The View From 1776

Keynesian Statistics

From one aspect, Keynesian economics is about aggregating many very different kinds of economic data into single indexes.  It is this which animates the Federal Reserve’s monetary policies, Congress’s stimulus spending packages, and New York Times propagandist Paul Krugman’s never-ending calls for increasing governmental deficit spending.

Posted by .(JavaScript must be enabled to view this email address) on 11/14 at 12:31 AM
  1. Fortunately, the unemployment rate has dropped again to 5.8% and the economic outlook is improving under the Fed's polices and the (inadequate) stimulus package passed by Congress. And one cannot argue with Stockman and Stapler's contention that not all jobs are equal. But the fact that all jobs are aggregated in the unemployment statistics does not negate the usefulness of the statistics.

    If you want to break out "good" jobs from "not-so-good" jobs, you certainly can do that, and doing so would help illuminate certain economic problems that arise out of failures of our education system. That granularity would enhance our understanding of where policies could be improved. More data analysis is always good. But the overall number is a valuable rough guide to understanding the health of the economy in a broad brush way and the method of data analysis in no way invalidates the need to increase government spending during recessions.
    Posted by .(JavaScript must be enabled to view this email address)  on  11/14  at  10:55 AM
  2. J. Jay,

    Obviously, you once again skimmed the linked article without actually reading it; else you’d have realized it makes nonsense beforehand of your argument the so-called stimulus was somehow ‘inadequate’. The article also addresses jobs metrics such as the one you cite (U3), how poor those statistics are at giving us a true picture, and how easily and often they are manipulated by politicians and bureaucrats to say whatever they want them to say. Moreover and, as Stockman’s graphs clearly demonstrate, there has been a real decline in the U.S. jobs picture; which is nothing to brag about for either Obama or Bush.

    Stockman (not I) is the one negating the usefulness of aggregated statistics such as BLS regularly disgorges as gospel, but the points he scores against BLS is less about they are aggregated than they are inappropriate to what they are supposed to tell us; and that is because BLS counts (and double-counts) heads rather than measure economic health. It may be an acceptable statistic for determining (roughly) how many jobs are worked, but is not a reliable statistic for showing how many people actually work (or, conversely, are not working who should), how fully, or as a proxy for the overall jobs market versus economic health; which is how it is typically misrepresented.

    To make Stockman’s point clearer, let us suppose in year 2003 that out of 300-million citizens there were 100-million full-time employees and 10-million part-time employees working 30 hour weeks. The rest consist of entrepreneurs, capitalists, children, housewives, retirees, and long-term welfare recipients who are not counted. I chose 2003 as that was the last year for which the U3 rate matches the current rate of 5.8%. Let us next assume that in year 2014 we have 310-million citizens plus another 20-million ‘undocumented’ individuals (newly arrived), of whom 87.5-million are legitimate full-time employees, 12.5-million are undocumented ‘guest-workers’ (full- and part-time), and only 750,000 citizens are part-time employees. Moreover, in reaction to Obamacare, part-time worker hours have been sharply cut from 30 to 20 hours. To keep this simple, I am holding all other features equal; including: aggregate hours of all those employed, the average hourly wage, inflation & CPI at 0%, &c. Amongst citizens, the ratio of paid workers to dependents will have remained about the same. However, we know that among illegal-aliens, the ratio of earners to dependents is much higher. Moreover, because many (if not most) ‘undocumented workers’ take their wages ‘off the books’, they will be unaffected by Obamacare’s employer penalties, and can, therefore, work more hours at lower wages than legitimate workers. Notice right away that while total available work hours has remained about the same, the total hours per employee has shrunk dramatically, especially among young, unskilled, low-wage workers. Personal wages will have also shrunk, albeit less dramatically, as ‘guest workers’ siphon off hours and wages that should have gone to unskilled citizens. These are just a few of the things our BLS statistics fail to account affecting our base population. Also note that, while U3 for both years is about the same, U6 for 2014 is at 12% versus 10% for 2003; which correlates quite well with my model.

