Keywords: Education, Skills
How right he was!
Keywords: Monetary Policy, Printing Money, Taxation
read Ezra Klein's interpretation here:
Keywords: Mitt Romney, Barack Obama, Bain Capital
Is China poised to become the world’s next superpower? This question is increasingly asked as China’s economic growth surges ahead at more than 8% a year, while the developed world remains mired in recession or near-recession. China is already the world’s second largest economy, and will be the largest in 2017. And its military spending is racing ahead of its GDP growth. read more
Keywords: China, Chinese Economy
"This paper asks whether increases in government spending stimulate private activity. The first part of the paper studies private spending. Using a variety of identification methods and samples, I find that in most cases private spending falls significantly in response to an increase in government spending. These results imply that the average GDP multiplier lies below unity. In order to determine whether concurrent increases in tax rates dampen the spending multiplier, I use two different methods to adjust for tax effects. Neither method suggests significant effects of current tax rate changes on the spending multiplier. In the second part of the paper, I explore the effects of government spending on labor markets. I find that increases in government spending lower unemployment. Most specifications and samples imply, however, that virtually all of the effect is through an increase in government employment, not private employment. I thus conclude that on balance government spending does not appear to stimulate private activity."
Keywords: Government Spending, Private Activity
Americans' expectations for their personal financial situations have recovered from the low point of four years ago, with 63% now saying they expect to be better off a year from now, up from 52% in late May/early June 2008. The 18% who say they will be financially worse off in a year is by one percentage point the lowest since 2003. read more on Gallup Wellbeing
Keywords: US Economy, Expectations of US Citizens
Keywords: Innovation, Regulation
Keywords: US Economy, Incentives for Enterprises
What Peter Thiel, paypal founder and facebook investor, said about theories on the bubble and bust economy in 2008. (For Peter Thiel a big financial event is ahead - the facebook IPO).
Keywords: Asset Bubbles, Bubble Economics
Keywords: Technology, Economic Development, Economic Growth, Stagnation
With the sap rising and the governments falling, all the European powers are merrily acting in national character.
In the midst of a severe financial crisis, the French have just elected a champagne socialist on promises of a 75 percent top tax rate and a lower retirement age. The Greeks also had an election in which the established parties lost to a ragbag of splinter groups. The outcome of the election was that they need to have another election. (Cue Zorba the Greek theme music.) Meanwhile, the wailing gloom of the flamenco emanates from Spain, where youth unemployment is now around 50 percent. read more
Keywords: European Crisis, European Nationalistic Tendencies
....."The developed world’s economies are headed for social, political, and economic disaster if the terms of the debate are not transformed to include the extraordinary and untapped potential of aging populations as a central part on the growth side.
Michael W. Hodin, Ph.D., is Adjunct Senior Fellow at The Council of Foreign Relations and Executive Director of The Global Coalition on Aging."
Keywords: Aging Population, Social Systems
Keywords: Taxes, Corporate Income Taxes
Keywords: European Crisis, US Economy
Daniel Gros has a good article on Project Syndicate expressing his views on the wrong focus of many European politicians when tackling growth:
Here is an excerpt:
"The urge to be seen to be “doing something” is leading Europe’s policymakers to rely on the few instruments with which the EU can claim to foster growth. But they should recognize that today’s growth crisis is different. The real bargain should not be austerity plus a Marshall Plan for the south, but rather continued austerity plus labor-market reforms in the south, combined with more infrastructure investment in Germany and other AAA-rated countries like the Netherlands.
CommentsDeep service-sector reforms in Germany would also help to unlock the country’s productivity potential and open its market to services exports from southern Europe. That way, the South would have a chance to find jobs for its rather well-educated young people, whose only choice now is between unemployment and emigration." Source: Project Syndicate
Keywords: European Crisis, European Economic Stagnation, Growth Measures
Keywords: Road to Serfdom, F.A. Hayek, Milton Friedman
In this postmortem, I find that the design, implementation, and maintenance of financial policies during the period from 1996 through 2006 were primary causes of the financial system’s demise. The evidence is inconsistent with the view that the collapse of the financial system was caused only by the popping of the housing bubble and the herding behavior of financiers rushing to create and market increasingly complex and questionable financial products. Rather, the evidence indicates that regulatory agencies were aware of the growing fragility of the financial system associated with their policies during the decade before the crisis and yet chose not to modify those policies.
