And thank you again Max, for a great couple of hours, and to Bev and FDL for having me on. Also to my (many) friends who came by.

I missed that one.

If you want to see (a much younger version of me) in debate with Milton F., check out the 1990 re-issue of Free To Choose — first program.

Yes, I think that was a favorite Salazar trick. Your memory is good.

Interesting question, Art. The data that we use in two chapters (from Eurostat) probably could be used to show shifting employment patterns by sector, at least within Europe. I haven’t done that, though, and I’m not sure the level of detail is fine enough to do a really good job.

In Europe as in the US, most jobs are in services and they don’t go anywhere. Or in construction, where they come and go.

Mike Masters and Michael Greenberger provided congressional testimony on this back in the fall of ’08.

I’ve been working through a number of recent books on oil but haven’t got a recommendation at hand.

One of things we have, that Europe lacks, is social insurance at the continental level. Greek pensions have been slashed because the Greek state can’t pay them. In the US, this hasn’t happened (yet) and we can still fight it off if we’re well-prepared to do so.

I’ve argued for a “European Pension Union” that would put a floor under pensions all across Europe, and stabilize demand in the periphery.

Running everything through infrastructure funds leads to paving beautiful places, without necessarily doing the right thing for economic development. The freeways in Portugal are another example of this, I fear.

Well, I like the non-profit sector in this country a lot. Health care, education — these are useful things. Paul Samuelson once said to me “Health care is 15 percent of GDP, and it’s the best 15 percent of GDP.”

The thing about these sectors is, they have multiple funding streams. Higher ed has state money, federal money, tuition, philanthropy… This buffers the institution from cuts.

If you go to (say) France, and look at what happens when you rely entirely on state funding for universities, you’ll see what I mean.

That said, the federal government handles *insurance* extremely well. Social Security and Medicare are functional, efficient programs. That is why they are so hated by some people – and prized by others.

I’ll put in a good word for the investigators!

I think Phil Angelides (and Wendy Edelberg) did a terrific job. I think Elizabeth Warren (and Damon Silvers) did a terrific job. Likewise the Levin committee. And SIGTARP.

We have had some excellent official investigations. What we haven’t had, is action from the responsible authorities.

I think I borrowed this line from Bill: “If only Atty Gen. Holder were alive.” …

Not so far. There is one thing from 2008 that we need to go back to, however. And that’s energy prices.

You remember that in 2008 there was a huge run up in oil prices, which we were told was all supply-and-demand (China and India, don’t you know). Energy economists knew this was ridiculous. And then the price collapsed at the start of the great crisis.

The FCIC and other investigative bodies (understandably, they were overloaded) never took this on. But now we’re seeing the same Hydra raising another head. I think this issue has to be addressed – you need a strategic approach to energy or you’ll never have either sustained economic growth or a profitable alternative to fossil fuels.

As for Paul Krugman on “structural unemployment,” — one thing we know, is that economists do not know what the unemployment rate is that will bring on wage inflation. That’s because the shocks that are mistaken for inflation have (since the 50s) always come from somewhere else, and are unrelated to the US rate of unemployment at any given time.

True. “Demographic” is more on target for the specific issue I was raising here.

Let me take a second here to make a key distinction. In the book I talk about two very distinct concepts.

One is income inequality. Income is what the tax authorities say it is, and in the US, income inequality is driven very largely by finance and the stock market. That’s the way a capitalist economy works: capital is held by a relatively few people, and their incomes are driven by pricing on capital markets.

The other concept is pay inequality — the inequality in what people earn for work. That depends on two things: economic structure and economic performance. When the economy is doing well, pay inequality tends to go down. So it’s quite possible for income and pay inequality to go in opposite directions.

When you compare pay inequality in the US with pay inequality in Europe, you find something very interesting. While US pay inequality is on the high end (comparable to Spain or Italy) for Europe, it isn’t wildly out of line. And US pay inequalities are less than they are in Europe taken as a whole — when you compare Europe as a continent to the US as a continent.

Why? Because we had the New Deal and the Great Society, which work to almost erase what used to be huge differences between the North and South in the US. Europe hasn’t had the equivalent.

I think this also bears on why Europe has had such high unemployment in recent years (before the crisis made things worse). They were actually much more unequal than they thought they were, and policies that attack the existing welfare states in Europe have been making that worse.

I have a review of Acemoglu and Robinson, at

http://www.democracyjournal.org/2/6482.php?page=all

We have definitely been feeding the financial maw and hoping for trickle-down. And very little does.

At some point, it will be time to send in the investigators instead.

Or so I hope. Bill Black has been beating this drum for years now, with my cheering from the front row.

Point taken. It’s a tactical issue and there are mornings when I agree with you.

There’s not too much math in it…

One of the things we did was to classify just about every observation we had (by country and year, going back to the 1960s) according to the type of government that existed at that time. And then we asked whether there were significant differences between levels of inequality according political type.

And the answer, not surprisingly, was that there were. The group that we called social democracies had fairly low inequality, especially if they’d been pursuing social democracy for a long time. So did the countries that call themselves Islamic republics. Dictatorships tend to be much more unequal. Recently-created democracies don’t do so well — because they inherit the character of the regimes they replace.

None of this is really surprising, but it does help build confidence in the quality of the data. Common sense results are a good thing, in this line of work.

Right.

Good for you. I was on the congressional staff at that time so I still have some scars from the previous fight.

But I think there are ways to get jobs funded — you just have to put a few degrees of separation between the program and the budget-cutters.

That’s an interesting observation. I call the period from 1980-2000 the “Soros superbubble” — his term — but make the point that it was a “supercrisis” for poorer people and countries around the world. This shows up very clearly in my inequality data; it’s one of the key findings in the whole body of work.

And I would date the key turning point at 2000, when the NASDAQ collapsed.

But I’d still defend the term “Great Crisis” for the period when it all unraveled, beginning in 2007. Likewise we call 1929 the Great Crash.

I think that when you get a big slump it does produce a “structural” problem — especially when you’ve got a lot of older workers out there. Many of them will go to the back of the queue when jobs start to become available, and they haven’t got all that much work-time left.

That’s why I think some “structural” solutions are useful, especially in the present situation.

That said, I don’t like the term “cyclical” because it implies that what goes down will necessarily come back up. Larry Summers and company fell into that trap in 2009, accepting forecasts that made that assumption mechanically.

agreed.