Sara Dustin '59 Lecture
Sara Dustin '59
In her talk, "Some Experiments in Iconoclastic Economics", Sara Dustin '59 gives a political-economics lecture based on her paper "Notes Toward a Useful Theory of Inflation." She discusses errors that blinded establishment economics to the role of the everyday economic decisions of liberated U.S. housewives in creating the late 20th century's fast-growing, inflation-prone economy, and the profession's current difficulties generating satisfying explanations of crucial 21st-century economic changes.
Dustin is the sole proprietor of Dustbin Antiques in Hopkinton, N.H. While at Swarthmore, she studied political science and international affairs.
Sara Dustin: Okay, I have a question for everyone. How many people here think they are middle class?
Speaker 2: What?
Speaker 3: Pardon?
Sara Dustin: Do you think, raise your hands if you think you're middle class. Would you pass out the pass outs?
Speaker 4: Middle class is really very poorly defined.
Sara Dustin: Yes. Well actually you can define it mathematically.
Speaker 4: Right, but there are social assumptions to get your written ticket. Right?
Sara Dustin: Well actually there are boundaries of household income by population syntax. You're going to first pass out the questions.
So you should be looking at page one. Were there enough to go around? Everybody got one?
Speaker 4: Yes.
Sara Dustin: Annual US household income by population Quintiles. Bottom quintile goes, you can read this. The boundaries are zero to 25 thousand a year. Second, 20%, which is a working class, is 25 thousand to 48 thousand. The mathematical middle class is 48 thousand to 86 thousand. If you're not in that group, you're basically not really middle class, you're really upper middle class. And the reason this is an important point, I'm not going to embarrass everybody by raising their hands.
But the point is that 40 to 60% of the population is that. Economics is an upper middle class occupation. Pretty much. And it's very hard to understand how it works, how the bottom 60% or 50% of the country behaves. And they don't behave like you do, for example they do not save. They do not have pensions, for the most part. They do not buy stocks and bonds. So if you do any of these things and you can afford to do them, you're probably upper middle class. Or in the bottom of the upper class.
The trouble is that when people who come from upper middle class do not pay attention to what's going on below us, this is one of the problems with economics. Yes?
Speaker 5: Could you speak a little louder?
Sara Dustin: I can't. I can't because I have been sick and I have laryngitis so I will try. I'm not sure how long my voice will last before we'll work. Largely get their data from a service that services stock market. So, they're getting their data with an upper class slant. And they're not paying any attention to the effect on the economy of the bottom 50% of the country. Which means, a lot of things are wrong.
The second thing, how many people here think deficits are dangerous?
Speaker 2: It depends.
Sara Dustin: Apparently, it’s the right answer.
Speaker 2: Depends what you spend on them.
Sara Dustin: That's a good answer too.
Speaker 2: The context depends-
Sara Dustin: The federal deficit. How many people are really worried about the size of it or are you well educated?
Speaker 5: I do.
Sara Dustin: You do?
Speaker 5: Mm-hmm (affirmative)
Sara Dustin: Oh that's too bad.
Speaker 2: If you spend it on capital goods like trains and airplanes and roads and perhaps even research, that's one thing. If you spend it on tax cuts for the last two categories of the bottom of the upper rich and the rich, then that's another. And what we've seen is the latter recently.
Speaker 3: What about weapons and chains?
Speaker 2: No.
Speaker 4: Isn't it also matter what percent of the GDP that, that percent of our debt is ...
Sara Dustin: Actually, the United States has a huge economy. GDP for 2018 was 21 trillion dollars.
Speaker 5: Trillion?
Speaker 6: Trillion.
Sara Dustin: Trillion. So our deficits run, if you look at deficit in ratio to GDP for the year, the deficit for the year to the GDP for the year, it runs very low. It goes, well in World War II you got up to 26%, but that's an all time high. Right now they're running, let's see, around 3%, 3.4%, 2.4%, the Stimulation Act of 2009, 9.8%. So, they went up during the 8.6%, 8.3%, 6.7%. Then they went down again after Obama lost control with legislature. So, it's been 4%, 2.7%. The Trump deficit is actually 4%, which is very moderate.
Now, the total national debt is equal to, is 22 trillion and equal to about 105%. This is, you would, yes?
Speaker 2: I'm just wondering if your answer would be different if the United States dollar was not a world reserved currency.
Sara Dustin: Yes it would.
Speaker 2: Okay.
Sara Dustin: Yes. I think this will help you understand the dance between Nancy Pelosi and Donald Trump because everyone who's savvy in probably most of congress except for the very louder senators from the red states understand perfectly well that a deficit is a very important tool for stimulating the economy when there's trouble, because when consumer power gets too low and consumers cannot buy everything that they make, then the national government has to step in as a vital last resort to maintain employment. Yeah.
So, now if you go back to page one, which is the second section, which is the sessions Cannon have been engineered for time tested race to slower tank the economy. You raise interest rates. You restrict or slash deficit spending. You run up the price of an inelastic good like an essential inelastic good like as gasoline inelastic means that you have to buy it no matter how much it costs. So, it eats up income that would be spent in other, like in retails and so on. So, everywhere else economy suffers.
And discipline in the workforce, which means force down wages and take away benefits and cut pensions. You want us to understand what's going on in Europe right now. That's all that it's called, that's scary. And Europe has locked itself into severe restrictions on deficit spending. So they've only got one tool left to simulate the economy, and that's super low interest rates.
Speaker 3: Ask Japan how that turned out.
Sara Dustin: Well it worked for us but-
Speaker 3: Didn't work for Japan because they were already at zero when they started and they went negative and it didn't work.
Sara Dustin: Well, no it's a weak tool, but it's not so weak. So ... four tried and true methods for invigorating the economy are rescuing from the session, the next page. Increase deficit spending, lower interest rates dramatically, control or lower gasoline prices, raise the minimum wage. Because you increase the buying power of the bottom 50% of the country. And people can buy more of what they produce.
I want to say something about banking and probably everybody here doesn't need this, but you all understand that banks create, the money supply has to increase with the size of GDP, otherwise there's not enough money to carry on business. Okay? And the economy starts to constrict. If the federal reserve raises interest rates, the amount of people who take loans from banks goes down, and the money supply in ratio to GDP diminishes, and when that happens it's very, very powerful, and in fact I will speak more about that later.
But if you look historically, my title here is recessions 10 have been engineered. Particularly under Nixon, under ... under Jimmy Carter, and under ...
Speaker 3: Reagan.
