Politics Come Before Job Creation in The GOP

To the surprise of no one, the GOP killed the administration's job bill proposal. Two economic forecasting firms estimated that the bill would have created over one million jobs in 2013. The GOP would rather sacrifice those who would have benefited from the bill in order to run against the president facing a weak economy next November. They prefer to talk about the "job killing" policies of the administration than to take actions to create jobs.

The Woman Who Knew Too Much

This article (via Manan Shukla) in Vanity Fair describes the politics in Washington that make it very difficult for competent individuals with a concern for the public interest to be put in a position to serve the public interest. The major reason is that the oligarchy that funds political campaigns does not recognize the concept of public interest. For them there is no such thing as a body public. There are only individuals seeking to maximize their self interest and they are the winners.

Most of you are probably familiar with this story but it is worth reading this article in order to learn more about the kind of person who should be one of our government leaders. Elizabeth Warren is a real American hero. She should be the model for the rest of us.

Solutions Versus First Aid For European Crisis

This article in the Financial Times suggests that despite new efforts to reduce the risk of panic, a long term solution is needed. It argues that there is a triple shock risk in Europe. The aftershock to the financial crisis may prove worse than the original shock; the sovereign crisis includes Europe's third largest economy, and there is risk to the European Project that poses unknown political risks.

Germany will do all that is necessary to maintain the system unless it threatens its solvency. Some have even suggested that this threat to Germany is real. Financial adjustments must be made that do not prevent needed fiscal adjustments, but austerity cannot be imposed that prevent fiscal recovery.

Its Time to Put Milton Friedman Into Proper Perspective

This article describes the legacy of Milton Friedman. He did more than any other US economist to popularize the advantages of markets. Unfortunately, in his zeal to popularize markets he also popularized the view that government was the enemy of markets. Most of the ideas that flow from the Economics Department of The University of Chicago reinforce that theme. For example, rational expectation theory, which dominated macroeconomics for decades, leads to the conclusion that individuals will anticipate the consequences of government policy and take actions which will thwart the intention of the policy. Even if government wanted to fine tune the economy, market responses would keep this from happening. Robert Lucas is one of many economists who argue that our slow recovery from a balance sheet recession is due to the expectations that businesses have about the potential impact of government regulation and higher taxes. The assumption is that businesses would increase investment in an economy with slack demand if government policy were less harmful to their interests.

While markets can provide many benefits, it is foolish to ignore the numerous benefits that government provides which enable the potential of markets to do the magic ascribed to them. Some of these benefits are described in this article, and the example of China is raised to show how government policies have led to the rapid expansion of its economy. The suggestion is that Friedman and his successors would have difficulty explaining China's successful use of industrial policy.

The conclusion of the article is that one of the icons of economics is somewhat diminished because of his failure to see the important role that government plays in the mixed economic systems that actually exist. One can't take criticisms of Friedman to far however, because it is important to the profession to show some reverence for those who have risen to the top of the profession.

I have a view of Friedman that is similar to the view that Keynes had of Ricardo. He suggested that Ricardian ideas came to dominate classical economics because they justified the status quo and ratified the positions of those who dominated society at that time. Friedman was just the right economist during the cold war, and his ideas were useful to those who wanted to turn back the clock to the gilded age that preceded the New Deal and the Great Society programs that stood in the way.

Tom Friedman Being Tom Friedman

In this Op-Ed Tom Friedman essentially blogs about two books. The first book connects the global unrest that we see in response to growing inequality to globalization that has not lived up to its potential to make everyone better off, and to deal with our environmental problems at the same time. The second book emphasizes the opportunities provided by globalization. It reinforces the views that he espoused in The Earth Is Flat. That is, we all have to get smarter to take advantage of globalization. The problem is not in the system, it depends upon each individual responding to the challenges of adapting to the opportunities made possible in a technologically advanced global economy. He claims, accurately, that his heart is in the second analysis, but we need to pay some attention to growing unrest. In other words, the world is flat and that's good, but we better be careful.

A Seminar Type Debate Over Our Response to Financial Crisis and Recesseion

This article (via Manan Shukla) and the comments that follow. Provides a good debate on the pros and cons over how the financial crisis and the recovery has been handled.

A Sample of the Right Wing Reactions to Occupy Wall Street

This op-ed (via Manan Shukla)describes the reactions to Occupy Wall Street from the usual suspects. Krugman's view is that the "economic royalists" can't bear scrutiny and their hired guns do what they can to help out.