Monday, February 25, 2019

Bill Mitchell — The NAIRU/Output gap scam

There is a campaign on the Internet calling itself CANOO (the Campaign against nonsense output gaps) which one Robin Brooks, economist at the Institute of International Finance and former Goldman Sachs and IMF employee, is pursuing. You cannot easily access his written memos on this because the IIF forces you to pay for them. However, there is nothing novel about his claims and the points he is making are well-known. However, they are points that are worthwhile repeating at loud volume because the implications of the ‘nonsense’ are devastating to the well-being of workers, particularly those most vulnerable to precarious work and unemployment. So while the CANOO is just dredging up old issues I am very glad that it is. The concept of biased estimates of output gaps and so-called ‘full employment unemployment rates’ goes to the heart of the way the neoliberal economists, who dominate policy making units in government and places like the IMF, the OECD and the European Commission, create technical smokescreens to justify their dirty work. The more people find out about the basis of the scam the better. I have been working on this issue (estimating, writing and publishing) since the late 1970s as a graduate student. So welcome Robin Brooks, and make a lot of noise....
Bill Mitchell – billy blog
The NAIRU/Output gap scam
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

1 comment:

Unknown said...

Read critique ”Output gap nonsense”, by Adam Tooze,
Social Europe, 30th April 2019. Seemingly innocuous concepts constrain policy
and shape reality. Thwarted historic-based output gaps,
prevents growth stimulus for Italy. Beyond EU false outputgap methodology
its labour market flexibility doctrine is another spurious concept. Ephemeral
improved price competitiveness is typically offset by reduced wage demand
and productivity capture. In the limit, continued economic stagnation in Italy, youth
unemployment at 30% and poverty feed support for extreme right parties
with roots in identity