Bob Cropf

Interesting blog post

In economics on January 25, 2009 at 4:59 PM

This is an interesting blog post that uses a graph to show that over the long run, economic growth swamps short term fluctuations in the economy. The graph also tells the story mentioned in class that only the massive spending prompted by the world war pulled us out of the Great Depression. The overriding message of the post seems to be that historical trends indicate that we will pull ourselves out of this current mess; the fear that has captured the public is probably natural but that in the end long term growth will prevail.

Another great site for visualizing data is FlowingData. This example shows some interesting ways to visualize consumer spending.

Another good piece is this one in Forbes which provides a fair overview of the history of economic stimulus packages.

  1. I thought that CLEW index was particularly enlightening and troubling. The supple-siders, or even some more hard core non-interventionists (please correct me if wrong), argue against more progressive taxation because the rich spend/invest their wealth and create jobs. I realize the argument is more heavily weighted toward the investing… but the tax structure isn’t just for business income but also personal income (the distinction can be very difficult to make).

    So this graph is showing that the current conditions are not only allowing but maybe even encouraging the (super)wealthy to amass MUCH more wealth. While in theory that is all well and good IF those who are not super-wealthy are similarly allowed/encouraged to increase their wealth base, but when this graph is coupled with other statistics (stagnating wages, increased costs of living, etc.), those not super-wealthy have had difficulty amassing much additional REAL wealth in this time (have increased standard of living through borrowing, which is coming back to bite us all).

    Also, Bill Moyers had a program a long time ago about how alot of $$ is and has been made by selling to the poor… again, all well and good as long as it is done on non-punitive terms but all evidence is that a LOT of it has been exploitative to say the least (payday loans and NINA mortgages with balloon payments anyone?)

  2. I realized I did not clarify or examine my own assumptions:
    (1) There is an optimal distribution of income in a society. This is true from both a moral perspective (subjective), political perspective (money = power) (subjective), and most importantly from an efficiency perspective (NOT subjective) . What that optimal distribution is is subject to debate.
    (2) Gross inequality in the distribution is harmful. Whether this qualifies as “gross” is subject to debate. I would say it is.
    (3) The wealth amassed by the wealthy is to some degree unavailable to society in that the investment is not benefiting others (the essence of trickle down/supply side). They could and are investing it, but the question is whether that investment does trickle down (i.e., building a plant that creates *new* jobs for lower income, high school graduates). All the evidence is that the most of the investment since the late 90s did not lead to anything but more wealth for others in the super-wealthy class because the job creation was not in lower income brackets but in the financial sector (not even *new* but replacement jobs for college graduates).

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