Wednesday, July 29, 2015

How Money Influences Education Policy In New York

This article describes the battle between the teachers union in NYC and lobbyists who have a different agenda for education  in NYC and the state level.  The teachers union, of course, has an interest in defending programs that benefit its teachers.  One of the lobbyist groups is called StudentsFirst.  It is funded at the national level, and at the local level in NYC.  It has contributed heavily to Governor Cuomo and it helped to create a Republican majority in the State Senate.  Its name implies that it promotes the interests of students.  The programs that it supports, including the expansion of charter schools, and changes in the teacher evaluation process, assume that its programs will improve the education of students.  There is little evidence to support their assumption.  It is clear, however, that some outside interests who fund the group would benefit from its programs.

Everyone would like to improve the public education system.  It would appear, however, that the battle for political control over the school system is not about determining the best way to improve public education.  The teachers union has not placed the improvement of public education at the top of its agenda.  One the other hand, the outside groups that are pushing their agenda, are funded by individuals who might benefit from privatizing the education system and, or, those who have an ideological commitment to privatization and a distaste for public sector unions that tend to vote for democrats.  It is unfortunate that the battle for control of public education is more about politics than it is about improving education.  Reforming the complex education system does not lend itself to easy solutions.  We have a large number of public schools in our country that work very well when they are well funded and when most of the students do not suffer from financial and family hardships.  Making them work, when those conditions do not prevail, has no easy solution.  Teachers probably know more about the problems and potential solutions than most groups.  They have been put on the defensive by lobbyists who blame them for the problems, and who claim to have simple solutions which are not supported by educational research.

Tuesday, July 28, 2015

Why We Need More Robots To Raise Our Standard Of Living

We are familiar with rapid advances in technology, and the potential for robots to be more useful, but they have not increased our productivity.  This article argues that slow growth in productivity is more of a threat than the loss of jobs from new technologies.  The new technologies, that we are all familiar with, have automated the use of our leisure time.  We need to reduce the cost of things that we monetize, in order to have an impact on productivity.  For example, the demand for healthcare services is going to rise along with our aging population.  We need to find ways to use technologies to reduce the cost of healthcare.  We need to find more ways to use technology to complement the production of goods and services that we purchase in order to increase our standard of living.

Sunday, July 26, 2015

Joe Stiglitz Criticizes The Troika Recovery Plan For Greece

Joe Stiglitz, unlike most of  us, has read the Troika plan, to which Greece must conform, in order to receive essential funding.  He argues that the plan is not good for creditors and it is not good for Greece.  The faulty plan does not surprise him.  His experience with the World Bank is full of examples in which external funding agencies have imposed structural changes on indebted nations that made their economies worse, and also made it less likely that the debts would be repaid.  The plan proposed by the Troika is subject to all of the problems that one might expect from a plan that must satisfy the needs of a wide variety of interest groups.  That includes the oligarchs within Greece which control the media and the financial system. 

Stlglitz understands that the Greek economy would be better off if it could make some structural changes.  He has two problems with the structural changes proposed in the Troika plan.  In the first place, it takes a long time for structural changes to have an impact on the economy.  They won't solve the short term problems that are ravaging the Greek economy today, and which will made worse by the fiscal contraction imposed on Greece by the Troika plan.  Secondly, the Troika has not put its finger on the structural changes that would be best for Greece.  Many of the structural changes in the plan will make things worse in Greece if they were implemented.  Several of the faulty changes are described in detail in his critique. 

Friday, July 24, 2015

Financial Times Sale To Nikkei Is Praised By Felix Salmon

Felix Salmon explains why Nikkei's purchase of the prestigious Financial Times is good for financial journalism.  His major point is that Nikkei is an employee owned news company.  Unlike most newspapers it is not in business to please shareholders.  Salmon believes that the Financial Times, which focused primarily on the UK, will have an opportunity to become the premier provider of global financial news to an increasingly digital customer base. He argues that the FT will no longer have to shape its reporting to please advertisers, and that its excellent journalists will have more freedom from editorial control.  In other words, journalism will take precedence over business as usual. 

