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Scott Krisiloff, CFA

 
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  • Could There Be A Silver Lining To Declining Labor Force Participation? [View article]
    I agree with your logic in many ways, and that's why this article was meant to focus on the dynamics of the labor market specifically. On that front I am willing to defend the idea that a structurally shrinking labor pool benefits those who remain in the labor pool.

    Of course, you have to believe that the labor pool is an accurate representation of those who want to work. If people who are counted as having exited the labor pool are actually still marginally attached to it, then it is likely that new job openings or higher wages would attract these individuals back into the labor pool. This would complicate the argument that a smaller labor pool gives more bargaining power to laborers because in fact the labor pool isn't actually smaller on anything other than an accounting basis.

    I think that because the labor market deals with human lives there is a reluctance to analyze it in the same fashion that you would analyze any other market for goods and services. However I think it's obvious that holding demand constant if a good becomes in relatively short supply the price should rise. If the good is readily producible then enough supply should come to market to meet the demand at a market clearing price at which the cost of the good matches the societal value of the good. IN THEORY.

    At all this article is really saying is that a declining labor force participation rate is a sign of a labor market trying to find an equilibrium. There is an abundance of labor in the market for a variety of reasons. And on some level the cost of hiring an additional laborer is above the marginal productivity that an entrepreneur/capitalist expects to receive from hiring that laborer. One would expect that this would put pressure on wages.

    Unemployment by definition exists because some people choose not to take a job at a prevailing market rate. Sometimes the "bid" and "ask" are very far apart because of the slack in the market. For example, as a business owner I would be happy to employ any unemployed person for $1 annual salary. I am positive that I could earn a return on that investment. However, no laborer would ever accept that wage and rightfully so. It's not worth their time. Therefore rather than be employed by me at a rate that is not worth their time, they choose to be unemployed or exit the workforce.

    From a societal perspective I understand your point that you could maximize GDP in the current period through full employment. But this doesn't take into account the present and future costs of production in the future period. There is a cost to full employment that may not meet the marginal benefit of full employment. Tangibly speaking let's for the sake of argument say that the point of maximum productivity is at a 7.5% unemployment rate. Let's say it costs $50,000 to employ the marginal worker but they only produce $20,000 of extra benefit. No profit maximizing entrepreneur would hire this worker. To the extent that the wage is an adequate reflection of the societal cost of hiring the worker taking into account a pricing structure which should theoretically incorporate the present value of demand from all future generations, society as a whole loses if that worker is highlighted, perhaps not in today's GDP but in tomorrow's and the next day's.

    All of this is in theory (bolded, underlined and italicized), but all economic theory is not completely useless.
    Apr 11 04:48 PM | Likes Like |Link to Comment
  • Could There Be A Silver Lining To Declining Labor Force Participation? [View article]
    Thanks Tom,

    Honestly, we all agree on the limits of the regression. See my response to Jesse99 above.

    This is mostly a qualitative piece, but I always like to have some data to support the analysis, unlike some others who may or may not have commented here...
    Apr 10 02:10 PM | 1 Like Like |Link to Comment
  • Could There Be A Silver Lining To Declining Labor Force Participation? [View article]
    I'll take the under on 101 million. Do you really believe that everyone who chooses not to work wants to work but just can't find a job?

    Believe it or not, some people choose not to work, for example, a stay at home parent.
    Apr 10 02:07 PM | Likes Like |Link to Comment
  • Could There Be A Silver Lining To Declining Labor Force Participation? [View article]
    Please re-read the third sentence of this article which acknowledges that negative views of declining participation are justified. This article is meant to put forth one positive view that you may not be thinking of.

    Economics has many short comings, especially in trying to describe short term fluctuations. Properly applied it only makes sense over the very long term. I'd rarely put a pure academic in charge of anything, but in running the economy I'd take a good economist over a good lawyer any day.
    Apr 10 02:03 PM | Likes Like |Link to Comment
  • Could There Be A Silver Lining To Declining Labor Force Participation? [View article]
    Yet you felt the need to mention that you went to U Chicago...

    If you can pass the CFA in your sleep then I suggest you do so. It would be a much more productive thing for you to do with your life than troll around the message boards at Seeking Alpha.
    Apr 10 01:55 PM | Likes Like |Link to Comment
  • Could There Be A Silver Lining To Declining Labor Force Participation? [View article]
    Thank you Dave for your truly obnoxious commentary. You are cool.
    Apr 10 01:54 PM | Likes Like |Link to Comment
  • Could There Be A Silver Lining To Declining Labor Force Participation? [View article]
    Actually that's not at all what this analysis is saying. But yes, if there were only one person working in an economy, that individual would likely be the wealthiest person in the world.

    Take for example a deserted island on which there are two people. One person lays on the beach all day and the other gathers food. Which one is relatively wealthier?

    Note: This says nothing about societal welfare. Both people would likely be better off if both were working and shared/divided their labor.
    Apr 10 01:53 PM | Likes Like |Link to Comment
  • Could There Be A Silver Lining To Declining Labor Force Participation? [View article]
    Fair enough. I'm ordinarily not a huge fan of time series analysis either, but this isn't a scientific study (there is of course no science in the social sciences). The chart is just some light evidence to support the thesis which is mostly qualitative.
    Apr 10 01:51 PM | Likes Like |Link to Comment
  • Google/Motorola: Patent Hoarding Is a Sign of a Mature Tech Industry [View article]
    I appreciate the thoughtful comment Jorge. I went back to the WIPO site and pulled some more specific industry level data. You can find the analysis here:

    avondaleassetmanagemen...

    WIPO doesn't break patent data into US Patent Office classes unfortunately, so I couldn't show the data for the individual classes you highlighted.
    I agree that the high level data wont tell you everything you need to know about the quality of the patents, but I think the data is pretty interesting on its own.
    Aug 17 07:53 PM | Likes Like |Link to Comment
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