Category Archives: Business Cycles

CEI Podcast for May 3, 2012: Paving the Way for Innovation and Job Creation

Posted on May 3, 2012 | Leave a comment


Have a listen here.

Unemployment remains stubbornly high, more than three years after the financial crisis hit. Congress has tried a number of measures, from fiscal stimulus to stricter financial regulations. None of them have worked. That’s because they get in the way of the key driver of economic growth – innovation. And as any entrepreneur will tell you, innovation requires investment. John Berlau, CEI’s Senior Fellow for Finance and Access to Capital, suggests a number of reforms to make innovation, investment, and job creation easier.

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Posted in Business Cycles, CEI Podcast, Economics

Economic Optimism

Posted on January 30, 2012 | Leave a comment

Mark Mills and Julio Ottino argue that despite current troubles, our economic future is a bright one:

In January 1912, the United States emerged from a two-year recession. Nineteen more followed—along with a century of phenomenal economic growth. Americans in real terms are 700% wealthier today.

In hindsight it seems obvious that emerging technologies circa 1912—electrification, telephony, the dawn of the automobile age, the invention of stainless steel and the radio amplifier—would foster such growth. Yet even knowledgeable contemporary observers failed to grasp their transformational power.

In January 2012, we sit again on the cusp of three grand technological transformations with the potential to rival that of the past century. All find their epicenters in America: big data, smart manufacturing and the wireless revolution.

Read the whole thing.

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Posted in Business Cycles, Economics

What Decline and Fall?

Posted on November 22, 2011 | Leave a comment

Roger Cohen’s column in today’s New York Times is titled “Decline and Fall.” Channeling Gibbon, he compares America in 2011 to Rome in 475 A.D., says “the West is shot,” commits the broken window fallacy, and generally paints a picture of doom and gloom.

Classical references aside, Cohen seems to be innocent of historical knowledge. The graph below shows real GDP since 1929 (source). The wee little dip at the end is the cause of Cohen’s histrionics.

Yes, economic growth is weak. Far, far too many people are out of work. And it will probably be a few years before boom times return. But context, please.

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Posted in Business Cycles, Economics

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Yes, Regulation Does Keep Unemployment High

Posted on October 31, 2011 | Leave a comment

Over at RealClearMarkets, my colleague Wayne Crews and I argue that the law of demand holds. Hard to believe that’s actually controversial, but that’s Washington for you. Here’s our conclusion:

Eberly was put in an uncomfortable position when she came to Washington. Just as a lawyer’s job is to vigorously defend clients even if she knows they are guilty, Eberly’s job is to vigorously defend policies that are obviously harmful to the economy. Try as she might, she cannot argue against the law of demand.

Regulations make hiring costlier and thus make jobs scarcer. And regulatory uncertainty makes companies reluctant to hire employees they might not be able to afford down the road. Case closed.

Read the whole thing.

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Posted in Business Cycles, Economics, Publications, regulation

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Herbert Hoover, Father of the New Deal

Posted on September 29, 2011 | Leave a comment

Whether you love the New Deal or loathe it, its policies were not entirely new. FDR’s predecessor, Herbert Hoover, set the precedent. History remembers him as a laissez faire president; a do-nothing who simply let the Great Depression happen. This requires an odd definition of “laissez faire” and an even stranger understanding of “do-nothing” to actually be true.

A new Cato paper from St. Lawrence University economics professor Steve Horwitz takes a closer look:

In fact, Hoover had long been a critic of laissez faire. As president, he doubled federal spending in real terms in four years. He also used government to prop up wages, restricted immigration, signed the Smoot-Hawley tariff, raised taxes, and created the Reconstruction Finance Corporation—all interventionist measures and not laissez faire. Unlike many Democrats today, President Franklin D. Roosevelt’s advisers knew that Hoover had started the New Deal. One of them wrote, “When we all burst into Washington … we found every essential idea [of the New Deal] enacted in the 100-day Congress in the Hoover administration itself.”

Read the whole paper here.

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Posted in Business Cycles, Economics, History

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Hayek vs. Keynes, Round Two

Posted on April 28, 2011 | Leave a comment

Russ Roberts and John Papola are at it again. Last year they made a rap video starring F.A. Hayek and John Maynard Keynes. It garnered over 2 million views, many of them in economics classrooms. Today, they release the sequel. Check it out.

