Tuesday, May 31, 2016

Adult Colouring Books Remind us that Innovation lies outside economics [feedly]

Adult Colouring Books Remind us that Innovation lies outside economics
// Digitopoly

We don't speak of it very often but economists face a fundamental challenge with respect to innovation: if innovation is something no one has anticipated, then the (Savage) axoims upon which we base our rational choice decision-making cannot apply.

Let me explain. Decision-making is all about actions and their consequences. Leonard Savage created the framework by which economics deals with this by assuming that all agents 'look before they leap.' That is, an agent would choose amongst actions available taking into account all possible states of the world and the consequences in each state. This requires agents to have complete knowledge of the state-action space.

Savage himself thought this assumption was heroic and basically could not be justified by anything he had seen regarding human capabilities. Instead, he saw that people would more likely pursue a 'cross that bridge when you come to it' rule to examine what happens over a smaller set of states and then plan things out. Savage, however, did not know how to do it. He wrote:

I am unable to formulate criteria for selecting these small worlds and indeed believe that their selection may be a matter of judgment and experience about which it is impossible to enanciate complete and sharply defined general principles. Savage, The Foundations of Statistics, 1972, p.16)

Indeed, in a paper I published in 1996, I argued that Savage couldn't do this because it was, in fact, impossible.

Savage was emphasizing computational complexity and essentially making a point that rationality is bounded. But when it comes to innovation — which could be conceived of as coming up with an entirely new state of the world — it is fundamentally impossible to plan everything out. Everyone is forced to cross that bridge when they come to it.

In this situation, we can be surprised when something like the iPhone comes out or CRISPR or what have you. We change our outlook for the future. We recalibrate and that is it. To be sure, many would like to have planned out for the possibility earlier but the world seems to move on. These things represent the system working with epochal pockets to break up the monotony.

But the very same issue — that not all states can be conceived of and planned for — necessarily means that sometimes innovations come to the market at times that seem random. We can trace the set of innovations that needed to proceed the iPhone and rationalise why 2007 was its time. But there are other innovations for which it seems surprising they happened when they did. Why now and not years earlier.

And so we arrive at the adult colouring book. In 2015, three of the best selling books of the year were adult colouring books. In Canada it was 5 of the top 10 including the top 2. These sell for around $10.00 and have complex designs that would be challenging for a kid to colour between the lines. They are highly rated and sometimes seen as challenging and sometimes as relaxing.

Near as I can tell (and I'll admit my research methodology is weak on effort), the idea for adult colouring books came from an illustrator, Johanna Basford. She convinced a British publisher to commission her idea — a book called Secret Garden — and since then it has sold over 2 million copies. There were others that launched around the same time in different countries. It appears to be a situation following the theory of multiples where a few people have the same idea at the same time. That suggests a common cause but it is hard to identify it. The New Yorker speculated it was about adults returning to their youth. But again: why now?

A natural theory is that it may have been an accident. Ask any economist who heard about the adult colouring book idea before it was done and they would likely have said that it wouldn't work because it would be imitated and the art wouldn't be worth much. Basford has proven that incorrect and seems to be doing just fine. The same is true for initial pioneers but their run may be for a few years but that would be enough to justify any initial investment.

The idea of colouring books for adults was around earlier. Apparently, there were some subversively themed ones in the 1960s (when else). But these ones seem to be a sort of art phase. They are relaxing, easy to learn and can be done while doing other things. To be sure, they had to be designed which is why people weren't using children's colouring books for these things. But once they were, there was a compelling market. An immediate "I could use that" notion for some people.

And as with such things, they also become "X could use that" and they are a safe gift. They are marketed at adults, look pretty and for that reason are a very safe gift. They won't offend anyone and no one will be hurt if they come by a year later and see an uncoloured book on the shelf. In some sense, this is the 'Pet Rock' of our era except that they can be tailored, branded and customised to taste.

Finally, and I would be remiss as an economist not to mention this, as a physical book category they are likely to be robust to the two big challenges of that industry: second hand sales and digitization. Once coloured, they can't be resold. And we are yet at a point where an iPad version (and you should know they exist) is going to substitute for either the use-value or the gift-value of these things.

My point is this: the fact that prior to 2011, no one saw this business opportunity and after that point it was completely obvious, is basically the same innovation event as occurred with the iPhone. It could have happened a decade, two decades or more earlier. It did not simply because no one thought about it who had the confidence to design it and take it to market. And that tells us, as economists, that there can be $100 bills or $10 million dollar bills casually lying on the sidewalk in a state we have not conceived.


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Can Democrats Avoid the Circular Firing Squad? [feedly]

Can Democrats Avoid the Circular Firing Squad?
// Robert Kuttner

A couple of months ago, it appeared that the Republican presidential field was a fragmented fratricidal mess, with party disarray and deadlock on display all the way to the Cleveland Convention. The Democrats, meanwhile, were on track to an early nomination and party unity.

Things didn't quite work out that way. Hillary Clinton could still lock up the nomination by the last primaries on June 14, but not without relying on super-delegates. Here are the numbers:

Clinton has 1,769 pledged delegates won in caucuses and primaries, out of 2,310 delegates required for nomination. There are 913 yet to be awarded in the last round of primaries. To go over the top before the convention, not counting super-delegates, Clinton needs to win 541 more delegates, or well over half. But with Sanders surging nearly everywhere, that seems extremely unlikely.

So the state of play after the six states vote June 7 (DC votes June 14, but has only 20 delegates) is likely to show Clinton with 50 to 100 votes short, Sanders with momentum, and the Sanders campaign mounting a last ditch effort to persuade most of the 712 super-delegates (541 of whom have already declared for Clinton) to reconsider, on the premise that Sanders has the better shot at beating Trump.

Changing that many minds seems vanishingly unlikely. However, the Sanders campaign is increasingly in a go-for-broke mood.

Many Sanders supporters are far more militant than Sanders himself, and some are openly expressing the hope that Clinton will be indicted for some aspect of the email dust up.

That also seems highly improbable.

However, Clinton has been unable to catch a break. The theme of her campaign has been experience and competence, but her improper use of a private email server suggested neither. It gives Trump a huge opening to challenge her honesty and probably signals a further decline in voter trust in Clinton.

For the past couple of weeks, many progressives who sympathize with Sanders on the issues have urged him to recognize that he will not be nominated and to think about how else to exercise his substantial influence to to push both Clinton and the Democratic Party to the left in the coming political era. There is also the small matter of not inviting a Trump presidency.

Robert Reich, a fervent Sanders supporter, urged the Clinton camp to stop requesting Sanders to exit the race -- but called on Sanders and his backers to support Clinton for the greater good once she wins the nomination.

Some of you say even if Hillary is better than Trump, you're tired of choosing the "lesser of two evils," and you're going to vote your conscience by either writing Bernie's name in, or voting for the Green Party candidate, or not voting at all.

I can't criticize anyone for voting their conscience, of course. But your conscience should know that a decision not to vote for Hillary, should she become the Democratic nominee, is a de facto decision to help Donald Trump.

