Very Interesting Forbes article on Behavioral Economics and Healthcare

While I might not fully agree with the author's opinions in this particular article, I find it a quite interesting short read. While behavioral economics usually reaches the right conclusions, I find the author's opinion on behavioral economics and healthcare to be quite fascinating.

The Democrats Have Lost Me with their $15 Minimum Wage in their Platform

I believe that the Democrats have made a grave decision by including the wrong-headed $15 minimum wage by including it as part of their platform. Many people regard this as a radical idea, but I regard this as an economically inefficient and completely nonsensical idea to boost poverty in the United States. Why are they wrong? Here's my take on the idea.

1. Minimum Wage of $15 Will Almost Never Boost Poverty: Wages are generally set by the market in every sector and this corresponds almost exactly to the goods and services that our consumers purchase from that company or that organization. The minimum wage was never intended to be anything but to maintain that the person to be working at the minimum rate to receive anything but a level barely above a subsistence level. Franklin Delano Roosevelt and the New Deal government at that time never meant it to be anything but such, rather than a "living wage". There is also the moral judgement of whether we should reward workers who might not contribute enough economically to warrant such a wage. Surely it will have negative consequences on the wages of other workers.

2. Minimum Wage of $15 in an era of globalization and will cause an increase in goods and services: Minimum wages will not work in an era of globalization. With factory jobs and other positions located elsewhere, there is good impetus for companies to outsource the positions if the prices are too high for them to be located in the current location. If it is a job you cannot outsource, it will just lead to inflation on goods and services which will be extremely detrimental to the customers and also on workers. It will not really increase the wages in that sector if it will cause goods and services to adjust accordingly.

3. Minimum Wage of $15 Will Lead to Further Unemployment: A majority of empirical studies, including this one conducted by the Congressional Budget Office, listed that it will indeed cost jobs. Let's use a generalized example here: What if a business that produces $20 dollars and by hiring two workers at the current federal minimum rate of $7.25 will help it to generate a profit of $5.50. What if that business can no longer make a profit by the new minimum wage laws? They will most likely have to adjust their business strategy by laying off or not hiring any workers. This especially applies to the young that are just starting out in the labor force and unskilled laborers. This will just put more people out of work and into taking more federal welfare money. The United States already has the population roughly the size of Spain on welfare and we don't need another Spain without making the federal budget deficit even worse.

4. Fight for Fifteen? How about a fight for 25 or 50: If they have a rationale for $15 a hour, why not $25 a hour or $50 a hour? Where are they getting their numbers from? If these qualified policymakers think that increasing the minimum wage will not cause any increases in how the other factors are calculated, then the opinion from economists do not matter!

I think it's better if both parties listened to economists and realized that increasing the minimum wage above the appropriate price ceilings, it will have a detrimental effect on the economy as a whole. It will lead to unemployment, inflation on good and services and worst of all, more outsourcing! There are many other ways of increasing the welfare and the livelihood of people rather than increasing the minimum wage, which is a detriment to how the labor markets function.

A Well Written Short History/Introduction to Behavioral Economics

Here is a short history and introduction to Behavioral Economics for those that are interested in the field. I find it a good introduction to Behavioral Economics even though Richard Thaler's Misbehaving: The Making of Behavioral Economics is a better and a more in-depth breakdown of the field.

Good Hoover article on the Rise of Scientism

Just reading through a plethora of online articles, I found something that can be applied to economics, which is the idea of rise of "Scientism". Here is the article that is posted on the Hoover Institution website. It's quite interesting to think of how it relates to all of the 'competitive discussion' within the economics community. All of theories in each of the competing different schools of economic thought comes to mind! A good article and good food for thought for those who are interested in trying out new ideas or just a good read in general as "Scientism" is something to be entirely avoided in our field.

June Reading List

Since I have started to be busy this month working on more important details, I will list my June AND July Reading List this month. I will also catch up on the books that I have not completed from the previous months and they will not be listed on this list. This means the list I have here will be much more brief than previous lists.

Econ Books:
1. Nahid Aslanbeigui & Guy Oakes - The Making of a Cambridge Economist
2. James Rickards - The Death of Money
3. Robert J. Shiller - Irrational Exuberance

Non-Econ Books:
1. Graham T Allison - Essence of Decision: Explaining the Cuban Missile Crisis

May Reading List

Here's my May Reading List:

Econ Books:

1. Robert J. Gordon - The Rise and Fall of American Growth (from April)

2. Akerlof/Shiller - Phishing for Phools: The Economics of Manipulation and Deception

3. Paul Samuelson (edited) - Inside the Economists' Mind

Non-Econ Books:

1. Martha Nussbaum - The Frontiers of Justice (continued reading)

Great Paper on the New Keynesian model

As I was scourging through interesting papers, I found a very interesting paper written by Cohen-Setton, Hausman and Wieland on the New Keynesian model. Within the contents of the paper, they discuss the New Keynesian model and it's effect on supply-side shocks in depressed economies. They utilized a very interesting example in France and its economy after a special measure where they had lifted the gold standard and set interesting economic measures. The results are quite fascinating and the paper goes into quite detail utilizing time series and a fantastic model to describe what had happened in detail. I'm still reading the paper, but it looks like they have found the key to the current debate over structural reforms within both the United States and the European Union. By utilizing these structural reform measures that were recommended before, the example shows that it doesn't particularly work very well in times of rare financial crises. A good read for anyone who is interested in these pressing matters, along with observing the model that they had utilized.

New Economic Theory Missing the Point or Could Be Right On Point?

This latest blog post will explore some ideas that I have gathered by reading Noah Smith's blog. In a blog post about two interesting articles read by Noah Smith about new paradigms in economic theory, it is definitely interesting to think about new possible paradigms in economic theory as the field of theory has somewhat stagnated as of late. While it is interesting to think about all of the stuff Nick Hanauer and Eric Liu have to offer, I want to nail it down to an idea that I have on what they have written.

In the article, they talk about social preferences and cooperative games. I have explored both of these interesting concepts in previous thought bubbles, with some of the others as well and it has given me an excellent idea to write a working paper on this particular issue, which excentuates what some others have worked on in social preferences and cooperative games. What I'm going to do differently in this working paper is utilize them to talk about methods of how it interacts with certain fields in Political Economy. While I can elaborate in person about these issues, it would be utmost difficult to surmise that I can find a solution here to the question at hand right away. For those who are interested in these new possible paradigms in Political Economy, I am also combining it with other more established methods of research that has been conducted it before. For those who are interested in what Hanauer and Liu have written in this short, but rather informational piece, the link is here.

Reading List for the Months of March and April

As we have reached the middle of March and Spring is in the air, I will post my reading lists for the months of March and April. This is a bit late for my usual reading list for the month, so I will post two months as I did last month already. I have already finished several books and I will list them along with the books I'm currently reading.

Already Finished:
Joseph Schumpeter's Two Theories of Democracy - ed. John Medearis
Leo Strauss's Defense of the Philosophic Life: Reading "What Is Political Philosophy?" - ed. Rafael Major

Econ Books:
1. John Maynard Keynes: Volume 2: The Economist as Savior, 1920-1937 - Robert Skidelsky
2. Capitalism, Democracy and Socialism (re-read) - Joseph Schumpeter
3. Why Nudge?: The Politics of Libertarian Paternalism - Cass R. Sunstein
4. Advanced Macroeconomics - David Romer (re-read of advanced undergraduate material)
5. Lectures on Macroeconomics - Olivier Blanchard and Stanley Fischer
6. Monetarist Economics - Milton Friedman

Justin Wolfers' Interesting Article on Bernie Sanders' Economic Plan

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.