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Thread: End of the Summer already? it is only Sept.

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    End of the Summer already? it is only Sept.

    Analysis: Summers exit lets Obama retool team and message

    Analysis: Summers exit lets Obama retool team and message | Reuters

    (Reuters) - The departure of economic adviser Larry Summers opens the way for President Barack Obama to shake up leadership of his economic team and show he is taking seriously growing public frustration over the sluggish economic recovery.

    Whoever replaces Summers will have policy options constrained by a record $1.47 trillion budget deficit and the possible Democratic loss of control of the House of Representatives in November 2 congressional elections.

    * With slow economic growth and nearly double-digit unemployment the central issues in the elections, Summers' exit continues the overhaul of Obama's economic team, after White House budget director Peter Orszag and top White House economist Christina Romer departed recently.

    Obama's team had been widely criticized for overly optimistic forecasts about an economy that has not gathered enough steam to erode stubbornly high unemployment.

    Word of Summers' departure followed a town hall meeting on Monday where Obama came face-to-face with supporters disillusioned with his economic recovery efforts.

    * The risk for Obama is that the loss of another of his top economists could look like disarray in his inner circle. The president and his aides are struggling with balancing the need to boost economic growth in the short term with a credible long-term plan to bring down the deficit.

    * Possible successors include Laura Tyson, a former top economic adviser in the Clinton administration, and Vice President Joe Biden's chief economist Jared Bernstein. If Obama looks to the business community, one possibility could be Richard Parsons, chairman of Citigroup, who is close to presidential adviser and confidant Valerie Jarrett.

    * Replacing Summers, an academic, with a well-known corporate executive could help defuse the persistent notion that Obama is hostile to business. His administration has also been criticized because none of his closest advisers have a practical management background at that level.

    * Summers, known for his abrasive style, has not been the best communicator of the administration's economic policies. His departure would allow Obama to bring in a new public face for his economic agenda.

    * The White House gave no immediate word on who was under consideration for the post, but whoever is eventually chosen will not be subject to Senate confirmation, a process that has stalled many of Obama's nominees for top jobs because of Republican blocking tactics.

    * Summers' departure could solidify Treasury Secretary Timothy Geithner's position as Obama's chief economic policy maker. Geithner, one of the key architects of the bailout of Wall Street, has weathered criticism for his stewardship of the economy and repeated calls by some lawmakers to step down.

    (Reporting by Matt Spetalnick, Patricia Zengerle, Alister Bull and Ross Colvin; Editing by Eric Walsh)
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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    Official Thread Jacker Senior Contributor gunnut's Avatar
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    Is this what happened to the "summer of recovery?" Pun intended of course.

    It doesn't matter who the top adviser is, as long as he's picked by Obama, he'll be likely to share Obama's misguided view on economics, i.e. "stupidly" to use an Obama-ism.
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    The rats are abandoning the sinking ship.

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    I'm going to make a gross generalization (that just happens to be mostly true).

    Serious economic problems have never been solved by professional economists of any kind. In the history of human civilization, serious economic problems have always been solved by disruptive technological, social, demographic, or political change that liberated new sources of productivity or business creation or created new competitive advantages.

    These processes are fundamentally non-linear and unpredictable. Economists, at best, can maintain the status quo and not screw up the economy too much. (Witness the myth of magical Greenspan).

    The next economic team need some level headed strong willed business leaders who can pull Obama's head out of his ass and take some serious steps to make this country a good place to make things again. Short of that there will be nothing to halt the long slide.

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    citanon,

    Serious economic problems have never been solved by professional economists of any kind. In the history of human civilization, serious economic problems have always been solved by disruptive technological, social, demographic, or political change that liberated new sources of productivity or business creation or created new competitive advantages.
    economics as a science only began in the late 18th century with smith and ricardo, and what we recognize as modern economics only began around 1870 (ironically, with the rise of marxism and people seeking to counter their economic predictions).

    as late as 1930 there was no fundamental idea on how to deal with recessions or depressions; the first instinct by all nations around the world was to go protectionist, then cut back government spending-- both of which turned a recession into the Great Depression.

    so really, you're talking about the last 50-60 years when there have been modern economic schools which offer choices to policymakers. for that matter, it hasn't been until the 20th century that governments actually have the power to influence the economy in more subtle ways than straight up taxation.

