dunnettreader + consumer_demand   33

Marco Di Maggio
The Importance of Unemployment Insurance as an Automatic Stabilizer
Marco Di Maggio, Amir Kermani
NBER Working Paper No. 22625
Issued in September 2016
NBER Program(s):   EFG   LS   PE
We assess the extent to which unemployment insurance (UI) serves as an automatic stabilizer to mitigate the economy's sensitivity to shocks. Using a local labor market design based on heterogeneity in local benefit generosity, we estimate that a one standard deviation increase in generosity attenuates the effect of adverse shocks on employment growth by 7% and on earnings growth by 6%. Consistent with a local demand channel, we find that consumption is less responsive to local labor demand shocks in counties with more generous benefits. Our analysis finds that the local fiscal multiplier of unemployment insurance expenditure is approximately 1.9.
paywall  unemployment_insurance  consumer_demand  unemployment  paper  NBER  demand-side  recessions  fiscal_multipliers  automatic_stabilizers  fiscal_policy 
october 2016 by dunnettreader
Bordalo, Pedro, Nicola Gennaioli, and Andrei Shleifer - “Competition for Attention” (2016) Rev of Econ Studies
Bordalo, Pedro, Nicola Gennaioli, and Andrei Shleifer. 2016. “Competition for Attention.” Review of Economic Studies 83 (2): 481-513. -- Abstract
We present a model of market competition in which consumers' attention is drawn to the products' most salient attributes. Firms compete for consumer attention via their choices of quality and price. Strategic positioning of a product affects how all other products are perceived. With this attention externality, depending on the cost of producing quality some markets exhibit “commoditized” price salient equilibria, while others exhibit “de-commoditized” quality salient equilibria. When the costs of quality change, innovation can lead to radical shifts in markets, as in the case of decommoditization of the coffee market by Starbucks. In the context of financial innovation, the model generates the phenomenon of “reaching for yield”. -- downloaded via iPhone to DBOX
behavioral_economics  attention  paywall  consumerism  competition  cognition  article  cognitive_bias  downloaded  prices  rational_choice  commodities  cognitive_science  consumer_demand 
august 2016 by dunnettreader
Bordalo, Gennaioli and Shleifer - Diagnostic Expectations and Credit Cycles - WP June 2016 version
Bordalo, Pedro, Nicola Gennaioli, and Andrei Shleifer. Working Paper. “Diagnostic Expectations and Credit Cycles”.Abstract
We present a model of credit cycles arising from diagnostic expectations – a belief formation mechanism based on Kahneman and Tversky’s (1972) representativeness heuristic. In this formulation, when forming their beliefs agents overweight future outcomes that have become more likely in light of incoming data. The model reconciles extrapolation and neglect of risk in a unified framework. Diagnostic expectations are forward looking, and as such are immune to the Lucas critique and nest rational expectations as a special case. In our model of credit cycles, credit spreads are excessively volatile, over-react to news, and are subject to predictable reversals. These dynamics can account for several features of credit cycles and macroeconomic volatility
PDF, revised June 2016 -- downloaded via iPhone to DBOX
financial_system  bubbles  creditors  investors  leverage  credit_crunch  paper  capital_markets  debt_crisis  consumer_demand  debt-overhang  banking  reallocation-labor  demand-side  credit_booms  downloaded  debt-restructuring  reallocation-capital  financial_crisis  investment 
august 2016 by dunnettreader
Atif Mian, Amir Sufi - Who Bears the Cost of Recessions? The Role of House Prices and Household Debt | NBER -:May 2016
NBER Working Paper No. 22256 -- This chapter reviews empirical estimates of differential income and consumption growth across individuals during recessions. Most existing studies examine the variation in income and consumption growth across individuals by sorting on ex ante or contemporaneous income or consumption levels. We build on this literature by showing that differential shocks to household net worth coming from elevated household debt and the collapse in house prices play an underappreciated role. Using zip codes in the United States as the unit of analysis, we show that the decline in numerous measures of consumption during the Great Recession was much larger in zip codes that experienced a sharp decline in housing net worth. In the years prior to the recession, these same zip codes saw high house price growth, a substantial expansion of debt by homeowners, and high consumption growth. We discuss what models seem most consistent with this striking pattern in the data, and we highlight the increasing body of macroeconomic evidence on the link between household debt and business cycles. Our main conclusion is that housing and household debt should play a larger role in models exploring the importance of household heterogeneity on macroeconomic outcomes and policies.
