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Reconstructing Keynesian MacroeconomicsSCEPA Economist Willi Semmler published a new book, Reconstructing Keynesian Macroeconomics Volume 3, coauthored with Carl Chiarella from Australia's University of Technology and Peter Flaschel from Germany's Bielefeld University.

The final of a three volume series which reinterprets and restructures Keynesian macroeconomic thinking, the book focuses on the interaction between the real economy (where goods and services are exchanged) and the financial markets (where money is borrowed and lent). The authors provide a detailed investigation of the financial, goods, and labor markets and show how variations in one can be stabilized or amplified by changes in another. Using novel empirical methods to test their conclusions, the authors propose a framework for policymakers' use in the modern economy.

declarationSCEPA Economist Willi Semmler joined 266 economists from 44 countries in signing the Economists Declaration on Universal Health Coverage, calling on global policymakers to "prioritize universal health care coverage as an essential pillar of sustainable development." Semmler, a professor of economics at The New School, directs SCEPA's Economics of Climate Change project. 

As the United Nations meets this week to adopt 17 sustainable development goals, the declaration urges the international body to prioritize a "pro-poor pathway to universal health coverage" and calls for increased domestic funding, donor country commitments, and political leadership to advance necessary reforms. The economists estimate the benefits of investing in basic health care will be 10 times greater than the costs. 

The declaration was convened by the Rockeller Foundation and led by Harvard Professor and former US Treasury Secretary Larry Summers. 

New School Economics Professor Sanjay Reddy is offering a free online course in microeconomics in collaboration with the Institute for New Economic Thinking (INET). Titled, "Advanced Microeconomics for the Critical Mind," the class will transcend the narrow and technical nature of modern microeconomics to present a holistic survey of the discipline. The course will engage students in a wide range of topics so they can better understand the foundations and implications of modern microeconomic theory.

Professor Reddy received his PhD from Harvard University in 2000. His research focuses on Development Economics, International Economics, and Economic Philosophy. Teaching Assistant Rafaele Chappe received her LLM from New York University, and came to The New School after eight years as an attorney in the financial services industry. Her research focuses on finance, risk management, and the political, social, and economic implications of the 2008 financial crisis. 

Classes begin October 12th. The course is free and registration is open to anyone interested.

Cecilia NahonHer Excellency Dr. Cecilia Nahón, Argentina's Ambassador to the United States will give a talk entitled "Argentina's Response To Its Debt Crisis."

October 6, 2015
4:00pm to 6:00pm
The New School
6 East 16th Street, Room 1009

Cecilia Nahón holds a Ph.D. in Social Sciences from the Latin American School of Social Sciences, a Master of Science in Development Studies from the London School of Economics and a Bachelor in Economics from the University of Buenos Aires.

She has served in the public and private sectors as well as the academic sector. Prior to her current appointment, Ms. Nahón served as Secretary of International Economic Relations of the Ministry of Foreign Affairs and Worship of Argentina.

The Fall 2015 Seminar Series is hosted by The New School Economics Department and SCEPA.

Clara MatteiClara Mattei, PhD Candidate, Scuola Superiore Sant'Anna, Pisa, Italy and Visiting Scholar will give a presentation titled: "Market Fundamentalism and Fascist Politics in Europe in the 1920's."

October 20, 2015
4:00pm to 6:00pm
The New School
6 East 16th Street, Room 1009

Clara Mattei is a PhD Candidate at Scuola Superiore Sant'Anna, Pisa, Italy and Visiting Scholar in the Economics Department at The New School for Social Research.

The Fall 2015 Seminar Series is hosted by The New School Economics Department and SCEPA.

Casinos as Industry and Metaphor: A Qualitative Study of Declining Job QualityDeborah M. Figart and Ellen Mutari will give a presentation on their newly released book "Just One More Hand: Life in the Casino Economy."

October 27, 2015
4:00pm to 6:00pm
The New School
6 East 16th Street, Room 1009

Deborah M. Figart, Distinguished Professor of Economics, and Ellen Mutari, Professor of Economics, both of Richard Stockton College of New Jersey, located just outside of Atlantic City.

