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On Krugman's Epiphany
Paul Krugman is one of the leading “names” in economics today. There are reasons for his stature. He’s got a Nobel Prize, he’s an academic at a leading University, he writes for the NY Times, and not a week goes by without him being on some TV show or another. If you asked the average guy on the street to name an economist, there’s a good chance the answer would be - “Krugman”.
PK has been having a slow motion epiphany over the last month. He has posted four articles on a topic since December 8. (Link, Link, Link and Link) He has identified a “phenomenon” that is occurring in the US economy. This new, powerful force that he has stumbled upon, is keeping him awake at night. Clearly, PK is troubled by what he has uncovered. His words:
“It” has really uncomfortable implications. But I think we’d better start paying attention to those implications.
Are you worried yet?
PK drives home the point that what he has uncovered is not now in mainstream economic thinking. He admits that even he missed the signs that something was amiss in the world of modern economics:
Not enough people (me included!) have looked up to notice that things have changed.
Okay. What is it that PK has found hidden deep below the economic rocks that is causing him such fits? Grab onto your seats - this is big. PK has observed, for the first time in his economic career, the simple fact that technology has reduced the role of labor in the economy.
That’s PK’s epiphany? He just came to that conclusion in the last month? I’m thinking, “What planet has this guy been living on the past 10 years?” But then I realized PK has not been living on Mars, he’s been living in Princeton; amongst the Ivy.
Has PK not gone to a new mechanized distribution center like FedEx, UPS and Amazon have? Does he not know that it takes less printers to make the NYTs these days? Has he not been to a modern assembly plant that makes things with robots? How could he have missed the notion that technology was reducing the demand for human labor all these years? The only way that this could have been missed is if PK had his eyes covered and his head in the sand. He had this to say about his big new "find".
Mea culpa: I myself didn’t grasp this until recently. But it’s really crucial.
Forget about why PK has not connected these very important dots over many years; focus on why he's crapping in his pants over his new awareness. It’s simple math. Take two examples A) where Labor = 60% of GDP and B) Labor = 50% of GDP. If GDP = $16T, then A = 9.6T and B = 8T.
The problem is that Social Security (SS) taxes Labor at 12%. The difference between A and B ($1.6T * 12.4%) means that SS ends up with $200 Billion less in annual revenue.
PK went off and pondered his “discovery”. He did the A and B math, then he wrote:
If payrolls lag behind overall national income, this will tend to leave those programs underfunded
Duh….
Then PK went on to really stir the pot by suggesting that the Congressional Budget Office (CBO) was using a rosy long-term estimate for the critical Labor/GDP percentage in its projections. PK says:
CBO could very easily be quite wrong here, and will indeed be very wrong if the rise of smart machines plays out
What’s dawning on PK is that his vision of the future does not take into proper consideration the role that technology has today, and will play in the future, on labor employment. What he's looking at is a structural change; one that can’t be altered. He’s coming to the conclusion that Social Security doesn't “work” when there are not enough workers paying into the scheme. This is a remarkable conclusion from the most liberal economist out there.
Move on a few days and PK does some more deep thinking. He now realizes that the current expectations for future revenue for SS are unrealistic. He knows that the lines will cross more quickly than is now anticipated. He understands that this is a here-and-now problem, but he also has grasped that this is also a 75-year problem. So he comes up with a plan; simple yet elegant. He wants to tax the robots.
There would be no problem, at least in economic terms, by adding revenue (to SS) from dedicated taxes on capital income.
No problem? PK thinks it’s okay to charge 12% FICA taxes on a robot. OMG!
Actually, I don’t think that PK really believes that taxing investments in manufacturing technology is a good idea. The fact is, it’s a terrible idea, and PK knows it. If you want an economy to grow, and be globally competitive, you create incentives (tax breaks) for capital investment; you don’t create disincentives. Period.
I suspect that PK is slowly recognizing that he has put himself in a box. He has come to conclude that SS, as it is currently configured, is not viable. The villain is technology that reduces the long-term demand for labor. His solution, not surprisingly, is more taxes. But there is not a chance in 100 of taxes on capital investments to support SS (nor should there be).
PK is walking a plank, he’s getting close to the edge. When he goes over, he will bring with him a bunch of other liberal economists that believe that the SS “miracle” can be sustained. In his latest missive on this topic PK promises:
I’ll be writing more about this in weeks to come
I can’t wait.
Notes:
- PK is quite right that the CBO's assumptions regarding Labor’s share of future GDP are optimistic. I’m sure that the folks at the CBO read PK’s criticism. I doubt they were too happy about it. The question is, what will CBO do, now that a Nobel has challenged a basic assumption it uses? If the CBO were to re-gear its computers to reflect a lower long term role of labor in the economy, it would create a massive hole in America's entitlement programs.