Harold Meyerson, vice-chair of Democratic Socialists of America, executive editor of The American Prospect, and one of the most astute analysts of the Sanders phenomenon, called on Sanders and his supporters to look beyond the election to build a movement, and warned against the self-indulgence of the self-righteous:

What is arguably the most successful left campaign in the nation's history stands in danger of being undone by an infantile fraction of its own supporters. The threats of violence, the shouting down of such lifelong liberals as Barbara Boxer, and the growing desire of some in the campaign, both on its periphery and at its core, to walk away from the real prospect of building left power by refusing to work with allies and potential allies in the Democratic Party -- all these now threaten the campaign's potential to bring lasting change to American politics.

I write this as a strong Sanders supporter (albeit one who never thought he could win the nomination), as a lifelong democratic socialist (indeed, for some years, Bernie and I were probably the two most out-of-the-closet socialists in D.C.) who's been astounded and thrilled by Sanders's success so far in pushing the national and Democratic discourse to the left. I write this with the hope that the Sanders legions can come out of this election year with the networks and organizations that can reshape the American economic and political order -- bolstering workers' power, altering corporate governance, diminishing the scope of finance. But to do that effectively, they'll have to make common cause with progressives who've backed Hillary Clinton.

Peter Dreier, another savvy Sanders supporter, spelled out a five-point plan for Sanders and his followers to build a durable left in America, something that has eluded progressives since FDR.

Many progressive politicians have promised to transform their electoral campaigns into ongoing movement operations, but few have had the patience or resources to do so. Many of Jessie Jackson's supporters hoped that his presidential efforts in 1984 and 1988 would evolve into a permanent Rainbow Coalition of progressive activists, but it didn't happen. After Obama won his brilliantly-executed 2008 campaign -- built by an army of seasoned political and community organizers who trained hundreds of thousands of volunteers in the art of activism -- he created the nonprofit now known as Organizing for Action (OFA). OFA has not lived up to its early promise, in large part because Obama made it an arm of the DNC in a bid to build support for his legislative agenda.

I find these arguments very persuasive. But first, Democrats need to avoid the ritual of the circular firing squad during the period between the last primaries and the July convention.

The challenge is that Sanders has built one of American history's most potent mass movements for progressive change, reflecting deep frustrations on the part of young and working class people, and they are not about to quietly step aside and let Clinton have the prize. Nor are they in any mood to listen to elders still repenting their youthful votes for Eldridge Cleaver rather than Hubert Humphrey in the fraught 1968 election, opening the way for Richard Nixon. Each generation gets to define its own politics and make its own judgments and mistakes.

If Clinton had some momentum, if she were not the victim of her own missteps, if she had found a plausible voice to puncture Trump's pretentions, then she would have a much stronger case that Sanders and his people should get on board. But it's Sanders with the momentum, Clinton who keeps stumbling, and even her own strongest supporters are dismayed that her campaign seems mechanical and joyless.

Last Tuesday, Senator Elizabeth Warren delivered the keynote speech to the gala of the Center for Popular Democracy. It was one of the most effective demolitions of Donald Trump ever. She said, referring to the fact that Trump bragged about betting on a housing collapse in 2006:

What kind of a man roots for people to get thrown out of their houses? What kind of a man roots for people to get thrown out of their jobs? To root for people to lose their pensions? I'll tell you exactly what kind of a man does that. It is a man who cares about no one but himself. A small, insecure, money-grubber who doesn't care who gets hurt, so long as he makes a profit off it.

Clinton makes similar arguments, but it is Warren who does it with verve, wit and devastating effect, and Clinton who manages to sound mechanical.

The period between the last primaries and the convention is shaping up as a time of maximum risk for Democrats. Political logic dictates that Democrats should unite behind Clinton because of the greater threat of Trump. But she is such a flawed candidate that political passions in many quarters dictate otherwise.

Sanders evidently believes that not only that he should be the Democrats' nominee but that if events break right, he still can. Assuming Hillary Clinton is nominated, it will take rare statesmanship and leadership for Sanders to urge his followers to support Clinton while he keeps on building a movement.


Robert Kuttner is co-editor of The American Prospect and professor at Brandeis University's Heller School. His latest book is Debtors' Prison: The Politics of Austerity Versus Possibility.

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The Global Refugee Crisis: Past, Present, and Future [feedly]

The Global Refugee Crisis: Past, Present, and Future
// Global Policy Journal

Aramide Odutayo argues that history matters when studying the present migration crisis.Does history matter when studying international migration? This commentary will compare the global response to th...Read more

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Oil supply and demand trends


Saturday, May 28, 2016

The Great P Value Controversy [feedly]

The Great P Value Controversy

This quarter I have been part of the teaching team for Research Design and Quantitative Methods, a core class in Evergreen's Masters of Environmental Studies.  Naturally, I had to include a discussion of the debate that has been swirling around the use of P values as a "significance" filter and the role of null hypothesis statistical testing in general.  Because the students have very limited backgrounds in statistics and the course ventures only a little bit beyond the introductory level, I have to simplify the material as much as possible, but this might be useful for those of you reading this who aren't very statsy, or who have to teach others who aren't.

As background reading for this topic, students were assigned the recent statement by the American Statistical Association, along with "P Values and Statistical Practice" by Andrew Gelman, whose blog ought to be on your regular itinerary if you care about these questions.  Here are the slides that accompanied my lecture.
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How About 100 Bernie Sanders? [feedly]

How About 100 Bernie Sanders?
// Portside

The passion around his presidential campaign can be channeled into transforming Congress. We'll pool resources across the US to beat big money.

As we approach the end of the current primary election cycle, many people are asking: what is next for the Sanders progressive revolution? The movement that has grown around Senator Bernie Sanders' presidential bid does not live or die by the success of his presidential campaign. Rather, it is part of a long history of progressive struggle and engagement across the country – and one that is only going to grow stronger.

There are many candidates out there who stand for the same things as Bernie Sanders. I'm thinking of people like Zephyr Teachout, and candidates such as Pramila Jayapal, Lucy Flores, Tim Canova and many more who have shown that they can stay true to their progressive platform and their core beliefs and yet remain competitive. These candidates reject the corrupt campaign finance system and have opted for funding grounded in small donations. Like Sanders, they support policies such as raising the minimum wage to $15 an hour, social security expansion, and free college for all.

That's why it's important to think beyond the presidential election. Progressives have a fierce fight on our hands in 2016 and beyond. Republican donors like Art Pope, an ally of the Koch brothers, have pledged to invest millions into down-ballot races instead of funding Donald Trump. We, like them, should have an eye to changing more than just the White House. We must change Congress, and every other level of government, right down to the grassroots.

So, will progressives be able to harness the energy and momentum of the Sanders movement to bring candidates to power across the country, candidates who stand for the same things he does?

I am a part of an initiative called Brand New Congress. Many of us are former Sanders campaign staffers, who are hoping to help elect Bernie Sanders-like candidates in at least 100 different districts in the next two years. Rachel Maddow described us as running a "presidential campaign with 400 heads".

With our eye on the midterm election cycle in 2018, Brand New Congress is engaging with people across congressional districts to identify potential candidates. We launched with the express purpose of building on the Sanders platform and securing meaningful representation in Congress.

