Friday , July 10 2020
Home / The Angry Bear / Lawrence Summers discovers bargaining power

Lawrence Summers discovers bargaining power

Summary:
Lawrence Summers discovers bargaining power Mainline macroeconomics pretends to be “value neutral,” by which practitioners mean that they assign no moral value to the supply or demand curves to the participants in the economy: they simply exist. The question of *why* participants in the economy have particular supply and demand curves is simply not even in the universe of parameters. But in my experience “why” participants in an economy are willing to pay x amount for y good or service most often comes back to bargaining power. My ability to coerce if necessary a particular outcome comes down to the financial ability to walk away from the transaction. Or, as I have quoted a few times before, “Thems that has, git’s.” Yesterday the following abstract of

Topics:
NewDealdemocrat considers the following as important:

This could be interesting, too:

NewDealdemocrat writes June data starts out with a bright spot in manufacturing

Barkley Rosser writes Wildly Off Forecasts?

NewDealdemocrat writes Coronavirus dashboard for June 29: renewed exponential growth in infections, decline in deaths has stalled

Dan Crawford writes Ask me anything — vacation edition

Lawrence Summers discovers bargaining power

Mainline macroeconomics pretends to be “value neutral,” by which practitioners mean that they assign no moral value to the supply or demand curves to the participants in the economy: they simply exist. The question of *why* participants in the economy have particular supply and demand curves is simply not even in the universe of parameters.

But in my experience “why” participants in an economy are willing to pay x amount for y good or service most often comes back to bargaining power. My ability to coerce if necessary a particular outcome comes down to the financial ability to walk away from the transaction. Or, as I have quoted a few times before, “Thems that has, git’s.”

Yesterday the following abstract of a new economic paper, “The Declining Worker Power Hypothersis,” from Lawrence Summers and Anna Stansbury came across the transom:

Rising profitability and market valuations of US businesses, sluggish wage growth and a declining labor share of income, and reduced unemployment and inflation, have defined the macroeconomic environment of the last generation. This paper offers a unified explanation for these phenomena based on reduced worker power. Using individual, industry, and state-level data, we demonstrate that measures of reduced worker power are associated with lower wage levels, higher profit shares, and reductions in measures of the NAIRU. We argue that the declining worker power hypothesis is more compelling as an explanation for observed changes than increases in firms’ market power, both because it can simultaneously explain a falling labor share and a reduced NAIRU, and because it is more directly supported by the data.

Hoocoodanode?!?

Leave a Reply

Your email address will not be published. Required fields are marked *