Matt Nolan

Global youth unemployment, why?

/4 Comments/in , /by

Arnold Kling raises the issue that youth unemployment has risen disproportionately during the recession.  He raises three stories and says only one makes sense – his third story:

  1. Sticky wages,
  2. Shift in demand/technology
  3. His PSST story – where it is taking time for entrepreneurs to utilise labour/match skills following a structural shock.

This is all well and good, but there is a massive story missing here.  Young workers require training, and have no prior experience with which to base their quality on – they are a “risky investment”.

Firms pull back on investment during times of uncertainty and distress, as a result we would expect to see youth unemployment rise disproportionately around the globe.

That is why its always made sense to me to have skill training as part of any unemployment program, so that an unfortunate recession that leads to the exclusion of part of the labour market only has a limited long-term impact – without this type of intervention we run the risk that the young people suffering from misfortune today have permanently lower income as a result!

Matt Nolan

Twitter gets it

/in /by

#FirstWorldProblems is awesome and FirstWorldLife is also good.

Read it sarcastically, and read it to give some context if possible.

Matt Nolan

Incompetence in Europe

/in , /by

I fully endorse Krugman’s point here:

These alleged technocrats have in fact systematically ignored both textbook macroeconomics and the lessons of history in favor of fantasies. The European Central Bank has placed its faith in the confidence fairy, while imagining that it can run policy in a way that has never worked in several centuries of central bank experience. Meanwhile, the European policy elite has simply wished away the clear evidence that the euro zone needs to make an adjustment that is virtually impossible unless inflation targets are raised.

Not only are we seeing why the Euro was a silly idea in technical terms – we are seeing how endemic policy failure can be in places like Europe.

Seriously, the vast majority of economists knew that we just needed the ECB to act as a lender of last resort, and for the default in Greece (and policy changes in the rest of the PIIGS) to be determined in a reasonable amount of time – instead we’ve seen failure from both monetary and fiscal authorities around the region.  Embarrassing failure.

Matt Nolan

A matter of certainty

/in , /by

After negotiating a sizable haircut on Greek debt and pushing through an expansion in the EFSF we have seen markets rally.

The current crisis has very much been one of people wondering “who the hell will bear the burden of default”.  The closer we get to solving that question, the closer we get to putting this junk behind us.

I don’t like how people are calling these things “buying time” – in reality there just needs to be a clear set of policies set down, and a clear lender of last resort for the regions banking sector.  Get those things in place and the crisis will get the hell out.

There has been progress this month, but the international situation is still pretty weak.

Matt Nolan

A point on global income inequality

/7 Comments/in /by

From Ezra Klein we have the following:

Those at the 34th percentile of income in the United States are at the 90th percentile globally, and those at the 50th percentile in the United States are at the 93rd percentile globally. Even the very poorest Americans — those at the 2nd percentile of income in the United States — are at the 62nd percentile globally.

So a person who represents the poorest 2% in the US has more income than 62% of the worlds population – and don’t forget this excludes the implicit security net you gain by being in a developed economy (and excludes the fact that wealth disparities may be more significant at a global level). And the following graph:

Now I would note that the fact that there is global inequality does not imply that domestic inequality is “fair” – or that policy is appropriate.  But it does imply that there are other more important sources of income inequality in the world.

Another thing, the key issue isn’t inequality of income – it is inequality of opportunity.  The fact that people in the developed world restrict the movement of labour, and do not help improve institutions in poor countries, is doing more to reduce equality of opportunity than anything.

In NZ, I came from a poor family in a country town – thanks to the way the country is structured I have been able to borrow, invest in my human capital, and work my way up to be an economist and live comfortably.  That sort of mobility on the basis of effort is what we want in society.  And this is the thing that people born in poor countries do not have access to, which is why the real injustice is being perpetrated on these people.

Matt Nolan

A message to tomorrow’s protesters

/38 Comments/in , , , /by

Update:  The protest that I’m arguing against in the first half of the post isn’t till the 5th of November (thanks Seamus!).  However, my main critique in the second half applies to both protests insofar as the first protest is focused on inequality again.

Personally I AGREE with a some of the issues being put down for the first protest – and would potentially head along if it wasn’t that the bullshit inequality line is being sold so hard (including in the picture for the site).  Sigh

I see that a number of people have decided that, on Saturday, they are going to camp outside the Reserve Bank of New Zealand in Wellington to protest.  After seeing a similar protest on Wall Street these protesters have stated that they are the “99%” (a statement that implies that they aren’t part of the 1% that is assumed to own most of the capital) – and they are protesting for “change”.

I understand why people feel worn down, I understand the power and importance of non-violent protest, but I have to say something that will likely upset the protesters and many of my closest friends:

This protest and its message are wrong, and by doing it you both ignoring the real issues in the world and acting in a selfish way – and for that reason I think less of every single one of you.

That’s a pretty damned cutting statement – so let me discuss why I believe this.

Read more