Mike Smitka, Economics, Washington and Lee University
Discourse in economics presumes that knowledge is convergent: more empirical research and better theory will together refine our knowledge and helps us approach a "true" understanding. That implicit methodological assumption is not only wrong, but leads to the flawed application of economics. In practice, economics is perhaps better thought of as divergent.
Mike Smitka, Economics, Washington and Lee University
Here's another quick cut on what's been happening over the past decade. Prior to 1997 employment as a percentage of the population in different age brackets was nearly constant. During the Great Recession older workers either didn't lose their jobs or found new ones.
Mike Smitka, Economics, Washington & Lee Univ
Today's Employment Situation. Adding jobs isn't enough, because our population is growing. I've created a normalized level of employment that accounts for example for "boomer" retirement. At the current rate we'll be back pretty close to normal within 2 years. Since the are headwinds, basically the entire rest of the world, the Fed will be slow to raise rates, but raise they will, so the next President will face quite a different environment. (Note: the age-specific levels of employment for the age brackets I display were stable for the 10 years preceding the start of the Great Recession in January 2007. That provides the basis for my calculations. For details see HERE.)
Mike Smitka, Economics, Washington & Lee Univ
Toyota will eliminate the Scion brand; Ford is withdrawing from Japan. In the US, Suzuki, Hummer, Pontiac, Plymouth, Mercury, Oldsmobile, Isuzu, Renault, Yugo, Saturn, Hyundai (since returned) and others vanished years ago. Excluding upscale marques, today only 2 other brands have market shares in the US below Dodge's 3.5%: Fiat at 0.2%, and Mitsubishi at 0.6%. Meanwhile Scion averaged 0.3% for the whole of 2015, and hasn't been consistently above 0.5% since hovering near the 1% level under the high gas price era that ended in 2008. The Fiat 500 had the misfortune to launch even later, in 2011. Now my categories are arbitrarily mine. BMW's Mini is also at 0.2%, but the base two-door starts at $20,000 while net of current rebates the Fiat 500 starts at $15,000. Even the Chrysler brand, which to me is not now particularly upscale, has a 1.6% market share.
Mike Smitka, Economics, Washington & Lee Univ
Trump has run a strategically brilliant campaign, playing the media to the hilt to speak to the very specific and fairly narrow section of the electorate who vote in Republican primaries. He employed his savvy for publicity to see that, no matter how much they spent, Donald would be the name on the home page of all the news sites, every day.
Only some of today's votes are in, but so far that strategy is working.
from the start, Trump needed only a third of the primary vote to garner the nomination
Mike Smitka, Economics, Washington & Lee Univ
i'm pondering the nature of globalization in the auto industry. In addition, suppliers are realigning their businesses, with for example JCI and Visteon selling their interior businesses to Yanfeng, Visteon selling their air conditioning business to Halla Climate Control (now Hanon), and Visteon buying Yanfeng's share in a vehicle electronics joint venture. Then there are OEMs: what was the progression of cross-border integration in Europe, as intra-European restrictions were gradually lowered following the formation of the Common Market. First I'll ponder, the blog, then write ...
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WREL Lexington (VA) is changing its format, so today is my last regular radio show. So looking back, what have we talked about, and what then should we think about moving forward? First and foremost there's the slow but steady growth of the US economy. Because most observers are parochial, unfamiliar with the experience of other countries and of our own history, that slowness continues to be treated as a surprise. More in a moment. Looking forward I see four long-run economic issues facing the US: education, infrastructure, population aging and fiscal health. While it's a bit of a straw man, can we make America great again? More properly, will our children face a future of falling incomes and rising social tensions? I fear the answer is "no." I don't want to end my regular radio presence without a reminder that I'm a practitioner of the dismal science.
Mike Smitka, Economics, Washington and Lee University
We'll continue to see media coverage of financial scandals in China. For example, the FT Alphaville blog has a "Bezzle Watch" on financial institutions there. This should not surprise us on three levels.
First, under the Stalinist planning system that dominated the urban sector in China there were no banks as we understand the concept. Zero. Similarly in the rural sector communes were expected to fend for themselves – even when that meant privation – so again there was no role for finance, though there were institutions that accepted small individual deposits. Reforms began in the early 1980s that opened up space for "modern" financial institutions to operate, though the legal and institutional foundations weren't put into place until 1994-95. That means that no bank has more than 20 years operating experience. Young institutions that have no experienced staff – and cannot hire from elsewhere because such individuals simply did not exist – have control and monitoring issues. It takes time to set up accounting systems, operating standards, and checks and balances against individual behavior. If global institutions have problems restraining rogue traders, then China's challenges are worse.
...with lower growth, many who operated in the shadows will find their operations cast into the light...
Mike Smitka, Economics, Washington & Lee Univ
Under the US primary system for Congress and the White House, politicians must flip-flop in order to be elected. Now candidates may be dishonest in the normal sense of the word. But if a candidate truly wishes to be elected – surely most do! – then they must change their positions during the course of a campaign. That's not healthy for our political system.
Mike Smitka, economics / Washington and Lee
First to exit, that is. The rush to enter China has led to a market with too many players with too many products and too many assembly plants that are too scattered in geography. The logic is reminiscent of the dot.com era, a combination of optimism unbounded by reality tinged with a belief that, in a market where most consumers are first-time purchasers, buying "clicks" today is essential for future profits. (It's also a predictable consequence of China's policies toward the industry, a topic for other posts.) Most of the new entry and the additions to capacity over the past 10 years took the form of a 50:50 joint venture between a Chinese automotive firm and a global producer. It takes two to tango, and "domestic" players were just as eager to dance as latecomers. But 10% GDP growth and 20% industry volume growth weren't going to continue forever.
