Re: Law School Class of 2010 Starting Pay Fell 20% as Jobs Erode
Posted: Fri Jul 29, 2011 5:20 pm
robotclubmember wrote:kapital98 wrote:THE STIMULUS WORKED.
I agree with the multiplier effect though, to you, you define one job or more being created as a success. Economically that's true. In theory. But in reality all I see is the opportunity cost of not pursuing a more effective stimulus. And I therefore don't see it as a success. See I agree with you but we are on a different page philosophically at a level beyond the economic understanding of this. Where I will acknowledge I was incorrect however, was in confusing GDP as being growth net core inflation as opposed to growth less GDP deflator, as scammedhard pointed out.
Except you obviously don’t agree with me.
I don’t think of one or more job being created as a success. If you have 25% unemployment and, after increasing the money supply by a small portion, you have 24% unemployment that is not a successful policy. TARP worked because it avoided the systemic collapse of the financial system. The American Recovery Act worked because it partially filled the output gap, prevented a double-dip recession, and drastically reduced potential unemployment.
(For the record: Real GDP is measured using “nominal GDP – inflation.” You can use any measure you want. The U.S. gov’t uses deducts the rise in the Consumer Price Index from GDP to calculate real production. This is NOT the core index. It is the full index with food and energy included. Real GDP is only one measurement of growth and should be taken with a grain of salt in policy analysis – though it is very important.)
robotclubmember wrote:I agree that we will have very feeble growth as you described. I also agree with the reasoning you gave. And further, I agree that this meets the criteria of a recovery that is commonly established in textbooks. I just disagree with saying we are in a recovery until we are at least at parity with the base year. I mentioned that before. The reason is because I live in reality, and in reality, everyone is feeling the effects of a recession, no matter what you call it. You call this a "recovery" and in economic terms that is correct. But where is the recovery for lawyers whose starting salaries fell 20% in 2010? You see, this simply isn't a good economy for lawyers. This is not a recovery for lawyers. And it's not a recovery for average people who are facing unemployment and falling real wages.
I’ll give you a question that might help you understand your own question: Where is the recovery for auto-workers over the last 40 years?
I hope you see that cyclical and structural issues are inherently different. A recession is a cyclical phenomenon. Trying to say a recession exists because one sector of the economy is doing poorly is missing the entire point of economics. No one at the Federal Reserve should care if lawyers are doing poorly. They should care if the aggregate people are doing poorly or well. It’s about the aggregate good. Trying to cater to specific sectors is industrial policy and is a completely different branch of economic than business cycle theory (and macroeconomics for the most part.)
Regarding real wages: They have increased. This fits precisely with macroeconomic theory. Neoclassical theory suggests real wages decrease and employment remains the same. Keynesian theory (and monetarist) claim that real wages increase and employment decreases. This recession has fit precisely into Keynesian theory. It would significantly help labor markets if real wages decreased temporarily. This is another common misunderstanding among laypeople (and one of the major problems with neoclassical theory regarding business cycles.)
robotclubmember wrote:What you are saying appears theoretically sound. To you, if the stimulus package created one job, it would in theory be a success. To you, if GDP went up .1% it would theoretically be a recovery. To me those are not things that I consider a recovery in any meaningful way (again, I think of the opportunity cost of bad policy). You're debating this using a set of economic terms, and I'm using the same terms but applying them to the realities of the legal market, and that is why we aren't on the same page. I think you're arrogant but I don't think you're theoretically wrong. I think that the application of our terms is different. The word "strike" means different things to a baseball player, a bowler, and a union organizer. Don't tell me I'm wrong because I say we're in a recession still and you have a definition that makes that false, because I already established what it means to me pages ago and we're not using the same definition. And don't argue that I'm making up my own definitions because I'm not. The bottomline is that your statistics would say that we were recovering in 2009-2010. The exact opposite is reflected in the job market, real wages, and especially the legal market. This is a book recovery and that's been acknowledged, but does not satisfy the spirit of a recovery.
I never said one job is a success or a recovery. The words you are using have STRICT definitions in economics. You cannot simply make up whatever you want and then say it is the same thing. All parties involved use the same definitions for clarity. In classical economics Karl Marx used the same language and theory as Adam Smith. In modern macroeconomics Milton Friedman used the same language as John Maynard Keynes. The word “strike” means only one thing in economic theory. The word “recession” is defined by the NBER. I have never read or talked to an economist that used “recession” differently than how I previously quoted. Any other use of the term is incorrect according to the science of economics (I hope you understand how flexible the NBER definition is if correctly used.)
The worst problem with your understanding of the issue is a complete misunderstanding of macroeconomics (Keynesian and Monetarist policy.) The government doesn’t care where growth is created for stimulus. Monetary policy, and to a smaller extent fiscal policy, leaves that completely for the markets to decide what's best. Keynes’ famously said it would be better to pay people to dig up money during a recession. Friedman gave the example of throwing money randomly out of a helicopter. The reason for this is double ledger accounting. When the money is spent it does not cease to exist. The business will deposit it in a financial institution. This will, literally, double the amount of money in a society. Then the bank lends the newly created money to more people while still owing the money (not currently being used) to the original business. VOILA! The multiplier effect in a vacuum. In reality the multiplier effect depends on many things (like liquidity preferences) but the general idea remains the same.
This is not philosophy. We are not talking about a “spirit of recovery.” People are unemployed during the greatest economic expansions. You are constantly mixing and matching separate ideas in a convoluted mess. This is not a normative argument about what is “wrong” or “right.” I’m simply stating what economic theory says “IS.”
If you wish to talk about what is “Right” that is a different argument. In that case there is no reason you should be pointing at news articles and then saying there is economic justification for your posts. There isn’t. Please reference works on ethics and morality. However, I really don’t see people having much sympathy for the legal sector. Only a very small special interest would sacrifice government resources for your so called “spirit of recovery.”