The aim is to run one campaign for hundreds of candidates. Instead of running the races separately, we will be centralizing fundraising, awareness raising and organizing for campaigns across the country. Our unified process will level the playing field, and thus permit new leaders to rise up from the ranks of our working and middle class.

No longer will capable and competent individuals be told to wait on the sidelines because they don't have big-money donors behind them. We seek to provide the infrastructure and strategic expertise to a new cadre of candidates across the country.

This is a watershed moment for progressives. From state and local elections to c ongressional races, there are politicians and grassroots volunteers moving the needle on progressive action in this country. By empowering people to take part in the political process, via their voices and their votes, we have the beginnings of a change in the game.

We need an honest and accountable Congress, one that is not swayed by the allure of wealthy donors. By building a network of campaigns to run simultaneously against business as usual, we have a chance at turning the tide in the 2018 midterm elections and beyond. The revolution is here, and it's here to stay.


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Ownership of US Corporate stock

US Corporate Stock: The Transition in Who Owns It

Timmothy Taylor
It used to be that most US corporate stock was held by taxable US investors. Now, most corporate stock is owned by a mixture of tax-deferred retirement accounts and foreign investors. Steven M. Rosenthal and Lydia S. Austin describe the transition in "The Dwindling Taxable Share
Of U.S. Corporate Stock," which appeared in Tax Notes (May 16, 2016, pp. 923-934), and is available here at website of the ever-useful Tax Policy Center.

The gray area in the figure below shows the share of total US corporate equity owned by taxable accounts. A half-century ago in the late 1960s, more than 80% of all corporate stock was held in taxable accounts; now, it's around 25% The blue area shows the share of US corporate stock held by retirement plans,which is now about 35% of the total. The area above the blue line at the top of the figure shows the share of US corporate stock owned by foreign investors, which has now risen to 25%.

A few quick thoughts here:

1) These kinds of statistics require doing some analysis and extrapolation from various Federal Reserve data sources. Those who want details on methods should head for the article. But the results here are reasonably consistent with previous analysis.

2) The figures here are all about ownership of US corporate stock; that is, they don't have anything to say about US ownership of foreign stock.

3) One dimension of the shift described here is the ownership of US stock is shifting from taxable to less-taxable forms. Stock returns accumulate untaxed in retirement accounts until the fund are actually withdrawn and spent, which can happen decades later and (because post-retirement income is lower) at a lower tax rate.  Foreigners who own US stock pay very little in US income tax--instead, they are responsible for taxes back in their home country.

4) There is an ongoing dispute about how to tax corporations. Economists are fond of pointing out that a corporation is just an organization, so when it pays taxes the money must come from some actual person, and the usual belief is that it comes from investors in the firm. If this is true, then cutting corporate taxes a  half-century ago would have tended to raise the returns for taxable investors. However, cutting corporate taxes now would tend to raise returns for untaxed or lightly-taxes retirement funds and foreign investors. The tradeoffs of raising or lower corporate taxes have shifted.
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John Case
Harpers Ferry, WV

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Friday, May 27, 2016

Verizon Workers Win Strike [feedly]

Verizon Workers Win Strike
// Talking Union

Striking Verizon Workers Win Big Gains
Friday, May 27, 2016
Nearly 40,000 Verizon workers who have been on strike since April 13 are celebrating big gains after coming to an agreement in principle with the company. After 44 days of the largest strike in recent history, striking CWA members have achieved our major goals of improving working families' standard of living, creating good union jobs in our communities and achieving a first contract for wireless retail store workers.

"CWA appreciates the persistence and dedication of Secretary Perez, Federal Mediation and Conciliation Service Director Allison Beck and their entire teams. The addition of new, middle-class jobs at Verizon is a huge win not just for striking workers, but for our communities and our country as a whole. The agreement in principle at Verizon is a victory for working families across the country and an affirmation of the power of working people," said Chris Shelton, President of the Communications Workers of America. "This proves that when we stand together we can raise up working families, improve our communities and protect the American middle class."


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Verizon and Unions Reach Accord to End Strike, U.S. Says [feedly]

Verizon and Unions Reach Accord to End Strike, U.S. Says
// NYT > Business

The Labor Department said the company and two unions were nailing down contract language to submit to nearly 40,000 workers on strike since mid-April.

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Look at the Bank of North Dakota - It Soars Despite Oil Bust [feedly]

Look at the Bank of North Dakota - It Soars Despite Oil Bust
// Portside

Despite North Dakota's collapsing oil market, its state-owned bank continues to report record profits. Farmers were losing their farms to Wall Street bankers. They organized, won an election and passed legislation to create a public bank. The Nonpartisan League's rise to power was fast and had a lasting impact on North Dakota. This article looks at what California, with fifty times North Dakota's population, could do following that state's lead.


Despite North Dakota's collapsing oil market, its state-owned bank continues to report record profits. This article looks at what California, with fifty times North Dakota's population, could do following that state's lead.

In November 2014, the Wall Street Journal reported that the Bank of North Dakota (BND), the nation's only state-owned depository bank, was more profitable even than J.P. Morgan Chase and Goldman Sachs. The author attributed this remarkable performance to the state's oil boom; but the boom has now become an oil bust, yet the BND's profits continue to climb. Its 2015 Annual Report, published on April 20th, boasted its most profitable year ever.

The BND has had record profits for the last 12 years, each year outperforming the last. In 2015 it reported $130.7 million in earnings, total assets of $7.4 billion, capital of $749 million, and a return on investment of a whopping 18.1 percent. Its lending portfolio grew by $486 million, a 12.7 percent increase, with growth in all four of its areas of concentration: agriculture, business, residential, and student loans.

By increasing its lending into a collapsing economy, the BND has helped prop the economy up. In 2015, it introduced new infrastructure programs to improve access to medical facilities, remodel or construct new schools, and build new road and water infrastructure. The Farm Financial Stability Loan was introduced to assist farmers affected by low commodity prices or below-average crop production. The BND also helped fund 300 new businesses.

Those numbers are particularly impressive considering that North Dakota has a population of only about 750,000, just half the size of Phoenix or Philadelphia. Compare that to California, the largest state by population, which has more than fifty times as many people as North Dakota.

What could California do with its own bank, following North Dakota's lead? Here are some possibilities, including costs, risks and potential profits.

Getting Started: Forming a Bank Without Cost to the Taxpayers

A bank can be started in California with an initial capitalization of about $20 million. But let's say the state wants to do something substantial and begins with a capitalization of $1 billion.

Where to get this money? One option would be the state's own pension funds, which are always seeking good investments. Today state pension funds are looking for a return of about 7% per year (although in practice they are getting less). One billion dollars could be raised more cheaply with a bond issue, but tapping into the state's own funds would avoid increasing state debt levels.

At a 10% capital requirement, $1 billion in capitalization is sufficient to back $10 billion in new loans, assuming the bank has an equivalent sum in deposits to provide liquidity.

