Tuesday, April 25, 2017

A Very Brief and Non-Technical Appendix About Then and Now

Something I read this afternoon, slightly edited..

"Economists are very worried about the decline in labor’s share of U.S. national income... https://www.bloomberg.com/view/articles/2017-04-24/cracking-the-mystery-of-labor-s-falling-share-of-gdp...For decades, macroeconomic models assumed that labor and capital took home roughly constant portions of output—labor got just a bit less than two-thirds of the pie, capital slightly more than one-third. Nowadays it’s more like 60-40. Economists are therefore scrambling to explain the change. There are, by my count, now four main potential explanations for the mysterious slide in labor's share. These are: 1) China, 2) robots, 3) monopolies and 4) landlords..."
There is, in my view, a fifth—and a much more likely—possibility: the low-pressure economy.

"Rob said...I don't really understand this explanation.There certainly seems to be a secular trend as well as a cyclical effect. Brad's explanation for the secular trend is what? That we've actually been in recession since 2000? That we need inflationary booms to "reset" labour's share? That labour's share is related to inflation in a non-expectations-adjusted way?"
And something that seems relevant.

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