    The upshot of this little exercise is that, while U3 is indeed much lower and glacially receding from the 2009 high of 10.3%, both the total number and percentage of Americans actually out of work (including those who have given up and have become charity dependent) are still much higher than 2003-2008 levels (see http://www.shadowstats.com/alternate_data/unemployment-charts ). The point Stockman makes is that, while the U3 employee head count may be back to pre-recession levels, the overall employee situation and jobs market are not, and may never return to healthy levels without shedding a lot of recently piled-on, Keynesian, monetarist and statist baggage.

    This is not fresh ground we are discussing here, as we have amply demonstrated to you on many occasions the multiple flaws in your leftist line of reasoning, as well as your overreliance on self-serving pronouncements from government and its media stooges. Because you are blinded by some need to evade reality, you really need to look ‘outside the box’ to find arguments as stand up to scrutiny (which, thus far, you refuse doing). I agree with you U3/U6 has some [minor] utility, but not in the way you suggest, and cannot be manipulated to depict a strong recovery where none exists (recovery of sorts yes, but not one you can brag about). No one statistic can do that, and it is only by looking at all the elements of an economy (with a good deal of granularity) we can confidently say we are a) recovering or b) still losing ground. Your focus needs to be micro as well as the macro – on individuals as well aggregates – to see not only the economy has recovered but also how individuals comprising that economy are faring. This combined picture does not present a ‘robust’ economy at all, especially for those at or near the bottom. So you (and Obama) need to come down off of Mount Olympus to see what the rest of us plainly see. The lack of a real recovery as affects both those out of work, as well as a great many of us supporting those unemployed (i.e., adult children, close-relatives and spouses).

    This is not a partisan complaint I am making; it is not Democrat versus Republican ‘visions’. This is government (and all those married to the idea of ‘more is better’) versus those of us who want to be left alone to make our own lives better. In the processes we, not government, will make this a better, stronger freer and more prosperous society for all – just as we have done many times before. The strength of any country is not in its government, but in its people and in our freedom to act.
    Posted by .(JavaScript must be enabled to view this email address)  on  11/16  at  06:40 PM
  3. Bob,

    You make a number of very fair points. It is certainly true that a deeper analysis of the job situation will reveal trends in the employment of subgroups that the gross numbers do not expose.

    At the same time there is undeniable utility in continuing to record the broad brush overall statistics without changing the method of calculation and reporting because altering the analysis would prevent comparison with past data. So, while one number cannot show the entire picture, it is still a valuable number.

    I think we agree that all is not rosy within our economy, but I think we can also both agree that conditions have improved since 2009. I think we can also both agree that the US economy is in better shape than any other economy on earth right now.

    So, while I attribute this in large measure to the success of the (inadequate) stimulus, TARP, and the Fed's QE, you apparently do not. Or perhaps you maintain that the (limited) recovery occurred in spite of the Keynesian activities rather than being due to them.

    It may be that you believe that the recovery would have been quicker and broader had the Fed done nothing, and there had been no bailouts. Fortunately, we do have a baseline model for this behavior in what the Europeans did after the recession. Because we can also see that the austerity model they followed is failing, it is difficult to conclude that their approach would have worked better here!
    Posted by .(JavaScript must be enabled to view this email address)  on  11/21  at  04:33 PM
  4. J. Jay,

    I must apologize in advance for any typos as I am typing with a sprained wrist.

    Biggest is not necessarily best, or even better. With regard to your comment “…we can … agree that conditions have improved since 2009 [and] the US economy is in better shape than any other economy on earth right now”, I agree to the first but not the second part. You are presuming that, because the U.S. still has the largest GDP of any country, that that makes it more robust than those of smaller countries. However, when viewed on a per capita basis, we rank only 10th out of 195 countries (see http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita ). Now, let’s look at some other comparative measures:
    64 out of 219 – unemployment
    16 out of 34 – employment rate among OECD countries
    151 out of 219 – GDP growth rate (i.e., relatively stagnant)
    84 out of 187 – trade imbalance as %GDP
    7 out of 148 – Global Competitive Index

