Economics

一点都不自然的自然失业率

Nov 2, 2017 Edmund S. Phelps

纽约—通胀始终萎靡不振的国家，失业率为何如此低？对经济学家来说，这是一个根本性的问题。而当经济学家面对一个根本性的问题时，常常会产生根本性的分歧。

20世纪60年代，我属于叛逆经济学家，拒绝接受我们在50年代所学到的宏观经济学，即由希克斯（J.R. Hicks）、菲利普斯（A.W. Phillips）和托宾（James Tobin）发展出来的“凯恩斯主义”理论。这一理论认为，总需求驱动一切。高失业率只能由需求不足造成，而只能由反常的高需求导致。

这令我们很困扰，因为我们所学到的基本经济理论——由马歇尔（Alfred Marshall）、维克赛尔（Knut Wicksell）和索洛（Robert Solow）所构造的理论——认为一切都由结构性力量驱动。较快的技术进步和较高的工作或储蓄偏好是一件好事，因为它们能够提振劳动力和资本的供给——从而提振就业和投资。但凯恩斯主义者坚持认为结构性力量是坏东西，因为它们让人们失去工作，除非决策者能制造足够的需求匹配供给的增加。

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0 Comments on this paragraph, 20 Comments on this article

Manu Oquendo Nov 18, 2017

Tend to agree with the main article. We are living through dramatic structural shifts. To many to mention.
One of them is the huge loss of industry. Industrial jobs, public service jobs and private service jobs have very little in common. Changes in their mix are important.
Change is pervading. So much so that I suspect that Keynes would go back to his casket just from listening to some "neo Keynesians".

On the inflation front this is also bound to have implications. On the one hand consumers live worse than 40 years ago and monetary flows tend to be contained in relatively closed circuits and geographies. Also procurement in low cost countries, etc. has helped mask astronomic QE's.
In addition one suspects the CPI's is no longer valid as a temporal comparison tool. The value of statistics is suspect and we are comparing apples with potatoes.
This looks like a mega Ponzi.
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Paul Friesen Nov 14, 2017

I guess I'm one of those much-reviled Keynesians. At least, while I have my own rather off-beat way of looking at things, it almost always gives me the same answers as people like Paul Krugman get.

I don't think that any Keynesian would claim that demand is "all powerful" as the author suggests. What they do say is that recessions like what started in 2009 are caused by a lack of demand. To me, that is so self-evident I can't believe there seem to be those who debate it. Companies can't sell things they are able to produce. Unemployment rises. What is so hard to understand?
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B Wilds Nov 10, 2017

In the area where I live we see a lot of new temporary staffing agencies possibly in reaction to the ACA or Obamacare. And a couple just moving into my apartment complex claims to be working five different jobs. What is really going on will be revealed in time but creating "real jobs" in a mature market or economy is not an easy task and poses difficult challenges.

Globalization has elevated the importance of creating jobs and a balanced economy that supports a strong middle class. We must differentiate the difference between creating a valuable and worthwhile product that benefits society and breaking a window then praising the jobs replacing it yields. The article below delves into what constitutes a "real job" and its value.

http://brucewilds.blogspot.com/2016/11True-job-creation-constitutes-real-challenge.html
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Enrique Fleischmann Nov 8, 2017

Ceteris Paribus. Fixed NAIRU was relevant in a world of steady labor share (wages x employees). When labor share declines (as is the case for the last 45 years a decline of between 5% and 15% , with US at ap. 10% in G-20 countries), the same level of employment ( 1- unemployment) would mean lower wages and a lower NAIRU. Therefore, the question is to see why has the Labor share declined and if and how this decline affected output and NAIRU.
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Phil Cartier Nov 6, 2017

I've found that a significant part of the problem is the poor quality of education, and not just public schools. I've visited several schools Science Fairs, where the students get to showcase their scientific projects for credits. I found one that was actual, real science- the daughter of a noted local physician and his biochemist wife had put together a genetic engineering experiment using her parents access to lab facilities. The experiment showed that common bacteria could take up and express genetically modified plasmids. Talking to her she had a good grasp of the concepts and the difficulties in actually making genetic changes and understood what she had done was a demonstration of a common technique in genetic studies..

The polar opposite was a poor young lad trying to explain global warming. He didn't understand what the global average surface temperature meant. He didn't understand the the statistics involved or that a straight line regression was inappropriate. He didn't understand what radiation meant in the context, much less what infrared radiation was.

Unfortunately, 90%+ of the projects were of that poor quality.

It doesn't get tremendously better going further up the educational ladder. Even in business it's hard to find the employees with million dollar ideas, and much less bosses that recognize them. It's hard to increase productivity when a manager's idea of productivity is having someone red 50 slides with better pictures.

