Things to Read at Night on July 24, 2014

Should-Reads:

1. Aida Caldera Sánchez et al.: Improving Well-Being in the United States: “Life is quite good in the United States compared to other OECD countries, thanks to strong economic growth and technological progress having lifted average income to high levels. Nonetheless, there is evidence that the benefits from growth have not been sufficiently broad based. Self-reported happiness increases with income, an issue particularly resonant in a country with among the highest levels of income inequality in the OECD and a pattern of inequality that appears to be moving toward even more concentration at the very top at the expense of the middle class and the poor. Working hours that remain among the longest in the OECD are also creating challenges for work-life balances, child education, personal care and leisure. These pressures are contributing to higher job strain and work-related stress with unhealthy consequences, including for mental health, and a detrimental impact on employability and medical costs. While these trends cannot be easily reversed, a number of policy options are being usefully rolled out and other initiatives are being considered: federal-level policies improving access to health care and early-childhood education, state-level initiatives favouring workplace flexibility, firm-level investments in job quality and greater attention to the health consequences of job-stress. If successfully adopted, they would go a long way toward improving the well-being of American working families…”

2. Cory Doctorow: When all the jobs belong to robots, do we still need jobs?: “Where Tufekci’s analysis falls short is in her willingness to think outside the market box. She implies that the solution to this all is some kind of market reform, but doesn’t suggest that, perhaps, markets can’t efficiently organize abundant things–only scarce things. If we persist in the view that the dividends from robots’ increased productivity should accrue to robot owners, we’ll definitely come to a future where there aren’t enough owners of robots to buy all the things that robots make…. There’s a real scarcity of economists willing to think about the possibility that abundance makes markets obsolete altogether. Property rights may be a way of allocating resources when there aren’t enough of them to go around, but when automation replaces labor altogether and there’s lots of everything, do we still need it?…”

3. James Heckman (2010): I could tell you a story about… Milton Friedman. In the nineteen-seventies, we were sitting in the Ph.D. oral examination…. After he’d left, Friedman turned to me and said, ‘Look, I think it is a good idea, but these guys have taken it way too far.’ It became a kind of tautology that had enormously powerful policy implications, in theory. But the fact is, it didn’t have any empirical content. When Tom Sargent, Lard Hansen, and others tried to test it using cross equation restrictions, and so on, the data rejected the theories. There were a certain section of people that really got carried away. It became quite stifling…. The further down the food chain you go, the more the zealots take over…. We knew Keynesian theory was still alive in the banks and on Wall Street. Economists in those areas relied on Keynesian models to make short-run forecasts. It seemed strange to me that they would continue to do this if it had been theoretically proven that these models didn’t work…. The underlying ideas of the Chicago School are still very powerful. The basis of the rocket is still intact. It is what I see as the booster stage–the rational-expectation hypothesis and the vulgar versions of the efficient-markets hypothesis–that have run into trouble…. People got too far away from… confronting ideas with data…. When Friedman died… we had a symposium…. Lucas was talking about rational expectations…. One woman… said, ‘Look at the evidence on 401k plans and how people misuse them, or don’t use them. Are you really saying that people look ahead and plan ahead rationally?’ And Lucas said, ‘Yes, that’s what the theory of rational expectations says, and that’s part of Friedman’s legacy.’ I said, ‘No, it isn’t. He was much more empirically minded than that’…” Via Lars Syll

4. Jesse Rothstein: Is the EITC as Good as an NIT? Conditional Cash Transfers and Tax Incidence: “The EITC is intended to encourage work. But EITC-induced increases in labor supply may drive wages down. I simulate the economic incidence of the EITC. In each scenario that I consider, a large portion of low-income single mothers’ EITC payments is captured by employers through reduced wages. Workers who are EITC ineligible also see wage declines. By contrast, a traditional Negative Income Tax (NIT) discourages work, and so induces large transfers from employers to their workers. With my preferred parameters, $1 in EITC spending increases after-tax incomes by $0.73, while $1 spent on the NIT yields $1.39…” Via Owen Zidar