    These processes are fundamentally non-linear and unpredictable. Economists, at best, can maintain the status quo and not screw up the economy too much.
    so the question is, if that's what you believe, why should anybody bother to study economics? what makes "some level headed strong willed business leaders" able to solve "fundamentally non-linear and unpredictable" processes whereas economists cannot?

    the fact is that as economics continue to grow as a science, economists can offer policy solutions that do a better (obviously not perfect) job of modeling and solving the underlying economic problem. that's why the leading edge theories of the 18th century are now economics 101, and the leading edge theories of the early 20th century are now probably first-semester graduate economics.
    There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

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    Official Thread Jacker Senior Contributor gunnut's Avatar
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    I wouldn't call economics as a "science." At least not in the traditional science sort of way. I say that as an economics major.

    Economics is all about hindsight and group psychology. There's nothing to experiment on. There's nothing to control. It's all guess work in a white coat.
    "Only Nixon can go to China." -- Old Vulcan proverb.

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    gunnut,

    I wouldn't call economics as a "science." At least not in the traditional science sort of way. I say that as an economics major.

    Economics is all about hindsight and group psychology. There's nothing to experiment on. There's nothing to control. It's all guess work in a white coat.
    that's more true for micro than macro. on a macro scale, people tend to act more rationally, which is why we can say, for instance, that free trade works vice protectionism. even behavioral economics, which you're referring to, undergoes the normal scientific process of theory-procedure/test-result.
    There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

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    Astralis,

    Quote Originally Posted by astralis View Post
    citanon,

    economics as a science only began in the late 18th century with smith and ricardo, and what we recognize as modern economics only began around 1870 (ironically, with the rise of marxism and people seeking to counter their economic predictions).
    My POV is that strong central governments have been practicing economics at least as early as the existence of the idea of a money supply, and probably even before that. Certainly through out the centuries there have been many scholars and officials in China and other places who studied and experimented with ways to improve productive output and income of the government. They were not working with modern economic theory and methodology, but it would not be a stretch to call them "ancient economists".

    Is it fair to group them in with modern economists? I think in one sense it's fair: they failed in ways that modern economists continue to fail.


    as late as 1930 there was no fundamental idea on how to deal with recessions or depressions; the first instinct by all nations around the world was to go protectionist, then cut back government spending-- both of which turned a recession into the Great Depression.
    I would group this in the screwing things up category.

    so really, you're talking about the last 50-60 years when there have been modern economic schools which offer choices to policymakers. for that matter, it hasn't been until the 20th century that governments actually have the power to influence the economy in more subtle ways than straight up taxation.
    The tools and the science have improved, but the central question is, and has always been: are they adequate?

    so the question is, if that's what you believe, why should anybody bother to study economics?
    I don't reject the possibility that at some point they might do better, or imply that economists do not serve an important function today in understanding and fine tuning the steady state behavior of economies.

    what makes "some level headed strong willed business leaders" able to solve "fundamentally non-linear and unpredictable" processes whereas economists cannot?
    I should have better defined those leaders. I believe that the core leadership of the economic team need to have participated in, and understand, the highly non-linear and unpredictable process of new business creation. They need to be former participants of those processes that truly drive deep, long lasting economic change. I would place those people in key leadership position that generate core policy ideas with economist providing advice and input on near term and mid term effects that result from fairly linear and predictable processes.

    the fact is that as economics continue to grow as a science, economists can offer policy solutions that do a better (obviously not perfect) job of modeling and solving the underlying economic problem. that's why the leading edge theories of the 18th century are now economics 101, and the leading edge theories of the early 20th century are now probably first-semester graduate economics.
    These activities are valuable, as long as one understand and avoid their shortcomings.

    What especially frustrates me, regarding economic policy formulated by economists, is that they tend to have a narrow vision that concentrates on tweaking economic knobs whose effects can be modeled by economic theory, such as taxation and interest rates. In fact, if serious long term economic problems are solved by non-linear processes that cannot be modeled, then one needs to look outside economists' traditional bag of tools for solutions.

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    Quote Originally Posted by citanon View Post
    ...These processes are fundamentally non-linear and unpredictable. Economists, at best, can maintain the status quo and not screw up the economy too much. (Witness the myth of magical Greenspan).
    Ding Ding Ding! Give this man a kewpie doll.

    You're exactly right Citanon. The macroeconomic models used today are based on thermodynamics. Economies are not closed systems, and the assumption of the models that they will reach equilibrium is a fantasy. Economies display all the typical chaotic behavior like sensitive dependence, red queen, etc.

