The May 10, 2012 event, hosted by the Brookings Institution and the National Endowment for the Arts (NEA), examined new growth theory as a tool for assessing the impact of art and culture on the U.S. economy. New growth theory argues that, in advanced economies, economic growth stems less from the acquisition of additional capital and more from innovation and new ideas.

Schmitz's research was part of a panel on case studies on the arts and economic development. Her paper, Do Cultural Tax Districts Buttress Revenue Growth for Budding Arts Organizations?, questions the role government should play in financing the arts by analyzing Denver's Scientific and Cultural Facilities Districts (SCFD). Her results find that, rather than public funds 'crowding-out' private dollars, there is evidence of a 'crowding in' that increases private investment. 

The symposium featured papers commissioned by the NEA Office of Research and Analysis and Michael Rushton, the co-editor of the Journal of Cultural Economics. The presentations were moderated by experts from Brookings, the Department of Housing and Urban Development and the Department of Commerce.

"(Jamie) Dimon, among the most cautious of executives, couldn’t control this trading animal with a life of its own, either. That’s the important conclusion. A Volcker rule to limit speculative trading for banks is necessary. They are using federally insured money to finance much of their banking operations, enabling them to leverage other facets of the company. They are using shareholder money, not their own, to take risks, yet they take enormous bonuses when all goes right. And they are implicitly using taxpayer money, because if they lose too much, they will be bailed out by the federal government. They remain too big to fail.

Serious capital requirements must be implemented against such trading, and banks must also change banker compensation procedures further. For traders, it’s a heads I win, tails you lose proposition. And so it is with the bank CEO as the firm’s overall earnings rise and are socked with a blow only every once in a while. These compensation plans have changed under pressure from the federal government to some degree. But probably not enough. The firms’ partners and employees have to be on the line for losses over time.

All this is a case study in why finance needs more government rules and regulations than most other industries. The omnipresent claim that such rules undermine liquidity in markets is almost laughable. In truth, we have a lot of liquidity when we don’t need it and little when we do—such as after the Lehman Brothers catastrophe in the fall of 2008. As regulations were eliminated and weakened after the 1970s, finance became more unstable, crises more frequent, and trillions of dollars were invested down the rat holes of speculation and fantasy, while Wall Street employees made countless millions. Yes, finance is important to economic growth, but only if government controls it properly. Otherwise it can be and has been damaging."

Reddy not only diagnoses the problem, but puts forward a prescription: "One way to effect amore equal income dist bution and increase the roleof domestic demand in the growth process is to promote co-ordinated enhancementsin wages and labour standards across Asian countries. Such an approach would muteany adverse impact on the competitiveness of individua exporting countries and alsofoster regional trade. In the present situation, a bias in favour of workers cansimultaneously improve lives and make the aggregate pa ern of development moresustainable, in both Asia and the world."

10:00am - 5:30pm
Wednesday, May 16, 2012
6 East 16th Street, 11th Floor, Room 1107

Led by Assistant Professor of Economics Lopamudra Banerjee and development economics students, the event is co-sponsored by SCEPA and the Economics Department. Students will present their work, acting as discussants, chairs, and reviewers of the presentations. The day will conclude with a faculty panel discussion to reflect on Amartya Sen's classic question, "Development: Which Way Now?" with panelists Professors Banerjee, Sanjay Reddy, Michael Cohen and Nidhi Srinivas.

Read More to view the full program. 

According to Walker, "If workers continue to be forced to play the dual role of employee and retirement actuary, stories of older workers like Edwards will not change for the better. We must work to improve and expand retirement options."

In a close election, as this one is likely to be, every factor counts, and numbers like today's mean Obama has almost no margin for error.

The economy is a key to the election. Although analysts like Nate Silver are skeptical about predicting election results based on economic data, even he concludes that economic factors account for around 40 percent of election results. (One of the earliest predictive models based on economic factors was developed by Ray Fair, and you can play around with different election scenarios based on that model here.)

After last month's weak employment report, where job creation fell well below 200,000, many analysts (including me) were waiting to see if that was a one-month blip or whether employment and the economy were weakening. We had been on a relatively strong trend—between December and February, job growth averaged 252,000 per month, but fell to 154,000 in March.

