What defence do we have against politically-motivated scientists?

[Solly]

Drogue, do you have any evidence that stable growth is superior to "boom-and-bust"?

The latter can help to reduce imbalances that grow in the economy, while the former may let them continue. Just a thought.

[Barnabas]

The good thing for the USA is all their debt is in dollars

Other countries, If they have a big crisis, and their currency devaluates, suddenly find paying their debt (which usually is in dollars) much more difficult

[Drogue]

Originally posted by Doddler
Drogue, do you have any evidence that stable growth is superior to "boom-and-bust"?

The latter can help to reduce imbalances that grow in the economy, while the former may let them continue. Just a thought.

Wait, what is it disputing here? The former does correct imbalances, that's the whole point. If an external shock happens, say input prices rise a lot, it slows growth to stop inflation and keep the economy from bad recession or hyper-inflation. The latter is just unpredictable.

It's a value decision, not an evidence situation. Would you prefer boom-and-bust over stable growth? Would businesses that have menu costs? Would people who's wages are worth a different amount every time they're paid? Would the stock market or currency markets? Why is inflation or instability a bad thing? It's like a first year economics question.

Feel free to dispute that it is, but generally, the vast majority of people realise that severe fluctuations are not good. Unpredictability has costs involved and leads to inefficiency. But I'd love to hear any reason at all why unpredictability and boom-and-bust is a good thing?

[Drogue]

Originally posted by Brachy-Pride
The good thing for the USA is all their debt is in dollars

Other countries, If they have a big crisis, and their currency devaluates, suddenly find paying their debt (which usually is in dollars) much more difficult

While partly true, that is a seperate and different problem for the US. if they have a big crisis, their currency still devalues, meaning foreign people want to call their debt in as it causes them to be shaky, as any devaluations do. It also causes oil to become much more expensive.

While devaluation doesn't make their debt rise, as it would for other countries, it does cause severe problems.

[Ned]

Sustainable growth? Would that be growth in the labor force + growth in productivity?

[Drogue]

Well, that would be whatever the economy can continue to grow at without causing inflationary pressure. So labour force plus productivity growth would seem to be it, however it also involves interest on the debt, changes in the balance of payments, expectations of inflation/growth and credibility. It involves whatever the market thinks sustainable growth will be, as that is what will cause inflationary pressure, or not, aswell.

[Ned]

Drogue, what effect, if any, does a large increase in the minimum wage cause?

[Drogue]

Two effects. Firstly, it cuts off all the lower paying jobs, so raises unemployment. Admittedly some people's wages will be raised rather than lost, as in some cases the company may be making more money from that worker than the wage rate, but due to demand it could be kept low before the minimum wage.

Secondly it will break any monopsony power in the labour market. This is when businesses are the sole (or one of few) buyers of labour in the area or sector. They have market power, and thus can keep wages low by employing fewer workers, in the same way monopolies keep prices up. Raising the minimum wage can change this, actually reducing unemployment.

Usually the first effect is far stronger, so in most cases, raising the minimum wage will raise unemployment. However it depends on the structure of the labour market, such as labour mobility and transferable skills. It also depends on how what the unemployment rate is and high the minimum wage is to start with. If the minimum wage is low, the unemployment-increasing effect will be lesser, and the monopsony-breaking effect stronger, and vice versa.

The general conclusion is that with a perfectly competitive labour market, there's no efficiency reason for a minimum wage. However with an imperfect labour market, some minimum wage could increase employment. Large increases are likely to be bad though.

*I stress this is just an opinion, I've no data to back it up, but it seems the more logical outcome to me.

[Imran Siddiqui]

Originally posted by Drogue
Nope, not if the economy grows faster. Say debt's $100bn and growing at 2% a year (ie. the government deficit is $2bn). Let's say the GDP of this country is £1000bn, leading to tax revenues of $400bn, and growing at 3% a year. So at year 0, the debt ratio is 1/4. After a year, we have debt of $102bn and tax revenues of $412bn, leading to a debt ratio of just under 1/4. Every year, even with debt increasing, the debt ratio drops.

However, Ned wants a constant deficits, which means during recessions the deficit amount will not be lower than growth rate (of course and neither should it). But he doesn't want to correct for what has happened to the debt ratio during those recessions.

IMO, you can't run constant deficits without it getting away from you, because of what happens during recessions. If you aren't willing to entertain surpluses when you get out of the recession (to correct how out of wack the debt ratio got during the recession), the debt ratio will eventually get away from you.