Where to get the deposits? One possibility would be the California Pooled Money Investment Account (PMIA), which contained $67.7 billion earning a modest 0.47% as of the quarter ending March 31, 2016. This huge pool of rainy day, slush and investment funds is invested 47.01% in US Treasuries, 16.33% in certificates of deposit and bank notes, 8.35% in time deposits, and 8.91% in loans, along with some other smaller investments. A portion of this money could be transferred to the state-owned bank as its deposit base, on which 0.5% could be paid in interest, generating the same average return that the PMIA is getting now.


For our hypothetical purposes, let's say $11.1 billion is transferred from the PMIA and deposited in the state-owned bank. With a 10% reserve requirement, $1.1 billion would need to be held as reserves. The other $10 billion could be lent or invested. What could be done with this $10 billion? Here are some possibilities.

Slashing the Cost of Infrastructure

One option would be to fund critical infrastructure needs. Today California and other states deposit their revenues in Wall Street banks at minimal interest, then finance infrastructure construction and repair by borrowing from the Wall Street bond market at much higher interest. A general rule for government bonds is that they double the cost of projects, once interest is paid. California and other states could save these costs simply by being their own bankers and borrowing from themselves; and with their own chartered banks, they could do it while getting the same safeguards they are getting today with their Wall Street deposits and investments. The money might actually be safer in their own banks, which would not be subject to the bail-in provisions now imposed by the G-20's Financial Stability Board on giant "systemically risky" banking institutions.

To envision the possibilities, let's say California decided to fund its new bullet train through its state-owned bank. In 2008, Californians approved a bond issue of $10 billion as the initial outlay for this train, which was to run from Los Angeles to San Francisco. At then-existing interest rates, estimates were that by the time the bonds were paid off, California taxpayers would have paid an additional $9.5 billion in interest.

So let's assume the $10 billion in available assets from the state-owned bank were used to repurchase these bonds. The state would have saved $9.5 billion, less the cost of funds.

It is not clear from the above-cited source what the length of the bond issue was, but assume it was for 20 years, making the interest rate about 3.5%. The cost of one billion dollars in capital for 20 years at 7% would be $2.87 billion, and the cost of $11.1 billion in deposits at 0.5% would be $1.164 billion. So the total cost of funds would be $4.034 billion. Deducted from $9.5 billion, that leaves about $5.5 billion in savings or profit over 20 years. That's $5.5 billion generated with money the state already has sitting idle, requiring no additional borrowing or taxpayer funds.

What about risk? What if one of the cities or state agencies whose money is held in the investment pool wants to pull that money out? Since it is held in the bank as deposits, it would be immediately liquid and available, as all deposits are. And if the bank then lacked sufficient liquidity to back its assets (in this case the repurchase of its own bonds), it could in the short term do as all banks do -- borrow from other banks at the Fed funds rate of about 0.35%, or from the Federal Reserve Discount Window at about 0.75%. Better yet, it could simply liquidate some of the $56 billion remaining in the PMIA and deposit that money into its state bank, where the funds would continue to earn 0.5% interest as they are doing now.

Assume that from its $5.5 billion in profits, the bank then repaid the pension funds their $1 billion initial capital investment. That would leave $4.5 billion in profit, free and clear -- a tidy sum potentially generated by one man sitting in an office shuffling computer entries, without new buildings, tellers, loan officers or other overhead. That capital base would be sufficient to capitalize about $40 billion in new loans, all generated without cost to the taxpayers.

A California New Deal

The bullet train example is a simple way to illustrate the potential of a state-owned bank, but there are many other possibilities for using its available assets. As the BND did after building up its capital base, the bank could advance loans at reasonable rates for local businesses, homeowners, students, school districts, and municipalities seeking funds for infrastructure.

These loans would be somewhat riskier than buying back the state's own bonds, and they would involve variable time frames. Like all banks, the state bank could run into liquidity problems from borrowing short to lend long, should the depositors unexpectedly come for their money. But again, that problem could be fixed simply by liquidating some portion of the money remaining in the PMIA and depositing it in the state-owned bank, where it would earn the same 0.5% interest it is earning now.

Here is another intriguing possibility for avoiding liquidity problems. The bank could serve simply as intermediator, generating loans which would then be sold to investors. That is what banks do today when they securitize mortgages and sell them off. Risk of loss is imposed on the investors, who also get the payment stream; but the bank profits as well, by receiving fees for its intermediating functions.

The federally-owned Reconstruction Finance Corporation (RFC) did something similar when it funded a major portion of the New Deal and World War II by selling bonds. This money was then used for loans to build infrastructure of every sort and to finance the war. According to a US Treasury report titled Final Report of the Reconstruction Finance Corporation (Government Printing Office, 1959), the RFC loaned or invested more than $40 billion from 1932 to 1957 (the years of its operation). By some estimates, the sum was about $50 billion. A small part of this came from its initial capitalization. The rest was borrowed -- $51.3 billion from the US Treasury and $3.1 billion from the public. The RFC financed roads, bridges, dams, post offices, universities, electrical power, mortgages, farms, and much more, while at the same time making money for the government. On its normal lending functions (omitting such things as extraordinary grants for wartime), it wound up earning a total net income of $690 million.

North Dakota has led the way in demonstrating how a state can jump-start a flagging economy by keeping its revenues in its own state-owned bank, using them to generate credit for the state and its citizens, bypassing the tourniquet on the free flow of credit imposed by private out-of-state banks. California and other states could do the same. They could create jobs, restore home ownership, rebuild infrastructure and generally stimulate their economies, while generating hefty dividends for the state, without increasing debt levels or risking public funds -- and without costing taxpayers a dime.

[Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. In the Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her websites are http://EllenBrown.com, http://PublicBankSolution.com, and http://PublicBankingInstitute.org. ]


Thanks to the author for sending this to Portside.


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Thursday, May 26, 2016

History of economic thought


Former McDonald’s CEO: It’s Cheaper to Buy Robots Than Pay $15 Minimum Wage [feedly]

Former McDonald's CEO: It's Cheaper to Buy Robots Than Pay $15 Minimum Wage
// The Curious Capitalist - TIME.com

Fast-food industry veterans are coming out against raising the minimum wage.

"It's cheaper to buy a $35,000 robotic arm than it is to hire an employee who's inefficient making $15 an hour bagging french fries," former McDonald's USA CEO Ed Rensi said in an interview on Tuesday on the Fox Business Network's "Mornings with Maria." "It's nonsense and it's very destructive and it's inflationary and it's going to cause a job loss across this country like you're not going to believe."

Business Insider: McDonald's is making a big push in Asia

According to Rensi, rising labor costs are forcing chains to cut entry-level jobs and replace workers with machines. Currently, Wendy's, McDonald's, and Panera are rolling out kiosks across the US, in part because of the rising cost of labor.

Business Insider: How McDonald's chicken nuggets are made

This isn't the first time Rensi, who served as McDonald's USA's president and chief executive from 1991 to 1997, has spoken out against increasing the minimum wage.

"I can assure you that a $15 minimum wage won't spell the end of the brand," Rensi wrote of McDonald's in Forbes in April. "However it will mean wiping out thousands of entry-level opportunities for people without many other options."

Rensi isn't alone in this belief.

