strong in the second half of their data sample as in the first half; a one standard deviation increase in the HHI was associated with a wage reduction of between 1 and 2 percent. They estimate that a firm operating in a labor market in which it was the only employer would pay wages 3.1 percent lower than those of a firm that operated in a less concentrated market. Most of the decline in wages appeared to occur as labor markets approached the pure monopsony case, namely the situation in which only one firm is hiring workers. In addition to finding lower wages in monopsony markets, the researchers also found that, over time, firms that dominate their labor markets were less likely to share productivity gains with employees. A one standard deviation decline in the HHI mapped to an increase in the elasticity of wages with respect to productivity of about 25 percent, from 0.38 to 0.47. Over the course of the study period, U.S. imports from China increased. The researchers found that import competition from China, which was associated with the closure or relocation of plants in a number of industries, accelerated the trend toward greater employer concentration in some local labor markets. This finding suggests that import competition not only reduced the demand for workers who previously produced the now-imported products, but that it may also have depressed wages for workers in other industries in affected labor markets as a result of increased labor market concentration. The only employees who did not experience wage stagnation in markets with high plant concentration were those who belonged to unions. About one quarter of the plants studied were unionized; the fraction was lower in the later than in the earlier years. Because this study focuses on workers employed by industrial firms, the fraction of workers who are union members is higher than for the U.S. labor market more broadly. To assess the robustness of their results, the researchers compared plants in the same industry owned by the same company but operating in different locations; they found that "those located in a more concentrated local labor market pay significantly lower wages."
In Concentration in U.S. Labor Markets: Evidence from Online Vacancy Data (NBER Working Paper No. 24395), José A. Azar, Ioana Marinescu, Marshall I. Steinbaum, and Bledi Taska found that in most locations employers have substantial monopsony power. The researchers studied job vacancies in the 709 federally delineated commuting zones, which depict the bounds of local economies. Drawing on a database compiled by Burning Glass Technologies from 40,000 employment websites, they calculated the level of labor market concentration by commuting zone, occupation, and quarter for the year 2016. They selected the top 200 occupations as classified by the Bureau of Labor Statistics' six-digit code, capturing 90 percent of the job postings in the database. As a yardstick for labor market concentration, the study calculated the Herfindahl-Hirschman Index measure, similar to the application in Working Paper 24307. The results suggested that the higher the market concentration, the stronger an employer's bargaining position. The average market had the equivalent of 2.5 recruiting employers. Under the standards that federal antitrust officials use when determining whether product markets exhibit excessive levels of concentration, 54 percent of the markets were highly concentrated, meaning they had the equivalent of fewer than four firms recruiting employees. Eleven percent of markets were moderately concentrated, and only 35 percent had low concentration. Nationwide, among the 30 largest occupations, marketing managers, web developers, and financial analysts faced the least favorable job markets; markets were most favorable for registered nurses, tractor-trailer drivers, and customer service representatives. The actual picture for job seekers, however, was brighter than these figures would indicate because commuting zones vary widely in employment levels. Commuting zones encompassing large cities had lower levels of labor market concentration than those around small cities or in rural areas. Accounting for the unequal distribution of employment, the researchers found that 23 percent of the national workforce is in highly or moderately concentrated labor markets. They argue that traditional market concentration thresholds underestimate workers' loss of bargaining power over time. They point out that those thresholds are geared to gauging the impact of mergers on the consumer marketplace, and that while consumers can buy products without the producers' explicit agreement, workers must find employers who agree to hire them.
- Free markets require robust social insurance. - The Washington Post
- "The Very Structure of Capitalism Is Inherently Monopolistic" - ProMarket
- Is the Great Recession Still Holding Down Wages? (Wonkish) - Paul Krugman
- Unemployment Falls to 3.9 percent, Wage Growth Remains Weak - Dean Baker
- Apple and the Fruits of Tax Cuts - Paul Krugman
- Progress in economics - Stumbling and Mumbling
- Hamilton on Econometrics, Energy, and Low Interest Rates - David Beckworth
- Rising Bilateral Deficit with China, Negotiations Over China 2025 - Brad Setser
- Spring 2018 Journal of Economic Perspectives is Online - Tim Taylor
- Donald Trump’s Normal Fed - Kenneth Rogoff
- The influence of Karl Marx—a counterfactual - globalinequality
- Don’t go spare over excess capacity in manufactures - VoxEU
- Financial globalisation, bank lending and the limits of monetary policy - VoxEU
- Politicians Don’t Need New Ideas - Paul Krugman
- Why was economics so insular? - mainly macro
- The Eurasian Landbridge and China's Belt and Road Initiative - VoxEU
- Can an Emerging Economy Hold Too Many Foreign Assets? - Brad Setser
Tuesday, May 01, 2018
- How’s That Tax Cut Working Out? - Paul Krugman
- Gender and collaboration in economic research - VoxEU
- Economics: Reviled Because It Matters - Tim Taylor
- Econ Grapples With What Causes Recessions - Noah Smith
- Investment Boom From Trump’s Tax Cut Has Yet to Appear - NYTimes
- The strong economy: how Brexit dishonesty began - mainly macro
- Excessive Zoning Makes Us Poorer and More Unequal - ProMarket
- Is The Economist Correct About the State of Applied Micro? - Matthew Kahn
- An Age Such As This - Economic Principals
- Quantifying the gains from trade - VoxEU
- The financial power of the powerless - VoxEU
- Is Marx Still Relevant? - Peter Singer
Friday, April 27, 2018
- Inequality in US Life Expectancy - Tim Taylor
- Opinion | Trump’s War on the Poor - Paul Krugman
- Data Workers of the World, Unite! - ProMarket
- How much does infrastructure boost an economy? - MIT News
- Macroeconomic Policy Reform the IPPR way - mainly macro
- Some Things Are Worse Than Paying Taxes - Justin Fox
- Why Innovation Tends to Bypass Mainstream Economics - Bloomberg
- Keynesian economics without the Phillips curve - Farmer and Nicolò
- Econ Critics Are Stuck in the Past - Noah Smith
- Revisiting the 1990s debate on globalisation - VoxEU
- The curse of persistently low real interest rates - VoxEU
- Rethinking the macroeconomics of resource-rich countries - VoxEU
- Do Firms Use Capital and Labor Efficiently? - ProMarket
- Opinion | We Don’t Need No Education - Paul Krugman
- Hayek, Radner and Rational-Expectations Equilibrium - Uneasy Money
- Regulatory failure - Understanding Society
- Is Amazon really an antitrust worry? – Digitopoly
- Opinion | Americans Aren’t Centrist on Economics - NYTimes
- Universal Central Bank Digital Currency? - Cecchetti & Schoenholtz
Monday, April 23, 2018
This is by Seppo Honkapohja and Kaushik Mitra (very wonkish):
Price Level Targeting with Evolving Credibility, by Seppo Honkapohja and Kaushik Mitra: Abstract We examine global dynamics under learning in a nonlinear New Keynesian model when monetary policy uses price-level targeting and compare it to inflation targeting. Domain of attraction of the targeted steady state gives a robustness criterion for policy regimes. Robustness of price-level targeting depends on whether a known target path is incorporated into learning. Credibility is measured by accuracy of this forecasting method relative to simple statistical forecasts. Credibility evolves through reinforcement learning. Initial credibility and initial level of target price are key factors influencing performance. Results match the Swedish experience of price level stabilization in 1920's and 30's.
