macroeconomics | Utopia, you are standing in it!

The puzzlingly large cross country differences in sector labour productivity

02 Aug 2014 Leave a comment

by Jim Rose in applied price theory, entrepreneurship, macroeconomics Tags: barriers to riches, Britain, France, Germany, Japan, relative labour productivity, USA

There are large productivity differences between the global industrial leaders at the industry level. In a 1993 McKinsey’s study, large differences were uncovered in value added per worker between the USA, Japan, France, the UK and Germany across individual industries, by a factor of three in some cases (Prescott and Parente 2000, 2005).

The USA competes with Japan for productivity leadership in many manufacturing industries.
The Japanese services sector productivity can be as little as a one-third of that of the USA. Japanese labour productivity is almost twice Germany’s in producing automobiles and is better that Germany by a large margin for many other manufactured goods.
The USA is uniformly more productive in services sector labour productivity. For example, British, French and German telecom workers were 38 to 56 per cent as productive as their American counter-parts.

Figure 1: Relative Value Added Per Worker: Germany, Japan, and the United States Manufacturer’s Industries

Industry	Japan	Germany
Automobiles	116	66
Automobile Parts	124	76
Metal Working	119	100
Steel	145	100
Computer	95	89
Consumer Electronics	115	62
Food	33	76
Beer	69	44
Soap and Detergent	94	76

Differences in the access to the global pool of useful knowledge cannot explain such large productivity differences at the sector and the individual industry levels between the USA, Japan, France, the UK and Germany and between these three European neighbours. The stock of useful technological knowledge does not vary that much across these countries (Prescott and Parente 2000, 2005). These countries produce and are the markets for the majority of that knowledge.

Figure 2: Relative Value Added Per Worker – service industries

Industry	Japan	Germany	U.K.	France
Retailing	44	96	82	69
Telecommunications	66	50	38	56
Banking	–	68	64	–

Lags in technology diffusion cannot be important. The USA, Japan, France, the UK, and Germany define the global technological frontier.

Differences in the skills of the individual worker or in the total stock of human capital of all workers in a country cannot explain these differences in value added per worker. The USA, Japan, France, the UK and Germany all have relatively well-educated, experienced and tested labour forces. For example, the 1993 McKinsey’s study inquired into the education and skills levels of Japanese and German steel workers. Comparably skilled German steel workers were half as productive as their Japanese counterparts (Prescott and Parente 2000, 2005).

What differ between these countries at the glob technological frontier is the amount of the global pool of useful productive of knowledge that is used and as work practices. Ford Europe failed to adopt Japanese just-in-time production, but Ford U.S.A. has adopted it. In the beer industry, much of the high technology machinery in Japan and U.S. is manufactured in Germany but German breweries fail to use these more productive technologies. The less productive airline sector in Europe vis-à-vis the United States is the result of over-staffing.

The contribution of the random fortunes of large firms to business cycle volatility, or how a single, small, dirty pipe threatened to bring a nation to its knees

02 Aug 2014 Leave a comment

by Jim Rose in business cycles, macroeconomics Tags: Fonterra, real business cycle theory

One contaminated pipe at a milk processing factory of New Zealand’s largest company, Fonterra, New Zealand’s largest company (7% of GDP) and largest exporter caused such a loss of brand-name value of the company that the New Zealand Treasury revised down its GDP forecasts for the year.

It is a little bit scary to wonder what kind of nation we live in when a single, small, dirty pipe threatens to bring the nation to its knees. That indeed was the fear when, over the weekend, Fonterra announced the contamination of a small amount of whey powder from a Waikato processing plant – Bank of New Zealand

This growth forecast revision after the milk contamination scandal, but turn out to be false reading, is a good example of how the random fortunes of individual large companies can have economy-wide implications and can even lead to recessions.

Figure 1: Sector’s concentration (Herfindahl Index) and sector’s contribution to aggregate volatility

Source: (Gabaix 2011).

