Over My Shoulder | Mauldin Economics

Over My Shoulder

Robots Are Us: Some Economics of Human Replacement

February 26, 2015

Serious economists are starting to ask whether the Luddites were right all along.

On that note, the latest paper from Benzell, Kotlikoff, LaGarda, & Sachs will likely have a big impact on the policy discussion re robotics & automation.

They take a decidedly negative view on the economic implications of automation, arguing that – without a serious policy intervention – putting a large share of the population out of “good work” will drag on consumption over time and lead to prolonged economic declines. And they are already calling for "highly tailored skill- and generation-specific redistribution policies” to keep the robots at bay.

While I spend a lot of time worrying about the implications of a lasting shock to low- & medium-skilled labor (which is a very real concern), we desperately need thoughtful policy and regulation that will address the needs of workers initially left behind while encouraging the entrepreneurship and explosive productivity growth that can carry us forward as a society.

History has shown that entrepreneurship and innovation can dramatically raise overall living standards while creating new, more productive, and (over time) higher-wage jobs for otherwise displaced workers… but the lack of an entrepreneurial solution to the developed-world labor shock (from globalization) since the end of the Cold War suggests that new and better jobs will only come if the right incentives are present… and if those workers attain new skills that are relevant to the digital age.

I firmly believe that some countries will miss out on the benefits of the Robolution as populist movements hijack governments – through the ballet or by the bullet – and enact policies that discourage automation. The end result is that many economies will likely be left behind while others take a giant leap forward.

We need to think long and hard about these ideas from a policy perspective… while getting in on the investable opportunities today. The Age of Automation is just beginning and will be a MAJOR macro theme for the rest of our lifetimes. As we have already seen with internet-related businesses, expect booms & busts along the way.

Download - Benzell_Kotlikoff_LaGarda_Sachs_-_Robots_are_Us.pdf

David Zervos: When you get the money, you get the power

February 25, 2015

The Greek response is a huge joke. Total can-kicking and political cover. Syriza is in trouble.

Some very astute comments on Greece from David Zervos attached. Here's a snippet:

Before turning away from Greece I must say that I did enjoy reading the Varoufakis homework assignment released Monday evening. It was a finely crafted apology letter which, if implemented in any economy, would be a huge economic success. I particularly liked this passage:

"....Reduce (a) the number of Ministries (from 16 to 10), (b) the number of 'special advisors' in general government; and (c) fringe benefits of ministers, Members of Parliament and top officials (e.g. cars, travel expenses, allowances)."

Lefties cutting government programs, who would have thought?? Maybe we need a few neo-libertarian Marxists in Washington!!"

And I thought I would just cut and paste Joan McCullough's note here:

An eternally astute observer who obviously doesn’t get much shut-eye, J, kindly forwarded me copies of some written response from the IMF and the ECB.  To the proposals from the Greek government and a copy of that as well.
Judge Judy would say that the proposal is a buncha’ “who shot John?”  LOL.  But seein’ as how I get paid by the word, allow me to elaborate:
The Greeks, in their 6 page “menu”, went hog-wild “Thesaurus”.   The result reads like an outline for a term paper.  A high school term paper.   Among their vast usage, the following verbs: 
Enhance, modify, advise, strengthen, staff, reform, limit, broaden, modernize, enforce, improve, work towards, adopt, devise, augment, review, control, calibrate, not roll back, commit, respect, unify, achieve, expand, develop, phase in, remove, pursue, align, operationalize, activate, establish, rationalize, promote and evaluate. 
And the following nouns:
new culture, compliance, amendments, steps, openness, transparency; legislation, revenues, process, independence, high wealth, large debtors, inspections, audits, collection, pension funds, income, corruption, smuggling, prices, corruption, arrears, schemes, default, policies, non-performing loans, banks, privatizations, gas, electricity, practices, shelter, nourishment, health services, energy, fuel, tobacco and humanitarian crisis.
It is a grand plan, make no mistake about it.  But nothing more than an outline. And a loose one at that.  They envision a lot.  But it’s unclear how they’re gonna’ get there.  Which fact, believe it or not, their taskmasters may have picked up on.  J

Draghi, in his response letter, indicated that it was a good starting point .  He backed that assessment up by acknowledging the lack of concrete measures it contained.  But gave the Greeks quarter, pointing out that they had little time to get the proposal slapped together.

Draghi stated that the Greeks will be held to the current MOU and the MEFP (Memorandum of Economic and Financial Policies).  And pointed out that Monday’s proposal varies somewhat from the terms of these agreements.  His bottomline:  Take a nothin’ done unless after review, it is determined that the new terms offered by the Greeks are of equal or better quality “in terms of achieving the objectives of the programme”.  Cute. Consider that the “out” if they need one later.

Closed by advising Greece to shake a leg.

Lagarde wrote similarly in that she views the proposal as a good starting point as well.  Noting that the Euro members get to put their 2 cents in as well.

She encouraged the new government’s more aggressive approach to fighting tax evasion and corruption.

And then she got serious.

To wit:  the MEFP on which Draghi gave them an eentz of leeway. 

Lagarde gave them none as she does not appear willing to budge on this existing agreement.  And cited specific areas which the Greeks mentioned in their proposal but which they also failed in their proposal … to commit to.  She is talking about “reforms”.  Labor, VAT, privatization, pensions, to cite a few areas of concern.  And used the compound adjective “already-agreed”.

Her tone was a bit impatient, though civil.

And there you have it.  Hopefully, the beginning of a four-month respite.


The Greeks wrote 6 pages of baloney. 

The IMF and the ECB punched their ticket.

And in so doing, allowed the clock to keep tickin’. 

Which is a fine objective with a fair outcome, if you ask me. 

We just gotta’ hope that nobody else acts up.  Next case.

Download - 150225_Zervos.pdf

Joan McCullough: Numbahs +, Feb. 19, 2015

February 19, 2015

I can’t forward Joan McCullough’s notes to you very often as she charges her clients a princely sum, but she lets me share her musings every now and then. Some of you might be able to get your firms to put her into the research budget.

Anyway, she gives us two notable points, one having to do with the currency battle that we are in as everyone tries to export their deflation, and the other concerning the godawful Producer Price Index yesterday, which went into outright deflation, even ex food and energy – all across the board. She has a link to the PPI, and it is worth looking through. Even though rates are stupid low, it is going to be hard to find the nerve in that room full of doves to do anything about them.

Download - n2-19-15.pdf

Kiron Sarkar: China

February 16, 2015

Kiron Sarkar sent me this note, which is part of a round-robin email discussion on China. I have left some personal notes in there as I think they help you understand why I read him so closely. He really is wired in and smart and has a few decades of experience in the investment wars.

Download - Sarkar_-_China.pdf