paper  paywall  NBER  economic_history  Great_Recession  financial_crisis  debt_crisis  debt-overhang  business_cycles  house_prices  mortgages  consumer_demand  US_economy 
july 2016 by dunnettreader
Atif R. Mian, Amir Sufi, Emil Verner - Household Debt and Business Cycles Worldwide | NBER - Sept 2015
An increase in the household debt to GDP ratio in the medium run predicts lower subsequent GDP growth, higher unemployment, and negative growth forecasting errors in a panel of 30 countries from 1960 to 2012. Consistent with the “credit supply hypothesis,” we show that low mortgage spreads predict an increase in the household debt to GDP ratio and a decline in subsequent GDP growth when used as an instrument. The negative relation between the change in household debt to GDP and subsequent output growth is stronger for countries that face stricter monetary policy constraints as measured by a less flexible exchange rate regime, proximity to the zero lower bound, or more external borrowing. A rise in the household debt to GDP ratio is contemporaneously associated with a consumption boom followed by a reversal in the trade deficit as imports collapse. We also uncover a global household debt cycle that partly predicts the severity of the global growth slowdown after 2007. Countries with a household debt cycle more correlated with the global household debt cycle experience a sharper decline in growth after an increase in domestic household debt.
paper  paywall  NBER  economic_history  post-WWII  housing  house_prices  mortgages  interest_rates  business_cycles  debt_crisis  debt-overhang  debt-restructuring  macroeconomic_policy  consumer_demand  global_economy  global_financial_cycle  economic_growth 
july 2016 by dunnettreader
Guido Alfani, Wouter Ryckbosch - Income inequality in pre-industrial Europe | VOX, CEPR’s Policy Portal 06 November 2015
Thomas Piketty and others have prompted renewed interest in understanding long-term patterns of inequality. This column presents evidence from pre-industrial Europe. Inequality rose even during the success stories of early modern Europe, but it can hardly have been the sole requisite for growth. In both economic history and today’s economic theory, the idea of a universal trade-off between growth and inequality needs to be replaced by stronger attention to social processes and institutional developments. -- brief but extensive lit review of how thinking of economic historians has been evolving -- downloaded pdf to Note
paper  economic_history  early_modern  Europe-Early_Modern  16thC  17thC  18thC  19thC  economic_growth  inequality  capital_formation  new_institutionalism  institutional_economics  political_economy  state-building  nation-state  human_capital  urbanization  Innovation  Industrial_Revolution  consumer_revolution  consumer_demand  wages  growth-equity_tradeoff  bibliography  downloaded 
november 2015 by dunnettreader
Jonathan Eacott - Selling Empire: India in the Making of Britain and America, 1600-1830 (2016) | UNC Press
Linking four continents over three centuries, Selling Empire demonstrates the centrality of India--both as an idea and a place--to the making of a global British imperial system. In the seventeenth century, Britain was economically, politically, and militarily weaker than India, but Britons increasingly made use of India’s strengths to build their own empire in both America and Asia. Early English colonial promoters first envisioned America as a potential India, hoping that the nascent Atlantic colonies could produce Asian raw materials. When this vision failed to materialize, Britain’s circulation of Indian manufactured goods--from umbrellas to cottons--to Africa, Europe, and America then established an empire of goods and the supposed good of empire. Eacott recasts the British empire's chronology and geography by situating the development of consumer culture, the American Revolution, and British industrialization in the commercial intersections linking the Atlantic and Indian Oceans. From the seventeenth into the nineteenth century and beyond, the evolving networks, ideas, and fashions that bound India, Britain, and America shaped persisting global structures of economic and cultural interdependence. -- Jonathan Eacott is associate professor of history at the University of California, Riverside.