[Dauphin]

Re: Re: Re: Re: Re: Re: What defence do we have against politically-motivated scienti

Originally posted by Drogue
Even if 60% were politically motivated strongly enough towards one side that they stopped looking at arguments and thinking critically (highly unlikely - I don't know many politically motivated scientists at all as they care more about science), then the other 40% would have plenty of opportunity to create reasoned rebuttals.

There are circumstances whereby their very nature as scientist can leave them politically motivated. For example, experts in the field of stem-cell research are highly unlikely to be on the same side, politically, as those who are against stem-cell research.

[Imran Siddiqui]

Originally posted by Drogue
It's not rocket science. The hard part is saying what fine-tuning the economy needs to stay on that course, as there's nothing keeping it there naturally. Too much growth can be disasterous.

That's understating it a bit ("the hard part" being keeping the economy on a stable level growth plane ). Ideally that'd be great, but I have doubts that practically it'll ever happen. After all, politicians have their own agenda and are usually not content with deferring over what is best for the economy. And then, of course, you have ideological beliefs on what is best for taxation (ie, we are taking too much from people so a massive tax cut is the moral thing to do and that shouldn't be raised when the economy is on the cusp of overheating either).

[Ned]

Drogue, I was also thinking that jump in the minimum wage would have a long term benefit in boost in efficiency as employers would have to invest in efficiency in order to stay even. But, this would be necessary only where other factors, such as competition, were not already forcing greater efficiency. Thus, a minimum wage would be good for service workers and farm hands, but not for factory workers whose products faced competition.

I note that most factory workers are way above the minimum wage already, so much so, that US manufacturing employers have a hard time staying in business vis-a-vis foreign competition.

Imran, I think the focus should be on growth. The long expansion we had from 1991-2000 showed that the business cycle did not require a recession every four years. I will therefor assume that we made mistakes in 1999-2000 that caused the deep recession in 2001. Do you agree with this much, or are you of the opinion that there was nothing we could have done to stem the recession.

Drogue, do you have a view on this issue as well?

[Imran Siddiqui]

Originally posted by Ned
Imran, I think the focus should be on growth. The long expansion we had from 1991-2000 showed that the business cycle did not require a recession every four years. I will therefor assume that we made mistakes in 1999-2000 that caused the deep recession in 2001. Do you agree with this much, or are you of the opinion that there was nothing we could have done to stem the recession.

No, that's entirely silly. The long expansion was starting to show signs of overheating by 1995. Remember Greenspan's statement about "irrational exuberance"? People laughed at him then, but he wasn't wrong. The economy was growing waaay too quickly and would have headed for recession regardless to correct the market. Perhaps raising taxes or cutting services in the mid 90s may be brought the growth down to manageable levels, but things were going out of control.

[Drogue]

I'm with Greenspan. Krugman wrote a great article on it called "the four percenters". Basically there is a conservative group of politicians who believe that the US can grow at 4% a year, sustainably. However we tend to find anything over 3% and the US economy starts to overheat. It's not about having a recession every four years, it's about if we grow at much above that, we'll end up with occasional recessions. The faster we grow, the more often the recessions. Basically there is a trend that the US can't overshoot by much without causing a recession.

However there are policies that can affect this, mostly those that affect culture. It's often said that the American Dream is worth half a point of growth. The belief that people can work their way to riches and the labour mobility and willingness to adapt that goes with this means the US can grow faster than Europe, sustainably. Lower taxes don't just raise growth by spending, they encourage people to work longer hours. It's these extra hours and this culture that aids the US. Education is also reckoned to have an effect. That's what I mean by money spent well. Lower taxes, better education and better infrastructure all aid growth, not just by increasing demand, but by increasing output. However wasted money only increases demand.

I think the focus should be on utility. Growth is necessary for that, but it's by no means sufficient. By most measurements (from surveys to quality-of-life reports) the US is not as 'happy', for want of a better word, a country as much of Europe. The French, for example, would rather be safe in the knowledge that if they lose their job, they have a safety net, than have that extra half a percent growth. The US wouldn't. And thus their policies and aims are shaped towards that. So what you aim for is really down to what you want in a country.

[TCO]

The defense is to do good work yourself (or have others do it) and then publish it. The aim should NOT be to fight a PR battle, but to clarify things. Steve McIntyre does a poor job here. He is overly argumentative. Is not clear. Does not publish. And avoids clarifying areas where it diminishes the impact of his flaws found in other's work.