The Free Competitive Market as Red Herring

Mariano Torras Economic Theory, General, History, Macroeconomics, Microeconomics, Politics, Public policy/Wellbeing, Reflections Leave a Comment

August 28, 2020

I like to ask my economics students whether competitive free markets are a good thing. Despite the fact that many of them want to go into business as a career, they mostly agree that competition and free markets are universally desirable. I try to remind them that absence of competition is what most helps businesses stay alive – never mind rake in abnormal profits – but they are not easily persuaded. Further discussion with them reveals a widespread and ingrained …

On Getting “Back to Normal”

Mariano Torras Environment/Sustainability, Finance, Future, General, Health/Disease, Politics, Public policy/Wellbeing, Reflections 1 Comment

August 13, 2020

It is quite understandable that after five months of one unprecedented event after another people in the United States are experiencing Covid fatigue and yearning for a return to normal. But what exactly is “normal?” And should we be wishing for a return to it? The question reminds me of a comedian I saw almost exactly four years ago who was discussing the 2016 contest between Hillary Clinton and Donald Trump. “Clinton or Trump,” he mused, “it’s a little like …

The Great Divergence: The Economy and the Stock Market

Mariano Torras Finance, General, Macroeconomics, Public policy/Wellbeing 1 Comment

July 17, 2020

Our economy presently faces by far the greatest collapse in the lifetime of most people alive today. Indeed, long after the Covid-19 scare passes, we are likely to remain mired in a high unemployment trap for an extended period. The U.S. economy has lost over 40 million jobs in the past four months, even if several million have been temporarily recovered as a result of the federal government’s Paycheck Protection Plan. Consumption fell by record amounts in April and May …

Economic Depression and the Liquidity Trap

Mariano Torras Economic Theory, Future, General, Macroeconomics, Public policy/Wellbeing Leave a Comment

July 3, 2020

I never quite got the liquidity trap when I was in college. Not having grown up during a major war or an economic depression, the concept always seemed kind of abstract. I understood it a bit better when I was in graduate school, probably because by then I had greater general curiosity about economics. But even then, it was not easy to fathom without direct observation or experience. Things change. The past 10-12 years are, arguably, Exhibit A. According to …

What the Unemployment Rate Conceals

Mariano Torras Future, General, Macroeconomics, Methodology/Statistics, Public policy/Wellbeing Leave a Comment

June 19, 2020

A couple of weeks ago the Bureau of Labor Statistics (BLS) reported the May unemployment rate at 13.3 percent. In normal times, such a number would be considered alarmingly high. But we are not in normal times. And compared the 14.7 percent rate for the preceding month, many – not the least President Trump – took the announcement as good news. Unfortunately, there are a number of factors underneath this single statistic that should give us pause. First, there are …