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Saturday, May 07, 2016

The Economics of Persistent Slumps


This week I went with a friend to the Philips lecture  http://www.lse.ac.uk/economics/newsEventsSeminars/EconomicaCoasePhillipsLectures.aspx  at The London School of Economics and Political Science (LSE) with Professor Robert Hall https://lnkd.in/ek88vS7 of Stanford University, originator & author of ‘The Flat Tax’ https://lnkd.in/eqttU6b  & one of the founders of Macroeconomics (author of one of the first books on the subject and now the standard University textbook on Macroeconomics  https://www.amazon.co.uk/Macroeconomics-Principles-Applications-Robert-Hall/dp/1111822352 )
The gist of the lecture was how productivity has declined in the USA. Areas of concern included the rapid fall in the Labour participation rate, which has now started to affect women (who previously were increasing in the labour force quite rapidly) too.



The biggest surprise here is that almost all of the decline in the Labour force is in the top levels of income and education.

Almost all the Labour participation shrinkage in the US Economy is from the richest and most highly educated sectors













 Professor Hall calculated that US GDP would be approximately 15 percentage points higher if this and a few more minor issues were addressed. He was only covering the US in his lecture. However I'd imagine these issues with productivity will only be worse for some of the other developed countries, if you look at this chart below.


Current price GDP per hour worked, G7 countries 2013 and 2014



We rounded off the night with dinner at Delaunays https://www.thedelaunay.com/