For the moment, let’s go with old saw that “economics is the study of scarcity.” (Though I disagree with it; the proper study of economics is human reaction functions.) What’s scarce these days? Certainly not supply. In an 80%-service economy suffering high unemployment and a unprecedentedly low labor/population ratio, higher demand for massages is not […]

The mystery revealed in this post is that potential GDP and labor share reflect each other. One thing people must realize is that potential GDP describes the center of the business cycle. (See video below for visual explanations.) It seems most people think potential means the top end of the business cycle, but they would […]

Bill McBride at Calculated Risk points us to some apparent better news State and local government austerity is over I think most of the recession related state and local government layoffs are over, and it appears state and local government employment has bottomed.  Of course Federal government layoffs are ongoing, but it appears state and local […]

I really shouldn’t comment on Simon Wren_lewis’s defence of rational expectations until I have calmed down, but I can’t help muself. I will try to stick to FRED, that is data. Wren-Lewis argues that it is reasonable for macroeconomists to assume rational expectations since the practical alternatives are rational expectations or naive expectations. However most […]

Total Security on Planet Elsinore: a Social Security Thought Game (Part 1) – Set the gameboard and initial rules for Total Security or TS for short. To recap the USE a democratic republic polity on Planet Elsinore has a long established government retirement security program called Total Security paid for by an across the income […]

Paul Krugman mentions a “blockbuster” paper from the Fourteenth Jacques Polak Annual Research Conference. The paper is titled Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy. It was written by Dave Reifschneider, William L. Wascher and David Wilcox… all from the Federal Reserve Board. The paper states […]

Real GDP came out today. The number was $15,790 billion for the 3rd quarter 2013. Back in July, I posted an article that Real GDP had an appointment to keep with Effective Demand. I showed a series of graphs from the past of how real GDP grows up to the effective demand limit before a […]

Lets play a game. The ultimate point of the game is to understand certain aspects of Social Security but to keep complications from creeping in too early (wait for later parts) we are going to start with simple game play on a board far, far away. In fact on distant yet oddly Earth-like Planet Elsinore. […]

Lifted from comments from Edward Lambert’s International flows Part 4 comes a reminder from Angry Bear Steve Roth: This is all part of the universal “saving/saving” confusion.  See Nick’s post “Why ‘Saving’ Should be Abolished” http://worthwhile.typepad.com/worthwhile_canadian_initi/2012/01/why-saving-should-be-banned.html Key point, I think, been meaning to write a (another) post on this: “The economy” cannot “save” money. For […]

Dean Baker was polite in responding to another story from the Washington Post in the campaign to discredit the program: That’s what the headline of the front page Washington Post story might have read if the purpose was to inform readers. Instead the lengthy piece (which covers the whole back page) told readers that Social […]