Without discipline, responsibility, self control, and a sense of self no one can get an education, especially when so many competing, useless, time wasting ideas are pounding at them daily.
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Mark Culver Nov 5, 2017

I do think that there has been a structural change/shift, in economic terms, in the US to the utility that many prospective workers assign to an hour of their time. This probably accounts for the stubbornly low Labor Participation Rate. These prospective workers demand higher wages, more stimulating responsibilities, more upward mobility, etc. before they are willing to trade their finite time. Instead, they have opted to live off savings (perhaps their own savings, perhaps their parent's savings, or societal safety nets) and by living more efficiently/frugally. In a global labor pool, this also helps explain a lot of the offshoring of labor to poorer countries without the accumulated savings.
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Michael Parsons Nov 5, 2017

Keyenes said little about the supply response, assuming firms would adapt normally - demand-deficiency being the urgent problem at that time. But since the terms of trade between labour and capital have been turned in ca[ital's favour, your answer is that the suppression of real-wage increases explains lack of inflation. As tothe 'Phillips Curve' what evidence was there ever for it? It was a back-of-an-envelope slogan at best. Keyenes should at least have given us pause for thought whenever we start talking about 'natural' equilibria, long-term aggregate equlibrium etc. and talk about equilibria having to be achieved in terms of the (irrelevant) time it takes the earth to travel round the sun.
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Adam F Nov 5, 2017

"Low inflation ... ? " Well, that depends what you're counting and whether it's counted accurately.

In the UK at least, the cost of housing is not accurately captured as a cost of living, presumably because government econometricians don't live in houses, they live in a fantasy land.

If inflation figures don't accurately capture the cost of living, what's the point of them - and how can policy be built upon them?
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Ronald McQuaid Nov 5, 2017

To what degree has the influence of using the nation state as the major unit of analysis altered? Compared to the 1970s (or more recently), capital supply is more disconnected from domestic savings (especially through massive inward capital flows), labour supply (both quality and quantity) can more easily be increased by producing abroad through global supply chains etc., two-way flow of technology between the US and other countries is more rapid and interrelated, while potential 'leakages' from increases in domestic aggregate demand are arguably greater than in the past etc. Of course the many other factors mentioned are also important, such as demographic, participation rates, worker and employer perceptions changes, and also exchange rates not simply being a comprehensive explanation etc. So the relationships between, and constraints on, domestic economic responses to domestic changes have been increasingly mediated through global and other influences, at least in the short term, and have altered over time. If there is a 'natural' rate of unemployment it would indeed be expected to change due to such exogenous, as well as endogenous, factors.
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KC LOH Nov 5, 2017

Such discussions about natural rate of unemployment and inflation seem to assume that there is only one dependent variable and one independent variable.

May be in reality there are many other variables that act to confound the direct relationship between the rate of inflation and the unemployment rate? The labour force participation rate, for example, probably could be one such confounding factor. Another might be the rate of increase in money supply. And there might be other factors such as the skewedness of income distribution or the impact of imported inflation etc.

Perhaps there is indeed a natural rate of unemployment in the absence of everything else, like the speed of light in a perfect vacuum. Or perhaps there isn’t. But in our real world, the relationship between rate of inflation and unemployment rate does not exist in the absence of everything else.
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Egmont Kakarot-Handtke Nov 3, 2017

Rethinking the Phillips curve
Comment on Edmund S. Phelps on ‘Nothing Natural About the Natural Rate of Unemployment’

Edmund Phelps summarizes: “What explains the paradox of low unemployment despite low inflation (or vice versa)? So far, economists – structuralists as well as diehard Keynesians – have been stumped.”

The paradox is explained by the fact that the concept of the Phillips curve has been messed up back in the 1960s by both structuralists as well as diehard Keynesians.

For details see:
NAIRU, wage-led growth, and Samuelson’s Dyscalculia
https://axecorg.blogspot.de/2015/01/nairu-wage-led-growth-and-samuelsons.html

Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2130421

Putting economic policy on scientific foundations
https://axecorg.blogspot.de/2017/08/putting-economic-policy-on-scientific.html

The Phillips curve is since 60+ years one of the conspicuous landmarks of the failed science economics and Edmund Phelps is still way behind the curve.