David Brooks Expounds On Raising The Minimum Wage

The Democratic Party is taking the position that its time to raise the minimum wage.  David Brooks does his usual number on this issue.  He claims that it is a "muddle" because some economic studies have shown that the minimum wage can be raised without causing a loss in jobs, and some studies show that raising the minimum wage will reduce jobs.  Having satisfied his readers that he been objective, by citing both sides of the issue,  he reaches a predictable conclusion.  Raising the minimum wage is a bad idea because it will hurt the least skilled workers.  Employers will refuse to hire them at a higher price.  He does not oppose raising the minimum wage because it might increase labor's share of compensation; he is for the little guy.  Underneath all of his babble on the topic, is his faith in the idea that markets do a better job of determining prices than government.  That may be true when both sides of the wage negotiation have equal power, but that condition does not prevail in this segment of the market.  There is a reason why we have a minimum wage law.  There is also a reason why the minimum wage has not risen at the rate of inflation.  His favorite political party has no "muddle" about the topic.  They oppose raising the minimum wage.  David Brooks job is to justify their opposition by claiming that it will cost jobs and hurt the little guy.  He has no "muddle" about raising the minimum wage either.

This is classic David Brooks.  Its always a good idea to go right to the last paragraph in his op-eds.  He reveals his position only after he has demonstrated his objectivity by looking at both sides of an issue.  He is not an economist, and it is not likely that he reviewed the economic research that he cited in this op-ed.  Its pretty certain that one of the conservative think tanks did most of this for him.  That is one of the reasons why they exist.  Brooks job is to package their work into a readable op-ed that is suitable for the NYT.

Wednesday, July 22, 2015

The US Economy Can Grow At 4% But Jeb Bush Won't Like The Method

GDP is simply defined as the total output per person.  The US could welcome millions of immigrants and total output could grow at 4%.  The anti-immigrant Republicans would not support that approach, and per capita GDP, which is a measure of our standard of living, would drop.  China's economy is larger than the US economy because it has a much larger population.  Its standard of living is lower because it well below per capita GDP in the US.  Since Republicans don't support a huge large scale immigration Jeb Bush, and others like him, are forced to make another argument which few economists accept.  Bush and his followers assume that cutting taxes, primarily for the rich, and deregulating the economy will double our growth rate from its current level at around 2%.  They also assume that they can cut taxes without running budget deficits.  Some even argue that cutting tax rates for the rich will actually increase government tax revenues.  Apparently, they would work harder if they could increase their after tax income. 

The CEO Of Unilever Explains Why He Is Paid Too Much

Paul Polman is not the typical CEO in many ways.  In this interview he takes positions of many issues that separate him from most CEO's and he explains why he no longer provides quarterly guidance to investors.  He is very much like Warren Buffet on that issue. He wants shareholders who are concerned with the longer term prospects of Unilever.  Quarterly reviews place the management focus on short term financial targets.  Like Buffet, he argues that a company cannot be successful when it worries obsessively about quarterly performance and fluctuations in the stock price. 

Tuesday, July 21, 2015

Ireland Versus Greece

This article tries hard to show that Ireland has recovered faster than Greece because fiscal contraction (austerity) was much larger in Greece.  This explanation would make sense if standard macroeconomic analysis were applied to nations with similar economies.  The author of the article is a highly regarded economist and his readers are much more knowledgeable than the typical commentary class in the blogosphere.  The differences between Ireland are substantial.  Austerity has not been good for either of them, but the the differences in their economies, and in their political systems, overwhelm the effort made to put the blame on austerity using standard neo-liberal economic concepts.  The comments that follow this article illustrate the important differences between Ireland and Greece.  Ireland has done better than Greece but it has also suffered from the recession and the collapse of its banks.

Sunday, July 19, 2015

The Debate Over Jeb Bush's 4% Growth Rate Claim

Jeb Bush claimed that he will introduce free market policies that will cause the US economy to reach a 4% growth rate.  Noah Smith, among others, raised questions about Jeb's claim.  John Cochrane responded by criticizing Noah Smith and accused him of rejecting free market policies and their ability to produce a 4% growth rate.  This article by Noah Smith provides his interpretation of the debate.  Smith takes the position that free market ideologists like Cochrane are the real outliers within the profession.  The great majority of economists believe in the mixed economy.  He argues that liberalization may have some positive effects on the growth rate, but that Cochrane has not provided any evidence that "free market nirvana" will achieve a 4% growth rate.  Jeb Bush's claim, like Cochrane's defense, is derived from a belief in "free market nirvana". 

