EPTEuropean Politico-economics QA Mega-thread - Page 58
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WhiteDog
France8650 Posts
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cLutZ
United States19573 Posts
On February 21 2015 18:23 WhiteDog wrote: No what explain the difference in price are the differences in wages increase, that are entirely related to cultural and ethical questions. What? Aren't those things mostly related to the underlying economic realities of the country/region? | ||
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Nyxisto
Germany6287 Posts
On February 22 2015 04:16 WhiteDog wrote: Unemployment boost productivity because unemployment specifically touch the least productive workers (people with no diploma, no qualification and - above everything else - no experience) - that is actually the law of diminishing marginal productivity (even if I believe that law is false in many cases, here it's pretty pertinent). And yes there is unpaid overtime, but overall firm can pressure on wage and force workers to do more than they would if the labor market was more competitive. Is this really empirically proven? Sounds counter-intuitive because in quite a lot of countries blue collar workers are heavily unionised and hard to lay off even during a crisis. | ||
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WhiteDog
France8650 Posts
On February 22 2015 04:28 cLutZ wrote: What? Aren't those things mostly related to the underlying economic realities of the country/region? I just showed two graph : one with productivity, one with wage increase, and you clearly see Germany is below what it should according to economist definition of wage increase (wage are at marginal productivity). Everybody knows that German's wages are below what they "should" from a purely economical standpoint, because they opted for a strategy of competitive disinflation : so it's not the result of economic realities, but the result of a political strategy, possible for cultural reasons (german accept low wage ?). On February 22 2015 04:37 Nyxisto wrote: Is this really empirically proven? Sounds counter-intuitive because in quite a lot of countries blue collar workers are heavily unionised and hard to lay off even during a crisis. It is not counter intuitive at all : yes it is empirically proven that diploma, experience and qualification protect from unemployment. France is a text book proof of that fact, as we have one of the highest productivity in the world (if you put aside small cheating countries such as luxemburg) but that is both the result of our educational system and of our tendancy to exclude the poorest and most uneducated people from the labor market (and force them into long term unemployment). | ||
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cLutZ
United States19573 Posts
On February 22 2015 04:38 WhiteDog wrote: I just showed two graph : one with productivity, one with wage increase, and you clearly see Germany is below what it should according to economist definition of wage increase (wage are at marginal productivity). Everybody knows that German's wages are below what they should because they opted for a strategy of competitive disinflation : so it's not the result of economic realities, but the result of a political strategy, possible for cultural reasons (german accept low wage). Well, I'd like to see absolute numbers as well. Because if at the beginning Germans already had high wages vs. productivity then the graph makes sense, or if they have a tax system that disincentivizes increased wages, etc. The thing I fundamentally disagree with here is that it is perfectly fine for a piece of cheese to cost 1 Currency in place A and 2 Currency in place B regardless if they are the same currency or 2 different currencies. The only problem is when there is high leveraging that doesn't result in high enough growth to repay the leverage. | ||
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zlefin
United States7689 Posts
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WhiteDog
France8650 Posts
On February 22 2015 04:45 cLutZ wrote: Well, I'd like to see absolute numbers as well. Because if at the beginning Germans already had high wages vs. productivity then the graph makes sense, or if they have a tax system that disincentivizes increased wages, etc. The thing I fundamentally disagree with here is that it is perfectly fine for a piece of cheese to cost 1 Currency in place A and 2 Currency in place B regardless if they are the same currency or 2 different currencies. The only problem is when there is high leveraging that doesn't result in high enough growth to repay the leverage. I'll say it in another way : in this situation, normally greeks would lose purchasing power in german currency as the increasing greek wage inflation would result in an increasing demand of german currency and thus increase the parity of german currency relative to greek currency. This would end up preventing Greeks from buying german goods to no end. In the euro land of flawed currency, nothing permit this equilibrium, and the 1 euro of inflation of greek goods does not result in an increase of 1 € of German goods, thus giving competitive advantage to german goods (and increasing inequalities in competitivity). It goes back to 1998 and it's not enough lol. You think wage were high in the old and splitted in half germany ? On February 22 2015 04:45 zlefin wrote: That graph looks to have issues; what with all the salary increases tending to be much higher than the productivity increases. That's because of inflation. 70 pts increase does not mean an increase of 70 pts in purchasing power. I give 100 € as a wage and sell shoes at 100, they will buy 1 pair of shoes. I give 170 € as wage and sell shoes at 120 €, they will not buy 1.7 pair of shoes. | ||
