So "Liberation Day(s)" are here and the whole pile of pro Trump economics, business & financial writers have disappeared as they can't defend or even model the chaos of the last 30 days..
this is GFC & Covid on crack.. its like a daily TARP vote..
We have a "Negative Gamma" sell into a declines which is blasting our global financial economics, economy, business environment. We are stuck in "Buy the truth and sell the news" is our real world facts.. stuck in recession all man made...
Everyone knows this is demolishing earnings projections for 20,000 public trading companies, top 10,000 private firms in the world. These 30,000 firms are earth..These firms are 90% of earnings, 90% corporate taxes, 85% of trade, 90% of private R&D, 90% CapX, 85% technology spending, 90% Industrial investment, 60% of employees..
As these 30,000 firms cut their earning projections, hiring, investment, trade, taxes.. this will smash $10 trillions out of the global economy.
Then the largest 1000 banks & 5000 financial firms in the world which drive $100s of trillions of financial flows across equities, credit, currency, trade, payments, swaps, financial products, pensions, funds, etc.. they are very sensitive to massive change and will reduce $10s of trillions of transactions which will blast their balance sheets
This is "man made" train wreck recession but the hard right & pro Trump wing are stuck as they have zero answers as team Trump is blowing up the global economy..
Outside of all of this everything is great.. can't wait to see the pro Trump & hard right defense of this in their economics & financial opinion pieces..
I love this summary, thank you. The Jan 25 paper looks at the productivity effects within each industry. But recessions cause shifts in industrial composition. Do they look at that? We’ve become more service oriented and less manufacturing. Every time factories close in a recession, the new ones opens up abroad, not in the US. Not the same for restaurants and delivery drivers.
Since the industry shares have changed so much over time, it’s difficult to compare episodes
You would need that composition to change on an annual basis. I forget if they correct for that (other papers do) but I don't think its the main focus.
An incredibly naive question: is increasing productivity even necessarily a good thing? Consider the following. Alice, Bob, and Carl are outside picking apples. Alice picks 40 lbs/hour, Bob 30, and Carl 20. If only Alice works, we get 40 lbs per hour worked. But to pick the most apples, we need all three, so total output becomes 90 lbs, but average productivity drops to (40 + 30 + 20)/3 = 30 lbs/hour per worker.
In the same way, I wonder whether a drop in productivity per worker, or per unit of capital employed,is actually a positive signal: a sign that we’ve managed to employ more labor and/or capital. Maybe what looks like declining efficiency is just expansion in disguise.
Correct. That's the mechanical efficiency end. Moving from all 3 workers to only 1 worker would raise average productivity. We don't want to capture that. We want to capture the fact that if Carl went to a new firm, he would rise to 40 per hour. That's a true gain.
I'm still unconvinced that recessions (2008-aside) "increase" productivity. You state that historically recessions have lead to greater allocation of resources to more productive-firms, but that answers the question of efficient allocation of resources, not necessarily productivity.
Suppose firm A received has 10 employees and produces $1000, and firm B has 8 employees and produces $500. Obviously firm B is less efficient. Well, lets say a recession occurs, and employees are re-allocated so now firm A has 15 employees and produces $800, and firm B has 3 employees and produces $100. The more productive firm is the greater recipient of resources, but overall productivity is lower (each employee produces less).
But lets even put that aside. Lets say Firm A actually does become more productive. It starts with 10 employees making $1000, and after the recession it gets 15 employees and makes $3000. Who's to say that without a recession, they wouldn't have gotten 20 employees and made $5000? Perhaps the recession made acquiring resources more prohibitive, and businesses are less capable of investing in capital-intensive expansions that would increase their productivity.
I do agree that recessions are likely to weed out inefficiencies as resources get scarce. There's an analogy to forests where after a fire, the ecosystem can rebuild stronger as old decaying trees are turned into resources for more fit organisms. However, I don't think we have pressing systemic inefficiencies to be purged, and we could do better living under blind optimism rather than austere uncertainty.
I think the best explanation for productivity booms in recessions is just job insecurity. In good times, there’s an ability for workers to be somewhat comfortable. And that’s fine, maybe even good. Perhaps a worker sneaks out of work one afternoon for a parent-teacher conference or a doctor’s appointment and doesn’t feel the need to make it up late into the night.
But if the economy is struggling and cutbacks are looming, every worker is angling to prove that they’re indispensable and shouldn’t be on the chopping block, and that boosts productivity. But that seems… not great? I kinda feel like we want workers to have some cushion and balance in their lives?
