ES EN
Menu Menú

Publications

Publicaciones

Search Publications

Buscar publicaciones

Filters Filtro de búsqueda

to a

clear selection Quitar los filtros

none

Article Artículo

Economic Growth

Inequality

Workers

Wisconsin vs. Minnesota: What the Data Show

Tonight, Governor Scott Walker will speak at the GOP Convention supporting his former rival, Donald Trump. As the Governor makes the case for the Republican nominee, it is worth assessing Walker’s record in his more than 5 years in Wisconsin.

During his time as governor, Wisconsin has been a laboratory for many Republican economic policies. Walker cut taxes by more than $4.7 billion, stripped state employees of collective bargaining rights, and deregulated industry. The Republican Party platform calls for similar polices on the national level, making promises to cut taxes and reduce regulatory barriers.

At the same Governor Walker took office in Wisconsin in 2010, Mark Dayton, a liberal Democrat took office in neighboring Minnesota. The relative performances of the two states provide a simple and interesting test of their differing agendas.

CEPR and Michael Ratliff / July 20, 2016

Article Artículo

Paul Krugman’s Stock Market Advice

Paul Krugman actually did not make any predictions on the stock market, so those looking to get investment advice from everyone’s favorite Nobel Prize winning economist will be disappointed. But he did make some interesting comments on the market’s new high. Some of these are on the mark, but some could use some further elaboration.

I’ll start with what is right. First, Krugman points out that the market is horrible as a predictor of the future of the economy. The market was also at a record high in the fall of 2007. This was more than a full year after the housing bubble’s peak. At the time, house prices were falling at a rate of more than 1 percent a month, eliminating more than $200 billion of homeowner’s equity every month. Somehow the wizards of Wall Street did not realize this would cause problems for the economy. The idea that the Wall Street gang has some unique insight into the economy is more than a bit far-fetched.

The second point where Krugman is right on the money (yes, pun intended) is that the market is supposed to be giving us the value of future profits, not an assessment of the economy. This is the story if we think of the stock market acting in textbook form where all investors have perfect foresight. The news that the economy will boom over the next decade, but the profit share will plummet as workers get huge pay increases, would be expected to give us a plunging stock market. Conversely, weak growth coupled with a rising profit share should mean a rising market. Even in principle the stock market is not telling us about the future of the economy, it is telling us about the future of corporate profits.

Okay, now for a few points where Krugman’s comments could use a bit deeper analysis. Krugman notes the rise in profit shares in recent years and argues that this is a large part of the story of the market’s record high, along with extremely low interest rates. Actually, the profit story is a bit different than Krugman suggests.

CEPR / July 15, 2016