The General Economics Thread

"Yet the debate last week actually highlighted a third position. If either the techno-optimists or the techno-pessimists are right, then we should see a major positive impact on worker productivity. But it just isn’t there in the data. If anything, the rate of technological change in the United States has decreased since at least 2003, specifically in the technology sectors widely thought to be most innovative.

In contrast, we definitely see worker displacement, stagnant earnings, a failing job ladder, rising inequality at the top, “over-education” (workers taking jobs for which they’re historically overqualified), and declining rates of employment-to-population and household and small business formation. What we do not see are the productivity gains, either on a micro or macro level, that are supposedly driving worker displacement."

Heh. So dont blame technology. Something else must be at fault. I wonder what that could be?

The government!

If only- would be easier to reform in that case.

We can blame the government for a lot of our economic woes (even if most of it is of the flavor "why aren't you stopping megacorps from pissing on everyone?"), but this one is more complex. Off the top of my head, I'd say the problem is not enough investment into technological development, perhaps paired with a tendency for investors to jump ship after a few setbacks (because no one understands that setbacks are an important part of science). But I haven't studied this one in any depth.

Still say that most of our problems can be solved by giving most of our military budget to NASA, though. Or just giving them any money at all.

Sorry, but I'm just too cynical to believe that yet. The problem isnt just technological advances automating certain job functions- that's happening, but that's always happening, ever since the Agricultural revolution. What normally happens next is that businesses take the money saved by the new technology, and reinvest it in new production- which creates new jobs. So, in the end, the economy actually grows, and even though many jobs are lost to technology, more are created by the new investments that the cost-saving technology makes possible. The difference this time is that the large corporate employers are sitting on the money, or directing it into financial investments instead. So- the money being saved in recent years isnt being used to expand production or create new jobs. The real question is why that's happening.

Money is now being seen as having inherent value, so the idea of constantly gaining money is now seen as a good thing, regardless of whether or not you're actually going to use any of it. If you have money and just sit on it without the intent to eventually spend it, it's become completely worthless.

In fact it's the other way around. High demand for held money makes money worth *more*, which discourages spending and thus deadens the economy.

Which is why the government is supposed to put more of it into the economy.

Ah, but that would be red Bolshevism. Folks get thrown in jail for stuff like that.

@Fighteer: Actually, the financial industry and the economics discipline are two separate but related problems.

The financial industry generally doesn't care. They hire the economists who will say things that lead to policy recommendations that benefit them; it's the usual corporate science at work. Their internal people who understand economics usually understand the Keynesian model pretty well, because they're trying to follow the bubbles and sell out before they burst so they don't get caught with any hot grenades. I don't think there's as much goldbuggery on Wall Street; it would get in the way of the Hookers and Blow.

The economics discipline, meanwhile, is split for the reasons you mentioned; the Chicago school is corrupted and the Austrian school as such exists because a lot of money is spent to hire economists to say stupid things about gold, no government intervention, and cutting taxes on the rich during wartime, while people like Krugman who aren't in it for the speaking fees hold down their side of the economics field and earn respectable five-figure incomes.

There is inherent value in money: money is power potential. The more money you own, the more leverage you have to get anything you want done. Namely, lobbying, propaganda, and corporate science.

When a society allows a very wealthy upper class to develop, it's a vicious cycle, because they are in a perpetual, runaway arms race to grow richer than each other, consume little, and use their money as leverage to rig the game so they can make more of it.

Even assuming the rich start consuming like crazy, Versailles-style it still redirects the economy towards their service and their luxury. Lots and lots of people's lives become about serving them, pleasing them, seeking their approval. I think that kinda sucks.

edited 30th May '15 4:10:39 AM by TheHandle

What are the merits of family firms, and of A and B shares?

Once again, Greenmantle, please provide more context when asking these questions.

Heavy metal: Life at the world's largest shipyard. It's basically a Hyundai Company Town, but here's the interesting bit:

And that's where Hyundai's founder comes in:

Hm. An excellent example of rich people consuming very little in proportion to their earnings.

I've just brought myself a new book — How to speak Money, by John Lanchester. It contained more or less that, in terms of A and B shares. To put it simply, it appears to let, say, a family retain control of their business, yet have their shares publicly traded on the Markets.

Sounds familiar. Direct Government intervention (and organisation of) of businesses was certainly more of a done thing during the 50s-70s.

edited 31st May '15 8:08:12 AM by Greenmantle

Why does your British Railways logo resemble the one from Jurassic Park?

And why isn't that a done thing any more? It seems damned effective.

The first point: BR got their first; it were created in 1948, as part of the Attlee Government's Nationalisation Programme.

And the second point: (Global) Competition is now seen as a good thing. It's probably connected to the end of Keynesian influence and the rise of neo-liberalism at the end of the 70s.

edited 31st May '15 8:30:07 AM by Greenmantle

Wasn't there always global competition between the nations? Don't capitalists owe fealty to their nation first?

edited 31st May '15 8:46:38 AM by TheHandle

Profits, not nation.

That kind of state driven development is seen as useful during the initial transition to an industrialized economy, but also as too simple and ineffective once the markets becomeself-sustaining.

The trouble is that with the growth of the neoliberal paradigm, any sort of state-sponsored incubation is roundly punished by the rich countries, so only the strong-willed will get their countries through industrial takeoff nowadays.

Only the strong-willed... OR THE INSANE!

I'm a bit late on this, but the May 27th Krugman article had a shout-out to my favorite economic writer: Jane Jacobs! It's about the effect of globalization on city centers, and you can put me down in the "local markets should be protected from big money" camp.

Jamelle Bouie: “What do you call a $60 million film from a multibillion dollar multimedia company that grossed almost half a billion dollars? If you’re most moviegoers, you call it The Lego Movie, one of the surprise hits of last year. But if you’re Wisconsin Sen. Ron Johnson, you call it anti-business propaganda…”

How Dropbox remains relevant

The Finnish Disease: What's going wrong with Finland's economy is the Euro straightjacket preventing it from effectively adjusting to adverse shocks.

Where's my economic recovery: The pace of real GDP growth [for the U.S.] in the first half of 2015 may be 0.5%/year.

(EquiBlog/NYT) "Josh Barro": But What Does the Trade Deal Mean if You’re Not a Cheesemaker?

(Basically noting one of the major problems is the TPP could end up just being an engine for rent seeking.

Lord Business is real!