Sara Dustin: Reagan thank you, yes. And you do it, how any people here believe that LBJ's overspending on the Vietnam War and the war on poverty cause 36 years of solid inflation? Does anybody believe that? Cause that was the explanation of the time. Yeah. LBJ had no ... let's see. 1960 ... his deficits ran .09%, .02%, .05%, 1%, it went up to 2.6 in 1968 because he ran a 25 billion dollar ... deficit. After that it went right down again. You get to Nixon, if you and I meant to work this up for you or whatever, I've been very ill, so I didn't have time to do everything.
But if you look at, there's a pattern, inflation was starting to get scary, it's got up to 6%, but it's 1969. And so when Nixon came in, they did two things at once, he was friendly with the federal reserve, raised interest rates, and he lowered the federal deficit very, very distinctly and produced a recession. And then two years later because he needed to get re-elected, he then ran his deficits right up to LBJ's level and better. To rescue it. And you can see that pattern over and over again.
Speaker 3: Wasn't the recession that caused it, not lead right into the 71, taking us up the dollar standard in phase one, two, three and four, I mean the whole monetary collapse came out before-
Sara Dustin: You know more than I do, so you can join me up here.
Speaker 3: I'm sorry,
Sara Dustin: I don't know much about that.
Speaker 3: That was before his reelection so, he was struggling through ...
Sara Dustin: But there's this constant political pattern, which is very prevalent to what's going on right now. The inflation rate had reached 11% by Jimmy Carter's regime. He took the bulk of the main land, the monitors. They raised interest rates to double digits, and the power of the contracting produced a recession, they backed out very, very fast. But when Ronald Regan came in, he lowered the deficit spending and the federal reserve put interest rates very high and kept them there for a year and a half and they had a really large impression.
And then of course, he had to get re-elected, so his deficits went up to about 125 billion on 50 whoops ... let's see we're looking 81, they went up from, to 79 billion, 129 billion, 208 billion in '83. 285 billion in '84. So, you see this pattern over and over. So, the dance between Nancy Pelosi and our president Trump, is that Trump has very, very smart economic vices, one of whom is a Swarthmore, I think chairman? You say Fred?
Speaker 6: I think he's chairman with council to economic advisors.
Sara Dustin: Yeah what's his name?
Speaker 6: I don't know.
Sara Dustin: Don't remember, but he's a Swarthmore graduate. And everyone knows, everyone who's educated and most of the leadership of congress and the parties understand that deficits are a tool. Regan, I mean Trump has been very, very lucky. He's been able to present deficits to come to a very conservative republican senate in terms they cannot turn down. As age who disasters in red states, and as tax cuts. I mean no red butter republican is going to vote against the tax cut. Which, really is real.
Especially for the lower part, the bottom 50% of the population. And including some very hefty refundable's to the very poor. So, the people at the bottom of the economy are doing actually better, and actually the New York Times agrees with me on this. That he's keeping his campaign promises. Okay, so he wants to do infrastructure. Now, this is not something that we'll get a conservative republican ready to run a deficit. So, he's having a hard time. But if he gets it he guarantees his re-election because the economy is going to be great.
So, Nancy Pelosi's job is to make sure he doesn't quite get it, and to drive him nuts. And maybe if she'd get him to collapse psychologically in front of the whole country, which she's getting there, then they will have a chance to win. And then they will run deficits for sure. Okay?
Speaker 2: If deficits caused problems, in World War II we would've had a collapsed economy. Instead we had the biggest deficit of ever, and we had the best economy ever relative to itself in terms of its growth, and what we produced was war material, it's just stunning.
Sara Dustin: But you don't need deficits. The problem is its lack of consumer capacity to buy within it. Now go into that and some detail. The other thing that I do is very selfishly, I want to discuss how I became an economist when I was basically a political science English literature major. In 1999 when welfare reform came here, I was the leader, the organizer and the leader of welfare rights, when welfare reform came through, I was the leader of and the organizer of welfare rights in New Hampshire.
Welfare reform took away from the last ordinary women in the country to lose the right to raise, stay home with babies and raise small children at home, and the question was why. Well, it was obvious that by that time the mainstream housewife, all but the most prosperously married women had lost that right. I mean they were going to work full-time, lifetime, and staying home maybe if they were lucky for 10 weeks. Because they weren't lucky, they would have to put the baby in daycare at one week and get back to the seminar.
And this is very disturbing to me, I'm sure it's responsible for a lot of our social problems. And the deterioration of the bottom of the workforce, the ordinary labor force. I just wanted to know why, and it was obviously an economic problem, how did this happen? How did the mainstream housewife lose the capacity of being home with their babies? So, I started going to the state library and reading the New York Times on microfilm to catch up with what was going on in the transitional period.
I also sat down by pencil, because I didn't have a computer at the time, I was not computer literate, and worked out numbers and relationships. It was very clear to me that there was a very close relationship between the movement of women, middle class women into the workforce. And how it progressed. And the rise and fall of inflation in this country. More about that later. I finally got in touch with UN Manchester, retook Macro one and two. Got the use of their computer lab and learned to use a cell, and I could generate correlations.
But I had to read their text books, and I'd read famous Swarthmore ... type. I just read these textbooks very, very carefully. It was clear to me they were full of distortions and absurdities. Because Swarthmore, the textbooks were Keynesian, and Keynesian was a genius. These textbooks were part of this influence by the supply-siders. And one of the first things I noticed that they had very interested in what happens in the upper middle class. For example, to upper middle class spending, which they took to be, represented the important spending in the nation when the stock market went up.
They said the stock market goes up, people, in general, they generalize to the upper middle class. From the upper middle class to the population as a whole. We said the economy, it would stimulate the economy if the stock market was doing better because people would feel more confident that they would have money and they would spend more. They totally ignored one of the basic rules of Keynsesian which is the problem in order to stimulate the economy, you have to reduce the rate of household spending. The regular household savings. The higher the savings rate is, the more depressive it is on the economy.
This would, and the people who do not save are the bottom 50%, and this was totally ignored, so what I'm talking about is economics, is an upper middle class. Takes the upper middle class as standing for the whole nation. So, I started attending each economics association meetings. Annual meetings, and at one of them the planner or speaker, the problem at the time was why was the economy so slow, they could not understand it. This is the mystery. He gave a number of reasons.
So, I raised my hand and I said what about, you left out the redistribution income upward. And he said well why is that relevant. The speaker was the economics editorialist for the New York Times, what's his name? He's famous. He worked for Clinton. Well, anyway. And I said ... well on the most elementary level that when you, transfer of income moves upward, the saving bank goes up. And he said "oh". And it slows down the economy. So, when I went to my next session, the place was bust and they looked at me. And not only did they look at me, but within a year and a half, this had become an accepted cause of slow economy. And I said hey this is fun. So, I started, because I tell have this capacity to see things somehow, that other people don't see it.
