About one month ago I wroute about Euro Area inflation: “troubling but transitory“. One month more of data are in. It is even more troublesome but also more transitory. The increase of the consumer price index is dominated even more by energy prices than one month ago. As the Euro Area is a net importer of energy (among other items: natural gas from Russia.). This particular kind of inflation is, to use confusing terminology, highly deflationary… (for the non-energy sectors).

Purchasing Power is transferred to Russia (and other energy exporters) and siphoned off from other sectors. The rational response: investing in energy saving (let’s commute less…) and green energy. The problem: production costs of natural gas are very low, especially labor costs. Production costs of

It still has to feed into the management of pension funds or global wealth funds. Or, does it? It seems that Black Rock is already investing more in real estate… Look here and here. It might well be that this happens because because the smarties at Black Rock read the work of Jorda, Knoll, Kuvshinov, Schularick and Taylor, who gathered data on ‘‘The Rate of Return on Everything, 1870–2015”, including the rate of return on ‘houses’ (better: the rate of return on ‘land underlying houses’), for quite a period and a whole number of countries. We now know more, much more, about rates of return on, well, ‘everything’ than ever before. Macro can finally be Macro. But: what is a “rate of return”? And why is this important?

Source: Jordà, Òscar, Katharina Knoll, Dmitry Kuvshinov,

The Bank of England has a 28 MB Excel dataset containing: “A millenium of macro economic data”. A treasure trove. A good thing about it: as it are long term series and as these are roughly based on national accounts data and not just on economics 101 it’s not only focused on GDP but also on sectoral developments and flows between and within sectors. I can’t show it all, and…

will leave, to name only one (!) major part of it, the Flow of Funds data, which, among other things, show which sector provides loans and credits to other sectors, out of the discussion. Another major part which won’t be covered: international trade. The dataset is incredibly rich as you can see for yourself on the second Excel worksheet. I won’t discuss conceptual issues (the meaning and nature and

Inflation in the Euro Area is high and erodes the purchasing power of many (but not all) incomes. Bad. But it will be transitory. And there is no indication of endogenous macro-economic instability. Why do I think this?

I’ll first discuss the (largely) transitory nature of the present price increases, macro (in)stability comes next.

Graph 1 shows two metrics of inflation. The first is based on the ‘normal’ consumer price index, but this time without energy and without increases of indirect taxes (read: Value Added Tax, VAT). As we can see this inflation metric was quite low during a large part of 2021 and still is way below the 2,0% ECB inflation target. Crisis? What crisis! The data show that the recent (and large) increase in inflation is largely caused by energy

In September 2021, a Dutch judge decided, in a case of the FNV Union against Uber, that Uber drivers are employees, not dependent or independent contractors. Meaning, on the micro level, that these employees in one stroke were entitled to more money, more protection and more rights. In the macro-conceptual framework of the International Labour Organization (ILO) this means that they shifted from a somewhat informal status to a formal status (see below). While it shows up, in the conceptual framework of the economist Guy Standing, as a shift from the ‘precariat’ towards the ‘salariat’:

“the old salaried class has splintered into two groups: the salariat, with strong employment security and an array of non-wage forms of remuneration, and a small but rapidly growing group of

I love the national accounts (NA). The NA focus on the money-economy. Total wages (who pays, who receives), profits, imports, exports, consumption, bank credit, the value and ownership of fixed and financial capital and (on the other side of the sectoral balance sheets) debts. By focusing on different kinds of money flows and stocks and by tracking flows between sectors the national accounts enable us to map the relations between economic sectors like construction and industry (cement!) but also between spending categories like consumption and production as well as imports. ‘Input output’ and ‘supply and use’ tables enable an analysis of these ever changing relations.

Even when the flows as presented in the national accounts are monetary, some tinkering with granular data on

The post 2009 decade will stand out as a golden age for economic statistics. I do not mean econometric analysis, I mean statistics like asset prices, rents or estimates of inequality and household income. The empirical basis for a truly scientific macro economics has finally become less shaky. On an irregular basis, I will publish some posts on some of the treasure troves which have become available.

Here, already one example, based on the recent PhD of Matthijs Korevaar., ”Financial lessons from the long history of housing markets”. Finally a long term series of one of the most important price series there is: rents. How could we ever have done proper macro without it!

.

