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December 8, 2014

Latest Posts from Economist's View

Latest Posts from Economist's View


Paul Krugman: Recovery at Last?

Posted: 08 Dec 2014 12:24 AM PST

Economic recovery from a recession: Obama versus Bush:

Recovery at Last?, by Paul Krugman, Commentary, NY Times: Last week we got an actually good employment report... We're still nowhere near full employment, but getting there no longer seems like an impossible dream.
And there are some important lessons from this belated good news..., it does put the lie to some of the nonsense you hear about why the economy has lagged.
Let's talk first about reasons not to celebrate.
Things are finally looking better for American workers, but this improvement comes after years of suffering..., it has been a terrible seven years... Why was it so bad?
You often hear claims, sometimes from pundits who should know better, that nobody predicted a sluggish recovery, and that this proves that mainstream macroeconomics is all wrong. The truth is that many economists, myself included, predicted a slow recovery from the very beginning. Why? ...
We could have had a much faster recovery if the U.S. government had ramped up public investment and put more money in the hands of families likely to spend it. But the Obama stimulus was much too small and short-lived..., and since 2010 what we have actually seen, thanks to scorched-earth Republican opposition on all fronts, are unprecedented cutbacks in government spending, especially investment, and in government employment.
O.K., at this point I'm sure many readers are thinking that they've been hearing a very different story about what went wrong — the conservative story that attributes the sluggish recovery to the ... Obama administration. ...
Which is where the new job numbers come in. At this point we have enough data points to compare the job recovery under President Obama with the job recovery under former President George W. Bush, who also presided over a postmodern recession... And by any measure you might choose ... the Obama recovery has been stronger and faster. Oh, and its pace has picked up over the past year, as health reform has gone fully into effect.
Just to be clear, I'm not calling the Obama-era economy a success story. We needed faster job growth ... than under Mr. Bush, because the recession was deeper, and unemployment stayed far too high for far too long. But we can now say with confidence that the recovery's weakness had nothing to do with Mr. Obama's (falsely) alleged anti-business slant. What it reflected, instead, was the damage done by government paralysis — paralysis that has, alas, richly rewarded the very politicians who caused it.

Links for 12-08-14

Posted: 08 Dec 2014 12:06 AM PST

'The Imaginary World of Small State People'

Posted: 07 Dec 2014 10:46 AM PST

Simon Wren-Lewis:

The imaginary world of small state people: ...In ... Europe ... there actually was a large constituency on the left that wanted a large state as a matter of principle. In the UK that constituency lost all its influence with Margaret Thatcher and New Labour, and it has also lost its influence in the rest of Europe. However this decline in the influence of big state people on the left was matched by a rise to power on the right of those who want a small state as a matter of principle. George Osborne's plan for the UK over the next few years is the apotheosis of this neoliberal view.
I think I'm like the majority of people in not having any fixed ideological position about whether the state should be large or small. The state is clearly good at doing some things, and bad at doing others. In between there is a large and diverse set of activities which may or may not be better achieved through state direction or control, and they really need to be looked at item by item on their merits.
My first major problem with small state people is that they are not prepared to look at these items on their merits. Instead they have a blanket ideological distaste for all things to do with government. ... My second major difficulty with many small state people, like George Osborne, is that they are using fear of a debt crisis (a possibility which for the UK and US is non-existent) to achieve their ends. This is political deceit on a grand scale. My third major problem follows from the second: reducing government spending during a liquidity trap recession does real harm. It wastes resources on a huge scale. ...
Which brings me to a final problem I have with small state people, which is their disregard for the evidence. It is true that most people are bad at acknowledging counter evidence, but those with an ideological conviction are worse than most. ...
The ... claim that Osborne's cuts have been such a success that they will cause a "deeper intellectual wound to the left than we currently understand" is simply delusional. These are fantasy ideas from those living in an imaginary world, while in reality the policies they support do serious harm.

'Decline in the Labor Force Participation Rate: Mostly Demographics and Long Term Trends'

Posted: 07 Dec 2014 10:16 AM PST

Bill McBride at Calculated Risk:

Decline in the Labor Force Participation Rate: Mostly Demographics and Long Term Trends: For several years, I've been arguing that "most of the recent decline in the participation rate" was due to demographics and other long term structural trends (like more education).  Clearly this was an important issue because if most of the decline had been due to cyclical weakness, then we'd expect a significant increase in participation as the economy improved. If the decline was due to demographics and other long term trends, then the participation rate might keep falling (or flatten out for a period before declining again) as the economy improves. ...
Most of the recent research supports my view. ...

After going through lots of evidence, including the reasons for the decline in the participation rate for prime age workers (how much is due to the recession?), he concludes:

The bottom line is that the participation rate was declining for prime working age workers before the recession, there are several reasons for this decline (not just recent "economic weakness") and many estimates of "missing workers" are probably way too high.

'The Obama Recovery Has Been Miles Better Than the Bush Recovery'

Posted: 07 Dec 2014 09:56 AM PST

Brad DeLong follows up on a recent post from Paul Krugman (and another from Kevin Drum) showing how much better the recovery has been under Obama as compared to recovery under Bush:

Morning Must-Read: Kevin Drum on Paul Krugman on the Obama Recovery:

EmpBushvsObama

Kevin Drum: The Obama Recovery Has Been Miles Better Than the Bush Recovery: ...

... If you want to credit Bush for his tax cuts and malign Obama for his stimulus program and his regulatory posture, then you have to accept the results as well. And by virtually any measure, including the fact that the current recovery hasn't ended in an epic global crash, Obama has done considerably better than Bush.

I ... want to reinforce and mark this thing that is going on in the public intellectual sphere: that to be a partisan Republican these days appears to be to make absolutely no effort to connect whatever one says to empirical reality. I hear, over and over again, that government policy was settled and certain under Bush and is unsettled and uncertain under Obama, and that that is the reason that the Obama recovery has been so weak. And yet anyone who looks at the numbers can only respond to this in one way: "Huh?!" ...

The question is: is this the same thing that is going on in Chicago economics, or not? As you know, Bob, when Chicago Lucas models began failing their empirical statistical tests massively, the response was to abandon statistical testing because it was "rejecting too many good models". When Chicago finance model began failing their empirical statistical tests massively, the response was to redefine what investor psychology was: Investors no longer had a stable utility function relating their consumption spending to their well-being exhibiting declining marginal utility. Instead, investors had whatever and however rapidly changing a function relating their well-being to their consumption spending that was needed in order to keep the efficient markets hypothesis from being falsified.

The question is: Are these different things, or are these the same things? And how are they related to the earlier tobacco money-infused campaign of tobacco denialism? And how are they related to the present oil money-infused campaign of global warming denialism? And how are they related to the Cato Institute's failure to register that its anti-fiscal stimulus campaign of 2009–along with its anti-ObamaCare campaign, and its anti-debt crisis campaign–now looks like something really not to be proud of?

Answers, anyone?

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