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The relationship between unemployment and inflation, at least as measured by official statistics, has not behaved in a Keynesian-style way for a decades. And yet even today, many economists are of the view that once the unemployment rate falls below an “optimal” rate--called the Non-Accelerating Inflation Rate of Unemployment (NAIRU)--it sets off

Many government-produced statistics carry the label “seasonally adjusted.” What does this mean? It indicates that the statisticians, based on a wrongheaded theory of macroeconomic fluctuations, have swept the data clean of certain variations that are said to distort the underlying reality economists are seeking to study. But neither the theory nor

Are American workers becoming more productive? It would be nice to know, but it is a difficult question to answer. Notwithstanding pretensions to scientific accuracy, the data used to measure productivity are unreliable. According to a recent announcement by the US Labor Department, workers productivity in the non-farm sector increased at an

According to the efficient markets hypothesis, stock market prices move in response to new, unexpected information. Since, by definition the unexpected cannot be known, it implies that an individual’s chances of anticipating the general direction of the market are as good as anyone else’s chances. It is thus suggested that since the future

To gain an insight into the economic future, many economists follow a variety of consumer and business surveys. In these surveys, randomly selected consumers and businessmen are asked to provide their views about where the economy is heading. If a survey shows that the majority are optimistic, this is supposed to be good news for the economy.

As the economic boom continues to fizzle, pundits have theorized that the downturn results from a drop in demand for goods and services. This is said to drive the business sector to unprofitability, which then further depresses stocks and commerce generally.  The policy recommendation follows logically: government and its central bank must step in

President Bush says that the projected budget surplus makes his proposed $1.6 trillion tax cut “affordable,” but his tax-cut plan won’t truly benefit the American people until he deals with the problem of government spending. In fact, for the fiscal year starting October 1, Bush has proposed a spending increase of 4 percent, or $25.7 billion, on

At the March meeting of the Fed’s Open Market Committee, officials expressed concern that consumers might boost their savings, thereby weakening or even aborting the economic expansion. Most economists concur with the view that what keeps the economy going is consumption expenditure.  Furthermore, it is generally held that spending, rather than

On June 27, citing the downturn in economic activity, the Fed announced that it had lowered the target for the federal funds rate by 0.25 percent, to 3.75 percent. Since January, the U.S. central bank has lowered its target by 275 basis points. Can aggressive lowering of the federal funds rate prevent the U.S. economy from falling into a

To gain insight into the state of an economy, most people rely on a statistic called Gross Domestic Product (GDP). The GDP framework looks at the value of final goods and services produced during a particular time interval, usually a quarter or a year. This statistic is constructed in accordance with the view that what drives an economy is not the