The debate between Cochrane and Smith is important because a small minority of economists are true believers in free market nirvana.  In a sense it describes "heaven on earth".  Heaven is a world in which market forces are allowed to operate in the absence of government regulation and high tax rates.  Ronald Reagan is viewed as prophet who was instructed by an economic God to liberate the economy from an oppressive government.  Heaven was reachable, according Reagan, by getting government off of our backs.  The belief in a free market nirvana is utopian, but it has an influence that goes well beyond its credibility.  There are a large number of "churches", that are called think tanks, which evangelize the public about their nirvana.  Its not clear whether the evangelists really believe in their nirvana, but their belief system helps to make the tax system less progressive and it shifts government spending away from things that they don't like and in directions that maintain a plutocracy.

We would be better off if we spent less time debating free market nirvana and the other utopia in which governments controlled everything.  Our central problem is to make the mixed economy work better, and that requires a more effective government that is responsive to democratic forces.  The plutocracy hates democracy.  They spend millions to keep it from working.  Government is fine if they can control it and free market nirvana is one of their control mechanisms.

Saturday, July 18, 2015

Greg Mankiw Tells Us That Conservative Economists Were Right About The Euro

Greg Mankiw correctly points out that there was a lot of skepticism within the economics profession about the adoption of a common currency.  He cites two prominent conservative economists who said the obvious things about the European Project.  Everyone knew that it would be difficult to make the common currency work without a fiscal union, and the inability of each nation to devalue its currency in response to recessions.  However, many hoped that the European Project would help to reduce the potential for warfare between nations that were bound together by a common currency.  Friedman and Feldstein were not among them.  They did not believe that nationalism could be overcome.  Perhaps they also disliked the very idea of a more centralized government in Europe.   

The European Project worked well economically and politically for many years.  The financial crisis and recession exposed the central weaknesses of the common currency.  It has also ignited a resurgence of nationalism and enmity within the eurozone.  Some, like Mankiw, will cheer this result and tell us that conservatives were right about all along about potential for a more united Europe.

Mankiw is also wrong on another front.  He claims that the austerity which was imposed upon Greece, and which helped to deflate its economy, was a necessary response to the crisis.  Its hard to see how this helped Greece or the prospects for the eurozone.  Some believe that it was the only way to force structural changes that would make Greek exports more competitive.  Destroying a weak economy through austerity has turned out to be bad medicine for Greece and for the European Project.

Friday, July 17, 2015

Is The Banking Game Corrupt?

This article, by a former Wall Street banker, argues that the system is corrupt.  Banks in the US and Europe play a dangerous game, with the help of rating agencies, in which they buy and sell risky assets to each other and to even more naive customers such as the Greek government.  They do so because they understand that they are too big to fail.  They make hay while the sun shines and they get bailed out by governments when it rains.  The Wall Street banks were bailed out by the US government after packaging and selling toxic assets, which were falsely rated safe by the rating agencies, because they believed that the government would buy the risky assets that that they did not unload.  The European banks bought risky assets from the Wall Street banks and they also bought sovereign debt from Greece which had received risk free ratings.  The storm for the European banks came in 2010.  The assets that they purchased from Greece lost their value when it became clear that the Greek government could not service the "risk free" assets that they purchased from Greece.  In order to save the banking system from collapse, loans were made to the Greek government which allowed them to repay the banks that purchased their assets.  That transferred the risk from the banks to the governments that provided the funds to the Greek government.  The Greek government was a bad borrower that sold toxic assets to the banks, but the banks that purchased those assets were rescued by their governments.  We tend to assign blame to bad borrowers but not to bad creditors.  The governments that made the loans to the Greek government have been caught holding the bag.  They can't let the Greek government off of the hook without angering their citizens who will end up paying for the bad loans.

The banking system, and the governments which protect them,  are the bad guys in this story.  The comments that follow this article provide an interesting response which illustrates how difficult it is determine the real culprits in the story.  It is pretty clear, however, that bankers, with their supporters in the rating agencies, have little regard for their customers who purchase toxic assets.  Some blame the banks for selling toxic products, others blame the purchasers for being naive. 

Thursday, July 16, 2015

What Is Crony Capitalism?

When the government takes some actions which are in the public interest it will have unequal effects across industries and across firms.  Some economists accuse the government of crony capitalism when this happens.  They are generally opposed to government intervention in the economy.  Noah Smith makes an effort to distinguish between crony capitalism and decisions by the government which serve private interests rather than the public interest.  However, he actually makes a point which is much broader than he may have intended.  It is not possible to have an economy that is even mostly independent from any government that is organized to provide for the general welfare.  That is especially true among advanced economies with highly developed systems that provide education, research, infrastructure and enforcement of the rules in which the economic and social system function.   

