Dean Baker's Blog, page 322

Open Source Seeds and Inequality

Morning Edition had an interesting segment reporting on a new effort to promote open source seeds. These seeds could be freely reproduced and varied, as long as any resulting seeds were also freely available.

Unfortunately this piece did not fully flesh out the economic implications of this movement. While it included the comments of the representative of a seed company, saying that it would likely avoid open source seed in order to be able to continue to sell patent protected seed, it did in...

Will the Wall Street Journal Give Ed Lazear Space to Correct His Piece About Falling Work Hours?

Last month the WSJ ran a column by Ed Lazear, a Standford economics professor and former chief economist to President Bush, which noted the decline in the length of the average workweek between the fall and the most recent data from February. The piece noted that if labor demand was measured in hours, we had lost the equivalent of 100,000 jobs over the prior six months. He discussed possible causes for this decline and highlighted the incentives created by the Affordable Care Act.

While some...

If We See Inequality Because of Technology, It's Because the Government Wanted Us to Have Inequality

How rich would Bill Gates be if anyone in the world could make a computer with the latest version of Windows without even sending him a thank you note? Think about this question as you read Eduardo Porter's piece on how technology might be shifting income towards capital making society ever more unequal.

Porter is of course right, we have seen a large shift in income from labor to capital across the world over the last three decades. However it is difficult to see how this could be seen as te...

If Rents Are Pricing People Out of the Market, It's Because New Rental Units Are More Expensive

The NYT had an interesting piece on how a rapidly growing number of people are finding rents unaffordable (defined as more than 30 percent of gross income. There are two reasons that rents can rise in price. The first is that the same units cost more money. The second reason is that the mix of rental units change so that the the typical unit costs more.

It is clear that the main cause of higher rents is the latter, as shown below.

This graph shows that the owner equivalent rent index from t...

More Joke Budget Reporting in the NYT

The NYT is continuing its parody of news reporting with a piece that discusses the budget proposals of France's Prime Minister, Manuel Valls. It told readers:

"On Tuesday, Mr. Valls offered the most detailed summary yet of how the government intends to meet its promise to enact Really Big Number in spending cuts by 2017. He called for Really Big Number in cuts to the central government bureaucracy, Really Big Number to the national health care system and Really Big Number to local governments...

Robert Samuelson Is Concerned That the Unemployment Rate Could Be Too Low

Hey, who isn't? His column today raises the possibility that because the long-term unemployed are effectively excluded from the labor market, they don't exert downward pressure on the inflation rate. This means that we should only focus on the short-term unemployment rate, which is already near its average rate over the last two decades.

There are many reasons for not accepting this view. For example, if the number of short-term unemployed dwindled, it is likely that employers would start to...

Corporate Directors Give Corporate CEOs Bloated Pay

In an otherwise interesting article on bloated CEO paychecks, the NYT almost entirely neglected the role of corporate directors. The directors are the people who determine CEO pay. It is their job first and foremost to hold down CEO pay in the interest of protecting shareholders.

As a practical matter, the directors rarely serve as an effective check on pay because they often owe their position as a director to the CEOs. They tend to view their directorships as a sort of sinecure, giving them...

Nonsense on Deflation: Prices Are Falling in the Euro Zone

Expressing concern over deflation (i.e. the inflation rate turning negative) is the way in which people tell you that they have no clue about economics and just repeat what they heard others say. The inflation indexes we use are an aggregation of millions of different price changes. There is a substantial amount of dispersion around the overall inflation number. This means that when the inflation rate is near zero, there are many goods and services whose prices are already falling.

This means...

Why Is the I.M.F. Urging Japan to Bring Women Into the Labor Market?

That's what readers of this NYT piece must have been asking. It reported:

"It [the I.M.F.] has urged Tokyo to make structural reforms to bolster its labor market, by, for instance, bringing women into the work force."

This seems strange since the OECD reports that the employment to population ratio for women in Japan was 72.2 percent in the third quarter of 2013, the most recent data available. By comparison it was 67.4 percent in the United States.

U.K. Conservatives Redefine Success Downward

The folks on the right don't seem to think that they should have to be evaluated by the same standards as everyone else. Hence we find George Osborne, the U.K. finance minister, boasting in the WSJ about his country's economic performance now that its economy is finally beginning to grow again.

For people who missed it, the conservative coalition in the U.K. thought it was smart to cut spending and raise taxes in 2010 even though its economy was very far from full employment. These measures h...