Month: June 2014

Productivity and Potential Output Before, During, and After the Great Recession: “U.S. labor and total-factor productivity growth…

…slowed prior to the Great Recession. The timing rules out explanations that focus on disruptions during or since the recession, and industry and state data rule out “bubble economy” stories related to housing or finance. The slowdown is located in industries that produce information technology (IT) or that use IT intensively, consistent with a return to normal productivity growth after nearly a decade of exceptional IT-fueled gains. A calibrated growth model suggests trend productivity growth has returned close to its 1973-1995 pace. Slower underlying productivity growth implies less economic slack than recently estimated by the Congressional Budget Office. As of 2013, about 3⁄4 of the shortfall of actual output from (overly optimistic) pre-recession trends reflects a reduction in the level of potential.

Mike Konczal (2011): Examining the Limitations of a Neoliberal Safety Net: “What are the differences between our current [social democratic] approach and the Romney [neoliberal] approach?…

…The first difference is that the unemployment insurance savings accounts don’t actually involve what the liberal government does best: social insurance. There’s no risk pooling…. Whether or not you view the ideology of insurance as sound actuarial reasoning or as a form of solidarity doesn’t matter because the actual mechanisms of insurance don’t exist…. The second is that redistribution in the Romney suggestion is quietly upwards, towards the richest, instead of obviously towards those in need…. The third is that it weakens the power of the unemployed…. A fourth is that it is hard to scale outwards in cases of emergency…. And the fifth and last point is that it removes the idea of the government from the equation of people dealing with economic risks. Like much of the ‘submerged’ state, people will look at private savings accounts and think that the government isn’t doing anything…. There’s no social to this program and thus no politics and thus no real political constituency for it…. This is my quick read, and I’d really enjoy your thoughts.  What do you think about the difference of the two approaches?

Should-Reads:

1. Steve Benen: Are our memories really so short?: “[Edward-Isaac Dovere of] Politico published a piece over the weekend about President Obama’s challenges in Iraq, which was otherwise unremarkable except for a quote…. That [Doug] Feith disagrees with the Obama administration hardly comes as a surprise, but what was striking… [was that] Politico presents Feith’s condemnations as if they have value… as a credible voice whose assessments of U.S. policy in Iraq have merit. The article never mentions, even in passing, that Feith was a national laughingstock during his tenure in the Bush/Cheney administration, getting practically everything about U.S. policy in Iraq backwards. General Tommy Franks, the former Commander of the U.S. Central Command, once famously referred to Feith as ‘the dumbest f—ing guy on the planet’…”

2. Tim Duy: FOMC Preview: “My baseline expectation is minimal policy changes this week.  Moreover, my baseline remains a still long period of low rates.  I think the Federal Reserve would like to hold onto the ‘low wage growth means plenty of slack and no inflation’ story as long as possible. Watch also the geopolitical risk, as that will tend to reinforce the Fed’s existing path. Overall, the situation altogether still argues for the first rate hike in the second half of next year. The Fed’s low rate story, however, will come under increasing pressure as the Fed gets closer to reaching its policy goals. And that pressure will only intensify if growth does in fact accelerate. That leaves me feeling that the risk to my baseline assumption is that the first rate hike comes sooner than currently anticipated…’

3. Jose Pagliery: Comcast is turning your home router into a public Wi-Fi hotspot: “Anyone with an Xfinity account can register their devices (laptop, tablet, phone) and the public network will always keep them registered–at a friend’s home, coffee shop or bus stop. No more asking for your cousin’s Wi-Fi network password. But what about privacy? It seems like Comcast did this the right way…. What if you hate the idea of your private boxes turned into public hotspots? You can turn it off by calling Comcast or logging into your account online. The company says fewer than 1% of customers have done that so far.”

4. Jared Bernstein: Labor Supply and the Poor: Some Facts That Might (or Might Not) Surprise You: “Of the about 21 million, non-disabled poor adults, half worked (and another 3 million did not work because they were in school)…. It is definitely the case that the poor work less than the non-poor–which is one of the reasons they’re poor, of course. Among non-poor adults (again, 18-64), 81% worked in 2012…. Still… the idea that the poor don’t work, or work very little, is clearly wrong. Moreover, in the latter 1990s, when demand for low-wage workers was uniquely strong, employment rates and hours worked among the poor and near-poor reached historical highs…. These facts… belie the idea that our safety net is a hammock or that the structure of benefits* prevents the poor from working.”

