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Labour market measurement – Part 2

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

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Differences on the Eurozone periphery

This will be one of those blogs that lays out what a researcher does in a day as opposed from the blogs I write that use what I do in a day as an evidence base for advocacy. The former type of blog is based on data digging and observing some interesting patterns. In the current context, the “digging” is not finished and so the story presented is incomplete. But if you have a penchant for statistics and data patterns like me, then you will find the following story interesting. This work is part of a larger work I am pursuing that considers the question of cyclical labour market adjustments. That will become a completed book in a few years (there are others in the queue ahead). But today I was examining the relative responses of real GDP and employment over the course of the economic cycle and some interesting patterns certainly emerged. What we find, among other things, is that the Eurozone nations on the periphery have behaved quite differently to each other over the crisis (and prior to the collapse).

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Fiscal austerity is self-defeating

The British Office of National Statistics published the latest National Accounts data for the third-quarter 2012 yesterday, which showed a modest burst of growth, consumer driven via the Olympic Games. It is a temporary spike in a downward trend. I will consider the growth data another day. It follows the release last week (November 21, 2012) of the latest – Public Sector Finances – for October 2012, which demonstrates why fiscal austerity is self-defeating. By failing to acknowledge that when non-government sector spending is insufficient to drive economic growth at levels sufficient to reduce unemployment there is a need for increased discretionary government net spending to support growth, the British government not only is creating an increasing economic malaise but failing to achieve its own (mindless) targets – a reduction in the deficit and outstanding public debt. The lesson is that fiscal austerity is self-defeating on all counts – the things that matter (the real economy including unemployment) and the things that don’t matter (financial ratios).

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Macroeconomic constraints render individual action powerless

When recessions become prolonged and long-term unemployment rises, the conservative denial machinery always scapegoats the most disadvantaged by recommending cuts to welfare to make people more desperate. This is dressed up in terms that attempt to make this sort of policy sound reasonable – like we should all be adventurous and entrepreneurial. The facts are that mass unemployment represents a macroeconomic failure that can be addressed by expansionary fiscal and/or monetary policy. It has nothing to do with the provision of the miserly amounts that are given to the unemployed via income support arrangements. Cutting those benefits will not cure involuntary unemployment. In all likelihood, cutting benefits will make the aggregate demand shortfall that caused the unemployment to worsen. The result is that the cuts will only make the lives of the unemployed more desperate than they already are. It is time that the conservatives learned about macroeconomic constraints.

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More myths from the mining oligarchs

Australia is in the grip of a group of mining oligarchs, who are spending enormous amounts of monety to shape the economic debate to suit their own very narrow interests. They are opposed to the mining tax (a resource rent tax) and have in the past denied the state (on behalf of all of us) owns the resources that they plunder for private profit. They have also sponsored national tours of leading climate-change deniers (such as Lord Monckton) who are known to trade on distortions of the truth. Overall, there personal resources guarantee them access to the daily media and they use it relentlessly. They also write books which get national coverage and have a record of suing peope who criticise their views. The result is that there is very little critical scrutiny of the propositions they advance to justify their claims. Some of the propositions are pure fantasy yet they have gained traction with the public who have been too easily duped by the promotional onslaught. Here is a little sojourn into the fantasy world on one such oligarch.

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Saturday Quiz – November 24, 2012 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Labour market measurement – Part 1

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

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British labour market is very active but stuck

The British economy has entered a double-dip recession as a result of aggregate spending slowdowns driven by a pessimistic private domestic sector, a poor net exports outlook and the increasing impacts of the fiscal austerity. The result has been that unemployment is stuck at its elevated levels and will likely rise in the coming year if the government doesn’t change its tack. However, the official data released last week by the UK Office of National Statistics (see link below) shows us that if you are employed in Britain at present the chances of losing one’s job are slim. It is rising but still very small. What the gross flows data allows us to appreciate is that the much-focused on unemployment rate does not tell us about the chances that are worker will remain in that state, become employed or leave the labour force. Even those the risk of an employed person becoming unemployed is low, it still remains that the chances of an unemployed person remaining so is higher and significantly higher than before the recession. This is because the net flows into employment are too low relative to the labour force growth. This blog is the first of a few which attempts to encourage people to look deeper into the statistics and gain a wider appreciation of what is happening in the labour market. I will write more on it in further blogs when I have more time.

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Neo-liberals can’t even identify self-interest when it is staring at them

The British Prime Minister gave a – Speech – to the Confederation of British Industry Conference on November 19, 2012, where he outlined how tough his government had been in terms of imposing fiscal austerity. In other words, he was taking responsibility for Britain’s appalling dive back into (double-dip) recession, although it is hard to find that confession in his actual words. Over the English Channel, the EU is busily preparing the champagne and fine foods for its upcoming summit on the 2014-2020 EU Budget. The EU leadership is talking tough and proposing large cuts in EU-level spending not the least being harsh cuts in the Overseas Development Aid (ODA) budget. The cuts are, of-course, based on false premises – that the economies are broke and have to live within their means – even though millions of workers lie idle. The idiocy is exemplified though in the failure to understand that ODA, while perhaps provided for ethical reasons, actually improves the outcomes of the donor nation. So these so-called free marketeers cannot even identify self-interest when it is staring them in the face. So they busily go about cutting their noses off!

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