There is growing evidence that idiosyncratic shocks to the fortunes of the 100 largest firms arising from changes in demand and cost conditions in their local and export markets combine to contribute about one-third of up-swings and downswings in U.S. output and employment (Gabaix 2011).

In an economy dominated by a few large firms, idiosyncratic shocks to large firms do not cancel out. The ups and downs in the individual fortunes of very large firms combine with firm-to-firm linkages to travel far beyond the firm and sector of origin (Gabaix 2011). These effects are likely to be stronger outside of the USA because it has a more diversified economy than most countries (Gabaix 2011).

Di Giovanni and Levchenko (2010) found that having fewer and less diversified firms and exports dominated by large firms helps to explain why small, more open economies such as New Zealand are more volatile. Fonterra accounts for 7 per cent of GDP and 20 per cent of overall exports. Drought is important to the New Zealand business cycle and agricultural exports (Buckle, Kim, Kirkham, McLellan and Sharma 2007).

As another example of the importance of a few large firms, Samsung and Hyundai account for 35 per cent of Korean exports and 22 per cent of Korean GDP.It would not be a good idea for the chief executives of those two Korean businesses to travel in the same car and have an accident.

Finland was monikered the one-firm economy because Nokia was responsible for 1/5^th of Finnish economic growth, exports and company tax revenues for two decades. Nokia shares initially fell by 90 per cent in 2007 when Apple leap-frogged it with an iPhone that resembled a PC. The loss of one product development race imperilled the foundation of one-fifth of Finnish economic growth.

The literature on the contribution of large firms to business cycle volatility is a good examples of how the real business cycle theory is alive and well and is a progressive research programme.

Keynesian analysis implicitly assumes that a fiscal deficit does not have any effects on other spending

01 Aug 2014 1 Comment

by Jim Rose in budget deficits, fiscal policy, macroeconomics, Milton Friedman, monetarism Tags: budget deficits, fiscal policy, fiscal stimulus, Milton Friedman

The

Eugene Fama and the simulative effects of fiscal policy

31 Jul 2014 6 Comments

by Jim Rose in budget deficits, fiscal policy, great depression, great recession, macroeconomics Tags: crowding out, Eugene Fama, fiscal policy, Treasury view of fiscal policy

Eugene Fama argues that government bailouts and stimulus plans seem attractive when there are idle resources – when there is unemployment such as in a recession or depression including in the 1930s.

Fama counters that:

1. Bailouts and stimulus plans must be financed.

2. If the financing takes the form of additional government debt, the added debt displaces other uses of the funds.

3. Thus, stimulus plans only enhance incomes when they move resources from less productive to more productive uses.

In the end, despite the existence of idle resources, bailouts and stimulus plans do not add to current resources in use. They just move resources from one use to another.

Fama noted that there was just one valid negative comment in response to this argument that appears to be valid which was made by Brad DeLong.

Fama thinks Delong’s point about involuntary inventory accumulation is consistent with Fama’s initial arguments about the need for the stimulus to work through moving resources to higher value uses.

For me, the notion that a fiscal stimulus is a negative productivity shock is a good starting point for analysis. The method of financing the stimulus is important too.

Economic agents know that a temporary expenditure program has no lasting effect on employment but has lasting effect on disposable income and taxes. Indeed, massive public interventions to maintain employment and investment during a financial crisis can, if they distort incentives enough, lead to a depression.

In Australia, there was a massive fiscal contraction from late 1930 onwards called the Premiers’ Plan. In 1931, unemployment rates was 25% or more.

The Premiers’ Plan required the federal and state governments to cut spending by 20%, including cuts to wages and pensions and was to be accompanied by tax increases, reductions in interest on bank deposits and a 22.5% reduction in the interest the government paid on internal loans.
The Premiers’ Plan was complementary to the Arbitration Court’s 10 per cent nominal wage cut in January 1931 and the devaluation of the Australian pound. Most countries had abandoned the gold standard by 1931 and 1932 and devalued by about 10% including the UK. These competitive devaluations were called currency wars. Most countries below started to recovery before they left the gold standard, a year or two before they left the cross of gold.

