Worthwhile Canadian Initiative

One Million Jobs One More Time

The debate over the Ontario PC “Million Jobs” platform has certainly gone ballistic over the last few days and having posted on the subject in January when the plan was first announced I certainly think its worth another post.  When the “Million Jobs” plan was first mentioned in January, my response was to look at employment growth over the long term to see how plausible 125,000 jobs a year was as an outcome.

Flogging a Dead Horse II: A million jobs anyway?

 

This post was written by Mike Veall of the Department of Economics at McMaster University.

I have been asked by a few people about my statement here that “I would hope that whoever is in charge, whoever wins the election, that eight years from now we would have a million more jobs …I would expect the employment rate to continue to bounce back from the recession. That alone, probably, would get us to a million.”

I should have said “close to a million” but here’s my calculation:

Flogging a Dead Horse: Research the Progressive Conservatives misinterpreted was flawed

This post was written by Mike Veall of the Department of Economics at McMaster University.

David Reevely and Jim Stanford, followed up by Paul Boothe, Mike Moffat, the Globe and Mail and others have shown that the Ontario Progressive Conservative millions job plan does not follow from the research it is based on. For example, one of their commissioned studies says that a reduction in regulation (Ontario level to Alberta level, however measured) will yield a total of 10,600 jobs. But the PC plan says that will create that many jobs per year, so that over 8 years, that is 8 × 10,600 = 84,800 jobs. They make the same mistake looking at other proposals.

I had been looking at this too but was slow to the draw. One point that I don’t think that has yet been covered is that one of the pieces the PCs misinterpreted, the study by Washington D.C. economist Benjamin Zycher, is not exactly technically watertight itself.  So let’s flog the dead horse. I am grateful to WCI for giving me the space to do so.

Some Miscellaneous Thoughts on the Economics of Social Interaction

Economics is really all about incentives and their effect on behaviour at the micro and macro level. My training in economics emphasized the role of prices in communicating information about scarcity and opportunity cost and providing the incentives that affect economic behaviour. Yet, all of our economic behaviour is also rooted on an institutional framework that includes not only the structure of markets and public institutions but also codes of human behaviour such as honesty and trust. None of this is new but it brings me to my point-how ingrained codes of social behaviour can be used.  Simply being helpful or asking for help or looking needy can be used to generate an opportunity for further economic interaction, which is not always to your benefit. I suppose the old adage is that no good deed goes unpunished.

Countries as homes

I was up late last night for the results of the EU elections. In the UK, the UK Independence Party came first with 27.5% of the vote (Labour second with 25.5% and Conservatives third with 24%). In France, the Front National came first with 25%.

Both UKIP and the FN want to withdraw from the EU and reduce immigration (they differ in other respects). Since the UK is not part of the Euro, and is not likely to adopt the Euro in the near future, it is unlikely that the ECB's monetary policy had any big effect on the UK results. Neither party is fully "respectable" in the eyes of the establishment, but UKIP is more respectable than the FN.

Is Health Care Reform Working?

Health care reform in Canada in the wake of the Romanow Royal Commission and the 2004 Health Accord has often been described as a story of missed opportunity with the increases in federal transfer spending not accompanied by desired results. As the review of the 2004 Health Accord by the Standing Senate Committee on Social Affairs, Science and Technology concluded in 2012, the achievements of the accord were mixed.  The increased funding “had increased the provision of services, but had not resulted in reform of health-care systems, including the much-needed integration of different health-care sectors and the breaking down of silos.”  In other words, it has been pretty much business as usual.  Yet, there is some interesting evidence in a recent paper by Arthur Sweetman and Gioia Buckley (both at McMaster University) that in the area of primary care reform, Ontario has been implementing some major reforms.

Action bias and the political economy of penalty kicks

Most penalty kicks result in a goal; this is why soccer players go to such comical lengths to draw a penalty. The distance between the ball and the goal is so short that goaltenders don't have time to react; they have to commit to a strategy as the ball is being kicked. The usual strategy is to try and guess where the ball will be kicked and to jump in that direction. Surprisingly enough, the tactic of not jumping - that is, guessing that the ball will be kicked down the middle - is under-utilised.

An interesting study from a group of Israeli researchers (Bar-Eli et al, 2007) offers a plausible explanation: 'action bias'. 

How long is the short run? The macroeconomics of "doing nothing" revisited

The answer we normally give, when teaching intro macro, is: "It depends on price stickiness; if prices are very flexible it will be short, and if prices are very sticky it will be long."

A better answer would be: "It depends on monetary policy; if monetary policy is very good it will be short, and if monetary policy is very bad it will last forever."

I think I am on the same page here as Simon Wren-Lewis. And I agree with Simon that this point matters not just for students of intro macro.

Interest, capital, MRScc=(1+r)=1+(MPK/MRTci)+(dMRTci/dt)/MRTci

That's the equilibrium condition for the real rate of interest in a competitive economy. I will explain what it means a little later.

This is intended as a simple "teaching" post, and because I have a strange feeling that the theory of interest and capital is becoming topical again in the blogosphere, and that a post like this might be helpful.

Gary Becker: The Father of Economics Imperialism

This was written by the University of Toronto's Aloysius Siow:

Gary Becker, an American economist, died on May 3 at the age of 83. His major contribution was the systematic application of economics to the analysis of social issues. Before his work, economists primarily studied how markets and market economies worked. He used economics to study discrimination, criminal behavior, human capital, marriage, fertility and other social issues.

The New Keynesian conspiracy

New Keynesians believe that Say's Law is false. But they want the central bank to try to make Say's Law look true.

New Keynesians believe that real business cycle theory is false. But they want the central bank to try to make real buiness cycle theory look true.

New Keynesians believe that the loanable funds theory is false. But they want the central bank to manipulate liquidity preference to try to make the loanable funds theory look true.

New Keynesians believe that the economy has zero self-equilibrating tendencies. But they want the central bank to make it look like the economy has powerful self-equilibrating tendencies.

New Keynesian model + New Keynesian central bank = "classical" economy + random error (because no central bank is perfect).

New Keynesian model + non New Keynesian central bank (like one that sets interest rates on a whim) = godawful explosive or implosive mess.

New Keynesians are engaged in a terrible secret conspiracy to try to make the economy look very different from how they think it really is. Except it's not terrible, and not secret.

The Economist on WCI

The Economist has a story on the state of the Canadian economy and it features an appearance by Livio Di Matteo:

Yet luck played a large, unacknowledged part, says Livio Di Matteo, an academic and contributor to Worthwhile Canadian Initiative, the world’s best-named economics blog.

It's official: WCI is now the best-named economic blog. Take that, Marginal Revolution!

Canadian Manufacturing Employment: Growth and Decline (But more decline than growth)

Ontario’s budget will be  presented today in the wake of new GDP numbers from Statistics Canada showing that Ontario’s real GDP growth was amongst the poorer performers in the country in 2013 (Quebec, NS, & NB were lower).  Manufacturing was again singled out as one of the sectors in which Ontario is doing rather badly with a decline in output in 2013 of 2.3% as “computer and electronic products, motor vehicle and motor vehicle parts, machinery, and iron and steel mills and ferro-alloy products all declined.” However, 2013 saw an increase in manufacturing output in Saskatchewan of 3.4 percent with the gains in the areas of chemical, food and wood products.  Alberta also saw an increase in manufacturing output of 1.1 percent.  It would appear that the news in manufacturing is not all bad even if one considers employment.