books  economic_history  British_Empire  17thC  18thC  19thC  British_history  colonialism  settler_colonies  South_Asia  North_America  West_Indies  slavery-Africans  commerce  consumer_revolution  consumer_demand  East_India_Company  American_colonies 
september 2015 by dunnettreader
Gennaioli Shleifer and Vishny - Money Doctors (2015) | Andrei Shleifer
2015. “Money Doctors.” Journal of Finance 70 (1): 91-114.
Abstract
We present a new model of investors delegating portfolio management to professionals based on trust. Trust in the manager reduces an investor’s perception of the riskiness of a given investment, and allows managers to charge fees. Money managers compete for investor funds by setting fees, but because of trust, fees do not fall to costs. In equilibrium, fees are higher for assets with higher expected return, managers on average under perform the market net of fees, but investors nevertheless prefer to hire managers to investing on their own. When investors hold biased expectations, trust causes managers to pander to investor beliefs. -- downloaded via iPhone to DBOX
investors  risk-mitigation  risk_premiums  risk  liquidity  long-term  article  benchmarks  consumer_demand  institutional_investors  asset_prices  trust  capital_markets  financial_instiutions  risk_management  flight-to-quality  behavioral_economics  investment  management_fees  financial_innovation  downloaded  risk_assessment  asset_management 
march 2015 by dunnettreader
James Hamilton - Demand factors in the collapse of oil prices | Econbrowser Jan 2015
update of his analysis from a month ago - still sees c. 40% of price declines across commodities from slowing hlobal economy with exception of US
global_economy  US_economy  Eurozone  China  oil_price  economic_growth  energy  consumer_demand  commodities 
january 2015 by dunnettreader
Twin Engines: How Consumer Spending and Commodities Drive Indonesia's Growth - Knowledge@Wharton - June 2012
a few years old, pre elections and commodity price declines, but interesting stats on how growth was continuing post global financial crisis - the energy, infrastructure & transport pressures to meet growing middle class demand are going to be severe
Asia-Pacific  Indonesia  economic_growth  emerging_markets  commodities  consumer_demand  middle_class 
january 2015 by dunnettreader
Nitzan, Jonathan - LSE Public Event: Can Capitalists Afford Recovery? -- Video and Paper (May 2014) | bnarchives
Presentation at the LSE Department of International Relations. 27 May 2014. -- Theorists and policymakers from all directions and of all persuasions remain obsessed with the prospect of recovery. For mainstream economists, the key question is how to bring about such a recovery. For heterodox political economists, the main issue is whether sustained growth is possible to start with. But there is a prior question that nobody seems to ask: can capitalists afford recovery in the first place? If we think of capital not as means of production but as a mode of power, we find that accumulation thrives not on growth and investment, but on unemployment and stagnation. And if accumulation depends on crisis, why should capitalists want to see a recovery? -- Video duration: 2:24 hours -- Keywords: crisis, differential accumulation, economic policy, economic theory, expectations, growth, income distribution, Keynesianism, Marxism, monetarism, neoclassical economics, profit, underconsumption -- Subjects: BN State & Government, BN Power, BN Region - North America, BN Business Enterprise, BN Value & Price, BN Crisis, BN Production, BN Macro, BN Conflict & Violence, BN Money & Finance, BN Ideology, BN Distribution, BN Methodology, BN Capital & Accumulation, BN Policy, BN Class, BN Labour, BN Growth -- links to LSE on YouTube -- downloaded pdf to Note
paper  video  Great_Recession  financial_crisis  economic_growth  capital_as_power  capitalism-systemic_crisis  economic_theory  economic_models  macroeconomics  neoclassical_economics  Keynesian  Marxist  monetarism  monetary_policy  fiscal_policy  austerity  sovereign_debt  public_finance  public_policy  productivity  production  consumer_demand  underconsumption  investment  profit  productivity-labor_share  distribution-income  distribution-wealth  finance_capital  financialization  capitalization  accumulation  accumulation-differential  elites-self-destructive  elite_culture  ruling_class  class_conflict  Labor_markets  inequality  unemployment 