Maclaren (1936) dated the Australian economic recovery from the last months of 1932. It was to take another three years before unemployment rates fell below 10 per cent — the rate it had been during most of the 1920s.

The June 1931 Premiers’ Plan of fiscal consolidation had time by late 1932 to become credible and take hold given the usual leads and lag on fiscal policy. Unemployment data for the time show a rapid fall in the high twenties unemployment rate in 1932 to be below 10 per cent by 1937.

“Inflation is always and everywhere a monetary phenomenon”

31 Jul 2014 Leave a comment

by Jim Rose in budget deficits, fiscal policy, macroeconomics, monetarism, monetary economics Tags: Joan Robinson

Joan Robinson thought German hyperinflation was not caused by monetary policy!!

Matt Rognlie

Almost, but not quite.

Back in the days when dinosaurs roamed the earth, and Cambridge economists kept guard at the Temple of Keynes, Milton Friedman’s focus on inflation as a monetary phenomenon was a revelation—and an excellent one. Next to Joan Robinson’s surreal claims that printing money was not responsible for the German hyperinflation, Friedman’s version of monetary economics provided a very healthy dose of sanity. And as central banks across the world learned from the mistakes of the 70s and brought inflation under control, it became clear that the monetary authority indeed had the power to contain the price level via control of the money supply.

But it’s important to know what this account leaves out: how, exactly, do prices adjust? And over what length of time does this happen?

The modern view, backed up by impressive (though not entirely conclusive) empirical evidence, is that most prices are…

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Hayek on Keynes and the microeconomic foundations of macroeconomics

31 Jul 2014 9 Comments

by Jim Rose in applied price theory, F.A. Hayek, macroeconomics Tags: FA Hayek, Keynes, the microeconomic foundations of macroeconomic

HT: Cafe Hayek

Calmfor’s Iron Law of Active Labour Market Policy.

31 Jul 2014 Leave a comment

by Jim Rose in applied price theory, fiscal policy, job search and matching, labour economics, labour supply, macroeconomics, welfare reform Tags: Active labour market programs, Lars Calmfors, welfare reform, work for the dole, workfare

Lars Calmfors is a Swedish economist whose main interest is labour makets.

His iron law of Active Labour Market Policy (ALMP) refers to a characteristic of make work schemes, like the WPA that operated in the United States in the 1930s.

The characteristic or problem with these schemes is that if people are attracted to these schemes by generous pay or conditions, their motive to search for regular work is necessarily reduced.

Assuming unemployment is anywhere near NAIRU, the effect of this reduced aggregate labour supply will be inflationary, which means that demand will have to be reduced, which in turn means that the jobs created by the make work scheme will be, at least to some extent, at the expense of regular jobs.

Alternatively, if people are coerced into joining make work schemes because of what might be called a “workfare” sanction, their job search efforts are not reduced, thus the jobs created by the make work scheme have a better chance of not being at the expense of normal jobs.

via RALPHONOMICS: Calmfor’s Iron Law of Active Labour Market Policy..

Will work-for-the-dole work in Australia?

29 Jul 2014 12 Comments

by Jim Rose in labour economics, labour supply, macroeconomics, unemployment, welfare reform Tags: benefit exhaustion spike, search and matching, unemployment insurance, US welfare reforms, welfare reform

One of the strongest empirical findings of modern labour economics is the benefit exhaustion spike. This is the large increase, shown in the diagram, in the probability of finding a job on the eve of exhausting unemployment benefits or unemployment insurance eligibility.

