Tuesday, March 3, 2009
CBO on the Stimulus
The Congressional Budget estimates the impact of the recently passed stimulus call. Scroll down to page 12 for their bottom line.Consistent with textbook Keynesian models, they report a a significant short-run effect but little long-run effect. In fact, they estimate the long-run effect on GDP may be slightly negative due to crowding out.
As for employment, the CBO estimates the bill will create 1.2 to 3.3 million jobs at the end of 2010. By the end of the President's first term, the projected impact of the bill falls to 0.3 to 0.7 million jobs.
Monday, March 2, 2009
Sunday, March 1, 2009
The Personal Cost of Public Service
Katherine Ozment tells us how she feels when her husband, MIT economist Michael Greenstone, gets a job working for the President.
I know what she is going through, or more precisely, my wife does: When I became CEA chair, I left my wife and three kids (then ages 11, 8, and 4) at our home in Wellesley, and I commuted back on weekends. Economists who take policy jobs make some sacrifices to engage in public service, but often their spouses and families make even more.
I know what she is going through, or more precisely, my wife does: When I became CEA chair, I left my wife and three kids (then ages 11, 8, and 4) at our home in Wellesley, and I commuted back on weekends. Economists who take policy jobs make some sacrifices to engage in public service, but often their spouses and families make even more.
Cartels and the Secret Ballot
To my surprise, quite a few mainstream economists have endorsed the so-called Employee Free Choice Act. I am surprised for two reasons.
First, the act strengthens unions, and unions are a cartel. When cartels exert their monopoly power, they raise wages above the equilibrium level, leading to a variety of inefficiencies and inequities. As Larry Summers once put it, "Another cause of long-term unemployment is unionization. High union wages that exceed the competitive market rate are likely to cause job losses in the unionized sector of the economy. Also, those who lose high-wage union jobs are often reluctant to accept alternative low-wage employment."
Second, the act would allow unions to organize without a secret ballot, as long as a sufficient number of workers put their names on cards endorsing a union. Union organizers would be able to use strong-arm tactics to get workers to say they support a union, even when privately the workers don't. In light of the sometimes violent history of the labor movement, this concern seems very real. As a matter of procedural fairness, I cannot understand why one would oppose a secret ballot.
My guess is that if you polled economists, you would find more opposed than in favor of the proposed legislation. But that is just a guess, as I have not seen such a poll conducted.
First, the act strengthens unions, and unions are a cartel. When cartels exert their monopoly power, they raise wages above the equilibrium level, leading to a variety of inefficiencies and inequities. As Larry Summers once put it, "Another cause of long-term unemployment is unionization. High union wages that exceed the competitive market rate are likely to cause job losses in the unionized sector of the economy. Also, those who lose high-wage union jobs are often reluctant to accept alternative low-wage employment."
Second, the act would allow unions to organize without a secret ballot, as long as a sufficient number of workers put their names on cards endorsing a union. Union organizers would be able to use strong-arm tactics to get workers to say they support a union, even when privately the workers don't. In light of the sometimes violent history of the labor movement, this concern seems very real. As a matter of procedural fairness, I cannot understand why one would oppose a secret ballot.
My guess is that if you polled economists, you would find more opposed than in favor of the proposed legislation. But that is just a guess, as I have not seen such a poll conducted.
A New Text for Money and Banking
I don't usually plug textbooks on this blog (I mean, other authors' textbooks), but here I will make an exception. I recently received a copy of the new Money and Banking text by my old friend and sometime coauthor Larry Ball, and it is excellent. If you teach this course, I strongly recommend that you give it a look. To learn more about the book, click here.
Somewhere, Milton Friedman is smiling
According to a new Rasmussen Reports telephone survey, 59% of voters still agree with Ronald Reagan’s inaugural address statement that “government is not the solution to our problem; government is the problem.”. Only 28% disagree, and 14% are not sure.
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