I had opined that I thought that macro economic models need to address the labor market rather than the product market and I'm wondering if these puzzles are really product market related or just labor market anomalies.
Keep in mind, we have had a recovery in output, but not in employment. That means a smaller number of laborers are working, but we are producing as much as before. As a simple first cut, how should we measure the marginal product of those now laid-off workers? I would start with the number zero. If a restored level of output wouldn't count as evidence for the zero marginal product hypothesis, what would? If I ran a business, fired ten people, and output didn't go down, might I start by asking whether those people produced anything useful?
It is true that the ceteris are not paribus, But the observed changes if anything favor the hypothesis of zero marginal product. There has been no major technological breakthrough in the meantime. If anything, there has been bad monetary policy and a dose of regulatory uncertainty. And yet again we can produce just as much without those workers. Think of "labor hoarding" yet without...the hoarding.
You might cite oligopoly models and argue that the workers can produce something, but firms won't hire them because they don't want to expand output, due to lack of demand. That doesn't seem to explain that output has recovered and that profits are high. And since there is plenty of corporate cash, it is hard to claim that liquidity constraints are preventing the reemployment of those workers.
... In general, which hypotheses predict lots more short-term unemployment among the less educated, but among the long-term unemployed, a disproportionately high degree of older, more educated people? This stylized fact seems to point toward search and recalculation ideas, with some zero marginal products tossed in. Do aggregate demand theories yield that same data-matching prediction? I don't see it, at least not without being paired with a theory of concomitant real shocks.
My question here is what is "real" about shocks? Are we back to exogenous technological shocks again? I hope not.
Tuesday, July 20, 2010
Stay in stocks?
So says Jeremy Siegel as my quarterly 401(k) report tells me that I just lost $10K over the last quarter. On the personal front, my decision to reallocate from stocks to TIPS isn't paying off that well either.
For the current quarter, it seems that neither stocks nor bonds are really delivering any returns. This is the quandary that money managers face as they chase higher returns - so when the next 'big thing' comes along they plunge into it. The dot-com crash was followed by herding into MBS. What's the next big thing?
As fiscal stimulus stalls, it may become apparent that the government will need to spend more and spend directly - shove ready or not. One possibility is infrastructure investment and who knows, perhaps we really need it. And it's not just the Americas that infrastructure investment is being touted. Example, here.
For the current quarter, it seems that neither stocks nor bonds are really delivering any returns. This is the quandary that money managers face as they chase higher returns - so when the next 'big thing' comes along they plunge into it. The dot-com crash was followed by herding into MBS. What's the next big thing?
As fiscal stimulus stalls, it may become apparent that the government will need to spend more and spend directly - shove ready or not. One possibility is infrastructure investment and who knows, perhaps we really need it. And it's not just the Americas that infrastructure investment is being touted. Example, here.
Over-active voice
The passive voice seems to have fallen out of favor over the years and I don't really know why.
When I was in school, the passive voice was encouraged among other reasons, it conveyed the humbleness of the writer. These days, the passive voice has even carried over to scientific and technical writing.
For instance, it is also advocated here (note the use of passive voice is to sound less accusatory). It is also encouraged here for the following reasons:
We find an overabundance of the passive voice in sentences created by self-protective business interests, magniloquent educators, and bombastic military writers (who must get weary of this accusation), who use the passive voice to avoid responsibility for actions taken. Thus "Cigarette ads were designed to appeal especially to children" places the burden on the ads — as opposed to "We designed the cigarette ads to appeal especially to children," in which "we" accepts responsibility. At a White House press briefing we might hear that "The President was advised that certain members of Congress were being audited" rather than "The Head of the Internal Revenue service advised the President that her agency was auditing certain members of Congress" because the passive construction avoids responsibility for advising and for auditing.
Yet, the active voice when used can lead to criticism such as this where Tyler Cowen is apparently reprimanding John Taylor for his over-use of I in Taylor's memoir Global Financial Warriors. My theory is that the rise of the use of the active voice coincides with the rise of the Internet, reality TV and in essence the ME generation.
When I was in school, the passive voice was encouraged among other reasons, it conveyed the humbleness of the writer. These days, the passive voice has even carried over to scientific and technical writing.