october 2014 by dunnettreader
Tobias Adrian and Nellie Liang - Monetary Policy, Financial Conditions, and Financial Stability | Federal Reserve Bank of New York - Staff Reports Number 690 - September 2014
In the conduct of monetary policy, there exists a risk-return trade-off between financial conditions and financial stability, which complements monetary policy’s traditional trade-off between inflation and real activity. The trade-off exists even if monetary policy does not target financial stability considerations independently of its inflation and real activity goals, because risks to future financial stability are increased by the buildup of financial vulnerabilities from persistent accommodative monetary policy when the economy is close to potential. We review monetary policy transmission channels and financial frictions that give rise to this trade-off between financial conditions and financial stability, within a monitoring program across asset markets, banking firms, shadow banking, and the nonfinancial sector. We focus on vulnerabilities that affect monetary policy’s risk-return trade-off, including 1) pricing of risk, 2) leverage, 3) maturity and liquidity mismatch, and
4) interconnectedness and complexity. We also discuss the extent to which structural and time-varying macroprudential policies can counteract the buildup of vulnerabilities, thus mitigating monetary policy’s risk-return trade-off. -- downloaded pdf to Note
paper  Fed  US_economy  macroeconomics  financial_system  monetary_policy  financial_stability  macroprudential_policies  macroprudential_regulation  money_market  capital_markets  banking  shadow_banking  NBFI  investors  institutional_investors  credit  risk_premiums  leverage  money_supply  monetarism  interest_rates  business_cycles  demand-side  investment  consumer_demand  open_market_operations  downloaded  EF-add 
october 2014 by dunnettreader
Jonathan E. Leightner - Asia's Financial Crisis, Speculative Bubbles, and Under-Consumption Theory | JSTOR: Journal of Economic Issues, Vol. 34, No. 2 (Jun., 2000), pp. 385-392
He looks at Asian high savings rates (and global imbalances) in 1990s and returns to Mummery& Hobson theory of under-consumption from late 19thC -- Mummery, A. F., and J. A. Hobson. The Physiology of Industry: Being an Exposure of Certain Fallacies in Existing Theories of Economics. London: J. Murray, 1889, reprint Fairfield, N.J.: Augustus M. Kelley Publishers -- His doctoral work looks to have focused on comparative growth patterns and importance of balanced growth of social and economic classes in providing consumer demand that pushes new technology and productivity gains -- dangers of inequality and benefits of more equal distribution -- Leightner, Jonathan E. "The Compatibility of Growth and Increased Equality: Evidence from Thailand, the United Kingdom, Sweden, and South Africa." Unpublished part of Ph.D. diss -- short article, didn't download
article  jstor  economic_history  political_economy  1990s  Asian_crisis  international_political_economy  international_finance  financial_crisis  consumer_demand  inequality  savings  global_imbalance  economic_growth  economic_theory  19thC  Victorian  demand-side  development  bubbles  speculative_finance  EF-add 
september 2014 by dunnettreader
Matthew Klein - Where are Americans’ debts? | FT Alphaville - September 3, 2014
Excessive US household borrowing of the 2000s was not evenly distributed. During the peak of the bubble, the average Nevadan carried about two-and-a-half times as much mortgage and consumer debt as the average Texan What’s striking to us, from a new research note published by the Federal Reserve Bank of Cleveland, is that the amount of variation within metro areas was often as big as, if not greater than, the variation between them. Debt reduction since 2007 has been heavily concentrated in extremely indebted neighborhoods, also according to the Cleveland Fed. Many of these ultra-borrowers did not reduce their debt burdens solely out of their income. According to a study from the New York Fed published at the end of last year, foreclosures (red) reduced mortgage balances more than paydowns (green). The concentration of extreme indebtedness among a relatively small subset of the US population may help explain why politicians had relatively little interest in doing anything to mitigate the damage caused by foreclosures. Hopefully the research produced in the aftermath of the crisis will help limit a repeat performance. -- fascinating charts of geographic distribution and debt reduction via foreclosures
