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Институт нового экономического мышления
18 января, 13:00

The Economics of the Affordable Care Act

Dean BakerInstitute for New Economic Thinking, January 17, 2017 Read More ...

17 января, 22:15

The Economics of the Affordable Care Act

Dean Baker at INET: The Economics of the Affordable Care Act: The Affordable Care Act (ACA), which President-elect Donald Trump and the Republican-controlled Congress have vowed to repeal, was crafted to overcome two basic problems in the provision of health...

12 января, 12:00

Роботизация разрушит капитализм

Аналитики компании Bernstein утверждают, что «Исследование о природе и причинах богатства народов» Адама Смита было актуально в течение 240 лет, но теперь устарело. Причиной этому послужили две тенденции — развитие робототехники и меняющаяся экономика Китая. Согласно идеям основателя экономической науки Адама Смита, человек, компания или страна должны производить то, что им выгоднее всего, и продавать […]

12 января, 05:00

Chanos Fears Trump's "Unmet Expectations", Warns Investors To "Rethink Almost Everything In Your Life"

Submitted by Lynn Paramore via The Institute for New Economic Thinking, Milwaukee-born short-seller Jim Chanos, founder and managing partner of New York-based Kynikos Associates, teaches University of Wisconsin and Yale business students about corporate fraud. During his life and career, he has witnessed seismic shifts in economic thinking and the relationship between labor and capital.   Chanos shares his thoughts on the world emerging from the election of Donald Trump and the tumultuous political events of 2016.  Lynn Parramore: Leading up to the election of Trump, we had eight years of Obama, and before that, eight years of Bush. Before we get to the president-elect, how do you assess the records of those past presidents in terms of basic policing of markets and corporate fraud? Jim Chanos: Bush was the MBA president who was going to be pro-business, cut taxes, and deregulate. Meanwhile, he had two recessions on his watch, less employment than when he started, and two bear markets in the stock market — probably the worst president for business since Herbert Hoover. The business guy!   Yet, he did tighten up the Justice Department and go after corporate crime. The Ashcroft Justice Department, as bad as it was in lots of other things, went after corporate fraud and accounting fraud, criminally. In 2002, we got Sarbanes-Oxley to curb fraud.   I don’t know that all this was Bush’s predilection — remember, his biggest supporter was Enron. But because of Enron and the other dot-com era scandals, he got backed into a corner to go hard on them. I’ve joked that the only person who put more corporate executives in jail than George W. Bush was his father during the Savings and Loan Crisis.   On these issues, I’d rather have Bush any day of the week than Obama. Both Eric Holder and Lanny Breuer of Obama’s Justice Department said in TV interviews and testimony that they factored in non-judicial aspects as to whether to mount prosecutions. I think that this had political costs to the Democrats. The crony capitalism still bothers people — the idea that Wall Street got off scot-free and they are still struggling. That lack of justice applied equally under the law was corrosive, not necessarily for Obama personally, but certainly for the party following him. LP: How do you see a Trump presidency in this light? JC: You and I have talked about how it has become a cost calculus for lots of corporations and financial institutions to cheat. “If I get caught,” they say, “I’m just going to pay a fine.” How does this change with new faces in Washington?  You still have this very pro-corporate group on Capitol Hill whose main bailiwick, in my opinion, is to protect the corporate class and the very wealthy. You’ve got what ostensibly is a proto-populist in the White House with a cabinet that is a mélange of different types, so who knows?   In my overall view, stuff happens to change people. If we go back to Bill Clinton, his “Putting People First” manifesto in ’92 was quite left-of-center, but he didn’t govern that way. If you look at things like NAFTA, Welfare reform, and cutting capital gains taxes  — well, in many ways, Ronald Reagan would have been proud of him.   Events conspire to derail our perceptions of presidents. When we look at their platforms, we think we know where things are headed. But in modern times, the only two presidents that I can think of who really got their ideas and platforms enacted wholesale were FDR and Reagan. Everybody else has gotten compromised, or has had events overwhelm them. LP: What do you make of the expectations of the economy under Trump? JC: I worry about the heightened expectations from the people who voted for him thinking that he’s their savior. That’s what scares me — unmet expectations.   For the swing voter in the Midwest who voted for this guy because he thinks coal-mines are coming back or the plants are going to reopen — it’s not going to happen. LP: What about the rise in bank stocks since the election? Are banks anticipating deregulation? JC: Almost all stocks are going up, mostly because of the belief of lower taxation. But after Obama’s election, most stocks went down and kept going down until the following March — and then they tripled! So I wouldn’t read a lot into the first month or two.   It could be that banks are anticipating deregulation, but so what? Deregulated to what end? They’re still going to have the capital requirements, which are international. Putting capital standards on them is the biggest way in which they were regulated.   In the bigger picture, if you think this is an uncertain presidency and we’re not quite sure where he’s going and how events will conspire, it’s not that important to get too worked up because things will happen and you’ll have to react. If, however, this is a once-in-a-fifty-year change in global thoughts about capitalism, then you have to pay attention. LP: If this is a once-in-fifty-year change, what’s at stake? JC: Part of my view is that in the 1930s, we rejected the individuality of the ’20s and before. After the crash and the Depression, we finally put the corporate class and bankers to the sidelines. Whether it was Keynesianism or the New Deal in the West, or state fascism or the advent of Stalinism, you saw more government control over the economy. This was good for workers and large governments. It was more nationalistic and led, obviously, to the next conflict. But the rise of government planning and government involvement was good for nominal GDPs. It was not good for the asset-holding classes — stocks and bonds did terribly over that period, right? You wanted to be a worker, you wanted to be labor, not capital.   