Keywords: Financial Crisis, Reasons for Financial Collapse
The sustainability of government finances is very much the topic of the day. But the issue poses serious questions for the future, particularly how well off today’s younger generations will be compared with their parents. This column argues that the Ponzi scheme being played by the US government amounts to "fiscal child abuse" and is close to game over. For today's children the American dream will be just that – a dream. read moe on Project Syndicate
Keywords: US Economy, US Social Security System, US Re-Distribution
"The case made for minimal government by Milton and Rose Friedman in their 1979 book, Free to Choose, has been debunked, according to Berkeley professor Brad DeLong. Basically, he avers that the Friedman program has been tried and failed. As a commentary on Friedman, this is outrageously misleading. But Mr. DeLong provides a revealing glimpse of the left-liberal mindset.
He makes three main points. One is that steady monetary growth does not foster macroeconomic stability, contrary to Milton Friedman’s analysis. Ben Bernanke used the Friedman script in the recent recession and yet here we are with anemic growth. That’s the evidence Mr. DeLong cites.
Freidman argued against discretionary policymaking and in favor of an automatic, consistent mechanism. Federal Reserve policy has been anything but steady and automatic in the past 20 years. The Fed opened the sluices in 1998, thereby encouraging the stock bubble. The Fed kept rates low in the early 2000s, thereby feeding the credit and property bubbles. John Taylor derived a flexible rule that would meet the Friedman criterion of consistency but showed that the Fed deviated from this rule. The Fed bubble blowing episodes strengthen the case for steady, rule-based monetary growth, consistent with Friedman’s reasoning.
How to deal with externalities, or effects on third parties, is the second ground on which Mr. DeLong claims to rebut Friedman. He suggests the courts fail to correct externalities, in particular in the medical area. It is true that tort litigation has become a travesty with gigantic class action suits that redistribute income to lawyers. Friedman was an optimist –as he and Rose acknowledged in their memoir – and he expected certain parts of the government to work relatively well. That the courts work badly does not support Mr. DeLong’s suggestion that more regulation is the solution.
In fact almost every activity in America is increasingly handicapped by regulation. While Friedman’s optimism has not been born out, he looks more prophetic than ever in warning against pullulating regulation and working to stop this trend.
Mr. DeLong’s third point is that inequality has escalated, again contrary to Friedman’s expectation. Notwithstanding his optimistic outlook, Friedman had a solution for poverty. He favored a simple negative income tax that would automatically supply income to anyone who fell below a given level. This has not been tried—instead the US supplies an intricate mass of benefits to some and imposes myriad burdens on others, with some degree of arbitrariness.
Mr. DeLong does not get into that. He concludes that government provision of a limited safety net, courts and steady monetary growth does not achieve “a relatively equal and prosperous society with full employment and equal opportunity.” Minimal government is out of fashion. Maximal government is in.
Indeed, that is what we’re getting. This year Federal spending will soak up 24.3% of GDP, up from 20.8% four years earlier—as Glenn Hubbard argued, a level of spending that will almost certainly increase most Americans’ tax burden. And President Obama’s new budget weighs in at $3.6 trillion.
That’s the thing about maximal government. Some intervention to reduce inequality and create safety is not enough. Why not more intervention to further reduce inequality, create more safety and do a thousand other things besides? Thus it grows and grows. Mr. DeLong might have looked around in his own state of California to see the consequences of unbounded government.
Friedman tried to ward off the danger and his patient, thoughtful work had some result. But his influence was temporary. That is our tragedy."
Reproduced with the courtesy of Think Markets, A blog of the New York University Colloquium on Market Institutions and Economic Processes
Keywords: Markets, Free Markets, Regulation, Milton Friedman
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