Lord Skidelsky looks beyond capitalism

In a post on Project Syndicate, Robert Skidelsky speculates that capitalism might well have had its day, at least in so far as it has provided a level of well-being at which more stuff isn't making people happier. Capitalism:

. . . inspired the American way of life, where money always talks. The end of capitalism means simply the end of the urge to listen to it. People would start to enjoy what they have, instead of always wanting more. One can imagine a society of private wealth holders, whose main objective is to lead good lives, not to turn their wealth into “capital.”

His argument isn't quite that the forces of production have outgrown the relations of production, but that the forces of production have outgrown the actual needs of people in most places.

Housing still looking for the bottom

Calculated Risk reports a new record low in housing completions last year, predicting new record lows for 5+ units for this year as well. This year might mark the bottom of the housing crash.

Pakistan finally pissed enough to do something?

Well yes, now that a NATO helicopter air strike has killed three of it's soldiers rather than mere citizens, Pakistan is blocking a NATO supply route, according to the Guardian. Enough is enough?

I am not shocked

by the news that income inequality is worse than it's been in a looooong time.

Robert Barro's pony express to lower unemployment

In a Wall Street Journal Op-Ed (why do I read these!?), Harvard economist Robert Barro claims that "according to [his] calculations" without extended unemployment benefits the unemployment rate would now be 6.8%. What are these calculations? Glad you asked!

To get a rough quantitative estimate of the implications for the unemployment rate, suppose that the expansion of unemployment-insurance coverage to 99 weeks had not occurred and—I assume—the share of long-term unemployment had equaled the peak value of 24.5% observed in July 1983. Then, if the number of unemployed 26 weeks or less in June 2010 had still equaled the observed value of 7.9 million, the total number of unemployed would have been 10.4 million rather than 14.6 million. If the labor force still equaled the observed value (153.7 million), the unemployment rate would have been 6.8% rather than 9.5%.

See? If you assume that long-term unemployment is caused by extended unemployment insurance benefits, then removing unemployment insurance extensions solves the problem of long-term unemployment (and you get a pony!). This must be why he makes the big bucks. Magical thinking.

Suppose we make a different assumption. Let's assume that changes in consumer demand has an effect on the level of employment. If so, then the decision to not extend unemployment benefits would reduce demand for goods and services. Where will the jobs come from? Businesses are not going to expand their capacity or their workforce in the face of falling demand for their products. The only way that extending unemployment benefits could actually increase the unemployment rate above what it would otherwise be (other than just assuming it will, as Barro does) is to assume that the people receiving those benefits, rather than spending them on food and rent, use the checks to set fires to businesses that are currently employing people. This assumption has the advantage of actually leading to the conclusion that Barro reaches, without magic.

Update: cross-posted at Multiplier Effect.

Not a nation, but a republic of property owners

Uwe Reinhardt in Are We a Nation of Property Owners?, uses research by Arthur Kennickell at the Federal Reserve and my colleague Ed Wolff at Levy Economics Insitute (and NYU) to argue that Michael Barone of American Enterprise Institute is wrong to say that we are a republic of property owners. The specific passage of Barone's that Reinhardt takes exception to is:

The fact is that we are once again, as in the days of the early republic and not in the heyday of the Progressives and the New Dealers, a republic of property owners. Most Americans have accumulated — or will, during the course of their working years, accumulate — significant amounts of wealth. And that is why, I believe, American voters seem to be rejecting the policies of the Obama Democrats.

Reinhardt's point, made using the research mentioned above, is that most people in the U.S. own very little property, since almost 50% of families have net worth (including homes) of $10,000 or less. So Barone is just wrong to claim that most Americans have or will accumulate "significant" amounts of wealth. Of course, if you believe that significant in this context should mean more than zero, I can't help you.
I think that Barone is onto something, though, as is so frequently the case, not what he intended. The definition of republic is:

a state in which the supreme power rests in the body of citizens entitled to vote and is exercised by representatives chosen directly or indirectly by them.

Barone was talking about a republic in the Jeffersonian sense, apparently, a republic of small property owners (or for Jefferson, yeoman farmers). What we have, essentially is a republic more in the Roman mold, where the property owners are the citizens entitled to vote. But, you say, there are no property restrictions on voting in the U.S.! Right you are, but there are certainly property restrictions on who you get to choose from when you go to vote. More accurately there are property restrictions on who gets to decide who you get to choose from. In this unintended sense, Barone is right. Reinhardt is also right to say that we are not a nation of property owners.

We are not a nation, but a republic of property owners.

In which, if you read between the lines, I foam at the mouth

Half a stimulus is better than none « Multiplier Effect