Sunday, February 27, 2011

Let's do a standard Krugman correction

In this case, Krugman is passing along the Baker analysis of returns on public pensions. In it, Krugman refers to the Risk Free Rate of return. What he means is the shape of the yield curve under equilbrium conditions. Behind this assumption is that distribution has minimized redundancy, and all economic components are operating with standard uncertainty. The value is constant because standard uncertainty is biologically determined.

Unfortunalely, and Krugman knows this, the public sector is one of the components that has to reach equilibrium to get the risk free return, and public sector unions  are not at equilibrium..

Public sector unions are keeping us from equilibrium. How do I know? Because they consume 80% of the public taxes in California, California on the edge of bankruptcy and has been for quite some time. California, acording to our elected Governor, cannot reach equilibrium unitl we lay off a whole bunch of public sector unions employees. California is due to pay 15% of the DC debt, and cannot do so until it reaches equilibrium.

Krugman is playing  the expectations game. The idea is to convince us that Public Sector Unions earn their risk free rate, and once convinced, then he can go ahead and update the national accounts and say all is well, it must be somebody else's fault.  We also call this the Great Exogenous religion.

This is theory of economics based on deception.  If public sector unions could always get the risk free rate, then why do they need the Dills Act?

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