This benefit exhaustion spike is mobile: when unemployment insurance eligibility is lengthened, the benefit exhaustion spike moves out to the new benefit exhaustion date. For example, from 26 weeks, then to 39 weeks, then 52 weeks and then to 99 weeks. There is also a benefit exhaustion spike where the generosity of unemployment or other insurance decreases after a certain time. The alleged decay in the human capital of the long-term unemployed does not seem to affect this benefit exhaustion spike.

In addition, in the EU, the job finding probability of unemployment insurance recipients eligible for other welfare schemes are less sensitive to changes in the level and duration of their unemployment benefits benefits.

The benefit exhaustion spike shows that job seekers have much more control over their re-employment prospects than is commonly granted even in the worst of economic conditions such as in Pittsburgh in the early 1980s in a major recession and when US manufacturing industry industry was in a long-term decline.

The individual’s reservation wage (i.e. the lowest wage wage at which individuals will accept a job offer) decreases whilst search intensity increases as they approach unemployment benefit eligibility exhaustion.

This reduction in reservation wages or the asking wages of job seekers increases the incentives for employers to post new vacancies because they can fill them at a lower cost. Both more intensive job search and more vacancies will see jobs filled faster, and more jobs created and filled.

A mechanism for reducing welfare programme entry rate while increasing welfare benefit exits is mandatory minimum job search and mandatory work requirements such as those proposed this week for Australia. These minimum hours can be spent working part time, in study and training, work preparation and job search assistance or volunteering. A work requirement is a screening device that removes any advantage of moving on to welfare in terms of more leisure time.

The proposals announced this week in Australia are most job seekers will be required to look for up to 40 jobs per month and work for the dole will be mandatory for all jobseekers younger than 50. Job seekers younger than 30 would have to work 25 hours a week under the expanded programme, while those between 30 and 49 will be asked to do 15 hours work a week, and those aged 50-60, 15 hours a week.

At least 13 OECD member countries require at least monthly visits to a local employment office by unemployment beneficiaries to present job-search evidence and also perhaps to receive advice and even referrals to specific job openings.

Reforms in a range of overseas countries that introduced more intensive monitoring of job search and stronger sanctions on benefits for non-compliance significantly reduced unemployment spells.

One of the surprising results of more intensive monitoring of job search and a requirement to sign on regularly at the local employment office or Social Security office is the sheer horror of having to sign-on and talk to caseworker for five minutes encourages 5 to 10% of unemployed beneficiaries to find a job. When unemployment and sickness beneficiaries are required to undergo a full reassessment of their eligibility, it is common for up to 30% of them simply to not reapply.

The stronger monitoring of job search and the real prospect of stiffer sanctions for non-compliance encourages all benefit claimants, current and future, and not just those actually sanctioned to search harder for jobs. This anticipation of stricter monitoring and more frequent eligibility reviews has a much larger effect of welfare dependency than the actual sanctioning of the non-complaint. People review their options and marshalled their resources to find or stay in work.

The welfare exit effect and welfare entry deterrence arises from mandatory work requirements from the relative non-financial rewards of working and not working having changed in favour of staying in full-time and semi-work for persistent workers temporarily on a welfare benefit.

Persistent workers gain from anticipating the onerous nature of work requirements and searching more intensively for jobs which are more stable and enduring. These job seekers may reduce their asking wage to win a lower paid but steadier job.

Seasonal and temporary jobs will be less attractive if there are work requirements. The incentive to cycle between the benefit and part-time and full-time work including seasonal and temporary jobs are reduce because work requirements make welfare receipt more onerous. Those job seekers with fewer outside of the workforce obligations such as young children are the most likely to move to (stable) full-time work because of work requirements.

A work requirement as a condition for a welfare benefit receive unambiguously increases net labour supply and reduces the number of people relying on the welfare system now and into the future.

The number of people working increase and some leave welfare rather than comply with the mandatory work programmes. Work requirements make welfare receipt unambiguously less attractive and will close the gap between earning full-time wages and the net rewards of not working or part-time work and partial benefit receipt.

