Look at the Data (wasRe: Mother Pelican Vol. 7 No. 10 October 2011)

CSGnet Archive CSG2011
1

[From Rick Marken (2011.10.2.2220)]

Martin Lewitt (2011 Oct 2 15:55) –

Rick Marken (2011.10.02.1100)]

  Martin, your "ideas" have no interest to me as long as they are

based on nothing more than your imagination. In my previous post
I asked you a question, based on actual data, and (just as I
thought) you change the subject here. To refresh your memory, we
were discussing the data presented here:

  [http://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.html?ref=sunday](http://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.html?ref=sunday)


    You said it was Fed policies, not Reagan's policies, that

started the economic decline in the US that started in ~1980. So
I asked what the Fed was doing right from 1947 to 1979 that
produced those good results. I got no answer.

What economic decline?

The one show in the graphs.

Your graph was about the way wage increases

tracked productivity changed in 1980, that is different than an
economic decline, growth continued, household income continued to
increase as women entered the workforce, and profits were
increasing.

Well, let’s call it something other than economic decline, then, like “a great regression”. So you are now saying that there is no problem here?

ML: We would have

been better off with free market policies, because we are better off
producing more than producing less

But the graph shows that that’s not true. There was a 120% increase in productivity in the 32 years from 1947-1979 and an 80% increase in the 32 years from 1980-2010. But there was a 72% increase in wages from 1947-1979 and only a 7% from 1980-2010. It looks like trickle up economics to me.

    RM: What evidence do you have that this [improvement in the economy with free market policies] would be

the case?

ML: Because wages started to increase due to market forces several

times, and each time the Federal Reserve tightened policy again.

So the Fed was consistently doing this post 1980 but not pre-1980?

And if this is the case, it seems like the period from 1947-1979 proves that non-free-market policies work great as long as the Fed is not doing their wage suppression thing. Before I would even consider letting free market policies be implemented I would want to see clear evidence that such policies produce better results, in terms of income gains overall and in different income groups, than those seen from 1947-1979.

    RM: Were the policies from 1947 - 1979 more free

market than those from 1980 to the present? Was Reagan actually
leading us away from free market policies?

ML: Reagan improved the tax and regulatory situation so those free

market policies were better, the Federal Reserve repeatedly
exercised tighter control purposely slowing the economy and wage
growth, so it is difficult to say what the net effect was relative
to the time frame you are obsessing on.

So your story is that non-free market policies prevailed from 1947-1979 and wages and productivity increased substantially because the Fed didn’t interfere. Then Reagan came in with free market policies that would have made everything even better but at exactly the same time the Fed started working hard to suppress wage growth, and this continued from slightly before Reagan’s inauguration until the present. I’d believe it is you presented data showing the “control” exerted by the Fed from 1947-2010. As with the wage data there should be a marked discontinuity at around 1980. There is a spike in the discount rate that starts in about 1979 and lasts until about 1984. But other than that 4 year period the Fed rates pre-1979 and about the same as those post 1984. Was it that 4 year period of high Fed rates that prevented the miracle of the free market form making it’s appearance? Seems very unlikely to me. But even so it seems like the period from 1947-1979 was pretty darn nice economically. How much better could things get with a free market?

RM: What evidence to you have that the data completely or even partially

contradicts the idea that free market policies would be anything but
disasterous?

ML: Well it is pretty complex, perhaps you have an answer as to whether

it was more free market in the period you are obsessing with or the
period since? Were any other factors different?

The period I am obsessing about is the one shown in the data: 1947-present, approximately the same period that I have been in this world. The data show quantitatively what I experienced as a member of US society. From 1947-1979 there was a much fairer distribution of the the wealth created by the US economy. Things changed dramatically in 1980; productivity continued to increase but most of the wealth created by that production went to the top, making it harder for people in the middle and bottom to support their families. The big change in 1980 was the Reagan revolution, which was bringing “free market” economics to America: less government regulation,union busting, reduced taxes, particularly on the wealthy (now known as job creators). Many things were changing during this time period, but they came and went. The main systematic change that occurred in 1980 that is relevant to the economy was the change to “free market” economic policies – policies that have prevailed through the entire time period since 1980. This was a sea change from the socio/economic climate that prevailed when during my youth – 1947-1979. During that time there seemed to be a consensus that the New Deal policies implemented by FDR – policies that involved large government investment in education, research and infrastructure – was responsible for the prosperity that existed at the time.