And:

• Claire Cain Miller: How Technology, Aided by Recession, Is Transforming the Work World
• Margot Sanger-Katz: Two Americas on Health Care, and Danger of Further Division

Should Be Aware of:

2. Thomas Ricks: Why Am I Moving Left?: “In my late 50s, at a time of life when most people are supposed to be drifting into a cautious conservatism, I am surprised to find myself moving steadily leftward…. During the time I was a newspaper reporter, I didn’t participate in elections, because I didn’t want to vote for, or against, the people I covered. Mentally, I was a detached centrist…. But since leaving newspapers, I have again and again found myself shifting to the left… wondering just what happened to this country over the last 15 years, and what do to about it…. Our wars in Afghanistan and Iraq were the first big shocks…. Torture. I never expected my country to endorse torture…. How we fought. I never thought that an American government would employ mercenaries in a war. And yet we did this in Iraq by hiring thousands of armed ‘security contractors’ who in practice were subject neither to local law nor to the American military justice system, and so could and often did treat Iraqis badly…. Intelligence officials run amok…. Growing income inequality…. The middle class used at least to get lip service from the rich—’backbone of the country’ and such. Now it is often treated like a bunch of saps not aware enough to evade their taxes.”

Already-Noted Must-Reads:

1. Guido Matias Cortes et al.: The Micro and Macro of Disappearing Routine Jobs: A Flows Approach: “The U.S. labor market has become increasingly polarized since the 1980s, with the share of employment in middle-wage occupations shrinking over time. This job polarization process has been associated with the disappearance of per capita employment in occupations focused on routine tasks. We use matched individual-level data from the CPS to study labor market flows into and out of routine occupations and determine how this disappearance has played out at the ‘micro’ and ‘macro’ levels. At the macro level, we determine which changes in transition rates account for the disappearance of routine employment since the 1980s. We find that changes in three transition rate categories are of primary importance: (i) that from unemployment to employment in routine occupations, (ii) that from labor force non-participation to routine employment, and (iii) that from routine employment to non-participation. At the micro level, we study how these transition rates have changed since job polarization, and the extent to which these changes are accounted for by changes in demographic composition or changes in the behavior of individuals with particular demographic characteristics. We find that the preponderance of changes is due to the propensity of individuals to make such transitions, and relatively little due to demographics. Moreover, we find that changes in the transition propensities of the young are of primary importance in accounting for the fall in routine employment…”

2. James Pethokoukis: The weird obsession that’s ruining the GOP: “Call it doomsday prepper economics. For more than five years, many Republicans and conservatives have warned that catastrophe is nigh. Washington’s deficit spending and the Federal Reserve’s excessive money printing will lead to a financial crisis worse than the Great Recession, they prophesied. Inflation will skyrocket, the dollar will collapse, and the Chinese will dump treasuries, they swore. As Ron Paul, the libertarian former GOP congressman and presidential candidate, said back in 2009: ‘More inflation is absolutely the wrong way to go. We’re taking a recession and trying to turn it into a depression. We’re going to see a real calamity’. Many GOP politicians have since echoed Paul’s prediction. But the Next Great Inflation never happened….
    
   “The inflation alarmism driving them is taking a weird turn…. Conservative author Amity Shlaes approvingly cites ShadowStats as supporting her thesis that ‘inflation is higher than what the official data suggest’. Others fans include conservative intellectual Niall Ferguson, Sen. Tom Coburn (R-Okla.), and a good chunk of the conservative blogosphere. ShadowStats’ popularity on the right is crazy…. If GOP inflationistas had their way, the weak U.S. recovery would almost surely be even weaker. Just look at Europe…. Why this GOP inflation obsession? Maybe it’s a legacy of how rapidly rising prices in the 1970s swept conservatives into power in both America and Great Britain. Maybe it’s how many conservative talk radio shows are sponsored by gold companies who stand to benefit from inflation hysteria. Maybe it’s a belief that every single economic metric must be a nightmare under President Obama. But whatever the reason, the GOP’s preoccupation with phantom price increases is distracting it from the actual problems afflicting the U.S. economy…”

