Peak babies has been. Young men are not expendable, anymore.
Peak Babies was in 2012. At this moment, we´re back to the level of forty years ago (and the most recent data may well be an overestimate). For the first time in centuries, cohorts entering the global labour market will soon be smaller than the cohorts preceding them.
Even when there are significant differences in levels between countries, the years around 1970 were a turning point everywhere. In 1965, the relentless movement towards below-replacement human reproduction started. Aside: that won´t be a blessing for the environment. The 10% wealthiest people cause about 50% of all unsustainability or something like that, meaning that a much smaller global population can still wreck the planet.
Do not underestimate the magnitude of the decline. In Seoul, the fertility rate has plummeted to 0,55, meaning grandchildren are around 1/14th of the grandparents’ generation. Other cities will follow. It puts the MAGA wish to deport tens of millions of people into a ´the department of stupid´ perspective. Instead of doing this, countries should provide a safety net, free education, accessible healthcare, and many more excellent houses and high-quality jobs for their citizens. Having stated this, Russia is already trading oil for military-commodified North Koreans. My prediction: We haven´t seen the latest of such deals. All this will, however, not increase fertility rates.
NAIRU — a harmful fairy tale
from Lars Syll
The NAIRU story has always had a very clear policy implication — attempts to promote full employment are doomed to fail since governments and central banks can’t push unemployment below the critical NAIRU threshold without causing harmful runaway inflation.
Although a lot of mainstream economists and politicians have a touching faith in the NAIRU fairy tale, it doesn’t hold water when scrutinized.
One of the main problems with NAIRU is that it is essentially a timeless long-run equilibrium attractor to which actual unemployment (allegedly) has to adjust. If that equilibrium is itself changing — and in ways that depend on the process of getting to the equilibrium — well, then we can’t really be sure what that equilibrium will be without contextualizing unemployment in real historical time. And when we do, we will see how seriously wrong we go if we omit demand from the analysis. Demand policy has long-run effects and matters also for structural unemployment — and governments and central banks can’t just look the other way and legitimize their passivity re unemployment by referring to NAIRU. Read more…
Monetary developments in the Euro Area, september 2024. Quiet.
Like John Stuart Mill, I´m more interested in credit than in money. Developments in the amount of credit provided are much more instructive to the economist than data on money. Look at the graph below (no. 2 in the ECB press release) , a highly Post-Keynesian graph that originated from the pre-Euro Bundesbank and is now published by the European Central Bank. It shows that money growth in the EU is relatively moderate and, more interesting, caused by a combination of
1) lather large inflows of money from outside of the Euro area (I do not know from which country) in combination with
2) a sizeable negative effect from ´longer term liabilities´. People move money from overnight accounts, which are included in the ´M3´ definition of money, to longer term accounts which are not included in this definition. The long-term accounts, with a maturity of over 2 years, have higher interest rates than overnight accounts but you can´t touch your money for at least two years) which pay higher interest rates.
In both these cases, Euro´s are shifted around, no new Euro´s comes into existence. Net credit, however, does lead to new Euro´s and the ECB also provides data on this (table 1)
Superinflation in Milei´s Argentina
Hyperinflation is defined as over 50% inflation per month. Let´s define ´normal´ inflation as anything between 0 and 1% per month and anything between 1 and 50% per month as superinflation (1% a month is still a lot, yearly!). Before President Milei, Argentina already knew superinflation. After Milei, inflation accelerated, and the country almost entered a period of hyperinflation. It´s still nearly 200% a year. The maximum monthly increase of the consumer price index was over 24%. These increasing price increases were not caused but enabled by a sudden spurt in the amount of money and, to an extent, caused by a massive devaluation (which increased prices of imported goods and which, looking at the current account, was totally unnecessary).
Graph 1. Year-on-year inflation in Milei´s Argentina. Up and still sky-high.
Election: Take Four
from Peter Radford
Take four.
I continue to listen in on the conversation.
The election reverberates loudly around leftish circles. Recriminations mount. Criticisms fly. Finger pointing and over-analysis have become all too common. And this is after just a week. Imagine what a month can produce.
