There has been considerable conversations over Bernie Sanders' economic plan over the internet and among several top macroeconomists in the United States. Among the economists that are talking about Professor Gerald Friedman's plan that has estimated a Sanders Presidency would greatly improve the economy of the United States with its plan of completely transforming the country into one that more or less resembles that of the Nordic social democratic societies. As my father is on the faculty at one of the University of Massachusetts schools, it's interesting to consider Professor Friedman's analysis of the Sanders economic plan. I personally think that the universal healthcare program that he has promoted is while valid, it might not be the plan of action. The Nordic welfare states (Norway, Sweden, Finland and Denmark) were created earlier on in the century and had promoted a decent foundation for their societies as a whole to function on a very high level. They were created when these states did not have any nationalized program of any sort or extremely complex healthcare systems. They were relatively small and homogeneous at that period of time. My main problem with Sanders' plan is that it does not go into detail about how and where the healthcare system will change. Also, there seems to somewhat of a disagreement between how mainstream economists and how Professor Friedman sees the topic of macroeconomics as a whole. We will explore this later on this blog post, but let's first talk about Wolfers' point of view.
Let's first look at what Wolfers and the Romers have to offer for the conversation over Sanders' economic plan. The Wolfers article goes into a recent short article of what Professor David and Christina Romer have written and explains that Friedman's plan is out of whack based on their point of view. I must admit that it is completely feasible for a bunch of center-left Democratic star economists, which include Paul Krugman, to fully denounce what someone from a (more-or-less) a Post-Keynesian perspective would have. They all focused on the demand-induced part of Sanders' plan. They find it incredulous that the plan would be in Wolfers' words, "an economic nirvana". I have read and looked over Professor Friedman's plan and it does not look incredibly implausible, especially when you look at the CBO estimates or in its calculations. Maybe it is somewhat different than what most center-left macroeconomists such as Wolfers would consider to be credible. If you read towards the end of his short article, Justin Wolfers pointed out that Gerald Friedman's long and careful analysis as one that is more or less the perspective of the Post-Keynesian macroeconomists from the tradition of Joan Robinson. Let's look into this historical phenomenon where generally liberal economists divulge tremendously.
If you look back into history, John Maynard Keynes truly changed the way many in the economics arena had seen economics. He argued that the mainstream neo-classical models mostly in the field of macroeconomics to be mostly wrong and his particular analysis of how the world of economics works to be right. Of course this does not come with its controversy in the world of economics as many traditional neoclassical economists did not view his completely "heretical views" very well. Then fast-forward 10 years, two top MIT economists, Paul Samuelson and Robert Solow, created a somewhat combination of Keynes' works with the earlier neoclassical economists into somewhat of a paradigm shift between the two competing schools of economic thought into the neo-classical synthesis. This is when Joan Robinson and others at the Department of Economics in Cambridge, of which Keynes last taught before his death, argued in the Cambridge capital controversy about certain components of their competing ideologies especially about the unrealistic assumptions component to their mathematical models. The Post-Keynesian school, of which Joan Robinson is famous for, argued based primarily on the Keynesian tradition, while the other somewhat Keynesian argued based on a moderate fusion of the two competing schools. This led to a long ideological battle that has also included an entire generation of economists in the "new classical tradition" that in Robert Lucas wanted to "bury Keynesianism" and also attacked the earlier mentioned unrealistic assumptions part in their math modeling. The Wolfers' article and Krugman's numerous articles explain this battle, but it is generally between the dominant faction of Keynesians and those like Friedman, which are in the more left-leaning Robinson faction of the Keynesians.
While I don't necessarily agree completely with Friedman's observations on Sanders' economic plan for the country, Professor Gerald Friedman and Bernie Sanders' economic plan is especially important in that it's exposing the general public to more of Keynes' economic thoughts. While Keynesianism might not be the solution to some of problems in the models that some in the New Classical school of thought ran into during the Great Recession, it should form the basis in any academic and policy discussion to correcting the country's trajectory towards an entrenched oligarchy and a mass of working poor.
Friday, February 26, 2016
Wednesday, February 24, 2016
A Short Analysis of Donald Trump's Economic Proposals
As Donald Trump edges towards winning the Republican Party nomination for President of the United States, I will break down Trump's economic proposals that he has for the United States. Three of the main proposals he has proposed will actually be very detrimental for the country. These three include deporting millions of Americans, large tariffs on goods with China, Japan and Mexico and an extremely unfriendly foreign policy towards the Middle East.
By deporting millions of undocumented Americans from Latin American countries such as Mexico, he might cause a large shortfall in minimum wage and other low wage positions in agriculture, in food preparation and in perhaps janitorial roles. There aren't enough people in the country that will comfortably fill those positions as those have been mostly filled by new immigrants, some of them illegal. While some of the domestic unemployed might be able to fill in some of these positions, they won't be able to cover all of these positions as some of the more vulnerable local populations might not want to even take these jobs, without a modest wage increase. While it might decrease unemployment among the working population, this might create a large void in the service economy and that might result in prices going up.
