The title of this post describes the main message of Pavlina Tcherneva’s research. This video is a “must see”. If her message becomes part of the policy approach for the next recovery, we will see much better net social benefits for society after the next recession. (video link)

¯\_(ツ)_/¯ Back in April, I wrote that the Dow Jones would rise to 16,800 and then revolve around that point and then eventually come down from there. “My view now is that the Dow Jones will make a publicity effort with hopes to get back up to 16800, then come down from there.” (link) I […]

Mark Thoma wrote today that the Fed should not raise rates too soon, because… “If the Fed raises rates too soon, it is working class households who will be hurt the most by the slower recovery of employment.” His thinking is not deep enough. He just sees that a rise in the Fed rate will […]

In a speech this week, the President of the Federal Reserve Bank of Chicago, Charles Evans, made a case for keeping the effective Fed rate low well into the foreseeable future. He concluded… “To summarize, I am very uncomfortable with calls to raise our policy rate sooner than later. I favor delaying liftoff until I […]

Brad DeLong has a video discussing Piketty’s book. In the video, the subject of labor share comes up, which has dropped to new lower levels in advanced countries. Robert Solow tries to make an analogy for labor share being an irrelevant factor. So he describes two islands. (36 to 38 minutes in video) and asks […]

It all started with an article about a speech by Dallas Fed President, Richard Fisher, in the Business Insider last Friday. Mr. Fisher basically said that wages could start rising once unemployment hits 6.1%. He then said that the Fed should start raising the effective Fed rate earlier than projected. The idea is that the […]

  When someone says, “if we raise the minimum wage, there will be more unemployment.” That may be true, but their fear of unemployment is not wise. It is better to say, “if we raise the minimum wage, will net social benefits be increased?” When someone says, “if the Fed had gradually raised the Fed […]

Now that the Fed has sent the message that nominal rates will stay at the ZLB for a considerable time after October, let’s revisit the concept of the Zombie firm. The ZLB Fed rate makes it more likely that zombie firms will continue to limp on… Zombie firms are not good for society. The main […]

Greg Mankiw posted about his version of the Taylor rule. He basically sees the Fed rate heading into positive territory, which would indicate that the Fed rate should start rising according to the rule. However, he also sees the need to allow the Fed rate to now stay below a rule rate in order to […]

A comment on a previous post said that the unemployment rate is under-measuring the true unemployment rate due to people having withdrawn from the labor market. The low labor force participation rate would reflect this view. Is the 6.1% unemployment rate a reliable measure of un- and under-employment? One model for the supply & demand […]