So, yes, I explain the change in wage and compensation growth on the change to free market economic policies that occurred in 1980. I think that graph is very strong evidence that those policies were a success only in terms of their being a windfall for the wealthy. Unless you are wealthy, I think you are a fool to support such policies.

RSM

···

–
Richard S. Marken PhD
rsmarken@gmail.com
www.mindreadings.com

2

[Martin Lewitt 2011 Oct 3 0022 MDT]

[From Rick Marken (2011.10.2.2220)]

        Martin Lewitt  (2011

Oct 2 15:55) –

Rick Marken (2011.10.02.1100)]

            Martin, your "ideas" have no interest to me as long as

they are based on nothing more than your imagination.
In my previous post I asked you a question, based on
actual data, and (just as I thought) you change the
subject here. To refresh your memory, we were
discussing the data presented here:

            [http://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.html?ref=sunday](http://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.html?ref=sunday)


              You said it was Fed policies, not Reagan's policies,

that started the economic decline in the US that
started in ~1980. So I asked what the Fed was doing
right from 1947 to 1979 that produced those good
results. I got no answer.

What economic decline?

      The one show in the graphs.

Words have meaning, where is the economic decline plotted?

        Your graph was about

the way wage increases tracked productivity changed in 1980,
that is different than an economic decline, growth
continued, household income continued to increase as women
entered the workforce, and profits were increasing.

      Well, let's call it something other than economic decline,

then, like “a great regression”. So you are now saying that
there is no problem here?

I'm saying there is not an economic decline.   And if there is a

regression, there isn’t evidence of it in the graph.

          ML: We would have been better off with free

market policies, because we are better off producing more
than producing less

      But the graph shows that that's not true. There was a 120%

increase in productivity in the 32 years from 1947-1979 and an
80% increase in the 32 years from 1980-2010. But there was a
72% increase in wages from 1947-1979 and only a 7% from
1980-2010. It looks like trickle up economics to me.

Where is free market policies on the scale?

          RM: What evidence do you have that

this [improvement in the economy with free market
policies] would be the case?

        ML: Because wages

started to increase due to market forces several times, and
each time the Federal Reserve tightened policy again.

      So the Fed was consistently doing this post 1980 but not

pre-1980?

Yes, the Fed was inconsistent pre-1980.

      And if this is the case, it seems like the period from

1947-1979 proves that non-free-market policies work great as
long as the Fed is not doing their wage suppression thing.

You appear to be jumping to conclusions.   The policies before 1979

were not “non-free” market. The Soviet Union specifically invested
in making East Germany a show case relative to the other captive
nations, and yet the contrasts at the Berlin wall remained nearly
as obvious as it is at the 38th parallel in Korea.

      Before I would even consider letting free market policies

be implemented I would want to see clear evidence that such
policies produce better results, in terms of income gains
overall and in different income groups, than those seen from
1947-1979.

The doesn't plot income "income gains" and to be "overall" it would

have to include more than just the US.

          RM: Were the policies from 1947 - 1979 more

free market than those from 1980 to the present? Was
Reagan actually leading us away from free market policies?

        ML: Reagan improved the tax and regulatory situation so

those free market policies were better, the Federal Reserve
repeatedly exercised tighter control purposely slowing the
economy and wage growth, so it is difficult to say what the
net effect was relative to the time frame you are obsessing
on.

      So your story is that non-free market policies prevailed from

1947-1979 and wages and productivity increased substantially
because the Fed didn’t interfere.

No, the Fed is part of the policy, so difference in the two periods

is qualitative and not just quantitative, and other variables are
not controlled.