Why is this important? Economists like to argue using stylized facts which are based upon stylized

Technical addendum: ‘Individual consumption expenditure of general government’ equals spending on health care and education and the like. Collective expenditure equals the proverbial streetlamps. NPISH stands for Non Profit Institutions Serving Households like churches, unions and soccer clubs.

At this moment there is quite some talk about the specter of inflation. And indeed: some prices are increasing. Houses! The runaway increase of house prices sure is a specter to be bothered about! But should we also bother about ‘flow’ prices, like consumer prices or the prices of fixed investments? The answer is: life isn’t simple. There are many kind of ‘flow’ prices. We should look at them in tandem. The consumer price index has been developed and designed to estimate the purchasing

India and China are taking over. Cuban vaccines have entered phase three. It’s not the case that western countries are tacking the backseat. Yet. However… There are of course issues with the global vaccination effort. According to rumors, there are 29 million AstraZeneca doses produced in the Netherlands and stored in Italy which are not entering the vaccination chain because of… nobody knows (personal opinion: it sometimes feels as if the ‘intern from hell’ chairs the AstraZeneca board). Also, vaccines work excellent at the micro level, at this moment, when it comes to protecting the vulnerable. Vaccinating old men and women leads within weeks to a staggering decline in the death rate. The macro level is another issue. Only Israel, the fastest vaxer of them all, however seems to have

The ILO (International Labour Organization) has published a ‘flagship’ report about the platform economy. You know, the ‘Deliveroo‘, ‘AirBnB‘, ‘Uber‘ and ‘Mechanical Turk‘ economy. This economy is rapidly growing and is already changing our way of life – and work. I’m not going to parse the report (the ‘executive summary’ is 10 pages for a reason) but I will investigate if the platform economy is a new ‘mode of production’.

The first question is how to define a ‘Mode of Production’. Let’s be inspired by Engels and Marx: for living, breathing, procreating people, a Mode of Production is “a definite form of expressing their life … What they are, therefore, coincides with their production, both with what they produce and how they produce“. So, does the platform economy change

From the AFEE (Association for Evolutionary Economics):

February 24, 2021

Subject: An Open Letter Regarding a Proposal to Dismiss 145 Faculty Members at the University of Leicester

We are shocked to hear that 145 staff members have been placed at risk of compulsory redundancy at the University of Leicester. 

In particular, 16 people within the School of Business have been targeted because their work is deemed to fall within “Critical Management Studies” or “Political Economy”. Specifically, “class based” and “institutionalist” forms of political economy are deemed redundant. However, the “rational choice orthodoxy” has been excluded from this definition.

The proposed action threatens academic freedom. It betrays a lack of appreciation of

Covid 19 vaccinations are going well. Quite a number of vaccines have been approved. And these are being used. At the time of writing close to 100 million ‘jabs’ have already been provided, not just of the Moderna and Pfizer vaccine but also of the Sputnic, AstraZeneca and Sinovac vaccines. And the pace is quickening, for instance in countries like Brazil and Morocco (which uses AstraZeneca and Sinopharm vaccines in its 3.000 vaccination centres).

Look here for the scientific results of the Russian Sputnik vaccine. Look here for the results of the Chinese Sinovac vaccine. Look here for the Cuban/Iranian efforts (Cuba has not enough Corona cases to test it at home). Look here for Indian efforts, one for a vaccine which supposedly can be stored at 37 degrees Celsius.

I’m

.

Eurostat has recently published new data on EU unemployment. It’s going down again. Which seems good. But there is more to this than meets the eye. To be counted as ‘unemployed’ one has to have no ‘gainful employment’ and to be actively seeking for a job. People who give up seeking are not counted as unemployed. Neither are people leaving the labor market. And people are giving up seeking as well as leaving the labor market…

Eurostat has engineered a ‘dashboard’ which maps the economic and some of the demographic and mental consequences of the Corona crisis and Corona policies, including data on labor flows. Good. Even when its name, the ‘recovery dashboard‘, sounds a little optimistic. When we look at these flows, it turns out that it has become much harder for the

Immigration is a hotly debated issue in the EU. To be more precise: immigration from the ‘south’ is hotly debated. Immigration from the East is much more important and increasing. Some facts:

