A Tale of Two Cities published by the Demand Institute offers some insights into the distribution of housing wealth in the United States: It is all too easy when discussing the U.S. economic outlook to forget that it aggregates the economic prospects of thousands of different cities, towns, and villages across the nation. National statistics […]
As output increases, there is an effective demand limit which slows down the utilization of capital and labor. Utilization of capital typically slows down before labor. The circled areas show times in the US when capacity utilization (blue) declined as employment (red) was rising or holding steady. This pattern normally happens before a contraction in […]
Simple national income and product accounting tells us that the current US recover (I can barely manage to type that without scare quotes and I *hate* scare quotes) has been horrible for two reasons: low government purchases of goods and services (G) and low housing investment. Consumption, fixed non residential investment, and inventory investment have […]
The weather has been great in Phoenix for months, but even so, the housing market is slowing down. Nick Timiraos, Real Time Economics from the Wall Street Journal, has an article today that presents the Phoenix housing market as the canary in the coal mine. If the housing market in Phoenix cools down, then other […]
I’ve decided to look at US economic aggregates using theory and statistical methods which were popular in the 1960s. I have long told students that the model of investment which best fits the data is the now ancient flexible accelerator. This is just a reduced form equation without theory. It just says that the ratio […]
Yes, potential output is lower than people thought, much lower. I have been saying for almost a year that potential output is lower. (link 1, link 2) Commentators on Mark Thoma’s blog thought I was nuts. Mark Thoma himself did not agree with me. Mark Thoma now offers one explanation to his class that the […]
by Joseph Joyce Group Therapy Pop quiz: which U.S. policymaker said last week: “We can’t solve everyone else’s problems anymore” in response to foreign criticism of U.S. handling of what issue? a—Federal Reserve Chair Janet Yellen, responding to criticism by foreign central bankers of the Fed’s tapering of its asset purchases; b—Treasury Secretary Jack Lew, […]
Despite the UAW’s attempt to do for the South what it has done to Detroit, the South can continue to practice entrepreneurial federalism. Capital is mobile. It goes where it is welcomed and stays where it is well treated, so states compete to create tax and regulatory environments conducive to job creation. Liberals call this […]
They say sample size matters. A handful of sample points in a study doesn’t tell you much, because they could just be showing random variation. This is also true not when you’re looking at many studies. You need to look at lots of research that uses different methodologies and data sets to get a confident feel […]
There is a bedtime story of a young boy who put all his eggs into one basket and when that basket fell, all the eggs broke. It is risky to put your eggs into one basket. Investors overcome this risk by diversifying their portfolio. Even the colossal derivatives market is said to lower risk through […]