Business Insider: This is why a strong US dollar will hurt McDonald's

"With government driving up the cost of labor, it's driving down the number of jobs," Andy Puzder, CEO of Carl's Jr. and Hardee's, told Business Insider. "You're going to see automation not just in airports and grocery stores, but in restaurants."

But there is some evidence that concern regarding rising wages may be overblown.

Business Insider: Target is raising its minimum wage

In the past year, McDonald's investment in employee wages and benefits has already had a significant impact on customer service — one of the most problematic parts of McDonald's business. According to CEO Steve Easterbrook, customer satisfaction scores were up 6% in the first quarter, compared to the same period last year.

Business Insider: Britain's new minimum wage feeds in to 'Brexit' debate

Even if Rensi is convinced that increased pay could doom entry-level employees, it seems as though Easterbrook is seeing returns on McDonald's investment in workers. Rising costs may convince some chains to invest in machines, but they're also helping make business more efficient and improving the customer experience.

This article originally appeared on Business Insider


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Reich on Sanders/ Hillary


Business Investment Lags, but Housing Sales Surge [feedly]

Business Investment Lags, but Housing Sales Surge
// NYT > Business

Business spending intentions weakened in April for a third month, but jobless claims fell and pending home sales reached a 10-year high.

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Obama races to cement the big Pacific Rim trade deal that all his potential successors oppose [feedly]

Obama races to cement the big Pacific Rim trade deal that all his potential successors oppose
// L.A. Times - Business

President Obama is racing against the clock to cement a massive Pacific Rim trade deal that all of his potential successors oppose, with his administration eyeing a looming fight on Capitol Hill while starting to implement as much of the complicated pact as it can. 

The effort begins in Vietnam,...


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The Atlanta Fed Wage Tracker: What’s it saying re wage growth and the Fed? [feedly]

The Atlanta Fed Wage Tracker: What's it saying re wage growth and the Fed?
// Jared Bernstein | On the Economy

As OTEers know, I track various measures of wage and compensation growth. Five—count 'em!—show up in the wage mashup, recently updated.

One increasingly popular series I've not included is the Atlanta's Fed Wage Tracker (FWT). It's an interesting and useful contribution, so let me make a few points about this series: what it shows, why it doesn't belong in the mashup, and importantly, given that it's accelerating faster than other series, what it says about wage-push inflation.

The figure below shows the most recent version of the FWT. While my mashup was last seen growing at around 2.3%, the FWT is popping along at 3.4%. Whussup widdat?

Source: Atlanta Fed

In fact, it's a very different beast from all the other series, with two major differences (I first saw this approach in a Jesse Rothstein paper from a few years back). First, while all the other series take snapshots of wages in period 1 and compare them with snapshots from period 2, the FWT measures the growth of the same workers over 12 months. If Jane earned $10 in April of 2015 and $10.50 in April of 2016, her wage growth is recorded as 5%. In the "snapshot" series that we're more used to, Jane's wage growth is not tracked. We're just comparing averages or medians of a sample of all wage earners (or blue-collar workers, or whatever) in two different periods.

By looking at continuously employed workers (actually, workers employed in both time periods), the FWT will typically show more growth than other series, since it's including an "experience premium," the bump to wages some workers enjoy as they age (or, similarly, as they add another year of tenure at their job).

The FWT is also, and this is an important attribute, less susceptible to compositional or demographic changes. If an improving job market pulls in a bunch of low-wage workers, the snapshots will reflect slower wage growth than the FWT, which excludes new entrants. This recent analysis by economists at the SF Fed shows this cyclical dynamic, along with a secular one of aging boomers leaving the job market (which also tends to push down wage growth since these leavers have higher wages), to be in play in the current wage-growth story.

The second unusual aspect of this wage series is that the median plotted above is not the median wage. It's the median growth rate. They calculate the wage growth of people like Jane who were working in the survey over the course of a year, and construct a distribution of growth rates from which they plot (a 3-mo. moving average of) the median. That means the median growth rate in any given month could be for low-, high-, or mid-wage workers.

So, besides the findings from the SF Fed re the impact of secular and cyclical trends holding back the broad measures of wage growth with which we're more familiar, is there anything else to learn from this series? We know that continuously employed workers, especially full-timers, are more likely to experience wage growth than others, so the fact that this series grows faster than the mashup isn't surprising.

But is columnist Robert Samuelson correct to conclude that these findings should exert "pressure on the Fed to raise interest rates," as they reveal a tighter job market goosing wages more than we thought?

The SF Fed authors suggest maybe not: "As long as employers can keep their wage bills low by replacing or expanding staff with lower-paid workers, labor cost pressures for higher price inflation could remain muted for some time." They do, however, note that if low-wage entrants are "less productive," that could create inflationary pressures.

I examined such linkages in a recent post wherein I argued that any pass-through from wage growth to price growth was awfully hard to tease out of the data, even controlling for slower productivity growth. Using a simple method I describe in the post, "I simulate an increase in the wage variable and estimate the impact on price growth."

Let's apply that same test to the FWT.

The first figure shows that a one standard deviation spike in the FWT wage growth series has no impact on core PCE inflation over the course of the next 12 months. The second figure shows the same result for full-time workers.

Source: See data note.

Source: See data note.

This shouldn't surprise you. A look at the first figure above shows that even FWT wage growth remains below where it was in the full employment 90s and even the less full 2000's. If anything, this measure shows we're still pretty far from full employment. Moreover, there's increasing evidence that wage-push inflation isn't so much of a thing as it used to be.

So, happy to add the FWT to the mix, but a) it's not signaling inflationary pressures, and b) once you extract its built-in premiums, I don't think it's telling a very different story than the mashup series. The job market's tightening, and that's giving workers a bit more bargaining clout to push for wage gains. To which I say: it's about time!


Data note: The statistical analysis uses monthly, year-over-year percent changes in the core PCE deflator and the FWT. These are run through a VAR (vector autoregression) with 6 lags of the price and wage variables, and one control variable: the annual change in the broad trade-weighted index of the dollar. The figures show impulse-response functions of a one standard deviation shock in the wage variables on the price index (PCEC), with confidence bands of two standard errors.


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Rising Latin American Corporate Risk: Walking a Tightrope [feedly]

Rising Latin American Corporate Risk: Walking a Tightrope
// iMFdirect – The IMF Blog

By Carlos Caceres and Fabiano Rodrigues Bastos

Versions in Português (Portuguese) and Español (Spanish)

The rapid increase in Latin American corporate debt—fueled by an abundance of cheap foreign money during the past decade—has contributed to an increase in corporate risk. Total debt of nonfinancial firms in Latin America increased from US$170 billion in 2010 to US$383 billion in 2015. With potential growth across countries in the region slowing, in line with the end of the commodity supercycle, it will now be more difficult for firms to operate under increased debt burdens and reduced safety margins.

In this environment, Latin American firms are walking a tightrope. With external financial conditions tightening, the walk towards the other side—notably through adjustment and deleveraging—while necessary, has become riskier. After making good progress, the crossing has also become more perilous due to strong headwinds—including slower global demand and bouts of heightened market volatility.