- Winners and losers from rising American inequality - VoxEU
- A Tribute to Uwe Reinhardt - Paul Krugman
- Metrics Monday: Don’t Overcontrol - Marc Bellemare
- A hostile environment - mainly macro
- Steel Tariffs and Wages (Painfully Wonkish) - Paul Krugman
- "What Money Can't Buy" with Sandel, Barro, and Summers - Matthew Kahn
- Marx and modern microeconomics - Samuel Bowles
- The 2018 John Bates Clark: Parag Pathak - A Fine Theorem
- How the Loss of Union Power Has Hurt American Manufacturing - NYTimes
- Good bad theories - Stumbling and Mumbling
- The Clean Cooking Problem: 2.3 Million Deaths Annually - Tim Taylor
- International transmission of monetary policy via banks - VoxEU
- The Great Snake Oil Slump - Paul Krugman
- Natural Resources, Living Standards and Inequality - Livio Di Matteo
- U.S. inequality: It's worse than we thought - FRB Minneapolis
- Facts vs hand-waving in economics - Stumbling and Mumbling
- Moving the Overton Window: Let the Debate Continue - Roger Farmer
- Did macro give up on explaining recent economic history? - mainly macro
Thursday, April 19, 2018
- Trump’s Advisors Recognize That His China Tariff Strategy Calls for… What Might You Call It? A “Trans-Pacific Partnership”, Perhaps? - Equitable Growth
- Equilibrium Selection, Observability and Backward-stable Solutions - Brad DeLong
- On Equilibrium in Economic Theory - Uneasy Money
- Scam I Amn’t: Voters and the Tax Cut - Paul Krugman
- No Worker Left Behind - Laura Tyson & Lenny Mendonca
- Why Democracy Fails to Reduce Inequality - ProMarket
- Rent Stabilization Fails to Target Those in Need - Richard Green
- FedViews: April 12, 2018 - Federal Reserve Bank of San Francisco
- The FOMC: Inflation Theory and Inflation Control - Stephen Williamson
- The Wage Growth Premium from Changing Jobs - macroblog
- A neo-Fisherian experiment that hedges its New Keynesian bets - longandvariable
- Mexico and Its Workers Didn't Hit the Jackpot With Nafta - Bloomberg
- Important Choices for the Federal Reserve in the Years Ahead - William Dudley
- The Importance of Meta-Learning - EconoSpeak
- Mutiny on the Down-Low - Economic Principals
- Employment Breakeven Levels: They’re higher than most of us thought - Jared Bernstein
- Update: journals making it difficult to review a paper - Environmental Economics
- Krugman on renewables - Environmental Economics
- The Fed’s Asymmetric Forecast Errors - Andrew C. Chang
- How Much Consumption Responds to Government Stimulus - FRBSF
- Can Media and Text Analytics Provide Insights into Labour Market Conditions in China? - Econbrowser
- Prediction Machines – Digitopoly
- Trump Picks Monetary Expert for No. 2 Job at Federal Reserve - The New York Times
- On the Distribution of Wealth - Cecchetti & Schoenholtz
- Mortgage-Backed Securities Ratings and Losses Maybe Not So Bad - Carola Binder
- Opinion | Earth, Wind and Liars - Paul Krugman
- On the rift between economics and everything else - Notes On Liberty
- What Does Economics Need to Learn Next? - Brad DeLong
- Jupyter, Mathematica, and the Future of the Research Paper – Paul Romer
- Standing on the Shoulders of Giants - Roger E. A. Farmer
- Wage returns to schooling and early work experience - VoxEU
- Opinion | The Paul Ryan Story: From Flimflam to Fascism - Paul Krugman
- The Dream of a Republican New Deal - The New York Times
- China’s Communists Rewrite the Rules for Foreign Businesses - The New York Times
- Fiscal Rules: Make them Easy to Love and Hard to Cheat - IMF Blog
- What can regional data tell us about the UK Phillips Curve? - Bank Underground
- State and Local Spending on Higher Education - Tim Taylor
- The leverage ratio as a macroprudential policy instrument - VoxEU
- Paul Ryan's Roadmap Was an Epic Fiscal Failure - Justin Fox
- China’s hidden shipbuilding subsidies and their impact on its industrial dominance - Microeconomic Insights
- Solutions to the Threats of Digital Monopolies - ProMarket
Tuesday, April 10, 2018
- The Fallacy of the Free Market - James Kwak
- Trump’s Trade Confusion - Joseph E. Stiglitz
- Capital in Russia - Thomas Piketty
- What’s Been Stopping the Left? - Dani Rodrik
- Opinion | Obamacare’s Very Stable Genius - Paul Krugman
- Supporting Strong, Steady, and Sustainable Growth - John Williams
- A debt crisis is coming. But don’t blame entitlements. - The Washington Post
- Price-level targeting to escape the zero lower bound - VoxEU
- Phillips Curve bashing and immaculate inflation - longandvariable
- Vulnerable Growth - Liberty Street Economics
- US Lagging in Labor Force Participation - Tim Taylor
- Donald Trump trade threats lack credibility - Larry Summers
- Opinion | Unicorns of the Intellectual Right - Paul Krugman
- DSGE models: A cup half full - John Williams
- What Random Walks in Multiple Dimensions Teach You About Life - WIRED
