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Academic Insights for the Thinking World
We economists spend a lot of time writing about the job market. Can the unemployment rate drop any further? Will the number of unemployed people increase when the Fed starts to raise interest rates? And will wages begin to pick up if the unemployment rate does drop?To pursue these questions, economists construct theoretical models of the labor market, gather hiring and wage data from a variety of industries and regions.
In the 1983 movie The Right Stuff, during a test of wills between the Mercury Seven astronauts and the German scientists who designed the spacecraft, the actor playing astronaut Gordon Cooper asks: “Do you boys know what makes this bird fly?” Before the hapless engineer can reply with a long-winded scientific explanation, Cooper answers: “Funding!” If an economist were asked, “Do you know what makes this economy fly?” the answer, in one word, would be “trust.”
The Chinese New Year begins on 8 February, ushering out the year of the sheep (or goat, or ram) and bringing in the year of the monkey. People in China will enjoy a week-long vacation and will celebrate with dragon dances and fireworks. Given the financial fireworks emanating from China, this is a good time to briefly review some of the major economic news coming out of the Middle Kingdom.
Economists are better at history than forecasting. This explains why financial journalists sound remarkably intelligent explaining yesterday’s stock market activity and, well, less so when predicting tomorrow’s market movements. And why I concentrate on economic and financial history. Since 2015 is now in the history books, this is a good time to summarize a few main economic trends of the preceding year.
Once again, one of President Obama’s major legislative initiatives is being battered by a hostile Congress. Only this time, it is not Republicans standing in the way of the Administration’s plans, but the Democratic minority in the US Senate holding up the president’s Trans-Pacific Partnership (TPP) trade deal. The TPP is an ambitious trade deal currently being negotiated between eleven countries: Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, United States, Singapore and Vietnam.
I have written about the dangers of making economic policy on the basis of ideology rather than cold, hard economic analysis. Ideologically based economic policy has laid the groundwork for many of the worst economic disasters of the last 200 years.
On September 18, Scots will go to the polls to vote on the question “Should Scotland be an independent country?” A “yes” vote would end the political union between England and Scotland that was enacted in 1707. The main economic reasons for independence, according to the “Yes Scotland” campaign, is that an independent Scotland would have more affordable daycare, free university tuition, more generous retirement and health benefits, less burdensome regulation, and a more sensible tax system.
By Richard S. Grossman
Russia’s seizure of Crimea from Ukraine has left its neighbors—particularly those with sizable Russian-speaking populations such as Kazakhstan, Latvia, Estonia, and what is left of Ukraine—looking over their shoulder wondering if they are next on Vladimir Putin’s list of territorial acquisitions. The seizure has also left Europe and United States looking for a coherent response.
By Richard S. Grossman
2013 was an eventful year from the perspective of economics. The US government was shut down for 16 days as ideologically-driven Republicans held the budget hostage in an effort to repeal the Affordable Care Act. Japan’s new nationalistic government embarked on a bold, and so far largely successful attempt to revive the country’s anemic economy.
Is it morbid or therapeutic to analyze the economic catastrophes of the past? What critical strategies can be imported from the realms of medicine and military history to the study of the current state of the economy? Richard Grossman, author of Wrong: Nine Economic Policy Disasters and What We Can Learn From Them, skillfully dissects the cadavers of economic policies.
By Richard S. Grossman
To what extent should economic and foreign policies be guided by ideology? Are politicians who remain committed to particular policy prescriptions principled representatives? Are they opportunists who ride the popularity of simple, easily explained idea into office?
By Richard S. Grossman
What do the Irish famine and the euro crisis have in common? The famine, which afflicted Ireland during 1845-1852, was a humanitarian tragedy of massive proportions. It left roughly one million people—or about 12 percent of Ireland’s population—dead and led an even larger number to emigrate. The euro crisis, which erupted during the autumn of 2009, has resulted in a virtual standstill in economic growth throughout the Eurozone in the years since then.
By Richard S. Grossman
For the past half dozen years or so, the first Friday of the month has brought fear and dread to large portions of the United States. This heightened anxiety has nothing to do with the phases of the moon, the expiration of multiple financial derivatives, or concerns about not having a date for the weekend.
By Richard S. Grossman
Because Europe accounts for nearly a quarter of the world’s economic output, this question is important not only to Europeans, but to Africans, Asians, Americans (both North and South), and Australians as well. Those who forecast that the United States’s relatively anemic five-year-old recovery is poised to become stronger almost always include the caveat “unless, of course, Europe implodes.”
Overpromising was a central feature of Donald Trump’s campaign for the presidency. He was going to build a big, beautiful wall and make the Mexicans pay for it. He was going to unleash a secret plan to defeat ISIS. And he was going to repeal Obamacare and replace it with something really terrific. Unfortunately, Donald Trump and the Republicans aren’t the only ones making unrealistic promises.
No one enjoys paying taxes. Remember receiving your first paycheck and discovering how much of your hard-earned money you would be sharing with the government? Most of us recognize that some taxes are necessary. Although economics recognizes the need for taxes to fund the government, it is pretty clear-eyed about the downside of taxes. One example is the tax on cigarettes.