Should Be Aware of:

• Alec MacGillis: “The Unelectable Whiteness of Scott Walker: A journey through the poisonous, racially divided world that produced a Republican star…”
• David Jacobs: “Most research examining growing income inequality in the United States has focused on economic causes, for seemingly obvious reasons. But a new study suggests… the politically-induced decline in the strength of worker unions may play a much more pivotal role… larger than many of the favorite explanations offered by economists, such as the education gap…”
• Dylan Matthews: The successful 70-year campaign to convince people the USA and not the USSR beat Hitler
• Sebastian Thrun: “Introducing Nanodegrees: Industry credentials for today’s jobs in tech: Credentials built and recognized by industry leaders to advance your career…”
• Kate Erbland: Phil Lord and Chris Miller’s Closing Credits Are Always Awesome
• Jim Edwards: This Google Search For ‘Coconut Flour’ Shows Why Amazon Needed To Make A Smartphone
• Jonathan Parker: “Governments around the world are searching for macro-stimulation instruments…. Rebate-type payments policies generate substantial increases in demand for goods and services. In particular, a large portion of tax rebates are spent rapidly on arrival…”

And:

1. Athanasios Orphanides: The Euro Area Crisis: Politics Over Economics: “The dominant role of politics in decisions made by euro area governments during the crisis. Decisions that appear to have been driven by local political considerations to the detriment of the euro area as a whole are discussed. The domination of politics over economics has led to crisis mismanagement. The underlying cause of tension is identified as a misalignment of political incentives. Member state governments tend to defend their own interests in a noncooperative manner. This has magnified the costs of the crisis and has resulted in an unbalanced and divisive incidence of the costs across the euro area. The example of Cyprus is discussed, where political decisions resulted in a transfer of about half of 2013 GDP from the island to cover losses elsewhere. In the absence of a federal government, no institution can adequately defend the interests of the euro area as a whole. European institutions appear weak and incapable of defending European principles and the proper functioning of the euro. Political reform is needed to sustain the euro but this is unlikely to pass the political feasibility test with the current governments of Europe.”

2. Lucas W. Davis and Catherine Hausman: The value of electricity transmission: Evidence from a power plant closure: “Estimating the economic value of energy transmission is difficult because investments in transmission capacity are endogenous to market conditions. This column presents recent research that takes advantage of a natural experiment to generate a credible counterfactual. The unexpected closure of the San Onofre Nuclear Generating Station in California increased generation costs by $350 million per year; it also led to increased carbon emissions worth $320 million annually…”

3. Matthew Yglesias: The mess in Iraq proves Obama was right to leave: “Iraq’s government draws support from the country’s majority Shiite community, possesses the considerable advantages of being an internationally recognized sovereign state, has access to vast oil revenue, and is able to avail itself of weapons and training provided by the United States of America during a years-long period of tutelage. So why is it unable to field a military force capable of standing up to the numerically smaller, poorer, worse-equipped, and less-trained fighters of the Islamic State of Iraq and the Levant (ISIS)? Congressional Republicans know the answer: Barack Obama…. The logic on display here shows the toxic self-justifying nature of American military adventures. If a war accomplishes its stated objectives, that goes to show that war is great. If a war fails to accomplish its stated objectives — as the Bush-era surge miserably failed to produce a durable political settlement in Iraq — then that simply proves that more war was called for…”

Already-Noted Must-Reads:

1. Mark Thoma: What’s the Penalty for Pundits Who Get It Wrong? “I would separate those who are honestly wrong from those who take a misleading position (or one they know is wrong) for political purposes. There should be consequences in both cases, those who are honestly wrong again and again should come to be ignored, but those who intend to mislead and deceive should face much higher penalties. As it stands, there’s hardly any penalty at all for telling people what they want to hear even if there is no basis for it, or misleading people to accomplish a political agenda…”