    Mandelbrot saw this way back in the late 50's and published some papers demonstrating the behavior on financial markets and commodities pricing. James Gleick described some of that work in "Chaos". A good read.

    Both the keynesians and the monetarists have it wrong- and for the same reason. Economies are fundamentally non-linear, and will never reach equilibrium.

    There is a school of complexity economics that is on the right track, They understand that micro and macro economics are intertwined and can't be separated. There are no one-dimensional relationships like the conventional models.

    Instead of thermodynamics, they base on chaos theory. Important factors like confidence play a key role that you won't find in the conventional models (because they don't know how to quantify it in the conventional models).

    It's a work in progress, but it's inevitable that it will supplant the conventional wisdom someday.

    What I expect is will show is that the less the government does in the way of interfering, the better. I'm not optimistic that it will gain acceptance quickly, because it's not going to be popular with the folks who think the government has all the answers when it comes to managing the economy.

    Lest Astralis think I am pure laissaz-faire, let me add that there is a place for government- someone has to set the rules. The derivatives blowup was like an invasive species in nature- we had rules setup for equity markets, and along came these derivatives. Unchecked, they consumed all the capital.

    Free markets depend on predictability and the rule of law, that's the role of government. Attempting to manage it through keynesian stimulus plans is like feeding an elk herd in a hard winter. The intentions may be good, but it only weakens the herd.

    Our true understanding of economics today is crude as hell, so for now the light touch is best, imo.
    Last edited by highsea; 23 Sep 10, at 04:31.

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    Now, I don't want to stir a fecal storm, though at those threads I will no matter what I post.

    Free markets depend on predictability and the rule of law, that's the role of government. Attempting to manage it through keynesian stimulus plans is like feeding an elk herd in a hard winter. The intentions may be good, but it only weakens the herd.
    How does this statement reflect the experience of the last Great Depression, in which recovery was stalled when FDR lost controlled of the Congress and unable to continue the Great Deal legislations, then resumed by full, war-time production?

    One model I have heard economists discuss, is that stimuli are, in fact, not substantive in helping the economy, but it operates on the level of group psychology. Or "animal spirits," in the more lively academic language at that time.
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    Quote Originally Posted by Triple C View Post
    How does this statement reflect the experience of the last Great Depression, in which recovery was stalled when FDR lost controlled of the Congress and unable to continue the Great Deal legislations, then resumed by full, war-time production?
    I had this debate with Astralis in another thread. FDR turned a recession into a depression by creating huge uncertainty among private investors. There was a short period where investments returned and the economy started to recover, but it stalled out. (We had the same thing in the first quarter of this year- look ast the BEA numbers).

    The war came along, but you can't credit keynesians with that one. Unemployment dropped way down, in no small part due to the conscription of 12 million men. Factory production went up for war material, but when the war ended the keynesians were predicting the country would revert back to depression without all the government "stimulus".

    Didn't happen. FDR was dead, we had a businessman in the White House, and private investments took off.

    Quote Originally Posted by Triple C View Post
    One model I have heard economists discuss, is that stimuli are, in fact, not substantive in helping the economy, but it operates on the level of group psychology. Or "animal spirits," in the more lively academic language at that time.
    Yeah, behaviorial economics. Lol. Freud would love it.
    Last edited by highsea; 23 Sep 10, at 19:24.

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    Census Finds Record Gap Between Rich and Poor

    I would like input on what widens and closes this gap. Thanks.

    WASHINGTON (Sept. 28) -- The income gap between the richest and poorest Americans grew last year to its widest amount on record as young adults and children in particular struggled to stay afloat in the recession.

    The top-earning 20 percent of Americans - those making more than $100,000 each year - received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent earned by those below the poverty line, according to newly released census figures. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968.

    A different measure, the international Gini index, found U.S. income inequality at its highest level since the Census Bureau began tracking household income in 1967. The U.S. also has the greatest disparity among Western industrialized nations.

    At the top, the wealthiest 5 percent of Americans, who earn more than $180,000, added slightly to their annual incomes last year, census data show. Families at the $50,000 median level slipped lower.

    "Income inequality is rising, and if we took into account tax data, it would be even more," said Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in poverty. "More than other countries, we have a very unequal income distribution where compensation goes to the top in a winner-takes-all economy."

