Falling Unemployment Rate Is A Mirage

The headline news was that the unemployment rate dropped below 9% to 8.6%. This article goes beyond the headline number and shows why the unemployment rate would be over 11% if we accounted for the decrease in the number of persons who dropped out of the labor force and do not count in the statistics.

At Bainbridge Graduate Institute This Week End

Posts will be sparse this weekend while I am at Bainbridge.

Elizabeth Warren Versus Wall Street

This article describes the increased level of funding from Wall Street and the Chamber Of Commerce to support Scott Brown in the Massachusetts Senate race against Warren. They are against her because she knows too much about how Wall Street works and she is smart an incorruptible. That is a combination that cannot be tolerated in the Senate.

Is Modern Capitalism Sustainable?

Ken Rogoff provides a qualified yes to the question. He refers to alternative forms of capitalism that also have problems, and he identifies the major problems with US style capitalism. He views inequality, the failure to accurately value public goods such as clean air and water; access to healthcare and a lack of concern for future generations as the key problems.

Krugman Has Low Expectations For Europe and US Economiies

Paul Krugman explains why the approach that Europe is likely to take will make things worse for the crisis states. He believes that recession is Europe is almost certain and that will exacerbate debt to GDP ratios. He is also concerned that the deficit and inflation hawks in the US are winning the battle against those who are primarily concerned about unemployment and doing what is needed to prevent more foreclosures in the housing market.

The Rebirth of Social Darwinism

Robert Reich argues that GOP politicians who claim to be conservatives, are not conservative at all. They want to return America to a past that it had rejected. It is a past in which civilization was rejected in favor of the law of the jungle. In the jungle only the strong survive and the weak perish. Natural selections is at work and those that are most fit rise to the top. Government intervention in the market prevents natural selection from taking place. It is best to let nature work as God intended.

There is much in what we hear from the GOP that fits Reich's characterization of their philosophy. They reject civilization in favor of the jungle. The obvious advantage of their philosophy is that oligarchy is justified as natural selection. Perhaps that explains why the CEO of Goldman Sachs claimed that he does God's work. Financiers have risen to the top of the social and economic hierarchy by natural selection and they should be compensated accordingly. It is not surprising that the case for Social Darwinism was made by a professor at one of our elite university's and widely acclaimed as gospel during the "Gilded Age" that preceded the "Great Depression". It should not surprise us that the revival of Social Darwinism is part of the effort to justify and restore the "Gilded Age". We have to decide whether the jungle is God's work or whether civilization is an improvement over the jungle.

Kenneth Arrow Explains The Causes of Rising Inequality and Recommends Progressive Taxes

Kenneth Arrow describes the growth in inequality that we are familiar with by now. His comment on inequality is important, however, because he is a highly respected economist, and because he attributes the rise in inequality to market failure. The financial sector has captured 40% of corporate profits and it is responsible for much of the rise in inequality. It has accomplished this because of asymmetric information. Financial products are so complicated that consumers do not understand them as well as the producers, and they are unable to compare competing products and services as they can compare most manufactured products. Financial industry profits are the result of monopolistic competition,

It follows from Arrow's analysis that government should use a progressive tax system to redistribute monopoly profits as it has done in the past. His argument for taxing capital gains as ordinary income, and for raising more revenue from the estate tax mirrors the arguments made by other economists but it will have more influence because it comes from Kenneth Arrow.