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Monday, November 29, 2010

Wage Freezes for All?

Today Obama announced a largely symbolic gesture to freeze federal employee pay for 2 years.  That's all fine and good, but I've been thinking about this as a potential broader policy too, particularly in relation to some post-Keyensian economists who are calling for dramatic 'employment' tool(s).  They are in favor of a tool that basically negates the need to try and effect unemployment indirectly with interest rates and spending, and replacing it with a tool whereby the government would hire droves of people during recessions (kind of like a 'New Deal' instrument).  I've mentioned before I'm not in favor of such an idea in large part because it sounds needlessly bureaucratic, full of moral hazard, and could theoretically permanently increase the size of government to a dramatic and largely inefficient level.

However, what if the instrument were not employment levels but the actual wage levels - private wages - the government could control temporarily.   It wouldn't be bureaucratic since the government could pronounce say that, until such time X, Y, Z (sufficient employment/GDP growth has been attained), job-earned wages (including bonuses) are to be kept frozen across the board for EVERYONE.   This in effect would be a way around the New-Keynesian 'sticky wage / sticky price' problem.   According to classical theory if wages were allowed to freely adjust in recessions, employment would not fall as hard.   Economists point out that wages often don't fall downward (or even stagnate - many keep growing) due to union contracts, social pressure/norms, maintaining a sense of morale, etc.   But what if the government had all the power to set wages during extreme downturns?  That would take the stigma off of private employers.

It wouldn't be without issues: timing would still be important.  Rules vs. discretion would be as well.  I would imagine such a program wouldn't work (politically or otherwise) if it was left to discretion, but if certain rules were enacted as law, it might stand a chance.   What the rule is is best left to economists more mathematically inclined that myself.  I suspect tying it positively to some level of inflation would be useful such that the real wage keeps a level of stability.  Unions wouldn't be particularly happy about governments temporarily over-riding their contracts, etc.  But, I think some of them would come around when they saw that the alternative was significant unemployment.   Perhaps the biggest issue is the same big issue with all forms of fiscal/government-mandated stimulus - it all starts with politics, not economics.  That is to say, economics cannot be separated from its political cousin in the real world.  Devising a program rule that would withstand changes in political climate or parties should be paramount - but how one would go about doing that is a bit beyond me at this point....

At best, it could ease unemployment in recessions - create a more direct target for unemployment.  At worst, it could provide evidence for or against the very underpinnings of New Keynesian economics.

Monday, November 1, 2010

Top Reasons Not to Vote

I'm tired of get out the vote campaigns that pretend that they care about things like 'involvment', 'patriotism', or 'civic duty.'  Let's face it, when people say, "don't forget to vote tomorrow," what they usually mean to say is, "don't forget to vote for the party I support tomorrow."   So, what seems like a selfless, nation-enhancing act, is really nothing than self-interested politics.

There are two time-honored and indisputable legitimate reasons NOT to vote:

1.  You are ignorant about issues and/or candidates

If you don't know what or for whom you are voting beyond their name and their party, then you need to ask yourself why you are voting in the first place.  Are you just voting for a party that you think serves your interests?   That isn't always a safe bet particularly in today's environment where there's a lot of variance on certain key issues even within each party (blue-dog vs. liberal, neocon moralist vs. tea party vs. Rockefellarian).  Even worse, if you don't know anything about the issues, or if all your information is from mainstream media (be in liberally biased MSNBC or conservatively biased Fox News ....) ....then you likely are doing the country a dis-service by voting.  Not just that, but you are doing yourself a disservice.

2.  You are disenchanted with the political climate or discourse

If you are of the opinion that by in large (particularly at the Federal level, though not necessarily at the State level always...) that politics and the political climate has become dirty, corrupt, loud, or unintelligent, and if third parties are almost surely losers, then why vote for the establishment?   You can elect someone whose views are more in line with yours, but if the politics of the day preclude their goals from being realistically attainable, then what is the point in voting?

So, if you know who and what you are voting for and you are ok with one or both of the two main political machines, then by all means vote.  If not, then don't.  It's ok.  It's not your civic duty to vote.  It's your civic duty to be true to yourself.  Why take the time, gas, effort to stand in line to have a statistical probability of effecting an election equal to winning the lottery for something you either don't know enough about, or don't feel will be effectual in moving our country forward.