Economics And Public Policy

This discussion between two philosophers about economics, and its use in public public policy, does a good job in describing the use and misuse of economic science.  In the first place it is important to understand that economies are much more complex than the phenomena studied in the natural sciences.  Physicists did not attempt to study gravity by observing the behavior of falling leaves on a windy day.  The effect of gravity is small relative to other factors that determine the behavior of the falling leaf.  The laws of gravity are very powerful even though they may not be very useful in predicting the flight of falling leaves.  It is more difficult for economists to discover natural economic laws in the complex environment is which they work.  That does not mean that they have not found anything useful; but it is more difficult to build a consensus in economics.  Public policy issues are not only very complex, but they involve values that are excluded from economic analysis.  Much of the disagreement about pubic policies goes well beyond what can be determined by economic analysis.  The debate over the minimum wage law provides a good example.  Increasing the cost of labor by raising the minimum wage might decrease the demand for labor.  However, it is not possible to determine whether that will actually happen in the wide variety of situations that arise in the real economy.  Conservative economists claim that jobs will be lost by raising the minimum wage but in many cases employers have no alternative to the use of unskilled labor even at a higher price.  There is no convincing experiment available which provides a clear answer about the impact of the minimum wage on employment.

There is little debate among climate scientists about the complex interaction between carbon emissions and global warming.  On the other hand, it has been possible to confuse much of the public about this issue. Many have been led to believe that there is no consensus on this issue because of claims made by a small number of dissenters.  It should not be surprising that the same kind of thing happens when economic analysis is applied to public policy issues.  Even when most economists agree about an issue it is possible for a handful of dissenters to convince the public about the implications of policy decisions.

Wednesday, July 15, 2015

IMF Won't Agree To Greek Deal Unless Greece Receives Debt Relief

The IMF released a memo which argues that Greece will not be able to pay down its debt without some form of relief from its creditors.  The implication is that the eurozone requires some form of fiscal union to be workable.  There is no cost free way to deal with the Greek debt.  Creditors will need to take a hit one way or another.  If they don't write off some of the debt, and force Greece out of the eurozone,  they will still take a hit on the Greek debt.  The Greek economy cannot generate enough of a surplus to pay down all of its debt.

Its hard to imagine how this will turn out well.  Politicians in Germany and other Northern states have taken a popular stand against writing down a portion of the Greek debt.  There is little popular support for a stronger fiscal union which includes transfers from rich states to Greece.  The IMF is one of Greece's creditors and it will take a hit on the Greek debt along with creditor nations.

Tuesday, July 14, 2015

Recent Poll Shows Biggest Gains For Donald Trump

Jeb Bush is still the leader in this recent poll of Republican voters.  The real news in the poll is the rise of Donald Trump.  His unfavorables have dropped and his favorable ratings have put him in second place in this poll.  The widespread negative reaction to Trump's campaign speeches have undermined his public reputation.  His appeal to the Republican base illustrates the polarization that has been ongoing in US politics.  He is telling them what they want to hear, and the negative reaction to his views in the broader public makes him more attractive to the GOP base.

Why We Need More Government Rather Than Less Government In 21'st Century

Brad DeLong was asked to provide his views on the medium term economy that we are approaching.  He restricts his analysis to the advanced economies in the North Atlantic and concludes that government spending as a share of the economy should be greater than it is today.  He assumes that interest rates for government debt will remain lower than the economic growth rate.  That makes the debt affordable.  The next question is whether government investments are worthwhile.  He argues against the assumption of government failure that is a critical assumption in conservative ideology. 

His argument is also based upon the changes that we see in modern economies.  We are no longer in the commodity based economy described by Adam Smith.  He describes some of the key elements of the information technology that has emerged to replace the economy envisioned by Adam Smith.  For example, Google has one of the largest market caps in the global economy.  Its profits are not based upon the price that its users are willing to pay for the services that it provides.  Advertisers pay for the services provided by Google in order to more effectively target their ads to consumers.  Facebook operates the some kind of business.  It also has an extremely large market capitalization that continues to grow as advertisers learn how to exploit the information provided by Facebook.

