On Monday, however, President Obama may have let the world know that Bernanke is out of the running for the position. Obama mentioned that Bernanke stayed in the position "a lot longer than he wanted or he was supposed to," and he was evasive when asked whether he would reappoint Bernanke if Bernanke wanted the job. Those statements are certainly going to fuel the gossip surrounding Bernanke's potential successor, so stay tuned.
Fogel had been a professor at the University of Chicago, and his main claims to fame were his research on the economics of slavery and his use of economic theory and fairly rigorous statistical methods (common in economics in general) in the study of history. His work was controversial in large part because it showed that slavery was not, as a lot of people thought, an inefficient system that was doomed to fail. (One could, however, interpret this message as supporting the need for government intervention end the practice.) Fogel received the Nobel Prize in 1993.
My favorite line from the essay, despite not being used to make a direct point, is the following: "That is, we shouldn't be concerned about the next Steve Jobs striking it rich, but we want to make sure he strikes it rich in a socially productive way."
In related news, I wonder what macroeconomists would think about this alarm clock's effect on the money supply. At the very least, we can name it the "anti-Bernanke clock."
This concept is nowhere better illustrated than in the market for diamonds. Essentially, the DeBeers diamond company convinced men (and, by extension, women) a while back that engagement rings were absolutely necessary, and then they went around buying up all of the world's diamonds so that they could release them at a pace that is profit-maximizing for the company. In related news, monopolies are not welcomed in the U.S., so DeBeers was the subject of a class-action lawsuit back in 2008 and is now sending out checks to compensate those whose prices were inflated due to monopoly power.
Another fun fact from the article: Diamonds don't actually hold their value, so don't let an unscrupulous jeweler tell you otherwise.
Recently, entrepreneur Nick Hanauer got the chance to essentially say as much to the U.S. Senate. A few points in the remarks are worth noting:
- I'm not sure that I entirely buy the supposed direct relationship between taxes and hiring, if for no other reason than labor costs are an expense to a business and thus not part of its taxable income. It is, however, possible that higher corporate taxes make it less attractive to produce on the margin and therefore companies might not expand as much, but even this argument is challenging since the taxes wold affect all businesses that people put their resources into. (This isn't even considering the fact that much of the "job creators" talk focuses on personal rather than business taxes.)
- The argument that Hanauer makes perfectly characterizes the demand versus supply debate that exists in macroeconomics. Clearly, an economy needs both demand and supply to function, but which comes first? This is basically the macroeconomic equivalent of the chicken and egg problem. (On the other side of the argument from Hanauer you have Say's law, which was sarcastically co-opted by John Maynard Keynes as "supply creates its own demand.") I'm inclined to take Hanauer seriously on this point, since he is clearly speaking from experience.
- I think the statement "the goal of every business--profit-- is largely a measure of our relative ability to not create jobs compared to our competitors" is one of the best parts of the speech. Really, how many companies can you think of that will certainly try everything to get more work out of existing employees (and existing salaries) before bringing in new people?
- From a policy perspective, fiscal stimulus (read, tax cuts that increase the deficit) are attractive because they get people to consume more. Like Hanauer, I've often wondered if policy makers realize that rich guys often don't use but a small portion of their money for consumption. (Talking to you, Waren Buffett. Also, I think the term Hanauer is looking for is "low marginal propensity to consume.") In some cases, there could still be aggregate demand benefits to tax cuts for rich people if they put their extra income into savings, since savings ultimately funds investment. At the present time, however, interest rates (i.e. the cost of borrowing to invest) are already so low that these effects would be greatly muted.
- It's important to understand that the lower tax rate on capital gains as opposed to income is at least partially a result of the fact that the profits causing the capital gains are already taxed at the corporate level whereas labor is a pre-tax expense for companies. (In other words, just because somebody's not physically writing a check doesn't mean that he's not paying a tax.)
You can take or leave Hanauer's normative statements on inequality, but, either way, the guy makes some decent and realistic economic points and highlights some areas that require more nuanced thinking.
- The nonfarm economy added 175,000 jobs and the unemployment rate rose a tiny bit to 7.6%. (If you are confused about how both of these things can happen at the same time, you haven't been doing your reading.)
- This translates to 11.8 million unemployed people in the U.S.
- Notable industry employment gains were in professional and business services, food services and drinking places, and retail trade.
- Federal government employment fell by 14,000 this month, for a total decline of 45,000 over the last 3 months. (This is mainly the sequester in action.
- Average workweek hours wages basically stayed the same from last month, at 34.5 hours and $23.89, respectively.
Overall, the jobs report was in line with what people were expecting, though some say it's better than expected, and a few others even seem to think it's the most important thing ever. The market reaction to the report appears to be positive for stocks but negative for gold and Treasury securities.
The term is a reference to Japan's Prime Minister, Shinzo Abe, and it's clearly the same play on words that got us Reaganomics, Freakonomics, and so on. (Sidenote: if you want an -onomics named after you, just run a country or sell a few million books!) Abenomics has actually been around for a while, since Abe was reelected in December 2012 and introduced most of his policies at that time. Abe's goal is to reinvigorate the Japanese economy and bring it out of the general stagnation that it has been experiencing over the last couple of decades. (In fact, China surpassed Japan in 2010 to become the world's second-largest economy.) The specific plans include a mix of inflation, government spending, and growth initiatives, and the specific points are as follows:
- Targeting inflation at 2% per year.
- correcting or at least mitigating the appreciation of the yen that has made it hard for Japan to exports to other countries,
- Lowering interest rates to bring them (at least in real terms) into negative territory,
- Quantitative easing,
- Public investment in infrastructure projects.
Prominent economists such as Joe Stiglitz approve of Abe's plan, and we're starting to see the effects it is having on the Japanese economy. So far, the plan seems to be working, at least by some measures, but others say it is faltering for a number of reasons or that it is overshooting on the currency front. Regardless, it provides an important case study for the rest of the world.
Krueger's rumored replacement is Jason Furman, who is currently the Deputy Director of the National Economic Council. Greg Mankiw, a former economic adviser to President Bush, approves of the choice, and Tyler Cowen agrees. So far, the most notable feature of Furman's rumored appointment is that he is one of the few people slated for this role that have spent more time in Washington than they have as academic economists. Whether that is a positive or a negative remains to be seen, and you can read a bit more about his particular views here.
In the meantime,