So, I started to submit papers, and over the course of about six papers, took sessions, I had put together a coherent explanation of five major mysteries of the unsolved mysteries of the current economy which I'll read to you. But, three years ago one of my papers got a plus in the session. Two years ago it got an ovation. I said I think I finally fulfilled my promise. I've done enough to justify my college, my Swarthmore education. And this is good enough for Swarthmore which is why I'm standing here talking to you.
Okay, so now I will deal with this paper, and I'm sorry I'm probably going to have to read it. Though, I think I'll be able to shorten some things. It's called notes taught a multi factor solution to five contemporary interrelated 21st century macro-economic mysteries. Why falling unemployment rates no longer trigger runaway inflation. Why corporations choose to invest profits in finance rather than production. Why productivity growth is so sluggish. Why GDP growth has been so slow, and rage growth remains the sponge mop, so weak.
Last year was Fed chairman, Janet Yellen characterized a prevailing contemporary economic theory of inflation as not useful to monetary policy. She delivered several pages in 2017 and one of them said we cannot be sure that this modest sensitivity of inflation rates to unemployment rates will persist in the face of strong labor market conditions, because we do not understand how it comes to be so modest in the first place. She also said another risk is that our framework for understanding inflation dynamics could be re-specified in some fundamental way. Perhaps because our economic model overlooks factors that will restrain inflation in coming years despite solid market conditions.
I agree with her. It does. My colleagues and I may have misjudged the strength of the labor market. The degree to which longer range in expectations are consistent with our inflation objectives, or even the fundamental forces driving inflation. I will attempt in this paper to identify what some of these overlooked fundamental driving forces might be. But before I begin, I feel the need to make a few necessary comments on the nature of economics itself. The field of economics has become very, very mathematical.
You might as well when you go to a conference be going to a conference in statistical analysis. Very elaborate. The whole emphasis in many, many seminars by young the people is how elaborate I can make my proof, my ... and the whole discussion is about the intricacies of these proofs. And very little about what they're talking about, what's the point they're trying to make. You have to listen very fast and you have to ask them to be clear. What did you find, what did you want to find, and what did you prove?
The problem is, economics is in the stage you're trying to make yourself into a science. The problem is that unlike the hard sciences like physics, which deals with an unchanging, a relatively unchanging material. For example, the law of gravity and how fast the ball will run down a slope is probably good for many millennium. It's not forever. I mean, it probably will change eventually. But the, let's see ...
It's important to remember that economics does not have the advantages of the physical sciences which, it is a social science, and best dependent for its accuracy on the capacity to recognize and keep up with swiftly changing social economic undercurrents of the spear of the inventive human being. Therefore, the kindest findings and laws of underworld being swept away by some new powerful social economic undercurrent true inaccurate for the time, in which they were designed but gradually drawing weaker and less applicable as time passes.
The problem is that people make careers about their laws, and the relationships they discover and the formulas, and it's very hard to let go. So, the history of economics is limited, littered with formulations which are not as powerful and accurate as they once were. The calculation that the natural rate of unemployment that will not accelerate inflation lies between six percent and seven percent of, is an idea that, or even the idea that there is any longer a natural rate of unemployment at all which Jenna Alen also mentions, is one of them.
Because of the rapidly changing nature of our material, economists especially need to stay nimbral. To do so we must cultivate the capacity to continually reassess the current accuracy and usefulness of the resilient and convincing findings and formulations of past masters and society shifts. Okay. Three underlying social economic changes likely to be altering the conventional predictive relationship between inflation rate and the unemployment rate. Two of these changes are long term drivers still active in the contemporary economy. Number one, the annual decline since 1973 of a wage growth in relation to productivity growth. Two, the continuous replacement essentially since the late 1990's of higher paying production jobs by lower paying service jobs.
The third driver is consequential specifically because of its absence from the current macroeconomic mix. It is the rapid increase between 1962 and 1989 in the number of dual income US households, and distinct growth of their aggregate medium income. The capacity of the mainstream housewife to defend your household against the ravishes inflation, and official actions reducing her mate’s real wages, by continuously increasing the number of her years, weeks and hours that she worked outside the home expired in 1898.
When the full-time lifetime employment of married women became the new social economic norm. In 1990, she could not add the second part-time job to her core employment, though it would've been necessary to maintain her household standard of living against inflation without risking the well-being of her household, her children and herself. Apparently, she chose not to, because after 1989, the indexes of female weekly and hourly employment leveled off, and the growth rate of the female workforce slowed down to the generational replacement levels of the Eisenhower era simultaneously inflation began to re-subside. And so that's the world we live in. Yeah.
Speaker 2: I hadn't heard that last number. That did make absolute sense for what you're saying but I hadn't thought of that as a factor.
Sara Dustin: Yeah, actually as I worked over this paper I came up with one more. In 1973, the Keynesian public economists were discredited by their inflexibility, their lack of limberness to explain stagflation. And the monitorists could, the spy ciders could at least partially, I mean they didn't have the whole explanation. And they took over and supply side economics says that anything that race is cost to business, including wages, is bad for the economy.
So, in 1973 businesses were given official sanction to stock cutting giving wage rises. And wages began to fall against the value of, the hourly medium wage, and the average wage began to fall against the hourly value of the newest product. So, year after year, our workforce, the bottom 40% of these, bottom 35% has been unable to buy, every year can buy less of what it produces. And this means that we have a problem with demand or demand for economy that the businesses that actually destroyed their own market. And that's why we need super low, we have to prop up the economy with the large deficits and super low interest rates.
Speaker 2: More effort than this?
Sara Dustin: Yeah.
Speaker 3: It can be argued but that’s tough. The diminishing wages for labor have to do with increasing efficiency of production as well as the competition of the labor force.
Sara Dustin: Well productivity has slowed down too.
Speaker 3: Pardon?
Sara Dustin: Productivity growth has slowed down also. But it could be argued, yeah. It does get argued, but it's been years, I mean I just clipped the Wall Street Journal article that said you have to get productivity up so companies can pay better wages. It’s been 26 years since companies shared their decrease in productivity with their workers.
Speaker 6: We can no long manufacture anywhere nearly as efficient as China. So, basically everything comes from China.
Sara Dustin: True.
Speaker 2: Well certain things
Speaker 3: Yeah I don't think that, we can no longer manufacture a lot of class of things, it would require a lot of people involved, but in terms of manufacturing productivity overall we’re not bad.
Speaker 4: I go to Dollar Tree and there is nothing that’s not manufactured-
Sara Dustin: Okay, one, two, three.
Speaker 4: Me?