In our most recent regional report, and in a companion working paper, we take a deeper look at the factors driving corporate risk in Latin America over the last decade. We use company-specific financial information for close to 500 publicly listed nonfinancial firms between 2005–15 in 7 major economies—Argentina, Brazil, Chile, Colombia, Mexico, Panama, and Peru. We then gauge the main factors driving corporate risk dynamics in the region. We analyze company-specific, country-specific, and global conditions and the factors contributing the most to the recent rise in corporate risk.

Warning signs

The data shows that corporate risk, as reflected in higher credit default swaps (CDS) spreads, has indeed been rising in 2014–15 (Figure 1), though only in the cases of Argentina and Brazil has it approached the levels observed during the global financial crisis. Interestingly, but not surprisingly, the peak year in most commodity prices (2011) marks the beginning of risk differences across countries, which have further widened since late 2014.

Our results show the following:

All dimensions—company-specific, country-specific, and global factors—play a role in driving corporate risk, albeit to varying degrees and with different implications across countries. Overall, macroeconomic domestic factors, particularly the pace of currency depreciation and changes in sovereign spreads, are key direct factors placing upward pressure on corporate risk since 2011 (Figure 2). External conditions—in particular measures of global risk aversion (such as the Chicago Board Options Exchange Volatility Index, VIX)—constitute a dominant driver of corporate risk. Stress tests indicate that external shocks can generate substantial increases in corporate risk across the region—ranging from 100 to almost 300 basis points  in the event that the VIX surges to just half of the spike observed during the global financial crisis.

Domestic macroeconomic and political factors have played a particularly important role in generating upward pressures on corporate risk in Argentina and Brazil through rapid exchange rate depreciation and an increase in sovereign CDS spreads—reflecting significant macroeconomic imbalances (Figure 3). Higher corporate vulnerabilities in Colombia have been driven by the large exchange rate depreciation, as well as deteriorating firm-specific factors. The latter has also generated upward pressure on corporate spreads in Peru. In contrast, Chile, Mexico, and Panama have experienced much lower pressures on corporate risk from domestic economic factors. Across these major Latin American economies, benign global financial conditions (in particular, low market volatility) have helped to contain corporate risk despite an environment of slower external demand and declining commodity prices.

Minimizing risk

The soundness of policy frameworks matters for corporate risk. Indeed, given the important link between corporate and sovereign spreads, macroeconomic stability and credible policies are an important defense against additional upward pressures on corporate spreads. For instance, reining in risks to fiscal sustainability as well as curbing inflation, particularly in Argentina and Brazil, is crucial to contain corporate risk.

Recognizing the importance of global factors in driving corporate risk at home, solid macroeconomic policies alone, however, may not be enough and supporting underlying microeconomic adjustments are also imperative. This means promoting firms' capacity to push through needed adjustments. In particular, orderly deleveraging through market-based solutions should be the first line of defense in highly indebted companies. Public sector equity should not be used to stave off needed adjustments in the corporate sector. In the case of insolvent companies, restructuring and bankruptcy legislation should minimize both administrative costs and economic losses related to default.

Finally, enhanced monitoring and supervision and well-targeted macroprudential policies are key to alleviate risks and spillovers, particularly to the financial system. Policymakers should monitor closely corporate balance sheets and income flows, particularly in systemically important nonfinancial firms. Financial regulators also have a critical role to play. Adequate consolidated supervision, particularly in cases where financial and nonfinancial firms are highly interlinked, remains an important risk-mitigating tool.


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Sachs endorses Sanders


GAO report on segregation misses the bigger picture [feedly]

GAO report on segregation misses the bigger picture
// Economic Policy Institute Blog

Last week, the Government Accountability Office (GAO) issued a misleading report on school segregation, which I discussed with NAACP Legal Defense Fund President Sherrilyn Ifill and others on the Diane Rehm Show.

The takeaway line of the GAO report was:

From school years 2000-01 to 2013-14, the percentage of all K-12 public schools that had high percentages of poor and Black or Hispanic students grew from 9 to 16 percent.

(When the GAO referred to "poor" students, it was not really speaking of poor students, but rather of those from families with incomes less than nearly twice the poverty line and who are eligible for subsidized lunches in schools.)

Not by coincidence, the GAO report was released on Tuesday, May 17, the 62nd anniversary of the Supreme Court's Brown v. Board of Education decision banning school segregation. So it was not unreasonable for those who did not read the GAO report very carefully to conclude that it described a dramatic increase in racial segregation over the last 13 years.

But it did not, and could not.

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Larry Summers, the Congressional Progressive Caucus Budget, and the abandonment of fiscal policy [feedly]

Larry Summers, the Congressional Progressive Caucus Budget, and the abandonment of fiscal policy
// Economic Policy Institute Blog

Federal budget season came and went this year without any budget proposal hitting the floor of the U.S. House of Representatives. This was an odd (and ironic) bit of incompetence by the GOP leadership, who couldn't even wrangle a majority to support their own budget proposal. But it was especially damaging to U.S. economic policy debates because it limited attention paid to the budget of the Congressional Progressive Caucus (CPC).

It's true that political gridlock has meant the only live macroeconomic policy debate in DC in recent years has been around monetary policy. And the Fed's decisions are important! But the abandonment of fiscal policy as a tool that could boost the economy, which began not soon after the recovery from the Great Recession began, is a real tragedy.

The need to resuscitate fiscal policy was usefully underscored in a widely-discussed speech by former Treasury Secretary and National Economic Council Chair Larry Summers earlier this week. Because the CPC and Larry Summers are perhaps not always thought of as completely in sync in policy debates, it's worth noting that Summers's remarks can be read as a ringing endorsement of the CPC budget. Some examples:

"I am here to tell you that the most important determinant of our long term fiscal picture is how successful we are at accelerating the economy's growth rate in the next three to five years, not the austerity measures that we implement."

The CPC budget includes substantial upfront fiscal stimulus (mostly front-loaded infrastructure investments projects) precisely to accelerate the economy's growth rate in the near-term.

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Social-democratic vs market-friendly progressivism [feedly]

Social-democratic vs market-friendly progressivism
// Consider the Evidence

I learn from virtually everything I read by Mike Konczal, and agree with much of it. But the essay he and Patrick Iber have written on Karl Polanyi, progressivism, and the 2016 Democratic nomination contest leaves me with more questions than answers.

Iber and Konczal aim to highlight a tension within the American left between a "social democratic" vision of how to address social problems and a "progressive but market-friendly" vision. They say Bernie Sanders, a social democrat, believes access to education and healthcare should be a right, available to all persons regardless of income or wealth, whereas Hillary Clinton, a market-friendly progressive, thinks education and healthcare should remain market commodities, with access hinging at least partly on a person's ability to pay. Sanders, according to Iber and Konczal, "offers a straightforward defense of decommodification — the idea that some things do not belong in the marketplace — that is at odds with the kind of politics that the leadership of the Democratic Party has offered more or less since Carter."

What does treating education or healthcare as a right imply for policy?

