Re: Re: Bushies say NAIRU is 4.9
On Tuesday, August 27, 2002 at 16:41:15 (-0400) Doug Henwood writes: Devine, James wrote: The number of disinterested seekers of truth is very small in academia, especially among economists. David Card comes to mind. Anyone else? Does James Galbraith count? Bill
RE: Re: Bushies say NAIRU is 4.9
I'll admit as much as more coherent or more systematic but more scientific? That's like saying one astrologer is more scientific than another. I maintain that these slurs against astrology are misplaced; the Popperian definition of a science is that a field of study makes testable predictions, and the science of astrology gives me twelve testable predictions, every day, free with my daily newspaper. dd ___ Email Disclaimer This communication may contain confidential or privileged information and is for the attention of the named recipient only. It should not be passed on to any other person. Information relating to any company or security, is for information purposes only and should not be interpreted as a solicitation or offer to buy or sell any security. The information on which this communication is based has been obtained from sources we believe to be reliable, but we do not guarantee its accuracy or completeness. All expressions of opinion are subject to change without notice. All e-mail messages, and associated attachments, are subject to interception and monitoring for lawful business purposes. (c) 2002 Cazenove Service Company or affiliates. Cazenove Co. Ltd and Cazenove Fund Management Limited provide independent advice and are regulated by the Financial Services Authority and members of the London Stock Exchange. Cazenove Fund Management Jersey is a branch of Cazenove Fund Management Limited and is regulated by the Jersey Financial Services Commission. Cazenove Investment Fund Management Limited, regulated by the Financial Services Authority and a member of IMA, promotes only its own products and services. ___
Re: Bushies say NAIRU is 4.9
Title: Re: Bushies say NAIRU is 4.9 Saying that a phenomenon is natural is a much less scientific way of describing something than doing so in simple descriptive terms (which are more coherent or systematic). The term natural implies you can't mess with Mother Nature and stuff like that -- or that somehow Adam Smith's natural liberty exists. Economists use the word natural in an mystical way, as part of the Holy Cult of the Invisible Hand. JD -Original Message- From: Tom Walker To: [EMAIL PROTECTED] Sent: 8/26/2002 4:59 PM Subject: [PEN-L:29889] Re: Bushies say NAIRU is 4.9 I'll admit as much as more coherent or more systematic but more scientific? That's like saying one astrologer is more scientific than another. Jim Devine wrote, The NAIRU is a more-scientific way to describe what Milton Friedman calls the natural rate of unemployment. His idea is that the economy gravitates toward the natural rate unless the government or central bank screws things up. Tom Walker 604 254 0470
RE: Re: Re: Bushies say NAIRU is 4.9
Title: RE: [PEN-L:29890] Re: Re: Bushies say NAIRU is 4.9 I didn't know that anyone was arguing about the right number. Why is it a trap? -Original Message- From: Eugene Coyle To: [EMAIL PROTECTED] Sent: 8/26/2002 5:59 PM Subject: [PEN-L:29890] Re: Re: Bushies say NAIRU is 4.9 Arguing about whether the right number is 8.5% or 4.9% or 0.5% is a trap. The figure for the NAIRU should not be a discussion we enter into. Gene Coyle Tom Walker wrote: I'll admit as much as more coherent or more systematic but more scientific? That's like saying one astrologer is more scientific than another. Jim Devine wrote, The NAIRU is a more-scientific way to describe what Milton Friedman calls the natural rate of unemployment. His idea is that the economy gravitates toward the natural rate unless the government or central bank screws things up. Tom Walker 604 254 0470
RE: RE: Re: Bushies say NAIRU is 4.9
Title: RE: [PEN-L:29896] RE: Re: Bushies say NAIRU is 4.9 FWIW, the NAIRU theory does make testable propositions. Its adherents said that 6 percent unemployment (or higher) was The Line We Shouldn't Cross. The US crossed that line in the 1990s -- and the theory's prediction failed. So the NAIRUvians are changing their minds, etc. Of course, there are always dogmatists out there, some in positions of power. JD -Original Message- From: Davies, Daniel To: '[EMAIL PROTECTED]' Sent: 8/27/2002 4:21 AM Subject: [PEN-L:29896] RE: Re: Bushies say NAIRU is 4.9 I'll admit as much as more coherent or more systematic but more scientific? That's like saying one astrologer is more scientific than another. I maintain that these slurs against astrology are misplaced; the Popperian definition of a science is that a field of study makes testable predictions, and the science of astrology gives me twelve testable predictions, every day, free with my daily newspaper. dd ___ Email Disclaimer This communication may contain confidential or privileged information and is for the attention of the named recipient only. It should not be passed on to any other person. Information relating to any