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Wednesday, October 2, 2013

The Stiglitz Economy: Workers Make Less Than Before the Recession

      After being re-elected for Speaker back in January, Boehner said he needed the job like a hole in his head. If this is true why is he playing Russian Roulette with the economy just so he can keep his job?

      http://diaryofarepublicanhater.blogspot.com/2013/10/speaker-john-boehner-man-fiddling.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29

      http://diaryofarepublicanhater.blogspot.com/2013/10/gop-has-economy-begging-for-mercy.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29

      I could add that we need him to be Speaker of the House like a whole in the head. Thanks to him an economy already challenged has to go through this needless crisis. Meanwhile, even prior to this this recession has been unusual in that workers are actually making less than prior the the crisis

     http://thinkprogress.org/economy/2013/10/02/2715621/workers-wages-recession/

 There's been a fair amount of disagreement and controversy on economic inequality and the Great Recession. The idea that inequality can actually slowdown the recovery is a very counter-intuitive idea within the dominant Neoclassical school of Econ. Which just goes to show you how NC is a whole counterculture within the larger culture. I'd argue that the idea that it couldn't possibly hold back the recovery would seem totally counter-intuitive among non NC economists. Perhaps this is why Unlearning Econ has a blog on nothing but how to unlearn NC Econ.

    http://unlearningeconomics.wordpress.com/

    Even a liberal like Krugman doesn't see how it's possible. In this sense, maybe Stiglitz is the best of the NC economists as he alone among them has argued that it is possible and it's hurting us now.

     "it’s worth tuning in to a recent debate between liberal economists Joseph Stiglitz and Paul Krugman. While they agree on most things, the two have been at odds over whether economic inequality is holding back the recovery. Stiglitz says it is, and Krugman, while agreeing the inequality is unfortunate, says it is not. "Economics is not a morality play," Krugman observed.  

     "The debate is important. After leveling off during the recession, income inequality is growing again according to a study by the Economic Policy Institute. If it is a factor in the recovery slowing, then government, it seems, should try to do something about it."

     http://www.newrepublic.com/article/112278/paul-krugman-vs-joseph-stiglitz-inequality-slowing-recovery

     Indeed, Stiglitz makes this point in his recently published The Price of Inequality. 

     http://www.amazon.com/Joseph-E.-Stiglitz/e/B000APIKRK/ref=sr_ntt_srch_lnk_1?qid=1380759425&sr=1-1

     Basically the conservative attitude to any discussion of inequality is to say what Krugman said: economics is not a morality tale. I don't disagree but I will also note that economics is-whatever it's 'physics envy'-actually a social science. Any social science necessarily is based on value judgments on what's preferable in a healthy, cohesive society.

     The idea that inequality is not an appropriate discussion for economists is already a moral judgment of sorts. Not that Krugman says we can't discuss inequality; he does acknowledge it's an evil but the difference is that he sees the issue of macroeconomic growth, health, and stability as one question and inequality as another. The idea that a conversation about growth and one about inequality are mutually exclusive has been around for as long as the NC school has been around-since 1871.

     Even a great Keynesian like Okun bought into the idea that there's a tradeoff between a growing economy and economic equality.

     http://www.amazon.com/Equality-Efficiency-Tradeoff-Arthur-Okun/dp/0815764758/ref=sr_1_fkmr2_1?s=books&ie=UTF8&qid=1380759815&sr=1-1-fkmr2&keywords=okun+growth+and+inequality

     As Stiglitz notes, in the postwar era, the social stigma of laying off too many workers during a recession led most employers to keep on as many as they could while accepting a certain drop in productivity. So during a recession, wages would go up. Then once the economy came back, there'd be a productivity boon-thanks in part to grateful workers who felt more of stake in the job-and wages would go down-as a share of income while wages would go up.

   What we've seen lately ,however,-this dynamic started in 2000-is employers have started priding themselves in laying off workers during a recession and have actually seen productivity increase and wages decrease during the recession.

    That the idea that inequality can't possibly slowdown the recovery just shows the rarefied air that NCs inhabit. As Stiglitz points out, with wages going down there's less income and so demand is further subdued. It's not hard to understand. Unless perhaps you took Macro with Sumner at Bentley.

     http://www.themoneyillusion.com/?p=23790

   


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