- Reflections on Economics and Policy Making in the Environmental Domain - Robert Stavins
- Should the 5% Convention for Statistical Significance be Dramatically Lower? - Tim Taylor
- "Trickle Down", "Magic Dirt", memes and deep parameters - Nick Rowe
- Misconceptions about Milton Friedman's 1968 Presidential Address - Tim Taylor
- Early gender gaps among university graduates - VoxEU
- The Outlook for the U.S. Economy - Jerome Powell
- Modern Money Theory (MMT) vs. Structural Keynesianism - Thomas Palley
- Unemployment Holds at 4.1 Percent in March, Wage Growth Picks Up - Jobs Bytes
- The economic impacts of immigration to the UK - VoxEU
- Disagreeing With Krugman: Is China Stealing Knowledge? - Dean Baker
- The Art of the Flail - Paul Krugman
- The Roots of ‘Bubbly’ Recessions - Federal Reserve Bank of Richmond
Wednesday, April 04, 2018
- Trade Wars, Stranded Assets, and the Stock Market - Paul Krugman
- No, “Obamasclerosis” wasnt a real problem for the economy - Larry Summers
- Will China Really Supplant US Economic Hegemony? - Kenneth Rogoff
- Consumption data: New frontiers - VoxEU
- The dollar-euro exchange rate, 2016-2018 - VoxEU
- India’s Path to Stigmatized Capitalism - Arvind Subramanian
- What’s the Matter With Trumpland? - Paul Krugman
- Inequality and poverty - Stumbling and Mumbling
- Safeguarding public interests in the platform economy - VoxEU
- A recipe for monetary policy in emerging market economies - VoxEU
- Flexible Price-Level Targeting in the Big Picture - macroblog
- Raising the Speed Limit on Future Growth - FRBSF
Monday, April 02, 2018
- Will China Really Supplant US Economic Hegemony? - Kenneth Rogoff
- The Debate on Trade Deficits Is Littered with Misconceptions - Joseph Gagnon
- Big Business Is Too Big - The New York Times
- ‘Metrics Monday: Survivorship Bias - Marc F. Bellemare
- Liquidity Regulation is Back - Cecchetti & Schoenholtz
- Stabilising the real economy increases average output - VoxEU
- The uncertain future of central bank independence - VoxEU
- Cloak and… Megaphone - Economic Principals
- When did sustained growth start? - Growth Economics
- The Phillips Curve and the Lucas Critique - Uneasy Money
Friday, March 30, 2018
- Is It Policy, or Just Reality TV? - Paul Krugman
- How to Think About Corporate Tax Cuts - Justin Wolfers
- Misconceptions about Trade Deficits - Tim Taylor
- “Globalization Has Contributed to Tearing Societies Apart” - Dani Rodrik
- Congress Considers Going Easy on Predatory Lenders - NYTimes
- E.P.A. Prepares to Roll Back Rules Requiring Cars to Be Cleaner - NYTimes
- Endogenous Uncertainty - Fed in Print
- Inflation and Unemployment (Part 2) - MacroMania
- Beware Economists Who Warn of an Entitlement Explosion - Justin Fox
- NY Fed's Next President Should Be More Challenging - Narayana Kocherlakota
- The UK’s productivity puzzle is in the top tail - Bank Underground
Wednesday, March 28, 2018
- Immaculate Inflation Strikes Again (Wonkish) - Paul Krugman
- The Phillips Curve and Identification Problems - Everyday Economist
- Large Scale Econometric Models: Do they Have a Future? - Roger E. A. Farmer
- A Long-Run Monetary Policy Framework: Framing the Question - macroblog
- The Principle of Bounded Nominal Uncertainty - macroblog
- An Example of Flexible Price-Level Targeting - macroblog
- Trump’s economic team needs to grow up — fast - Washington Post
- The world is not flat - FT
- The stubbornly high cost of remittances - VoxEU
- Pols Use Economics the Way Drunks Use Lampposts - Alan Blinder
- How does monetary policy affect inequality? - Bank Underground
Monday, March 26, 2018
- Trade and the Cities (Wonkish) - Paul Krugman
- Tax Cuts and Wages Redux (Slightly Wonkish) - Paul Krugman
- Chinese income distribution in 2002-3 and 2013 - globalinequality
- Tariffs as a Method of Promoting LR Free Trade - Everyday Economist
- Saving the Shrinking Middle - Mohamed A. El-Erian
- The War Within The FBI - Economic Principals
- Inflation and unemployment - MacroMania
- Mechanisms, singular and general - Understanding Society
- Do Adjustment Lags Matter for Inflation-Indexed Bonds? - FRBSF
- Size is Overrated - Cecchetti & Schoenholtz
Friday, March 23, 2018
- Bumbling Into a Trade War - Paul Krugman
- Globalization: What Did Paul Krugman Miss? - Brad DeLong
- The Economic Scars of Crises and Recessions - IMF Blog
- The Trump Boom Is Making It Harder to See the Next Recession - Robert Shiller
- The Output Gap is no longer a sufficient statistic for inflation - mainly macro
- How economics failed us - Martin Wolf
- Response to Wolf: Economics failed us before the global crisis - Peter Doyle
- Francis Bator, Influential White House Economist, Dies at 92 - NYTimes
- Income redistribution through taxes and transfers - VoxEU
- The hysteresis-resilience trade-off in unemployment - VoxEU