The Fall 2015 Seminar Series is hosted by The New School Economics Department and SCEPA.

Aleksandr Gevorkyan, Professor of Economics at St. John's University and New School PhD, joined with Otaviano Canuto from the World Bank to call for the creation of a Migration Development Bank (MDB).

With 250 million migrants in 2015, the authors cite the need for "an internationally recognized and functional institutional financial framework that would systematize the positive economic impacts of migration and remittances for developing countries while smoothing capital and labor flows."

Using Eastern Europe and the Former Soviet Union as case studies, they show how an MDB would provide an institutional framework for remittances and build the possibility for development in migrants' home countries.

Their article was published by Huffington Post, EconoMonitor and Seeking Alpha.

Rick McGaheyby Rick McGahey, SCEPA Senior Fellow

While May's stronger job growth is welcome, continuing low inflation and annual wage growth below 2.5% don't present any macroeconomic threats that warrant driving up interest rates. But the Fed, like many economic policymakers, seems to be operating in a "new normal" where an unemployment rate of 5.5% is considered full employment. That is not a world where most workers and families will make any significant economic progress.

The May employment report shows job creation numbers bounced back with a gain of 280,000. And an upward revision of the numbers for the previous two months added 32,000 jobs, pushing the three-month rolling average to 207,000 new jobs per month. The unemployment rate ticked up by a probably meaningless one-tenth of a percent, to 5.5%. The big jump in employment has many observers predicting a Federal Reserve interest rate increase sooner rather than later.

But even with these job gains, we still are not seeing significant labor market pressures.

Julia PuaschunderThis week's Worldly Philosopher, Julia M. Puaschunder, describes how meritocracy enables intergenerational mobility to foster equitable societies.

Thomas Piketty's Capital in the 21st Century is about societal inequality, but it also raises important questions about social mobility.

Inequality occurs in immobile societies. If individuals cannot advance based on education, work and natural skills, societal status depends on their parents' wealth, income and networks. An Organisation for Economic Co-operation and Development (OECD) Economic Policy Reform Report finds a significant relationship (r=.56, 88, p<.05) between inequality and wage distribution by measuring the gap between the wages of those with fathers with and without any higher education. The Great Gatsby Curve connects wealth in one generation with the ability to move up the economic ladder in the next generation. As you can see, children from poor families are less likely to improve their economic status in countries where income inequality is higher.

Rick McGaheyby Rick McGahey, SCEPA Faculty Fellow

This morning's April employment report shows a U.S. economy with continuing weaknesses, underscored by other economic data indicating that first quarter GDP may actually have declined. The economy added 233,000 jobs, with a stagnant unemployment rate of 5.4% and a continuing historically low labor force participation rate. But jobs numbers for February and March also were revised, showing 39,000 fewer jobs than previously reported. That puts the three-month rolling average for job creation below 200,000 per month. 

The weak jobs number must be viewed in relation to other data suggesting a weakening economy. In March, the dollar hit a 40-year high against the Euro and has been strengthening against almost all other currencies, hurting U.S. exports and leading to a March trade deficit of $51.4 billion, a six-year high. 

Some of the dollar's growth has been driven by expectations of Federal Reserve interest rate increases, but today's employment report is another signal that the Fed should hold its fire. This is a weak economy that is going nowhere fast, and increasing interest rates could tip it into recession, or at least lock us into stagnation. We are now in the 70th month of the (very weak) economic recovery, much longer than the post-World War II average of 58 months. 

In the labor market, working hours and wages aren't growing, another signal of overall economic weakness. Hours worked in April didn't increase, and average hours in the private sector are exactly the same as one year ago. And average hourly earnings increased by only 3 cents in April, for a 2.2% increase over the past year.

These are not strong labor market numbers.

Ismael CidThis week's Worldly Philosopher, Ismael Cid-Martinez, reveals the challenges older workers face in the labor market.

Last month the unemployment rate for workers age 55 and over dropped to 3.9% from 4.3%. This fall obscures the challenges older workers continue to face in the labor market - prolonged unemployment and underemployment. This reality means that those who can find jobs often accept lower pay, poorer working conditions and reduced benefits.