company or security, is for information purposes only and should not be interpreted as a solicitation or offer to buy or sell any security. The information on which this communication is based has been obtained from sources we believe to be reliable, but we do not guarantee its accuracy or completeness. All expressions of opinion are subject to change without notice. All e-mail messages, and associated attachments, are subject to interception and monitoring for lawful business purposes. (c) 2002 Cazenove Service Company or affiliates. Cazenove Co. Ltd and Cazenove Fund Management Limited provide independent advice and are regulated by the Financial Services Authority and members of the London Stock Exchange. Cazenove Fund Management Jersey is a branch of Cazenove Fund Management Limited and is regulated by the Jersey Financial Services Commission. Cazenove Investment Fund Management Limited, regulated by the Financial Services Authority and a member of IMA, promotes only its own products and services. ___
Re: Re: Bushies say NAIRU is 4.9
John Bates Clark once said that natural theories were necessarily static. On Tue, Aug 27, 2002 at 06:40:42AM -0700, Devine, James wrote: Saying that a phenomenon is natural is a much less scientific way of describing something than doing so in simple descriptive terms (which are more coherent or systematic). The term natural implies you can't mess with Mother Nature and stuff like that -- or that somehow Adam Smith's natural liberty exists. Economists use the word natural in an mystical way, as part of the Holy Cult of the Invisible Hand. JD -Original Message- From: Tom Walker To: [EMAIL PROTECTED] Sent: 8/26/2002 4:59 PM Subject: [PEN-L:29889] Re: Bushies say NAIRU is 4.9 I'll admit as much as more coherent or more systematic but more scientific? That's like saying one astrologer is more scientific than another. Jim Devine wrote, The NAIRU is a more-scientific way to describe what Milton Friedman calls the natural rate of unemployment. His idea is that the economy gravitates toward the natural rate unless the government or central bank screws things up. Tom Walker 604 254 0470 -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
RE: RE: Re: Re: Bushies say NAIRU is 4.9
Title: RE: [PEN-L:29890] Re: Re: Bushies say NAIRU is 4.9 My understanding has always been that the natural rate of unemployment and the NAIRU are technically different, though looking like and supporting some similar conclusions. Mat
RE: RE: RE: Re: Re: Bushies say NAIRU is 4.9
Title: RE: [PEN-L:29905] RE: RE: Re: Re: Bushies say NAIRU is 4.9 In some ways the choice of one vs. the other represents the political perspective of the economist (within the mainstream). The natural rate is Chicago-school lingo, whereas the NAIRU is more MIT or Yale (Modigliani, Tobin, etc.) in its feel. According to the MF, the natural rate is the unemployment rate ground out by a Walrasian general equilibrium system once a bunch of imperfections are introduced. (This, of course, ignores the fact that after one or two imperfections -- i.e., elements of the real world -- have been introduced, the Walrasian GE system becomes incoherent, producing multiple equilibria, etc.) The NAIRU, on the other hand, simply describes the threshold behavior: if unemployment gets too low, inflation takes off. This can be consistent with theories that base the NAIRU on bargaining power issues (e.g., Carlin Soskice, later aped by Blanchard Katz with attribution). Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine -Original Message- From: Forstater, Mathew [mailto:[EMAIL PROTECTED]] Sent: Tuesday, August 27, 2002 8:09 AM To: [EMAIL PROTECTED] Subject: [PEN-L:29905] RE: RE: Re: Re: Bushies say NAIRU is 4.9 My understanding has always been that the "natural rate of unemployment" and the "NAIRU" are technically different, though looking like and supporting some similar conclusions. Mat
Re: Bushies say NAIRU is 4.9
Jim Devine wrote, Saying that a phenomenon is natural is a much less scientific way of describing something than doing so in simple descriptive terms (which are more coherent or systematic). Except that this distinction ultimately goes around in circles. Instead of attributing the mystical status directly to the rate itself, the NAIRU description defers its mysticism to the unexamined definitions of inflation and unemployment. Whatever the common sense notions of those two categories may be, their measurement is profoundly subject to manipulation by policy. For example, policy can count as employed someone who has worked one hour in the last week or can change the eligibility requirements for unemployment benefits and sickness benefits, thus redefining people out of the labour force. Hypothetically, one could design various procrustean policy regimes that would generate roughly just about whatever NAIRU one wished to designate as _the_ NAIRU, which takes us back to Looking Glass world where words mean precisely what Humpty-Dumpty wants them to mean. The reductio ad absurdum limit cases might be thought of as, on the one hand, a subsistence economy where there