UMass Econ in the News

Gerald Friedman, UMass Amherst economics professor, commented in a story about price-cutting in the art market.  According to the article, the art market has been effected by the current world-wide economic slump and, in response, galleries are offering more significant discounts and asking artists to lower their prices.  Friedman comments on how this price-cutting may be perceived.  “Price is a signal of quality and your commitment that this is good art,” said Friedman. “If you cut the price, it sends a signal that this is not a desirable product. If you are an investor, cutting the price is a sign that no one is going to buy it in the future.” If someone wants to buy work by a particular artist, he stated, they will pay the going rate, rather than switch to other artists.  (Huffington Post, 2/26/10)

Gerald Friedman, UMass Amherst economics professor, was quoted in a story by the Daily Hampshire Gazette.  According to Friedman, the nation will need a four percent economic increase to support a significant addition of jobs.

Daily Hampshire Gazette
Experts say ‘vicious cycles’ near end, on the way
By Kristin Palpini

Estimates for how much the economy may grow in 2010 range from about 2 percent to 3 percent, which signifies a slight improvement in gross domestic product over last year.

It isn’t quite enough to prompt a large wave of hiring. Gerald C. Friedman, a UMass economics professor, said the nation needs about a 4 percent economic increase to support a significant addition of jobs.

“There will be acceleration in 2011, but you need to bring down unemployment and you need about 2 million jobs to do that,” he said.

The Dollars and Sense blog featured Ben Bernanke’s undeservedly easy week. Bernanke got a pass for reappointment from the Senate Banking Committee and was named Time’s Person of the Year for 2009. The blog post featured the comment of UMass Econ Professor Gerald Friedman.

Bernanke, Time, Senate Banking Committee by Dollars and Sense
I asked Jerry Friedman, who wrote Bernanke’s Bad Teachers for our July/August issue, to give us his reaction to Time’s announcement. Here’s what he had to say:

In picking Ben Bernanke as Person of the Year, Time Magazine recognizes the man responsible for the little good and much bad that has characterized policy the worst economic crisis since the 1930s. When President George W. Bush appointed him to succeed Alan Greenspan as head the Federal Reserve, Bernanke was Chair of the President’s Council of Economic Advisors and an acknowledged acolyte of Milton Friedman. Like Friedman and Greenspan, Bernanke believes in “Say’s Law” or the principle that individual action through markets will eliminate unemployment. To Bernanke, the current crisis was caused by government mistakes, particularly the misalignment of currencies and the subsequent Chinese savings glut which, when it flowed into the United States housing market, led to an unsustainable real-estate boom. To address the subsequent financial crisis, Bernanke has been willing to move very aggressively but his actions have stopped with the Wall Street bailout because he sees no broader ramifications of the crisis. Confident in free-market capitalism, there is, for Ben Bernanke, no problem with free capital markets, no concern that growing income inequality or changing industrial policy may be undermining effective demand, and no reason, therefore, to revisit the conservative and pro-business policy decisions made during the neo-liberal era that began in the 1970s.

In this month’s Dollars and Sense, UMass Professor of Economics Gerald Friedman offers a clear, chilling, and historically informed assessment of how the Crisis of 2008 will continue into 2010 and beyond as the States, hobbled by limited fiscal capacity, will be forced to cut jobs and public services.

The Economic Crisis in the States — By Gerald Friedman — Dollars and Sense: Real World Economics

… without serious action, a sharp drop in government employment, with a loss of a million jobs or more, is what we can expect over the next year. This has implications for the economy as a whole and also for the well-being of large parts of the American public who depend on state and local government services. Two intrinsic features of the American system of government come together to threaten a social disaster: the limited capacity of state and local governments to spend beyond their immediate revenues even in the harshest economic crises, and our peculiar federal system in which education and social services are largely funded by local and state authorities rather than by the federal government, with its deep pockets and ability to spend beyond its revenues as needed to maintain existing services….