There was a more than 60% reduction in welfare caseloads after the 1996 federal welfare reform in the USA that introduced work requirement and five year lifetime federal welfare eligibility time limits on a national basis. In the four decades preceding the 1996 welfare reform, the number of Americans on welfare had never significantly decreased.

The gains in U.S. employment after the 1996 Federal welfare reform were largest among the single mothers previously thought to be most disadvantaged: young (ages 18-29), mothers with children aged under seven, high school drop-outs, and black and Hispanic mothers. These low-skilled single mothers in the USA were thought to face the greatest barriers to employment.

The U.S. literature has many competing estimates of the relative effects of work requirements, lifetime time limits and a far more generous earned income tax credit (EITC). It is agreed that work requirements and time limits reduced entry into welfare caseloads. The relative importance of time limits, work mandates and greater EITC generosity for exits is more disputed.

The Minnesota Family Investment Program (MFIP) had a more complex experimental design that allowed separate evaluation of the mandatory welfare-to-work program and the lower benefit reduction rate. The results indicated that the lower benefit abatement rates appear to have had little labour supply effect. The increase in labour supply seems to have come almost entirely from the mandatory welfare-to-work program and its associated sanctions.

Much was initially made in the US empirical literature of the strong state of the American economy in the 1990s as an explanation for part of the drop in welfare caseloads. The relevance of this faded when welfare caseloads did not increase again when the economy deteriorated after 2007 in the USA.

The shape of recoveries from recessions

28 Jul 2014 Leave a comment

by Jim Rose in business cycles, macroeconomics, Milton Friedman, monetarism Tags: boom and bust, Milton Friedman, plucking model, recoveries from recessions

Milton Friedman (1993) proposed a model of the depth of recessions and steepness of recoveries built on two empirical regularities:

output is on average below a ceiling defined by supply capacity and tends back to this ceiling; and
large contractions are followed by large expansions and mild contractions are followed by mild expansions.

The strength of a recovery should be positively correlated with depth of the recession but there should be no correlation between expansions and recessions (Friedman 1993; Alchian 1969).

The figure below illustrates Friedman’s model, which likens the time path of output to a string on the underside of an upward sloping board that is plucked downward at random intervals to various extents into busts that are followed by booms.

Source: Garrison (1996).

The upward sloping board plotted as a thick line in the figure represents a ceiling on feasible output and employment in a given year that is set by resource and technology availabilities. The upward slope of this board accounts for trend real GDP growth over time due to technological progress and other factors.

The business cycle starts with a bust caused by an adverse policy or other shock and is then followed by a boom as the market self-adjusts and the policy errors are reversed. Without the initial adverse policy or other shock, there would neither be a bust nor a boom.

The correlation between busts and booms arises from the monetary contraction that caused the bust eventually inducing an offsetting correction in monetary policy.

The monetary contraction that pushed or plucked output below the upward sloping ceiling is later followed by a monetary expansion that offset the earlier contraction. With the amplitude of monetary expansions correlated to offset the prior contractions, GDP growth will have similar plucks or falls and rebounds to the upward sloping output ceiling because of the link albeit with a lag between monetary growth and output fluctuations. The increases and decreases in monetary growth are independent policy choices with unique causes.

The associated upward and downward movements in GDP growth are not correlated with each other but should be correlated with the prior fluctuations in monetary growth. There would not be a bust and later boom if there is no monetary contraction to start the cycle. This is why Friedman (1993) proposed that the depths of busts are unrelated to the duration and strength of prior economic booms.

Milton Friedman on what is monetarism

26 Jul 2014 Leave a comment

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The leads and lags on monetary policy are long and variable

25 Jul 2014 Leave a comment

by Jim Rose in business cycles, inflation targeting, macroeconomics, Milton Friedman, monetarism, monetary economics Tags: leads and lags on monetary policy, Milton Friedman, monetary policy

Many Keynesians, Friedman notes, advocate “leaning against the wind.” By this they mean, in some sense, that the monetary (and fiscal) authorities should try to balance out the private sector’s excesses rather than passively hope that it adjusts on its own.