Since the Great Recession, the unemployment rate of older workers has not shown a consistent recovery. Instead, it has been up and down. In December of 2007, it was 3.2%, but four years into the recovery in December of 2013 it was 5.1%. A year later, it fell below 4%, only to climb back to 4.3% by February of this year.

Not only do workers of older ages experience inconsistent employment opportunities, they are also victim to prolonged joblessness. Last month's job numbers show jobseekers between the ages of 55 to 64 spent an average of 43.7 weeks actively looking for work and those 65 years and older 42.6 weeks. In 2014, nearly half (45%) of older workers were unemployed for 27 weeks or more, making up the second largest group among the long-term unemployed.

These long periods of unemployment are eroding the bargaining power of older workers. AARP's Public Policy Institute confirmed this in a recent survey examining how unemployment affected workers between the ages of 45 and 70 over the past five years.

AARP's results show that older workers are not finding work that reflects an extension of their careers.

Rick McGaheyby Rick McGahey, SCEPA Faculty Fellow

A provocative new document on global environmental challenges says that "climate change and other global ecological challenges are not the most important immediate concerns for the majority of the world's people. Nor should they be." Is this just the latest self-regarding propaganda from international agribusiness and oil companies? No, the statement comes from the new "manifesto" just released on "eco-modernism."

The ecomodernists are associated with the Breakthrough Institute, founded by activists associated with the Apollo Alliance and other thinkers who want a more dramatic move to clean energy to spur economic growth while reducing carbon release and environmental damage. Eduardo Porter has a positive piece on the manifesto in the New York Times.

The manifesto calls explicitly for more urban development and growth, arguing that is the best way to increase the standard of living for the world's population. They see the possibility of a greener, better managed way of living in a more urban-centered world.

The manifesto explicitly rejects what they view as romantic visions of rural living and subsistence agriculture. The authors argue that "The average per-capita use of land today is vastly lower than it was 5,000 years ago, despite the fact that modern people enjoy a far richer diet. Thanks to technological improvements in agriculture, during the half-century starting in the mid-1960s, the amount of land required for growing crops and animal feed for the average person declined by one-half."

So they want more intensified, productive agriculture and aquaculture, along with nuclear power, desalinization, and other technologies. I think the manifesto is very hopeful to naive about our ability to manage some of these specific technologies (especially nuclear waste). But I'm drawn to their argument that says smarter and lower carbon technologies can help raise everyone's standard of living, shifting our economy to less polluting and carbon-intensive services.

In what seems a deliberate echo of Karl Marx, this manifesto says,

CNN.comSCEPA Faculty Fellow Rick McGahey published an opinion piece on today, Where are the Good Jobs?" McGahey explains why the recent job growth has not led to wage growth. The 'weak wage growth puzzles economists. After all, as the labor market improves, workers should be able to get raises as employers compete for a tighter labor force.' McGahey lists four reasons for the suppressed wage growth:

  1. People are still out of work. In March labor force participation was 62.7%, the U.S. hasn't experienced a labor force participation this low since 1978.
  2. Job growth is too slow. It took 6 ½ to regain the jobs lost in the Great Recession.
  3. The jobs created pay worse that the jobs lost during the Great Recession.
  4. The suppressed wage growth is due to the long-term failure to share productivity gains between workers and businesses.

McGahey recommends that 'we won't see higher wages without two important policy changes: more government stimulus to create jobs, and changes in labor market rules to rebalance power between business and workers.'

This week's Worldly Philosopher, Kyle Moore, discusses how the disparity in morbidity between Black and White individuals can result in unequal retirement time and benefits.

The New England Journal of Medicine recently published two articles calling on the medical and public health fields to engage in the #BlackLivesMatter movement. In a previous post, I spoke about the importance of the #BlackLivesMatter movement to economic policy in general and retirement policy in particular. Policymakers and the public need to understand how different racial group's health status effects retirement. Otherwise, they run the risk of enacting policies, such as raising the retirement age, that are likely to have a disparate impact on communities of color.