US_economy  Great_Recession  housing  debt  consumer_demand  bubbles  US_politics  political_economy  banking  deleverage  leverage 
september 2014 by dunnettreader
Matias Vernengo - NAKED KEYNESIANISM: Institutions, what institutions? - September 2014
Nice breakdown of theorists of causes of development and underdevelopment and problems of trying to catch up -- So if you believe most heterodox economists institutions are relevant, but not primarily those associated to the supply side; the ones linked to the demand side, in Keynesian fashion are more important than the mainstream admits. Poor countries that arrive late to the process of capitalist development cannot expand demand without limits since the imports of intermediary and capital goods cause recurrent balance of payments crises. The institutions that allow for the expansion of demand, including those that allow for higher wages to expand consumption and to avoid the external constraints, are and have been central to growth and development. The role of the State in creating and promoting the expansion of domestic markets, in the funding of research and development, and in reducing the barriers to balance of payments constraints, both by guarantying access to external markets (sometimes militarily, like in the Opium Wars) and reducing foreign access to domestic ones was crucial in the process of capitalist development. In this view, for example, what China did not have that England did, was not lack of secure property rights and the rule of law, but a rising bourgeoisie (capitalists) that had to compete to provide for a growing domestic market that had acquired a new taste (and hence explained expanding demand) for a set of new goods, like cotton goods from India, or china (porcelain) from… well China, as emphasized by economic historian Maxine Berg among others (for the role of consumption in the Industrial Revolution go here). Or simply put, China did not have a capitalist mode of production (for the concept of mode of production and capitalism go here). Again, I argued that Robert Allen’s view according to which high wages and cheap energy forced British producers to innovate to save labor, leading to technological innovation and growth, and the absence of those conditions in China led to stagnation is limited since it presupposes that firms adopt more productive technologies even without growing demand. -- see links
economic_history  economic_theory  economic_growth  17thC  18thC  19thC  20thC  development  emerging_markets  Latin_America  Great_Divergence  demand  consumer_demand  British_history  China  institutional_economics  institutional_change  institution-building  institutions  supply-side  demand-side  cultural_history  economic_culture  political_culture  industrialization  Industrial_Revolution  international_political_economy  international_monetary_system  balance_of_payments  state-building  rent-seeking  rentiers  commodities  links 
september 2014 by dunnettreader
Over the hill. The secular decline of the rate of ‘fixed’ investment in rich countries | Real-World Economics Review Blog - August 2014
Adding to the "secular stagnation" debate -- decline of fixed investment, which will have to shift to household changes in social structure -- Summarizing: the rich countries are plagued by a post 1970 secular decrease of the fixed investment rate. Policies aimed at increasing savings to raise the investment rate will fail, as this decline is not caused by short-term supply side or even demand side factors but by changing historical circumstances. Policies enabling households to make investments (classified as ‘consumption’ in the national accounts!) into life cycle proof houses, cars, or even electric bicycles. Be aware: ‘life cycle proof’ is not just a technological but also a social concept as it might mean that a new ‘phase of life’ will have to be ‘discovered’, which consists of elderly living independently together under one roof in ‘lame and blind’ houses for some years.