So far the central narrative seems to be that the Democrats have become isolated from the most consequential issues that regular folk feel are important. The explanation being that the party is now dominated by a relatively well-off college educated elite that is absorbed in a sort of political navel gazing that prevents to from hearing, seeing, and reacting to much more immediate and thus relevant issues.
The Democrats have become a party obsessed with pronouns, politically correct conversation, identity, and the rendition of grievances . Paying the rent and buying food are seen as trivial by comparison.
This separation of the party’s establishment from everyday life — especially true in the case of its academic wing — has given it an air of aristocratic detachment that makes ridicule of any attempt it makes to attach itself to the working class. There is an arrogant haughtiness in its condemnation of vulgarity in language. It is as if we need to cleanse our gutters of all the stereotypical jokes and epithets accumulated through centuries of contact with each other. We now need to spend our time watching what we say for fear of stirring up some potential slight, but we need spend no time at all on worrying whether those we slight can pay their bills.
Priorities are askew. Read more…
Employment growth in Europe. Stark differences.
Eurostat published new data on employment in Europe. Average employment growth is +0,9%. The average hides stark differences. A Germany-centered core consisting of Germany, Austria, Sweden, Estonia, Finland, and Hungary shows declines. Surprisingly, it excludes Denmark, Belgium and the Netherlands. The South does better. Countries like Portugal, France, Greece, and, especially, Spain post above-average increases. But unemployment in these countries is still high (over 5%), even when EU long-term unemployment hit a historical low (1,9%, Eurostat, series starts in 2005).
Table 1. Employment growth in Europe. Source.
In Greece, gross fixed investment still is at a pre-industrial level.
Executive summary: if investments are needed, do not reform. Invest. Investments are the reform.
Angus Maddison (historical patterns of growth) and Jan Kregel (leading post-Keynesian economist) were the intellectually dominant forces during my economics study in Groningen around 1982. Let´s apply their frameworks to Greece.
- Growth, as we measure it, has many sources: increasing the productivity of existing activities (the mechanization of the potato harvest), shifting labour from low-productivity activities to high-productivity activities (supermarkets outcompeting small groceries), or using less stuff to produce more stuff (the increasing fuel efficiency of planes). One source of productivity increases is, or used to be, old people who retire and end low-productivity businesses like small-scale farming or a mom-and-pop store. More complicated: a shift of relative prices (lower prices of imported energy increases nominal domestic value-added, which we, to calculate growth, divide by the price level, which is actually going down because of lower energy prices). Productivity increases real production (the opposite happens in the exporting country). Behind this is the idea that everything happens: productivity increases, and we can make more with less. This applies to the non-money economy, too. Washing machines drove out paid maids. Domestic chores require less labour. But events in Greece are of a different order.
Argentina bucks the trend. Vitamin A deficiencies are increasing
- Because of libertarian policies of the Milei government in Argentina, poverty and food deficiencies are increasing. People are getting less healthy and, hence, less able to care for themselves and their loved ones. One problem we thought we got rid of but resurfaces in Argentina: vitamin A deficiencies. Children are getting sick and starting to go blind.
- Vitamin A helps your body protect itself against many diseases. Thanks to concerted action and diffusion of knowledge and action, progress has been global. Argentina is, thanks to the Libertarian policies of the Milei government, regressing. It´s the New Old Africa. Look here for WHO data and here for Vitamin A policies in New Africa, where they want people to be healthy.
Making America Great Again, 2024
from Shimshon Bichler & Jonathan Nitzan
In 2019, we published a RWER paper assessing Trump’s promise to ‘Make America Great Again’. https://bnarchives.net/id/eprint/630/
Here are updates of two key charts from this paper.
The first figure depicts the relative global decline of U.S. corporations. It shows that U.S. firms currently accounts for ~1/3rd of global corporate profit, down from 2/3rds half a century ago.
The second figure shows the growing dependence of U.S. firms on foreign operations. Read more…
Völkermord in Gaza. Two million deaths are in the cards.
