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Industrial production: We’re DOOO …. oh, wait, it’s the global warming hoax

by New Deal democrat

Industrial production: We’re DOOO …. oh, wait, it’s the global warming hoax

At first blush yesterday’s negative industrial production print gives the lie to the proposition that the economy has left last year’s “shallow industrial recession” behind, as it looks to be going mainly sideways:

But a closer examination shows that is not the case.  Industrial production is broken up into three groupings: manufacturing (by far the biggest), utilities, and mining (including oil and gas).

So here is the information for manufacturing (blue. left scale) and mining (red, right scale):

Although the trend is modest, manufacturing has broken out to new highs.  And the energy patch is clearly seeing a rebound.

Which means that the *entire* reason for the decline is utilities:

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Recall and the General Strike

by Sandwichman

Recall and the General Strike

The tradition of the oppressed teaches us that the “emergency situation” in which we live is the rule. — Walter Benjamin, On the Concept of History, 1940

Back in December, I posted Full Employment and the Myth of the General Strike to start the conversational ball rolling about the idea of a general strike. It was the middle post in a three-part series on full employment.
Events move fast in 2017.
In the past two days, op-eds have appeared in the Washington Post and the Guardian taking up the issue of job action — and the general strike — as forms of resistance. On Monday, the Guardian published a Comment is Free by Francine Prose, “Forget protest. Trump’s actions warrant a general national strike.” This morning, “Where’s the best place to resist Trump? At work.” by labor lawyers, Moshe Marvit and Leo Gertner, was published as a PostEverything by the Washington Post.
Apparently, a call has gone out for a general strike on February 17, which strikes me (no pun intended) as rather precipitous. But the conversation is rolling.
Another element I would like to throw in is “what are the demands?” That Trump stop doing nasty things? That the GOP house and the GOP senate impeach the one who is going to sign their tax cut bills? I propose recall — total recall. Not only are the elected officials themselves corrupt, incompetent and unrepresentative but the electoral system that has installed them has been thoroughly corrupted and undemocratic. Throw the bums — AND THE NAG THEY RODE IN ON — out.
To give context and American (U.S.) historical resonance to that demand, it is useful to consider Populist and Progressive proposals for “direct democracy,” through initiative, referendum and the “imperative mandate” (recall) from over a century ago.
What am I really talking about here? What am I doing? The narrative time dimensions of the revolutionary general strike and of the reformist recall, as conceived by Populists and Progressives, could not be more contrasting. The general strike takes place in what Walter Benjamin referred to as jetztzeit — “not homogenous, empty time, but time filled by the presence of the now.”

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Why You Should Never Use a Supply and Demand Diagram for Labor Markets

by Peter Dorman    (published originally at Econospeak)

Why You Should Never Use a Supply and Demand Diagram for Labor Markets

You would know this if you read your Cahuc, Carcillo and Zylberberg, but you probably won’t, so read this instead.
A standard S&D diagram for the labor market might look like this:

It’s common to use W (wage) on the price axis and N (number of workers) on the quantity axis.  Equilibrium is supposed to occur at the W where quantity supplied equals quantity demanded.  From here you might introduce statutory minimum wage laws, or jobs with different nonpecuniary benefits and costs, etc.  The default conclusion is that free markets are best.

But hold on a moment.  S and D don’t tell you how many workers actually have jobs or how many jobs are actually filled—these are offer curves.  The S curve tells you how many workers would be willing to accept a job at various wages, and the D curve tells you how many jobs would be made available to them.  That’s not the same as employment.

They would be the same in a world in which labor markets operated according to a two-sided instantaneous matching algorithm, something designed by Google with no human interference at any stage of the process.  In such a world all offers would enter a digital hopper, and all deemed acceptable by someone else’s algorithm would be accepted immediately.  Maybe not Google but Priceline.

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Resettling Refugees – A Thought Experiment

Consider a country with a vicious ongoing multi-sided Civil War which includes some amount of deliberate large scale civilian extermination.  You know the sort of thing: Syria today is just the most recent example, but there are other well-known examples from the last few decades.  To keep things generic, let us refer to the various sides in the Civil War as A, B, C, etc.

Militias from each group have been caught massacring civilians from the other group.  Or maybe the evidence points toward only one side being responsible for such atrocities.  Truth to tell, nobody in the US really has a firm and unbiased grasp of what is going on.  If this sounds like the vast majority of wars since 1945, it should.