- Oil prices do not affect inflation expectations after all - VoxEU
- How reciprocity can magnify inequality - EurekAlert
Tuesday, March 20, 2018
- Trump and Trade and Zombies - Paul Krugman
- The Distribution and Redistribution of US Income - Tim Taylor
- The Golden Rule - Magic, maths and money
- What economics and cars can tell us about guns - The Berkeley Blog
- Big Data and Economic Nowcasting - No Hesitations
- What anchors inflation? - MacroMania
- Tougher capital regulation pays off - Cecchetti & Schoenholtz
- What Does it Mean to Have Rational Expectations? - Roger Farmer
- A road to right wing authoritarian government - mainly macro
- The /Other/ Marshall Plan - Economic Principals
Saturday, March 17, 2018
- Voters May Be Wising Up - Paul Krugman
- A new classification of monetary policy frameworks - VoxEU
- Monetary and Fiscal Federalism, Debt, Canada, and the Eurozone - Nick Rowe
- Paul Krugman Explains Trade and Tariffs - The New York Times
- The Skeptical View in Favor of an Antitrust Push - Tim Taylor
- Monetary policy spillovers in the first age of globalisation - Bank Underground
- Cryptocurrencies challenge the status quo - VoxEU
- Mortgage delinquency rates: A cross-country perspective - VoxEU
- The illusion of knowledge - Stumbling and Mumbling
- A Keynesian model of long-run growth - VoxEU
- What Hath Merkel Wrought? - Uneasy Money
- Household Inequality, Consumption, and Aggregate Real Shocks - FRB Chicago
- The Dollar’s Doldrums - Barry Eichengreen
- The Distribution of Gains from Globalization - The Unassuming Economist
Tuesday, March 13, 2018
- Springtime for Sycophants - Paul Krugman
- Assessing Trends in Real Shares - Econbrowser
- The consumer benefits of trade agreements - VoxEU
- Towards a Union in the Union - Thomas Piketty
- When Shall We Overcome? - Joseph E. Stiglitz
- AEA draft code of conduct - Women in Economics at Berkeley
- China’s Unnecessary and Counterproductive Fiscal Consolidation - Brad Setser
- Identification Is Not Causality, Causality Is Not Identification - Marc Bellemare
- Trade Wars Can Be a Game of Chicken. Sometimes, Literally. - NYTimes
- Budget deficits, fiscal councils and authoritarian regimes - mainly macro
- The Great Recession took a toll on public health - EurekAlert
- Shares of Real GDP Don't Give the Real Story of Manufacturing - Justin Fox
- Great Recession still plagues workers with lower lifetime wages - EurekAlert!
- The Household Fallacy - Roger E. A. Farmer
- Ergodicity - Roger E. A. Farmer
- Cultural costs of high house prices - Stumbling and Mumbling
- US economy is still far from fully recovered - Martin Sandau
- Ten Years After Bear - Cecchetti & Schoenholtz
- Can central bankers become Superforecasters? - Bank Underground
- Innovation as a Challenge to Regulation - The Regulatory Review
- Equity markets are thriving but are they relevant? - John Kay
Monday, March 12, 2018
Jobs Report Gives Fed Cover To Retain Gradual Rate Path: The jobs report gives the Fed cover to retain a gradual rate path. To be sure, the rapid pace of job growth will leave them nervous about an unsustainable pace of growth. But the flat unemployment rate remains consistent with their forecasts. In addition, low wage growth indicates the economy has not pushed past full employment. If inflation remains constrained, the Fed would be pretty much on target for this year. That suggests the three-hike scenario should remain in play. But increased confidence in the outlook and risk management concerns will push up enough “dots” in the next Summary of Economic projections toward four hikes for this year. ...continued here...
Sunday, March 11, 2018
- Trump’s Trade Gimmickry - Dani Rodrik
- The three mistakes of centrism - mainly macro
- Trump’s Negative Protection Racket (Wonkish) - Paul Krugman
- Graphs for the Most Basic of Business Cycle Macro Analyses - Brad DeLong
- Inflation? Bring It On. Workers Could Actually Benefit. - Isabel Sawhill
- Immigration: the wrong battle - Stumbling and Mumbling
- Potential threats to central bank independence - VoxEU
- The New Fama Puzzle, post-ZLB - Econbrowser
- FedView - FRBSF
- Special Greeting from the UCLA Causality Blog - Judea Pearl
- Putin’s Stated Plan: A High-Tech Russian Doll - Economic Principals
- The many flaws in the Senate’s rollback of Dodd-Frank - Jared Bernstein
- Job Growth Soars in February, Wage Growth Slows - Dean Baker
- How poor was 18th century France? - Notes On Liberty
- Wicksellian Exchange Rate – losinterest
- Some Economics of Place-Based Policies - Tim Taylor
- The New York Fed DSGE Model Forecast–March 2018 - Liberty Street
- Medicine Markup - FRB Richmond
- Too Many Co-Authors - FRB Richmond
- Interview of Jean Tirole - FRB Richmond
Friday, March 09, 2018
I kind of got behind...
