Comments on: The Mystery of the Awful Economists

By: touche

touche — Fri, 01 Apr 2005 18:12:43 +0000

Most economists tend to look for factors that will cause incremental changes from the current state and believe in reversion to the mean. Like, we’re in a recession so things will improve at a typical pace. They tend to miss big picture issues.

One big picture issue is the decoupling of employment from corporate profits. US companies are increasingly off shoring work, which increases their profits without increasing employment.

Another big issue, yet to impact, is the huge debt that households have been accumulating relative to their income. Even with record low interest rates, the ratio of interest payments to income is at an all time high. This is why retail sales have held up better than employment.

Why have so many economists missed these issues? They’re a bunch of lemmings. Very few have enough confidence in their own opinions to deviate significantly from the consensus of their peers.

By: Joe McKenzie

Joe McKenzie — Tue, 08 Mar 2005 14:06:44 +0000

Under “Dividend tax cut” you state “the cash is neither spent nor reinvested in the broader economy”. Unless cash is kept in a safe deposit box or under the mattress, I don’t understand how it can lay fallow. Even in a bank account, it becomes part of the flow of loans. Used to buy more of the stock that paid the dividend, it goes to some other investor who spends or invests it. Maybe you could explore this more fully in some future article.

By: Blogcritics

Blogcritics — Mon, 07 Mar 2005 17:49:25 +0000

Carnival of the Capitalists

Blogcritics.org is proud to host this week’s nomadic Carnival of the Capitalists, a smorgasbord of penetrating and perceptive peeks into…

By: David Yaseen

David Yaseen — Thu, 03 Mar 2005 17:54:35 +0000

Thanks for the excellent article.

I just have one quibble, with the following:

“The math is simple: The employment rate is a percentage of people with fulltime jobs divided by the labor force. The unemployment rate is the balance (100% minus employment rate% = unemployment rate%).”

I know you know what the official unemployment rate measures, so why this description, with no mention of unemployment insurance? I’ve seen others (notably DeLong) stress using the labor force participation rate as the best measure. Is there a reason you do not?

Thanks,
David

By: Dave Altig

Dave Altig — Thu, 03 Mar 2005 09:34:53 +0000

Barry –

Thanks for advertising the Cleveland Fed’s work, but I will confess that I’ve lately begun to disavow the picture you show. Here’s what I mean: Organizing the data in terms of the trajectory of employment since the last business cycle peak invites us to think of the employment picture in terms of a single event that followed from the last recession. I now think that the story is one of multiple events, largely having to do with energy-price shocks. In other words, there is no real puzzle. Energy shocks are generally bad for the economy, and we have had two of them (at least) since the end of the last recession.

I lay out my case in full here: http://macroblog.typepad.com/macroblog/2005/01/a_different_tak.html .

Cheers.

By: Rob Hayward

Rob Hayward — Thu, 03 Mar 2005 06:09:50 +0000

Interesting. I am inclined to believe that this is something to do with consistently over-stating growth forecasts and understating productivity forecasts, but, as you say, these are well known factors. Many of the other factors that you mention seem to be related to productivity. Incidently, there are examinations of consistent forecast errors here http://w4.stern.nyu.edu/glucksman/docs/McCabe%20Paper%202004.pdf
and here
http://www.phil.frb.org/files/spf/spfq304.pdf

By: niq

niq — Thu, 03 Mar 2005 02:54:44 +0000

How would the dividend tax cuts contribute to economic recovery without job creation? Honest question: I can’t follow how that would work out [not because I'm skeptical, but because I'm dumb].

And what are NILFs ? Google is unhelpful and thinks I have misspelled a search for porn.