The period from the late 1970s to 1980 changed all that. You had Thatcher and the U.K. and Reagan in the U.S. Mao died in 1976, the Solidarity movement in Poland began in 1978, and the Soviet Union peaked in power in 1979. You saw that the pendulum had gone too far and now we’re going to cut taxes on capital, we’re going to be more globalistic, and trade was going to improve. Since then, capital has risen and assets have done better than labor. Taxes have been light on financial assets and heavy on labor. Everything was reversed on its head.   If we look at the events of 2016 — Brexit, the Italian referendum, Trump, and the rise of nationalist China — are these the harbingers of something bigger? Or are they just a coincidence?  The ground seems to be fertile for things to change globally. If so, does this give rise to a more nationalistic, protectionist, statist scenario?  Are labor prices going to go up again? Are we going to tax capital and emphasize wages?   We’ll see…. LP: Going back to Trump’s promise to bring jobs back to the U.S. — can the government even do that? JC: In the case of the ’30s, you had massive public works spending and government spending, so you created construction workers. But on that front, we’re not going to compete anymore, as the Carrier guy said. Mexican labor is $3 an hour. No amount of retraining for a lower-skilled assembly job is going to change that. The only thing that will replace that Mexican worker himself is a robot. And a robot is infinitely cheaper than even the cheapest labor.   Surveys show that there are jobs open in the economy, but there’s just not a skill level to fill all of them. Our problem is the displacement in things like mining, assembly, low-end manufacturing – that’s where the job losses have occurred. It is just very hard under almost any scenario no matter what your politics are to see where those jobs are going to come back.   To the extent that you have wholesale, large, construction-like projects, then you will put people to work at relatively high rates, but the jobs are episodic and not necessarily career paths. When I was making $14 an hour working steel in Milwaukee in the summers in college, a steel worker could basically say, “all right, as long as I understand that I’m going to work in this factory, I can have a nice living for my family.” Those jobs are gone. The plants closed. So the whole idea that someone can now say, “I can work in the Carrier plant for $20 an hour and be assured of a job for life and security and put my kids through college” — that doesn’t exist anymore.   That’s where the problem and discontent will come — when you’ve sold that dream and it doesn’t happen. In that scenario, Trump begins to have a pretty short honeymoon. LP: You’ve long been linked with China. What do you make of the positions of China and the U.S. in the international economy, and how do you think they’re changing? JC: To me, the rise of Xi Jinping is a big event still underestimated in the global political economy. He is more of a personality than either Deng Xiaoping or Mao Zedong, certainly higher in stature internally than his predecessors. He is not first among equals in the Politburo Standing Committee — he’s first. This goes along with the theory about the rise of nationalists such at Putin in Russia. Xi Jinping is also a nationalist. He talks about the China Dream, China getting back to past glories, and not exporting communism. What you would have heard Mao say.   He’s a member the Chinese Communist Party, but the Party exists now as a political apparatus, not an ideology. China would not have the type of capitalism it has today if this were not the case. So these are not Marxist-Leninists, but rather just a fantastic single party in control. We have to understand it in that light.   China is increasingly a geostrategic rival. In the past, China looked toward protecting what it had — making claims on Taiwan and Tibet and ancillary areas, but the Chinese were really content not to compete in the global Cold War between the Soviet Union and the United States. Now we have this multi-polar world, and China sees itself clearly as the prime actor in the Pacific willing to fill any vacuum that the United States begins to pull away from.   Xi Jinping comes in and immediately he rewrites the passport maps. He sets the air traffic and extends the air defense zones. More ominously, he begins to militarize the South China Sea, and puts military bases on the islands, which alarms pretty much everybody. (And yet if you look at a map of the Pacific, the only country that really needs to traverse the South China Sea is China itself —oil going from the Middle East to Japan goes around it. The South China Sea is symbolic more than it is geostrategic).   I think, however, that Trump has decided that China makes a convenient media punching bag. You can claim that China took your jobs and China is a bogeyman. It seems to me that president-elect Trump does best when he has someone to fight against. However, the broader issue will be that foreign policy and national security events have a whole different dynamic than beating up on a defense contractor for an air conditioning plant.   What will be the ramifications? How will China react? What do you do about countries like the Philippines that are in the middle — a country that has elected its own interesting president, someone who seems to want to embrace China after decades of being staunchly a U.S. ally? What does this do for Japan? Japan itself has a nationalist, Shinzo Abe, who wants to increase military spending and take off the yoke of the Japanese constitution block on an expanded military.   There are many questions, but whatever you might think, China and Japan, while big trading partners, are not the best of friends in that neighborhood. Finally you’ve got the wacky guy in North Korea. What’s he going to do?   This whole area just keeps quietly but relentlessly getting to be more dangerous. I think that at some point in the first four years of the Trump administration, the Pacific is going to heat up again.   People are talking about starting a trade war with China but they haven’t really thought it through, because if you talk to corporate execs in the United States, they’re sort of quietly terrified.  