Though Sanders favors free college for everyone, that isn't what he would provide. He proposes zero tuition (for in-state students at four-year public universities). But that wouldn't cover room and board, which costs $10,000 a year or more for a typical student. Offering "free" college that doesn't include room and board is a bit like offering "free" healthcare that covers the cost of surgery but requires patients to pay out of pocket for the hospital room. In the Sanders plan, low-income students, but not middle-income ones, "would be able to use federal, state, and college financial aid to cover room and board, books, and living expenses." So for Sanders, like for Clinton, college education wouldn't be genuinely decommodified.

That's the case in Sweden too, which is why a large portion of young Swedes leave college with fairly large student loan debt despite paying zero tuition. Earlier in the life course, Swedes benefit from high-quality child care and preschool. But while public funds heavily subsidize the cost, parents do have to pay for this early education, up to 10% of household income. Is Sweden failing to treat education as a right?

How about healthcare? I share Sanders' preference for a single-payer system, but that wouldn't necessarily decouple access to healthcare from one's income. Medicare pays, on average, only about two-thirds of elderly Americans' total medical expenses, so "Medicare for all" arguably wouldn't ensure everyone a right to what we think of as minimally adequate healthcare.

If we believe in a right to healthcare and education, shouldn't the same be true for food and housing? If so, does that mean everyone should receive a basic food allowance? A housing allowance? What if providing a meaningful housing allowance to all Americans turns out to be extremely expensive? Wouldn't we want to consider a policy that ensures housing for those least able to afford it but provides less help to those with higher incomes? That would be a "market-friendly" approach, in Iber and Konczal's formulation, but it might also be the best one.

To me, labeling Bernie Sanders' proposals "social democratic" and Hillary Clinton's "market friendly" obscures more than it clarifies. And applying an overarching principle, such as universal right to access, doesn't get us very far in figuring out the policy details for education (early, K-12, college), healthcare, food, housing, and more.


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Millionaire Tax Flight Myth Debunked — Again [feedly]

Millionaire Tax Flight Myth Debunked — Again
// Center on Budget: Comprehensive News Feed

An important study published today conclusively debunks the myth that raising state income taxes on the wealthy causes many of them to flee to lower-tax states.  It also shows that repealing state income taxes — a change the American Legislative Exchange Council (ALEC) and others are promoting across the country — likely won't attract rich business owners and workers with sought-after scientific and technological skills, let alone average families.


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Kansas City Fed: Regional Manufacturing Activity "declined modestly" in May [feedly]

Kansas City Fed: Regional Manufacturing Activity "declined modestly" in May
// Calculated Risk

From the Kansas City Fed: Tenth District Manufacturing Activity Declined Modestly

The Federal Reserve Bank of Kansas City released the May Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity declined modestly.

"Regional factory activity continued to drift down in May, as weakness in energy and agriculture-related manufacturing persisted," said Wilkerson. "Still, firms expect a modest pickup in activity later this year."
The month-over-month composite index was -5 in May, which is largely unchanged from April and March readings ...
emphasis added

The Kansas City region was hit hard by lower oil prices.

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US productivity declines [feedly]

US productivity declines
// Socialist Economic Bulletin

By Michael Burke
US productivity is set to decline for the first time in three decades, according to forecasts from the influential business research organisation the Conference Board. The level of productivity, which is the amount produced per hour of labour, is decisive for living standards. It is extremely difficult to increase the living standards of the mass of the population without increasing productivity, and impossible to do so on a sustained basis. The Conference Board is forecasting US productivity will decline in 2016.

The Financial Times quotes Bart van Ark, the Conference Board's chief economist saying, "Last year it looked like we were entering into a productivity crisis: now we are right in it". Fig.1 is the Conference Board chart reproduced from the FT. Rising productivity has been a feature of the US economy since the crisis of the early 1980s.

Fig. 1 Conference Board changes in US productivity -via FT


But the chart also shows US productivity growth has been exceptionally weak in the recovery phase since the 2008 crisis. This weakness or outright falls in productivity is a generalised feature of the advanced industrialised economies since the crisis.

The cause is easily identified. Weak productivity growth is associated with weak investment growth. Outright falls in productivity have followed declines in investment. This is the pattern evident in the US economy. Fig.2 below shows Federal Reserve Board of St Louis data on the level of real investment (Gross Fixed Capital Formation) in the US economy, which is falling.


Fig.2 Level of real Investment (Gross Fixed Capital Formation) in US


The level of productivity is expected to fall after the level of investment has already fallen. In effect, more workers will be attempting to produce goods and services with fewer machines to hand. As a result the level of that output per hour worked will decline. It is possible, for a period, to make the existing level of productive capacity work harder. But this simply accelerates the deterioration and dilapidation of that capital stock (its 'wear and tear') so the rate of consumption of capital exceeds the rate of investment. Net investment falls and with it the productive capacity of the economy as a whole.

Two further points are worth noting. First, the level of investment in the US economy never recovered its pre-recession peak and is now turning lower. The economic outlook is deteriorating as a result, not improving as the policy makers of the Federal Reserve Board seem to believe

Secondly, the chart clearly demonstrates that this was an investment-led downturn in the US economy. As the US led the whole world into crisis, therefore it is reasonable to state that the Great Recession was caused by the US investment decline. In the chart above the shaded area represents the period of the recession itself. Evidently investment declined long before the recession began. In fact, it was two years later that recession began, as investment peaked in the 1st quarter of 2006. As the financial crisis of 2007-2008 also followed the investment decline, the millions of words written in support of the idea that it was the financial crisis which caused the recession are factually wrong. It was the fall in investment which caused both the financial crisis and the recession.

Turning to the UK economy, a cottage industry has grown up attempting to obscure the fundamental forces driving the decline in productivity here. SEB has shown that it is the decline in investment, leading to a decline in the net capital stock which has caused the crisis of productivity here, and that all other explanations are spurious. In the words of the FT report, the UK may simply be the 'canary in the coalmine', its productivity decline a harbinger of what may happen to the Western economies generally.


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Dani Rodrik. 'm profiled

I'm profiled...
// *Dani Rodrik's* weblog

by the IMF, in their magazine Finance & Development. Here is the link. The piece is written by the IMF's Prakash Loungani, who has gone back and fished out vignettes that even I had forgotten. Here is the opening:

The triumph of markets over the state appeared almost complete in the early 1990s. The collapse of the Soviet Union and the fall of the Berlin Wall had discredited the role of the state in commanding the economic and political life of citizens. The political scientist Frank Fukuyama proclaimed in 1992 that the spread of democracy and capitalism around the globe would henceforth make history somewhat "boring." Among economists, markets—already held in fairly high regard—gained further esteem. Prominent left-leaning economists like Larry Summers admitted to a "grudging admiration" for such champions of the global spread of free markets as Milton Friedman.

But Harvard economist Dani Rodrik refused to join the party. Instead, he warned that globalization—the process of economic integration of nations through trade and finance—may have gone too far. In a 1997 monograph, he said there was a "yawning gap" between the rosy view of globalization held by economists and "the gut instincts of many laypeople" to resist it. In the United States, he noted, "a prominent Republican," Pat Buchanan, had just run "a vigorous campaign for the presidency on a plank of economic nationalism, promising to erect trade barriers and tougher restrictions on immigration" (themes pushed two decades later by Republican Donald Trump in his campaign for the 2016 presidential nomination).