That's a more ambient criticism of using a metric to optimize for. It's the same thing with GDP—if we produce more, but no one's happy what's the point?
I think it's an important point though, and I am quite uncertain why Donald Trump has focused on productivity specifically.
I do think you're right about workers having conflicting values, and reprioritizing work, but we could also look at it more optimistically. Say you're a low-producing worker who often comes late, doesn't work diligently, goes through the motions; during a recession, you'll likely be more serious, and actually commit yourself to work. When you look at it that way, it seems like collective punishment—already productive workers are going to be constrained by a worse quality of life, just to eke out some extra effort from poor performers. How is that fair?
But also I wonder if another productive force during recessions is lower quality of life. If you're already unemployed, maybe it's better to take a gamble and work on your start-up? High-risk, high-benefit behaviour might be incentivized?
I find criticism of GDP to be misguided. They usually amount to “what about [insert complaint here]”? Those misunderstand what GDP is. It’s not some all purpose measure of economic goodness— it’s a measure of output. On that rubric it’s… pretty good (but not perfect— if, for instance, I’m a teacher and I hire a nanny for childcare, both of our wages count as output; if I stay home and care for my kid while the nanny does the same teaching job, only the teaching work counts as output).
I also think economic distress won’t cause people to take risks. Quite the opposite. Startups tend to fail en masse when the economy is struggling, as funding is harder to get. Workers at big companies tend to have a bit more job security.
I think there’s some balance, but generally it’s good for workers to have some leeway. If someone is chronically late and doesn’t pull their weight, they should probably be let go regardless of the economic circumstances. But it’s hard to avoid all workers, including generally productive ones, buckling down and sacrificing their personal lives to avoid being let go in a downturn.
How to avoid cyclical insecurity in downturns is a difficult public policy problem— even if you have a robust safety net, no one wants to lose their income, even if they could withstand the shock. But I’d just argue that positive productivity shocks in slumps shouldn’t be viewed as a positive.
Nothing about “creative destruction? requires that all the destructionist at the same time. And the benefit that Austrians see in recession is just the visible failure of investments that were made at a result of unwise over-target inflation (too low interest rates).
That clouds have silver linings does not make them blue sky.
So "Liberation Day(s)" are here and the whole pile of pro Trump economics, business & financial writers have disappeared as they can't defend or even model the chaos of the last 30 days..
this is GFC & Covid on crack.. its like a daily TARP vote..
We have a "Negative Gamma" sell into a declines which is blasting our global financial economics, economy, business environment. We are stuck in "Buy the truth and sell the news" is our real world facts.. stuck in recession all man made...
Everyone knows this is demolishing earnings projections for 20,000 public trading companies, top 10,000 private firms in the world. These 30,000 firms are earth..These firms are 90% of earnings, 90% corporate taxes, 85% of trade, 90% of private R&D, 90% CapX, 85% technology spending, 90% Industrial investment, 60% of employees..
As these 30,000 firms cut their earning projections, hiring, investment, trade, taxes.. this will smash $10 trillions out of the global economy.
Then the largest 1000 banks & 5000 financial firms in the world which drive $100s of trillions of financial flows across equities, credit, currency, trade, payments, swaps, financial products, pensions, funds, etc.. they are very sensitive to massive change and will reduce $10s of trillions of transactions which will blast their balance sheets
This is "man made" train wreck recession but the hard right & pro Trump wing are stuck as they have zero answers as team Trump is blowing up the global economy..
Outside of all of this everything is great.. can't wait to see the pro Trump & hard right defense of this in their economics & financial opinion pieces..
I love this summary, thank you. The Jan 25 paper looks at the productivity effects within each industry. But recessions cause shifts in industrial composition. Do they look at that? We’ve become more service oriented and less manufacturing. Every time factories close in a recession, the new ones opens up abroad, not in the US. Not the same for restaurants and delivery drivers.
Since the industry shares have changed so much over time, it’s difficult to compare episodes
You would need that composition to change on an annual basis. I forget if they correct for that (other papers do) but I don't think its the main focus.
An incredibly naive question: is increasing productivity even necessarily a good thing? Consider the following. Alice, Bob, and Carl are outside picking apples. Alice picks 40 lbs/hour, Bob 30, and Carl 20. If only Alice works, we get 40 lbs per hour worked. But to pick the most apples, we need all three, so total output becomes 90 lbs, but average productivity drops to (40 + 30 + 20)/3 = 30 lbs/hour per worker.