The second and most damaging of his economic proposals would be to slap large tariffs on goods with countries that provide some of the products that are consumed in this country such as China, Japan, Mexico, South Korea and elsewhere. His rhetoric contends that this will help to revitalize America's flagging domestic manufacturing industry, but this does not seem like it will be the case. The best case scenario will cause some of these offshore jobs to move to even lower income countries such as Indonesia, Vietnam and India and cause prices for goods and services to raise accordingly to the rate of tariffs. You would have to slap prohibitive tariffs to move the low-wage manufacturing jobs back to the country. Prices on everyday goods such as t-shirts might even double as a result of this import tariff. This will surely increase the costs of living in the United States and it will hit the working people even harder. The cheaper goods that the country has been receiving (some of the cheapest in the world) has been caused by low tariffs to low to middle income countries such as China, Mexico and cheap higher-quality goods from countries such as South Korea. This has been a boon for the working people to consume more cheaper products and has helped to move some of those same people into more value-added service positions that contribute to the less manufacturing intensive some of the economy. This has also been environmentally feasible for the country as heavy manufacturing plants has caused massive population problems for a country such as China. Let's also not talk about a massive trade war with China or a tariff war with the European Union...
The third and last of his proposals has been quite damaging for America's image and relations with countries in the Middle East as to outlaw all Muslims coming into the country might cause more hostility towards the United States in those Middle Eastern states. This might be an ideal solution for Trump but this might cause a breakdown in commerce between the United States and the Middle East. While relations with certain states in the Middle East such as Iran and Syria might not improve under President Trump, relations with allies such as Turkey, Saudi Arabia and Egypt might be strained. While the economies of this region do not figure much to America's export economy, it might cause a strain in developing good relations with a region that is so vital to providing the oil and gas to the world's second largest economy (the United States). By promoting and causing more Muslim hostility to the United States, the country might have to spend more on its wasteful military spending that does not provide much benefit to the domestic consumption economy of the United States and further drag the federal government into the brink of bankruptcy.
From these three proposals we can see briefly that a Trump Presidency will be horrible for the country's economic well-being, along with foreign policy problems with Muslim countries due to his well documented Islamophobic comments in order to win more fear on his behalf. While relations with countries such as Russia might improve under his presidency, he might cause rough relations with manufacturing countries such as China and South Korea. This would not put the United States in the right footing as to compete with these countries on a global level with heavy tariffs damaging domestic American firms' capabilities to compete on the international level. By deporting millions of undocumented immigrants, he might also put those that might be able to work in manufacturing jobs back to their home countries. Like Trump has used his "huge" quote on many things such as his proposals and his campaign, a President Trump would cause severe economic problems in the United States. This short blog post is just a brief summary of the problems that a President Trump would have and we will find out and see if the country is smart enough to elect a President other than Donald Trump.
By deporting millions of undocumented Americans from Latin American countries such as Mexico, he might cause a large shortfall in minimum wage and other low wage positions in agriculture, in food preparation and in perhaps janitorial roles. There aren't enough people in the country that will comfortably fill those positions as those have been mostly filled by new immigrants, some of them illegal. While some of the domestic unemployed might be able to fill in some of these positions, they won't be able to cover all of these positions as some of the more vulnerable local populations might not want to even take these jobs, without a modest wage increase. While it might decrease unemployment among the working population, this might create a large void in the service economy and that might result in prices going up.
The second and most damaging of his economic proposals would be to slap large tariffs on goods with countries that provide some of the products that are consumed in this country such as China, Japan, Mexico, South Korea and elsewhere. His rhetoric contends that this will help to revitalize America's flagging domestic manufacturing industry, but this does not seem like it will be the case. The best case scenario will cause some of these offshore jobs to move to even lower income countries such as Indonesia, Vietnam and India and cause prices for goods and services to raise accordingly to the rate of tariffs. You would have to slap prohibitive tariffs to move the low-wage manufacturing jobs back to the country. Prices on everyday goods such as t-shirts might even double as a result of this import tariff. This will surely increase the costs of living in the United States and it will hit the working people even harder. The cheaper goods that the country has been receiving (some of the cheapest in the world) has been caused by low tariffs to low to middle income countries such as China, Mexico and cheap higher-quality goods from countries such as South Korea. This has been a boon for the working people to consume more cheaper products and has helped to move some of those same people into more value-added service positions that contribute to the less manufacturing intensive some of the economy. This has also been environmentally feasible for the country as heavy manufacturing plants has caused massive population problems for a country such as China. Let's also not talk about a massive trade war with China or a tariff war with the European Union...
The third and last of his proposals has been quite damaging for America's image and relations with countries in the Middle East as to outlaw all Muslims coming into the country might cause more hostility towards the United States in those Middle Eastern states. This might be an ideal solution for Trump but this might cause a breakdown in commerce between the United States and the Middle East. While relations with certain states in the Middle East such as Iran and Syria might not improve under President Trump, relations with allies such as Turkey, Saudi Arabia and Egypt might be strained. While the economies of this region do not figure much to America's export economy, it might cause a strain in developing good relations with a region that is so vital to providing the oil and gas to the world's second largest economy (the United States). By promoting and causing more Muslim hostility to the United States, the country might have to spend more on its wasteful military spending that does not provide much benefit to the domestic consumption economy of the United States and further drag the federal government into the brink of bankruptcy.
