Dean Baker's Blog, page 207

The Old Which Way Is Up Problem in Economics

Many people have contempt for economists. It is remarkable they don’t have more. Economists can’t even agree on answers to the most basic questions, like is an economy suffering from too little demand or too much demand. If that sounds confusing, this is like a weatherperson telling us that we don’t know whether to expect severe drought or record floods.

Today’s example is Japan. The NYT had a front page story about its declining population. Unlike many pieces on falling populations, this one...

The Washington Post Treats a Financial Transactions Tax Seriously

Are rivers flowing upstream? Has anyone seen four horsemen? Anyhow, it seems that the Washington Post editorial board is now acknowledging that a financial transactions tax [FTT] could be a serious policy. It ran an editorial which included a few derisive comments directed towards Senator Bernie Sanders, who has advocated a financial transactions tax in his presidential campaign, but favorably cited the Tax Policy Center’s analysis and said:

“They [FTTs] represent a ‘tempting’ option that mi...

Romer and Romer Do the Numbers on Friedman-Sanders

Since I had been critical of elite economists for using their authority rather than evidence to trash Gerald Friedman’s analysis of Bernie Sanders’ program, I should acknowledge a serious effort to do exactly the sort of analysis I advocated. Christina Romer, one of the four former heads of the Council of Economic Advisers who signed the earlier letter criticizing Friedman’s analysis, along with David Romer (both of whom are now Berkeley economics professors), did a detailed critique of the F...

Folks Worried About Robots Taking Our Jobs Need to Learn Arithmetic

Matt O’Brien had a very good piece on the silliness of the robots taking our jobs story. The basic point is that it is silly to worry about a possible future in which robots are taking our jobs, when we currently face a situation in which people don’t have jobs just because Congress won’t spend the money. I couldn’t agree more.

We can all see the really cool things that can be done by robots and advanced computers, but the fact is they are not doing it now. As Matt notes, productivity growth...

Fareed Zakaria Is Wrong: The Left Has Plenty of Good Solutions for Inequality, They Just Don’t Get Mentioned in the WaPo Opinion Pages

Fareed Zakaria used his column in the Washington Post this week to approvingly quote former British foreign minister David Miliband saying:

“The right has no good answer to the problem that globalization erodes people’s identities. The left has no good answer to the problem that it exacerbates inequality...”

Actually, the left has plenty of good answers on inequality, they just get ignored or misrepresented in outlets like the Washington Post.

For example, many progressives (including Senat...

Misplaced Celebration on Durable Goods Orders

The Washington Post headlined a Reuters' piece on the Commerce Department's release of January data on durable goods orders "new orders for durable goods increased in January." The first sentence told readers:"New orders for long-lasting U.S. manufactured goods in January rose by the most in 10 months as demand picked up broadly, offering a ray of hope for the downtrodden manufacturing sector."This is more than a bit misleading. The 4.9 percent jump in January looks much less impressive...

Cheap Oil Is Good News for Japan: Lesson on Inflation #52,467

The confusion on inflation continues. The NYT ran a Reuters piece on the latest inflation data from Japan. The piece began by telling readers:

“Japan's core consumer prices were unchanged in January from a year earlier, suggesting that persistent falls in energy costs will keep inflation well below the central bank's 2 percent target.

“While falling fuel costs may be a boon for corporate profits, low energy prices suppress inflation which in turn may discourage companies from raising wages or...

Ronald Reagan and Keynesian Stimulus

Jacob Weisberg wasn’t quite straight with readers when he said that Ronald Reagan supported “Keynesian stimulus” in a NYT column on how the Republican Party has changed since the days of Reagan. The Keynesian stimulus took the form of a large permanent tax cut that was highly skewed toward the wealthy. He also had large increases in military spending.

The current crew of Republican presidential candidates seems to be very much in this same mode, also urging large tax cuts that would primaril...

Robert Samuelson Is Unhappy that We Have Evidence Based Economics

It must be tough for flat earth believers; people insist on rejecting their views on the shape of the earth based on evidence. Robert Samuelson seems to be in the same situation. He used his column to complain about economists not caring about balanced budgets, just because there is no evidence that they should.

The immediate provocation for this diatribe is Doug Elmendorf, the former head of the Congressional Budget Office. Elmendorf used to be a big advocate of smaller deficits, but he now...

Will a Drying Up of Tech Capital Lessen Inequality?

The NYT had an article this morning on how European tech start-ups were seeing new capital dry up in the same way as Silicon Valley firms. The piece portrayed this as largely a negative event. Undoubtedly, it is bad news for the founders and top employees of these firms, but it’s not clear it is bad news for the economy.

The huge capitalizations of many start-ups has allowed a small number of people to get very rich, however it is not clear that their valuations bore any resemblance to their...