      Then Reagan came in with free market policies

that would have made everything even better but at exactly the
same time the Fed started working hard to suppress wage
growth, and this continued from slightly before Reagan’s
inauguration until the present. I’d believe it is you
presented data showing the “control” exerted by the Fed from
1947-2010. As with the wage data there should be a marked
discontinuity at around 1980. There is a spike in the discount
rate that starts in about 1979 and lasts until about 1984. But
other than that 4 year period the Fed rates pre-1979 and about
the same as those post 1984. Was it that 4 year period of high
Fed rates that prevented the miracle of the free market form
making it’s appearance? Seems very unlikely to me. But even so
it seems like the period from 1947-1979 was pretty darn nice
economically. How much better could things get with a free
market?

The Fed policy remained, it didn't end in 1984.  The policy is not

the Fed rate, the Fed rate is the main instrument of the mechanism.

        RM: What evidence to

you have that the data completely or even partially
contradicts the idea that free market policies would be
anything but disasterous?

          ML: Well it is pretty complex, perhaps you have an answer

as to whether it was more free market in the period you
are obsessing with or the period since? Were any other
factors different?

      The period I am obsessing about is the one shown in the data:

1947-present, approximately the same period that I have been
in this world. The data show quantitatively what I experienced
as a member of US society. From 1947-1979 there was a much
fairer distribution of the the wealth created by the US
economy.

It is a global economy.  But even within the US, it is not clear

that the distribution was fairer before. The union busting helped
rectify some unfairness, to the extent that they were monopoly
rents from the rest of the population through protective tariffs or
threats of violence. Wages in the textile industry were higher due
to protective tariffs, and cost consumers 5 to 6 times the benefits
of the higher wages. The teamsters and longshoremen extracted rents
from the rest of the economy via threats of violence and politically
obtained price controls and barriers to entry. The teamsters
stranglehold was broken through deregulation, but the longshormen’s
wasn’t.

Which, of course, is not an economic decline.

The sharpest changes were in Reagan’s policies, but also in Fed
policies. But other changes did not come and go. Japan and the
Asian tigers continued to progress as economic participants. Women,
minorities and immigrants (both legal and illegal) continued to
increase their share of the work force. There were some tax
increases, that did come and go to varying extent.
You still haven’t established that there was a net change to free
market policies.
The federal investment in education, research and infrastructure
increased, not decreased in the years since 1979.
You need more than just data, you need strong analytic skills to
determine what conclusions can be drawn from it (and which can’t)
and the to define your terms and draw your conclusions.
Globalization and social change did allow far more workers to
compete for a share of the more rapidly growing pie both within and
outside the US. The ability of some of the unions to extract rents
from the economy was reduced. Federal Reserve policy started
consistently treating wage increases as inflationary regardless of
whether productivity was increasing. It had always looked at wage
increases as inflationary, but enforced with more effectiveness,
consistency and credibility. The productivity increases resulted in
structural changes, as far fewer manufacturing jobs were needed,
more of the economy was service oriented. Rents extracted by OPEC
resulted in a several fold increase in energy efficiency in the
economy, but at the same time domestic political barriers to fossil
fuel and nuclear energy production increased. Globalization and
deregulation were both qualitative changes. The changes in tax
policy may seem different philosophically to you, but did not
achieve needed qualitative reforms in the impact of tax policy on
the structure of the economy. The strong bias toward debt rather
than equity financing remained. Tax and fed policy both reduced the
incentive to save.
What “regression”? There is a fairer distribution today if you look
at the global picture and at specific segments of the economy.
Fairness is determined not just by the ends, the distribution
itself, but the by the process or means to that end. To the extent
that the distribution is due to Fed biases favoring capital over
labor it is unfair. But there were other forces a work as well.
To the extent that the change in distribution is due to more labor
participation in the market it is fair. To the extent that it is
due to reduced rents extracted from violence and protective tariffs
and regulation it is fairer (textiles, transportation, dereg of
trucking and airlines,communications, breakup of AT&T, wireless,
cable and internet competition). To the extent that it is due to
currency manipulation (China, japan) and monopolistic trust behavior
nationalization of private property it is unfair (OPEC). To the
extent that it is due to progressive taxation it is unfair. To the
extent to which it is due to corruption of the voters and the
purchase of elections by public financing of campaigns it is unfair
(pork barrel spending and unfunded promises of entitlement
increases, i.e., the “free” lunch). Martin L

···

http://www.startribune.com/129454628.html?source=error

      Things changed dramatically in 1980; productivity continued

to increase but most of the wealth created by that production
went to the top, making it harder for people in the middle and
bottom to support their families.

