I wrote: > > the standard macro explanation points to Okun's "Law," > > which says that for the US, > > real GDP has to increase at about 3 per cent per year > > simply to keep the > > unemployment rate constant. This type of growth counteracts the > > [unemployment-raising] effects of an increased labor force and the > > growth of labor productivity. > > > > Okun's "Law" should be called Okun's "empirical generalization."
Jurriaan writes: > Yes, but, according to this site, there are two versions of > Okun's law: >http://www.amherst.edu/~econ53/Okun.PDF the two versions are largely consistent with each other, as the file indicates. >> orthodox macro ... points to wage rigidities as discouraging rapid equilibration >> of labor-power markets. This, of course, encourages them to call for making >> labor-power markets less rigid, by smashing unions, abolishing the minimum wage, etc. >Yes, but if you look at the New Zealand data, where labour market relations >were unquestionably de-rigiditized and livened up, the result was greater >income disparity and a decline of modal real wages. Everybody admits that >household incomes are higher in Australia, despite greater de-rigiditisation >in New Zealand. But of course they didn't believe the General Theory anymore >in New Zealand. I wasn't advocating orthodox macro. But the orthodoxy would point to a trade-off: in return for lower unemployment, NZ paid the cost of greater inequality and lower wages. Or is unemployment not lower in NZ? If unemployment didn't fall, then that contradicts the orthodoxy. >> some blame the fact that the Yen and renminbi haven't risen as the dollar >> has fallen, so that US aggregate demand has been slow. These rigidities are >> blamed on the Japanese and Chinese governments, respectively. >But if you look at capital and money movements between Europe and the USA, >and trade between Europe and the USA, they are greater by value and volume >than the corresponding trade with Japan and China. Therefore, the focus on >Japan and China probably means that the empire thinks the Japanese and the >Chinese are weaker and easier to beat, or pick off. But knowing a little bit >about the Chinese and the Japanese, they actually have considerable grunt >and clout. Therefore, the battle against the so-called "slit-eyes" and >"gooks" (sic.) might create a spot of bother for condom economics. Again, I wasn't advocating orthodox macro. But the total volume of capital and money movements doesn't seem relevant here. The pundits focus on the size of the trade deficits. Just because there's a taint of racism in the criticism of China's or Japan's policies doesn't mean that the rest of the critique is totally off-base. I think there's a contradiction within the US ruling class. An appreciation of the renibi (sp?) would aid US manufacturing and other exporting or import-competing sectors and help Bush get re-elected. But if the renibi were to rise, it would hurt existing fixed investments in China by US corporations, by hurting demand for their products. I don't know how big this contradiction is, but it seems real. Jim D.