Sara Dustin: Yeah.
Speaker 4: Okay, because some other things happened starting pretty much under Regan, well at the end of Carter and Regan which is one de-regulation, which made things very much more unstable in terms of and so on, you have more flexibility. But you've had this whole shift in the 80s into the 90s of forcing corporations and boards of directors and CEO's to only look at the short term quarterly performance of their companies, rather than the long term investment for long term growth, and so they, there are all these, and of course the buyouts and leverage buyouts and a lot of that crap as well. So, you had a huge shift away from simply the kind of investing that the Japanese were doing at the time.
Which was simply investing in new productivities that might not bear food for two or three years.
Sara Dustin: I'm going to address that later.
Speaker 4: Okay sure.
Sara Dustin: Two?
Speaker 3: The point about stagflation, trying to build it with me, because that's when I had an epiphany, I had taken some economics here at Swartgmore, three semesters worth. And there was nothing in any of that about stagflation. It's not possible to learn the theory, but I learned it then.
Sara Dustin: That's right, it's not possible to
Speaker 3: I take that to be a significant omission that somehow if the theory can't handle something that you actually experience-
Sara Dustin: I will address that also.
Speaker 3: It was a dramatic experience, it was enough to be scary. I mean, prices were going up by, rents were going up in New York City were going up by 11 and 12% a year.
Sara Dustin: And the diamond district businesses were going bankrupt because nobody had money to buy clothes. He put that off.
Speaker 3: And it started me reading economics again, and I did find value in economics other than Keynes. And after all microeconomics is really a product of Keynes. The idea that somehow the private market had caused a depression and the government had to save it. Keynes pitched that to the government and liked that idea, and ran with it. But there is debate about that even now. That there are other explanations for the depression. And there are many questions about Keynesian economics as to whether it's ...
Sara Dustin: I will actually address that also.
Speaker 4: Go ahead, I'll save my question for later.
Sara Dustin: Okay. 1973 to the present, the growing lag between wage growth and productivity growth. This was my paper of three years ago the one that got, my point that I made that got applause. Before 1973, the average real hourly wage of privately employed non-farm, non-supervising workers track upward in pace with the inflation that dusted sale value of the product of the same average labor hour. So, the capacity of these working families to purchase a share of what their labor produced remained stable and relatively generous.
In '73 the connection between wages and productivity was lost, as real wages began to stagnate while real productivity continued to rise. Since then, almost every year, the average hourly wage of this group of workers has fallen a little further behind the dollar value of their hourly product ...
So, in every successive year of the last 45, the percentage of goods and services produced by the US workforce that its in-admengable members can afford to purchase with their earnings that's has a little further than the year before. If you want some numbers, the second pass out deals with the wage productivity gap.
Speaker 6: The second pass out?
Sara Dustin: It's the pass out that starts, sheet one.
Speaker 7: We only got one.
Sara Dustin: No, it shouldn't be. there's not a second pass out?
Speaker 7: No.
Speaker 2: It's the second page
Sara Dustin: Somebody should call
Speaker 2: The second page shows what you want, sheet one shows what you're talking about. It's stapled together.
Sara Dustin: Oh, is it on the backside?
Speaker 2: No, it's the second page, they're stapled, the two pages are stapled together.
Speaker 5: It's there.
Sara Dustin: It’s this one that starts with am I middle class.
Speaker 2: Right.
Sara Dustin: And then there should be one that starts with wage and productivity growth
Speaker 2: They're just stapled together.
Sara Dustin: Oh okay, so you've got that okay.
Speaker 2: Front and back, this is the first page, and that's the second page that we have, second sheet. We have a front and back.
Sara Dustin: Oh I see, okay.
Speaker 2: So, we have it all. that's her copy.
Speaker 5: There's an extra copy back here.
Sara Dustin: Working from data developed by the economic policy institute I've calculated that by 2013, the capacity of the average non-supervisory US employee to buy with their earnings a portion of what he or she has produced has slipped by cumulative 55.35%. Huge. This is a significant loss of consumer purchasing power because privately employed non-farm, non-supervisor workers are 40% of the adult population of our country and among the economically active the fraction that spends the highest percent of this income on consumption.
Correlations I generated for this 2017 paper, pairing the annual percentage increase in GBP growth and the annual percentage growth and size of the gap between productivity and wage growth show little to no impact on the economy, so long as married women continue to possess the capacity to outline inflation by increasing their hours in the labor force. But once this capacity was exhausted in 1989 the scores turned negative, indicating that absent this compensating input to household income, the rate of GDP growth slows when the rate of the growth of the gap increases.
These correlations grow more strongly, negative with each success, that decade of the new century. From the period from 2008 to 2016 is .40%. That's a really strong correlation. Suggesting that the cumulative failure of wages divides with productivity and the consequent erosion of the workforce’s power to purchase what they make is now exerting a significant drive on the economy. Through a painfully slow process of maintaining a new zero base interest rates in order to nurture employment, the post-recession fed did manage to reverse the growth of the wage productivity gap in 2014 and 15, and you can find that on the second page on sheet two. And I have underlined it, you can see that by 2012 and 2014, something wrong there, I missed one. 2014 and 2015 there are two negative, that means the gap reduced.
However, as soon as the fed started to institute small, these micro interest rate increases, it could get the productivity gap, wage productivity gap starts increasing again. I don't know what it will be like this year because it had this enormous influx of, there's another very interesting place, the other time during the last, what is it? 36 years? When the productivity gap, wage productivity gap decreased was in the last two years of the Clinton administration. That would be '95 and '96, there were two successive one dollar an hour minimum wage increases. Increasing the capacity of this bottom of the workforce to buy. And this followed up by a significantly lower increase in productivity gap and the negative gap in '97 and then in '98 a significant decrease in the wage productivity gap.
Which I think is why Clinton got away with reducing deficit spending in those two years because he didn't need to pop up the job market, because the spending of the people who got the minimum wages increases were able to carry the economy. Okay. Chapter two. Driver number two. 2077, 2018, replacement of higher paying production jobs by lower paying service jobs. The offshoring of US production jobs which began in the late 1970's and accelerated in the 1990's and 2000's transformed our labor economy from one anchored by manufacturing to a service job based market. And must be counted amount, one of the most radical social economic changes experienced by our national community.
I suspect this transformation provides the basis for a coherent and unified explanation of several mysteries of the current economy, not only why the accepted contemporary non-inflation accelerated rate of employment standard of four to five percent is so inexpiably will become non-predictive. And also why wage growth has not accelerated with a drop in the unemployment rate. Why productivity growth has been so stubbornly refused to return to healthier levels. Why the economy has been so sluggish it's the beginning of the current century.
