Real-World Economics Review

from Cherrie Bucknor and Dean Baker The 4.9 percent unemployment rate is getting close to most economists’ estimates of full employment. In fact, it is below many estimates from recent years and some current ones. Many policy types, including some at the Federal Reserve Board, take this as evidence that it’s necessary to raise interest rates in order to keep the unemployment rate from falling too low and triggering a round of spiraling inflation. The argument on the other side is first...

Light the fires

from David Ruccio I’ve been writing for some years now about the emergence of new technologies, especially automation and robotics, and their potential contribution to raising already-high levels of inequality even further. The problem is not, as I have tried to make clear, technology per se but the way it is designed and utilized within existing economic institutions. In other words, the central question is: who will own the robots? If capital owns the robots, even if their development...

from Thomas Palley After more than 7 years of economic recovery, the Federal Reserve is positioning itself to tighten monetary policy by raising interest rates. In light of the wobbly reaction in financial markets, an important question that must be asked is whether raising interest rates is the right tool. It could well be that the world’s leading central bank is going about the process of tightening in the wrong way. Owing to the dollar’s preeminent standing, that could have severe...

David Ruccio During the past couple of weeks, the only real India economic news in the Western press was the decision by “the Ranbir Kapoor of banking,” Raghuram G. Rajan, to step down from his position as the head of the Reserve Bank of India. But we read almost nothing about the 2 September nationwide strike by 150 million Indian workers [ht: Magpie], which was certainly the largest strike in India’s long labor history—and may have been the largest general strike in world history. As...

from Dean Baker The efforts by many elite types to deny basic statistics and to tout the new technologies transforming the workplace are truly Trumpian in their nature. According to the OECD, productivity growth in the UK was essentially zero between 2007 and 2014 (the most recent year for which it has data). So we would naturally expect that the Guardian would run a column telling us that globalization and new technologies are making old workplace relations obsolete. As John Harris tells...

Did low interest rates contribute to the growth of tourism and tehrewith to higher aggregate demand? Yes. but not like the models predict. Lower rates on existing debts (instead of on new loans) fired the animal spirits of consumers (instead of producers). In normal times, Italy would have been hailed, by EU officials, as a beacon and an example of succesful development of one of its main sectors, tourism. Nowadays, the growth of employment in Italian tourism (+10% in three years, which...

from David Ruccio In a recent New York Times article, Quoctring Bui reveals some fascinating details about the geography of inequality in the United States—including the fact that  between 1990 and 2014, the states that we tend to think of as economic engines for the country — like New York, California and New Jersey — are the ones where inequality has grown the most.    But the author makes the mistake of repeating the common presumption that, prior to the new millennium (specifically,...

At this very moment (9 september 2016), arctic sea ice may have reached its yearly minimum extent. Does global warming cause a decline of this minimum? Business cycle economists use the phrase ‘months for cyclical dominance’: how many months does it take before trend movements are larger than monthly fluctuations of variables like consumption of exports? In the case of sea ice I used ‘years for cyclical dominance (YCD)’: a fourteen year moving average shows a continuous decline (the max....

from Dean Baker While Elizabeth Warren is praising the European Union’s crackdown on Apple’s Ireland tax scheme, Jack Lew and the Obama Treasury Department are going to bat for corporate tax cheating. Warren is far too optimistic about the prospect of a successful crackdown. These folks are prepared to spend a lot of money to hide their profits from tax authorities and they are likely to find accomplices in many Irelands around the world. It would be good to look in a different direction....