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me sounds to me like it supports the idea of the marginal propensity to consume is wikipedia pulling my leg posted by the arthurian at 4 00 am 4 comments labels fun with the mpc friday may 17 2013 interest income by quintile didn t have to pull too many teeth to find this pdf from the bls data for 2009 under sources of income the pdf includes interest dividends rental income other property income for all consumer units and by quintile under consumer unit characteristics the pdf provides the total income before taxes for each quintile i took a look at the ratios of those numbers graph 1 here s the spreadsheet considering interest dividends rental income and other property income as returns to various forms of saving i am calling the total interest income and using it as a proxy to estimate various forms of savings by income quintile for what it s worth posted by the arthurian at 4 00 am 0 comments labels fun with the mpc thursday may 16 2013 mcconnell discredited two excerpts from malcolm r mcconnell s 1975 textbook and a contradiction i let slide in yesterday s post first from the text above mcconnell s figure 11 2 many economists now feel that the mpc and mps for the economy as a whole are relatively constant statistical data such as those of figure 11 2 are consistent with this position in other words statistical data supports the view that the mpc does not change second from the text below mcconnell s figure 11 2 the figure suggests that households spend a larger portion of a small income than they do of a large income in other words statistical data supports the view that the mpc does change wow talk about seeing both sides of an issue posted by the arthurian at 4 00 am 0 comments labels fun with the mpc wednesday may 15 2013 gattopardo economics via reddit gattopardo economics the crisis and the mainstream response of change that keeps things the same by thomas i palley pdf 30 pages give or take i m four or five pages in and i have thoughts for a critique already but this paper is very good posted by the arthurian at 10 03 pm 0 comments mpc discredited steve roth ponders the marginal propensity to consume mpc here since those workers have a high propensity to spend their income all things being equal that distributional shift should mean there s a virtuous cycle and again here sumner drum and krugman all seem to think that the distribution mpc velocity argument has no legs they re quite categorical about this it is a big deal because a lot of things fall into place if the mpc idea holds good if it doesn t hold good people should be a little more explicit about how it fails than paul krugman is that the rich spend too little of their income this hypothesis has a long history but it also has well known theoretical and empirical problems if it doesn t hold good people should be a little more explicit about how it fails than scott sumner is at the first link you really need to give up on that mpc stuff it was discredited decades ago the quest for a better explanation of what s wrong with the mpc idea is roth s focus in comments at the first link in response to sumner i ve poked around a lot looking for a straightforward cogent refutation that doesn t make assumptions that i consider to be questionable any leads for me and at the second link in its entirety roth writes can folks especially those who don t believe this argument point me to what might be considered definitive takedowns i have notions about what they might say but want to see the best argument s out there i want to see too steve but i suspect they re a lot like the arguments for free trade 1 it s obvious 2 we ll get to that later and later they only say it s obvious or 3 something incomprehensible just to shut us up roth is looking for the slam dunk argument that has krugman and especially drum convinced that the mpc argument doesn t hold water you know what i like i like it that even though the mpc explains a lot in a most satisfactory way roth is willing to accept that the idea is garbage if someone can make the convincing argument that s the right way to do economics always approaching the best answer anyway i decided to look through some textbooks for views on the marginal propensity to consume maybe that would be the easy way to find the concept discredited i thought i went first to mcconnell s 1975 edition of economics the proportion or fraction of any change in income which is consumed is called the marginal propensity to consume mpc or alternatively stated the mpc is the ratio of a change in consumption to the change in income which brought the consumption change about that is this is a bit different from steve roth s admittedly brief poorer people spend a larger share of their income wealth than richer people and maybe that opens up a door because even of the marginal propensity to consume is junk roth s non marginal observation may still be true in his 1975 textbook mcconnell wrote economists are not in complete agreement as to the exact behavior of the mpc and mps as income increases for many years it was presumed it was presumed that the mpc declined and the mps increased that is it was felt that a smaller and smaller fraction of increases in income would be consumed and a larger and larger fraction of these increases would be saved many economists now feel that the mpc and mps for the economy as a whole are relatively constant statistical data such as those of figure 11 2 are consistent with this position these feelings that mcconnell describes is that all there is mcconnell s figure 11 2 source economics by campbell r mcconnell sixth edition page 229 reiterating the notes below the figure a dot would be on the 45 degree line the black line if every dollar of disposable income were spent where a dot falls below the black line it indicates that some part of disposable income has been saved the farther the dot falls from the black line the greater the amount that was saved mcconnell says the brown line suggests that households spend a larger portion of a small income than they do of a large income i agree the brown line is not a trend line for the dots the brown line is a constant percentage of income line for the years since 1946 through 1966 the dots are generally above the brown line for the years after 1966 the dots are generally below the brown line at the higher incomes saving was generally greater than at the lower incomes but somehow that doesn t feel like a slam dunk argument posted by the arthurian at 4 00 am 0 comments labels fun with the mpc tuesday may 14 2013 because too often one reads that the problem of scarcity has been solved from the mother of invention at interfluidity actual scarcity has not in fact been overcome we have not achieved overcapacity in aggregate in a depression businessmen perceive overcapacity all over the place but that is a distributional phenomenon there is an abundance of goods and services relative to the needs and desires of people with purchasing power to consume there is no such abundance in an absolute sense posted by the arthurian at 4 00 am 1 comments monday may 13 2013 an inverse relation via random eyes pretty interesting the interest rate and the federal debt relative to gdp move in opposite directions for a good long period too half a century it would be a mistake however to assume there is a causal relation between these two factors that would leave out too much why do interest rates blue continue to rise in the 1970s when the federal