Historical Patterns, Okun’s Law, and the Great Recession

Arin Dube shows that estimates of Okun’s law are inconsistent with the assertion that most of the unemployment problem is structural rather than cyclical:

Historical Patterns, Okun’s Law, and the Great Recession, by Arin Dube: After reading Paul Krugman’s post today, I decided to follow up by actually estimating out-of-sample unemployment rate change forecasts during the Great Recession based on a pre-2007 Okun’s law relationship (i.e., a regression of change in the unemployment rate on percentage change in real GDP).

This anchors the previous post.

This is the real issue. and politics is being used to keep the results where they are. But the good of the country as a just society – and a productive one – requires that the tide reverse and reverse the narrowing into a broadening of wealth holding and income possibilities. big task. But it must be done.

Some think this. Alternative views:

1. elites always win so nothing new.
2. finance is key to the economy so we need to allow it its prerogatives.

Where is economics entering this discussion?

Powerful picture.

Bush Tax Cuts, Wars Major Drivers of Projected Government Debt

The CBPP looks at the source of the public debt (previous charts have examined the source of deficits, i.e. the deficit or surplus in a given year, this looks at the debt which is the accumulation of all past deficits and surpluses). As this notes, “simply letting the Bush tax cuts expire on schedule … would stabilize the debt-to-GDP ratio for the next decade.” We are on the verge of trading tax cuts for the wealthy and spending on wars for large cuts to social programs (the budget hole the recession caused is helping to fuel the calls for austerity). Maybe that’s what we want, maybe not (and likely not if the polls are correct), but we ought to at least be more aware than we seem to be that this is the trade we are making:

Is the picture getting clearer? Yes. Any line of action? No.

If the expected price tag for Philips’ latest LED light bulb is any indication, a brighter tomorrow won’t come cheap. The “75W replacement,” known as the EnudraLED A21, apparently reduces energy by 80 percent, lasts 25 times longer than its conventional counterpart, and is expected to cost between $40 and $45. Given that’s significantly less expensive than the outfit’s 60W equivalent, but for us regular folks, that’s not exactly a drop in the bucket. However, if you’re picking up what Philips is laying down, the bulb — which uses a mere 17 watts of electricity to beam 1,100 lumens — could save the US 5,220 megawatts of electricity and $630,000,000 annually (if we all switch over tomorrow). That certainly sounds good, but somehow we doubt a $45 light bulb is going to be the incandescent killer. Full PR after the break.

The cost savings if all replaced tomorrow leaves out the environmental and energy cost of making the bulbs. Elementary and nearly ubiquitous logic. We must do better at logic and accounting.

so unfortunate, supposed to be an open air “cathedral” but there is no place to sit. This tech/art vs people. No way to get to a human respecting future.

All of us in the environment movement, in other words – whether we propose accommodation, radical downsizing or collapse – are lost. None of us yet has a convincing account of how humanity can get out of this mess. None of our chosen solutions break the atomising, planet-wrecking project. I hope that by laying out the problem I can encourage us to address it more logically, to abandon magical thinking and to recognise the contradictions we confront. But even that could be a tall order.

Important to read. If we add the problem with our inability to create jobs, we can only come to one of wo conclusions, we are lost or we need to rethink governance and elites.

Fed Watch: Monetary Policy on Autopilot

Tim Duy:

Monetary Policy on Autopilot, by Tim Duy: The first quarter GDP number was profoundly disappointing. I always look back to the benchmark of the mid-80’s to measure the pace of the recovery, paying close attention to real final sales:

The pace of the current recovery pales by comparison. Indeed, even the meager 1.6% average final sales growth is inflated by the blowout 6.7% gain in the final quarter of last year. Excluding that quarter, the average is a miserable 0.9%. It was the that fourth quarter data that gave me hope the economy was actually turning a corner; that hope was so quickly dashed

People still expect that the economy’s natural state is cyclical, and expands and contracts like a rubber bank or bouncing ball. The reality of lost jobs with nothing on the horizon to replace them doesn’t sink in. The idea of the stimulus is it will create jobs because it creates demand. Little understanding that more demand will employ more robots, or the stimulus money goes immediately overseas for investment there. Only when we get past this illusion of rebound and recovery can we face the real problem of production, income distribition, and environment (and population).

Government spending and government debt across countries:

To spend is to owe?, by Lane Kenworthy: A high level of government spending doesn’t necessarily produce heavy government debt. Nor does low spending guarantee low debt. Debt levels are a function of government expenditures and revenues and economic growth.

Just seeing this as a system would be a move forward.

My concern is that however spending would not create jobs.