DeLong's argument is well constructed but it is not easy reading for non-economists.  However, those who are willing to spend the time that it takes to consider his arguments will benefit from them.  It could provide a good basis for a seminar on our economic future.

New York Times Editorial On Greek Deal

European leaders made a deal with Greece that kicks the real problem down the road.  The real problem is that Greece is in no position to pay down its debt.  The fiscal austerity, which has been imposed upon the government, is assumed to provide a surplus that can be used to pay down its debt.  That has been tried in Greece and the economy has shrunk in response.  The deal provides funds to Greece that might enable it to service some of its loans that are currently due.  It does nothing to reduce the debt burden that is beyond the capacity of its government to service.  Moreover, the negotiations have laid bare much of the disharmony that exists in the European Union.  National politics dictate the behavior of the political leaders that should make decisions that are best for the community as a whole. This raises a question about the viability of the fragile union which was a noble idea which may have been poorly implemented.

David Brooks Provides His Views On Hillary's Economic Platform

This is classic David Brooks.  He begins by telling us that Clinton's platform is less shrill than Bernie Sanders attacks on the top 1%.  Rather than attacking Wall Street, and raising taxes on the super rich, Clinton offers programs that are designed to increase social mobility.  He calls this "Paleo-Liberalism" because most of her ideas are warmed over liberal ideas that have been tried, and have failed, in the past.  They can't work because government interference in markets is always bad.  The market is smarter than government.  We might call Brooks' critique "Paleo-Conservatism" if we wanted to be clever like Brooks.  He is trendy enough to have picked up on the use of "Paleo" in the social media to justify the return to diets that are more consistent with our genetic makeup.  Our digestive system is still in the dark ages where hunters and gatherers ate meat instead of grains.

Brooks then turns to what he really doesn't like about Clinton's platform.  He realizes that Bernie Sanders attack on the rich won't appeal to the electorate and he is concerned that Clinton's approach may have some appeal to an electorate that has become increasingly concerned about rising inequality and the direction of an economy that provides diminishing security for most Americans.  He simply dismisses her ideas as old fashioned liberalism that has not worked in the past and can't work in the future.  For Brooks the liberalism of the New Deal and the post-war years, which raised the standard of living for most Americans, does not exist.  It was an aberration that should have been extinguished by Reaganism  and Thatcherism which restored the conservative ideal that he worships.

Saturday, July 11, 2015

How To Make The US Economy More Like That Of Greece

Republican politicians accuse the Fed of debasing the dollar, and they claim that rising government debt will turn the US into Greece.  Paul Krugman explains why Republican economic policies are precisely the kind of policies that have depressed the Greek economy.  Sometimes it is necessary to cut government spending.  Canada did that in the 1990's but it coupled that with loose monetary policy.  That caused its currency to depreciate. That made its exports less costly to importers.  Cutting government spending in Greece has only made its debt to GDP ratio worse because it cannot use monetary policy to reduce the value of the euro and increase its exports.  Consequently, GDP has dropped faster than government debt.  If the GOP had its way, the Fed would not be able to use monetary policy or fiscal policy to moderate recessions.  Moreover, all of the predictions that they made about rising inflation and a debased dollar have turned out to be wrong.  If they ran the economy we might indeed look more like Greece.

Thursday, July 9, 2015

A Summary Of The Fed's Outlook On The US Economy

This paragraph summarizes the outlook at the Fed.  They see mediocre economic growth and an improving unemployment picture.  However, there has not been enough wage growth to raise concerns about inflation.  The Fed is still below its 2% inflation target.

Bottom Line: The US economy is plain vanilla. Clearly not accelerating enough to justify a faster pace of monetary policy normalization, but not slow enough for the Fed to abandon their hope of at least initiating the first rate hike this year. They are still looking for stronger numbers, however, to pull that trigger. Fed officials on average are cautiously optimistic the issues in China and Greece will not spill over to the US economy, giving them the opportunity to hike rates. Still, in the absence of confirmation of that hypothesis, those issues still decrease the odds of a rate hike this year. This is especially the case if the recent decline in commodity price places renewed downward pressure on inflation. Such an outcome would raise the bar on the strength of the remaining data to justify a rate hike. In her speech Friday, we will hopefully learn more of Federal Reserve Chair Janet Yellen's view on the importance of Greece and China for US monetary policy.

