Relevant and even prescient commentary on news, politics and the economy.

# A tale of two incomes in the money market

Real GDP has dropped to a new level. Many economists think it will return to its previous trend before the crisis. I made this video to explain how real GDP can drop to a new level as a result of labor share of income dropping after the crisis.   Capital income rose after the crisis, […]

# Projecting the utilization of labor and capital

So the cobra equation has made me re-evaluate the dynamics of the effective demand limit. The main reason is that the graph of the Cobra equation shows that capital utilization decreases as employment increases at the effective demand limit. I was assuming that as employment increased, the utilization of capital would also increase. That was […]

# A natural rate of unemployment in the Cobra equation

This post continues the exploration into the Cobra equation, which measures the profitability of utilizing labor and capital as a function of labor share. Now it looks as though the Cobra equation is implying a natural rate of unemployment. The simplified Cobra equation is now… Measure of profitability in the aggregate = (x + y) […]

# Update to Cobra Equation… 2001 recession

In the morning I posted about the Cobra equation and included some graphs using past data. The graphs showed how capital utilization and employment of labor would increase up to the profit maximization line and then fall back into a recession. But I did not include a graph for the years before the 2001 recession, […]

# The Cobra Equation for the Effective Demand business cycle (part 2)

OK… so the exploration is continuing into the new equation which I am calling “The Cobra Equation” because the 3D curve looks like a cobra. This equation shows promise in its ability to explain the process of the business cycle and to ascertain the utilization of labor and capital near the end of the business […]

# 3 dimensional equation gives another view of the path to a recession

I am working on a new equation and want to pass it along for feedback. The equation is 3 dimensional and simulates the effective demand limit upon the utilization of labor and capital. Here is the equation… Measure of profitability = MFP * ((x+y) – a * (x^2 * y^2) – b * (x^2 + […]

# Labor market is improving, but hanging high

The Federal Reserve Bank of San Francisco published a letter about the labor market. The letter is titled, Gauging the Momentum of the Labor Recovery, and written by Mary C. Daly, Bart Hobijn, and Benjamin Bradshaw. They observe 6 indicators to judge how well the labor market is improving. The 6 indicators are the insured […]

# Some basic principles of effective demand

Since I write about effective demand quite a bit here, I just want to post some of its basic principles. What is Effective Demand? Effective demand is a measure of the potential demand for the output of an economy. This potential establishes a limit upon output. In simple terms, the output of the economy will […]

# Dynamic model of tax transfers may see effective demand as an attractor state

A comment by Arne in a previous post raised the idea that a tax transfer from capital to labor would raise the effective demand limit. So a video was made using the dynamic model for the circular flow to test his idea. As it turns out, the model shows that the natural real GDP equilibrium […]

# Janet Yellen serves all people, but trusts firms to set optimal wages

In her acceptance speech for Fed Chair, Janet Yellen said… (at the 1:30 point in this video from The Daily Conversation) “The mandate of the Federal Reserve is to serve all of the American people” And then it appears as though she almost choked on those words. She must sense the rage and power seething […]