With the exception, now I did not do data for this, but it's all logic. I think the data will bear me up but it's pretty clear from the numbers. With the exception of positions held by well-educated professionals, service the jobs notoriously paid more poorly than production jobs. So, on the simplest level, the transformation of the labor economy from production based to service based should in itself produce a drop in the real hourly wage of a significant portion of the labor force.
Follows then, that as these workers trade production jobs for service jobs, their real aggregate incomes and the capacity of their households to make purchases can be expected to stagnate or fall, inducing a deflationary force into the economy. It seems possible to me that this deflationary portion from below is canceling up any inflationary effects generated by current levels of falling employment, and is lowering the natural rate of unemployment.
More directly, the decline in the real hourly wages of workers as they move from production to service employment must directly reduce the growth rate of the median real wage of privately employed non supervisory employees. So, this rolling historical change must be one of the most important factors to attributing to both the long-term stagnation of the real wages of this group, and the current failure of these wages to rise in the presence of falling unemployment and contribute it to inflation.
Since it's much harder to achieve productivity gains in service industries, which often require a one to one interaction between the provider and the consumer, then on the production line with the introduced production of the better machine, can step up output significantly and move it from production to services, must be also playing a major role in the slowing of the rate of productivity growth. And finally, since aggregate national household income and GDP are identical, the long-term depression of household income group in the affected group of the working population has by definition to be a significant contributor to the low growth economy that has been of concern to us since the beginning of the new century.
In short, falling employment rates cannot produce inflation unless they result in higher paychecks. Service jobs are now providing as much as 83% of all employment positions in the US according to one current estimate. It should not matter if the unemployment rate falls by 2%. If the additional new jobs transferred from the manufacturing sector to the service sector because a 2% increase in jobs paying half the wages of the old ones still adds up to an aggregate loss of working class income.
The current economy has a much more in common with the slow growth low inflation economy sale as of the Eisenhower and early JFK years, than the ebullient growing and inflation prompt economies of the later 60's, 70's, and 80's. And thus we should be looking to the unemployment levels of those earlier years for our standard of guidance to the fed. In fact the more I think about it the more I think we should stop worrying about if identifying the unemployment level of which inflation becomes a threat, and more about establishing the level of which unemployment will kick off for the recession. A far more central issue for these earlier economies, and possibly for ours.
Okay, now we go onto the absent inflation driver. 1962 to 1989. In migration to the mainstream housewife from the home to the workforce engaged the labor force rapidly, raised the rate of GDP growth correspondingly, and steadily and substantially increased the aggregate immediate household income and spending power of the ever-growing number of dual income pre-households be created in the process. This loss of economic stimulus is now absent from the economy.
Speaker 6: Sorry. Sorry.
Sara Dustin: I think I'm losing you, am I losing you?
Speaker 7: Somebody's phone went off.
Speaker 3: This goes back to the things you said 20 minutes ago, right, which is understanding that the world changes in a social science setting. And really, I think a lot of what you're saying, a lot of this is intuitive with compared to me is that we're almost reverting back to form, right? That the issue of the last 20 years was a somewhat unusual set of circumstances, and you've mentioned several of them. You mentioned the migration of married women to the workforce, you've mentioned significant increases in productivity. In the non-service economy. Right? And these are drivers that are really, almost seems to me unique to the time.
So, is your fundamental argument that we’re you going back to a much more stable existing pattern that existed in the past?
Sara Dustin: My expert in the front says no.
Speaker 4: That's not the message I'm getting. I'm getting that we're stuck in a bad cycle and we need to do something to get out of it or it's going to get worse and worse-
Sara Dustin: Yes, I think with this movement for 15 dollars per hour is what's going to rescue us.
Speaker 3: So, let me address the expert in the front for one moment, I don't disagree-
Sara Dustin: Yes go ahead, talk to each other my voice-
Speaker 3: It seems to me that the interesting question that underlies a lot of this is whether the assumption that economic growth is a long-term desirable thing, as opposed to a sustainable economy.
Sara Dustin: Yes. The fact that the economy is not growing that fast is I think when you think about global warming-
Speaker 3: Mm-hmm (affirmative) yeah, right, that's the question on the table.
Sara Dustin: So, that is the dog in the dog house. The ghost in the ...
Speaker 4: I don't want to interrupt your paper, but I would agree that growth per se is the long parameter because growth is so general, I mean we're getting growth of the rich and not growth of the poor. So, that's not useless growth, that's dangerous growth.
But we have this enormous multi-trillion dollar infrastructure deficit, and that's only a portion of the true deficit, because if we used what I call true cost accounting, which is what is the true cost to leave the oncology and nature and everything else the same way you've found that after you've done something with it, paying the full cost of pollution and everything else we’re doing, our economy isn't a huge deficit, right? We're not growing at all, we're shrinking. By those kinds of measures, right?
So, growth per se is just too general to even have any meaning. If you mean the GDP is growing as we now measure it, that's all you're saying right? And that's not,
Sara Dustin: Yeah, I'm using. What I do is I pay attention to what things people think they can't explain.
Speaker 4: Exactly right.
Sara Dustin: And I just try to explain them. But this has been on my mind that growth is not necessarily what we want.
Speaker 4: If we do what we need to do, we would have tremendous growth. But it would be the right kind of growth. It would be the growth in infrastructure which would force higher paying jobs, it would force the lower paying job wage, the rising even from that, 15 dollars mandated, if you had a huge requirement for people to do construction jobs and-
Sara Dustin: Oh that would be an economic stimulus
Speaker 4: Manufacturing stimulation in order to produce the steel and kind of everything else we need for infrastructure.
Sara Dustin: I'm not sure it would be shared with the workforce. I mean-
Speaker 4: I think it would have to be if you're going to increase a trillion dollars of demand for
Sara Dustin: That's right it would increase production jobs
Speaker 4: Exactly right.
Speaker 6: Well the politicians that keep getting elected, they need to keep blowing air into the balloon.
Speaker 5: What she talked about relax deficit spending certificate. The correlation she saw
Sara Dustin: Europe has denied itself this capacity, Europe is having a terrible time.
Speaker 6: The politicians are having a hard time getting re-elected.
Speaker 2: As a result, you're right.
Sara Dustin: And I read Kuttner, it's a very important book written by Kuttner car care and democrat, editor of the national prospect, and it's called Can the Democracy Survive Global Capitalism? And he analyzes ... he talks maybe about the fact that the financial industries, if the financial speculation was constrained after World War II there was a confidence.
Speaker 2: Yep.