Often the supply chain, even in U.S. manufacturing, relies on parts from Mexico and China coming in. We are pretty interconnected. Lots of businesses, and workers, too, will get disrupted in ways we can’t even think of in a trade war. There’s a reason why people studied the 1930s with the tariff walls that went up and the disruptions that happened. It’s negative for growth.   So stay tuned, it’s going to be interesting.  LP: To turn to Europe, you’re a Greek-American, and you have been critical of the Eurozone’s attitude toward Greece. What do you make of the situation there now? JC: The key issues for Greece now revolve around two entities that are not Greek. First you have the EU as a whole. We continue to have these bombshells, like the Italian referendum and Brexit — and you’ve also got elections coming up elsewhere in 2017.   I think Greece was sort of the Spanish Civil War to what’s about to be the EU’s WWII in that it was the opening preview of all of the problems that are going to come to the fore if Catalonia wants to become independent, if Italy wants to leave, if France wants to leave. The EU is being held together by chewing gum and string right now.   With this rise of nationalism  — if that’s what it is and it continues — the EU is going to find itself increasingly a victim of people wanting self-determination in northern Europe. That’s the first thing. Second is something I’m much more concerned about which nobody’s paying attention to, and that’s the continued rise of Erdo?an in Turkey. He has not only consolidated his power through a series of purges —thousands and thousands of journalists and academics have been thrown in prison since the aborted coup — but increasingly he is becoming more militant and Turkey is becoming a pro-Islamic state that is part of NATO. He’s throwing wild monkey wrenches into the whole Middle Eastern situation by making claims on land that was owned by the Ottomans, pre-WWI, like modern-day Iraq, modern-day Syria, and modern-day Greece and Bulgaria. He’s warned the EU that he will open Turkey’s borders to undocumented immigrants if EU membership talks are frozen.  Like Xi Jinping, he’s putting out these old maps and saying: this is our real land. Erdo?an is yet another nationalist.   Poor Greece is at the crossroads of all these seismic events and Ottoman Empire II. You’ve got the possible weakening or dissolution of the EU, and Greek debt problems are about tenth on the list of issues in that region. They’re going to struggle, no doubt about it. Every time the Greek economy starts to show some green shoots, it seems to stall and fall right back down again. LP: What do you hope might happen in this emerging world? JC: This is the tough thing about being in the financial markets. You can have opinions on all this stuff and either get it wrong or have it not matter.   First, I hope our system of free trade holds up. That’s one thing I believe in fervently. The evidence seems to be that a rise of tariffs and trade walls and barriers will be bad for global growth. Given the debt overhang that’s out there, which is relentless, the ability of economies to service debts in a global trade war will be greatly curtailed, so I’m clearly watching that.   I also continue to be concerned, on a stand-alone basis, with the giant debt bubble occurring in China. It has done nothing but just gotten bigger since you and I last sat down. Despite all the talk of reform, there really hasn’t been any. The Chinese are more reliant on the state than ever — on state lending and state banks. The debt continues to grow at twice the rate of growth, and now the currency is depreciating.   We’re getting a situation where the Chinese economy is still a very important driver of global growth, but increasingly it is using the old methods that the Chinese themselves said only a few years ago that they would have to change. But they can’t, because every time they try, the economy slows too fast.   China continues to be half of the demand for global commodities. It basically supports Africa and countries like Australia and Brazil. Almost 40 percent of global GDP is either China or commodity-exporting countries whose prime market is China. That’s considerable. So we have to look not only at China’s role with us, but China’s role on its own because it is such a driver for global growth, Chinese growth represents 1 point of the 3 percent GDP growth, so if China were not growing at all, we’d be at 2 percent. Doesn’t sound like a lot but it is. We have to keep our eye on what’s going on there. A global trade war would probably send China into a really steep recession.   How would an average worker navigate a rising trade barrier globally? It’s scary. If we look back at the ’30s template, one major outlet was, of course, a giant arms race. By the late ’30s, you had the whole world realizing the threats of fascism and rearming rapidly. Keynesian government spending was what pulled up the economies; it just had some really bad repercussions from 1939-45. But if we get into any kind of global arms race with China, either conventionally or otherwise, that would be Reagan-like. I don’t know what the numbers would mean in terms of employment, but you would take a lot of manufacturing people and turn them to making other things.  LP: How do you rate the current moment with big periods of change you’ve seen in your lifetime? JC: I had this odd personal journey from being a union pipefitter and boilermaker as a college student — I made more money in two-and-a-half months making steel than I did my first year on Wall Street. I went from being a product of the industrial Midwest and putting myself through college by working in a steel mill, to being the beneficiary of the Reagan-Thatcher era. I saw the world change, but I didn’t really understand until years later what an important period the late ’70s/early ’80s was (and a great period for music, by the way!).   If we’re in one of those periods now, if 2016 is like 1932 or 1979 — then you not only have to change your portfolio, you have to change your lifestyle. That’s one of the things we’ve been telling clients. If this is a major shift to populism, nationalism, greater state involvement, and less globalism, then you really have to rethink almost everything in your life.   Certainly, if you were a capitalist in 1932, you might be best served to change your outlook. And if you were a union leader in 1979, it would have been good to change your outlook. The question will be, in 2016, would it be best for the Davos man and woman, the globalists, to change their outlook?