- The gendered impact of eliminating mandatory retirement - Frances Woolley
- What Do Stock Prices Tell Us about the Economy? - Uneasy Money
- The productivity slowdown and labor’s income share - Equitable Growth
- A new take on low interest rates and risk taking - VoxEU
- Publicly funded applied research pays off - VoxEU
- The Real Engine of the Business Cycle - Amir Sufi & Atif Mian
- Will China Out-Innovate the West?- Edmund S. Phelps
- The Blockchain Pipe Dream - Nouriel Roubini & Preston Byrne
- Trump’s Tax on America - Brad DeLong
- What Insights Do Taxi Rides Offer into Federal Reserve Leakage? - Promarket
- Airlines Use Earnings Calls to Coordinate Capacity Reductions - ProMarket
- A Ranting Old Guy With Nukes - Paul Krugman
- Krugman’s Taking Your Questions on Trade - The New York Times
- Oh, What a Trumpy Trade War! - Paul Krugman
- Keynes on the Sequencing of Economic Policy: Recovery and Reform in 1933 - NBER
- A First Look at Employment - macroblog
- The Misthinking of Globalization—Past, Present, and Future - IGM Forum
- This article at Vox summarizes everything that I've been trying to say - Environmental Economics
- How Will the U.S. Fund its Twin Deficits? - Brad Setser
- Saving the heartland: Place-based policies in 21st Century America - Larry Summers
- Cochrane Fails to Make His Case for the Trump Tax Cut Again - EconoSpeak
- D is for Devastating: A Statistical Error and the Vitamin D Saga - Carola Binder
- The 2016 Sterling Flash Episode - Bank Underground
- Preventing Bank Runs - FRB Richmond
- Did the Dodd-Frank Act End ‘Too Big to Fail’? - Liberty Street Economics
- Currency markets send a warning on the US economy - Larry Summers
- E.U. Pledges to Fight Back on Trump Tariffs as Trade War Looms - The New York Times
- A new fiscal policy for a world of accelerated change and artificial intelligence - Brookings
- Economic Forecasts with the Yield Curve - FRBSF
- Bank Financing: The Disappearance of Interbank Lending - Cecchetti & Schoenholtz
- Janet Yellen: 10 quotes on her past and the economy - Brookings
- Questions - Tim Duy's Fed Watch
- The Macroeconomics of Trade War - Paul Krugman
- Consensus and mutual understanding - Understanding Society
- The economic and political cost of UK austerity - mainly macro
- Why do beginner econometricians get worked up about the wrong things? - Frances Woolley
- Sorting, incentives, and excessive managerial pay - VoxEU
- Top5itis: The Disease that Affects Economics - ProMarket
Friday, March 02, 2018
- The Force of Decency Awakens - Paul Krugman
- The Hidden Taxes on Women - The New York Times
- Republicans say they favor free markets. Yeah, right. - Washington Post
- Economists vs. Scientists on Long-Term Growth - Kenneth Rogoff
- Bernanke Interviews Yellen - Tim Taylor
- Mathematical Finance - Magic, maths and money
- Regional Consumption Responses and the Aggregate Fiscal Multiplier - Fed
- The dangers of pluralism in economics: the case of MMT - mainly macro
- Why Jay Powell’s Fed taper is not causing tantrums - FT
- Making Globalization Work - William Dudley
- A snippet on bounded rationality - Crooked Timber
- Peer to Peer – Scale and Scalability - Bank Underground
- Weighting the Wage Growth Tracker - macroblog
Thursday, March 01, 2018
Fed Changing Its Tune: Yesterday I called attention to this line from Federal Reserve Chairman Powell’s testimony:In gauging the appropriate path for monetary policy over the next few years, the FOMC will continue to strike a balance between avoiding an overheated economy and bringing PCE price inflation to 2 percent on a sustained basis.
I interpreted this as a shift in the Fed’s focus. The risks are shifting, hence the new concern about an overheated economy. In contrast, previous iterations of this policy guidance referred to “achieving” and then “sustaining” full employment. Central bankers must view the economy as in a danger zone for inflationary pressures. ...continued here...
Wednesday, February 28, 2018
“Avoiding An Overheated Economy,” by Tim Duy: Federal Reserve Chairman Jerome Powell delivered the Fed’s Semiannual Monetary Policy Report Tuesday morning. Powell smoothly and confidently responded to – or deflected – questions as if he were already seasoned in the role of Chair. As to the content of his remarks, they were hawkish. More hawkish than I anticipated and arguably signaled a significant change of focus for the Fed. ...continued here...
- Bonuses and Bogosity - Paul Krugman
- How Low Can Unemployment Really Go? - The New York Times
- Krugman on Temporary vs Permanent Monetary Injections - David Beckworth
- Two Central Bankers Walk Into a Restaurant... - Tim Taylor
- Fed Chair Jay Powell on Monetary Policy Rules - David Beckworth
- Black/White Disparities: 50 Years After the Kerner Commission - Tim Taylor
- Working Toward the Next Economic Paradigm 1 Mohamed A. El-Erian
- A skeptical view of the impact of the Fed’s balance sheet - Econbrowser
- Understanding the U.S. Investment Income Balance (wonky) - Brad Setser
- Computational social science - Understanding Society
- The Rate of Return on Everything - No Hesitations
- An Assessment of the U.S. Economy - Randal Quarles
Monday, February 26, 2018
Looking For Policy Continuity From Powell, by Tim Duy: Federal Reserve Chairman Jerome Powell will tackle his first Semiannual Monetary Policy Report to the Congress this week. The expectation is that Powell will by and large reiterate the case for continued gradual tightening of monetary policy. That has come to mean three rate hikes in 2018, although given the data dependence of policy the risk is that three becomes four. Market participants remains nervous, however, that Powell will set a more hawkish tone indicating a sharp acceleration of rate hikes. I think this very unlikely at this juncture. I do think there is room, however, to emphasize that if fiscal spending supercharges growth in 2018, then rate hikes will continue into 2019. ...Continued here...
- Paroling the Spanish Prisoner (Wonkish) - Paul Krugman
- The Making of Lehman Brothers II - Simon Johnson
- Monetary Policy Cycles and Financial Stability - FRBSF
- Three questions for Federal Reserve chairman Jay Powell - FT
- Options of Last Resort - Liberty Street Economics
- ‘Metrics Monday: What to Do Instead of log(x +1) - Marc F. Bellemare
- Relying on the Fed's Balance Sheet - Cecchetti & Schoenholtz
- Rebuilding macroeconomic theory project - Equitable Growth
- Keynes's General Theory Contains Few Mentions of "Fiscal Policy"- Brad DeLong
- Slok on QE, and a great paper - John Cochrane
- A great EFG - John Cochrane
- Money and monetary stability in Europe, 1300-1914 - VoxEU
- Paul Krugman Looks Back at the Macroeconomic Policy Debate - Brad DeLong
- A Skeptical View of the Impact of the Fed’s Balance Sheet”- William Dudley
- Bulls--- Detection as a Student Learning Goal - Brad DeLong
Friday, February 23, 2018
- Financial Plumbing Most to Blame for 2008 Crisis - IGM Forum
- Foreign exchange interventions: Frequent and effective - VoxEU
- The recession of 2012-13 and the taper tantrum - MacroMania
- Some Thoughts About Economic Exposition in Math and Words - Tim Taylor
- Europeans should stop whining about their appreciating currency - FT Alphaville
- In America’s absence, Japan takes lead on Asian free trade - Washington Post
- Should Hurricane Maria Be Modeled as a Positive Growth Shock? - Brad Setser
"there’s a faction in our country that sees public action for the public good, no matter how justified, as part of a conspiracy to destroy our freedom":
Nasty, Brutish and Trump, by Paul Krugman, NY Times: On Wednesday, after listening to the heart-rending stories of those who lost children and friends in the Parkland school shooting — while holding a cue card with empathetic-sounding phrases — Donald Trump proposed his answer: arming schoolteachers.