- It’s going on five years now that I’ve been writing about SS and the CBO. There must be a few hundred articles of mine in the ether on these two topics. Again and again I’ve said the same thing. The assumptions are not realistic, the numbers do not add up when realistic assumptions are used, the outcome will not be what is now anticipated, and there will be a disappointment when reality sets in. Sorry PK.
Maybe I should get a Nobel, that, or maybe PK shouldn't have one…..
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Itron has put god only knows how many meter readers out of work. Those jobs paid $30-40k per year with medical and defined benefit pensions and they are going going gone because water, gas and electric meters can be read by a vehicle driving down the street or over a telephone line.
Good. There's no reason to have thousands of people walking around reading meters. It adds literally no value. And to give them a salary for life so they walk around and enter 5 digits? Good riddance.
Lol. My leaves will always need raking until they invent robogardener.
Hmmmm......
Look up "Sociopath" in the dictionary, it reads see Paul Krugman
First of all there is no such thing as the "Nobel Prize" in economics..
There is a prize in the memory of Nobel, but that is something different, and set up by the joos.
http://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Economic_Sciences
From your link:
According to Samuel Brittan of the Financial Times, both former Swedish minister of finance Kjell-Olof Feldt and Gunnar Myrdal wanted the prize abolished, saying "Myrdal rather less graciously wanted the prize abolished because it had been given to such reactionaries as Hayek (and afterwards Milton Friedman)."[22]
In his speech at the 1974 Nobel Banquet Friedrich Hayek stated that if he had been consulted whether to establish a Nobel Prize in economics he would "have decidedly advised against it"[22][26] primarily because "the Nobel Prize confers on an individual an authority which in economics no man ought to possess... This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence. But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally"
sounds about right
It seems only natural that when one becomes a laughing stock for being so 'wonkish' that he no longer understands the most simple things, like how to tie ones own shoes, that in an effort to salvage his 'career' he will have to change his thinking. Paul Krugman is a commie and a shill for the democratic party and the NY liberal elite, aka, those that seek to destroy the country. As my father once told me, "There are those who will never understand because their job is dependant upon their not understanding".
OT (and will be taken as rayciss of course, but I digress): I came to learn about a phenomenon that I am going to call "Income Producing Blacks" for lack of a better description. The town where I learned of this occurring is pop. 1000 and located in rural IA. What is happening is tantamount to using blacks (in this instance more accurately 'slaves') as income producing property, due to the existing incentive structure provided from .gov. Here is how the game is being played out by some democratic loyalists in rural IA:
A local lawyer has taken to buying up all the run down properties in this town. These properties sell for 15-25K. This lawyer then works with community organizers in the ghetto up in Minneapolis to get poor blacks to move down and 'rent' these properties. The lawyer fills out all the appropriate paperwork so that these folks (who do not work) can recieve all the various aid components from .gov. It is my understanding that they keep their benefits in MN, and then apply and receive benefits in IA as well (the locals claim 'they' make a trip back once or twice a month to collect the MN loot). They get low income housing assistance (the rent the lawyer receives), heating oil assistance, cash welfare assistance, food stamps, etc. So the lawyer essentially now has a harem of 'income producing blacks'. How quaint, huh? This bothers me that this is occurring for a number of reasons.
- The voting base of the state, if this happens on a large enough scale, will be corrupted by these moochers.
- The locals claim an increase in crime due to these moochers being moved in, in fact many have moved to neighboring towns over the last number of years.
- This strikes me metaphorically as a form of 'slavery' as these uneducated blacks are used as pawns for rent seeking by well heeled attorneys who care only about making themselves money and not about the communities and state they stand to destroy as a result.
- This is a prime example of liberal policies and incentives being acted on, with results that are directly contradictory to the goals these hucksters state (helping poor people).
- This is prima facia evidence that entitlements must be reformed, as they are incentivizing really really dark things.
- I would suspect they still 'vote' in both states too. Hmmm.
I am not willing to accept these people destroying us from within, which is exactly what they seek to do. I encourage others to open their eyes and see who really benefits from these programs (it is not the blacks). When the governement entitlement regime has gotten so bad, it is profitable to take in slaves and get paid to keep them from .gov there is a real problem.
I'll leave you with this clip to ponder what our next move should be:
http://www.youtube.com/watch?v=1fuDDqU6n4o
May peace be with you all and happy new year!
Oh, and I discussed this material that PK's 'epiphany' came from at least a year or so ago here on zh. It may be under my prior moniker Stax Edwards, check for yourself if you like. I have what you might call a 'disdain' for Paul Krugman and all the rest of those overpaid ivy leaugue .gov apologists and enablers. To my knowledge a sorrier bunch of losers is hard to come by. As I stated some time ago, the New York Times has a negative value, that is that is has a cost to society not a benefit. Those NY liberals really have no right to call themselves Americans, as they are really communists through and through.
