Skip to main content

Alan Krueger to lead the CEA



The NYTimes reports that Alan Krueger will be the next chairman of the Council of Economic Advisors. A well respected, serious professor from Princeton, that almost everybody from Mankiw to Krugman will approve of. He is a labor economist, and yes that is a problem. My concern with labor economists, is that they tend to think in microeconomic terms when it comes to employment creation, and that is definitely not a solution for the current situation.

For example, the Times tells us that:
"Dr. Krueger was also one of the administration’s chief spokesmen for a payroll tax cut designed to encourage employers to hire, a policy that was in effect under the HIRE Act during 2010. The tax incentive, which was designed by Senators Chuck Schumer and Orrin Hatch after a raft of competing proposals floated through Washington, was criticized by some economists as being too small and ill-targeted to make much of a difference in hiring."
Don't get me wrong a reduction of payroll taxes, a regressive tax that burdens low income groups more heavily, is a good idea. But the reason is that it would stimulate consumption, not that it would reduce costs and lead to additional hiring. Why would a firm hire workers, because costs are lower, if they don't have demand for their products? Employment creation is NOT about incentives to the supply side, but about creating more demand!

Comments

  1. As Matias predicted, Krugman has heard the concern that Krueger is a microeconomist and therefore is wrong for the times, and while to my ear did not exactly leap to the ramparts, he defends nevertheless.

    He says true, but he also gets macro, after all he is a saltwater Princeton type economist.

    Sort of like Professor Krugman himself. And I certainly admire people who can change their minds with added data and thinking about that data.

    But after all we are entangled in a crisis which is a macro crisis, not a micro crisis, and needs immediate response. (Like 400K jobs a month hell or high water).

    So we need someone who instinctively responds at a macro level first. Alan Krueger had better get very wise very fast if he is going to be of any use in digging out of the disaster.

    ReplyDelete

Post a Comment

Popular posts from this blog

What is the 'Classical Dichotomy'?

A few brief comments on Brexit and the postmortem of the European Union

Another end of the world is possible
There will be a lot of postmortems for the European Union (EU) after Brexit. Many will suggest that this was a victory against the neoliberal policies of the European Union. See, for example, the first three paragraphs of Paul Mason's column here. And it is true, large contingents of working class people, that have suffered with 'free-market' economics, voted for leaving the union. The union, rightly or wrongly, has been seen as undemocratic and responsible for the economics woes of Europe.

The problem is that while it is true that the EU leaders have been part of the problem and have pursued the neoliberal policies within the framework of the union, sometimes with treaties like the Fiscal Compact, it is far from clear that Brexit and the possible demise of the union, if the fever spreads to France, Germany and other countries with their populations demanding their own referenda, will lead to the abandonment of neoliberal policies. Aust…

A brief note on Venezuela and the turn to the right in Latin America

So besides the coup in Brazil (which was all but confirmed by the last revelations, if you had any doubts), and the electoral victory of Macri in Argentina, the crisis in Venezuela is reaching a critical level, and it would not be surprising if the Maduro administration is recalled, even though right now the referendum is not scheduled yet.

The economy in Venezuela has collapsed (GDP has fallen by about 14% or so in the last two years), inflation has accelerated (to three digit levels; 450% or so according to the IMF), there are shortages of essential goods, recurrent energy blackouts, and all of these aggravated by persistent violence. Contrary to what the press suggests, these events are not new or specific to left of center governments. Similar events occurred in the late 1980s, in the infamous Caracazo, when the fall in oil prices caused an external crisis, inflation, and food shortages, which eventually, after the announcement of a neoliberal economic package that included the i…