international_political_economy  OECD_economies  investment  consumer_demand 
august 2014 by dunnettreader
Deborah Boucoyannis - The Equalizing Hand: Why Adam Smith Thought the Market Should Produce Wealth Without Steep Inequality | Cambridge Journals Online - Perspectives on Politics - Dec 2013
For long overview of the article, see her post from the LSE blog -- Perspectives on Politics, 11, pp 1051-1070. doi:10.1017/S153759271300282X. - That the market economy inevitably leads to inequality is widely accepted today, with disagreement confined to the desirability of redistributive action, its extent, and the role of government in the process. The canonical text of liberal political economy, Adam Smith's Wealth of Nations, is assumed even in the most progressive interpretations to accept inequality, rationalized as the inevitable trade-off for increasing prosperity compared to less developed but more equal economies. I argue instead that Smith's system, if fully implemented, would not allow steep inequalities to arise. In Smith, profits should be low and labor wages high, legislation in favor of the worker is “always just and equitable,” land should be distributed widely and evenly, inheritance laws liberalized, taxation can be high if it is equitable, and the science of the legislator is necessary to put the system in motion and keep it aligned. Market economies are made in Smith's system. Political theorists and economists have highlighted some of these points, but the counterfactual “what would the distribution of wealth be if all the building blocks were ever in place?” has not been posed. Doing so encourages us to question why steep inequality is accepted as a fact, instead of a pathology that the market economy was not supposed to generate in the first place. --Deborah Boucoyannis is Assistant Professor at the University of Virginia (dab5fw@virginia.edu). Her interests lie in the historical preconditions for the emergence of the liberal order and of constitutionalism.
paper  paywall  political_economy  intellectual_history  economic_theory  Smith  18thC  British_history  Scottish_Enlightenment  inequality  wages  taxes  landowners  monopolies  rent-seeking  luxury  consumer_demand  competition  profit  regulation  power  investment  capital  neoliberalism  Labor_markets  EF-add 
april 2014 by dunnettreader
Deborah Boucoyannis - For Adam Smith, inequality was contrary to the Wealth of Nations | British Politics and Policy at LSE – Feb 2014
Overview of her article in Perspectives on Politics - see Cambridge Journals bookmark - The assumption that Adam Smith accepted inequality as the necessary trade-off for a more prosperous economy is wrong, writes Deborah Boucoyannis. In reality, Smith’s system precluded steep inequalities not out of a normative concern with equality but by virtue of the design that aimed to maximise the wealth of nations. Much like many progressive critics of current inequality, Smith targets rentier practices by the rich and powerful as distorting economic outcomes.
paper  political_economy  intellectual_history  economic_theory  Smith  18thC  British_history  Scottish_Enlightenment  inequality  wages  taxes  landowners  monopolies  rent-seeking  luxury  consumer_demand  competition  profit  regulation  power  investment  capital  neoliberalism  Labor_markets  EF-add 
april 2014 by dunnettreader
EconoSpeak: Inequality and Sabotage: Piketty, Veblen and Kalecki (for anne at Economist's View)
Nearly a century ago, Thorstein Veblen offered insights into this mechanism in his The Engineers and the Price System. To Veblen r>g (although he didn't use that term) was a strategy pursued by business, not simply a statistical finding. As Veblen points out, "this is matter of course, and notorious. But it is not a topic on which one prefers to dwell." -- Kalecki outlined three categories of business objection to a full employment by government spending: "(i) dislike of government interference in the problem of employment as such; (ii) dislike of the direction of government spending... (iii) dislike of the social and political changes resulting from the maintenance of full employment." It is the first and third of these objections that have the most direct bearing on the issue of r>g -- There are different modes of efficiency and those differences result in different effects on the rate of return to capital. In other words, there are r>g efficiencies and there are r<g efficiencies. An example of an r>g efficiency would be a new machine that uses less fuel and less labour to produce a given amount of output. An example of an r<g efficiency would be a reduction in the length of the standard working day that improves worker productivity by reducing fatigue and increasing overall well being. Both are examples of efficiencies but they differ as to whom the benefit of the efficiency gain primarily accrues.