07 января, 10:28

Links for 01-07-17

Macrohypocrisy - Paul Krugman Bias Against Less Wealthy Families: Mutual Fund Managers - Tim Taylor Labor Market Monopsonies and the Decline of the Labor Share - ProMarket Race May be Pseudo-Science, But Economists Ignore it at their Peril - INET...

28 декабря 2016, 12:31

A Pragmatic Holist: Herbert Simon, Economics and “The Architecture of Complexity”

Vela Velupillai, Madras School of Economics “Herb had it all put together at least 40 years ago – and I’ve known him only for 35.” Alan Newell, 1989. And so it was, with Hierarchy in 1950, Near-Decomposability from about 1949, and Causality, underpinning the reasonably rapid evolution of dynamical systems into a series of stable […]

27 декабря 2016, 10:29

Links for 12-27-16

America’s concern for the poor is about to be tested - The Washington Post Analytics of Trade Deficits and Manufacturing Employment - Paul Krugman Sraffa’s Revolution in Economic Theory - INET The Curse of Credentialism - Baseline Scenario Democracy Is...

22 декабря 2016, 19:24

Jim Chanos: Big Change Ahead For Global Capitalism?

*This post originally appeared on the blog of the Institute for New Economic Thinking. Milwaukee-born short-seller Jim Chanos, founder and managing partner of New York-based Kynikos Associates, teaches University of Wisconsin and Yale business students about corporate fraud. During his life and career, he has witnessed seismic shifts in economic thinking and the relationship between labor and capital. Chanos shares his thoughts on the world emerging from the election of Donald Trump and the tumultuous political events of 2016. Lynn Parramore: Leading up to the election of Trump, we had eight years of Obama, and before that, eight years of Bush. Before we get to the president-elect, how do you assess the records of those past presidents in terms of basic policing of markets and corporate fraud? Jim Chanos: Bush was the MBA president who was going to be pro-business, cut taxes, and deregulate. Meanwhile, he had two recessions on his watch, less employment than when he started, and two bear markets in the stock market --probably the worst president for business since Herbert Hoover. The business guy! Yet, he did tighten up the Justice Department and go after corporate crime. The Ashcroft Justice Department, as bad as it was in lots of other things, went after corporate fraud and accounting fraud, criminally. In 2002, we got Sarbanes-Oxley to curb fraud. I don't know that all this was Bush's predilection -- remember, his biggest supporter was Enron. But because of Enron and the other dot-com era scandals, he got backed into a corner to go hard on them. I've joked that the only person who put more corporate executives in jail than George W. Bush was his father during the Savings and Loan Crisis. On these issues, I'd rather have Bush any day of the week than Obama. Both Eric Holder and Lanny Breuer of Obama's Justice Department said in TV interviews and testimony that they factored in non-judicial aspects as to whether to mount prosecutions. I think that this had political costs to the Democrats. The crony capitalism still bothers people -- the idea that Wall Street got off scot-free and they are still struggling. That lack of justice applied equally under the law was corrosive, not necessarily for Obama personally, but certainly for the party following him. LP: How do you see a Trump presidency in this light? JC: You and I have talked about how it has become a cost calculus for lots of corporations and financial institutions to cheat. "If I get caught," they say, "I'm just going to pay a fine." How does this change with new faces in Washington? You still have this very pro-corporate group on Capitol Hill whose main bailiwick, in my opinion, is to protect the corporate class and the very wealthy. You've got what ostensibly is a proto-populist in the White House with a cabinet that is a mélange of different types, so who knows? In my overall view, stuff happens to change people. If we go back to Bill Clinton, his "Putting People First" manifesto in '92 was quite left-of-center, but he didn't govern that way. If you look at things like NAFTA, Welfare reform, and cutting capital gains taxes -- well, in many ways, Ronald Reagan would have been proud of him. Events conspire to derail our perceptions of presidents. When we look at their platforms, we think we know where things are headed. But in modern times, the only two presidents that I can think of who really got their ideas and platforms enacted wholesale were FDR and Reagan. Everybody else has gotten compromised, or has had events overwhelm them. LP: What do you make of the expectations of the economy under Trump? JC: I worry about the heightened expectations from the people who voted for him thinking that he's their savior. That's what scares me -- unmet expectations. For the swing voter in the Midwest who voted for this guy because he thinks coal mines are coming back or the plants are going to reopen -- it's not going to happen. LP: What about the rise in bank stocks since the election? Are banks anticipating deregulation? JC: Almost all stocks are going up, mostly because of the belief of lower taxation. But after Obama's election, most stocks went down and kept doing down until the following March -- and then they tripled! So I wouldn't read a lot into the first month or two. It could be that banks are anticipating deregulation, but so what? Deregulated to what end? They're still going to have the capital requirements, which are international. Putting capital standards on them is the biggest way in which they were regulated. In the bigger picture, if you think this is an uncertain presidency and we're not quite sure where he's going and how events will conspire, it's not that important to get too worked up because things will happen and you'll have to react. If, however, this is a once-in-a-fifty-year change in global thoughts about capitalism, then you have to pay attention. LP: If this is a once-in-fifty-year change, what's at stake? JC: Part of my view is that in the 1930s, we rejected the individuality of the '20s and before. After the crash and the Depression, we finally put the corporate class and bankers to the sidelines. Whether it was Keynesianism or the New Deal in the West, or state fascism or the advent of Stalinism, you saw more government control over the economy. This was good for workers and large governments. It was more nationalistic and led, obviously, to the next conflict. But the rise of government planning and