Rodrik's warnings that the benefits of free trade were more apparent to economists than to others were prescient. His skepticism about the benefits of unfettered flows of capital across national boundaries is now conventional wisdom. His successful attack on the so-called Washington Consensus of policies to generate economic growth has made governments and international organizations like the IMF and the World Bank admit that there are many policy recipes that can generate growth. That the phrase "one size does not fit all" has become a cliché is due in no small part to the influence of Rodrik's work. "We didn't understand how right he was," says David Wessel, a former Wall Street Journal economics writer now at the Brookings Institution's Hutchins Center.

Loungani also has a separate article in the same issue titled "Neoliberalism" Oversold?" (co-authored with Jonathan Ostry and David Furceri).

A lengthy profile of me and a critique of financial globalization in the same issue of the IMF's flagship magazine? What is the world coming to?


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I'm profiled... [feedly]

I'm profiled...
// *Dani Rodrik's* weblog

by the IMF, in their magazine Finance & Development. Here is the link. The piece is written by the IMF's Prakash Loungani, who has gone back and fished out vignettes that even I had forgotten. Here is the opening:

The triumph of markets over the state appeared almost complete in the early 1990s. The collapse of the Soviet Union and the fall of the Berlin Wall had discredited the role of the state in commanding the economic and political life of citizens. The political scientist Frank Fukuyama proclaimed in 1992 that the spread of democracy and capitalism around the globe would henceforth make history somewhat "boring." Among economists, markets—already held in fairly high regard—gained further esteem. Prominent left-leaning economists like Larry Summers admitted to a "grudging admiration" for such champions of the global spread of free markets as Milton Friedman.

But Harvard economist Dani Rodrik refused to join the party. Instead, he warned that globalization—the process of economic integration of nations through trade and finance—may have gone too far. In a 1997 monograph, he said there was a "yawning gap" between the rosy view of globalization held by economists and "the gut instincts of many laypeople" to resist it. In the United States, he noted, "a prominent Republican," Pat Buchanan, had just run "a vigorous campaign for the presidency on a plank of economic nationalism, promising to erect trade barriers and tougher restrictions on immigration" (themes pushed two decades later by Republican Donald Trump in his campaign for the 2016 presidential nomination).

Rodrik's warnings that the benefits of free trade were more apparent to economists than to others were prescient. His skepticism about the benefits of unfettered flows of capital across national boundaries is now conventional wisdom. His successful attack on the so-called Washington Consensus of policies to generate economic growth has made governments and international organizations like the IMF and the World Bank admit that there are many policy recipes that can generate growth. That the phrase "one size does not fit all" has become a cliché is due in no small part to the influence of Rodrik's work. "We didn't understand how right he was," says David Wessel, a former Wall Street Journal economics writer now at the Brookings Institution's Hutchins Center.

Loungani also has a separate article in the same issue titled "Neoliberalism" Oversold?" (co-authored with Jonathan Ostry and David Furceri).

A lengthy profile of me and a critique of financial globalization in the same issue of the IMF's flagship magazine? What is the world coming to?


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Global trade slowdown -- Does it matter?


Wednesday, May 25, 2016

Businesses Mum on New Overtime Rules [feedly]

Businesses Mum on New Overtime Rules

Beckley Register-Herald – Come December, an estimated 66,000 West Virginians could see a bump in their paychecks when new overtime rules go into effect, allowing more low-level managers and educators to collect pay for working more than 40 hours a week. Read

The new rules increase the yearly salary threshold which generally determines which employees qualify for overtime pay after working 40 hours a week and are expected to have a sweeping effect on a number of workers in the retail, fast-food, higher education and nonfor-profit sectors.

The threshold will double to $47,476 annually from the current $23,660, the White House said last week. In other words, employees making $47,476 or less annually will be eligible for overtime pay, usually time and a half.

Sean O'Leary with the West Virginia Center on Budget and Policy said the new rules will affect West Virginia workers the most. The Mountain State has the largest share of salaried workers, nearly 31 percent, who will directly benefit from the increased threshold.

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More Krugman bullshit.

I won't bother to refute this garbage except to say that, if this is the liberal Clinton campaign appeal to Sanders voters she is in serious trouble


Obamacare is helping millions get needed healthcare, new survey finds [feedly]

Obamacare is helping millions get needed healthcare, new survey finds
// L.A. Times - Business

More than 60% of working-age Americans who signed up for Medicaid or a private health plan through the Affordable Care Act are getting healthcare they couldn't previously get, a new nationwide survey indicates.

And consumers are broadly satisfied with the new coverage, despite some cost challenges and...


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Where have all the Flowers Gone: Complexity & Worldwide Bee Declines [feedly]

Where have all the Flowers Gone: Complexity & Worldwide Bee Declines
// Global Policy Journal

Nicole Miller-Struttmann looks at the complex causes and possible response to globally declining bee populations. Over the past two decades, bee declines worldwide have drawn international attention. ...Read more

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Larry Summers on the next recession


Arguments that better overtime pay protection means less flexibility are untrue [feedly]

Arguments that better overtime pay protection means less flexibility are untrue
// Economic Policy Institute Blog

The Department of Labor has issued a new rule, which expands the right to be paid time-and-a-half for overtime to salaried employees who earn less than $47,476 a year. Business groups that oppose the new rule claim that salaried employees will lose important work schedule flexibility when they become eligible for overtime pay. But the evidence shows this fear is unfounded, and, in fact, salaried workers who earn less than $50,000 a year currently have barely more flexibility at work than hourly paid employees.

An EPI analysis using General Social Survey data by Penn State labor economist Lonnie Golden shows that:

Almost half—47 percent—of salaried workers earning less than $50,000 a year report that on a daily basis they "never" or "rarely" are allowed to change their work starting time and quitting times, while only 20 percent of salaried workers who earn $60,000 or more per year report never or rarely being allowed to change their schedules.Salaried workers earning less than $50,000 a year have no more ability to take time off during work for personal or family matters than hourly workers at the same level. Thus, "switching" employees from salaried to hourly status or requiring employers to track or monitor their hours for purposes of overtime pay would not reduce this valuable type of work schedule flexibility for employees. If we consider regularly being required to work overtime an indicator of inflexibility in one's work schedule, salaried workers earning between $25,000 and $50,000 a year have about the same or an even greater likelihood of working mandatory overtime than their hourly counterparts. Thus, raising the overtime pay salary threshold for exemption to $47,476 should, if anything, provide the newly eligible workers somewhat greater flexibility to refuse unwelcome work beyond their usual number of hours per week.

In light of these conditions and findings, it is unsurprising that salaried workers generally report higher levels of work-family conflict and work stress than do hourly paid workers. It is also important to note that nothing in the new rule requires any employer to change any employee from salaried pay to hourly pay. That decision is entirely within an employer's discretion. Many employers, including small business owners such as the National Retail Federation's witness at a congressional hearing last October, already track the hours of salaried employees and provide comp time and bonuses based on overtime hours.


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