It says something about the state of our national discourse that this wasn’t even among the vilest, stupidest reactions to the atrocity. No, those honors go to the assertions by many conservative figures that bereaved students were being manipulated by sinister forces, or even that they were paid actors.
Still, Trump’s horrible idea, taken straight from the N.R.A. playbook, was deeply revealing...
To see why, consider the very case often used to illustrate how bizarrely we treat guns: how we treat car ownership and operation...,there’s a lot of variation in car safety among states within the U.S., just as there’s a lot of variation in gun violence.
America has a “car death belt” in the Deep South and the Great Plains; it corresponds quite closely to the firearms death belt defined by age-adjusted gun death rates. It also corresponds pretty closely to the Trump vote — and also to the states that have refused to expand Medicaid, gratuitously denying health care to millions of their citizens. ...
For whatever reason, there’s a faction in our country that sees public action for the public good, no matter how justified, as part of a conspiracy to destroy our freedom.
This paranoia strikes both deep and wide. ... And it goes along with basically infantile fantasies about individual action — the “good guy with a gun” — taking the place of such fundamentally public functions as policing.
Anyway, this political faction is doing all it can to push us toward becoming a society in which individuals can’t count on the community to provide them with even the most basic guarantees of security — security from crazed gunmen, security from drunken drivers, security from exorbitant medical bills (which every other advanced country treats as a right, and does in fact manage to provide).
In short, you might want to think of our madness over guns as just one aspect of the drive to turn us into what Thomas Hobbes described long ago: a society “wherein men live without other security than what their own strength and their own invention shall furnish them.” And Hobbes famously told us what life in such a society is like: “solitary, poor, nasty, brutish and short.”
Yep, that sounds like Trump’s America.
I am here today:
Economic Fluctuations and Growth Research Meeting
Andrew Atkeson and Monika Piazzesi, Organizers
Federal Reserve Bank of San Francisco
February 23, 2018
Friday, February 23
Fatih Guvenen, University of Minnesota and NBER
Gueorgui Kambourov, University of Toronto
Burhanettin Kuruscu, University of Toronto
Sergio Ocampo-Diaz, University of Minnesota
Daphne Chen, Florida State University
Use It Or Lose It: Efficiency Gains from Wealth Taxation
Discussant: Roger H. Gordon, University of California at San Diego and NBER
Matteo Maggiori, Harvard University and NBER
Brent Neiman, University of Chicago and NBER
Jesse Schreger, Columbia University and NBER
International Currencies and Capital Allocation
Discussant: Harald Uhlig, University of Chicago and NBER
Katarína Borovičková, New York University
Robert Shimer, University of Chicago and NBER
High Wage Workers Work for High Wage Firms
Discussant: Isaac Sorkin, Stanford University and NBER
Marcus Hagedorn, University of Oslo
Iourii Manovskii, University of Pennsylvania and NBER
Kurt Mitman, Institute for International Economic Studies
The Fiscal Multiplier
Discussant: Adrien Auclert, Stanford University and NBER
Carlos Garriga, Federal Reserve Bank of St. Louis
Aaron Hedlund, University of Missouri
Housing Finance, Boom-Bust Episodes, and Macroeconomic Fragility
Discussant: Veronica Guerrieri, University of Chicago and NBER
John Kennan, University of Wisconsin at Madison and NBER
Spatial Variation in Higher Education Financing and the Supply of College Graduates
Discussant: Danny Yagan, University of California at Berkeley and NBER
Thursday, February 22, 2018
Fedspeak Reiterates Gradual Path: Fed speakers continue to reiterate that policy remains on a gradual path of tightening. So far, the inflation data and brightening economy has more emboldened their commitment to gradual rate hikes than a faster pace of hikes. What about fiscal policy? That train has left the station, but central bankers don’t seem too concerned – yet. ...continued here...
And one more from Tim:
First Impressions of the January FOMC Minutes: The minutes of the January FOMC meeting revealed increasing confidence in the economic outlook. That translated into increased confidence that gradual rate hikes remains the appropriate policy path. Does that mean the central bankers stand poised to raise their “dots” such that the median rate hike projection rises to four hikes? I don’t think so. I read the minutes as wiping away lingering concerns about the inflation outlook and allowing policymakers to coalesce around the existing three hike projection. The risk remains, of course, that conditions remain sufficiently buoyant to raise the rate projection in June or September. More important to me at this juncture is I see clear hints that the projections beyond 2018 are vulnerable to upward revisions. ...continued here...
- What Does a True Populism Look Like? It Looks Like the New Deal - Dani Rodrik
- Mapping Capital Flows Into the U.S. Over the Last Thirty Years - Brad Setser
- Stable exploitation - Stumbling and Mumbling
- The World-Wide Fama Puzzle Reversal - Econbrowser
- Puerto Rico and the U.S. Virgin Islands after the Hurricanes - Liberty Street
- Fed Officials Say Economy Is Ready for Higher Rates - The New York Times
- The Economic Roots of the Rise of Trumpism - John Komlos
- Economic Conditions and Key Challenges Facing the U.S. Economy - Dallas Fed
- Bank bail-ins: Lessons from the Cypriot crisis - VoxEU
Tuesday, February 20, 2018
Anna Stansbury and Lawrence Summers at VoxEU:
On the link between US pay and productivity, by Anna Stansbury and Lawrence Summers, VoxEU: Pay growth for middle class workers in the US has been abysmal over recent decades – in real terms, median hourly compensation rose only 11% between 1973 and 2016.1 At the same time, hourly labour productivity has grown steadily, rising by 75%.
This divergence between productivity and the typical worker’s pay is a relatively recent phenomenon. Using production/nonsupervisory compensation as a proxy for median compensation (since there are no data on the median before 1973), Bivens and Mishel (2015) show that typical compensation and productivity grew at the same rate over 1948-1973, and only began to diverge in 1973 (see Figure 1).