Sara Dustin: And then they fought back and they got rid of every single restraint, so what we think is normal, ripping currencies in and out of countries and investments in and out of countries is not normal. Well, Keynes was the force behind these laws that said you could not invest in something you couldn't withdraw it just to make more money, to speculate. Now you can.
Speaker 2: Yep.
Sara Dustin: And it has terrible consequences for economies. But I don't want to, I want to get through ...
Speaker 2: Yes please.
Sara Dustin: All right, I'm not sure if I have to read or talked to you already about the impact of, it's quite a long section. Okay, I guess I will read this to you. The flow of middle and upper middle class married women into the workforce began to accelerate in 1973 shortly after publication of Betty Friedan’s, The Feminine Mystique. Between 1962 and 1970, when the new Nixon administration and the federal reserve jointly acted to put the brakes on, raising interest rates lowering deficit spending, there were eight straight years when the inflation rate rose every year, imperceptibly at first, fast enough to be noticeable by mid-decade and reaching an alarming six percent by the end of the decade.
Determined to suppress this trend, the Nixon administration and congress slashed the federal budget in 1969, while the feds raised interest rates, creating an engineered recession. It was explained by the New York Times on LBJ spending too much. But you had to be careful around Nixon. Anytime you would try to deliver a letter, he would bar you from his press conferences and things like that. So, they blamed it on LBJ. In the meantime, and for the next 18 years, the number of dual income households continued to increase each year both absolutely, and as percent of all households. The number of years, weeks, years, weeks per year, and hours per week that married women spent in the workforce rose, and the rates of pay that they were able to command as they worked their way up the workforce increased.
As a result, the amount of income that married women were able to contribute to their individual households each successive year grew at the same time that the number of these households were growing. So, both the growth of the medium income of individual dual earner households, and the aggregate household income of this group accelerated over time. By 1979, the prevailing course of the inflation rate amplified by the second round of oil price increases. When you ... yeah, I don't have to explain that. It pushes prices up because it costs more to produce goods and services.
It pushed that index that you see, inflation rate index into the double digits. This moved both the Carter and Regan administrations and the federal reserve under the monitor risk vulgar. To repeat the Nixon experience in forceful inflation and suppression.
By raising the federal funds rate to 20% in two stages, if both the fed kicked off a deep recession, which is fierce enough to reduce the inflation rate to more tolerable levels that is tolerable to bankers and to reduce loans, regain their probability, and to persons living on fixed incomes, businesses and their employees suffer.
In the second year of Regan’s first term, the fed was forced to restore the money supply by reducing interest rates, and the administration to embark on the course of massive deficit spending in order to rescue the economy. But the fed continued to make control over the inflation rate by raising interest rates back up again every time the unemployment rate showed signs of dropping enough to permit wages to rise.
In the process the feds managed to push the real median hourly wage of non-supervisory male employees, that is the bottom 38% of the workforce, down by two dollars an hour between 1989 and the mid 1990's. Yeah.
Speaker 5: Well, some of that changed from production to service jobs also.
Sara Dustin: That's what happened. That didn't really get going heavily until the end of the 90's, by which time ...
Speaker 6: It was worse under Bush. That was the biggest loss of-
Sara Dustin: It started in-
Speaker 6: I'm agreeing, but under Bush was the most dramatic dropping of manufacturing jobs was under Bush.
Sara Dustin: Really?
Speaker 6: Yeah.
Sara Dustin: Yeah, wonderful.
Speaker 6: But that's what you're saying is it started in late Clinton and then into Bush.
Sara Dustin: The response of married women in defense of family living standards was equally fierce. In the early 1980's mothers with working husbands customarily stayed home with infants and toddlers until they were three. And worked before putting them in daycare, and worked part-time mothers hours thereafter so they could be home to greet their older children when they were delivered by the school bus in midafternoon.
By 1990 newborns were going into full time daycare in 10 weeks or less, and older children stayed in after school care centers until mom picked them up at 5:30 or six or later. And this is how the mainstream housewife’s capacity to defend the family standard of living ended for all practical purposes. Because you just couldn't get more minimalist and keep a healthy family.
By 1990, the only option for the US housewife attempting, I told you about this, I'm not going to repeat it. But I saw one of my bank officials who was not quite well paid in the village, she suddenly had taken on a weekend job waiting table. And then, two months later she was gone. She moved to some other profession or something because you just couldn't handle it.
Most could not do this, that is take on, add a part-time job without imperiling three good of high value to that. The adequate physical organization maintenance, and maintenance of the households sufficient time to care adequately for their children, and for their own happiness and health, it appears as a group they gave up trying. For both the average hours of labor force participation for individual women, and the overall percentage of women engaged in the workforce stopped increasing.
Female workforce participation stabilized at slightly below 60% and even fell a little as later in the 1990s, as professional women who were at sufficient clout at work to begin to negotiate extended benefit patchwork finance sabbaticals and see the infants through the first eight or nine months at home dropped out of the workforce. Much to the horror of the mothers of the older feminists consider this a ... treachery.
Speaker 5: Through?
Sara Dustin: Treachery to stay home with the baby. Pardon me?
Speaker 7: Betrayal.
Speaker 5: Betrayal.
Sara Dustin: Betrayal.
Speaker 5: Is that the word you wanted?
Sara Dustin: I had a lot of trouble, I started to write a book on this, and I submitted a draft to Nancy Folbre and she reacted with enormous negativity and said no this can't be true that there is reasons. And also had its conferences, when I tried to introduce this idea I would be attacked by the Ogar family from early 20th century families. Yeah.
Speaker 5: So, one of the issues lurking in here that is often unspoken is that in our society we respect people by how much they're paid. So, if you are a homemaker and you stay home and you're paid zero, your value is zero to the society and until you change that, looking at women and saying oh but what you really want to do is stay home and be a homemaker actually doesn't
Sara Dustin: Yes, yes, yes. Thank you for making that point
Speaker 5: Huge drivers for women to go out and work. And hopefully try get equal pay.
Sara Dustin: No status, you have no status. You're not doing useful work. That's what they're
Speaker 8: It’s called not working. To having a small bank which is suddenly a 724 job and was called not working
Sara Dustin: Welfare moms were told that welfare reform would give the opportunity to do useful work. When welfare reform came through. Cruel, I think this may be changing because we have the professional women are fighting, and we're fighting for paid family leave too. Yes.
Speaker 8: So, I think that whole question, do women want to stay home and do that is much more complicated than "oh well, we can just, if the world were better then they could just stay home and do that", there's some self-respect built into it that it's a really hard problem, and it's not just you can stay home for two or three years with a baby, that's ...
Sara Dustin: When I was working at an institute, I would have such contempt for women who were home with the children. For housewives, ordinary housewives. I mean, if the whole, everything depends on the raising of strong, sane, smart children.
