Debunking labour market “rigidities”

Neoclassical economics, when looking at the labour market, plots its supply and demand curves, with all of their loaded and unrealistic assumptions, and finds an equilibrium wage and employment. Then it finds that anything added on to this simplistic and flawed model – taxation, unions, minimum wages – perturbs that equilibrium. Therefore those things must be bad! A new paper […]

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The WTO is Not Free Trade

Since I just mentioned Dean Baker’s Beat the Press blog, here is a short but sweet commentary on the loaded term “free trade”. Dean has been making this point for years, perhaps too often for my tastes, but it is a good one and worth repeating in the context of the Doha collapse: The WTO is Not Free Trade It […]

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Herding cats: St. John’s edition

Looking towards the Council of the Federation meetings in St. John’s later this week, John Ibbitson thinks he’s found the magic elixer to solve the alleged “fiscal imbalance”: This week, the provinces probably will suggest a compromise. The first component of any federal transfer would consist of an equalization fix, based on a report commissioned by Ottawa and released in […]

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Bubble bubble toil and trouble?

The bad news is starting to come in from south of the border. For those interested in following bubblemania, I recommend The Vancouver Housing Market Blog. The LA Times reports: The chief economist of the California Assn. of Realtors has stopped using the term “soft landing” to describe the state’s real estate market, saying she no longer feels comfortable with […]

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WTO talks collapse

What a difference a few years make! Five years ago it was looking pretty ugly on the international trade front. The FTAA had a full head of steam, and was Bush’s top foreign policy priority …  at least until 9/11 happened. The post-9/11 climate led to a full court press by the US and EU on Southern countries to launch […]

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Luck, ability and income tax policy

A old NY Times column by economist Hal Varian, recussitated by Brad DeLong: … Those who argue for a more progressive income tax emphasize equity: a tax dollar paid by a rich person causes less pain than a tax dollar paid by a poor person. Those who argue for a less progressive system emphasize efficiency: the most productive people should […]

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The Economist takes on CGE modelling

When I was doing research on the idea of a Canada-US customs union, I came across a study (a PhD dissertation, actually) that was cited by proponents, claiming huge gains from a customs union. I looked into the methodology and found some serious shortcomings. CGE, or Computable General Equilibrium, models are a quasi-empirical approach that puts numbers to experiments, such […]

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Demographic apocolypse 2020?

Pierre Fortin, who I usually find to be an interesting economic commentator on public policy issues, makes the case for demographic apocolypse. i used to share that fear, but I’ve done some number crunching on this issue in the BC context (i.e. more seniors than the national average) and am not convinced that the problem is as large as Fortin […]

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Development Round? What Development Round?

Joseph Stiglitz demonstrates the hypocracy of the Doha Round, and US and EU trade policies: America’s new trade hypocracy As the current “development round” of trade talks moves into its final stages, it is becoming increasingly clear that the goal of promoting development will not be served, and that the multilateral trade system will be undermined. Nowhere is this clearer […]

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Housing the Homeless and Addicted

The New York Times reports on a Seattle initiative to provide homes for homeless alcoholics. They do not require sobriety to get a spot, a development that rankles moralistic conservatives. The reason is economics: it costs less to house them than what is currently spent on health care, detox and criminal justice. New York and some other major US cities […]

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Softwood: The Final Capitulation

“Guys, stop it! You’re gonna embarass me at George’s birthday party.” PM Harper clings to a crappy deal over the objections of companies representing half the exports to the US. Closer ties to Bush under conservative continentalism have not seemed to win us any favours. Oh, and by the way, Prime Minister Accountability, would you please release the text of […]

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Bubble seeks air

This makes me nervous: Mortgages getting risky: CIBC HEATHER SCOFFIELD Globe and Mail Update TORONTO — Household credit is stable, but that statement masks the growing popularity of untraditional and risky mortgages, a new study by CIBC World Markets says. Household credit is growing steadily at an 11-per-cent annual pace, pushed by a 10.9-per-cent rise in residential mortgages for year […]

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Rethinking income security

The Caledon Institute weighs in on income security for working age adults. The abstract is below but this does not give any of the details. The authors do a great job of describing why the current patchwork mix of EI and welfare does not work well. Towards a New Architecture for Canada’s Adult Benefits Ken Battle, Michael Mendelson and Sherri […]

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Brad DeLong on the state of economics

From his Project Syndicate column: Most academic economics rely on concepts laid down at the beginning of the twentieth century by the British economist Alfred Marshall, who said that “nature does not make leaps.” Yet we economists find ourselves increasingly disturbed by the apparent inadequacy of the neo-Marshallian toolkit that we have built to explain our world. The central bias […]