    To put in perspective what each of these metrics means for us and our own economy, here are some values on which those comparisons were made:
    Unemployment rate – USA: 5.8%, Qatar: 0.03% (best), Zimbabwe: 70% (worst)
    Employment rate – USA: 66.7%, Iceland: 78.2%, India: 38.4%
    GDP growth rate – USA: 1.6%, South Sudan: 24.7% (best), Central African Republic (Congo): -15.40%
    Trade-Bal as %GDP – USA: -2.39%, Timor-Leste: 45.01%, Mozambique: -39.51% (worst)

    Global Competitive Index is a blended metric, so I will not here list its highs and lows, but have provided a link to those below. GCI is important because it tells us how strong we are in the global market, and whether we are likely to grow or stagnate in competitive markets.

    Note I include trade imbalance not because it is necessarily a bad thing, but because ours has been constantly negative for decades purely as a consequence of meaningless liberal policy gestures. Also, and as I said before, bigger is not necessarily better (though, in some cases it is; as I will get to). GDP growth for South Sudan is a whopping 24.7%, but that mostly derives from a single resource development and is unlikely to be sustainable.

    I will, here, throw in two more metrics; one providing a broader or ‘compiled’ measure of economic robustness and another measuring the degree to which each country operates according to ‘free market’ principles. Forbes’ ranks the USA 10th (out of 134 countries) as favorable to business (climate). As recently as 2009, we placed 2nd in that ranking, and have been slipping ever since. Prior to 2009, we were always in the top three, and typically placed first. Heritage now ranks the USA 12th in economic freedom, after such countries as Estonia and Chile; countries once ranked among the more economically oppressed.

    So, no, we are not in better shape than most countries. We don’t even make the top 10 by most measures, and barely rank 10th for per capita GDP. I already discussed why and how government pronouncements of unemployment are misleading, yet you persist in insisting we must take them at face value. Sorry, but we choose not to be so easily mislead. Yes, we still rank as the largest economy on Earth, but so was Britain prior to WWII right before we snatched that distinction from them. You really need to take more time thinking through such assumptions to verify they stand up to scrutiny. Try putting yourself in your detractor’s place by testing them for easily corrected flaws. Then you won’t be so often embarrassed by your own inattention to detail.

    It should also be noted that Obama is perfectly okay with us being ranked lower than heretofore. Part and parcel of his ideology is that we are too big, and big equates to ‘evil’ in his jaundiced worldview. Possibly, you share that mindset and, therefore, prefer we suffer a little so as to achieve some kind of moronic ‘balance’. He imagines he can engineer our deflation such that no other country then assumes our vacated dominance. The reality is, however, should we lose our place as the world’s economic (and political) powerhouse, some other country will certainly fill that void; and that is unlikely to be an improvement for the world as a whole. This is the rare case where bigger is, in fact, better. It is better that we (or some equally ‘liberal’ society) be in an economically and politically strong position to arbitrate for the weak and oppressed. The alternative is the ruthless will, once again, dominate. Even if no one superpower emerges, that still leaves the weak vulnerable to every insult, invasion, exploitation, injustice, abuse and oppression; things you liberals claim to stand thoroughly against. If only that were true, we could all sleep a little better.

    I will address some more of your confusions in a subsequent post, as time allows.

    Links:

    http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)
    http://en.wikipedia.org/wiki/List_of_countries_by_real_GDP_growth_rate
    http://en.wikipedia.org/wiki/List_of_countries_by_unemployment_rate
    http://en.wikipedia.org/wiki/List_of_countries_by_employment_rate
    http://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance_as_a_percentage_of_GDP
    http://en.wikipedia.org/wiki/List_of_countries_by_real_GDP_growth_rate
    http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2013-14.pdf

    http://www.forbes.com/lists/2011/6/best-countries-11_land.html
    http://www.heritage.org/index/ranking - ‘free’ market ranking
    Posted by .(JavaScript must be enabled to view this email address)  on  11/23  at  12:21 PM
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