Greg Mankiw on the zero influence of modern macroeconomics on monetary policy making

Utopia, you are standing in it!

Two of my brothers studied economics in the early 1970s and then went on to different paths in law and computing respectively. If Greg Mankiw is right, my two older brothers could happily conduct a conversation with a modern central banker. Their 1970s macroeconomics, albeit batting for memory, would be enough for them to hold their own.

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Source: AEAweb: JEP (20,4) p. 29 – The Macroeconomist as Scientist and Engineer – Greg Mankiw (2006).

I would spend my time arguing with a central banker that Milton Friedman may be right and central banks should be replaced with a computer. The success of inflation targeting is forcing me to think more deeply about that position. In particular the rise of pension fund socialism means that most voters are very adverse to inflation because of their retirement savings and that is before you consider housing costs are much largest proportions of household…

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Eurosclerosis, Swedosclerosis, the British Disease and rising inequality harming economic growth

The Washington Centre for Equitable Growth have joined the Wall Street Journal in falling for that dodgy OECD hypothesis about rising inequality holding back economic growth.

The chart below shows stark differences between egalitarian Sweden and France, and the more unequal UK since 1970 in departures from a trend growth rate of 1.9% in real GDP per working age person, PPP.

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Source: Computed from OECD Stat Extract and The Conference Board. 2015. The Conference Board Total Economy Database™, May 2015, http://www.conference-board.org/data/economydatabase/

In the above chart, a flat line is growth at the same rate as the USA for the 20th century, which was 1.9%  for GDP per working age person on a purchasing power parity basis. The USA’s growth rate is taken as the trend rate of growth of the global technological frontier. A falling line in the above chart is growth in real GDP per working age person, PPP, at below this trend rate of 1.9%; a rising line is above trend rate growth for that year.

  • Sweden really had been the sick man of Europe until it turned its back on high taxing, welfare state socialism in the early 1990s.
  • France has been in a long decline so much so that the global financial crisis is hard to pick up in the acceleration in its long decline in the mid-1990s.

Britain did very well, both under the neoliberal horrors of Thatcherism and the betrayals by Tony Blair of a true Labour Party platform. The UK grew at above the trend annual growth to 1.9% for most of the period from the early 1980s to 2007.

Neither France or Sweden, despite their egalitarian economies, kept up with the US growth rate since 1970. Under the OECD’s hypothesis, if France and Sweden had been more unequal, their trend growth rates would have been even more appalling since 1970.

The Nuremberg trials began today

Why propaganda?

How the USA evolved

https://twitter.com/LearnSomethlng/status/655941471204339713

Syria ~ Map Update dd November 16

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Productivity and the National Living Wage

A brilliant point by @FlipChartRick in the reblog. What sort of single year labour productivity increase is required to cover a UK living wage increase. Basic arithmetic kills.

A 6.6% annual productivity growth would be required to fund a living wage. This will be far above trend and would be required in sectors such as services that are not at all known for rapid productivity growth because of Baumol’s disease.

A subsequent Twitter exchange updated a key chart to include Australia and New Zealand.

Flip Chart Fairy Tales

The CIPD and the Resolution Foundation are collaborating on a piece of research into the impact of the National Living Wage (NLW). According to their first study over half of the country’s employers expect to be affected by it. Around a third said they would meet the increased cost by improving productivity and 22 percent said they would take lower profits. Only 15 percent said they would lay off workers or slow down recruitment.

That all sounds promising but, as Matt Whittaker points out, the productivity increase needed to cover the cost of the NLW could be pretty steep. As you might expect, there is a strong relationship between rising minimum wages and rising productivity. Most countries in the OECD have not strayed very far from this line of best fit.

Screen Shot 2015-11-20 at 16.17.15In the absence of any productivity growth, the proposed NLW would move some way from the line (the green circle) by 2016 and…

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Solar and wind in India will remain uncompetitive for the next 25 years

Margaret Thatcher on the concept of a false consciousness

What is intuition?

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