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Softwood capitulation part 2

Columnist Paul Willcocks weighs in on the bad softwood lumber deal: VICTORIA – The softwood deal that David Emerson and Stephen Harper are pushing is so bad it’s hard to imagine what they’re thinking. The U.S. lumber industry wins; Canada loses. Canadian companies hand over $1 billion in to the U.S., with about half of it going directly to their […]

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WTO: not dead yet

Will this be the end of the Doha Round? I doubt it. Deadlines come and go but negotiations still manage to go on. The Uruguay Round that led to the creation of the WTO went for eight years. The Doha Round (originally framed as the Doha Development Agenda, but that has long been forgotten) seemed dead after the Cancun Ministerial […]

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Alberta’s resource royalties

Just on the heels of posting a $9 billion surplus for the last fiscal year, largely on the strength of resource royalties, comes this fascinating article in The Globe, which echoes comments about low royalty rates that the Edmonton-based Parkland Institute has been making for years: Alberta eyes greater share of oil wealth Considers changes to royalty system Alberta is […]

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Rethinking labour market “flexibility”

Jim Stanford looks at the OECD’s press for labour market “flexibility” in his Globe column: Traditional economics holds that a less regulated, more “flexible” labour market — freed from well-meaning but counterproductive government interference — will automatically find a better match between supply and demand, and hence reduce unemployment. This general view was roundly endorsed by the high priests of […]

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Canada’s softwood lumber capitulation

I don’t generally like Gary Mason’s columns, but in this one he does a good job of showing how bad the softwood lumber deal is for BC: … The agreement would allow the U.S. to keep about $1-billion of the $5-billion in penalties collected on Canadian softwood since 2002, and limit shipments to the United States if lumber prices begin […]

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Alberta’s Oil and Quebec Seperation

Rafe Mair looks back at history, then contemplates high oil prices and resulting tensions in Confederation, in his Tyee column: First some history. With the arrival of the Organization of the Petroleum Exporting Countries (OPEC) in 1965, the oil price fix has been in and we all know about the crisis in 1974 that brought about huge lineups at the […]

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Bank mergers coming soon?

With a Harper government, I had a sinking feeling that bank mergers were going to come up again. We grant chartered banks a huge privilege – the expansion of credit, or the creation of money, an essential utility-like function of a modern economy – that leads to enormous profits on the part of the banks. And yet we are repeatedly […]

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It’s Tax Freedom Day

Call me a curmudgeon, but I am not celebrating the Fraser Institute's Tax Freedom Day. This notion does not deserve any media attention, but the fact that it does suggests it is a clever and successful gimmick. That is about the nicest thing that can be said about TFD. It grossly exaggerates the amount of taxes people pay in a […]

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Is there a “Fiscal Imbalance”?

 One of the main arguments that there is a fiscal imbalance between the federal government and provincial governments (a vertical fiscal imbalance) is ongoing federal surpluses in the face of more constrained provincial finances. The latest Financial Management System data from Statistics Canada would seem to reinforce that view:  In 2005/2006, the consolidated surplus for all Canadian governments, including the […]

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The Distorted Priorities of Mainstream Economics

Writing in the Toronto Star (link lost), economists Arthur Donner and Doug Peters reflect on economics, employment and inequality: The Distorted Priorities of Mainstream Economics Arthur Donner and Douglas Peters, May 2006 There has been a monumental shift in mainstream economics over the past forty years. When we studied economics in the 1960s, economists and public officials who had an […]

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Greasing the wheels of federalism

The Globe and Mail's John Ibbitson (subscriber access only) thinks the outlines of a solution to the alleged "fiscal imbalance" has been found through a mix of more equalization plus increased program-related transfers to the provinces: The O'Brien report [aka the Expert Panel on Equalization and Territorial Formula Financing, appointed by former Finance Minister Ralph Goodale] reminds us of what […]

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Sachs sings the praises of Scandinavia

If you listen to the Fraser Institute or like-minded think-tanks on the right, high taxes kill incentives to work and invest. They argue that Canada needs to lower its taxes in order to produce higher rates of economic growth. By their logic, the Scandinavian countries, all of whom have levels of taxes relative to GDP substantially higher than Canada’s, ought […]

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Adam Smith the moralist

A new book on Adam Smith by James Buchan deepens the case that he did not wear an Adam Smith necktie. Commented on by Bloomberg columnist Matthew Lynn: Most people these days regard Smith as the founder of free- market economics. He’s the hero of the get-the-government-off- our-backs crowd. He’s the pin-up boy of the flat-taxers and the business-knows-best crew. […]

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