2. Jonathan Chait: Today’s Obamacare Non-Train-Wreck News: “One of the many, many, many predictions of Obamacare failure made by conservatives is that insurance companies would systematically drop out of the exchanges. They made this prediction many, many, many, many, many times…. [But] insurance companies are joining the exchanges…. As Larry Levitt explains, this is a big deal for the success of the program…. I have made this point repeatedly, but it’s fundamental enough to bear repeating: The information environment surrounding Obamacare is fundamentally asymmetrical. The liberal policy wonks reporting on the program have made a good faith and highly successful effort to depict both the good and the bad news about the program in context. Conservatives, even the most wonkish ones, have engaged in a one-sided propaganda effort. If you get your news about Obamacare from conservative sources, you have heard an endless succession of horror predictions that, when not borne out, have gone uncorrected. The bottom line is that the program is doing what it was designed to do…”

3. Adrianna Macintyre: The Most Depressing Graph in American Health Care:

4. Peter Orszag: Why Have Americans Stopped Moving?: “Americans are much less mobile than we think. Almost 70 percent of us who were born in the U.S. still live in the state of our birth, as only 1.5 percent of population moves across state borders [each year], a rate lower even than that of our parents. When we do move, it is… [to] the sun… [for] housing… [but] the biggest draw… is a job…. In the late 1980s, about 3 percent of Americans moved to a new state each year…. Raven Molloy… Christopher Smith… and Abigail Wozniak… find a strong link between lessening interstate migration and downward trends in the share of workers who move from job to job. And… changing employers no longer leads to as much gain in wages…. One troubling possibility is that it may be a decline in dynamism in the U.S. economy. A more auspicious explanation is that workers are increasingly able to find an ideal employer early in their careers…”

5. Aaron Carroll: Zombie arguments defending the US healthcare system: “There’s a new Commonwealth Study that ranks the US pretty poorly. Nothing new there. Nothing new to some of ways that people defend the US. So let’s dispense with them in rapid fashion. 1) Survival rates shouldn’t be used to defend the US…. Now I’ve got a video…. 2) Infant mortality differences aren’t because of different measurements. I covered that here. 3) It’s fun, perhaps, to point out anecdotal evidence of England neglecting patients, but that doesn’t mean that they don’t beat us in quality metrics in some areas. Here’s a video on the NHS. If you want to argue the US is awesome, go ahead, I suppose. But don’t use these arguments. They’re zombies.”

The Estimable Andrew Kelly writes some words well worth reading:

Andrew Kelly: Let’s Clarify The “College Is Worth It” Conversation: “The current debate about higher education has reached an odd status quo….

We’re questioning whether college is “worth it” at the same time that completing some form of postsecondary education is more important to economic success than ever before….

In trying to make sense of the noise…. Going to College ≠ Completing College…. That wage premium shows the value of completing college, not the value of going to college. What if you’re one of the 45 percent of students who don’t finish a degree within six years?… Millennials with some college or an associate’s degree out-earn their high school-educated peers by just $2,000…. Tell a prospective student that yes, completing college is, on average, worth the time and money. But not all postsecondary options are created equal, so choose the one that reflects your talents and abilities and gives you the best chance of success. And if you choose to go, work your tail off to make sure you finish….

Researchers have tended to compare college graduates with debt to a strange counterfactual: college graduates who don’t have debt…. But this comparison ignores the relevant counterfactual…. How do graduates with debt compare to non-graduates without debt?… [And= you know who does worst of all?… Those who took on student loan debt but failed to graduate. They have accumulated about 14 percent of the wealth that graduates with debt have. This is where the real student debt crisis lies…

From an individual point of view, the questions are:

1. Could you finish a two-year program that opens doors in three years or less?
2. Could you finish a four-year program in five years or less?

If the answers are “yes”, go for it. If the answers are “no”, don’t. And if you go for it, make sure you do finish: otherwise you will be behind the eight-ball in what looks to be for the foreseeable future a much worse job market, especially for the young, relative to our reasonable expectations than America has ever seen before.