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JonnyBNoHo
United States6277 Posts
On February 22 2015 04:37 Nyxisto wrote: Is this really empirically proven? Sounds counter-intuitive because in quite a lot of countries blue collar workers are heavily unionised and hard to lay off even during a crisis. It's not counter-intuitive at all. You have two sales people. One brings in $500K in sales, the other $1000K in sales. Who do you lay off first? If you lay off the person bringing in half as much, you've just boosted productivity. If you lay off the guy bringing in more sales, you're going bankrupt  | ||
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Nyxisto
Germany6287 Posts
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cLutZ
United States19573 Posts
On February 22 2015 04:48 WhiteDog wrote: It is perfectly fine if place A buy twice more goods than place B and that no mecanism permit this unstability to reequilibrate itself after a long time ? It goes back to 1998 and it's not enough lol. You think wage were high in the old and splitted in half germany ? Its called an arbitrage opportunity...Either they state producing more cheese in place B, or people start selling more cheese in place B, or there is something that causes transport costs to permanently prevent taking advantage of the arbitrage. And, more importantly, we are talking about labor price differences, which means the goods aren't even the same! Mexican labor is cheaper than American labor (same with cheese) even though we have floating currencies. Also I really don't know much about the absolute positions, I was just saying that I need to see that before your position even makes sense as a starting point for beginning discussion. | ||
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Toadesstern
Germany16350 Posts
On February 22 2015 04:56 Nyxisto wrote: You can't simply lay people off here. Full-time employed workers are pretty much unfireable. This is why I'm not sure I'll buy the whole" education protects you from unemployment" thing. I don't believe it's universally true. that's mostly a german thing | ||
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WhiteDog
France8650 Posts
On February 22 2015 04:57 cLutZ wrote: Its called an arbitrage opportunity...Either they state producing more cheese in place B, or people start selling more cheese in place B, or there is something that causes transport costs to permanently prevent taking advantage of the arbitrage. And, more importantly, we are talking about labor price differences, which means the goods aren't even the same! Mexican labor is cheaper than American labor (same with cheese) even though we have floating currencies. Also I really don't know much about the absolute positions, I was just saying that I need to see that before your position even makes sense as a starting point for beginning discussion. - You talk about labor price difference while I'm talking about increase (which is the point of the graph if you notice) ; - you resume all that to "cheese" while we're talking about labor (which is not only a good, but also a factor of production) ; - you put aside the existence of a common currency and thus refuse to think about what happen in a normal situation and in a common currency area. | ||
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JonnyBNoHo
United States6277 Posts
On February 22 2015 04:56 Nyxisto wrote: You can't simply lay people off here. Full-time employed workers are pretty much unfireable. This is why I'm not sure I'll buy the whole" education protects you from unemployment" thing. I don't believe it's universally true. It doesn't need to be universally true. So long as there is a bias wherein more productive workers are less likely to be laid off, the dynamic that WhiteDog is talking about can exist. Also, blue collar does not always mean less productive. It's an 'on average' thing. | ||
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cLutZ
United States19573 Posts
On February 22 2015 05:03 WhiteDog wrote: - You talk about labor price difference while I'm talking about increase (which is the point of the graph if you notice) ; - you resume all that to "cheese" while we're talking about labor (which is not only a good, but also a factor of production) ; - you put aside the existence of a common currency and thus refuse to think about what happen in a normal situation and in a common currency area. Increases are only relevant if you talk about starting points because in a relatively free trade area labor costs should close over time. This is true regardless of the currency situation. What you seem to consistently ignore is that having your own currency is only advantageous in an ex post facto discussion where you have a recession caused by overleveraging. You are like, "crap, we are overleveraged" and whether it is the people themselves, or the government the cheapest way to deleverage is to inflate away the principal. This is politically popular because there are more debtors than creditors in the typical economy. But what about before the crash? Well, you got to enjoy the fruits of your leveraging and to take out the debt because of the confidence inspired by the sound money regime. You ignore that your people enjoyed the sound money because it meant that their wage increases and savings could not be inflated away. And you ignore the lower transaction costs that basically gave you free money for years because of the common currency. Edit. You seem to be identifying problems caused by government manipulation of the free market an ascribing those issues to the common currency, and then prescribing greater centralization as the answer. When the simple answer is just to stop intervening. | ||
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WhiteDog
France8650 Posts