government involvement was good for nominal GDPs. It was not good for the asset-holding classes--stocks and bonds did terribly over that period, right? You wanted to be a worker, you wanted to be labor, not capital. The period from the late 1970s to 1980 changed all that. You had Thatcher and the U.K. and Reagan in the U.S. Mao died in 1976, the Solidarity movement in Poland began in 1978, and the Soviet Union peaked in power in 1979. You saw that the pendulum had gone too far and now we're going to cut taxes on capital, we're going to be more globalistic, and trade was going to improve. Since then, capital has risen and assets have done better than labor. Taxes have been light on financial assets and heavy on labor. Everything was reversed on its head. If we look at the events of 2016 -- Brexit, the Italian referendum, Trump, and the rise of nationalist China -- are these the harbingers of something bigger? Or are they just a coincidence? The ground seems to be fertile for things to change globally. If so, does this give rise to a more nationalistic, protectionist, statist scenario? Are labor prices going to go up again? Are we going to tax capital and emphasize wages? We'll see.... LP: Going back to Trump's promise to bring jobs back to the U.S. -- can the government even do that? JC: In the case of the '30s, you had massive public works spending and government spending, so you created construction workers. But on that front, we're not going to compete anymore, as the Carrier guy said. Mexican labor is $3 an hour. No amount of retraining for a lower-skilled assembly job is going to change that. The only thing that will replace that Mexican worker himself is a robot. And a robot is infinitely cheaper than even the cheapest labor. Surveys show that there are jobs open in the economy, but there's just not a skill level to fill all of them. Our problem is the displacement in things like mining, assembly, low-end manufacturing - that's where the job losses have occurred. It is just very hard under almost any scenario no matter what your politics are to see where those jobs are going to come back. To the extent that you have wholesale, large, construction-like projects, then you will put people to work at relatively high rates, but the jobs are episodic and not necessarily career paths. When I was making $14 an hour working steel in Milwaukee in the summers in college, a steel worker could basically say, "all right, as long as I understand that I'm going to work in this factory, I can have a nice living for my family." Those jobs are gone. The plants closed. So the whole idea that someone can now say, "I can work in the Carrier plant for $20 an hour and be assured of a job for life and security and put my kids through college" -- that doesn't exist anymore. That's where the problem and discontent will come -- when you've sold that dream and it doesn't happen. In that scenario, Trump begins to have a pretty short honeymoon. LP: You've long been linked with China. What do you make of the positions of China and the U.S. in the international economy, and how do you think they're changing? JC: To me, the rise of Xi Jinping is a big event still underestimated in the global political economy. He is more of a personality than either Deng Xiaoping or Mao Zedong, certainly higher in stature internally than his predecessors. He is not first among equals in the Politburo Standing Committee -- he's first. This goes along with the theory about the rise of nationalists such at Putin in Russia. Xi Jinping is also a nationalist. He talks about the China Dream, China getting back to past glories, and not exporting communism. What you would have heard Mao say. He's a member the Chinese Communist Party, but the Party exists now as a political apparatus, not an ideology. China would not have the type of capitalism it has today if this were not the case. So these are not Marxist-Leninists, but rather just a fantastic single party in control. We have to understand it in that light. China is increasingly a geostrategic rival. In the past, China looked toward protecting what it had -- making claims on Taiwan and Tibet and ancillary areas, but the Chinese were really content not to compete in the global Cold War between the Soviet Union and the United States. Now we have this multi-polar world, and China sees itself clearly as the prime actor in the Pacific willing to fill any vacuum that the United States begins to pull away from. Xi Jinping comes in and immediately he rewrites the passport maps. He sets the air traffic and extends the air defense zones. More ominously, he begins to militarize the South China Sea, and puts military bases on the islands, which alarms pretty much everybody. (And yet if you look at a map of the Pacific, the only country that really needs to traverse the South China Sea is China itself --oil going from the Middle East to Japan goes around it. The South China Sea is symbolic more than it is geostrategic). I think, however, that Trump has decided that China makes a convenient media punching bag. You can claim that China took your jobs and China is a bogeyman. It seems to me that president-elect Trump does best when he has someone to fight against. However, the broader issue will be that foreign policy and national security events have a whole different dynamic than beating up on a defense contractor for an air conditioning plant. What will be the ramifications? How will China react? What do you do about countries like the Philippines that are in the middle -- a country that has elected its own interesting president, someone who seems to want to embrace China after decades of being staunchly a U.S. ally? What does this do for Japan? Japan itself has a nationalist, Shinzo Abe, who wants to increase military spending and take off the yoke of the Japanese constitution block on an expanded military. There are many questions, but whatever you might think, China and Japan, while big trading partners, are not the best of friends in that neighborhood. Finally you've got the wacky guy in North Korea. What's he going to do? This whole area just keeps quietly but relentlessly getting to be more dangerous. I think that at some point in the first four years of the Trump administration, the Pacific is going to heat up again. People are talking about starting a trade war with China but they haven't really thought it through, because if you talk to corporate execs in the United States, they're sort of quietly terrified. Often the supply chain, even in U.S. manufacturing, relies on parts from