Blacks Don't Make it to Retirement Without Health Limitations

We know that being sick increases the chance that a person will retire early. We also know a lot about the differences in morbidity between Blacks and Whites. For example:

  1. Blacks have a 36% higher chance than Whites of developing a work-limiting health condition during their working careers.
  2. Blacks develop activity limitations caused by chronic conditions around age 61 – six years before Social Security's normal retirement age - while Whites develop these limitations around 67.

SCEPA Economists at DFG ConferenceThe German Research Foundation (DFG) awarded grants to seven SCEPA economists to support research on wealth and disparity in the United States and Germany. SCEPA Faculty Fellows Willi Semmler, Mark Setterfield, Christian Proaño, Teresa Ghilarducci, Rick McGahey, Research Economist Joelle Saad-Lessler, and NSSR Dean William Milberg are among the experts chosen for funding.

Semmler and Setterfield will research the trends, policies, and macroeconomic implications of inequality. Proaño's research focuses on experimental economics, entrepreneurship, and inequality. Milberg will analyze research from Lederer and other German University in Exile scholars who studied labor markets and inequalities. Ghilarducci, McGahey, and Saad-Lessler will research employment and retirement outcome inequalities in the two countries.

Scott Carter

On March 17, 2015, Scott Carter, New School economics alumnus and Professor of Economics at the University of Tulsa, discussed the need to make public Piero Sraffa’s unpublished notes on his book, “Production of Commodities by Means of Commodities: Prelude to a Critique of Economic Theory.”

Piero Sraffa (1898-1983) was an Italian economist at the University of Cambridge known for his criticism of mainstream economics. Citing an insight made by Ajit Sinha, Carter noted that the Prelude's text can be considered as a ‘masterpiece of minimalist art.’ At only 99 pages, it fueled the neo-Ricardian school of economic thought with a critique of the neo-classical theory of value.

Written over 30 years and originally comprised over 7,000 pages, Carter is working to assemble the work into an online timeline and database.

On March 10, 2015, David Kotz, Professor of Economics at University of Massachusetts Amherst and Distinguished Professor of Economics at Shanghai University of Finance and Economics presented a seminar on his new book, "The Rise and Fall of Neoliberal Capitalism." 

Kotz began studying neoliberal capitalism in the 1990s and was one of the few academic economists to predict the economic collapse of 2008. His presentation provided a historical trajectory of neoliberal capitalism from the Carter administration through the aftermath of the Great Recession.  

Wage Stagnation: The Unsustainable Outcome of Neoliberalism
Kotz imageKotz's analysis reveals that neoliberalism provided a long period of economic growth with low inflation, but that the corresponding decrease in wages had three significant side effects, including increasing inequality, asset bubbles, and financial institutions' increasingly risky behavior.

This precarious situation was initially supported by the growth in housing values. However, once the bubble burst, the unsustainability of neoliberal capitalism became clear in the rising household and financial debt, the spread of toxic financial assests and capacity in excess of demand. The recession and financial crisis that followed resulted in the structural crisis we experience today - stagnation.

Austerity: A Doomed Answer to the Structural Crisis
According to Kotz, labor force participation has been dropping since 2007. And while the profit rate bounced back immediately after the recession due to the federal rescue of financial institutions, capital accumulation did not. Kotz points to austerity policies, or curtailing public spending, as a doomed attempt to" double-down" on neoliberalism, but the conditions necessary to promote consumer spending are no longer present. According to Kotz's reading of history, "stagnation will continue unless and until there is a major institutional restructuring." 

The Real Answer: Restructuring 
Kotz gives us three potential scenerios for the future. First is a nationalist form of capitalism that relies on military growth to prop up spending and demand. Second is a return to neoliberalism's predecessor, regulated capitalism, which was built on a coalition between labor and capitol. Third is a transition to an alternative socialist system. 

Of the many possible critiques of the first two options, Kotz highlights that any system that rapidly accelerates economic growth will also accelerate climate change. However, the third option holds open the door to a transition beyond capitalism that increases social welfare while decreasing the production of goods. 