From these three proposals we can see briefly that a Trump Presidency will be horrible for the country's economic well-being, along with foreign policy problems with Muslim countries due to his well documented Islamophobic comments in order to win more fear on his behalf. While relations with countries such as Russia might improve under his presidency, he might cause rough relations with manufacturing countries such as China and South Korea. This would not put the United States in the right footing as to compete with these countries on a global level with heavy tariffs damaging domestic American firms' capabilities to compete on the international level. By deporting millions of undocumented immigrants, he might also put those that might be able to work in manufacturing jobs back to their home countries. Like Trump has used his "huge" quote on many things such as his proposals and his campaign, a President Trump would cause severe economic problems in the United States. This short blog post is just a brief summary of the problems that a President Trump would have and we will find out and see if the country is smart enough to elect a President other than Donald Trump.
Wednesday, February 17, 2016
A List of My Favorite Books By Genre
I'm sitting in the Coop right now enjoying Professor Martha Nussbaum's exquisitely written philosophical treatise and I had a thought in my mind about some of my favorite books here in this particular post. Because of this particular thought bubble, I will now list a relatively brief list of my favorite books by genre. As the blog is mostly about my interest in Economics, I will start with my favorite Economics books, but I will include books from other subjects such as Political Science, Public Policy, Philosophy, etc.
Favorite Economics Books:
Thomas Piketty - Capital in the Twenty-First Century
Hyman Minsky - Stabilizing an Unstable Economy
David Ricardo - The Principles of Political Economy and Taxation
Karl Polanyi - The Great Transformation
Milton Friedman / Anna Schwarz- A Monetary History of the United States 1867-1960
John Von Neumann - Theory of Games and Economic Behavior
Paul Samuelson - Economics
Ludwig Von Mises - Human Action: A Treatise on Human Behavior
John Maynard Keynes - The General Theory of Employment, Interest, and Money
Adam Smith - The Wealth of Nations
Favorite Non-Economics Books:
Wilhelm von Humboldt - The Limits of State Action
Francis Fukuyama - Political Order and Political Decay: From Industrial Revolution to the Globalization of Democracy
Richard Feynman - Feynman Lectures on Physics
John Nash - Essays on Game Theory
Confucius - The Analects
George Orwell - 1984
John Stuart Mill - Utilitarianism
Bertrand Russell - The Problems of Philosophy
David Hume - An Enquiry Concerning the Principles of Morals
John Stuart Mill - On Liberty
John Rawls - A Theory of Justice
Favorite Economics Books:
Thomas Piketty - Capital in the Twenty-First Century
Hyman Minsky - Stabilizing an Unstable Economy
David Ricardo - The Principles of Political Economy and Taxation
Karl Polanyi - The Great Transformation
Milton Friedman / Anna Schwarz- A Monetary History of the United States 1867-1960
John Von Neumann - Theory of Games and Economic Behavior
Paul Samuelson - Economics
Ludwig Von Mises - Human Action: A Treatise on Human Behavior
John Maynard Keynes - The General Theory of Employment, Interest, and Money
Adam Smith - The Wealth of Nations
Favorite Non-Economics Books:
Wilhelm von Humboldt - The Limits of State Action
Francis Fukuyama - Political Order and Political Decay: From Industrial Revolution to the Globalization of Democracy
Richard Feynman - Feynman Lectures on Physics
John Nash - Essays on Game Theory
Confucius - The Analects
George Orwell - 1984
John Stuart Mill - Utilitarianism
Bertrand Russell - The Problems of Philosophy
David Hume - An Enquiry Concerning the Principles of Morals
John Stuart Mill - On Liberty
John Rawls - A Theory of Justice
Tuesday, February 9, 2016
Interesting Seeking Alpha Article on Russia and Commodities
I have read a very interesting article on Seeking Alpha just recently in the morning. Here is the link. I agree with the opinion that low oil prices will not hurt Russia's economy in the long term as Russia is a very large country with bountiful amount of natural resources that cater towards their own socio-economic development. What's also going to be important towards the further development of their national economy will be their economic relationship with one of the most resource-hungry countries in the world (that being China). This will effectively lead towards the mitigation of the current ruble/currency crisis that has plagued Russia ever since oil prices took a nosedive. If this trend of the low prices continue, Russia will have to diversify its economy into building an economic base free of the "natural resource curse". Let's just put it this way: Russia will have to move away from its model of exporting natural resources (gas, oil, water, lumber) and towards exporting it's specialized products in military a lot more. While I agree with most of the points that the author in this article makes, I think it's more adequate to say that Russia faces troubles while their direct geopolitical and military competitor in the United States does not have similar issues.
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