The Ambrosini Critique

What Do Graduate Schools Want?

FRBSF: Economic Letter – Unemployment and Productivity (10/12/2001)

Sounds like there are no grand theories on connections between unemployment and productivity (at least in the long run).

The article states 2 ways in which technology improvements can cause permanent changes to the natural unemployment rate:

1. Job search technology speeds up the process of finding the right employer for the unemployed worker. The natural unemployment rate is ‘natural’ because all workers spend some time in between jobs. If this in-between time is shorter than fewer people will be unemployed at any one time.

2. Productivity growth increases profit (more output per unit of labor) which encourages firms to want to produce more by hiring more workers.

There’s one ‘it depends’ model presented that shows that examines the fact that some technical progress may destroy more jobs than it creates. The determining factor is the cost of upgrading jobs as capital becomes obsolete. If it costs a lot to upgrade an existing job as the capital used in that job becomes obsolete, that job will be abandoned. The problem with this model is that the relationship between unemployment and productivity depends on the type of job and the technology. In other words, it says nothing of the relationship between the two in aggregate.

Too bad, this last model has appeal. I wonder if we can talk about productivity in terms of its relationship to unemployment by examine its decreasing and increasing components… change in employment equals change in leveraged productivity (technical progress that improves existing jobs) minus change in replicative productivity (technical progress that replaces existing jobs). How would you measure aggregate productivity broken into its leveraged and replicative components? I’m sure I could find out more here, but I’m going to pass on paying $30 to see the article… Berkeley has it, and I guess you can access the article via ScienceDirect if your inside Berkeley’s network.

Web Allows People Like You

And Me to Spot Trends. Uh-Oh.

“But I have grander ambitions for the software. I foresee a day when everyone online will be linked into one big collaboratively filtered network, instantly knowing what everyone else with the same sensibilities is thinking and doing.”

I wonder what this ‘trend’ does for the definition of “pop culture”…

The Wedge Between Output and Employment Growth: Archive Entry From Brad DeLong’s Webjournal

Seem’s pretty straight forward. The economy grows because of productivity improvements. Each worker can produce more stuff. Also, if the unemployment rate goes up, the economy shrinks. Less workers to produce the stuff. So employment and productivity are substitutes for each other.

Well, today we have a situation were productivity and the economy are rising but unemployment is rising, too. This is easy to explain by saying that income gains from productivity increases are outstripping the income losses from unemployment.

Question: is there a causal relationship between productivity and unemployment or are they really perfect substitutes? I mean, is there some future economy that has such high productivity that it only takes one worker to produce all the output. Two follow-ups: First, what happens if productivity goes to infinity? No workers required and 100% unemployment? Second, is it ‘bad’ for productivity to replace employment?

Thomas Sowell: Who’s Rich

Sowell points out that there is often confusion between wealth and income. He claims that rich people may have insignificant income as its their wealth that makes them rich. He would have you conclude that discussions about taxing the rich are misplaced because rich people are wealthy and don’t necessarily have high incomes. Futhermore, when you ‘unfairly’ tax high income earners, you’re punishing folks that are making high contributions to the economy. You punish those folks, you punish the economy. Which means you punish us all.

I suppose this is correct in terms of income derived from labor, but what about investment income… I agree that there should be low(ish) taxes on income derived from labor, but this is not an argument for low taxes on investment income or on wealth in general.

It doesn’t seem fair to tax income based on work performed. A virtuous tax policy would have low tax on income from salary. It does seem just to tax wealth and income derived from wealth.

On a completely different note: why are there no aggregate wealth statistics that are widely reported? I mean you hear about GDP everyday it seems in one article or another. It seems that the health of the economy, as businesses, can be judged by looking at income AND the balance sheet (which I take to mean wealth).

Books to Study Before Going to Graduate School in Economics

Ok, I’m not real sure why I didn’t look at about.com before…

Letters of Rec for old farts like me (I’m 5 years out of school)

Yeah, I’ve been looking for an answer to this question!

I wonder if its possible for me to get research experience?

Three Pillars of Learning

- Depth; What ideas are important?

- Breadth; What connections are there between ideas?

- Process; How do people think about things? Models.

These pillars work with each other in a virtuous cycle of learning. Models of how the world works help you to understand it. Those models help to build deep understanding of a particular idea. The deep understanding means that you understand the model further, you generalize and then apply the model to other areas or fields. Because no model is perfect in a more general setting, applying the model more generally forces you to reevaluate the model and improve it or scrape it. The outcome is a better model and the cycle continues.

Graduate school is a social environment that allows this cycle to continue unhindered.

Questions To Ask When Thinking About Pursuing a PhD

“Research shows that up to half of the students who begin doctoral study never receive the Ph.D. One culprit in attrition is a poor match. Doctoral study may be a poor choice in the first place, or there may be a poor fit between the student and the program.”

Questions that need an answer:

1. Why a PhD?

2. Why economics?

3. Why Berkeley?

4. What advisors at Berkeley? Why?

EconLog, High income and Wealth: Library of Economics and Liberty

I like this one… I’ll come back to it. Basically, what would be a just distribution of wealth? What would a virtuous distribution look like? Assume each, justice and virtue, are mutually exclusive (I’m not sure if that’s the right term… in other words, justice plus virture adds up to 100% of your morals, I guess). Square the virtuous and just models of wealth distribution with their respective importance.

Also, I want to look into the ‘Survey of Consumer Finances’ more… For my personal financial planning if nothing else…