Tuesday, July 7, 2015

Gallop Poll Ranks Countries On Well-Being

For unexplained reasons, the happiest countries in the world are in Latin America according to Gallop.  Seven of the ten highest scoring nations are in Latin America.  The US dropped substantially in this year's poll. 

It Takes A Long Time To Build A Nation State With Effective Institutions

This is a review of a book on the historical development of national institutions in England and Spain.  It took centuries for each of them to develop a national government and effective institutions.  We attempted to build effective governments in the Mid-East, but we followed the wrong process according to this analysis.  Power must be concentrated at the center in order to build effective institutions.  We expected weak central governments to manage the development of effective institutions.  This argument can also be extended to other nations that are attempting to build a national government with effective institutions.  It takes a long time to complete the job.

Monday, July 6, 2015

Deindustrialization And Poverty Level Wages

One of the fundamental concepts of neo-liberal ideology is that the state should not interfere in the labor market.  The assumption is that market determined wages will be sufficient to provide at least a subsistence level of existence for families.  States have typically found it necessary to subsidize households that encounter a temporary interruption in wage income, or to care for those who are to old to work, but state interference in the labor market has always been anathema to neo-liberal ideologues.  This article provides a historical review of this issue as it has evolved in Britain.  It argues that deindustrialization in Britain has increased the need for the state to intervene in the labor market.  The transition from an industrial economy to a services economy has led to a new problem.  Many high paying services jobs have been created, but most of the services jobs do not provide an above poverty level of wages.  Unfortunately, the conservative government in Britain has justified its resistance to wage subsidies by invoking the neo-liberal arguments against state interference in the labor market that have a long history in the neo-liberal world that includes Britain and most advanced economies.

It is interesting to compare deindustrialization with the transition from an agricultural economy in the US to an industrial economy.  During that period higher paying industrial jobs replaced low paying farming jobs. The reverse has happened during deindustrialization.  The recovery from recession in the US is now complete if one uses the traditional unemployment rate as the measure.  However, it is far from complete if one takes a deeper look at the labor market.  There has been almost no growth in wages over the last 30 years, and much of the growth in employment has been in temporary or part-time jobs that do not pay for healthcare insurance.  There has also been a transition from employer provided defined benefit pension plans to defined contribution plans.  The link that used to bind employers and employees to the welfare of the firm has disappeared.  That has been replaced by a single, more powerful link, between top management and the shareholders of the firm.  The huge rise in top management compensation is also explained by reference to neo-liberal ideology.  That is, the rise in their compensation is justified by an increase in their productivity.  Their employment contracts also provide an increased level of security, while the security of most employees has declined.  The severance packages and pension plans, that are guaranteed by their contracts, are fit for a king.  They are being rewarded by compliant boards of directors for their singular contribution to the short term rise in the price of their stock.  Part of that rise is produced by reducing the cost of employee compensation.

Friday, July 3, 2015

James Galbraith Offers His View On The Greek Crisis

I have a lot of respect for Galbraith.  He has spent four years working with Greek officials in an effort to resolve Greeks economic and political issues.  That separates him from economists who have been offering their views on the crisis from a distance.  It also makes him more credible than media pundits who depend upon the opinions of their sources.  Galbraith's main point is that the central issue is not whether Greece wants to stay in the union or whether it wants to solve its fiscal issues.  The debate is really about the details of the austerity plan that is required.  The IMF and European leaders want to impose their austerity plan on Greece.  They will not let Greece implement the plan that it has proposed.  In essence, it is a political debate.  Greece must surrender its sovereignty in order to satisfy its creditors.

Wednesday, July 1, 2015

Why US Stock Price Growth Will Be Lower Than It Has Since 1980

We all know that stock prices are hard to predict.  However, we don't have a clear understanding of the factors that produce fluctuations in stock prices.  This study found that the rapid growth in US stock prices had very little to do with asset price models that are favored by the finance industry.  Most of the growth in stock prices since 1980 has been due to the redistribution of income from wage earners to shareholders.  Dividend growth is a function of lower wage growth.  Moreover, most of the redistribution of income from wage earners to shareholders has already occurred.  US stock price growth will not duplicate the growth rate since 1980 because the rate of income redistribution from wage earners to shareholders may have reached an upper limit. 

This study is bound to raise lots of questions about asset pricing models, and it should get lots of attention from investors and defenders of the asset pricing models in the finance industry.