is no unemployment because there is no employment and there is no inflation because there are no prices. NAIRU would be zero. At the other extreme, if we define as unemployment all hours spent not engaged at designated workplaces in direct production of a set of standardized staple goods and define as active in the labour force all individuals physically capable of performing some minimal routine operation there would be an extremely high NAIRU, let's say somewhere in the neighbourhood of 90. Back in the real world, the definitional play of NAIRU may be more of the order of its estimated size, which is to say 4.9, give or take 4.9. And I'm 6' 2 give or take a couple of yards. What is the scientific status of statements like that? At some ethereal level there may well be intuitive appeal to the idea of a NAIRU -- it's one of those seductive reactionary thought experiments. But NAIRU mixes together vague definitions with an _intimation_ of precise measurement for the purpose of arriving at a pre-conceived policy prescription. We already know what that prescription is -- restrain wages. Assigning a number doesn't make the prescription more scientific. In this regard, it is no different than judging figure skating at the Olympics. Tom Walker 604 255 4812
RE: Re: Bushies say NAIRU is 4.9
Title: RE: [PEN-L:29912] Re: Bushies say NAIRU is 4.9 I wrote, Saying that a phenomenon is natural is a much less scientific way of describing something than doing so in simple descriptive terms (which are more coherent or systematic). Tom Walker changes the subject: Except that this distinction ultimately goes around in circles. Instead of attributing the mystical status directly to the rate itself, the NAIRU description defers its mysticism to the unexamined definitions of inflation and unemployment. These definitions aren't unexamined by me. I would be the last one to reify the official definitions of these concepts and to not question the mode of their measurement. The key thing is that given the present institutional structure of the US economy (the one I know most about), if the officially-measured unemployment rate rises, almost all unofficial measures of unemployment and measures of working-class ill-health also rise, as do measures of income inequality, poverty, and racial income disparities. So even though the official unemployment rate is poorly measured, it does seem to capture something about inadequate demand for labor-power (where inadequate is defined from a working-class perspective). (Baran Sweezy noticed this back in their MONOPOLY CAPITAL in the 1960s.) It does seem that institutional change -- such as weakening labor unions and more anemic unemployment insurance benefits -- has made a percentage point of official unemployment have more impact in terms of raising workers' economic insecurity in 2002 than it used to (say, in 1980). But that doesn't mean that we should simply throw out the official measure of unemployment, as Tom seems to be implying. Inflation measures are shakier in my book. For example, a bit more than a year ago (March/April 2001), I published an article in CHALLENGE magazine in which I presented an alternative cost of living measure of inflation, bringing in non-market aspects of inflation and the like. According to my estimates, for the years 1980 to 1988, my most conservative measure of cost-of-living inflation rose 0.7 percentage points per year faster then the official measure (using the personal consumption expenditure deflator). This implied a much steeper fall in estimated real wages during that period than did the official measures. Even so, the official measures of inflation move with mine over short periods, e.g., in recessions and booms. Whatever the common sense notions of those two categories may be, their measurement is profoundly subject to manipulation by policy. For example, policy can count as employed someone who has worked one hour in the last week or can change the eligibility requirements for unemployment benefits and sickness benefits, thus redefining people out of the labour force. All of this is familiar, at least to me and to anyone else who's studied labor economics. For many purposes, the fact that the official definition of unemployment doesn't change very often means that the number do say something about the inadequate demand for labor-power. (It's not like in England, where the Thatcherites manipulated the definitions deliberately to lower measured unemployment rates. In the US, Reagan tried that, but it never took hold.) Hypothetically, one could design various procrustean policy regimes that would generate roughly just about whatever NAIRU one wished to designate as _the_ NAIRU, which takes us back to Looking Glass world where words mean precisely what Humpty-Dumpty wants them to mean. The reductio ad absurdum limit cases might be thought of as, on the one hand, a subsistence economy where there is no unemployment because there is no employment and there is no inflation because there are no prices. NAIRU would be zero. At the other extreme, if we define as unemployment all hours