I have been tied up most of today so have little time to write my blog. I was interested in the most recent US labour market data which suggested that in net terms there was some improvement in employment growth. I wondered how this translated into increasing the probability that an unemployed person might get a job and how likely it was that an employed person would lose their job. The recovery is clearly nascent and risks being squashed by the moronic leadership being shown in the US Congress at the moment. So how far has the US labour market come since the recession started? Gross flows analysis allows us to gain insights into this sort of question. So are things improving in the US?

I gave an interview on the national broadcaster ABC about the latest talk in Australia to ramp up the pernicious Work for the Dole program. I noted that the unemployment problem in Australia at present reflects a systematic failure to produce enough jobs rather than the personal failures of the unemployed themselves. Standard stuff. The interview got me thinking of about make work schemes and unproductive labour and boondoggling! and leaf-raking. My mind turned, immediately, to the IMF which runs one of the largest make work programs in the world and employs thousands of workers on good pay to do nothing constructive at all. The IMF is the exemplar of leaf-raking. You only have to read their working paper series – where multiple authors attach their name to senseless reports about nothing. These papers are always “Authorized for distribution by x” – that is, some higher-up leaf-raker who spent years learning the craft of being occupied doing nothing. All IMF economists aspire to be the person who sits in the office and authorises for distribution the papers that all the peons pump out which provide nothing useful to anyone. At least aggregate demand is being maintained via the workers’ wages. Pity the IMF couldn’t find something more productive for their workforce to do. Perhaps they are not skilled enough though. Anyway, life in the IMF fantasy world!

I am all done writing letters – at least for today. I forgot to send both. I noted someone mentioned that he had never read any admissions of error from me. True enough. Over the course of my academic career I have made many predictions and none have turned out to be qualitatively wrong (sometimes the quantum us shaky but the direction is correct). But I am not trying to sell tickets for myself. Economists like me who comment regularly on current affairs are always subject to empirical scrutiny. So I am regularly putting my neck on the line – in written word (blog, Op-Eds etc) and speech (presentations, media interviews etc). So far so good. I note that a correct empirical observation doesn’t mean the underlying theoretical explanation which might have motivated the prediction is correct. But it is a lot better than missing the empirical boat altogether and suggests that there is some worth in the theoretical framework being employed. From a personal perspective the current period of economic policy is very shattering (if you share my values about the dignity of work etc). But from an intellectual perspective, as an economic researcher, the current period is very interesting. It is providing us with real world data which directly relates to theoretical statements made by economic schools of thought. So I am keeping a running tally of how the laboratory rats are going? You can judge which theoretical structure you consider useful yourself when thinking about what is happening at present.

I have very little time again today so to the point! Sometimes you are reading an article or column and you nod along saying – yeh, that is correct, this writer understands it … and then crunch … the brick wall appears – one word, one phrase, one sentence, one paragraph and all that bonhomie evaporates and you realise that the writer isn’t as cognisant of the way the macroeconomy works as you first thought. It is a case of so near but so far.

I am flying today so do not have that much time. But I thought I might share with you a rough rule of thumb I use when it comes to PDF reports that I read. The rule: the larger the file (scaled to page numbers) the worse the report. A large file size (in mbs) usually indicates lots of colour and fancy graphics and usually very little substance. I am sometimes wrong when I apply that rule of thumb but not often. My rule of thumb served me well when I read this report – USA Inc – published by from some self-styled “brains trust”. I have received many E-mails asking me to analyse this Report. I read it and I wish I hadn’t. It was an appalling misuse of time. But moreover it perpetuates the standard conservative lies about the capacity of the US government (and any sovereign government by implication) to pursue appropriate fiscal policy. It gives more fuel to the austerity proponents. So someone has to provide some counter to the the narrative being presented. So here it is … USA Inc – what a lie.

I read two articles in the last few days which tell me that the bond market traders generally do not understand the intrinsic characteristics of the monetary system and that IMF economists have even less of a clue. The bond traders attribute to themselves an air of importance that it not a reflection of their real role in the monetary system. However, my own profession continues to disgrace itself and is nothing more than a propaganda machine. The mainstream economists are too stupid to realise that their models and frameworks do not explain anything that we are interested in. But such is their position of dominance in the policy space that their neo-liberal grandstanding is given credit. It is embarrassing but worse it is dangerous. Anyway, sometimes a journalist comes to the correct conclusion but for the wrong reasons. While the conclusion is correct, the erroneous reasoning does as much damage by way of misinformation than if the overall conclusion was also wrong. It is a case of being right for wrong reason equals wrong.

Whenever I hear some empirical proposition used by a politician my curiosity is immediately aroused and I go searching for evidence to support or refute the statement. That is the nature of my professional life as a researcher. I often find that politicians twist the facts to suit and when put in context the argument becomes more nuanced to say the least. I also often find out that the politician has just made things up which in other words is referred to as lying. The fiscal austerity push in the US and elsewhere is being justified by a number of erroneous propositions but one of the worst claims is that public workers are so well paid that they are bankrupting governments all over the world. That is a claim that needs investigating and fortunately some credible researchers in the US have done the hard yards and come up with some definitive results. They all show the claims by the austerity proponents to be lies, to say the least. Progressives should focus on these lies and construct simple messages to drown the public in – like – US public sector workers are paid less than their private counterparts! Then we can progress and discuss what deficits mean etc.