Tuesday, October 28, 2003

Interest rates and (un)employment Posted here Tuesday, October 28, 2003 at 9:37:41 PM     Overheard The Fed can cut interest rates all it wants, in other words. It can bring short-term rates down from a 45-year low to a 55-year low. It may bring about a boom in asset prices... and even a boom in consumer spending, but it cannot bring about a real boom in the economy. Because half of all the manufactured items the consumer buys are now made overseas... and it is overseas where the new factories are built. When the consumer spends, his money stimulates the economy. But not in America. It's the Chinese economy that feels the tickles. ********

The Conservation of Curiosity in economics Posted here Tuesday, October 28, 2003 at 8:46:09 PM     A good historical summary To have some idea of where we are going in this world, it is useful to have some sense of where we have been. It is one thing to assert that most prominent economists of the 20th century can be divided into three groups: the Generation of the Great Depression (and World War II); the Generation of the Cold War; and the Generation of Perestroika. That is certainly true, and probably useful, as far as it goes. But it doesn’t tell us much about economics It is quite another thing to identify the discipline’s galvanizing events from the perspective of those inside the field. Such a chronicle of internal developments is, after all, the way economists report their news to us. Until about 1960, the big news (it reached the public well after the fact) had to do with the appearance of various books: Keynes’ "The General Theory of Employment, Interest and Money" in 1936, Hicks’ "Value and Capital" in 1939, Von Neumann and Morgenstern’s "The Theory of Games and Economic Behavior" in 1944, Samuelson’s "Foundations of Economic Analysis" in 1948, Debreu’s "The Theory of Value" in 1959, Friedman and Schwartz’ "Monetary History of the United States 1867-1960" in 1963. After that (and in many cases before), the most significant contributions to economics are short, technical papers published in journals: Ronald Coase’s "The Problem of Social Cost" in 1960; George Akerlof’s "The Market for ‘Lemons’" in 1970, Robert Lucas’ "Expectations and the Neutrality of Money" in 1972, Fisher Black and Myron Scholes and Robert Merton’s papers on options pricing in 1973 and so on. An almost-serviceable definition of a good economist is someone who reads the journals instead of the newspapers. A proper history of 20th-century economics would interweave these narratives, internal and external, in order to produce a coherent account of how those three unmistakable generations came to coalesce, forming unities of experience and analysis both inside the discipline and in countless countries round the world. ********

Sony job cuts Posted here Tuesday, October 28, 2003 at 7:58:24 PM     The following indicates the intensity of job shifts.This is at the level where most corporations cannot be smart about who goes and who stays. In desperation the cut is even across the board and mostly non-strategic.Such actions are a result of deadening because mindless sacrificial responses to lack of cash flow. As companies and state agencies cut in this way, subtle concerns for fairness, environment, meaningfulness and long term hope are passed over in the quest of simple stopping the hemorage. Empathy and compassion are vastly reduced and the whole society goes into a basic survival state. Confirming a published report last week, Sony Corp. said it will eliminate 20,000 jobs - almost 13 percent of its workforce - over the next three years. One-third of the layoffs will come in Japan. They are part of a larger strategy aimed at turning around the company's fortunes. Other steps include a 30 percent cut in production, distribution, and service facilities; ending the manufacture of cathode ray tubes for television; integrating jobs that overlap; consolidating its marketing operations in the US on the West Coast; forming a holding company for its noncore banking and insurance units; and joining rival Samsung Electronics of South Korea in a $2 billion project to develop liquid crystal display panels. The electronics giant reported a 25 percent drop in profits in the third quarter and cut its profit forecast for the full fiscal year by 23 percent. ********