spent not engaged at designated workplaces in direct production of a set of standardized staple goods and define as active in the labour force all individuals physically capable of performing some minimal routine operation there would be an extremely high NAIRU, let's say somewhere in the neighbourhood of 90. yeah, but the people who do the defining -- in the US, the Bureau of Labor Statistics -- don't conspire with the macro-econometricians to do these kinds of tricks. Back in the real world, the definitional play of NAIRU may be more of the order of its estimated size, which is to say 4.9, give or take 4.9. And I'm 6' 2 give or take a couple of yards. What is the scientific status of statements like that? if the standard error of the estimate of the NAIRU is high (as it is), that's a serious strike against the theory, which is why people like Krueger Solow dedicate entire books like their THE ROARING NINETIES to re-examine such questions. A mystical theory -- such as astrology or the core theory behind neoclassical economics -- can't be undermined that way. At some ethereal level
Re: Bushies say NAIRU is 4.9
Jim Devine wrote, Tom Walker changes the subject... ... and then proceeded to 'counter' my arguments with material that basically confirmed what I was saying. What I was saying, distilled to its essence, is that NAIRU is rhetorical and not scientific in the sense of some disinterested search for truth. What Jim responded with was examples of why the rhetoric of NAIRU is understandable, given a capitalist society and a profoundly reactionary political culture in the U.S. I have no particular objection to viewing NAIRU in that way. Now, I really will change the subject. What we are _really_ talking about here is green cheese and why capitalists have to tell workers that the green cheese factory is on the moon. Tom Walker 604 255 4812
RE: Re: Bushies say NAIRU is 4.9
Title: RE: [PEN-L:29919] Re: Bushies say NAIRU is 4.9 I wrote, Tom Walker changes the subject... and then according to Tom: ... and then proceeded to 'counter' my arguments with material that basically confirmed what I was saying. What I was saying, distilled to its essence, is that NAIRU is rhetorical and not scientific in the sense of some disinterested search for truth. What Jim responded with was examples of why the rhetoric of NAIRU is understandable, given a capitalist society and a profoundly reactionary political culture in the U.S. I have no particular objection to viewing NAIRU in that way. I never mentioned any disinterested search for truth and don't see why it's relevant here. The MF, who along with Edmund Phelps developed the idea of the natural rate of unemployment (which became the NAIRU for others), is not now and has never been a disinterested seeker of truth. The number of disinterested seekers of truth is very small in academia, especially among economists. The NAIRU theory can be seen as marginally scientific, in that it makes real-world predictions. (And as I said before, the NAIRU is a more scientific concept than the natural rate of unemployment theory, which is truly rhetorical in intent and effect.) These have proven wrong, something that can't happen in astrology. Of course, in order to replace the NAIRU theory, a better one needs to be found. It's not enough to simply criticize the language or to point to the theory's empirical failure. JD
Re: RE: Re: Bushies say NAIRU is 4.9
Devine, James wrote: The number of disinterested seekers of truth is very small in academia, especially among economists. David Card comes to mind. Anyone else? Doug
RE: Re: RE: Re: Bushies say NAIRU is 4.9
Title: RE: [PEN-L:29921] Re: RE: Re: Bushies say NAIRU is 4.9 none here. Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine -Original Message- From: Doug Henwood [mailto:[EMAIL PROTECTED]] Sent: Tuesday, August 27, 2002 1:41 PM To: [EMAIL PROTECTED] Subject: [PEN-L:29921] Re: RE: Re: Bushies say NAIRU is 4.9 Devine, James wrote: The number of disinterested seekers of truth is very small in academia, especially among economists. David Card comes to mind. Anyone else? Doug
Re: Re: RE: Re: Bushies say NAIRU is 4.9
Date sent: Tue, 27 Aug 2002 16:41:15 -0400 To: [EMAIL PROTECTED] From: Doug Henwood [EMAIL PROTECTED] Subject:[PEN-L:29921] Re: RE: Re: Bushies say NAIRU is 4.9 Send reply to: [EMAIL PROTECTED] Devine, James wrote: The number of disinterested seekers of truth is very small in academia, especially among economists. David Card comes to mind. Anyone else? Doug Richard Freeman? Paul
Bushies say NAIRU is 4.9
. . . but it will take five years to get there. (p. 15, Mid-Session Review, OMB) mbs
Re: Bushies say NAIRU is 4.9
Are they just trying to lower expectations in anticipation of poor economic performance? On Mon, Aug 26, 2002 at 12:22:35PM -0400, Max B. Sawicky wrote: . . . but it will take five years to get there. (p. 15, Mid-Session Review, OMB) mbs -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
RE: Re: Bushies say NAIRU is 4.9
