Off topic but interesting

Another reason why we should encourage individuals to live in cities. More walking less driving.  Anyone know how we can create the right incentives to live in the city?

The Cost of Inflation

The costs of inflation (i.e. redistribution of wealth) fall mainly on low income families.

Nine ways to fix the economy.

Here are nine policies from around the world that just might work. I particularly like the policy from Australia, taxes should be based on age and income, not just income. The younger generations will have lower tax rates, all else equal. This is good, they didn't start the wars, the housing bubble, health care and retirement messes, but are paying for it.

Feldstein on the economy

Martin Feldstein (Harvard economist) on the current state of the economy. I tend to agree with him on a lot of areas, but military spending is not the biggest multiplier effect. Direct government spending into heavy production that is also has a use within the economy is much more valuable. For example, buying new (more fuel efficient) school buses would have at least the same effect as building tanks in terms of production, but without the costs of shipping them to Iraq/Afghanistan. Additionally, new buses will lower transportation costs for many school districts. Another directing spending example could be police, fire, or ambulances. If you want to spend it on military then look for things that can also provide a productive use domestically (i.e. cargo planes). Estimates of the military spending multiplier are approximately one. Yesterday we saw direct government spending in goods used domestically has a multiplier effect between one and 2.5.The benefits of military spending are in the production of new goods, we can get the same benefits of production combined with an added multiplier effect if these goods are also usefully in the domestic economy.

The problem with politicians.

Here's why the Federal Reserve doesn't like Congress.

Long-Term Unemployment

The Economists' take on long-term unemployment. Sound familiar.

20 Facts of Income Inequality

Stanford did a nice job with this report.

A Potential Solution

Hmmm America's transportation infrastructure is lacking and the economy is slumping. Does anyone have any ideas?

Who Created this Mess?

Are Republicans really to be trusted?

Time to do something

For the last 12-18 months the economy has been run on autopilot. No one has done anything to help it along. The Federal Reserve set interest rates really low to help facilitate borrowing, but Congress has been a disaster. We need Congress to come together now and figure out the debt ceiling, future tax rates, and spending. Households and firms are growing tired of the uncertainty. With an increase in unemployment it's time to act now. 

Unemployment

The recent unemployment numbers are out and they are not good. The economy only created 54,000 for the month of May. To maintain unemployment at the current rate we need to create more than 200,000. The result for May, an increase in the unemployment rate to 9.1%.

Why household's are not spending but saving!

Household expectations play a large role in economic growth. In this case, households don't see a lot of optimism. It's not hard to wonder why.

Update on Housing Prices

Economic growth continues to lag behind many forecast. The primary reason is likely tied into the housing market. The housing market has continued to fall and now prices from their peak are down over 30%.

A return to normal?

Will we ever return to normal? For the last four years a big debate in economics centered around if the economy would rebound faster following a large recession. Think of a rubber band. The idea was simple, the further we fall the faster our economy will grow during the recovery phrase. This is not happening. Instead the economy is growing the same as our trend. Unless economic growth is faster than trend, we will never see a decline in unemployment.

An Update on Manufacturing

American manufacturing jobs increased last quarter. This is a good sign, but still have a long way to go before we make up the 8+ million that were lost.

Development through Services

Traditionally many developing countries develop through manufacturing. Think about the US during the last 1800s and early 1900 and even China today. The path to economic growth is usually through the promote of manufacturing goods, developing countries have a comparative advantage in low skill manufacturing exports (think outsourcing). After a few decades incomes will start to rise allowing residents to invest in better education, technology, and health care. The process is slow, but with the right government it works, recent examples  include China, Singapore, Korea, Ireland, Taiwan, and Brazil (these are just a few). Of course with the wrong government the low-skilled work force will be exploited and the country will fail to growth.

Here is an article talking about the possibility of skipping manufacturing and go straight into services.

Update on Economic Growth

The economy is growing, just not enough. The slowdown in the GDP growth rate will result in higher unemployment. We need the economy to grow at a 2% rate to maintain the current unemployment rate. A growth rate of 1.8% will cause unemployment to increase. The growth slowdown is largely attributed to a decline in government spending, inflation, and high oil prices. What should we do?

The Case for a Better Measure of Welfare

In class we discussed how we use GDP to measure welfare and in particular focused on what GDP fails to measure. Here is a debate at the Economist talking about whether or not we need a new measure. In class we discussed the use of the UN Human Development Index.

Learning through Osmosis

Are students spending the time (and challenging themselves) to learn course material? This has been a talked about issue. See here.

Why Economics is the Dismal Science

Here's a take by Brad Delong (Berkeley economist).