    Lower-skilled adults ages 18 to 34 had the largest jumps in poverty last year as employers kept or hired older workers for the dwindling jobs available, Smeeding said. The declining economic fortunes have caused many unemployed young Americans to double-up in housing with parents, friends and loved ones, with potential problems for the labor market if they don't get needed training for future jobs, he said.

    Rea Hederman Jr., a senior policy analyst at The Heritage Foundation, a conservative think tank, agreed that census data show families of all income levels had tepid earnings in 2009, with poorer Americans taking a larger hit. "It's certainly going to take a while for people to recover," he said.

    The findings are part of a broad array of U.S. census data being released this month that highlight the far-reaching impact of the recent economic meltdown. The effects have ranged from near-historic declines in U.S. mobility and birth rates to delayed marriage and the first drop in the number of illegal immigrants in two decades.

    The census figures also come amid heated political debate in the run-up to the Nov. 2 elections over whether Congress should extend expiring Bush-era tax cuts. President Barack Obama wants to extend the tax cuts for individuals making less than $200,000 and joint filers making less than $250,000; Republicans are pushing for tax cuts for everyone, including wealthy Americans.

    The 2009 census tabulations, which are based on pre-tax income and exclude capital gains, are adjusted for household size where data are available. Prior analyses of after-tax income made by the wealthiest 1 percent compared to middle- and low-income Americans have also pointed to a widening inequality gap, but only reflect U.S. data as of 2007.

    Among the 2009 findings:

    -The poorest poor are at record highs. The share of Americans below half the poverty line - $10,977 for a family of four - rose from 5.7 percent in 2008 to 6.3 percent. It was the highest level since the government began tracking that group in 1975.

    -The poverty gap between young and old has doubled since 2000, due partly to the strength of Social Security in helping buoy Americans 65 and over. Child poverty is now 21 percent compared with 9 percent for older Americans. In 2000, when child poverty was at 16 percent, elderly poverty stood at 10 percent.

    -Safety nets are helping fill health gaps. The percentage of children covered by government-sponsored health insurance such as Medicaid and the Children's Health Insurance Program jumped to 37 percent, or 27.6 million, from 24 percent in 2000. That helped offset steady losses in employer-sponsored insurance.

    The 2009 poverty level was set at $21,954 for a family of four, based on an official government calculation that includes only cash income. It excludes noncash aid such as food stamps.

    Arloc Sherman, a senior researcher at the left-leaning Center on Budget and Policy Priorities, noted the effects of expanded government programs in cushioning the impact of skyrocketing unemployment. For example, the Census Bureau estimates that 3.6 million people would have been lifted above the poverty line if food stamps were counted - a number that would have reduced the 2009 poverty rate from the official 14.3 percent to 13.2 percent.

    Sheldon Danziger, a University of Michigan public policy professor, said while the U.S. has developed policies to combat poverty, it has trouble addressing ever-widening income inequality - even with a growing federal deficit and previous warnings by former Federal Reserve Chairman Alan Greenspan about soaring executive pay.

    An Associated Press-GfK Poll this month found that by 54 percent to 44 percent, most Americans support raising taxes on the highest U.S. earners. Still, many congressional Democrats have expressed wariness about provoking the 44 percent minority so close to Election Day.

    "We're pretty good about not talking about income inequality," Danziger said.
    Census Finds Record Gap Between Rich and Poor

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    Official Thread Jacker Senior Contributor gunnut's Avatar
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    Quote Originally Posted by Julie View Post
    I would like input on what widens and closes this gap. Thanks.
    Too many government workers?
    "Only Nixon can go to China." -- Old Vulcan proverb.

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    Quote Originally Posted by Julie View Post
    I would like input on what widens and closes this gap. Thanks.
    A high ratio of unskilled vs. skilled labor widens the gap. High unemployment rates widen the gap.

    The GINI index as measured in the US is a little misleading in that it doesn't count things like food stamps, child care subsidies, and EITC as income. If the various gov't handouts were included, the US would be more in line with the European ratios.
    "We will go through our federal budget – page by page, line by line – eliminating those programs we don’t need, and insisting that those we do operate in a sensible cost-effective way." -President Barack Obama 11/25/2008

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    Official Thread Jacker Senior Contributor gunnut's Avatar
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    What is the "correct gap" between the rich and the poor?
    "Only Nixon can go to China." -- Old Vulcan proverb.

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