INET in the News

“With all of that said, The Institute for New Economic Thinking (INET) recently published a study casting doubt about the methodology BLS uses to tabulate its unemployment data, especially when it comes to Black people. INET suggested that BLS’ data is inaccurate and downplays Black unemployment. On average, Black men’s unemployment rate is 2.8 percentage points higher than BLS data shows,” according to INET’s study, entitled, “Masking Real Unemployment: The Overall and Racial Impact of Survey Non-Response on Measured Labor Market Outcomes.” The same was true for BLS’ unemployment rate for Black women, which INET found was, on average, about 2.4 percentage points lower than its actual rate. The differences grow for younger Black males from 16 to 34 years old. INET’s findings lend some credence to a tweet from the Center for American Progress after January’s jobs report was published that said Black women, in particular, “are still being left behind by the recovery.” — Bruce C.T. Wright, News One

“Making matters worse, the Black unemployment rate might be much higher, according to a new analysis by the Institute for New Economic Thinking. The unemployment rate is calculated using data from the Current Population Survey. But that survey has a much lower response rate from Blacks than from white Americans, leading to more misclassifications in the official unemployment rate. For Blacks, the response rate is 72%, while the response rate is 90% for whites. Factoring that in, the unemployment rate for Black workers could be at least 2.6 percentage points higher than the monthly rate by the BLS, leaving it at 12.5% in February, the analysis found. For whites, the increase is much smaller at 0.7 percentage point. “The Current Population Survey has been missing a larger share of the population over time, particularly among Blacks,” said Baker, who is also an author of the analysis. “You have to ask what’s the situation for the people they’re not talking to.” — Denitsa Tsekova, Yahoo Money

“The piece gives a series of case studies. Parramore summarized the problem: “Players on Wall Street have been torpedoing our chances of averting environmental catastrophe for years. A group of billionaire financiers has made sure the companies the government must partner with to fight climate change are focused on one thing only – making these men (they all seem to be men) even richer. Instead of leading the world in climate change technology, firms like Apple, GE, and Intel have been pressured to become the personal piggy banks of powerful moneymen — known as hedge fund activists — who can’t see beyond the next quarterly report.” — Institute for Public Accuracy

“Pressley’s resolution builds upon the academic intellectual framework developed by advocates like Dantas and Wray, as well as the ongoing civil rights demand for federally guaranteed jobs, which can be seen in the 1963 March on Washington for Jobs and Freedom (where the Rev. Dr. Martin Luther King, Jr. gave his “I have a dream” speech) and indeed long before that. It also draws on the work of Sadie Alexander, recognized as the nation’s first Black woman economist. Speaking at Florida Agricultural and Mechanical College in 1945 (as noted by Professor Nina Banks, blogging at the Institute for New Economic Thinking), Alexander described full employment as a way to address the nation’s economic and racial imperatives.” — Marin Levine, Nonprofit Quarterly

Rob Johnson appeared on the Background Briefing with Ian Masters to discuss working with Trumpsters, the source of their anguish, and important pathways to healing

Two separate INET funded research articles are cited; first from Schularick, Jordà, & Taylor on leveraged bubbles followed by Bao, Hommes, & Makarewicz on bubble formation. “Since their inception, financial markets, and to a lesser extent some real markets, have been subject to bubbles. … More recently, stock prices, but also credit, real estate, commodities, bond markets, and famously, bitcoin, are all assets that have experienced bubble episodes. Regarding cryptocurrencies, many economists also defend a permanent bubble, their fundamental value being theoretically non-existent.” …. In fact, the presence of bubbles in the markets (financial and real) seems to stem from the persistent behavior of economic agents. Experimental studies, controlling exactly the actual value, showed that participants tended to set up a bubble-like operation, with price surges and collapses very similar to real economy situations, and in no way related to a change in the market.

“Texas’ leaders knew as of 2011 … when the state went through a short severe freeze, that the system was radically unstable in extreme weather,” wrote James K. Galbraith, of the University of Texas at Austin, in the Institute for New Economic Thinking. “But they did nothing,” he wrote. “To do something, they would have had to regulate the system. And they didn’t want to regulate the system, because the providers, a rich source of campaign funding, didn’t want to be regulated and to have to spend on weatherization that was not needed – most of the time.” That’s what happens when the private sector calls the shots. Money first.” — Richard Gross, Counterpunch

“Economic opportunity was further restricted by individual and institutionalized racism and political disenfranchisement. Discrimination in hiring by employers and intimidation of black workers through violence placed black workers at a direct disadvantage in the labor market,” Trevon Logan Peter Temin wrote in “Inclusive American Economic History: Containing Slaves, Freedmen, Jim Crow Laws, and the Great Migration,” a working paper written for the Institute for New Economic Thinking.” — Coastal Review

“That Italy is “lazy to reform” is probably one of the most widespread myths - and has little to do with reality. In 2015, for example, the OECD rated Italy’s reform efforts as significantly higher than those of Germany and France. The Dutch economist Servaas Storm takes the same line. In an in-depth study, he found that Italian politics as a whole adhered much more closely to the (market-liberal) economic policy guidelines of the EU than Germany and France.” — Phillip Heimberger & Nikolaus Kowall, Makronom

“The Biden administration must put a high enough price on carbon pollution to encourage the scale and urgency of action needed to meet the commitments it has made to Americans and the rest of the world. The future of our planet depends on it” — Nicholas Stern & Joseph Stiglitz, Project Syndicate