US_economy  US_history  19thC  20thC  Great_Depression  economic_history  economic_growth  political_economy  capital  capitalism  labor  Labor_markets  wages  unemployment  consumer_demand  profit  investment  unions  Veblen  Kalecki  productivity  inequality  EF-add 
march 2014 by dunnettreader
Michael Pettis - Economic consequences of income inequality - March 2014
Back to basics and the undercinsumption model that shows why it's necessary to save capitalism from itself -- I will again quote Mariner Eccles, from his 1933 testimony to Congress, in which he was himself quoting with approval an unidentified economist, probably William Trufant Foster. In his testimony he said:

It is utterly impossible, as this country has demonstrated again and again, for the rich to save as much as they have been trying to save, and save anything that is worth saving. They can save idle factories and useless railroad coaches; they can save empty office buildings and closed banks; they can save paper evidences of foreign loans; but as a class they cannot save anything that is worth saving, above and beyond the amount that is made profitable by the increase of consumer buying.

It is for the interests of the well-to-do – to protect them from the results of their own folly – that we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit. This is not “soaking the rich”; it is saving the rich. Incidentally, it is the only way to assure them the serenity and security which they do not have at the present moment.
Great_Recession  Great_Depression  economic_history  economic_theory  savings  investment  consumer_demand  unemployment  global_economy  international_political_economy  trade-policy  trade-theory  Eurozone  China  Germany  inequality  EF-add 
march 2014 by dunnettreader
Heterodox Economics - Readings | HMiRN
Extensive list of books, chapters, journal articles, periodically updated since 2011 -- Contents --
1. History and Methodology of Heterodox Microeconomics
2. Critiques of Mainstream Microeconomics
3. Principles of Heterodox Microeconomic Theory
4. Theory of the Business Enterprise
5. Structure of Production and Costs of the Business Enterprise
6. Costing, Pricing, and Prices
7. Investment, Finance, and Employment
8. Households, Consumption, and Market Demand
9. Industry and Market
10. Competition
11. Corporate Governance, Market Governance, and Market Regulation
12. Social Welfare
13. Heterodox Microfoundations and Modeling the Economy
bibliography  economic_theory  economic_history  economic_models  economic_sociology  firms-theory  Labor_markets  capital  corporate_governance  corporate_finance  M&A  regulation  consumers  consumer_demand  monopolies  finance_capital  taxes  competition  investment  prices  wages  heterodox_economics  microeconomics  macroeconomics  neoclassical_economics  EF-add 
february 2014 by dunnettreader
interfluidity » Standards of evidence (re inequality and growth) Dec 2013
After dismantling "intellectual" history of wide acceptance of Friedman's Permanent Income Hypothesis that allowed Marginal Propensity to Consume to lead to concerns re inequality -- Prior to 2008, we found means of supporting aggregate demand despite an almost certain drag imposed by increasing inequality. Those means included a broad mix that included fiscal policy (we ran deficits), unsustainable equity booms, the “democratization of credit” and unsustainable credit booms, and of course straightforward monetary policy. Real interest rates have collapsed since the early 1980s. The reason we might talk about inequality is not because it is mechanically, unconditionally, here-is-the-regression-now-STFU connected with growth. It’s because many of us have decided that other, more “conventional”, demand stimulants have run their course, that repeating them or increasing the dose won’t work, or would have adverse side effects we’d prefer to avoid.
economic_history  intellectual_history  economic_theory  consumer_demand  inequality  economic_growth  political_economy  US_economy  Great_Recession  20thC  21stC  EF-add 
december 2013 by dunnettreader
Daniel Davies - If this is “secular stagnation”, I want my old job back — Crooked Timber
My point here is that none of this was unknown at the time. The US economic policy structure was aware that they were accommodating China and NAFTA, and aware that the tool of demand management was consumer spending. They might or might not have been aware that the consumer spending was financed by borrowing against housing wealth, but if they weren’t, they thundering well should have been. They got a structural increase in personal sector debt because they wanted one and set policy in order to create one. There’s no good calling it a “bubble” or a “puzzle” now that the shit’s hit the fan.

