Someone wrote to me today and said they had been reading Paul Krugman’s 1999 book Peddling Prosperity, where he presents the now-famous baby-sitting model. You can read a shortened version of the model HERE. The reader asked me whether the model had any relevance to modern monetary theory. The short answer: yes but not necessarily in the way Krugman thinks (he is still locked into gold standard thinking).

I am catching up on the mountains of things I have to read. It is a pointless task – the pile rises faster than my eyes can process it. But I try. There was an article in the June 25, 2009 edition of The Economist entitled A slow-burning fuse, which carried the by-line “Age is creeping up on the world, and any moment now it will begin to show. The consequences will be scary”. It definitely might be scary getting old but the discussion that needs to be had is nothing remotely like the discussion that dominates the current policy debate about the ageing society.

The ABS released the latest Household Income and Income Distribution, Australia data today which allows us to get a better understanding of how the national income is being distributed among individuals. The data released today provides information about what is known as the size or personal distribution of income (ignoring how the income was gained). The data confirms the trend that Australia is becoming more unequal with the bottom 20 per cent losing out to the top 20 per cent. The changes however are relatively modest.

This blog is based on some research on Japan I have been doing as a precursor to a book contract I am working on which will be about developing a progressive macroeconomic narrative – a sort of cookbook for progressives to enable them to challenge the major myths that are perpetuated by neo-liberals. These myths lead to the imposition of voluntary constraints on the government capacity to achieve and sustain full employment. Some of the underlying dynamics of the system which expose these constraints for what they are – an ideological distaste for fiscal intervention – are still not well understood though. Here is some more on that theme.

Today I am a keynote speaker at the LHMU National Conference in Canberra. I am talking about the challenges of underemployment and low wages and the need for the union movement to broaden out their activism from narrow concerns about wages and conditions for their members to development and pursuit of a full-scale attack on neo-liberalism. In much the same way that the neo-liberal think tanks boosted the saturation of those ideas. I will report back when I get back – much later this evening.

On Friday, the RBA signalled that it wanted to start hiking interest rates early in the upturn (and be one of the first central banks to do so). The justification was that this recession was more like the shallow, short-lived downturn in 2000-2001. I disagree. The evidence doesn’t support that contention. Increasing interest rates now will have serious impacts on the solvency of households currently struggling to get anywhere near enough hours of work. The RBA once again will be choosing to use underutilisation as a tool rather than a policy target. Another disgraceful chapter in their history is looming.

In March 2008, we released the CofFEE/URP Employment Vulnerability Index (EVI), which provides a risk assessment by suburb of job loss in event of a serious downturn. It was based on an economic model that captured the major risk factors that would predicate job loss at a local spatial scale. Some data is now coming in that provides the capacity to assess the accuracy of our framework.

Today I have been working on part of a new book I am writing on the pathology of recessions. I have written a lot about this in the past and my last book was about this topic. But you can never say it enough – recessions impose huge social costs on the most disadvantaged members of our society and it is the responsibility of national governments to do every they can to avoid them. The neo-liberal onslaught on public policy has seen governments all around the world abandon this responsibility with obvious (ugly) consequences. Anyway, here is a way of thinking about all of this. It is not a happy story.

There have been several related reports and articles in the last few days about adjustments that are going on as the economy goes into recession. New data is also available to shed light on movements in wage costs and labour productivity which can help us better understand what is going on at present and provide comparisons with the now perennial question – is this recession different to that experienced in 1991. Today I decided to write about these matters as an on-going investigation into what is happening out there in the labour market. This is sort of my other main interest in economics alongside the development and explication of modern monetary theory. Today we find that the neo-liberal dumbing down of our labour market may have saved a few jobs – but at what cost!