For instance, it is also advocated here (note the use of passive voice is to sound less accusatory). It is also encouraged here for the following reasons:
We find an overabundance of the passive voice in sentences created by self-protective business interests, magniloquent educators, and bombastic military writers (who must get weary of this accusation), who use the passive voice to avoid responsibility for actions taken. Thus "Cigarette ads were designed to appeal especially to children" places the burden on the ads — as opposed to "We designed the cigarette ads to appeal especially to children," in which "we" accepts responsibility. At a White House press briefing we might hear that "The President was advised that certain members of Congress were being audited" rather than "The Head of the Internal Revenue service advised the President that her agency was auditing certain members of Congress" because the passive construction avoids responsibility for advising and for auditing.
Yet, the active voice when used can lead to criticism such as this where Tyler Cowen is apparently reprimanding John Taylor for his over-use of I in Taylor's memoir Global Financial Warriors. My theory is that the rise of the use of the active voice coincides with the rise of the Internet, reality TV and in essence the ME generation.
Fifty percent inflation?
Geez, was in the Mickey D's recently after an extremely long hiatus (probably over 2 years) and just noticed that the hash browns that used to go for $1 for 2 is now $1 for 1. Is it just in DC and/or did this just happen and I'm just clueless?
Saturday, July 17, 2010
Why I hate libraries
Well, after a long time, it has happened again. Ugh! It's also the very first time I'm borrowing from the DC library too. Yuck, because it seems like such a great library system.
Update (7/19): So I decided to take matters into my own hands and went to the library today to hunt for it. The reason I decided to do this was because the library system kept sending me e-mails that the book was due. I spoke to a librarian and she said that the system shouldn't be doing that since I had reported the book returned and that they had put a search out for it.
In any case, I found the book - on the shelf - and handed it to the librarian.
Update (7/19): So I decided to take matters into my own hands and went to the library today to hunt for it. The reason I decided to do this was because the library system kept sending me e-mails that the book was due. I spoke to a librarian and she said that the system shouldn't be doing that since I had reported the book returned and that they had put a search out for it.
In any case, I found the book - on the shelf - and handed it to the librarian.
Friday, July 16, 2010
Was it all a bubble?
Was all of the price increase a bubble? The price chart is from Zillow and all other charts are from Calculated Risk via Econbrowser.
I ask this because occasionally, I come across comments regarding auto sales and home sales such as the following:
"The seasonally unadjusted number of light vehicles sold in June was below the values for May or March and about the same as April. We still seem closer to the bottom than the top."
If I assume that at least some of the house price increase was due to fundamentals, for instance, up to 2003, and the rest was due to a bubble, then the above charts tell a different story than if we are trying to get our consumption back to its peak. Given that there was a consumption binge, do we really want the levels to go back to what they were in 2007? Given that there is now and excess supply of new homes, should we really expect sales of new homes to drive the economy and that mortgage applicatons and sales to return to pre-crash (or even pre-2003) levels? Assuming that consumers were highly in debt in order to buy cars, should we allow auto sales to return to their "normal" levels?
I ask this because occasionally, I come across comments regarding auto sales and home sales such as the following:
"The seasonally unadjusted number of light vehicles sold in June was below the values for May or March and about the same as April. We still seem closer to the bottom than the top."
"Housing continues to lurch up and down with the expiration of tax credits. New home sales and pending home sales were both at record lows for May, while mortgage purchasing applications were near a 13-year low."
If I assume that at least some of the house price increase was due to fundamentals, for instance, up to 2003, and the rest was due to a bubble, then the above charts tell a different story than if we are trying to get our consumption back to its peak. Given that there was a consumption binge, do we really want the levels to go back to what they were in 2007? Given that there is now and excess supply of new homes, should we really expect sales of new homes to drive the economy and that mortgage applicatons and sales to return to pre-crash (or even pre-2003) levels? Assuming that consumers were highly in debt in order to buy cars, should we allow auto sales to return to their "normal" levels?
Earthquakes
This mornings tremor shook me out of my sleep. Now I can safely say I've experienced a mild earthquake and it left me slightly queasy.
Judging by the number of earthquakes this year versus other years, e.g. 2009, it's hard to say if its been a more active year or not even though in my mind it feels like it has.
It would be interesting to see if there are any patterns via spatial and temporal autocorrelations - I'm familiar with autocorrelations in time series, less so spatial and don't even know if we can combine both.
Judging by the number of earthquakes this year versus other years, e.g. 2009, it's hard to say if its been a more active year or not even though in my mind it feels like it has.
It would be interesting to see if there are any patterns via spatial and temporal autocorrelations - I'm familiar with autocorrelations in time series, less so spatial and don't even know if we can combine both.
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