December 25, 2016

IT'S ALL JUST SIMON V. EHRLICH:

Janet Yellen can't find the natural interest rate (Mark Spitznagel, 12/25/16, Business Insider)

In short, the neutral interest rate is one where the central bank is not itself distorting the economy. Monetary policy would really be nonexistent, as the Fed would not be altering the interest rate resulting from a free market discovery process between borrowers and savers. (This of course raises the question, why do central planners need to fabricate something that would naturally exist in their absence?) This is near where Yellen actually thinks we are these days, hence she sees little urgency in raising rates and thus lessening what, on the face of it, looks like a very loose current monetary policy.

Much of this neutral rate talk at the Fed is supposedly supported by the work of Swedish economist Knut Wicksell (1851-1926), who argued that the "natural" interest rate would express the exchange rate of present for future goods in a barter economy. If in practice the banks actually charged an interest rate below this natural rate, Wicksell argued that commodity prices would rise, whereas if the banks in practice charged an interest rate above the natural one, then commodity prices would fall. But that's where Wicksell--often associated with the free-market Austrian School of economics--would cease to recognize his own ideas in current central bank thinking. Wicksell's natural rate was a freely discovered market price in an economy, which reflected the implicit (real) rate of return on capital investments. For Wicksell, the natural interest rate was not a policy lever to be manipulated, in order to hit some employment or output goal. Yellen and the other Fed economists writing on this topic have conveniently (and probably unwittingly) co-opted Wicksell into their own Keynesian (and exceedingly un-Austrian) framework.

Everything has been commodified and no one believes commodity prices rise.



MORE:
The Long-Term Jobs Killer Is Not China. It's Automation. (Claire Cain Miller, DEC. 21, 2016, NY Times)



Donald J. Trump told workers like Ms. Johnson that he would bring back their jobs by clamping down on trade, offshoring and immigration. But economists say the bigger threat to their jobs has been something else: automation.

"Over the long haul, clearly automation's been much more important -- it's not even close," said Lawrence Katz, an economics professor at Harvard who studies labor and technological change.

No candidate talked much about automation on the campaign trail. Technology is not as convenient a villain as China or Mexico, there is no clear way to stop it, and many of the technology companies are in the United States and benefit the country in many ways.

Mr. Trump told a group of tech company leaders last Wednesday: "We want you to keep going with the incredible innovation. Anything we can do to help this go along, we're going to be there for you."

Andrew F. Puzder, Mr. Trump's pick for labor secretary and chief executive of CKE Restaurants, extolled the virtues of robot employees over the human kind in an interview with Business Insider in March. "They're always polite, they always upsell, they never take a vacation, they never show up late, there's never a slip-and-fall, or an age, sex or race discrimination case," he said.


How robots will change the American workforce (Gary Robbins, 12/13/16, San Diego Union-Tribune)

The experts are being brought together by Henrik Christensen, the prominent Georgia Tech engineer who was hired in July to run UC San Diego's young Contextual Robotics Institute. [...]

Christensen sat down with The San Diego Union-Tribune this week to talk about what's likely to happen in the near term. The following is an edited version of that conversation:

Q: Automation and robotics are advancing quickly. What impact will this have on employment in the United States?

A: We see two trends. We will use robots and automation to bring manufacturing jobs back from overseas, primarily from Southeast Asia. At the same time, we will see some jobs get displaced by automation. There will be fully automated, driverless transportation in this country by 2020, and that will eliminate some jobs now held by workers like truck drivers and taxi drivers.  [...]

Q: We're both baby boomers. We've driven all of our lives. How do you feel about kids never having this experience?

A: I love to drive my car, but it's a question of how much time people waste sitting in traffic and not doing something else. The average person in San Diego probably spends an hour commuting every day. If they could become more productive, that would be good.

With autonomous, driverless cars, we can put twice as many vehicles on the road as we have today, and do it without improving the infrastructure. 

Q: Does that mean San Diego County will need fewer parking garages?  

A: There would be no need to have parking garages in downtown San Diego. In theory, you'd get out of the car and say, 'Pick me up at 4 p.m.' Long-term -- we're talking 20 years into the future -- you're not even going to own a car. A car becomes a service.



Posted by at December 25, 2016 11:39 AM

  

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