The new UN report on deaths in Gaza makes for Grim Reading. According to the admirable work of UN data sleuths, details close to 10.000 of the official 40.000+ deaths have been added. These are only the direct victims; indirect victims (starvation, stress, sickness) are omitted. One of the findings is that, unlike during earlier periods of war in Gaza, killing is indiscriminate. Many of the victims were women and children (graphs). The youngest victim was one day old, and the oldest was 97 years old. ´Völkermord´, to use the German word for genocide.
Graph 1 and 2 and 3. Age pyramids of deaths in Gaza in 2024/2025, 2021 and 2014. Read more…
Weekend read – Logic and truth in economics
from Lars Syll
To be ‘analytical’ and ‘logical’ is something most people find recommendable. These words have a positive connotation. Scientists think more deeply than most other people because they use ‘logical’ and ‘analytical’ methods. In dictionaries, logic is often defined as “reasoning conducted or assessed according to strict principles of validity” and ‘analysis’ as having to do with “breaking something down.”
But that’s not the whole picture. As used in science, analysis usually means something more specific. It means to separate a problem into its constituent elements so as to reduce complex — and often complicated — wholes into smaller (simpler) and more manageable parts. You take the whole and break it down (decompose) into its separate parts. Looking at the parts separately one at a time you are supposed to gain a better understanding of how these parts operate and work. Built on that more or less ‘atomistic’ knowledge you are then supposed to be able to predict and explain the behaviour of the complex and complicated whole.
In economics, that means you take the economic system and divide it into its separate parts, analyse these parts one at a time, and then after analysing the parts separately, you put the pieces together.
The ‘analytical’ approach is typically used in economic modelling, where you start with a simple model with few isolated and idealized variables. By ‘successive approximations,’ you then add more and more variables and finally get a ‘true’ model of the whole.
This may sound like a convincing and good scientific approach.
But there is a snag! Read more…
Who brought us Trump?
from Peter Radford
Battle is joined …
This might annoy some of you — it is my hasty first thought.
The Democrats have been thoroughly defeated. Deservedly so. They no longer relate to, or reflect, the American working class. Without building such a relationship they cannot regain power. Nor should they.
Yesterday, early on the morning of election day, a friend of mine forwarded an article by Robert Reich who argued that, in order to defeat Trump, Harris needed to focus more on the economy and it’s recent performance. I began my response thus:
“The problem with talking more about the economy is that it highlights the vast wealth/income/consumption gaps that have opened up in America. The headline numbers look good. The experience is very different if you aren’t in that top 20% or so.
When the dust settles I think the Democrats need to ponder a few salient questions:
Why is there such a gender gap in the electorate?
How do they re-connect with the white working class?
Do they want to remain the party of the educated elite?” Read more…
MMT — debunking the deficit myth
from Lars Syll
We have already shown that deficit spending increases our collective savings. But what happens if Uncle Sam borrows when he runs a deficit? Is that wht eats up savings and forces interest rates higher? The answer is no.
The financial crowding-out story asks us to imagine that there’s a fixed supply of savings from which anyone can attempt to borrow …
MMT rejects the loanable funds story, which is rooted in the idea that borrowing is limited by access to scarce financial resources …
Government deficits always lead to a dollar-for-dollar increase in the supply of net financial assets held in the nongovernment bucket. That’s not a theory. That’s not an opinion. It’s just the cold hard reality of stock-flow consistent accounting.
So fiscal deficits — even with government borrowing — can’t leave behind a smaller supply of dollar savings. And if that can’t happen, then a shrinking pool of dollar savings can’t be responsible for driving borrowing costs higher. Clearly, this presents a problem for the conventional crowding-out theory, which claims that government spending and private investment compete for a finite pool of savings.
The loanable funds theory is in many regards nothing but an approach where the ruling rate of interest in society is — pure and simple — conceived as nothing else than the price of loans or credit, determined by supply and demand in the same way as the price of bread and butter on a village market. In the traditional loanable funds theory — as presented in mainstream macroeconomics textbooks — the amount of loans and credit available for financing investment is constrained by how much saving is available. Saving is the supply of loanable funds, and investment is the demand for loanable funds and is assumed to be negatively related to the interest rate.