Immigration into the EU is increasing and has been increasing for quite some time (the ‘first residence permits’ mentioned in the graph and the quote are not permanent residence permits)This is to a considerable extent caused by immigration into Poland from countries like Ukraine and Belarus. Immigration shifted from Syrian and Ukrainian war refugees to people from Ukraine and Belarus wanting to improve their lives EU countries are bending over backwards to restrict immigration from the south (consider the walls in for in stance Ceuta and Melilla, built and paid for by Spain). But not so for

Let’s start to vaccinate as many people as possible as soon as possible. This will, together with other technological solutions like air purifiers, UV-C lamps as well as large scale fast testing, enable us to escape the cycle of alternating lock downs. It will also enable us to at least pursue a policy of total eradication of Covid-19. Lock downs work – for a while. They can buy us time. But the economic, social and psychological consequences are immense and we will have to rely as much as possible on other means. Vaccinations are one of our best weapons in this fight.

No. Vaccinations are not a cure-all. Hepatitis, HIV. The flue. Despite vaccines we have not yet eradicated these murderous diseases. But vaccines can be a miracle cure. Look at Polio. Smallpox. Measles. What do Polio,

Source

Measuring the labor market and understanding labormarket data has recently been more of a challenge than usual. An large number of people seem to leave the official labor market, rendering unemployment data less useful. Also, a large number of new arrangements influence who are counted as unemployed or as workers. The best and at this point of time the most useful data we have might be data on total hours worked. Which, for the EU and the UK, show a pitiful sight. It resembles half of a war economy.

Many sectors of the economy are curtailed, leading to large declines in hours worked. The other half of a war economy, employing the redundant people, is absent. True, employing people as soldiers or producers of weapons of destruction is a terrible thing. but in the war

Contrary to the Gini-index, the Theil inequality index enables us to directly tie estimates of inequality to the class and ownership structure of a society. As such, it’s an indispensable tool for the political economist, requiring a-priori knowledge of political economic theory but also an inductive reading of the sources and the situation. So, why is the Gini and not the Theil index often the economists inequality metric of choice? 

The Gini-index is an often used metric to estimate inequality. As such, it is highly useful. But for the political economist it has a fundamental drawback. It does matter if people are rich or poor and it does show the extent of differences in income or wealth. But it doesn’t matter if people are laborers or a capitalists, teachers of

Mortality and prevalence of Corona.
Iceland tests a lot and has some of the best, most complete and representative, data on Corona infections (graph above, which is consistent with comparable data for Iceland from surveys, h/t Jesse Frederik) and seems to have come to grips with Corona, for the moment. What do these data tell us about the prevalence and mortality rate of Corona? They show that young people (18-, below another definition will be used) seem to be relatively immune to infection. Other data show that they also get less sick and basically do not die from Corona. Mind: Iceland has a lock down but primary schools are open, the lock down can’t explain the low prevalence of Corona among the 18- generation. The relatively complete data from Iceland also indicate a mortality

The eight hour working day was a long standing aim of organized labor. For decades it seemed unattainable. ‘International competition’ often was a main reason why countries stubbornly refused to introduce it. But from 1915 on and starting in Uruguay it suddenly spread all over the world. Within a few years, in many countries the six day eight hour working week had become the new normal.
Corona won’t end the world. After World War I and despite the Spanish flu many countries rapidly bounced back to prosperity. The introduction of the eight hour day did not prevent this in any way! Too much of this prosperity was based upon flimsy finance the productive capacity was available – while more robust ways to finance investment are of course possible.  Prosperity never is the problem even when

Yesterday, the number of Corona deaths in Italy rose to 919. In one day. According to Eurostat,  the 2018 total Italian death tally was 633,000. Which translates to on average 1,734 deaths a day meaning that the level of Corona deaths was over half of the ‘normal’ amount of deaths. Already. Despite the lock down. Dear people: this is much worse than a bad flu. And it is as bad as the Spanish flu. Which is supposed to have killed, around 1919,  about 50,000,000 people. FYI: the latest estimate of the number of casualties of the Spanish flu in Italy sets this number at 466.000 in the 1918-1920 period. With 919 deaths a day – Italy will get there. The silver lining: China and South Korea do have it under control. It is possible.
Yesterday’s number of deaths in Italy was of course a

The news is as bad as it can be. Our most dependable indicator, people dying from Corona, suggest an exponential rate of growth of over 10%. Per day. Actually: 14%.  In a little over 2 weeks, 20.000 people will die. At least. Per day. If we do nothing.
The news is as good as it can be. High biotech companies are developing fast track tests at an unbelievable rate while the government offices which (rightly) have to approve these are working around the clock to do this. Korea will soon export 300.000 tests a week. That’s not enough to meet global demand. But if humankind has become good at anything it is at producing incredible amounts of stuff at an incredible speed. Tests, ventilators, masks – these will come. A million tests a day is feasible. And needed.
But other news is dire.

