A Different Perspective

I've been reading Justin Fox's new book The Myth of the Rational Market. It is excellent. It covers the intellectual history the economic and finance theories that created the Great Crash of 2008. Specifically, the idea that the market is composed of homo economicus, that markets are "rational", that the statistics are normal (and not power law distributions, i.e. with "fat tails), etc. He introduces you to the cast of characters who fell in love with their own theories and ended up creating the theories that made the Wiley Coyote moment of September 2008 inevitable, the moment where the market looked down, found no support, and crashed.

I liked the book so much, that I decided to start reading Justin Fox's blog. And right away I'm tickled pink because he deals with my favourite subject: Canada...

Here in the U.S., stock market investors seem thrilled that the pace of job losses slowed a bit in August. Guess what happened up in Canada? Payroll employment actually increased by 27,000 jobs (0.2%) in August, driven by gains in retail and wholesale trade and in financial services. Canadian economists weren't falling over themselves in excitement about the report—full-time employment actually decreased for the month, for one thing—but compared to the job picture here, things are looking awfully good North of the Border.

A couple weeks ago Barbara addressed the question of why this is, and came up with the reasonable answer that Canada's recession has been less severe than ours because its financial system didn't nearly melt down, and its recovery has been quicker in part because its economy is more closely tied to commodities exports. But I got an e-mail this morning from House Minority Leader John Boehner's office with the subject line, "New Jobs Numbers Require Dems to Drop Plans for Job-Killing Government Takeover of Health Care, Boehner Says," and that got me thinking. In Canada, where government took over health care long ago, employers don't really have to worry about health-care costs when they hire new workers. In the U.S., they worry a lot. Could that explain Canadian employers' comparative alacrity in switching from firing mode back to hiring?

I love to tweak the tail of our big neighbor to the south. And here's Fox doing it for me!

He has a great "gotcha" on Boehner who wants to present health care as a "job killer". Nuts! As Justin Fox points out, having a solid national health care plan makes it easier for businesses to re-start hiring.