Increases are only relevant if you talk about starting points because in a relatively free trade area labor costs should close over time. This is true regardless of the currency situation. And why do you think 1998 was chosen as a starting point ? What you seem to consistently ignore is that having your own currency is only advantageous in an ex post facto discussion where you have a recession caused by overleveraging. You are like, "crap, we are overleveraged" and whether it is the people themselves, or the government the cheapest way to deleverage is to inflate away the principal. This is politically popular because there are more debtors than creditors in the typical economy. Untrue. But what about before the crash? Well, you got to enjoy the fruits of your leveraging and to take out the debt because of the confidence inspired by the sound money regime. You ignore that your people enjoyed the sound money because it meant that their wage increases and savings could not be inflated away. And you ignore the lower transaction costs that basically gave you free money for years because of the common currency. You don't seem to understand the point at hand. In a normal economy, the increasing government investment and inflation rate in the greek economy would have 1) increase interest rate 2) depreciate the value of the currency relative to foreign currency and thus prevented consumption of foreign goods. You seem to be identifying problems caused by government manipulation of the free market an ascribing those issues to the common currency, and then prescribing greater centralization as the answer. When the simple answer is just to stop intervening. Who told you about free market ? When I talk about equilibrium, I'm not talking about general equilibrium or equilibrium of offer and demand, I'm merely talking about stable situation versus unstable. A desequilibrium of the balance of payment is just the existence of high deficit and high excedent, not a supposed imperfection in opposition to a perfect scenario where the utility "is maximized", the people are happy, and unemployment does not exist. I don't believe in a market that exist outside of "government manipulation" or even "agent manipulations". The reality of the market is both the confrontation of offer and demand and the political and social game of conflicting interests. The economy is not a sphere perfectly separated or "disembedded" from the rest of the human life. I'm not saying greater centralization is the answer either, the exact opposite can be true. I'm just saying the situation is not stable, it create crisis. | ||
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puerk
Germany855 Posts
When the simple answer is just to stop intervening. So that we can all live in a government free utopia with great cellphone coverage, and a thriving private ship relocation and repurposing sector.... Or in others words: usually the guy with "the simple answer[s]" to tough political problems does not understand the problem or is missleading (populist). | ||
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Nyxisto
Germany6287 Posts
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puerk
Germany855 Posts
Acting on principal and punishing greece, may satisfy the holier than thou crowd, but it wont work economically. You can't expect to make greece more competitive by burning the whole place to the ground. (except you are some of the participating freemarketers, who like that everyone for themselfs in the wildernis campfire idyll) | ||
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WhiteDog
France8650 Posts
On February 22 2015 06:09 puerk wrote: But the issue about inflation was, as far as i understood it, not printing debt away, but allowing for rebalancing of the competitiveness of the eurozone nations. Germany has had abyssmal wage growth and consumption which puts huge trade imbalances in the union. Acting on principal and punishing greece, may satisfy the holier than thou crowd, but it wont work economically. You can't expect to make greece more competitive by burning the whole place to the ground. (except you are some of the participating freemarketers, who like that everyone for themselfs in the wildernis campfire idyll) Yes, but it's not Germany that create the problem, but the inability of the euro zone to permit this situation to reequilibrate itself. I actually started to write a long response to another post about this, but it is such a long task that I didn't have the time to finish it properly and explain exactly the problem at hand. This problem actually makes all keynesian stimulus useless in the euro zone, and basically force the zone toward a spiral of competitive disinflation and austerity policies. In this sense, I believe that Syriza's program is actually useless : investing more in the greek economy will only result in an increase of the inequality of competitivity, because it will eventually create inflation in greece and not in germany. | ||
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Godwrath
Spain10109 Posts
On February 22 2015 04:56 Nyxisto wrote: You can't simply lay people off here. Full-time employed workers are pretty much unfireable. This is why I'm not sure I'll buy the whole" education protects you from unemployment" thing. I don't believe it's universally true. I guess that's true on Germany, but the policies that the goverment on Spain put through, made laying off full time employed like a breeze with the EREs (Betriebsbedingte Kündigung on German atleast on wikipedia, and a literal translation would be something like Employment regulation record). Which may sound good to some in theory, but it was implemented that any business could resort to it just by having or forseeing less profits for a three quarters in a row. | ||
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