Funny to note that the South during the civil war were the democrats, and now the north is the democrats and as it turns out they are also interested in slavery. So the musical chairs has taken place. Lincoln was a Republican. Something tells me if we were to split again today the south would not fight to bring the north back under their jurisdiction. Intersting stuff no doubt.
One last thing, for crying out loud, start stacking physical silver and gold for yourself. Do yourself a favor and get a safe deposit box at your local bank/credit union before there are no more left to be had. The endgame approaches.
Section 8 'farming' has been around since 5 minutes after section 8 was passed. This guy just exported it where it is visible. If an Apt. block owner is really into his work , he also owns the check cashing liquor store as well.
Ghettos are a growth industry.
Why comment on Krugman? The guy is a political hack who used to be an economist, of not distinction, but of distinctly dubious merit.
You know I love you PB. Never change brother. May I offer you an arrogant bastard and a romeo y julieta?
I'm stoned so'll read this latyer, butt-props furEUsian' Animal;:; riotious dizizrespex!!
NEW HAPPY BITTHKCLEZ YEERS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
P L A N T A T I O N
I guess this means that the Kroooog hasn't been to Wal-Mart or Lowe's or the grocery store in recent years and noticed that the check-out girls were replaced by Low Frequency Traders.
"Conscience of a Sociopath"--LOL! Sulzberger should be stoned publicly just for giving the guy a megaphone. They bow down before the same Ba'al Zebub.
I only give my cash or credit card ( issued by a low crime bank ) to a live person. I
will never get on an automated check out line if I can choose a human over a
machine.
Nothing is as it seems,
Nothing is an accident
Eveyone is a bit confused.
FWIW: The maps I have seen show a blue areas along the west coast and NE coast. The red map area began in Alaska, included parts of Canada, and ran all the way through the biggest portion of the US, and on into Latin America. I suspect the currency of this region will be called the Amero. Interestingly enough, as I have stated previously, reporting suggests that imports under current conditions would be cheaper if they arrive at mexican ports and take rail into the US. The West Coast mega ports are the least productive ports in the US as I understand it. I suspect money will flow to upgrade pacific mexican ports and rail infrastructure to allow a path around the west coast commies. I would like to see FL ports take traffic from the unproductive NE ports as well. We are right to work of course. I expect violence in Northern Union strongholds when their governments realize how bad they have messed up, and try to scale back the monster they created. Hedge Accordingly.
To summarize: IMO it will not be north/south so much this time as free areas vs communist strongholds. I have big hopes the ICE will move the major US stock exchange out of the hostile NY area.
Perhaps those areas will wish to stay in the union, if that is the case, expect european style austerity for them until they get their houses in order. It will be open to all who are interested in telling their people the truth and supporting free markets. Unions that seek to remain relevant had better start preparing to focus on worker safety over extortion. While I do not endorse unions, the IBEW (which I once trained with) is one that comes to mind that is well equipped to rid themselves of the thugs and go back to what they do best: Apprenticeship, Worker Safety, and a brotherhood that will stand strong against contractors who try to cut corners by putting their people in harms way. They have their own schools and curriculum btw. I am a libertarian.
Clearly, moving operations to Mexico would make them less susceptible to inefficiencies resulting from corruption, nepotism, etc. Ask any drug cartel.
beer hear
[But really... to all you 'out there[s]'(HERE AT ZH) WHO I LOVE A/O HATE SO MUCKIN' FUCH THAT IT HURTS: "May all your deposits be more solid tommorrow - than they were today!"[and that goes dubble for you secrete ladyz out htey're iknow ya'are...]
And BK (?): On Krugman's Epiphany
I suggest: "iConscienceTMFM"
The lawyers have running out of people to put on disability. Bill Clinton did not end welfare as we know it. They just changed the name.
Fixing up houses to HUD standards is the game now.
Aren't most politicians lawyers?
Shipping those jobs to China was fun for a while.
dumb hot babs: well if one man can do all that with a machine then it can't help but lessen jobs
propagandist: here's why they don't, babs. it's very simple. machine production makes better, cheaper products. as a result, more people want and can buy them. that, in turn, creates a demand for more labor.
shill: that's just one of those so-called economic laws that don't work in pratice.
propagandist: it works in steel, printing, textiles, and automobiles. and they're the most mechanized industries in the country.
dumb hot babs: let's see what's over here, shill. then I'll dump you and have some of that sex with the propagandist there.
http://www.youtube.com/watch?v=XMKGkO6uk2Q&t=1610s
The Middleton Family at the New York World's Fair (1939)
Krugman is nothing more than a rodeo clown designed by the elites to distract attention away from the Federal Reserve and the theft by the top 0.01%.
http://usa-wethepeople.com/2012/11/paul-krugman-wants-a-91-top-tax-rate/
BK spot on, PK spot off.