Now, let us say that the US has a pre-existing immigrant population from Group A.  For whatever reason, they have mostly settled in  Lincoln, NE.  (I picked Lincoln completely at random.  I understand some Thai and Burmese refugees have settled in Lincoln, but I would say that for the most part, the city doesn’t have a strong connotation with refugees among the general public.).   Lincoln now has a neighborhood called “Little X” where “X” is the capital of the country with the ongoing Civil War.   

If the Civil War results in more people from Group A are admitted to the US as refugees, it is natural to relocate them or at least encourage them to live in Lincoln.  But what if refugees from Group B are also admitted in not-insignificant numbers?  Groups A and B have a long history of distrust, and are vicious enemies in the current Civil War.  And if there is one thing Americans have managed to figure out about the ongoing war that is accurate, it is that there are some horrific atrocities going on.

So…  should it be the policy of the US government to try to settle the new refugees from Group B in Lincoln, NE?  There would be scale economies due to similar language, culture, food, and possibly even religion.  Or should it be the policy of the US government to try to get the refugees to settle somewhere far away from Lincoln, NE to minimize the possibility of conflict and ill will?  And does your answer change if we manage to learn that both sides are not equally at fault?  For example, do we make the same decision vis a vis Lincoln, NE if Group B was responsible for all or most of the atrocities and committed them against A, or vice versa?  You can assume that all the refugees are properly vetted and that none of them are known to have been involved in committing the atrocities.  


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Dumbest Statement Coming Out of Congress Yet on Healthcare . . .

A partial of the Republican plan:

introduced by Rep. Mark Sanford (R-S.C.) and Sen. Rand Paul (R-Ky.), would end Medicaid expansion, decouple health insurance from employers, offer a tax credit of up to $5,000 to fund HSAs, and eliminate most regulations on what health plans must cover. Insurers would be able to sell policies across state lines; regulations that mandate birth-control coverage would be nixed.

Hmmmm, that’s nice . . .

This is about the dumbest statement I have read yet by Senator Rand Paul;

“What if 30 percent of the public had health savings accounts?” Paul asked. “What do you do when you use your own money? You call up doctors and ask the price. . . . If you create a real marketplace, you drive prices down.”

“What if” we were all billionaires, able to buy the best care, and negotiate with multi-billion dollar hospitals? Yea “what if” . . . “What if” all the Senators and Congressmen, and Judges had our very same healthcare plan? Yea “what if” . . . “What if” all of those people fighting against the PPACA had really put some effort into learning about it, put the effort into forcing Congress to move forward with making it better . . . where would we be today? Yea “What if” . . .

Still love kicking the one layer deep naysayers around as they too will get a douse of what this is all about if ESI disappears as well as birth-control. Healthcare policies across state lines will be similar to what bank chartering is like with a couple of states controlling all the policies and no real competition (just like interest rates and usury).

“What if . . . “

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Bad news: real non supervisory wages have actually declined over the last year

by New Deal democrat

Bad news: real nonsupervisory wages have actually DECLINED over the last year

This morning’s inflation news was even worse than I expected based on the increase in gas prices.

On a monthly basis prices rose +0.6%. Core prices rose +0.3%.

More importantly, YoY CPI was up +2.5%.  Core YoY CPI was up+2.3%:

This means real nonsupervisory wages are now actually *down* -0.1% YoY for the last year.

Here is the actual level of real nonsupervisory wages for the last 3 years:

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The End of the Japanese Miracle… and the American One

Scott Alexander at Slate Star Codex has a very good post on cost disease. It definitely betrays a strong libertarian or conservative bias, but is nevertheless, worth reading.

The piece that resonates with me is posted below. It has some good insights, one or two that are questionable (for anyone not firmly ensconced on the right), but overall it methodically works its way to one hell of a punch-in-the-gut truth in last sentence.

Imagine if tomorrow, the price of water dectupled. Suddenly people have to choose between drinking and washing dishes. Activists argue that taking a shower is a basic human right, and grumpy talk show hosts point out that in their day, parents taught their children not to waste water. A coalition promotes laws ensuring government-subsidized free water for poor families; a Fox News investigative report shows that some people receiving water on the government dime are taking long luxurious showers. Everyone gets really angry and there’s lots of talk about basic compassion and personal responsibility and whatever but all of this is secondary to why does water costs ten times what it used to?

I think this is the basic intuition behind so many people, even those who genuinely want to help the poor, are afraid of “tax and spend” policies. In the context of cost disease, these look like industries constantly doubling, tripling, or dectupling their price, and the government saying “Okay, fine,” and increasing taxes however much it costs to pay for whatever they’re demanding now.

