So the cobra equation has made me re-evaluate many things about the Effective demand research.
The main cause was that the graph of the Cobra equation was showing that capital utilization would increase from this point on. I was assuming that as employment increased, that the utilization of capital would also increase. That is a mistake. The graph shows that capital will be less utilized as labor is more utilized at this point.
So here is the revised graph...
The blue dots show the economy moving from 2009 until 2nd quarter 2013. The blue oval shows the projected range of the equilibrium point where profit maximization crosses the effective demand limit.
I was projecting a lower limit of 7% for unemployment, but that was based on capital utilization rising. Now I have to reconfigure how low unemployment might go.
The recent theoretical focus is nice to see. I just hope it is put into an appropriate context. I have no doubt that this approach can catch a lot of flak if not grounded in some empirical data.
Despite this, the models I've constructed using your findings (and the corresponding data) backs you up.
Best Regards.
Posted by: David | 10/21/2013 at 09:50 PM
David,
Would you want to publish your models? We can do that.
Posted by: Edward Lambert | 10/22/2013 at 08:57 AM
Edward,
They're not as rigorous as I'd like them to be. When they are I'll be sure to let you know. I'm considering looking into the labor share of different countries and the impact on their economies.
David
Posted by: David | 10/22/2013 at 11:18 AM
David,
That would be great. Labor share in other countries can be a frustrating number to work with. I have not given it much time. I have focused on the US in order to develop the equations and the model.
Then someday the model can be applied to other countries. And if you use these models for other countries, we will turn to you for that information.
Posted by: Edward Lambert | 10/22/2013 at 11:37 AM