Figure 1 Labour productivity, average compensation, and production/nonsupervisory compensation 1948-2016
Notes: Labour productivity: total economy real output per hour (constructed from BLS and BEA data). Average compensation: total economy compensation per hour (constructed from BLS data). Production/nonsupervisory compensation: real compensation per hour, production and nonsupervisory workers (Economic Policy Institute).What does this stark divergence imply about the relationship between productivity and typical compensation? Since productivity growth has been so much faster than median pay growth, the question is how much does productivity growth benefit the typical worker?2
A number of authors have raised these questions in recent years. Harold Meyerson, for example, wrote in American Prospect in 2014 that “for the vast majority of American workers, the link between their productivity and their compensation no longer exists”, and the Economist wrote in 2013 that “unless you are rich, GDP growth isn't doing much to raise your income anymore”. Bernstein (2015) raises the concern that “[f]aster productivity growth would be great. I’m just not at all sure we can count on it to lift middle-class incomes.” Bivens and Mishel (2015) write “although boosting productivity growth is an important long-run goal, this will not lead to broad-based wage gains unless we pursue policies that reconnect productivity growth and the pay of the vast majority”.
Has typical compensation delinked from productivity?
Figure 1 appears to suggest that a one-to-one relationship between productivity and typical compensation existed before 1973, and that this relationship broke down after 1973. On the other hand, just as two time series apparently growing in tandem does not mean that one causes the other, two series diverging may not mean that the causal link between the two has broken down. Rather, other factors may have come into play which appear to have severed the connection between productivity and typical compensation.
As such there is a spectrum of possibilities for the true underlying relationship between productivity and typical compensation. On one end of the spectrum – which we call ‘strong delinkage’ – it’s possible that factors are blocking the transmission mechanism from productivity to typical compensation, such that increases in productivity don’t feed through to pay. At the opposite end of the spectrum – which we call ‘strong linkage’ – it’s possible that productivity growth translates fully into increases in typical workers’ pay, but even as productivity growth has been acting to raise pay, other factors (orthogonal to productivity) have been acting to reduce it. Between these two ends of the spectrum is a range of possibilities where some degree of linkage or delinkage exists between productivity and typical compensation.
In a recent paper, we estimate which point on this linkage-delinkage spectrum best describes the productivity-typical compensation relationship (Stansbury and Summers 2017). Using medium-term fluctuations in productivity growth, we test the relationship between productivity growth and two key measures of typical compensation growth: median compensation, and average compensation for production and nonsupervisory workers.
Simply plotting the annual growth rates of productivity and our two measures of typical compensation (Figure 2) suggests support for quite substantial linkage – the series seem to move together, although typical compensation growth is almost always lower.
Figure 2 Change in log productivity and typical compensation, three-year moving average
Notes: Data from BLS, BEA and Economic Policy Institute. Series are three-year backward-looking moving averages of change in log variable.Making use of the high frequency changes in productivity growth over one- to five-year periods, we run a series of regressions to test this link more rigorously. We find that periods of higher productivity growth are associated with substantially higher growth in median and production/nonsupervisory worker compensation – even during the period since 1973, where productivity and typical compensation have diverged so much in levels. A one percentage point increase in the growth rate of productivity has been associated with between two-thirds and one percentage point higher growth in median worker compensation in the period since 1973, and with between 0.4 and 0.7 percentage points higher growth in production/nonsupervisory worker compensation. These results suggest that there is substantial linkage between productivity and median compensation (even the strong linkage view cannot be rejected), and that there is a significant degree of linkage between productivity and production/nonsupervisory worker compensation.
How is it possible to find this relationship when productivity has clearly grown so much faster than median workers’ pay? Our findings imply that even as productivity growth has been acting to push workers’ pay up, other factors not associated with productivity growth have acted to push workers’ pay down. So while it may appear on first glance that productivity growth has not benefited typical workers much, our findings imply that if productivity growth had been lower, typical workers would have likely done substantially worse.
If the link between productivity and pay hasn’t broken, what has happened?
The productivity-median compensation divergence can be broken down into two aspects of rising inequality: the rise in top-half income inequality (divergence between mean and median compensation) which began around 1973, and the fall in the labour share (divergence between productivity and mean compensation) which began around 2000.
For both of these phenomena, technological change is often invoked as the primary cause. Computerisation and automation have been put forward as causes of rising mean-median income inequality (e.g. Autor et al. 1998, Acemoglu and Restrepo 2017); and automation, falling prices of investment goods, and rapid labour-augmenting technological change have been put forward as causes of the fall in the labour share (e.g. Karabarbounis and Neiman 2014, Acemoglu and Restrepo 2016, Brynjolffson and McAfee 2014, Lawrence 2015).
At the same time, non-purely technological hypotheses for rising mean-median inequality include the race between education and technology (Goldin and Katz 2007), declining unionisation (Freeman et al. 2016), globalisation (Autor et al. 2013), immigration (Borjas 2003), and the ‘superstar effect’ (Rosen 1981, Gabaix et al. 2016). Non-technological hypotheses for the falling labour share include labour market institutions (Levy and Temin 2007, Mishel and Bivens 2015), market structure and monopoly power (Autor et al. 2017, Barkai 2017), capital accumulation (Piketty 2014, Piketty and Zucman 2014), and the productivity slowdown itself (Grossman et al. 2017).
While we do not analyse these theories in detail, a simple empirical test can help distinguish the relative importance of these two categories of explanation – purely technology-based or not – for rising mean-median inequality and the falling labour share. More rapid technological progress should cause faster productivity growth – so, if some aspect of faster technological progress has caused inequality, we should see periods of faster productivity growth come alongside more rapid growth in inequality.
We find very little evidence for this. Our regressions find no significant relationship between productivity growth and changes in mean-median inequality, and very little relationship between productivity growth and changes in the labour share. In addition, as Table 1 shows, the two periods of slower productivity growth (1973-1996 and 2003-2014) were associated with faster growth in inequality (an increasing mean/median ratio and a falling labour share).
Taken together, this evidence casts doubt on the idea that more rapid technological progress alone has been the primary driver of rising inequality over recent decades, and tends to lend support to more institutional and structural explanations.