      The big change in 1980 was the Reagan revolution, which was

bringing “free market” economics to America: less government
regulation,union busting, reduced taxes, particularly on the
wealthy (now known as job creators). Many things were changing
during this time period, but they came and went.

      The main systematic change that occurred in 1980 that is

relevant to the economy was the change to “free market”
economic policies – policies that have prevailed through the
entire time period since 1980.

      This was a sea change from the socio/economic climate that

prevailed when during my youth – 1947-1979. During that time
there seemed to be a consensus that the New Deal policies
implemented by FDR – policies that involved large government
investment in education, research and infrastructure – was
responsible for the prosperity that existed at the time.

      So, yes, I explain the change in wage and compensation growth

on the change to free market economic policies that occurred
in 1980. I think that graph is very strong evidence that
those policies were a success only in terms of their being a
windfall for the wealthy. Unless you are wealthy, I think you
are a fool to support such policies.

      RSM

–

  Richard S. Marken PhD

  rsmarken@gmail.com

  [www.mindreadings.com](http://www.mindreadings.com)
3

[From Rick Marken (2011.10.02.1100)]

Martin Lewitt (2011 Oct 1 0710 MDT)–

“creating debt-free money by central and regional banks”

Hey, you guys stole my idea.

Martin, your “ideas” have no interest to me as long as they are based on nothing more than your imagination. In my previous post I asked you a question, based on actual data, and (just as I thought) you change the subject here. To refresh your memory, we were discussing the data presented here:

http://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.html?ref=sunday

You said it was Fed policies, not Reagan’s policies, that started the economic decline in the US that started in ~1980. So I asked what the
Fed was doing right from 1947 to 1979 that produced those good results. I got no answer.

You then went on to say:

ML: Maybe someday we will get a radical conservative president and

control of Congress at the same time, and try free market policies
for once.

And I asked:

RM: Would those free market policies produce results like (or even better than) those for 1947-1979?
If so, why would you think so? What evidence do you have that this would be the case? Were the policies from 1947 - 1979 more free market than those from 1980 to the present? Was Reagan actually leading us away
from free market policies?

Your answer…crickets.

I believe that this data completely contradicts the idea that free market policies would be anything other than disastrous and that that is the reason you won’t answer my questions. I think data is to a free market economist what a crucifix (or a mirror or the light of day) is to a vampire. So I can understand why you don’t want to deal with it. But I think your form of vampirism can be cured if you will take an honest look at the data for just a few minutes. Trust me, I’m a doctor (call me Van Helsing;-)

RSM

···

–
Richard S. Marken PhD

rsmarken@gmail.com
www.mindreadings.com

4

[Martin Lewitt 2011 Oct 2 15:55]

[From Rick Marken (2011.10.02.1100)]

Martin Lewitt (2011 Oct 1 0710 MDT)–

      "creating debt-free money by central and

regional banks"

      Hey, you guys stole my idea.

  Martin, your "ideas" have no interest to me as long as they are

based on nothing more than your imagination. In my previous post
I asked you a question, based on actual data, and (just as I
thought) you change the subject here. To refresh your memory, we
were discussing the data presented here:

  [http://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.html?ref=sunday](http://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.html?ref=sunday)


    You said it was Fed policies, not Reagan's policies, that

started the economic decline in the US that started in ~1980. So
I asked what the Fed was doing right from 1947 to 1979 that
produced those good results. I got no answer.

What economic decline?  Your graph was about the way wage increases

tracked productivity changed in 1980, that is different than an
economic decline, growth continued, household income continued to
increase as women entered the workforce, and profits were
increasing.

    You then went on to say:

      ML: Maybe someday we will get a radical

conservative president and control of Congress at the same
time, and try free market policies for once.

