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August 7, 2012

Latest Posts from Economist's View

Latest Posts from Economist's View

Posted: 01 Aug 2012 12:42 AM PDT
Why was so much time devoted to the National Health Service (NHS) in the opening ceremony for the Olympics?:
Why the National Health Service played a central part in the Olympic Ceremony, by Simon Wren-Lewis: ...What is perhaps not understood outside the UK is that the British regard the NHS as an institution on an equal par to our monarchy. Not beyond criticism, but seen as absolutely essential to national life. While many aspects of the 1945 post-war social transformation have been swept aside (nationalization of utilities) or greatly modified, the idea that the health service should be free to all and paid for through taxation is sacrosanct. ...
Is this attachment to the NHS national self delusion? ... The NHS embodies a principle that in critical matters involving health, all members of a society should be equal. Overall the UK is not a particularly equal society, and income and wealth inequalities have been growing, but this is one area where there is a strong national consensus that while additional income should mean that you contribute more to a health service, this does not entitle you to receive better treatment.
Do the British pay dearly for this attachment to equality in health provision? If you look at measures of quality or efficiency, the UK does reasonably well (for example here or here), but what does appear consistent is how badly the US performs in terms of efficiency. ... So what seems more likely is that it is the US aversion to government involvement in health provision that is a little delusional. ...
Posted: 01 Aug 2012 12:33 AM PDT
Lane Kenworthy corrects the record:
Wage stagnation isn't due to a compositional shift, by Lane Kenworthy: From the mid-1940s through the mid-1970s, inflation-adjusted wages for Americans in the middle and below rose in sync with the economy. Since then, the median wage has barely budged. Steve Landsburg suggests that worry about this is misplaced, because what looks like wage stagnation actually is an artifact of a compositional shift in our labor force: "There's been a great influx of lower income groups — women and nonwhites — into the workforce. This creates the illusion that nobody's progressing when in fact everybody's progressing."
It's true that employment of women and nonwhites has increased relative to that of white males. But that didn't begin in the late 1970s. It's been going on for a long time. Here is the trend in the white male share of total employment since the early 1950s:
A compositional shift in employment isn't what distinguishes the era of wage stagnation from the earlier period of rising wages.
Posted: 01 Aug 2012 12:15 AM PDT
Policymakers need to do more about the unemployment problem:
Jobless generation puts brakes on US, by Shannon Bond, FT: ...The share of American 18- to 24-year-olds who were employed fell to 54 per cent last year, the lowest since the labor department began tracking data in 1948, according to the Pew Research Center. The share who are in college has risen, but the researchers say this only partly explains the drop. The jobless rate for Americans age 16 to 24 is above 16 per cent, more than twice the national rate.
Youth unemployment has reached crisis levels around the world, with almost 13 per cent of the global youth labor force out of work this year... But the problem has a unique flavor in the US, where the weak job market has collided with record levels of educational debt – about $25,000 for the average graduate. Together, they pose a threat to the future earning power of young Americans ... and could have long-lasting effects on US growth. ...
Posted: 01 Aug 2012 12:06 AM PDT
Posted: 31 Jul 2012 12:28 PM PDT
Fire Ed DeMarco, by Paul Krugman: Do it now. ... DeMarco heads the Federal Housing Finance Agency, which oversees Fannie and Freddie. And he has just rejected a request from the Treasury Department that he offer debt relief to troubled homeowners — a request backed by an offer by Treasury to pay up to 63 cents to the FHFA for every dollar of debt forgiven.
DeMarco's basis for the rejection was that this forgiveness would represent a net loss to taxpayers, even if his agency came out ahead.
That's a very arguable point even on its own terms, because the paper he cited (pdf) in support of his stance took no account of the positive effects on the economy of debt relief — even though those effects are the main reason for offering such relief. ... Furthermore, even if there's a small net cost to taxpayers, debt relief is still worth doing if it yields large economic benefits.
In any case, however, deciding whether debt relief is a good policy for the nation as a whole is not DeMarco's job. His job — as long as he keeps it, which I hope is a very short period of time — is to run his agency. If the Secretary of the Treasury, acting on behalf of the president, believes that it is in the national interest to spend some taxpayer funds on debt relief, in a way that actually improves the FHFA's budget position, the agency's director has no business deciding on his own that he prefers not to act.
I don't know what DeMarco's specific legal mandate is. But there is simply no way that it makes sense for an agency director to use his position to block implementation of the president's economic policy, not because it would hurt his agency's operations, but simply because he disagrees with that policy.
This guy needs to go.
If households can't get help repairing their balance sheets, then the recovery from the balance sheet recession -- such as it is -- will be even slower. Banks got the help they needed with their balance sheet problems, but households have not received as much attention.
Posted: 31 Jul 2012 10:37 AM PDT
Brad DeLong also has a column today (and I no longer have this complaint):
Hopeless Unemployment, by Brad DeLong, Commentary, Project Syndicate: ...At first, the long-term unemployed in the Great Depression searched eagerly and diligently for alternative sources of work. But, after six months or so passed without successful reemployment, they tended to become discouraged and distraught. After 12 months of continuous unemployment, the typical unemployed worker still searched for a job, but in a desultory fashion, without much hope. And, after two years of unemployment, the worker, accurately expecting to be at the end of every hiring queue, had lost hope and, for all practical purposes, left the labor market.
This was the pattern of the long-term unemployed in the Great Depression. It was also the pattern of the long-term unemployed in Western Europe at the end of the 1980s. And, in a year or two, it will be the pattern again for the long-term unemployed in the North Atlantic region.
I have been arguing for four years that our business-cycle problems call for more aggressively expansionary monetary and fiscal policies, and that our biggest problems would quickly melt away were such policies to be adopted. That is still true. But, over the next two years, barring a sudden and unexpected interruption of current trends, it will become less true.
The current balance of probabilities is that two years from now, the North Atlantic's principal labor-market failures will not be demand-side market failures that could be easily remedied by more aggressive policies to boost economic activity and employment. Rather, they will be structural market failures of participation that are not amenable to any straightforward and easily implemented cure.

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