Economic Analysis

NPR (National Public Radio in the US) has two excellent podcasts about money and inflationary expectations:

The first is the use of stones as money in the Island of Yap.

The second is about controlling inflationary expectations using a fake currency - A Unit of Real Value.

The labour market and productivity are both supply side constructs and have an impact on the long term growth path of the economy.

Here are two stories from the New York Times: One is a personal story and the other a data story.

Basically as labour markets get tight (or as unemployment declines) wages tend to increase.  Unfortunately they are not.  Not just in the US but also in some other European countries.

The articles put it down to skills and the decline of unions.  Skills are shifting from the middle to the low and high end.  This is a structural problem. Its no wonder Singapore always emphasizes skills upgrading. At the end of the day we should expect inequality to increase. Partly also due to the gig economy.

The other is a scary story from the UK - productivity growth has declined - which means long term growth will decline.  Here is the full report from the The Office for Budget responsibility. But if you don't want to read that, watch this video they posted on twitter.

Venezuela is in bad shape and this is a country with natural resources. A good example of 'government failure'.

Here is a simple example (with a spreadsheet) of the properties of a straight line downward sloping demand curve (monopoly)

Here are two articles on Pigouvian Taxes and The Coase Theorem - I have shown you a picture of the former and will discuss the latter next week. The first article provides various examples of the use of these taxes to deal with externalities. The Coase theorem has applications beyond externalities.

It is the foundation of the transactions cost literature and the literature on contracts. This literature also provides us another way to look at markets and suggests that firms are substitutes for markets. They are both 'governance mechanisms' - they govern the conduct of transactions and the costs of using these two governance mechanisms determines which one is more likely to be used.

It also helps us to understand contracts and vertical integration. For example, we should expect to observe long term contracts or vertical integration in the aluminum value chain. This is because an alumina refinery can only accept a particular grade of bauxite and and aluminum smelter can only accept a particular grade of alumina. This type of exchange cannot be carried out using markets.

Automation and its potential impact on jobs is a much debated issue. A company which makes robots for use in the garment industry and their likely impact. Leather made using biotechnology.

The Adidas "Speedfactory" in Germany which uses 3-D printing and robots and has very few employees.

Here is a video.

Two articles on inequality. One on the role of government and taxes and the other on how employee benefits have changed over the years and how outsourcing cleaning services has contributed to income inequality.

Here is an article from the NYT by Paul Krugman on Europe.  And a slide deck he refers to.  The slide deck shows us a number of things:

• Output and capacity utilization are well below potential
• The crisis reduced Europe's potential GDP
• Investment has tanked
• US productivity is way higher than Europe's
• Interest rates are low
• People do not expect inflation (or expect low inflation)
• Bank lending to the private sector has tanked
  

Krugman is arguing for a Keynesian fiscal response to tackle the demand deficiency.

Here is an article from the NYT on the Phillips Curve. Janet Yellen thinks it's still important ... others don't.

This is a video on coordination games and Keynes.  Slides are here.