Mexico and China coming in. We are pretty interconnected. Lots of businesses, and workers, too, will get disrupted in ways we can't even think of in a trade war. There's a reason why people studied the 1930s with the tariff walls that went up and the disruptions that happened. It's negative for growth. So stay tuned, it's going to be interesting. LP: To turn to Europe, you're a Greek-American, and you have been critical of the Eurozone's attitude toward Greece. What do you make of the situation there now? JC: The key issues for Greece now revolve around two entities that are not Greek. First you have the EU as a whole. We continue to have these bombshells, like the Italian referendum and Brexit -- and you've also got elections coming up elsewhere in 2017. I think Greece was sort of the Spanish Civil War to what's about to be the EU's WWII in that it was the opening preview of all of the problems that are going to come to the fore if Catalonia wants to become independent, if Italy wants to leave, if France wants to leave. The EU is being held together by chewing gum and string right now. With this rise of nationalism -- if that's what it is and it continues -- the EU is going to find itself increasingly a victim of people wanting self-determination in northern Europe. That's the first thing. Second is something I'm much more concerned about which nobody's paying attention to, and that's the continued rise of Erdoğan in Turkey. He has not only consolidated his power through a series of purges --thousands and thousands of journalists and academics have been thrown in prison since the aborted coup -- but increasingly he is becoming more militant and Turkey is becoming a pro-Islamic state that is part of NATO. He's throwing wild monkey wrenches into the whole Middle Eastern situation by making claims on land that was owned by the Ottomans, pre-WWI, like modern-day Iraq, modern-day Syria, and modern-day Greece and Bulgaria. He's warned the EU that he will open Turkey's borders to undocumented immigrants if EU membership talks are frozen. Like Xi Jinping, he's putting out these old maps and saying: this is our real land. Erdoğan is yet another nationalist. Poor Greece is at the crossroads of all these seismic events and Ottoman Empire II. You've got the possible weakening or dissolution of the EU, and Greek debt problems are about tenth on the list of issues in that region. They're going to struggle, no doubt about it. Every time the Greek economy starts to show some green shoots, it seems to stall and fall right back down again. LP: What do you hope might happen in this emerging world? JC: This is the tough thing about being in the financial markets. You can have opinions on all this stuff and either get it wrong or have it not matter. First, I hope our system of free trade holds up. That's one thing I believe in fervently. The evidence seems to be that a rise of tariffs and trade walls and barriers will be bad for global growth. Given the debt overhang that's out there, which is relentless, the ability of economies to service debts in a global trade war will be greatly curtailed, so I'm clearly watching that. I also continue to be concerned, on a stand-alone basis, with the giant debt bubble occurring in China. It has done nothing but just gotten bigger since you and I last sat down. Despite all the talk of reform, there really hasn't been any. The Chinese are more reliant on the state than ever -- on state lending and state banks. The debt continues to grow at twice the rate of growth, and now the currency is depreciating. We're getting a situation where the Chinese economy is still a very important driver of global growth, but increasingly it is using the old methods that the Chinese themselves said only a few years ago that they would have to change. But they can't, because every time they try, the economy slows too fast. China continues to be half of the demand for global commodities. It basically supports Africa and countries like Australia and Brazil. Almost 40 percent of global GDP is either China or commodity-exporting countries whose prime market is China. That's considerable. So we have to look not only at China's role with us, but China's role on its own because it is such a driver for global growth, Chinese growth represents 1 point of the 3 percent GDP growth, so if China were not growing at all, we'd be at 2 percent. Doesn't sound like a lot but it is. We have to keep our eye on what's going on there. A global trade war would probably send China into a really steep recession. How would an average worker navigate a rising trade barrier globally? It's scary. If we look back at the '30s template, one major outlet was, of course, a giant arms race. By the late '30s, you had the whole world realizing the threats of fascism and rearming rapidly. Keynesian government spending was what pulled up the economies; it just had some really bad repercussions from 1939-45. But if we get into any kind of global arms race with China, either conventionally or otherwise, that would be Reagan-like. I don't know what the numbers would mean in terms of employment, but you would take a lot of manufacturing people and turn them to making other things. LP: How do you rate the current moment with big periods of change you've seen in your lifetime? JC: I had this odd personal journey from being a union pipefitter and boilermaker as a college student -- I made more money in two-and-a-half months making steel than I did my first year on Wall Street. I went from being a product of the industrial Midwest and putting myself through college by working in a steel mill, to being the beneficiary of the Reagan-Thatcher era. I saw the world change, but I didn't really understand until years later what an important period the late '70s/early '80s was (and a great period for music, by the way!). If we're in one of those periods now, if 2016 is like 1932 or 1979 -- then you not only have to change your portfolio, you have to change your lifestyle. That's one of the things we've been telling clients. If this is a major shift to populism, nationalism, greater state involvement, and less globalism, then you really have to rethink almost everything in your life. Certainly, if you were a capitalist in 1932, you might be best served to change your outlook. And if you were a union leader in 1979, it would have been good to change your outlook. The question will be, in 2016, would it be best for the Davos man and woman, the globalists, to change their outlook? -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