debt red is essentially flat why do interest rates fall through the 1990s while the federal debt makes an s turn there is more to the story than we can see on this graph posted by the arthurian at 4 00 am 0 comments sunday may 12 2013 the reason for desiring economic growth checking my blog stats the other day i noticed that one of the traffic sources was a google search for the reason for desiring economic growth is to now one of the things that s clear in my mind is why we might desire economic growth so i thought i d be explicit about it lots of people complain that gdp is not a good number for various reasons that may be but it s the number we have making the number better is off topic at the moment so what is gdp anyway it s a measure of what we produce in a year it s a way to measure the size of the economy and we want it bigger because nope not yet gdp gross domestic product gross all of it gross in this context does not mean yucky domestic within our country product the stuff we produce gdp is a measure of all of the stuff we produce within our country in a year now i can tell you why it s important it s important because the total value of what we produce in a year is equal to the total value of our income in a year gdp gdi where the p is product and the i is income so why do we want more economic growth because we want more income you do want more income don t you posted by the arthurian at 4 00 am 4 comments saturday may 11 2013 bcg81 said this is crude i m just throwing together a few pictures at fred in response to a comment from bcg81 on my old kaminska and unit labor cost post bcg81 said i agree it does not make sense to talk about a correlation between ulcs and inflation because they re the same thing but as i understand it the reason nominal compensation is compared to real productivity is to measure the extent to which compensation can rise as a result of compensation or inflation rising without putting pressure on prices you can t see that without holding output prices constant also when using ulcs as a measure of international competitiveness you want to see both cost i e nominal i e labor share competitiveness and price competitiveness i e relative rates of inflation i don t know how to respond in words the ideas are too big and too nebulous it goes in interesting but turns to mush in my head so i went to fred this is crude because i m just comparing labor cost to corporate profit here s the unit labor cost graph i showed in the old post graph 1 unit labor cost now if you wanted to compare that to something you might compare it to corporate profit as a share of gdp graph 2 corporate profit after tax as a percent of gdp but that s not really a good comparison for a couple reasons first of all the corporate profit measure is after taxes why i don t know that s the popular measure though at fred type corporate profits in their search box and hit enter and the first thing that comes up is corporate profits after tax on a list that s sorted by popularity whatever the second reason well wait a minute let s look at the graphs the first graph shows unit labor cost going up on a pretty straight path since 1980 that s labor cost meaning wages and salaries and benefits before tax as opposed to after tax in addition the taxes businesses pay on labor are added to that if i remember right the second graph shows corporate profits after tax drifting possibly down until the mid 1980s then rising from a low of 3 to a current high of over 11 from 1980 to the recent data unit labor cost rose from about 60 index units to less than 120 i don t know what the index units are but i can see that unit labor cost did not quite double since 1980 by contrast corporate profits increased from 3 to over 11 that s almost a fourfold increase in less time than it took for the unit labor cost to double now where was i the second reason these two graphs are not a good comparison is that graph 2 shows profit as a percent of actual price gdp to make it comparable to graph 1 we d have to show it as a percent of inflation adjusted gdp like this graph 3 corporate profits after tax as a percent of real gdp now that sucker s going up i downloaded the data from graph 3 and figured the average of the four quarterly values from 2005 that value is 9 72447382422837 you should be laughing because i m using all the digits i used the average to create a version of graph 3 that shows the data as an index with 2005 100 just like the unit labor cost in graph 1 here s the corporate profit data in blue and the unit labor cost data in red graph 4 unit labor cost red and unit corporate cost blue here s the same data just since 1980 graph 5 unit labor cost red and unit corporate cost blue since 1980 so what s going up faster what s driving prices up labor cost they say not the blue one they say well maybe that was true in the reagan years but you know maybe that s not so clear both lines are going up since the latter 80s let me do what i did in the old post and show the data relative to nominal gdp gdp measured in the prices we actually paid to buy the stuff we bought labor cost red and corporate profit blue indexes relative to actual gdp yeah that red one the one that s going down since 1960 that s the one they say makes prices go up it can t be true and now i can respond to bcg81 i don t know about the things you said but i know that any time you divide nominal something by real something you are factoring inflation into the result and i know that after you factor inflation into something the thing looks more like inflation than it did before and i know economists like to take these things with inflation factored in and compare them to inflation and say wow look at the similarity and i know that the similarity is created by the arithmetic not by the economy posted by the arthurian at 4 00 am 0 comments friday may 10 2013 notes on debasement in milton friedman s money mischief in a chapter titled the cause and cure of inflation we read so long as money consisted of specie whether gold silver copper iron or tin inflation was produced either by new discoveries or technological innovations that reduced the cost of extraction or by debasement of the currency the substitution of base metals for precious metals as long as money consisted of specie there were only two ways to create inflation friedman says and debasement was one of the ways to create inflation from price fixing in ancient rome mises daily thursday june 18 2009 by robert l scheuttinger and eamonn f butler in order to attempt to deal with their increasing economic problems the emperors gradually began to devalue the currency nero a d 54 68 began with small devaluations and matters became worse under marcus aurelius a d 161 180 when the weights of coins were reduced these manipulations were the probable cause of a rise in prices according to levy and again it would seem clear that the major single cause of the inflation from nero to diocletian was the drastic increase in the money supply owing to the devaluation or debasement of the coinage as with friedman here also the manipulation of the metal in money is offered as the cause of inflation not the result it s probably both as everything in the economy has two sides but what i m saying is that manipulation of the metal debasement is a response to changing conditions in the economy note the prefacing phrase in the first excerpt from scheuttinger and butler in order to attempt to deal w...
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