They forecast real GDP growth of 3.7 for CY2002 and '03, which looks to be on the rosy side. mbs -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of Michael Perelman Sent: Monday, August 26, 2002 12:59 PM To: [EMAIL PROTECTED] Subject: [PEN-L:29873] Re: Bushies say NAIRU is 4.9 Are they just trying to lower expectations in anticipation of poor economic performance? On Mon, Aug 26, 2002 at 12:22:35PM -0400, Max B. Sawicky wrote: . . . but it will take five years to get there. (p. 15, Mid-Session Review, OMB) mbs -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
RE: Re: Bushies say NAIRU is 4.9
Title: RE: [PEN-L:29873] Re: Bushies say NAIRU is 4.9 according to one estimate appearing in THE ROARING NINETIES, edited by Alan Kreuger and Robert Solow, the US NAIRU is about 5.1 % of the civilian labor force. Of course, the concept is very, very weak. The standard error of estimate is quite high relative to the rate. Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine -Original Message- From: Michael Perelman [mailto:[EMAIL PROTECTED]] Sent: Monday, August 26, 2002 9:59 AM To: [EMAIL PROTECTED] Subject: [PEN-L:29873] Re: Bushies say NAIRU is 4.9 Are they just trying to lower expectations in anticipation of poor economic performance? On Mon, Aug 26, 2002 at 12:22:35PM -0400, Max B. Sawicky wrote: . . . but it will take five years to get there. (p. 15, Mid-Session Review, OMB) mbs -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: Bushies say NAIRU is 4.9
Friends, Do you mind telling us what the heck this NAIRU is? Or should we ask Ravi to help us break this code too? Sabri
Re: Re: Bushies say NAIRU is 4.9
Friends, Do you mind telling us what the heck this NAIRU is? Or should we ask Ravi to help us break this code too? Sabri Non-Accelerating Inflation Rate of Unemployment. Carl _ MSN Photos is the easiest way to share and print your photos: http://photos.msn.com/support/worldwide.aspx
RE: Re: Bushies say NAIRU is 4.9
Title: RE: [PEN-L:29884] Re: Bushies say NAIRU is 4.9 Friends, Do you mind telling us what the heck this NAIRU is? Or should we ask Ravi to help us break this code too? Sabri the NAIRU is a hypothetical rate of unemployment. If the actual rate of unemployment goes below it, the inflation rate is supposed to take off into the stratosphere. It represents a barrier to attaining full employment and to fighting poverty, street crime, etc. If the actual rate of unemployment is above it, inflation is supposed to become better, or even become deflation (falling prices). The NAIRU is a more-scientific way to describe what Milton Friedman calls the natural rate of unemployment. His idea is that the economy gravitates toward the natural rate unless the government or central bank screws things up. Getting back to Bushies say NAIRU is 4.9, that's more optimistic, I'd say, than the consensus among macroeconomists, even though it's more pessimistic than the consensus among pen-l. It means that the Bushies are indicating a preference for a lower unemployment rate than that of the consensus macroeconomists. That's a good thing, except that it likely means bubkis in practice. For their purposes, I'd say that more important is the fact that it also means that official budget forecasts (which use the NAIRU as a benchmark) will show smaller deficits than would estimates done by consensus macroeconomists -- and deficits are seen as a Bad Thing. This connection occurs because lower unemployment rates imply higher tax revenues and lower spending on transfer payments like unemployment insurance benefits (all else equal). Even though the MF calls it the natural rate of unemployment, as some sort of neutral problem with the system that prevents full employment, there's a Marxist interpretation too. There needs to be a reserve army of labor in order to keep wages down, labor effort up, and profits up. If demand is so high that the reserve army goes away (and there's no substitute like forced-labor camps or other ways of punishing people for not working hard enough, etc.) then the capitalists will punish us for low profitability by pushing up prices. Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine
Re: Bushies say NAIRU is 4.9
I'll admit as much as more coherent or more systematic but more scientific? That's like saying one astrologer is more scientific than another. Jim Devine wrote, The NAIRU is a more-scientific way to describe what Milton Friedman calls the natural rate of unemployment. His idea is that the economy gravitates toward the natural rate unless the government or central bank screws things up. Tom Walker 604 254 0470
Re: Re: Bushies say NAIRU is 4.9
Arguing about whether the right number is 8.5% or 4.9% or 0.5% is a trap. The figure for the NAIRU should not be a discussion we enter into. Gene Coyle Tom Walker wrote: I'll admit as much as more coherent or more systematic but more scientific? That's like saying one astrologer is more scientific than another. Jim Devine wrote, The NAIRU is a more-scientific way to describe what Milton Friedman calls the natural rate of unemployment. His idea is that the economy gravitates toward the natural rate unless the government or central bank screws things up. Tom Walker 604 254 0470
