Archive for November, 2011

Economists, Sign Here: Economists’ Statement In Support of Occupy Wall Street

November 29th, 2011 Comments off

Job Satisfaction and Elasticity of Labor Supply

November 25th, 2011 1 comment

Thinking more about Steedman’s point, that how much people (don’t) enjoy their work has a massive effect on their “utility” and welfare, I wonder this:

Wouldn’t the market for higher-end jobs — which tend to deliver more job satisfaction, hence utility, hence welfare — display much lower elasticity of supply?

In other words, wouldn’t changes in salaries (or taxes on those salaries) have much less effect on workers in those high-end jobs than on workers in shitty jobs?

Do any of the supposedly micro-based DSGE models — or any economic models that you know of — incorporate this effect?

Bleg: Studies of Confirmation Bias in Different Groups?

November 25th, 2011 4 comments

It’s no secret that humans are prone to confirmation bias: adopt a belief, then go seek out evidence that supports it. Rafts of books, articles, and blog posts have been published on the subject, over many decades.

But so far (I haven’t searched comprehensively, by any means) I’ve been disappointed because they all tend to say “we all do this.”

Yes, of course, true. But there are matters of degree.

It seems equally obvious that some people do it more than others.

Are certain groups more prone to it? Has anybody studied this? How have those studies been crafted, or how would they be crafted?

Any leads much appreciated.

You know me, of course: my pretense of objective curiosity is simply a smoke-screen hiding my real effort — to find confirmation for my existing belief that Republicans/conservatives are more prone to confirmation bias than Democrats/liberals.

But I’m also just darned curious. Really.

Chinese VC Prefers Canada

November 23rd, 2011 Comments off

When asked why he chose to emigrate to Canada even though he still runs his business in the Chinese mainland, Michael Li gave a simple answer: “protection.”

Li, who works in venture capital, told the Global Times that the environment, food safety, social welfare and relatively small population in Canada give him a feeling of security and peace.

“But China has millions of money-making opportunities,” said Li, adding that he is not alone in seeing China as a place for business, but overseas countries as a place to live.

via Leaving Home.

Co-Founder of Reaganomics: The economic mess … is the direct consequence of too much economic freedom … the direct consequence of financial deregulation.

November 23rd, 2011 2 comments

The economic mess in which the United States and Europe find themselves and which has been exported to much of the rest of the world is the direct consequence of too much economic freedom. The excess freedom is the direct consequence of financial deregulation.

Paul Craig Roberts served as Assistant Secretary of Treasury in the Reagan White House — his claim to fame was being a co-founder of Reaganomics. Roberts is former editor for the Wall Street Journal, Business Week, and Scripps Howard News Service.


via The Case for Regulation | The Big Picture.

What You Do at Work Has No Effect on Your Utility or Well-Being. Oh, wait…

November 22nd, 2011 Comments off

Various sources have been pushing me lately to read Ian Steedman‘s work.

Right out of the gate, I come upon this aha! paper:

The welfare of almost all employed people is significantly affected by how they spend their working hours — and not just by how long they work and what they can purchase with their earnings. Yet this brute fact is all but ignored in welfare economics!

Let us call to mind the familiar but pivotal welfare economics analysis of Robinson Crusoe. Faced with given technical possibilities of production and fixed supplies of land and labour, Crusoe will ‘first’ identify efficient resource allocation points on the production contract curve — and hence on the production possibility frontier. In a `second’ logical step he will choose from amongst the output combinations lying on that produc- tion (and consumption) frontier according to his preference ordering over consumption bundles. Only such bundles influence his welfare. In a more complete version of the analysis, Crusoe would be supposed also to choose how much time was devoted to work and how much to leisure, his welfare now being dependent only on his consumption of commodities and his total leisure time. In neither the simpler nor the more complete analysis would Crusoe’s welfare be affected in the least degree by his working activities per se; only total working (leisure) time and the commodity outputs from that working time are held to be relevant to welfare.

Now … How many employed people do our readers know whose welfare depends only on their total leisure time and their consumption, having nothing whatever to do with how they spend their working hours? … This glaring omission certainly cannot be defended by any `realism of assumptions does not matter’ style of argument, since such an argument cannot be made within welfare economics, with its many untestable conclusions (cf. de V. Graaff, 1967, p. 3). Nor can it be defended on the grounds that the issue is very difficult to incorporate in welfare analysis, or on the grounds that its incorporation makes little or no difference to the conclusions reached. This essay will show both that the importance of working conditions for Robinson Crusoe’s welfare can readily be handled within the standard welfare theory framework and that recognition of that importance does indeed have a notable impact upon familiar welfare theory propositions.

Sorry, gated: Welfare Economics and Robinson Crusoe the Producer, Metroeconomica, 2000, 51(2), 151-167.

Update: See further on the implications of Steedman’s thinking:

Job Satisfaction and Elasticity of Labor Supply


Eugene Fama on the (Subprime) Meltdown

November 22nd, 2011 2 comments

You have to face the following fact: all assets declined by about the same amount, and real estate around the world by the same amount, even in places where there were no subprime mortgages. Cause and effect is not very easy to disentangle.

This argument seems to have legs (at least if this one does). I’m not at all sure he has his facts right, but still…

What say ye?

via Examining the financial crisis with professor Eugene Fama.

The Real Ponzi Scheme: Private Debt

November 21st, 2011 9 comments

Steve Keen was recently interviewed by Larry Elliott, Economics editor of the Guardian.

Keen’s argument is that the sovereign debt crisis is merely a symptom of the real cause of the problem: an exponential increase in private debt as a share of national income. In the early stages of a credit cycle, the private sector borrows to fund investment that pays for itself, but in the euphoric bubble phase borrowing is used to speculate on rising asset prices. Debt grows much faster than income but those borrowing the money assume they will be able to pay off what they owe from the rising capital value of their assets. This model of growth, in other words, is no more than a gigantic Ponzi scheme, named after the fraudster who paid out investors with money raised from the next wave of suckers.

Ultimately, of course, private debt and interest charges on that debt needs to be paid off from real-economy income. Asset prices can’t rise forever.

Economists will tell you that gross debt levels don’t matter because one person’s debt is another’s holdings. (Net: zero.) They ignore it.

But if the gross private debt is too large, the real assets in the real economy can’t generate enough income to pay it off. Not really complicated, conceptually.

People gnash their teeth about government debt (which in a sovereign-currency nation never needs to be, never is, paid off), but U.S. private debt hit 300% of GDP just before the crash. Same thing — at a lower but still historically unheard-of level in … wait for it … 1929.

via Rolls-Royce tastes lead to fiat money – time we wean ourselves off high debt | Business | The Guardian.

It Could Have Been My Kids. Or Yours.

November 20th, 2011 3 comments

I have two daughters in college, a freshman and a junior.

You’d love them. Everybody does.

So when I see this video of a policeman casually walking along a line of college kids who are just sitting there, pepper spraying them right in the face,

…and I think about this:

… I think how easily it could have been one of my girls. College students, doing what college students do, expressing their passion and their commitment, putting themselves — their bodies — out there to make the world a better place.

I think about how easily it could have been one of them.

And I cry.

Did I Mention That It’s the Wealth, Stupid?

November 19th, 2011 Comments off