  And I asked:

    RM: Would those free market policies produce

results like (or even better than) those for 1947-1979? If so,
why would you think so?

I wouldn't want to reproduce the 70s.  The first couple post war

decades were unique, by the 80s the US had competition. I think
free market policies would have been an improvement over what did
occur. The reason I think so, is that people were adapting to the
double digit Carter inflation. The easy Fed monetary policy was
lubricating the escape of industry to the right-to-work states in
the south. I was in graduate school at the time, and the inflation
was giving the students a first hand education in economics. We all
had our low interest student loans invested in money market funds
paying 14% or more. Reagan was intending to produce our way out of
the inflation, when Volcker put the clamps on the economy causing a
deep recession and unemployment and, if i recall correctly a dip of
about $150 billion in GDP. The abrupt change in interest rates and
inflation precipitated the Savings and Loan crisis. We would have
been better off with free market policies, because we are better off
producing more than producing less, and our growth would have
continued from a higher basis rather than from the deep dip in GDP
(back when $150 billion was real money).

    What evidence do you have that this would be

the case?

Because wages started to increase due to market forces several

times, and each time the Federal Reserve tightened policy again.

    Were the policies from 1947 - 1979 more free

market than those from 1980 to the present? Was Reagan actually
leading us away from free market policies?

Reagan improved the tax and regulatory situation so those free

market policies were better, the Federal Reserve repeatedly
exercised tighter control purposely slowing the economy and wage
growth, so it is difficult to say what the net effect was relative
to the time frame you are obsessing on.

  Your answer...crickets.



  I believe that this data completely contradicts the idea that free

market policies would be anything other than disastrous and that
that is the reason you won’t answer my questions.

What evidence to you have that the data completely or even partially

contradicts the idea that free market policies would be anything but
disasterous?

  I think data is to a free market economist what a

crucifix (or a mirror or the light of day) is to a vampire. So I
can understand why you don’t want to deal with it.

Well it is pretty complex, perhaps you have an answer as to whether

it was more free market in the period you are obsessing with or the
period since? Were any other factors different?

  But I think your form of vampirism can be cured if you

will take an honest look at the data for just a few minutes. Trust
me, I’m a doctor (call me Van Helsing;-)

As you can tell I have some familiarity with the data, Van Helsing.

-- Martin L
···

On 10/2/2011 11:59 AM, Richard Marken wrote:

  RSM

  --

  Richard S. Marken PhD

  rsmarken@gmail.com

  [www.mindreadings.com](http://www.mindreadings.com)
5

[From Rick Marken (2011.10.03.0900)]

Martin Lewitt (2011 Oct 3 0022 MDT)–

            RM:

In my previous post I asked you a question, based on
actual data, and (just as I thought) you change the
subject here. To refresh your memory, we were
discussing the data presented here:

http://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.html?ref=sunday

              You said it was Fed policies, not Reagan's policies,

that started the economic decline in the US that
started in ~1980. So I asked what the Fed was doing
right from 1947 to 1979 that produced those good
results. I got no answer.

ML: What economic decline?

ML: Words have meaning, where is the economic decline plotted?

ML: I'm saying there is not an economic decline.   And if there is a

regression, there isn’t evidence of it in the graph.

ML: You appear to be jumping to conclusions.   The policies before 1979

were not “non-free” market.

ML: The doesn't plot income "income gains" and to be "overall" it would

have to include more than just the US.

ML: No, the Fed is part of the policy, so difference in the two periods

is qualitative and not just quantitative, and other variables are
not controlled.

ML: It is a global economy. 


ML: You still haven't established that there was a net change to free

market policies.

ML: You need more than just data, you need strong analytic skills to

determine what conclusions can be drawn from it

ML: What "regression"?  There is a fairer distribution today if you look

at the global picture and at specific segments of the economy.

You have a truly dizzying intellect. I guess people will just have to decide whether they are convinced by your “strong analytic skills” or their lying eyes.

RSM

···

–
Richard S. Marken PhD
rsmarken@gmail.com
www.mindreadings.com