Why Trump Could Use More Economists

Better, Mick Mulvaney said, for opponents of legislation to supply their studies and advocates to supply their own. “And if it works, they would get re-elected and if it doesn’t, they don’t.”

 Mr. Mulvaney’s critique would be more convincing if the administration had in fact put forth its own estimates of the economic effects of its proposals. It hasn’t. Its failure to account for the trade-offs of tax cuts (bigger deficits) or reduced subsidies for health care (more uninsured) are one reason Mr. Trump’s agenda is moving so slowly.
.. Forecasts will be wrong more often than right. But they provide a benchmark against which to test proposals based on theory and evidence rather than instinct or unproven ideological priors.
..That discipline has been lacking in Mr. Trump’s administration. When Mr. Trump announced last week he was pulling out of the Paris climate accord, he cited not internal research on the economic harms of the deal, but a private study commissioned by two groups critical of greenhouse gas regulation. His budget two weeks ago was noteworthy for both forecasting 3% growth, much faster than what independent analysts think plausible, and the absence of any detailed analysis of how it will be achieved. Administration officials then contradicted each other on whether tax cuts would be financed with other tax increases.
.. This may reflect the absence of economists in its hallways, a result of Mr. Trump’s apparent early disdain for experts in general.
.. “I sleep better knowing James Mattis is defense secretary and I will sleep better if Kevin Hassett is confirmed as CEA chair.”

Pope Francis Shocks Workers With Pro-Capitalism Pitch

“There can’t be a good economy without good businessmen, without their capacity to create and to produce,” he said, shattering his reputation as an enemy of the free market economy.

 .. Moreover, only an economically healthy society can keep a democracy afloat, he suggested.
.. “A monthly check from the state that allows you to keep the family afloat doesn’t solve the problem. It has to be resolved with work for everyone,” he said.
.. “When it’s a system of individual incentives that puts workers into competition among themselves, you can obtain some advantages, but it ends up ruining the trust that’s the soul of any organization,” the Pope argued. “When a crisis comes, the company falls apart. It implodes, because there’s no longer any harmony.”
.. The Pope said that it is “the many thousands of men and women who strive each day to do an honest day’s work, to bring home their daily bread, to save money and – one step at a time – to build a better life for their families” who “sustain the life of society.”
.. The Pope’s most remarkable words came when speaking about the ability of the free market to lift people out of poverty.
.. “Business is a noble vocation,” the Pope continued, “directed to producing wealth and improving the world. It can be a fruitful source of prosperity for the area in which it operates, especially if it sees the creation of jobs as an essential part of its service to the common good.”

Everything you need to know about trade economics, in 70 words

If a country consumes more than it produces, it must import more than it exports. That’s not a rip-off; that’s arithmetic.

If we manage to negotiate a reduction in the Chinese trade surplus with the United States, we will have an increased trade deficit with some other country.

Federal deficit spending, a massive and continuing act of dissaving, is the culprit. Control that spending and you will control trade deficits.

Cracking the Mystery of Labor’s Falling Share of GDP

There are, by my count, now four main potential explanations for the mysterious slide in labor’s share. These are:

  1. China,
  2. robots,
  3. monopolies and
  4. landlords.

1) The China hypothesis basically says that the opening of the Chinese and Indian economies, combined with the invention of globalizing technologies like the internet and containerized shipping, dumped a flood of low-cost labor onto the world market, allowing multinationals to shop around for cheap workers while raising their profits.

.. One problem with this theory is that, according to Chinese statistics, labor’s share has been falling there, too.

 

2) ..The robots hypothesis says that as technology gets cheaper, employers are substituting machines for workers.

.. labor share is falling across the whole economy, but not within companies.

 

3)  .. the economy is simply shifting resources toward a few large companies that are very capital-intensive, and away from the more numerous, smaller companies that use more human labor. Autor et al. blame increasing monopoly power for labor’s decline.

 

4) .. While analyzing the work of French economist Thomas Piketty, Matt Rognlie found that national income accounts showed an increasing amount flowing to owners of land.

 

.. A recent blog post by Paul Krugman

.. When the productivity of the capital-intensive companies improves — due to mechanization, or the internet, or globalization — it shifts production toward those companies, and lowers wages in the process.

.. Now suppose that those capital-intensive companies are a small handful of superstar multinationals, while the labor-intensive companies are a bunch of small, local competitors. Improvement in robots, information technology and globalization would therefore be shifting resources away from the many and toward the few

.. new technologies that disproportionately help big, capital-intensive multinational companies.