3. Eric Chemi and Ariana Giorgi: For CEOs, Correlation Between Pay and Stock Performance Is Pretty Random: “With all the public chatter about exorbitant executive compensation and income inequality it’s useful to look at the relationship between chief executive officer pay and corporate performance. Typically, when the subject of their big pay packages arises, CEOs—usually through their spokespeople—say they are paid for performance. Does data back that up?… Equilar ranked the salaries of 200 highly paid CEOs. When compared to metrics such as revenue, profitability, and stock return, the scattering of data looks pretty random…. Check the comparison of the ranking of the 200 CEOs Equilar looked at to their company’s stock returns…. If ‘pay for performance’ was really a factor in compensating this group of CEOs, we’d see compensation and stock performance moving in tandem…. They certainly wouldn’t look like this…”

4. Brian Buetler: The Adler-Cannon Halbig v. Burwell Argument Is a Fraud–Just Ask Scott Brown: “It is now an article of faith on the right that Congress meant to condition the subsidies as an inducement to states, but overestimated the power of that inducement. I suspect many of the people advancing this claim realize that it is false, and are engaged in an elaborate gaslighting campaign. Others have probably convinced themselves that they are correct…. They need both an elaborate theory of legislative intent, and judges who are happy to treat the theory as plausible, even though it makes no sense. They’ve now found two such judges. Maybe their argument will carry in the Supreme Court, too. Or maybe the conservative justices will just say Congressional intent doesn’t matter and rule against the government anyhow. (I still tend to think that the government will prevail, assuming the case ever reaches the Supreme Court.)
    
   “But as far as… what Congress intended… there can be no debate. You can ask the people who wrote the bill. You can ask the reporters who chronicled the legislative process…. You can ask state officials, who were advised that federal Medicaid dollars were conditional upon the Medicaid expansion (as originally envisioned) but not that the subsidy dollars were conditional upon establishing an exchange…. You can ask Democratic legislators…. Or you can ask Scott Brown. When he was still a senator from Massachusetts, Brown sponsored legislation with Senator Ron Wyden of Oregon to hasten the availability of Wyden’s State Innovation Waivers…. Neither the existence of the waiver program, nor the desire among members to hasten its implementation, are consistent with the idea that Congress intended to allow states to essentially waive out of these same requirements simply by doing nothing…”

5. Ezra Klein: Paul Ryan’s Poverty Plan: “P
   The most important idea in Paul Ryan’s poverty plan reverses the most important idea in Paul Ryan’s budgets. Those budgets… [made] deep cuts to spending on programs for the poor the cornerstone of Republican fiscal policy… cut spending on the programs that fight poverty. Ryan’s poverty plan is… a sharp break with his budgets… an attempt to change the Republican Party’s view–a view driven, in large part, by Paul Ryan and his budgets–of what to do with programs for the poor….
    
   “This was a bit like hearing the Kool-Aid Man say that he only ever drank Kool-Aid for the money, and in truth, he thinks kids should drink more tap water, instead. But… this is a return to Ryan’s roots. Though he’s made his name as the GOP’s chief crusader against deficits… Ryan’s actual record… included a series of votes that massively increased the deficit… to wrench policy… conservative… George W. Bush’s tax cuts… the war in Iraq… the unfunded Medicare Prescription Drug Benefit. Prior to Barack Obama’s presidency, Ryan was best known for the Social Security Personal Savings Guarantee and Prosperity Act… $2.4 trillion in additional costs over the first 10 years… [that] the Bush administration ultimately dismissed… as ‘irresponsible’…”