- 'What Economics Can (and Can’t) Do'
- Links for 07-16-15
- 'Have Changing Job and Worker Characteristics Restrained Wage Growth?'
- 'An Unsustainable Position'
Posted: 16 Jul 2015 12:33 AM PDT
Gary Gutting interviews Daniel Hausman (both are professors of philosophy):
What Economics Can (and Can't) Do: ...G.G.: Can we regard the findings of economics as purely scientific conclusions? Or do they also involve value judgments?
D.H.: Many economists would maintain that their role in policy is, like engineers, merely to specify how to achieve the objectives at which politicians aim. Sometimes this is an apt description of the contribution they make, but most economists also take for granted that public policies should enhance people's well-being. So economists assess policies mainly in terms of their welfare consequences. Since economists regard people's preferences as motivating their choices as well as indicating what is good for them, they evaluate policies almost exclusively by examining how well they satisfy people's preferences.
Most economists would concede that other values, such as freedom, rights and justice should also influence public policies, but they regard their policy expertise as largely limited to the assessment of the welfare consequences of legislation and regulations.
G.G.: What help, then, are economists in debates about public policy?
D.H.: They tell us which are the right questions to ask if we seek to satisfy preferences. Knowing what to ask is enlightening even when it is hard to find the answers. Although helpful in these ways, economic knowledge is no cure for bias and shortsightedness. Knowledge does not benefit us if we make bad use of it.
G.G.: Can you cite some positive contributions of economists to public policy?
D.H.: Economists have chalked up some huge successes. ...
There's a lot more in the full post, including questions such as:
G.G.: I've found convincing Paul Krugman's arguments that austerity hasn't worked to solve Greece's economic problems and that the best path is to forgive some of their debt and to put more emphasis on stimulating their economy. Since there is no consensus among top-level economists about Krugman's views, should I withhold judgment on his recommendations? ...
Posted: 16 Jul 2015 12:06 AM PDT
Posted: 15 Jul 2015 10:49 AM PDT
John Robertson and Ellyn Terry at the Atlanta Fed's macroblog:
Have Changing Job and Worker Characteristics Restrained Wage Growth?: In the wake of the Great Recession, nominal wage growth has been subdued. But it is unclear how much of this relatively low wage growth reflects protracted weakness in the labor market versus other factors, such as changes in the composition of the workforce and jobs over time. Wage growth tends to vary across personal and job characteristics, so it stands to reason that changes in the composition of the workforce, alongside demographic and work characteristics, could be an important explanation of overall movements in wage growth.
In this post, we explore the impact of the changing mixture of worker characteristics (by age and education) and types of jobs (by industry and occupation) on the Atlanta's Fed Wage Growth Tracker. We find that composition effects do not account for the low median wage growth experienced in recent years. Holding worker and job characteristics fixed at their 1997 shares raises the median wage growth in 2014 by only about 0.2 percentage point. Our results are consistent with the analysis in a previous macroblog post, which found that changing industry-employment shares could not explain much of the sluggish growth in the average hourly earnings data from the payroll survey. ...
Posted: 15 Jul 2015 10:11 AM PDT
An Unsustainable Position: Everyone is talking about the IMF's new update to its debt sustainability analysis, which says that Greece's attempt to surrender is doomed to failure without massive debt relief. That's surely the right conclusion.
However, it's hard to accept the document's claim that this is a new development...
The point, surely, is that the plan for Greece was never feasible. No matter how willing a nation is to suffer, no matter how willing to run primary surpluses on a scale that is very rare in history, trying to pay off high debt through austerity without any kind of monetary offset is basically a recipe for debt deflation and failure. This is, in fact, what the IMF's own research has said. ...
So it's good to see the IMF being realistic here, but the institution remains unwilling to face up fully to past errors — which matters, because these past errors are prologue to the doom that faces any attempt to stay the course.
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