This morning's April employment report presents sobering news that the trend is weakening—total nonfarm jobs only grew by 115,000, below the consensus forecast of 160,000, with slow growth or actual declines across all industries. Unlike earlier months, when declines in government employment were a cause of overall weakness, government employment stayed relatively flat. And the unemployment rate stayed roughly constant at 8.1 percent.

Coupled with last week's report that first quarter GDP slowed to 2.2 percent from its 3.0 percent rate in the last quarter of 2011, today's report suggests the U.S. recovery is running out of steam. The effects of the too-small stimulus package have just about worked their way through the economy, and there isn't much on the horizon that will stimulate growth.

On the government side, state and local governments continue to cut budgets and hold down spending and job creation. Goldman Sachs released a study in January estimating that the "fiscal drag" from government reductions in spending would take around 0.5 percentage points off of GDP this year. The Federal Reserve is signaling that they do not anticipate new policy interventions, with some regional Fed Presidents actually calling for interest rate increases. And election pressures coming from Republican calls in Congress to make further cuts in spending means that the Obama Administration will have to do everything it can simply to hold the line.

Today’s weak unemployment report will give heart to Republicans, and should cause substantial concerns among Obama supporters.

Pensions & Investments - Robert Steyer's April 30, 2012 article, "Proposal Targets N.Y. Pension Gap," reports on efforts by New York City Comptroller John Liu to create Personal Retirement Accounts.

Connecticut Mirror - Keith M. Phaneuf's April 30, 2012, article, "Union Tries to Rally Support for Study on State-Run Retirement Savings Plan," reports on pending state legislation that would study a proposed state retirement plan for the increasing number of people without access to a retirement plan at work. 

As a proponent of greater individual access to the markets in the mid-90's - he wrote a book on the subject, "A Piece of the Action" – Nocera acknowledges, "In the book, I didn't make much of the decline of pensions. After all, we were in the middle of the tech bubble by then. What fun!"

He then relates his personal experience of bubbles bursting and portfolio losses, a 401(k)-halving divorce, and costly home renovations. All this left him with a "401(k) plan, which was supposed to take care of my retirement...in tatters." He goes on, 

"When I related my tale recently to Teresa Ghilarducci, a behavioral economist at The New School who studies retirement and investor behavior, she let out the kind of sigh that made it clear that she had heard it all before. The sad truth, she told me, is that I'm the rule, not the exception. "People have income shock, like divorce or loss of a job or a health crisis," and those crises tend to drain retirement accounts, she said.

That data starkly backs up Ghilarducci's contention. According to the Employee Benefit Research Institute, for instance, only 22 percent of workers 55 or older have more than $250,000 put away for retirement. Stunningly, 60 percent of workers in that same age bracket have less than $100,000 in a retirement account. Ghilarducci told me that the average savings for someone near retirement in America right now is $100,000. Even buttressed by Social Security, that's not going to last very long.

What, then, will people do when they retire? I asked Ghilarducci. "Their retirement plan is faith based," she replied. "They have faith that it will somehow work out."

But, for the millions of others who have discovered, as I have, that their original enthusiasm for investing was unwarranted, their faith-based retirement plan is all they've got left."

The legislation would create accounts for private-sector workers, pooling voluntary contributions from employees and employers into a professionally-managed retirement fund that leverages economies of scale and longer investment horizons. 

Jon Ortiz of the Sacramento Bee's State Worker blog is monitoring the bill's progress. He reports that the legislation now moves to the Senate Appropriations Committee. 

SCEPA is proud to announce that the influential Journal of Applied Econometrics will publish a SCEPA Working Paper by the research team of Professors Christian R. Proano and Willi Semmler and Research Assistant Christian Schoder. The paper, "Are the Current Account Imbalances Between EMU Countries Sustainable?" challenges the conventional view held by, among others, IMF chief economist Olivier Blanchard, that rising European imbalances are an optimal response to financial market integration.

The authors argue that the introduction of the Euro as a common currency, without proper fiscal institutional arrangements, aggravated increasingly unstable growing external imbalances. In the current crisis, they hinder recovery in the southern European countries. They conclude that ambitious policy coordination among member states is required to overcome the crisis and offer policy recommendations to foster sustainable and even growth in the Euro Area.