The event was part of the Spring 2015 Seminar Series hosted by The New School Economics Department. 

Rick McGaheyby Rick McGahey, SCEPA Faculty Fellow

Read Rick's comments in today's International Business Times, "Unemployment Report: Six Years After The Great Recession, Are The Good Jobs Ever Coming Back?"

This morning's employment report for February continues the story of this recovery: job growth trending upward, but still lots of slack in the labor market, and no signs of inflationary pressure. Jobs are growing, but wages and hours are not, and many of the jobs are low-wage.

295,000 jobs were added in February, in line with the three-month average of 288,000. Over the past year, job growth has averaged 266,000 per month. The unemployment rate ticked down slightly to 5.5% from 5.7 in January; over the past year, the rate has fallen by 1.2%, so we are seeing an improving labor market. But the labor force participation rate remained essentially unchanged, and is stuck at its lowest level in 37 years.

Wages and hours also remain flat, tempering any interpretation that we have a booming labor market. Average hourly wages were up by three cents, and have only risen by 2% in the past year. And average hours worked also remained flat—in February 2015 hours were 34.6, only two-tenths more than one year ago.

So we are seeing some job growth. But it isn't very strong, and the jobs aren't very good. Labor force participation, wages, and hours all are signaling a labor market with a lot of slack, and no significant upward cost pressures. The Federal Reserve should not be considering raising interest rates when faced with these numbers.

Anthony Bonen

This week's Worldly Philosopher, Anthony Bonen, discusses how even the best models for estimating the costs of adapting to climate change are still a guessing game. 

Estimates of the social cost of carbon (SCC) focus almost exclusively on the net benefit/loss of mitigating climate change. The cost of adapting to the unmitigated impacts of climate change remains an even more elusive figure. Properly calculated, however, SCC should include both dimensions.

As discussed in an earlier SCEPA working paper, SCC model estimates of mitigation costs are notoriously difficult to pin down. But, after being asked to give a presentation on adaptation, I soon learned that there is far less certainty in these costs. For developing countries, estimating the cost of climate change adaptation is essential. Their success or failure in saving lives, reducing poverty and becoming resilient to climate change depends in large measure on how much support – financial, logistic and political – the industrialized world is willing to provide.

Systematic efforts to estimate the global cost of adapting to climate change began in earnest only in 2006 with a World Bank study of investment flows in the developing world [1].1 The second generation of adaptation estimates relies on impact-level assessments. The best example of these more detailed, but still top-down, studies is the World Bank's report [2]. The IPCC's chapter on the Economics of Adaptation [3] calls it "[t]he most recent and most comprehensive to date global adaptation costs [in which] costs range from US$70 to more than US$100 billion annually by 2050." The conservative estimates for each of the 6 sectors are reproduced in Table 1.
Table 1

David HowellBrad DeLong, a widely-read economist and blogger, cites SCEPA economist David Howell's work investigating the causes of wage inequality and unshared productivity growth as today's "Morning Must-Read." Howell's research with the Washington Center for Equitable Growth asks, what happened to shared growth?

"Most economists continue to explain the explosion of earnings inequality with conventional supply-and-demand stories, in which worker compensation is believed to accurately reflect the contribution workers make to production. Thus, in this view, CEOs and financiers have received skyrocketing salaries, especially since the mid-1990s, because they are now contributing dramatically more to their firms and to the economy as a whole.

Similarly, the bottom 90 percent have seen stagnant and falling wages because they've fallen behind in the "race between education and technology." The computerization of the workplace requires greater cognitive skills, but workers have not kept up, as indicated by the slowdown in college graduation rates. Assuming (nearly) perfectly competitive markets, the explosion in wage inequality in this view must reflect a similarly explosive increase in skill mismatch (too many low skill workers, too few high skill ones).

Such arguments leave little or no room for labor market institutions and public policies in determining changes in the distribution of earnings up and down the income ladder. An alternative view is that institutionally-driven bargaining power is a critical piece of the story, whether it is the noncompetitive "rents" earned by top managers and financiers, or the collapsing power of hourly wage employees."