05 декабря 2016, 13:28

Ants, algorithms and complexity without management

Deborah M. Gordon, Department of Biology, Stanford University Systems without central control are ubiquitous in nature. The activities of brains, such as thinking, remembering and speaking, are the outcome of countless electrical interactions among cells. Nothing in the brain tells the rest of it to think or remember. I study ants because I am interested […]

24 ноября 2016, 11:06

Links for 11-24-16

Environmental Regulations Really Work - RegBlog FOMC Minutes, November 1-2 - FRB Paying Bone Marrow - Tim Taylor Trumpism Has Dealt a Mortal Blow to Orthodox Economics - INET The consent of the governed: The hole at the heart of...

18 ноября 2016, 10:15

Links for 11-18-16

Globalization’s Last Gasp - Barry Eichengreen Labor theory of value: a primer - Branko Milanovic Unwinding of the pound carry trade - VoxEU Ideology in economics - Stumbling and Mumbling The Simple Economics of Machine Intelligence - Digitopoly A higher...

12 ноября 2016, 23:01

Технологии подрывают капитализм

Дальнейшее развитие технологий может привести к углублению социального неравенства и подрыву основ капитализма — так считает экономист Адэр Тернер, председатель управляющего совета в Институте нового экономического мышления.Адэр Тернер, бывший вице-президент европейского отделения банка Merrill Lynch и экс-руководитель британского Управления по финансовому регулированию и надзору в интервью изданию Business Insider рассказал о возможных социальных последствиях, которые сопутствуют развитию технологий. По его словам, четвертая технологическая революция может привести к тому, что все ресурсы будут сосредоточены в руках компаний-гигантов, у которых есть необходимые знания и навыки для создания софта, в то время как все остальные будут вынуждены довольствоваться крайне низкооплачиваемой работой.Если во время индустриальной революции развитие технологий всегда приводило к созданию рабочих мест, то текущая революция технологий приводит только к их сокращению. Например, если Генри Форд хотел построить две фабрики вместо одной, то ему требовалось в два раза больше рабочих. Теперь же, напротив, массовая роботизация вытесняет людей из сферы промышленности и производства: так, согласно докладу канадского Международного института развития в ближайшие десять лет роботы смогут заменить более половины шахтеров.В то же время с технологическим развитием преимущество компаний, подобных Facebook, Uber или Airbnb, будет только увеличиваться. Например, в Facebook при рыночной капитализации в $370 млрд. работают только 14 тысяч человек, и первоначальные инвестиции в компанию были не так уж велики. «Причина этого заключается в одном исключительном экономическом свойстве технологий — если вам удалось создать одну копию программного продукта, остальные несколько миллионов копий не будут стоить вам ничего», — говорит Тернер.Летающий автомобиль Ларри Пейджа замечен в аэропорту ХоллистерОдним из выходов из сложившейся ситуации может стать повсеместное введение безусловного базового дохода. По мнению Тернера, государство должно поддерживать людей, которые оказались в крайне невыгодном положении из-за развития технологий — по крайней мере, выплачивать им пособия, достаточные для оплаты расходов на продукты питания и здравоохранение. С ним согласен финский экономист и предприниматель Бьорн Валрус, который считает, что автоматизация в скором времени приведет к полному исчезновению рабочего класса.[link]

01 ноября 2016, 10:06

Links for 11-01-16

Trade Plateaus (Wonkish) - Paul Krugman The revival of US economic growth - Dale Jorgenson, et. al. Denial of Access to Mortgage Credit for Black Americans - INET Will social democracy return? - Branko Milanovic Bank of Japan at the...

27 октября 2016, 16:26

Inequality As Policy: Selective Trade Protectionism Favors Higher Earners

Dean BakerInstitute for New Economic Thinking, October 27, 2016 Read More ...

26 октября 2016, 10:06

Links for 10-26-16

Labor Market Monopsony - Council of Economic Advisers Message to the candidates: Hands off the Federal Reserve - Alan Blinder The U.S. Job Recovery Is a Global Laggard - Narayana Kocherlakota Why unconventional monetary policy works in theory - Farmer...

20 октября 2016, 10:06

Links for 10-20-16

Fiscal Foolishness (at the Debate) - Paul Krugman It’s a war of ideas, not of interests - Dani Rodrik Africa's prospects for enjoying a demographic dividend - VoxEU Looking for Local Labor Market Effects of NAFTA - RESTAT Income distribution...

14 октября 2016, 10:06

Links for 10-14-16

The Mathematics of Cake Cutting - Scientific American Fiscal crisis quantitative easing works in theory, too - Ricardo Reis Unemployment Insurance Extension Did Not Destroy Jobs - INET China September Exports: Not Quite as Bad as They Seem? - Brad...

