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May 1, 2014

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Posted: 01 May 2014 12:03 AM PDT

'Begging the Inequality Question'

Posted: 30 Apr 2014 10:00 AM PDT

Chris Dillow:

Begging the inequality question, by Chris Dillow: ... many of us dislike inequality not because we envy the mega-rich but because it is (sometimes) a symptom of malfunctioning markets... The fact that so many bosses get paid millions even for failure suggests that they are not paid their marginal product. Instead, some mix of agency failure, efficient wage considerations (bosses must be paid not to steal corporate assets) and arms races force pay above marginal product.
Sure, you can write models in which inequality emerges as if it were the product of free choices in a free market economy. You can also model a man's empty house as if he had called in the removal men - but if he has in fact been burgled, your models miss something.
I fear that some free market advocates - not all by any means, but some - are mistaking the map for the terrain. They forget that the textbook perfect competition model is not a description of reality but rather of a utopia against which to assess actually-existing markets. And sometimes - not always but in some important respects - they fall well short. ...

'Real GDP increased at 0.1% Annualized Rate in Q1'

Posted: 30 Apr 2014 09:12 AM PDT

Bill McBride:

BEA: Real GDP increased at 0.1% Annualized Rate in Q1: From the BEA: Gross Domestic Product: First Quarter 2014 (advance estimate)

Real gross domestic product ... increased at an annual rate of 0.1 percent in the first quarter..., according to the "advance" estimate released by the Bureau of Economic Analysis. ...
The increase in real GDP in the first quarter primarily reflected a positive contribution from personal consumption expenditures (PCE) that was partly offset by negative contributions from exports, private inventory investment, nonresidential fixed investment, residential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased.

The advance Q1 GDP report, with 0.1% annualized growth, was below expectations of a 1.1% increase.  Personal consumption expenditures (PCE) increased at a 3.0% annualized rate - a solid pace.

However the the change in inventories subtracted 0.57 percentage points from growth in Q1, exports subtracted 0.83 percentage points, and both non-residential and residential investment were negative. ... State and local governments subtracted from GDP in Q1.

Overall this was a weak report, although PCE growth was decent.   Private investment (even excluding the change in inventories) was negative, and that is the key to more growth going forward.

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