As argued by Kelton in The Deficit Myth there are many problems with the standard presentation and formalization of the loanable funds theory. And more can be added to the list: Read more…
´Fryslan boppe´. An in-depth inspirational analysis of work rewarded with the 2024 Riksbank prize in economic sciences.
Introduction<
The 2024 Sveriges Riksbank Prize for Economic Sciences has been awarded to Daron Acemoglu, Simon Johnson and James Robinson for work on the influence of institutions on long-term economic progress and growth. Much has been written about this, for instance by ´Pseudoerasmus´ here and by Radford here. In this article, an ´in-depth´ analysis of a part of the work leading to the the prize, an analysis of the long-term impact of the Dissolution of the English monasteries (1535) on the economy, will be provided.[1] Developments in England are compared with developments in Fryslan (formerly: Friesland), a province in the northern Netherlands. Contrary to the situation in England, in Fryslan, not the land-owning gentry but land-renting and using farmers were the heroes of agricultural innovation after (and also before) the Dissolution of the Monasteries (1580). After about 1560 the Frysian countryside witnessed a genuine industrial revolution as wind power was used to drain and improve land on a massive scale – the number of wind drainage mills per Frysian parish was about 100 to 200 times as large as the number of textile mills per parish in England. The Dissolution in Fryslan did affect the distribution of agricultural income but had, contrary to the situation in England, little to do with the unleashing of the new powers of production.
AJR, Nobel, and prompt engineering
from Peter Radford
Well done AJR. A prize deserved. And remarkably little grumbling. What’s wrong with that?
In other news, my wife is deep into creating an artificial intelligence application. One of the great challenges of getting AI to be useful is something called ‘prompt engineering’.
What have these two snippets of news have in common?
The great thing about our better economists — the triumvirate we know affectionately as AJR being an example — is that they all seem to denigrate economics. Politely of course. Soto voce so to speak. Or, in the case of AJR and Joe Stiglitz in books written for public consumption.
They key to this criticism is, I think, that once you are suitably credentialed — via tenure, status within the discipline, being well published etc — you can moan about the state of economics without damaging your ability to get those credentials. It is as if you have to live two lives. The first being acceptance of the illusion. The second being the debunking of that illusion. There are those, of course, who merge the two into one and persist in proselytizing the illusion even after they have achieved job security. Those are the sort of people who keep telling the public that price gouging is a jolly good thing, and that there is no such thing as involuntary unemployment. Read more…
Central bank independence — a convenient illusion
from Lars Syll
Today’s model of delegation has much to recommend it. But it should not be cloaked in euphemism. It is an abrogation of democratic sovereignty for pragmatic reasons, conditioned on the one hand by deeply entrenched and unflattering assumptions about electoral politics and, on the other, on an unquestioning acceptance of the private organization of credit markets and their lack of confidence in democratic control of economic policy. This may be an abrogation that we are willing to accept, but it should be recognized for what it is and the assumptions on which it is based should be subject to scrutiny and, if necessary, to revision …
Independence of central banks was defined in relation to governments and the typical social interest groups of the corporatist era – trade unions and employers associations. But what about financial markets and their key actors?
How independent are central banks of the pressures of global finance? When it comes to financial crises their hands are forced. Central banks seem like hostages, or, eager collaborators of private finance … If independence was devised to guard against fiscal dominance, what it seems to have delivered in recent decades is financial dominance i.e. domination of central bank policy by financial markets …
For central banks to dig in their heels and insist that their only conceivable role is that defined by mandates shaped as part of a conservative counterrevolution half a century ago is not just small-minded or cautious. It is either an abdication of responsibility, a self-imposed immaturity, or, more ominously, a taking of sides with a dangerously unsustainable status quo …
The question bears repeating: independent from what? So long as the financial system retains its current structure, central banks are the hostage of crisis-situations that force their hand. Not just financial regulation, but structural change to the financial system should be seen as integral to the project of creating a more democratically accountable, truly independent central bank.