And so, welcome to the world you made guys. These are the consequences of globalization, entirely predictable and in fact predicted (by Dean Baker, among others). The final conclusion is probably the same as if it was a mysterious secular stagnation; fiscal policy. But the need for fiscal policy is such an obviously correct and obvious fact that more or less any economic argument is going to end up there unless it has major logical or accounting errors. But really – there is no need to tell ourselves ghost stories about animal spirits. There’s no puzzle here. We got this outcome because we wanted it.
20thC  21stC  economic_history  US_economy  global_economy  global_imbalance  trade  geopolitics  international_political_economy  international_finance  bubbles  financial_crisis  banking  shadow_banking  fiscal_policy  monetary_policy  central_banks  Eurozone  housing  consumer_demand  investment  leverage  stagnation  economic_growth  EF-add 
november 2013 by dunnettreader
Doug Henwood - That consumption binge? It’s mostly health care
Some numbers to make these points: at the end of 1978, consumption was 61.5% of GDP; in the second quarter of 2008, it had risen to 70.3%, or 8.8 points. Well over half that increase, 5.0 points, came from spending on medical care. The share of GDP devoted to spending on goods actually fell by 4.7 points over that 30-year period.

The pattern is preserved if you start the clock in 1997, just as the stock and housing manias were taking off. Medical spending accounted for almost a third of that rise between 1997 and 2008. Energy accounted for another third. Spending on goods accounted for just 3% of the rise, or 0.1 point. In other words, the familiar story that Americans went hogwild buying all kinds of stuff is wrong.

So the much-lamented decline in the U.S. savings rate begins to look less lamentable in light of this news.
US_economy  consumer_demand  health_care  savings  leverage  global_imbalance  21stC  EF-add 
november 2013 by dunnettreader
Marco Nappolini - Secular stagnation and post-scarcity | Pieria Nov 2013
The charts above illustrate that the overall picture is clearly one of falling long-term interest rates. As the authors say:

“[The] importance of monetary policy for long real rates appears to have diminished since the late 1990s… This is consistent with evidence that monetary policy has become more synchronised across countries, leaving less room for national real interest rates to diverge.”

This is what you would expect to see in a post-scarcity economy, though it is not to say that there are no projects that can deliver a real return on investment. Rather under post-scarcity conditions firms cannot have confidence in the existence of a market that can absorb all of their goods or services – so the risk adjustment of expected returns has to be larger. As such in order to get firms to part with their capital you would need to either set strongly negative nominal rates to force corporates into action or expand fiscal policy sufficiently to make it bear the investment risk that the private sector is refusing to take on. If Summers is right, however, it remains unclear whether even these measures would be sufficient to break developed economies out of secular stagnation.
global_economy  stagnation  consumer_demand  investment  profit  risk  interest_rates  monetary_policy  EF-add 
november 2013 by dunnettreader
Paul R. Sharp and Jacob L. Weisdorf: French revolution or industrial revolution? A note on the contrasting experiences of England and France up to 1800 - Springer
Springer full text html -- At the end of the eighteenth century, England and France both underwent revolutions: France the French Revolution, England the industrial revolution. This note sheds new light on these contrasting experiences in the histories of England and France by looking at the evolution of real consumer prices in London and Paris in the centuries leading up to 1800. Whilst in London, building workers were facing low and stable consumer prices over the period, leaving plenty of scope for a demand-driven consumer revolution (in particular after 1650), their Parisian counterparts had to engage in a year-long grind to maintain a decent living, and often had to cut consumption to make ends meet. The exercise conducted in the present paper gives a quantitative and economic underpinning to the notion that the French revolution did not arise out of nowhere, but rather had its roots in centuries of hardship amongst working class people as they struggled to make a living. -- This paper was presented at the ‘International Comparison of Output and Productivity in History’ session at the XV World Economic History Congress in Utrecht in 2009. -- Keywords Consumer revolution French revolution Great divergence Industrious revolution Industrial revolution Labour input
article  economic_history  economic_culture  economic_growth  17thC  18thC  Britain  France  London  Paris  Labor_markets  wages  Industrial_Revolution  consumers  consumer_demand  French_Revolution  EF-add 
september 2013 by dunnettreader

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