13 октября 2016, 18:53

Three Things To Know To Hold Wells Fargo Accountable

Just about everyone wants to hold Wells Fargo accountable for a scheme in which sales quotas drove employees to set up phony credit card and bank accounts without customer knowledge. A Donald Trump advisor declared the behavior “stupid” and “greedy,” while Hillary Clinton proposes to make it easier for consumers to take companies to court for such behavior. So far, over 5,000 regular workers have been fired at Wells Fargo, and the Consumer Financial Protection Bureau has fined the bank $185 million. “Hold Wells Fargo Accountable” even has its own Facebook page.Will it make any difference? Not much, warns William Lazonick, a leading expert on American corporations and co-author of a new study on CEO pay sponsored by the Institute for New Economic Thinking. Until critics truly understand why companies have strong incentives to create such schemes in the first place, they will go on doing so, hurting workers, customers, and taxpayers. The entire economy will be dragged down and economic inequality will continue to rise.   Until critics truly understand why companies have strong incentives to create such schemes in the first place, they will go on doing so. As Lazonick explains, the Wells Fargo cross-selling scandal and other scams that ripple across the headlines are born in a business culture in which executives are focused on jacking up stock prices in the short term so that they can cash in on stock options and awards. As long as this continues, the urge to cheat will be too tempting for most to resist.Here are three things anyone wanting to hold Wells Fargo accountable needs to know.1) American businesses have become stock manipulation machines.When a company does a stock buyback, it purchases its own outstanding shares, a financial trick that reduces the number of shares on the open market and boosts the price per share. As Lazonick points out, the 449 companies in the S&P 500 index that were publicly listed from 2003 through 2012 used over half their earnings to buy back their own stock, almost all through purchases on the open market. Buybacks continue apace.When companies do this, profits that could have been used to develop new products, pay workers fairly, and invest in the long-term health of the firm are diverted to prop up share prices. Executives love buybacks, because they often get paid in stock-based instruments. They can time stock price-boosting activity and cash in at the optimal moment to line their pockets.Before 1982, the Securities and Exchange Commission (SEC) considered stock buybacks to be a potentially unlawful form of stock price manipulation. But that year, under the sway of Reagan-era enthusiasm for unfettered markets, the SEC loosened its rules. This change, plus a shift toward stock-based compensation for top executives, has exacerbated economic inequality by pushing pay at the top into the stratosphere while shortchanging workers. Instead of growing companies in the long term and paying workers what they deserve, executives have focused on boosting stock prices in the short term for their own benefit. Stock buybacks drain trillions of dollars from the real economy and produce nothing of value.2) Focusing on short-term stock prices leads to corruption.As long as companies are incentivized to boost stock prices in the short term, executives will be tempted to do that by any means necessary. The problem is not just buybacks, Lazonick emphasizes. They will also engage in all sorts of misconduct and even outright fraud, whether it’s Wells Fargo setting up fake credit card accounts or pharmaceutical firms resorting to price gouging, as Mylan has done with its EpiPen.Lazonick points out that even the most vocal critics of such shady business practices often don’t understand what’s behind them. “When Mylan raises the EpiPen price,” he explains, “they use a million phony arguments to justify why they are doing it, but the truth is that they are doing it to boost the stock price so that executives can gain.”Simply stopping a particular shady activity will not solve the problem, says Lazonick. As long as the incentives for stock price manipulation are there, companies caught in one scam will just move onto another. “It’s totally corrupting,” he observes. “There may be some ethical constraints going on in some companies, but the scams still continue. Price gouging has been going on in pharmaceutical companies for thirty years. No one should be surprised about Mylan. Or the next Mylan.”Lazonick notes that even if an executive doesn’t want to engage in unethical behavior to boost stock prices, the pressure to do so from, say, an activist investor may be too great. Her job may depend on it. “CEOs who resist may be gone pretty quickly,” he notes.3) Punishment means little until executive pay is understood.Big fines, clawbacks, and withholding executive pay may sound great in terms of punishing wrongdoing, but they don’t mean much when they are based on fiction.The Wells Fargo board announced that CEO John Stumpf would lose unvested stock awards and would not be paid his annual salary while the investigation into the cross-selling scam was going on. But how much does he actually get paid? How much are his stock awards really worth?Turns out, hardly anybody really knows.Lazonick’s research with Matt Hopkins shows that for decades, corporate executives have been making far more money than anybody reports, because the metric used to estimate what they take home is wrong.When people talk about how much a CEO like Stumpf makes, they are usually basing the number on something called ” estimated fair value” (EFV) of his or her stock options and stock awards. But that doesn’t represent what Stumpf puts in his bank account and reports on his tax return. In the case of stock options, that estimate derives from a celebrated economic theorem, often referred to as the “Black-Scholes” model after the two economists who formulated it. But the real numbers require looking at “actual realized gains” (ARG) — that’s how much stock-based pay is worth at the time executives actually cash in.When you use the EFV metric, Stumpf’s compensation numbers from 2006-2015, for example, add up to add up to $179 million. That’s a lot of money, to be sure, but if you use the correct ARG numbers, you see that Stumpf’s taxable, take-home pay for those years was actually $259 million. That’s 1.45 times more than the vast majority of reports indicate.Even the most progressive organizations have been incorrectly stating CEO pay, says Lazonick. The AFL-CIO, for example, has long decried a ratio of CEO-to-average-worker pay of about 350:1. The actual figure, according to Lazonick’s research, is more like 700:1. He warns that people need to realize that they have been given false information."Reporters and others who are questioning executives on these things just quote the wrong numbers. The executives must be laughing all the way to the bank. The ones who are doing all the buybacks and the price gouging and the scams to get their stock prices up are the same ones for whom the actual realized gains are far out-pacing this phony metric of estimated fair value. The public is being mislead."   No wonder executives are happy that nobody understands it. There's no accountability if there's faulty accounting. The actual numbers that determine what executives take home reflect stock price volatility — the kind of volatility that happens, for example, when a buyback or cross-selling scam jacks up the price.No wonder executives are happy that nobody understands it. There’s no accountability if there’s faulty accounting.Lazonick and his colleagues were surprised when they found out how far off reported estimates of actual CEO pay have been:"Once we really took a deep dive into how to estimate executive compensation, we realized how complicated it is to understand. We knew there was a there was a problem of measurement, but we didn’t know how systemic it was or the extent of it. The reality is astonishing."Lazonick points out that while understanding the CEO pay numbers is important, even more important is realizing what’s driving those numbers. Executives engage in stock price manipulations schemes because they expect to time the market and take home giant piles of money when those prices rise temporarily.Stock buybacks that shortchange workers and scams that defraud customers drive the numbers. They fatten the banks accounts of executives and leave everyone else high and dry.It would be helpful, of course, if regulators would catch misconduct and fraudulent activity earlier, but ultimately, says Lazonick, the solution must come from taking on the corrupt culture of self-centered stock manipulation behind these activities.The fix, he says, is a relatively simple one.“The rule that was changed in 1982 has become a big problem. The SEC should not allow stock buybacks that encourage corporate executives to benefit from stock-price manipulation and to engage in unethical behavior. It’s time that we recognize how corrupting to business and how damaging to our economy this has become.”  -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.

10 октября 2016, 08:42

Sing for our time too, or what Homer can teach us about complexity

Last week’s Workshop on Complexity and Policy organised by the OECD New Approaches to Economic Challenges (NAEC) team along with the European Commission and the Institute for new Economic Thinking (INET) included a discussion about how you build a narrative around complexity. As one participant pointed out, “complexity economics” isn’t the most thrilling of titles, […]