For public policymakers, the questions are more complicated and subtle. There are six groups:

1. Those who would finish college whether or not college were made more affordable, who will be windfall gainers from policies to make college more affordable.
2. Those who would not attempt college unless college were made more affordable, but who would complete it if it were–these are the people at whom the policy is directed.
3. Those who would not attempt college unless college were made more affordable, but who would attempt it if it were but would fail to complete it–these are the losers from the policy.
4. Those who would attempt college but not finish it anyway–these are small gainers because more-affordable college reduces their student loan debt.
5. The taxpayers who pay for government policies to make college more affordable.
6. The academic administrators, faculty, entrepreneurs, and businesses who skim off their share from policies that make college more affordable.

We want policies to make college more affordable that maximize the number of and the value for people in group (2), and we are happy at the reduced debt burden on those in group (4).

We are really unhappy if such policies lead to an increase in the number of those in group (3), and we are also unhappy at the existence of groups (1) and (6), for the redistribution of the money of group (5) to them is a societal bad.

How large are the money flows between these six groups, and how large are groups (2) and (3), and how much extra education do groups (2) and (3) get?

Those are the questions that discussions of education policy should focus on. Yet when I look at the literature, those are not questions the answers to which I find readily.

Maybe I am lazy, or slow, or looking in the wrong places. But, still, it seems obvious to me that demand for these answers is (or should be) large: why does it not call forth the supply?

Aaron Carroll: Zombie arguments defending the US healthcare system: “There’s a new Commonwealth Study…

that ranks the US pretty poorly. Nothing new there. Nothing new to some of ways that people defend the US. So let’s dispense with them in rapid fashion. 1) Survival rates shouldn’t be used to defend the US…. Now I’ve got a video…. 2) Infant mortality differences aren’t because of different measurements. I covered that here. 3) It’s fun, perhaps, to point out anecdotal evidence of England neglecting patients, but that doesn’t mean that they don’t beat us in quality metrics in some areas. Here’s a video on the NHS. If you want to argue the US is awesome, go ahead, I suppose. But don’t use these arguments. They’re zombies.

Peter Orszag: Why Have Americans Stopped Moving?: “Americans are much less mobile than we think…

…Almost 70 percent of us who were born in the U.S. still live in the state of our birth, as only 1.5 percent of population moves across state borders [each year], a rate lower even than that of our parents. When we do move, it is… [to] the sun… [for] housing… [but] the biggest draw… is a job…. In the late 1980s, about 3 percent of Americans moved to a new state each year…. Raven Molloy… Christopher Smith… and Abigail Wozniak… find a strong link between lessening interstate migration and downward trends in the share of workers who move from job to job. And… changing employers no longer leads to as much gain in wages…. One troubling possibility is that it may be a decline in dynamism in the U.S. economy. A more auspicious explanation is that workers are increasingly able to find an ideal employer early in their careers…

Adrianna Macintyre: The Most Depressing Graph in American Health Care:

Jonathan Chait: Today’s Obamacare Non-Train-Wreck News: “One of the many, many, many predictions of Obamacare failure…

…made by conservatives is that insurance companies would systematically drop out of the exchanges. They made this prediction many, many, many, many, many times…. [But] insurance companies are joining the exchanges…. As Larry Levitt explains, this is a big deal for the success of the program…. I have made this point repeatedly, but it’s fundamental enough to bear repeating: The information environment surrounding Obamacare is fundamentally asymmetrical. The liberal policy wonks reporting on the program have made a good faith and highly successful effort to depict both the good and the bad news about the program in context. Conservatives, even the most wonkish ones, have engaged in a one-sided propaganda effort. If you get your news about Obamacare from conservative sources, you have heard an endless succession of horror predictions that, when not borne out, have gone uncorrected. The bottom line is that the program is doing what it was designed to do…”

Mark Thoma: What’s the Penalty for Pundits Who Get It Wrong? “I would separate those who are honestly wrong…

…from those who take a misleading position (or one they know is wrong) for political purposes. There should be consequences in both cases, those who are honestly wrong again and again should come to be ignored, but those who intend to mislead and deceive should face much higher penalties. As it stands, there’s hardly any penalty at all for telling people what they want to hear even if there is no basis for it, or misleading people to accomplish a political agenda.