Table 1 Average annual growth rates of productivity, the labour share and the mean/median ratio during the US’ productivity booms and productivity slowdowns
Note: Data from BLS, Penn World Tables, EPI Data Library.Policy implications
The slow growth in median workers’ pay and the large and persistent rise in inequality are extremely concerning on grounds of both welfare and equity. There are important ongoing debates about the factors responsible for this phenomenon, and what must be done to reverse it.
Our contribution to these debates is, we believe, to demonstrate that productivity growth still matters substantially for middle income Americans. If productivity accelerates for reasons relating to technology or to policy, the likely impact will be increased pay growth for the typical worker.
We can use our estimates to calculate a rough counterfactual. If the ratio of the mean to median worker's hourly compensation in 2016 had been the same as it was in 1973, and mean compensation remained at its 2016 level, the median worker's pay would have been around 33% higher. If the ratio of labour productivity to mean compensation in 2016 had been the same as it was in 1973 (i.e. the labour share had not fallen), the average and median worker would both have had 4-8% more hourly compensation all else constant. Assuming our estimated relationship between compensation and productivity holds, if productivity growth had been as fast over 1973-2016 as it was over 1949-1973, median and mean compensation would have been around 41% higher in 2016, holding other factors constant.
This suggests that the potential effect of raising productivity growth on the average American’s pay may be as great as the effect of policies to reverse trends in income inequality – and that a continued productivity slowdown should be a major concern for those hoping for increases in real compensation for middle income workers.
This does not mean that policy should ignore questions of redistribution or labour market intervention – the evidence of the past four decades demonstrates that productivity growth alone is not necessarily enough to raise real incomes substantially, particularly in the face of strong downward pressures on pay. However it does mean that policy should not focus on these issues to the exclusion of productivity growth – strategies that focus both on productivity growth and on policies to promote inclusion are likely to have the greatest impact on the living standards of middle-income Americans.
Acemoglu, D and P Restrepo (2017), "Robots and jobs: Evidence from US labour markets", NBER Working Paper 23285.
Acemoglu, D and P Restrepo (2016), “The race between machine and man: Implications of technology for growth, factor shares and employment”, NBER, Working Paper 22252.
Autor, D, D Dorn, L F Katz, C Patterson and J Van Reenen (2017), “The fall of the labour share and the rise of superstar firms”, CEPR Discussion Paper 12041.
Autor, D, D Dorn and G H Hanson (2013), "The China syndrome: Local labour market effects of import competition in the United States", American Economic Review 103(6): 2121-2168.
Autor, D, L F Katz and A B Krueger (1998), "Computing inequality: Have computers changed the labour market?" Quarterly Journal of Economics 113(4): 1169-1213.
Barkai, S (2016), "Declining labour and capital shares", Stigler Center for the Study of the Economy and the State, New Working Paper Series 2.
Bernstein, J (2015), “Faster productivity growth would be great. I’m just not sure we can count on it to lift middle class incomes”, On the Economy Blog, 21 April.
Bivens, J and L Mishel (2015), “Understanding the historic divergence between productivity and a typical worker's pay: Why it matters and why it's real", Economic Policy Institute, Washington DC.
Borjas, G J (2003), “The labour demand curve is downward sloping: Reexamining the impact of immigration on the labour market”, Quarterly Journal of Economics 118(4): 1335-1374.
Brynjolfsson, E and A McAfee (2014), The second machine age: Work, progress, and prosperity in a time of brilliant technologies, WW Norton & Company.
The Economist (2015), “Inequality: A defining issue – for poor people”, Economist Blog – Democracy in America, 16 December.
Elsby, M, B Hobijn and A Şahin (2013), "The decline of the US labour share", Brookings Papers on Economic Activity 2013(2): 1-63.
Feldstein, M (2008), “Did wages reflect growth in productivity?" Journal of Policy Modeling 30(4): 591-594.
Freeman, R B, E Han, B Duke, D Madland (2016), “How does declining unionism affect the American middle class and inter-generational mobility?”, Federal Reserve Bank, 2015 Community Development Research Conference Publication.
Gabaix, X, J‐M Lasry, P‐L Lions and B Moll (2016), "The dynamics of inequality", Econometrica 84(6): 2071-2111.
Goldin, C D, and L F Katz (2009), The race between education and technology, Harvard University Press.
Grossman, G M, E Helpman, E Oberfield and T Sampson (2017), “The productivity slowdown and the declining labour share: A neoclassical exploration”, NBER, Working Paper No 23853.
Karabarbounis, L and B Neiman (2014), “The global decline of the labour share", Quarterly Journal of Economics 129(1): 61-103.
Lawrence, R Z (2015), “Recent declines in labour's share in US income: A preliminary neoclassical account", NBER Working Paper No w21296.
Lawrence, R Z (2016), “Does productivity still determine worker compensation? Domestic and international evidence”, in The US Labour Market: Questions and Challenges for Public Policy, American Enterprise Institute Press.
Levy, F and P Temin (2007), "Inequality and institutions in 20th century America", NBER Working Paper 13106
Meyerson, H (2014), “How to raise Americans’ wages”, The American Prospect, 18 March.
Piketty, T (2014), Capital in the Twenty-First Century, Cambridge, MA: Belknap Press.
Piketty, T and G Zucman (2014), “Capital is back: Wealth-income ratios in rich countries 1700–2010”, Quarterly Journal of Economics 129(3): 1255–1310.
Stansbury, A and L Summers (2017), “Productivity and pay: Is the link broken?”, NBER, Working Paper 24165.
 As measured using the CPI-U-RS consumer price deflator. Using the PCE consumer price deflator, median compensation has risen by about 26% over the period rather than 12%. We use the Economic Policy Institute’s measure of median compensation, which they calculate from median wages (BLS) and the average wage-total compensation ratio (BEA NIPA).
 Note that we focus in this column on the divergence of median or typical pay from average productivity. The divergence of average compensation from average productivity – equivalent to the declining labour share – has been smaller and more recent. Analyses of the average compensation-average productivity divergence can be found in Feldstein (2008), Lawrence (2016) and our recent paper (Stansbury and Summers 2017).
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Monday, February 19, 2018
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