— European

William Janeway: Venture Capital in the 21st Century: ‘In this eight-part lecture series, Bill Janeway investigates the relationship between venture capital and technological innovation, and the interdependent roles of entrepreneurial firms, the mission-driven State and financial speculation in the overall innovation system… LINK: https://www.ineteconomics.org/perspectives/videos/venture-capital>

The Future of Macroeconomics Institute for New Economic Thinking, via Naked Capitalism 2-2-21]

RSS PUBLISHED TO eState4Column5©2013 Political Economy Group DK PEG Anti-Capitalist Chat TAGS Culture Economy Employment Media MMT PoliticalEconomy publicpolicy stagflation WhiteHouse Share this article Let real wages (of $15+/hour) grow faster than labor productivity for some years, undoing the wage repression of the last decades. We have been misled by neoliberal economics for now many decades, it’s time to turn many things around in what is becoming a second-rated US economy, recently crippled by the malevolent and narcissistic “king of debt”. In economics, stagflation or recession-inflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. It presents a dilemma for economic policy, since actions intended to lower inflation may exacerbate unemployment. The biggest risk for the stock market in 2021 is inflation, according to Morgan Stanley. Unprecedented radical spending by the federal government and the Federal Reserve, to stave off a panic-induced market crash, helped artificially drive stocks to temporary new highs last year. www.laloftblog.com/… For some, the math bore out the possibility that exuberance was rational even if the economy is always more irrational than its math. “The Lucas fantasy of costless disinflation from credible commitments in an ergodic world of rational agents was decisively falsified long ago.” The underlying problems of supply shocks related to Trumpian idiocy atop bailing out the banksters may have made the economy much worse. The pandemic has only made a bad situation worse, or made more of us myopic in our isolation. Paul Krugman has now taken the time to question the orthodoxy of stagflation. Darn economic orthodoxy being wrong since the 1970s. Let me start with the inflation story the way most economists, myself included, have been telling. In the beginning was the Phillips curve: the apparent tradeoff, fairly visible in the data, between unemployment and inflation. In the 1960s many people looked at that tradeoff, considered the mild costs of inflation versus the benefits of lower unemployment, and argued for monetary and fiscal policies aimed at running the economy hot. But in a hugely influential speech Milton Friedman made an argument also independently made by Columbia’s Edmund Phelps: the unemployment-inflation tradeoff wasn’t real, because any sustained effort to keep unemployment low would lead not just to high inflation but to ever-accelerating inflation. They claimed, specifically, that people setting wages and prices would begin marking them up to anticipate future inflation, so that the inflation rate associated with any given unemployment rate would keep rising. They predicted, in particular, that the course of the economy over time would look something like this: https___bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com_public_images_81db75c8-59f2-4b95-a60a-fe404a50c119_914x5331.png First, a government would push unemployment down; but this would lead to ever-rising inflation, which would stay high even as the economy cooled. So it would take a sustained period of high unemployment to get inflation down again, until finally unemployment could be brought back to a sustainable level. So their analysis predicted “clockwise spirals” in unemployment and inflation. Then came the 1970s: https___bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com_public_images_1d91277a-44fe-422b-b0c3-f1dfa8fb7428_933x5501.png This sure looked like a dramatically successful out-of-sample prediction — sort of an economics version of “Light bends!” Almost everyone in the economics profession took the Friedman-Phelps analysis as confirmed. This in turn had big practical and intellectual consequences. First, governments and central banks stopped pursuing low unemployment, believing that excessively ambitious stimulus caused the stagflation of the 1970s. They began aiming for stable unemployment around the NAIRU —non-accelerating-inflation rate of unemployment — instead. Second, since the Friedman/Phelps prediction was based on trying to assess what rational price-setters would do, their apparent success gave a big boost to the notion that all economics should be based on maximizing behavior. Friedman always had too strong a reality sense to personally go down the rational-expectations rabbit hole that swallowed much of macroeconomics, but given the law of diminishing disciples it was bound to happen. Third, the whole affair gave a boost to conservative ideology. We had seemingly seem a demonstration of the limits to government action; also, the Chicago boys had seemingly been proved right about something big. (I remember classmates in grad school saying “They were right about this. Why don’t you think they’re right about the rest?”) Finally, the Volcker disinflation of the 1980s — using high unemployment to end high inflation — became, in many minds, the model of what responsible policymakers should do: make tough choices for the sake of the future. BUT WHAT IF WE’VE BEEN TELLING THE WRONG STORY ALL ALONG? […] But suppose something like this is true. In that case, the narrative that saw stagflation both as the cost of excessively ambitious macroeconomic policy and as a vindication of conservative economic ideas was mostly wrong. And that matters not just for history but for policy right now, which is still to some extent constrained by the fear of a 70s repeat. How do you ask someone to be the last worker to be unemployed for a mistake? paulkrugman.substack.com/… The reality in a response by Lance Taylor and Nelson Henrique Barbosa Filho is that “For practical purposes, the results mean that, for the Fed to meet its inflation target, it would be necessary to let real wages grow faster than labor productivity for some years, undoing the wage repression of the last decades. Biden’s $15 minimum-wage proposal is a correct step in that direction.” This is despite so many economists taking an opposite, more cautious position. — Daily Kos

“Cultural theorist Lynn Parramore on the deep social effects of economic precarity, and her article “Epidemic of Despair Could Haunt America Long After COVID” at the Institute for New Economic Thinking. https://www.ineteconomics.org/perspectives/blog/epidemic-of-despair-could-haunt-america-long-after-covid” — Chuck Mertz,This is Hell!