Archive for May 4th, 2009

From a video at New Deal 2.0 (h/t Mark Thoma), a project of the Franklin and Eleanor Roosevelt Institute. The whole thing is good, but I think Stiglitz does a good job making a somewhat similar diagnosis to that of Richard Wolff, albeit without the Marxian solution. The excerpt I want to point out begins at 2:55.

The other part, obviously, that was absolutely key to the New Deal was a sense of social justice, fairness, whatever word you want to use. The New Deal had some very important social programs. One of the reasons why the economy, I think, has been doing poorly is because of the growing inequality. People at the bottom have not been doing very well, but we told them to consume as if they were doing well, by borrowing. But that was not a sustainable business model.

Anyways, I know that Stiglitz is not Richard Wolff, but it always strikes me when “the gap” analysis comes out from neoclassical economists. Of course, the work of those like Emmanuel Saez and Paul Krugman (whose nobel work is not explicitly related to inequality, but whose more recent work is tangentially), is gaining increased airing in mainstream academia. This is a positive development. I read that Obama even had dinner with Krugman and Stiglitz last night. These are the sorts of people he should be listening to, as opposed to Bob Rubin or Larry Summers, because they are outsiders. It would be great if he had dinner with Wolff or Resnick or Naomi Klein, but that is wishful thinking at this point.

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Dark Humor

Or at least I hope. I stumbled upon a blog called “Gateway Pundit,” where the author appears to be either very stupid or very funny. The post of interest is called “The Obama Disaster- By the Numbers”. The money excerpt:

The US economy enjoyed 7 straight years of unimpeded economic growth during the Bush years. The Bush tax cuts lifted the country out of its recession until the mortgage bubble erupted and the economy took a sudden nosedive in last half of 2008– something Bush repeatedly warned Congress about.

Unlike Bush, President Obama decided to spend his way out of his recession.
Here’s how it’s worked out:

Economists expected a 5 percent annualized decline in the first quarter but instead saw the economy drop by 6.1%.

I have no comment on this. I hope you enjoyed this visit to the right-wingosphere.

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Nancy Folbre, an economist at UMass Amherst who specializes in feminist economics, has a post at Economix that discusses the lack of home productio in GDP statistics in light of the economic crisis.

Home construction is way down in the United States, but home production — work to produce goods and services for own consumption — is way up. As people forgo expensive restaurant meals, they spend more time cooking at home. A Time Magazine poll reports that individuals are doing more housework and home repairs. Many Americans, famously including Michelle Obama, are planting vegetable gardens. Even some urbanites are raising chickens in their backyards.

The issue becomes most poignant when doing cross-country comparisons:

Average time devoted to home production in the United States is lower than in many other countries partly because female participation in paid employment is particularly high here. As a result, estimates of gross domestic product, based on market transactions, overstate our relative well-being. Research by economists Rick Freeman and Ronald Schettkatt, for instance, shows that the value of mothers’ unpaid work in Germany is even greater than it is here. Adding an estimate of the market value of this work to G.D.P. in both countries would increase measures of German living standards more than ours.

Household dynamics may change as a result of the recession, but GDP could miss it entirely:

Men in the United States have increased the average amount of time they devote to housework and child care since 1975. Unemployed husbands who depend on their wives’ paychecks have incentives to develop their skills in this department. They seem rather reluctant to do so.

But that may change as bouts of unemployment grow longer, as they have during the current recession. When data from the 2008 and 2009 American Time Use Surveys become available, it should be possible to estimate the amount and value of increased unpaid work by both women and men. In hard times, even a few dollars a day can make a difference.

Sometimes I debate whether GDP is a good enough measure to be worth fixing. However, so long as it remains the primary indicator of economic well-being, I would obviously prefer that it be as holistic as possible. Of course, we then get into the throny issues of how to value household production. In any case, it could be that the recession provides incentives to reevaluate our economic statistics.

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Imprudential Investing


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