The ECB rightly wants to pay more attention to costs of ‘owner occupied houses’ (OOH) when it comes to inflation. Statisticians often use ‘imputed rents’ to do this. The ECB shouldn’t do this but should look at actual costs of owners of houses.
Rents and monetary costs of OOH do not develop in the same way. Also, rented houses are not inhabited by the same social and demographic groups as owner occupied houses. Which means that using rents to gauge the costs of OOH, as happens in many countries, is not the right method. Other yardsticks have to be found. And maybe, in increasingly fragmented societies the time for only one consumer price index is over, especially because of demographic and labor market developments in connection with the increasing importance of housing costs in

Two days ago I posted ‘The macro economic graph of the decade‘. The comments were highly interesting and may be summarized as: “what does ‘headline’ unemployment measure anyway”. About this:
Headline of ‘U-3’ unemployment only captures a part of labor slack and is designed to capture only part of total slack. It can however be supplemented with other unemployment measurements which are designed to measure additional slack, like underemployed workers or discouraged workers.
But there are reasons to assume that it systematically underestimates what it tries to measure.
Ad 1) USA ‘broad’ unemployment is, measured in persons, at this moment about twice as high as headline unemployment (graph, I use USA data as these are very easily available). Also, the difference between broad and

Source: eurostat.
What did the last decade teach us about (macro-)economics? The graph above is clear:
* ‘Drunk driving’ financial crises do happen and cast a long shadow.
* Even then, the response to these crises does matter. Eurozone sobriety led to a double dip (in case of unemployment: a double increase). After a crisis, sobriety is not the answer. Remember: the famous ant of the fable of the ant and the grasshopper was not an austerian as he invested in real assets all the time! That’s what we should have done, too. The New Green Deal could have been largely completed by now.
* Absent such activities, recovery takes a lot of time
* Ideas about ‘natural’ or ‘equilibrium’ unemployment of 5 or 6% turned out to be nonsense. Unemployment can, without problems, go as low as 3 or even

Merry christmas and a happy new year! And a picture of an off the shelf heart shaped 2018 Christmas adornment which managed to twinkle 365/24/7 (even when not very bright) on one off the shelf battery, showing the power and the glory of modern contemporary off the shelf led and battery technology. Let’s embrace and welcome the next 365. And dump the last remaining 19th century technology totally outdated short lived energy wasting heat squandering incandescent light bulbs before the next year starts, making 2020 a happy place in advance.
And my favorite willow:

According to some economists, ‘Divisia money’ is, as a monetary aggregate, a superior and neoclassical alternative to the more often used M2 or M3 ‘single sum’ aggregates. But looking at such money aggregates in isolation prevents economists from analyzing monetary developments using the integrated and statistically coherent Flow of Funds framework which ties the growth of money to the growth of credit. Divisia money is not a sound alternative. The Flow of Funds are.

The graph shows that aggregate lending data are much more indicative of the growth of financial vulnerabilities and booms and busts than data on money.
What is Divisia money?
Divisia money is a neoclassical alternative to the classical ‘single sum’ money aggregates, like M3,  pioneered by Keynes in ‘A treatise on Money

From Merijn Knibbe
The EU has announced a ‘Green Deal‘.  Good. But at this moment, this only a plan for a plan. But there’s no time to waste. So, what to do while we wait? Let’s unleash the economists’ neurotic obsession with efficiency! Identify ‘fallen fruit’, energy gobbling activities which shouldn’t have been there in the first place. And get rid of it. Three examples, non of which requries massive investment or path breaking research:
Media boxes. Problem: extreme stand by use. Solution: waiting for Netflix (for a few seconds). Almost every household has a media box, nowadays. And we literally can’t wait to see Netflix. Which means that these boxes are on ‘stand by’ which uses lots of energy.
In the case of Ziggo media boxes: 56 Watt. Suppose that 100.000.000 households in the EU