NOVEMBER 17 2016

Lawrence H. Summers, Summers Blog: A badly designed US stimulus will only hurt the working class. Populist economics will play out differently in the US than in emerging markets. But the results will be no better. All with a stake in the global economy must hope that now, as has happened often in the past, a US president faced with the responsibility of governing preserves the valid core of campaign economic plans while making major adjustments. Not even US presidents with political mandates can repeal the laws of economics.

Olivier Blanchard, PIIE: In Light of the Elections: Recession, Expansion, and Inequality. So, in the end, expansion or recession will depend on the balance between macroeconomic and trade measures. My own guess is the first will dominate, and growth will be sustained, at least for some time. Will it be enough to satisfy those who voted for Donald Trump, worried about their incomes and their futures? I am not so sure. Growth will indeed lift most boats. But many measures will push in the opposite direction. Lower corporate taxes, lower personal taxes on the rich, and financial deregulation will increase the share of output going to capital (this probably explains in part what is happening to the stock market). Tariffs on foreign goods may save some middle class jobs but will destroy others and increase the cost of living for those at the bottom end of the income distribution. Inequality may well go up, not down

Zidong An, IMF:The Evidence that Growth Creates Jobs: A New Look at an Old Relationship. New research from the IMF looks at Okun’s Law and asks, based on the evidence, will growth create jobs? The findings show a striking variation across countries in how employment responds to GDP growth over the course of a year. In some countries, when growth picks up, employment goes up and unemployment falls; in other countries the response is quite muted. A pick-up in growth—through a stimulus to the demand side of the economy, for instance increased government spending on infrastructure—will result in more jobs.

Heather Hurlburt, Project Syndicate:The Myth of the Women’s Vote. It may seem surprising that only 54% of the female electorate voted for Hillary Clinton, the first woman nominated for president by a major party. But while gender is a strong marker for how Americans think about certain issues, it is not the best predictor of how they will vote. It turns out that female candidates do not face a single gender gap, but rather multiple gender gaps.

Stumbling and Mumbling Blog: Is globalization to blame? Donald Trump’s victory is being seen as a backlash against globalization. For me, this poses the question: to what extent is globalization to blame for the decline in many workers’ real incomes? The answer, I suspect, is: not much. These papers by Ann Harrison and colleagues and Jonathan Haskel and colleagues show that it is very hard to link declining US real wages to increased openness to trade. Equally, it is unproven (to say the least) whether increased immigration has contributed to falling wages: George Borjas’s claim that it is has has been sharply challenged.

Binyamin Appelbaum, NYT: A Little-Noticed Fact About Trade: It’s No Longer Rising. The growth of trade among nations is among the most consequential and controversial economic developments of recent decades. Yet despite the noisy debates, which have reached new heights during this presidential campaign, it is a little-noticed fact that trade is no longer rising. The volume of global trade was flat in the first quarter of 2016, then fell by 0.8 percent in the second quarter, according to statisticians in the Netherlands, which happens to keep the best data.

Arthur Turrell, BoE: Power and progress. Energy is the fundamental currency of the physical world, while GDP is the imperfect catch-all measure of economic progress. Across countries, electricity and GDP are very strongly correlated. But which way does the causality go? Studies have found evidence for GDP causing electricity generation, electricity generation causing GDP and for a bi-directional relationship.  For the UK, the evidence suggests that it is a bi-directional dependence, based on a bootstrapped Granger causality test. Given over 85% of the world’s primary energy consumption comes from fossil fuels, countries around the world are either going to have to find new ways to produce power or break the link between GDP and electricity – whichever direction the causality runs.

Tim Gohmann, behavioraleconomics.com: How Donald Trump Won the Election: A Behavioral Economics Explanation. Trump’s campaign execution was a simple yet elegant display of behavioral economics in practice as follows: 1. IDENTIFICATION — make such disparaging remarks about minorities that the core target “see themselves” in the candidate; 2. UTILITY — communicate the most motivating expected campaign result to the core target — a restoration of the value of their labor (and financial status), the cornerstone to making America great again; and 3. LOSS AVERSION — motivate the core target by suggesting that this was their only chance to recover their social and financial status, thereby empowering them to turn out in such record numbers that the opposition was overwhelmed.