If we give everyone free college education, that solves a big social problem. It also locks in a price which is ten times too high for no reason. This isn’t fair to the government, which has to pay ten times more than it should. It’s not fair to the poor people, who have to face the stigma of accepting handouts for something they could easily have afforded themselves if it was at its proper price. And it’s not fair to future generations if colleges take this opportunity to increase the cost by twenty times, and then our children have to subsidize that.

I’m not sure how many people currently opposed to paying for free health care, or free college, or whatever, would be happy to pay for health care that cost less, that was less wasteful and more efficient, and whose price we expected to go down rather than up with every passing year. I expect it would be a lot.

And if it isn’t, who cares? The people who want to help the poor have enough political capital to spend eg $500 billion on Medicaid; if that were to go ten times further, then everyone could get the health care they need without any more political action needed. If some government program found a way to give poor people good health insurance for a few hundred dollars a year, college tuition for about a thousand, and housing for only two-thirds what it costs now, that would be the greatest anti-poverty advance in history. That program is called “having things be as efficient as they were a few decades ago”.

I should note that the spending examples cited in the above paragraphs have numerical support earlier in Alexander’s post. But the problem with the post is the lack of a satisfactory answer to the question it raises: what caused the massive declines in efficiency we saw in many vital parts of the US economy?

And here I am pleased to say I can help. I actually provided an answer to that question in a post I wrote six years ago explaining why Japan grew so rapidly after WW2 and what policy changes led to the end of its rapid rise.

I encourage you to read my post, but it comes down to this: the Japanese Miracle ended when its fabled bureaucracy became far less of a test- and performance-based meritocracy.  This was done with the noble cause of broadening inclusion, which of course, was severely lacking in the old system.  But the baby was thrown out with the bathwater.  The new system ended up just as unfair as the old one, but in very different ways.  Unfortunately, it also became a lot less efficient.  Test scores turned out to be positively correlated with performance.   Highly correlated.  It didn’t take long for the public to notice the change.  The deference once afforded to entities like MITI dwindled and died.  Soon the ministries could no longer command the respect they needed to actually run the economy, much less the competence to do it well.  But the now enfeebled bureaucracy could still influence events.  It went on to buy into Reaganomics (tax cuts, smaller government, and a trade policy that was less export oriented). Put another way: Japan Inc. started hiring suckers, and predictably the suckers got suckered.

The parallels with the US are obvious. That isn’t to say  all is doom and gloom for either Japan or the US. Both countries remain rich, prosperous, and innovative. But Japan no longer inspires the world as it once did. The Japanese Miracle ended decades ago. And I have a real fear that America’s best moment may also in the past. Policies that elevate mediocrity achieve just that.  And they are awfully hard to reverse.

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Trump And The Fed

by Barkley Rosser originally published at Econospeak, “Trump and the Fed”

It may be way too soon to say anything sensible about what Trump thinks about the Fed or will do  about it, but as the first person to have publicly called for appointing Janet Yellen as Chair (back in 2009), I figure I am more situated to stick my neck out to say something, especially when it looks like what is coming is a big contradictory mess.For the moment the Fed seems to be laying low, having made almost no change in policy or projections as reported by the diligent …Tim Duy.  They remain open to maybe tightening after March if the employment report improves notably, but otherwise seem to be on a “steady as you goes” path for the moment, doing almost nothing.  This on top of a letter from Congressman McHenry demanding they stop cooperating with any international banking entities until Trump  makes appropriate appointments.  And Tim adds a comment on a recent column by former Fed gov Kevin Warsh, who indulged in criticizing the Fed by demanding that it follow policies it is already following.  In this latest post Duy suggests that perhaps Warsh is running for Fed Chair, which means one has to appear to criticize Fed policy, even if one is not really.  Which raises the question of what Trump will do.

Let us start with something that hardly anybody has noticed, but is just taken for granted: that Trump almost certainly will not reappoint Janet Yellen as Chair.  This just seems to follow from his general attitude that all incumbents are no good, and especially anybody appointed by Obama, except for FBI Director Comey.  Why she is no good is not immediately obvious, and in fact several times over the last two years he praised  her “low interest rate policies” noting that as an old real estate developer he has always been a fan of such policies.  However, in June of this past year when the Fed did not raise the fed funds target rate, he denounced her personally and the Fed more generally for not doing so, charging that their failure to do so was part of a plot to goose the economy in an effort to help elect Hillary Clinton. Given that rhetoric it seems unlikely that he would reappoint her, although it could still come to pass that if when her term comes up next year markets seem to like her as well as GOP commentators, he could change his mind.

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