There are large uncertainties about the size and timing of responses to changes in monetary policy. There is a close and regular relationship between the quantity of money and nominal income and prices over the years. However, the same relation is much looser from month to month, quarter to quarter and even year to year.

Monetary policy changes take time to affect the economy and this time delay is itself highly variable. The lags on monetary policy are three in all:

The lag between the need for action and the recognition of this need (the recognition lag)
The lag between recognition and the taking of action (the legislation lag)
the lag between action and its effects (the implementation lag)

These delays mean that is it difficult to ascertain whether the effects of monetary policy changes in the recent past have finished taking effect. Secondly, it is difficult to ascertain when proposed changes in monetary policy will take effect. Thirdly, feedbacks must be assessed. The magnitude of the monetary adjustment necessary to deal with the problem at hand is thus never obvious. It is common for a central bank to act incrementally. The central bank makes small adjustments to monetary conditions over time as more information is available on the state of the economy and forecasts are updated.

The existence of lags may mean that by the time policy has its full effect, the problem with which it was meant to deal may have disappeared.

Milton Friedman (1959) tested the Fed’s success at leaning “against the wind” by checking whether the rate of money growth has truly been lower during expansions and higher during contractions. He admits that this method of grading he Fed’s performance is open to criticism, but he decided to go ahead and see what turns up. Friedman found that Fed has – for the periods surveyed – been unsuccessful.

By this criterion, for eight peacetime reference cycles from March 1919 to April 1958. Actual policy was in the ‘right’ direction in 155 months, in the ‘wrong’ direction in 226 months; so actual policy was ‘better’ than the [constant 4% rate of money growth] rule in 41% of the months.

Nor is the objection that the inter-war period biased his study is good since Friedman found that:

For the period after World War II alone, the results were only slightly more favourable to actual policy according to this criterion: policy was in the ‘right’ direction in 71 months, in the ‘wrong’ direct in 79 months, so actual policy was better than the rule in 47% of the months.

One of the best ways to parry a metaphor is with another metaphor. Keynesians have a host of metaphors in their rhetorical arsenal; one frequently voiced is that a wise government should “lean against the wind” when choosing policy. Friedman counters:

We seldom know which way the economic wind is blowing until several months after the event, yet to be effective, we need to know which way the wind is going to be blowing when the measures we take now will be effective, itself a variable date that may be a half year or a year or two from now. Leaning today against next year’s wind is hardly an easy task in the present state of meteorology.

Friedman’s remarks, as even his strong critics admit, are mighty and strike at the heart of any activist stabilisation policy. By meeting Keynesians on their own theoretical turf and scrutinising their practice, Friedman manages to produce objections that both Keynesians and non-Keynesians must take seriously. A key part of any response to Friedman rests on the ability of forecasters to do their jobs with tolerable accuracy.

Keynesian policies do not necessarily follow even if the Keynesian theory of the business cycle were conclusively proved. It must also be demonstrated that the government has the ability and willingness of the government to act as the theory prescribes. Friedman’s critique does not depend on the quantity theory of money.

New Keynesian macroeconomics as the triumph of monetarism

25 Jul 2014 Leave a comment

by Jim Rose in macroeconomics, Milton Friedman, monetarism, monetary economics Tags: Brad Delong, Milton Friedman, monetarism, New Keynesian macroeconomics

In The triumph of monetarism, Brad De Long wrote in the Journal of Economic Perspectives—Volume 14, Number 1—Winter 2000—Pages 83–94 that today’s new Keynesian" macroeconomists would include in any list of their key ideas and premises the five following propositions that:

