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August 7, 2012

Latest Posts from Economist's View

Latest Posts from Economist's View

Posted: 19 Jul 2012 12:06 AM PDT
Posted: 18 Jul 2012 06:48 AM PDT
Paul Krugman:
Decoupled and Divided, by Paul Krugman: And so, predictably, Romney is accusing Obama of "attacking capitalism" and "dividing America" by raising questions about Bain and those hidden tax returns. This is all par for the course; many of us remember how any criticism of Bush was unpatriotic, and if I recall correctly, during the dotcom bubble the Wall Street Journal argued that any skepticism about stock market valuations showed a lack of faith in free markets.
The special Romney twist– aside from the willful misrepresentation of what Obama actually said about business success — is Mitt's desire to have it both ways. He's proud of his business record and his success, he says, but at the same time wants us to believe that he had nothing to do with Bain's actions over a three-year period when he was still its CEO, and is completely unwilling to let us see the tax returns that would tell us something about exactly how he achieved his current wealth. ...
Anyway, just a reminder about what's really dividing America: the fact that a rising tide no longer raises all boats,... there has been a dramatic decoupling between overall economic growth and the fortunes of the typical family:

It's not an "attack on capitalism" to suggest that growing income disparities and the corresponding failure of most Americans to benefit from rising productivity are problems. Still, what can be done? Well, you can ask the rich to pay somewhat higher taxes, and you can strengthen the safety net — which is what Obama actually advocates. But Romney wants to do the reverse.
So Romney wants us to celebrate the success of people like him, even though their success doesn't seem to have benefited ordinary families, and even though he stands for policies that would aggravate the gap between a fortunate few and everyone else. And then he accuses Obama of dividing America.
As I've argued many times, the idea that those at the top of the income distribution, particularly the people involved in finance, were paid according to their contribution to national GDP (i.e. their marginal product) is hard to swallow (no matter how often the right tries to jam it down our throats). I understand why those who benefit the most from the way things work now are defending the system tooth and nail, but it seems clear to me that the mechanism that allocates income to various strata of society is broken and in need of repair.
More from Paul Krugman here: Finance Capitalism and here: Thirty Troubling Years.
Posted: 18 Jul 2012 06:21 AM PDT
Pro-Growth Liberal:
Mankiw on the US Olympic Uniforms Made in China, Econospeak: Greg picks on Senator Reid:
Will some enterprising reporter please ask Senator Reid for the opportunity to inspect the senator's closet and check the labels of his clothing to make sure they are all American-made? I look forward to seeing Mr. Reid's bonfire. In the alternative, I would be happy to send the senator of copy of my favorite textbook. He should pay particular attention to Chapters 3 and 9.
Hey – I think we all get the point about comparative advantage. Larry Popelka made the case for Greg:
Garment manufacturing is a low-cost commodity business. Most of the value in the apparel industry comes from design, technology, sales, marketing, and distribution—not manufacturing. The successful players in apparel, such as Ralph Lauren and Nike (NKE), figured this out long ago
Look – we all understand that Ralph Lauren did what was best for Ralph Lauren and if the US Olympic Committee wanted these uniforms to be both designed by both Ralph Lauren and Made in America, maybe the contract with Ralph Lauren should have said so. But Larry also noted that politicians in BOTH parties are angry at Ralph Lauren. So why is Greg lecturing Senator Reid and not certain Republicans. For example, Donald Trump loves to China bash even though his clothing line is also Made in China. Of course, Trump is not the GOP Presidential candidate – that would be Mitt Romney:
On the campaign trail, Romney labels China's leaders as "cheaters" and "currency manipulators." His ads say the Republican nominee would be a president who "stands up to China on trade and demands they play by the rules." He has vowed to issue, on his first day in office, an executive order labeling China a currency manipulator.
Posted: 18 Jul 2012 06:12 AM PDT
Chris Sims explains why he got a Nobel Prize:
Tapp: So, if I asked you to describe the main contribution of your work to the field of economic modeling and maybe relating back to the traditional model, how would you describe that?
Sims: I think that what the Noble Prize people were singling out was that my work helped sort out the dispute between the monetarists and Keynesians. They, in part by introducing new approaches to statistical modeling in the '60s and early '70s, monetarists were claiming that the main source of business cycle fluctuations was bad monetary policy. The monetary authority was making mistakes, making the growth rate of money vary a lot, and all those variations resulted in recessions and booms, and if only we could force the monetary authority to stop messing with the economy and just keep money growth steady, the business cycle would be greatly reduced or even vanish.
And then the Keynesians were saying that can't be true, but they didn't have statistical models in which they could each put forward their position and ask, well, what did the data say? There were lots of attempts to do that, but with very awkward statistical modeling.
Over the course of about 10 years, things that I did and other people followed up on managed to sort out what the effects of monetary policy changes are and distinguish those from co-movements in money and prices and income that didn't have anything to do with policy. There's now pretty much a consensus on how monetary policy affects the economy, and on what the size of that effect is. The general conclusion is that it accounts for maybe somewhere between zero and 20 or 25 percent of the fluctuations we see, but if you try to trace out historically, you can't blame any recession on monetary policy.
Now we need Chris Sims, or someone like him, to lead the charge against the idea that the problem with the economy is bad fiscal policy. Even better would be if they could overcome the objections to the use of fiscal policy in severe recessions -- i.e. the type of recession that monetary policy alone cannot cure even if the interest rate is lowered to zero and non-traditional policies are put into place. In this case though, the empirical evidence is already mounting, what is needed are strong, respected voices to counter the objections to fiscal policy coming from the right (particularly, though not exclusively, objections to infrastructure investment). The politics of fiscal policy will always be a problem, but it would be less so if economists had the same unity on fiscal policy, particularly its ability to help the economy is severe recessions, that they have on monetary policy.
Posted: 18 Jul 2012 06:03 AM PDT
I don't agree with everything in this column, but I've long thought that the Obama administration's lack of effective spokespeople -- the Carville, Reich, etc. types that give a strong voice to the Clinton administration for example -- is a problem:
The White House has a surrogate problem, by Ed Rogers, Commentary, Washington Post: The White House does not have compelling surrogates who can effectively represent the president, his campaign or his domestic policies on TV. This will become more of a problem as the campaign progresses. How did this happen with a supposedly media-savvy Obama political team?
They seem to be doing a little better lately, but I think this is a problem. One thought, which I stole from someone else, is that Obama has a "distrust of populists even when he needs them."

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