5 ključnih ekonomskih formul za razumevanje in rešitev sedanjega sveta

Jared Bernstein (ekonomist, ki je s Cristino Romer pripravil študijo učinkov Obamovega stimulus paketa v 2009) je naredil velik podvig: ključne sedanje probleme je na zelo intuitiven način opisal v 5 ekonomskih formulah. Bolje rečeno, definiral je 5 ključnih neenakosti med ključnimi ekonomskimi indikatorji v obliki neenačb. In s tem nakazal rešitve iz sedanje situacije:

  • povečane neenakosti (kadar r > g),
  • prenizkih investicij glede na varčevanje (S > I),
  • prenizke zaposlenosti (u > u*),
  • prenizkih javnih investicij glede na stroške zadolževanja (g > t, in
  • izgube produktivnih resursov zaradi neukrepanja in stagnacije (h > 0.05).

Če spravimo v red te neenakosti (če izenačimo obe strani neenačb), bomo spravili v red tudi gospodarstvo.

Da ne bom prevajal, spodaj navajam ključne izvlečke. Tudi brez hudih osnov ekonomije se zadevo da razumeti. Za moje študente pa je to itak Must read!

r>g

Think of this one as Piketty’s warning. It simply argues that if the return on wealth, or r, is greater than the economy’s growth rate, g, then wealth will continue to become ever more concentrated among a narrow slice of households. […] Piketty’s data show some periods when the return to wealth was lower than the growth rate (r<g), but he argues those days are behind us. Others have cast doubt on the dynamics of r>g, or at least pointed out ways in which the returns to wealth could be more diffuse … […]

But there is little question that wealth concentration is at historically high levels and that mechanisms by which capital ownership could be diffused—like more progressive inheritance taxation or a financial transaction tax—are politically out of favor, particularly in the U.S.

S>I

Think of this one as Bernanke’s imbalance, though he calls it the “savings glut” (S is savings, I is investment). Larry Summers’ “secular stagnation” concerns offer a similar, though somewhat more narrow, version. For the record, I think this one is really serious (I mean, they’re all really serious, but relative to r>g, S>I is underappreciated).

If you suffered through econ 101, you might get tripped up by S>I, as we’re taught that what’s saved gets invested, so the correct formula should be S=I. But while that’s true for the world, it’s not true for individual countries, which can and do save more than they produce, thus running a trade surplus. Since S>I in, say, China, and S=I in the aggregate, S must be < I somewhere else, like the U.S., which runs large trade deficits. By “large,” I mean deficits averaging around -2.5 percent of GDP since the late 1970s and -4 percent since 2000, that have created a significant drag on growth. A nation can, and we have, offset this drag with other parts of GDP, but that’s led to deeply damaging bubbles, busts, and intractable recessions.

Central bankers, like Bernanke and Yellen, tend to discuss S>I and the jammed mechanisms just noted as “temporary headwinds” that will eventually dissipate (Summers disagrees). But while it has jumped around the globe—S>I is more a German thing right now than a China thing (Germany’s trade surplus is 8 percent of GDP!)—the S>I problem has lasted too long to warrant a “temporary” label.

u>u*

Think of this one as Baker/Bernstein’s slack attack. The first “u” is the unemployment rate and “u*” is a construct called the “natural rate” of unemployment, or the lowest unemployment rate consistent with stable inflation. No one knows what u* is and it’s increasingly hard to identify, but that’s actually not a big problem for this warning, as you’ll see.

What Dean and I have shown in various writings is that for most of the past few decades—about 70 percent of the time, to be precise—u has been > than mainstream estimates of u*, meaning the job market has been slack, characterized by weak labor demand. That, in turn, has led to diminished worker bargaining power, real wage stagnation, and higher inequality.

These three formulas—r>g, S>I, and u>u*—are all basically bad news. They’re economic pathologies implying increasing inequality, weak demand, and slack labor markets. But despair not! These next two formulas point to an important way out of the mess implied by the first three.

g>t

Think of this one as Kogan’s cushion. In a recent paper, budget analyst Richard Kogan made a critical and underappreciated discovery: for most of the years that our country has existed (he’s got data back to 1792!), the economy’s growth rate (g again) has been greater than the rate the government has to pay to service its debt, which I call t. Kogan calls it r since it’s a rate of return, but it’s not the same r as in Piketty (which is why I’m calling it t). Piketty’s r is the return to wealth holdings; Kogan’s is the interest rate on Treasury bills. They’re related but not the same, and Kogan’s t will typically be lower than Piketty’s r, for good reasons (e.g., being such a safe lender, the U.S. government doesn’t need to pad its t with a “risk premium”).

OK, but why does this make the list? Because it means we should be far less obsessive about our deficits and debts, especially when greater public spending could alleviate some of the pathologies described above. When g>t, the economy is spinning off enough growth, and thus tax revenues, to service the debt burden without going further into debt, or risking the debt spiral you’d get if t<g. As Kogan puts it, “when economic growth rates exceed Treasury interest rates, the burden of existing debt shrinks over time.”

Since 1947, g has been > t about two-thirds of the time, by 1.3 percentage points on average. But, as Kogan stresses, CBO tends to assume that t will exceed g, which a) makes their debt forecasts too pessimistic, and b) may well be too cautious given how low interest rates have been in recent years (partially a function of S>I, btw; lots of idle capital makes for low rates, as does accommodative Fed policy). Those forecasts give rise to austere budget politics that overemphasize the importance of paying down the debt, even at the expense of critical public spending and investments.

h>0.05

Think of this one as the DeLong/Summers low-cost lunch. It’s more obscure than the others, but really very intuitive when you break it down. All they’re saying is that when the private economy is weak, government spending can be a very low-cost way to lift not just current jobs and incomes, but future growth as well. In tandem with “Kogan’s cushion,” these formulas provide an important recipe for what to do in recessions and slow-growth economies (hmmm…can anyone think of a slow-growth economy?).

The “h” stands for hysteresis, which describes the long-term damage to the economy’s growth potential when policy neglect allows depressed economies to persist over time. When that happens, the stock of capital grows more slowly and the skills of un- and underemployed workers atrophy. It may sound theoretical, but if you look at our current investment record along with our labor force participation of prime-age workers (non-retirees), you see hysteresis in action. It’s tough to get a job when you’ve been out of work for a couple of years.

So, what’s the 0.05 got to do with it? In a 2012 paper, D&S argue that when the economy’s doing poorly and interest rates are low, it is worthwhile for the government to intervene even when h is very small. They write that “…even a small amount of hysteresis—even a small shadow cast on future potential output by the cyclical downturn—means…that expansionary fiscal policy is likely to be self-financing…[or at least] highly likely to pass the sensible benefit-cost test of raising the present value of future potential output.”

Basically, given reasonable assumptions about a bunch of other moving parts, D&S find that as long as an increase in current output by a dollar raises future output by at least a nickel, the extra spending will be easily affordable. But how do we know if h<0.05?

In a follow-up paper for CBPP’s full-employment project, D&S, along with economist Larry Ball, back out a recent number for h that amounts to 0.24, multiples of the 0.05 threshold, and evidence that, at least recently, h>0.05. QED!

Vir: Jared Bernstein

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