Speaker 2: Yes.
Speaker 5: But why should it only be women?
Sara Dustin: It isn't you know
Speaker 6: That's the cutting edge because we're seeing this happening in Scandinavia, you know if raising a family becomes a, if we move away from what you said and if the value system changes, so that raising a family and forcing their wives to go out and work.
Sara Dustin: It's my contact information is
Speaker 6: It has stability which are much harder to despise. And so that's a balance.
Sara Dustin: Sorry, what'd you say?
Speaker 6: Oh, we're all having a little corner discussion
Sara Dustin: I think it was misogyny the only real work is the work men do? That was the basic
Speaker 6: No, no, no. Not at all. But if you change the, I mean there are societies for sure where if you change the system of what is valued, the balance of men and women doing it will change. We've seen that happen even here. In other societies where men are more culturally dominant than they are in the United States. But there's another interesting factor though that I'm intrigued by and thinking of all the things, the points you're raising for sure. That you're putting together.
And there was an interesting article in The Economist magazine about the crook. The thing that's very interesting about service jobs is that they're actually quite hard to replace.
Sara Dustin: They're hard to do what?
Speaker 6: Replace.
Sara Dustin: Replace?
Speaker 6: Production can move to some other place and-
Sara Dustin: That's right, you only can do services here.
Speaker 6: Right.
Sara Dustin: Yes, you can't get the Chinese to do it for three dollars and not-
Speaker 6: Well, this is the interesting thing, that's an intrinsic value right? The fact that your job is more stable is part of its value, which may mean that the salary is going to be a little bit lower in return, because some of the value of it is that it's more stable.
Speaker 2: What about replacing them with ATM machines and self-checkout?
Speaker 6: And we need to be very careful, because nobody's brought up the artificial intelligence question yet. The booms, that ... but like healthcare worker, or someone of that sort today is much harder to replace in a low-paid manufactured version.
Speaker 2: Reading ...
Speaker 6: I know.
Speaker 2: Or that artificial intelligence reading X-ray
Sara Dustin: Do you know that all these fast food restaurants are run by 22 to 30 year olds for 10 dollars an hour or 12 dollars an hour?
Speaker 2: Oh my god.
Sara Dustin: And they're very bright and they do it and they're managerial. And that's what they're making. So anyway, I think I've come, okay the long migration of the mainstream housewife from the household to the labor force completed itself in 1989, and since then every increase in the feds interest rate designed to ward off and anticipate a resumption of double digit inflation because the employment rate has begun to fall has had to be rescinded because the onset of economic slowdown was so rapid. So, that was the part of women going into the workforce.
Okay, so coming ... what time is it?
Speaker 2: 4:15.
Speaker 3: It's 4:15.
Sara Dustin: Quarter past four, yeah I'm running late. Okay, a unified explanation of two interesting questions. Once the profound changes in the 21st century social economy that contributed to the current disconnect between low unemployment rates and runaway inflation are identified it becomes relatively easy to generate plausible solutions to the associated macro-economic mysteries of the current economy.
Corporate division of products profits from production to finance occurs because these enterprises no longer have anywhere else to where it makes sense to put them. The long term cumulative failure of the wages of their employees to keep up with the ever-increasing capacity of these employees to produce goods and services make it tough enough to sell what's already being made.
Corporate slow productivity growth is not anybody's fault or the failures of a complex economic mechanism. But primarily the natural consequent of the shift in employment from the production of goods to the performance of services in our domestic economy. Though the diversion of profits to finance also contributes. Economic growth has been so slow because since the stagnation of wages against productivity in 1973, conclusion of the con-sump-atory migration of the US mainstream have let another into the labor force in 1989. And the speed up of the growth of the service sector as a component of the labor market in the late 1990's, the effective buying power of approximately 32% of US households, to buy what they make has been declining every year.
We have managed to engineer ourselves into a demand for economy. Then I talk about the fact that the addition of a fifth of big change driving change and that is the replacement in 1973, 74, of the Keynesian microeconomic economists by supply side theorists, and as the dominant voices and shaping of public policy and I explained why because supply side economics reads classifies increases in wages as a threat to economic growth. And so it changed. So, on my Keynesian theory, which is neutral on subject of wages, supply side economics defines wage growth along with all other increases in the cost of doing business as dangerous to the bigger instability of the economy thus making wage suppression and active civil responsibility rather than an attack on it.
Okay. I wanted in the last part of my paper, the last four pages ... there is a theoretical objection to my assertion that rise in household income will lead entry of women, massive rise with the entry of women enabled could in effect actually create inflation. Theoretically in a perfectly competitive economy the additional worker from a household is that it generate enough product so that the additional income coming to the household is sopped up and there's no inflation.
However, we don't live in a perfectly competitive economy anymore. And in particular, we live in an economy where corporations and groups can individualize or monopolize in a product and charge what the market will bear. And in particular, there is the effect of the real estate market. One of the things I did early on was sit down and make a graph of the cost, I went to back the micro found, I looked at ads for houses in the conquer greater regional area. And I picked the highest priced houses, which I assumed would be a house in a good school district or a kind that an upper middle class person would want to buy. And then I also copied down, graphed the price of low class houses which probably would be bought by the working class.
Which didn't affect, were not affected by the women movement. Because the women's movement put the middle class up story and the upper middle class wife into the labor force much more the poorer women were already in. And I prodded this against the curve of inflation and the real estate people are not dummies. They know if a house has more income they can pay more for a house. And they got around all the regulations, which said you couldn't choose, you couldn't count the women's income or they would attribute it to someone else. When you range a sale.
And the slope of the inflation curve and the curve of the price of upscale houses between about '68 and '73, identical. Way down in the bottom there's a growth of the house for a lower working class person. So, it's the inelastic good, the good that you have to have if you're an upper middle class family. You got to have a good house and a good school district. Or if you don't have children, you got to have a house in a good neighborhood. Those are the houses that went up and that was the inflation driver.
The other ...
Speaker 5: You may need to be careful about that because just because two things look the same doesn't mean it's a causal relationship. You don't know which way it goes. So, observing that they are parallel to each other is really important, but accrediting a causal relationship is much harder.
Sara Dustin: That's true, you have to do a multi-factor timeline of these squares. However, there are problems with those too. You may not have everything.
Speaker 2: I think this goes back, so I had a very interesting experience as a college student, which I too took macroeconomics and was flunking it.
Sara Dustin: Oh my.