The key to understanding real fluctuations in employment and output is to understand the process by which business cycle-frequency shocks to nominal income and spending are divided into changes in real spending and changes in the price level.
Under normal circumstances, monetary policy is a more potent and useful tool for stabilization than is fiscal policy.
Business cycle fluctuations in production are best analysed from a starting point that sees them as fluctuations around the sustainable long-run trend (rather than as declines below some sustainable potential output level).
The right way to analyse macroeconomic policy is to consider the implications for the economy of a policy rule, not to analyse each one- or two-year episode in isolation as requiring a unique and idiosyncratic policy response.
Any sound approach to stabilization policy must recognize the limits of stabilization policy—the long lags and low multipliers associated with fiscal policy; the long and variable lags and uncertain magnitude of the effects of monetary policy.

De Long then went on to argue that the above research programme is the macroeconomic research programme of Milton Friedman in the mid-20th century.

Bagehot on the bank bail-outs and moral hazard

23 Jul 2014 Leave a comment

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Free trade weathered well in the global financial crisis

18 Jul 2014 Leave a comment

by Jim Rose in global financial crisis (GFC), international economic law Tags: free trade, global financial crisis

Bounce back

Lower levies

The mirage of cost-push inflation

17 Jul 2014 Leave a comment

by Jim Rose in inflation targeting, macroeconomics Tags: Bill Allen, cost-push inflation, lags on monetary policy

It does appear too many that rising costs push up prices, but this impression is an illusion caused by the way inventories delay the effect of money supply increases on retail prices.

When increased money growth causes total spending to rise more quickly, sales of particular businesses will increase. But sales fluctuate from day to day and week to week, so managers of these businesses cannot immediately know that this sales increase will last.

As sales continue to rise, restaurants will use up their inventories. Larger orders will then be placed with suppliers, and inventories of these suppliers will begin to shrink.

The retail price has not yet changed because inventories have absorbed the initial impact of the increased spending.

But as more orders to replace depleted inventories work their way down the chain of distribution, orders for too wholesalers also will rise faster.

The available inventories are inadequate to meet the rising amounts demanded at existing prices.

As a result, wholesale prices will rise as packers bid more intensely for scarce factory supplies. These higher prices then cause factories and other base suppliers to raise their prices; and higher wholesale prices cause retailers to charge more.

As higher prices work their way up the distribution chain to the consumer, they create an illusion that higher costs are pushing up prices.

But both costs and prices are being pulled up by the increased spending caused by a more rapidly growing money stock. Because the effects of more money and more spending are delayed by inventories, hasty conclusions about the cause of inflation can be deceptive.

HT: Bill Allen

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Utopia, you are standing in it!

The puzzlingly large cross country differences in sector labour productivity

Figure 1: Relative Value Added Per Worker: Germany, Japan, and the United States Manufacturer’s Industries

Figure 2: Relative Value Added Per Worker – service industries

The contribution of the random fortunes of large firms to business cycle volatility, or how a single, small, dirty pipe threatened to bring a nation to its knees

Figure 1: Sector’s concentration (Herfindahl Index) and sector’s contribution to aggregate volatility

Keynesian analysis implicitly assumes that a fiscal deficit does not have any effects on other spending

Eugene Fama and the simulative effects of fiscal policy

“Inflation is always and everywhere a monetary phenomenon”

Hayek on Keynes and the microeconomic foundations of macroeconomics

Calmfor’s Iron Law of Active Labour Market Policy.

Will work-for-the-dole work in Australia?

The shape of recoveries from recessions

Milton Friedman on what is monetarism

The leads and lags on monetary policy are long and variable

New Keynesian macroeconomics as the triumph of monetarism

Bagehot on the bank bail-outs and moral hazard

Free trade weathered well in the global financial crisis

The mirage of cost-push inflation

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Figure 1: Relative Value Added Per Worker: Germany, Japan, and the United States Manufacturer’s Industries

Figure 2: Relative Value Added Per Worker – service industries

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Figure 1: Sector’s concentration (Herfindahl Index) and sector’s contribution to aggregate volatility

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