Egmont Kakarot-Handtke
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CreditRider CreditRider Nov 3, 2017

The problem with the unemployment rate is that it is a very bad proxy for the purchasing power of labor. The unemployment rate could be very low at the same time when the purchasing power of wage earners is low. For instance: The loss of bargaining power of trade unions has weakened the power of laborers in wage negotioations as has part time employment and other labor market reforms of the last 30 years. So despite low unemployment numbers, the purchasing power of laborers is also low. And it is exactly this purchasing power that matters for the inflation rate and for the validity of the Philips Curve.
- Bala Subramanian Nov 6, 2017
  
  Yes indeed. The purchasing powers of global currencies have been in decline due to the failure to revalue the currencies periodically based on productivity gains resulting from net-work effects. I believe, a 5% annul for the last 2000 years would require today's currencies to be revalued at 1:100 ratio. Thus today's American penny should be revalued to today's American dollar to restore it's purchasing power. Only after such a correction can the economic principles be re validated and the solvency of the global economic system be restored/maintained. The current levels of global national debts can not be sustained with the existing purchasing powers of the issued currencies.
  A new reply to this comment has been posted.
- Bala Subramanian Nov 6, 2017
  
  Yes indeed. The purchasing powers of global currencies have been in decline due to the failure to revalue the currencies periodically based on productivity gains resulting from net-work effects. I believe, a 5% annul for the last 2000 years would require today's currencies to be revalued at 1:100 ratio. Thus today's American penny should be revalued to today's American dollar to restore it's purchasing power. Only after such a correction can the economic principles be re validated and the solvency of the global economic system be restored/maintained. The current levels of global national debts can not be sustained with the existing purchasing powers of the issued currencies.
  A new reply to this comment has been posted.
- Bala Subramanian Nov 6, 2017
  
  Yes indeed. The purchasing powers of global currencies have been in decline due to the failure to revalue the currencies periodically based on productivity gains resulting from net-work effects. I believe, a 5% annul for the last 2000 years would require today's currencies to be revalued at 1:100 ratio. Thus today's American penny should be revalued to today's American dollar to restore it's purchasing power. Only after such a correction can the economic principles be re validated and the solvency of the global economic system be restored/maintained. The current levels of global national debts can not be sustained with the existing purchasing powers of the issued currencies.
  A new reply to this comment has been posted.
- Bala Subramanian Nov 6, 2017
  
  Yes indeed. The purchasing powers of global currencies have been in decline due to the failure to revalue the currencies periodically based on productivity gains resulting from net-work effects. I believe, a 5% annul for the last 2000 years would require today's currencies to be revalued at 1:100 ratio. Thus today's American penny should be revalued to today's American dollar to restore it's purchasing power. Only after such a correction can the economic principles be re validated and the solvency of the global economic system be restored/maintained. The current levels of global national debts can not be sustained with the existing purchasing powers of the issued currencies.
  A new reply to this comment has been posted.
- Bala Subramanian Nov 6, 2017
  
  Yes indeed. The purchasing powers of global currencies have been in decline due to the failure to revalue the currencies periodically based on productivity gains resulting from net-work effects. I believe, a 5% annul for the last 2000 years would require today's currencies to be revalued at 1:100 ratio. Thus today's American penny should be revalued to today's American dollar to restore it's purchasing power. Only after such a correction can the economic principles be re validated and the solvency of the global economic system be restored/maintained. The current levels of global national debts can not be sustained with the existing purchasing powers of the issued currencies.
  A new reply to this comment has been posted.
A new reply to this comment has been posted.
Steve Hurst Nov 2, 2017

There is plenty of labour available outside the US and that availability has an impact. Offshore labour is easily accessible, in some cases over the internet instantaneously. There is also the arrival of AI which is just another version of labour. That's the problem with your supply and demand model, it doesn't recognise the accessibility of offshore labour or synthetic labour. Plug that in and the situation becomes simple
- Gerald O'Connell Nov 5, 2017
  
  Absolutely right. Outsourcing production of both goods and services overseas gives producers access to substantial labour pools in lower wage economies, while exerting downward pressure on wages in those economies where production is outsourced from. Mobility of labour within the EU has meant that labour is regularly imported in large quantities from low wage economies - this source of labour has lower expectations and sends a lot of money back to countries of origin where prices are lower. Globalisation of the labour market means that theoretical constructs based on events assumed to be occurring within a 'single economy' are no no longer likely to yield useful conclusions.
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Eric Einhorn Nov 2, 2017

Perhaps there are other "structural factors" such as the decline of employee power (shrinking unions vigorously suppressed in the USA), increased concentration of market power in large firms, decline in workforce due to incarceration and poor health (e.g. drug addiction) mainly in the USA, effective mercantilism by the "usual suspects" (Germany, China, Japan, S. Korea, et al.), and other factors.
Some countries (Sweden, Denmark, Germany, et al.) have managed to advance productivity through more effective training, education, and investment. This has allowed modest wage growth with minimal cost-push inflation.
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