In the same way, I wonder whether a drop in productivity per worker, or per unit of capital employed,is actually a positive signal: a sign that we’ve managed to employ more labor and/or capital. Maybe what looks like declining efficiency is just expansion in disguise.
Correct. That's the mechanical efficiency end. Moving from all 3 workers to only 1 worker would raise average productivity. We don't want to capture that. We want to capture the fact that if Carl went to a new firm, he would rise to 40 per hour. That's a true gain.
I'm still unconvinced that recessions (2008-aside) "increase" productivity. You state that historically recessions have lead to greater allocation of resources to more productive-firms, but that answers the question of efficient allocation of resources, not necessarily productivity.
Suppose firm A received has 10 employees and produces $1000, and firm B has 8 employees and produces $500. Obviously firm B is less efficient. Well, lets say a recession occurs, and employees are re-allocated so now firm A has 15 employees and produces $800, and firm B has 3 employees and produces $100. The more productive firm is the greater recipient of resources, but overall productivity is lower (each employee produces less).
But lets even put that aside. Lets say Firm A actually does become more productive. It starts with 10 employees making $1000, and after the recession it gets 15 employees and makes $3000. Who's to say that without a recession, they wouldn't have gotten 20 employees and made $5000? Perhaps the recession made acquiring resources more prohibitive, and businesses are less capable of investing in capital-intensive expansions that would increase their productivity.
I do agree that recessions are likely to weed out inefficiencies as resources get scarce. There's an analogy to forests where after a fire, the ecosystem can rebuild stronger as old decaying trees are turned into resources for more fit organisms. However, I don't think we have pressing systemic inefficiencies to be purged, and we could do better living under blind optimism rather than austere uncertainty.
I think the best explanation for productivity booms in recessions is just job insecurity. In good times, there’s an ability for workers to be somewhat comfortable. And that’s fine, maybe even good. Perhaps a worker sneaks out of work one afternoon for a parent-teacher conference or a doctor’s appointment and doesn’t feel the need to make it up late into the night.
But if the economy is struggling and cutbacks are looming, every worker is angling to prove that they’re indispensable and shouldn’t be on the chopping block, and that boosts productivity. But that seems… not great? I kinda feel like we want workers to have some cushion and balance in their lives?
That's a more ambient criticism of using a metric to optimize for. It's the same thing with GDP—if we produce more, but no one's happy what's the point?
I think it's an important point though, and I am quite uncertain why Donald Trump has focused on productivity specifically.
I do think you're right about workers having conflicting values, and reprioritizing work, but we could also look at it more optimistically. Say you're a low-producing worker who often comes late, doesn't work diligently, goes through the motions; during a recession, you'll likely be more serious, and actually commit yourself to work. When you look at it that way, it seems like collective punishment—already productive workers are going to be constrained by a worse quality of life, just to eke out some extra effort from poor performers. How is that fair?
But also I wonder if another productive force during recessions is lower quality of life. If you're already unemployed, maybe it's better to take a gamble and work on your start-up? High-risk, high-benefit behaviour might be incentivized?
I find criticism of GDP to be misguided. They usually amount to “what about [insert complaint here]”? Those misunderstand what GDP is. It’s not some all purpose measure of economic goodness— it’s a measure of output. On that rubric it’s… pretty good (but not perfect— if, for instance, I’m a teacher and I hire a nanny for childcare, both of our wages count as output; if I stay home and care for my kid while the nanny does the same teaching job, only the teaching work counts as output).
I also think economic distress won’t cause people to take risks. Quite the opposite. Startups tend to fail en masse when the economy is struggling, as funding is harder to get. Workers at big companies tend to have a bit more job security.
I think there’s some balance, but generally it’s good for workers to have some leeway. If someone is chronically late and doesn’t pull their weight, they should probably be let go regardless of the economic circumstances. But it’s hard to avoid all workers, including generally productive ones, buckling down and sacrificing their personal lives to avoid being let go in a downturn.
How to avoid cyclical insecurity in downturns is a difficult public policy problem— even if you have a robust safety net, no one wants to lose their income, even if they could withstand the shock. But I’d just argue that positive productivity shocks in slumps shouldn’t be viewed as a positive.
Nothing about “creative destruction? requires that all the destructionist at the same time. And the benefit that Austrians see in recession is just the visible failure of investments that were made at a result of unwise over-target inflation (too low interest rates).
That clouds have silver linings does not make them blue sky.