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Posted in Business Cycles, Economics

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How to Help Small Businesses

Posted on March 7, 2011 | 1 Comment

Politicians love small businesses. Almost every campaign stump speech gushes about how important they are for the economy. Never afraid to put our money where their mouth is, politicians even started a Small Business Administration in 1953 to transfer money from taxpayers to small businesses. Today, the SBA’s budget is nearing $1 billion.

Given how much taxpayer money politicians lavish on small businesses, most of elected officials are confident that they are helping, not hurting. They should listen more closely to the consituency they claim to love so much. The Bush-Obama era has been one of ever-increasing regulation. Over 30,000 new rules hit the books under Bush. Obama is regulating at an even faster pace. Many of their rules hurt small businesses.

Paychex, Inc., a payroll service provider that works with many small businesses, recently commissioned a survey. They asked small business owners their thoughts on the economy, and what the biggest obstacles are to growing their businesses. The most common gripe? Regulation. 47 percent of small business owners say that regulations have “slowed or prevented” their business from growing.

The Rochester Business Journal reports that the types of regulations that most concern small business owners are “tax changes (56 percent), health care reform (39 percent) and state regulations in response to budgetary challenges (25 percent). The research found 61 percent of respondents have seen more government regulation over the past five years.”

If Congress is genuinely interested in helping small businesses while speeding up economic recovery, it’s time for a different approach.

Transferring money from taxpayers to small businesses doesn’t help the economy on net. It actually hurts it. One reason is that the prospect of free money encourages small businesses to redirect their energy from entrepreneurship to K Street. Another is that government largesse tends to be given out according to political interests, not consumers’ interests.

Federal regulation alone costs $1.75 trillion to comply with. Congress should lighten the load. 47 percent of small business owners say that regulation has made their business grow more slowly. Letting that 47 percent grow more quickly would go a long way toward getting the economy growing again.

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Posted in Business Cycles, Economics, regulation

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Quantitive Easing, aka Printing Money

Posted on November 16, 2010 | 2 Comments

This video doesn’t get all the particulars right, but it gets most of them. And boy, does it have some good zingers. It has also gotten over 800,000 views; sometimes people do listen to good economics. Enjoy.

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Posted in Business Cycles, Economics, Monetary Theory

Clearing the Way for High-Tech Jobs

Posted on September 15, 2010 | Leave a comment

Over at RealClearMarkets.c0m, my colleague Ryan Radia offer some ideas for how to create more high-tech jobs. Our main points:

-Do more with less. This often involves cutting workers who aren’t productive enough to offset their wages. Sounds like bad news. But it’s actually crucial to job creation. That’s because in the long run, automation frees up resources — and employees — for new opportunities.

-Hiring new employees means jumping through countless regulatory hoops. According to a 2005 study by economist W. Mark Crain, compliance costs average $5,282 per employee at large companies. Small businesses pay $7,647 per employee. Some of those resources could have been spent hiring more employees. Over-regulation causes unemployment.

-Politicians can’t create jobs. But they can help to foster better conditions for wealth and job creation. Regulations cost businesses and consumers $1.17 trillion last year alone. Congress should roll them back. Some companies fear potential clampdowns on their businesses. Congress should leave them alone. Some failing businesses are eating up resources that could be better used elsewhere. Congress should stop bailing them out.

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Posted in Business Cycles, Economics, regulation, Technology

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One Way to Create High-Tech Jobs

Posted on September 14, 2010 | 2 Comments

My colleague Ryan Radia and I recently sent this letter to The New York Times:

Editor, New York Times:

Catherine Rampell’s September 7 article, “Once a Dynamo, the Tech Sector Is Slow to Hire,” mourns the recent decline in U.S. data processing jobs. She blames much of the decline on the automation of previously tedious tasks.

May we suggest one way to get those jobs back: No more automation. Ban the use of computers for data processing. Imagine how much information flows through today’s global economy in an average day. Computers handle most of the load. That costs millions of jobs.

The effects would reverberate far beyond the tech sector. The paper, pen, and pencil industries would also boom.

Companies are dead-set on doing more with less. True, that creates more jobs in the long run by freeing up resources — and employees — for new ventures. But if only they would consider doing less with more, they could create more data processing jobs.

Ryan Young and Ryan Radia
Competitive Enterprise Institute
Washington, D.C.

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Posted in Business Cycles, Economics, The Market Process

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