Central banks hold almost unrestricted power over monetary policies, policies that significantly influence inflation, employment, and economic stability. This power should be subject to greater democratic oversight to ensure it aligns with the interests of society’s citizens. Read more…
The 2024 economic laureates and more Nobel nonsense
from Steven Klees
I am quite sure that this year’s three Nobel Laureates in economics — Daron Acemoglu, Simon Johnson and James Robinson – are very competent new institutionalist economists. Lars Syll offers a thoughtful critique of their substantive arguments, but he misses the main point for me. New institutional economics, by and large, is nonsense. We used to have many sensible institutional economists who offered a qualitative, sociological-type analysis of the role of economic institutions. We still have them in the Association of Evolutionary Economics and their Journal of Economic Issues. They have declined in number after their stronghold in labor economics was folded into neoclassical theory by the advent of human capital theory turning Labor into a tractable commodity.
I suppose the new institutionalists deserve some credit for at least thinking about institutions which has rarely been part of neoclassical thinking and sometimes paying attention to history which is even rarer. (It is appalling that in many economics PhD programs economic history is not a required subject.) But new institutionalist economics is firmly rooted in neoclassical economic theory and in the methods of econometrics. Read more…
Pathways to sustainability (2): a critical review
from Maria Alejandra and WEA Pedagogy Blog
Jean-Baptiste Fressoz, professor at the School of Advanced Studies in Social Sciences in Paris, challenges our understanding of the current energy transition process.
In his book “The Shock of the Anthropocene: The Earth, History, and Us,” co-authored with Christophe Bonneuil, Fressoz offers a critical history of the Anthropocene, the current geological epoch defined by significant human impact on Earth’s geology and ecosystems. The authors challenge the conventional view of the Anthropocene as a recent phenomenon, arguing that human influence on the environment has deep historical roots. The book explores how industrialism, consumerism, and the manufacture of ignorance have contributed to environmental degradation. The book also scrutinizes the military’s involvement in environmental degradation and challenges the efficacy of the so-called energy transitions. Through a dialogue between science and history, the authors present an ecological balance sheet of our current developmental model and suggest paths for living and acting politically in the Anthropocene. Read more…
Falling shares of labour income
from C. P. Chandrasekhar and Jayati Ghosh
The latest World Employment and Social Outlook Report (update for September 2024) from the International Labour Organisation highlights some disturbing trends. Importantly, it identifies a significant decline and then stagnation in the share of labour income in GDP, for the world as a whole, in the past few years. This comes as part of a persistent trend of decline in labour income shares, other than spikes in “crisis years” like 2008-10 and 2020-21. (Note that the IO includes income from self-employment as part of the labour share, which is an important point since self-employment is very important, and indeed often dominated total employment, in poorer countries.)
Figure 1 shows the trend for the world as a whole, with the share of labour income falling by as much as 2 percentage points over two decades, from around 54 per cent in 2004 to just above 52 per cent (estimated) in 2024. Read more…
Breaking boundaries in economics: Rediscovering the roots of welfare
from Asad Zaman and WEA Pedagogy Blog
1. The Methodenstreit: How Economics Forgot History
In the late 19th century, economics experienced a deep philosophical debate over methodology, known as the Methodenstreit, or Battle of Methodologies. Geoffrey Hodgson, in his book How Economics Forgot History, emphasizes the critical nature of this debate. The essential conflict was between those who believed that historical context and specificity are crucial for understanding economic phenomena, and those who sought to create universal laws that apply across time and space, much like in the natural sciences.
Economic theories, in their ambition to be scientific, began to strip events of their unique historical context. The goal was to create models and laws that would be valid universally. However, as Hodgson points out, this desire to generalize economic principles meant that economists were forced to ignore the particularities of historical events. As a result, many of the most important economic insights—those tied to specific historical conditions—were lost or marginalized.
For example, Keynesian macroeconomics, which emerged as a response to the Great Depression, was deeply rooted in the historical circumstances of the 1920s and 1930s. Yet modern interpretations of Keynesian economics often abstract away from these historical details, reducing complex phenomena to simplified models. The result is an incomplete and, at times, misleading understanding of economic systems. Read more…
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