Speaker 2: And micro as well, until I came to the conclusion that they were using math to justify every intuition or what they thought must be true rather than using math to figure out what was true. And they would invent math to justify anything. So, in the particular case you are raising, it seems to me that the causal analysis intuitively is very strong. And it seems to me because as you point out economics is at the stage in its development where it is at best a soft science. We are heavily dependent on people with insightful intuitions. And the math is almost a validator, I'm curious does that relate to your comment? It seems like it has.
And I'm curious what you think about that, is economic, you were presenting-
Sara Dustin: Well I did in my lifetime do one multi-factor time with squares analysis. And it turns out I was interested in what was pushing minimum wages down. And I used the ratio of the money supply to GDP increasing as a stand-in for federal reserve raising interest rates and I got a very good score.
Speaker 2: Correlation.
Sara Dustin: But I didn't do, I have not done the work for this and I probably never will anymore, because I'm 81.
Speaker 2: Well, everything you have presented, and it goes back to thing you said at the beginning, that’s why I’m enjoying this so much, is that you see intuitive factors that seem to be clear and yet nobody has thought of. That no one has really is that thing you said at the beginning. Is that things seem to you they present themselves and you see it and as apparent, and yet they are not part of the conventional listing.
Sara Dustin: This is called iconic class economics. Its political economics. Okay, another two pages. One is the conclusions. The really interesting question from the women's point of view is why was the connection between the rise of the two-income household and inflation so invisible to the public economists of the period. And while misogyny appears to me as the mostly satisfying explanation, it probably is part of it.
I wouldn't suggest that this may be yet another consequence of professional inflexibility. It appears that the public economists of the 1960's early 1970's that were the Keynesians were unable to think about the possibility of a connection between the rapid growth of dual wager and household income and the equal rapid growth of inflation over exactly the same period, because they were locked into an eroded oversimplified and misapplied version of Keynesian economics.
By the 1970's Keynes specifically designed period down prescription for rebooting a depressed economy, which remains as powerful today in this context, had been transformed in the mind of the publicly acknowledged Keynesian authorities of the time into a universal blueprint imagining the health of the economy in any state of sickness or figure. Its central findings had become a mobilizing concrete in the form of a formulation, presents all economic growth solely dependent on four factors, and four factors only. The savings rates of households, the amount of capital investment by business, the balance of trade, and the sides of the federal deficit.
In this model these are also the sole generators of price increases. In this system there was no possibility that a change in the level of household income no matter how exogenous coming from the outside in origin could move the economy. Could move the economy. As an equivalent of GDP increases was treated solely as the outcome of the macroeconomic process, never a driver. And thus completely and exclusively determined by a change in one of these four factors.
The standard Keynesian graph of the macro born textbook cannot be used in any other way. What is interesting, I had a conversation in the lobby of the hotel in Boston where the conference, Steven Cunningham of the University of Connecticut, America's expert on economic history, he says Keynes himself actually experimented with the inclusion of changes of household income as a factor when he was working on his restarter prediction for depression. But he discarded it as irrelevant. He was just trying to write a prescription for getting out of depression.
Started it as irrelevant because in the greatest depression household income remained flat. So, it wasn't changing so it wasn't effective. So, the possibility that the addition of a second income to a rapidly increasing percent of the US households might be driving the economy and inflation was not an idea that could be comfortably entertained by a dedicated mid-century Keynesian.
The Keynesian authorities on the national economy conclusively demonstrated the virginity of their theoretical understanding of the macro-economy on the public stage in 1963, 64 when they proved completely baffled by said inflation. A crisis touched on by the decision of the newly organized, middle east oil producing nations to raise the price of anin elastic good that escaped gasoline which you're going to buy. Central to the functioning of our economy 10 fold in a few short months.
The textbook Keynesian model provides no framework for analyzing the macro-economic effects of the major change. And the cost of an essential commodity and apparently it did not occur to the Keynesian mandarins of the period to try and incorporate the work of other branches of economics from other schools into their model in order to generate a more broadly useful analytic tool. I mean Keynes never meant to prescribe for the economy as a whole.
As a consequence they where discredited and forced in 1973, and 74 to yield their position as the dominant public economists of the nation to supply side theorists who did have a credible if overtly simplified explanation. Because they only looked at the effect on supply, on cost of business. They did not look on what it would do to consumers who because they had to put in my marriage instead of putting 10 dollars into thw gas tank so my husband could get to work, we had to put 20, and I did not buy a new piece of clothing for myself or the kids or anyone for a whole year. And in that year the garment districts in New York City started to go bankrupt. That's how it works.
Unfortunately the supply side of economics which replaced its focus on replaced it, focused its primary attention on the cost of doing business while ignoring the role of demand also provides no ready structural framework for analyzing the impact of a major change in the growth rate of household income on the macro economy. So, it's a potential addition to the list of economic drivers. This factor has lingered in the theoretical shadows to this day as inaccessible to analysis under dominant successes to the Keynesians as it was to them.
And this is I argue, an important reason why it remains invisible to the social science of macroeconomics today. And this is the one, everything else I brought up, the wage productivity gap and movement from production employment to service employment. All of these things, you know I said good papers, I would notice a couple years, year and half a couple years later, the ideas would start percolating into the economy. And become accepted. But this one, the one that it was the massive increase of household income during the women's movement has not been picked up. Though I think it will because women are now getting really interested.
Okay I talked about the flaw in the blindside theory and what it did to the social context with how it destroyed the ... you're all leaving. How it destroyed the, it gave businesses permission not to share productivity growth with their employees. And what this did. So, I won't go further into that. Conclusions.
Wages in the bottom seven deciles of the US privately employed workforce are too low to support bigger healthy economic growth. Unless this is corrected, the economy will need to be propped up by extraordinary measures. Super low interest rates, high levels of deficit spending if it is to function with minimal acceptable stability. Two, the successfully died economy, the limber macro economists must pay close attention to the frequent alterations in the fabric of all of the human quality and modify theory accordingly. In particular, they must scrupulously inspect the mathematical relationships which have been generated by earlier research determined if they're still numerically correct on the current conditions.
Before using them as a basis upon which to calculate additional findings. They must also strive to maintain a perspective that is inclusive of all actors in the macro economy, including the housewife who's traditional power is the major purchasing agent for the household, and recently a non-traditional wage earner has been historically overlooked. And the largely ignored households of the sub-professional workforce.
In order to successfully meet the analytic needs of the evolving economy, we need to find ways to avoid entrapment in yesterday's solutions, and find a way to avoid investing ourselves so heavily in a body of classwork that impedes our flexibility to respond to the new. We also need, I believe to escape the recent trend towards the endless elaboration of econometric proof of small matters so we can invest our energies and devise in theories that work for now, and to ensure the future health of our profession, we need to find ways to teach beginners how to add this essential skill to their arsenal.