Brad DeLong: Worthy reads on equitable growth, August 17–23, 2018

Worthy reads from Equitable Growth:

  1. Antitrust law and policy is probably the most “relatively autonomous” piece of our whole legal system. The laws as enacted by Congress and signed by the president change rarely and slowly. How those laws are enforced—and how business is then conducted in the shadow of the possibility of resort to the courts for antitrust cases—changes much more radically and substantially. It is a dance of intellectual fashion, some serious benefit-cost analysis, and a great deal of lobbying and lobbying-funded motivated reasoning. My view is that the answers to the three questions Michael Kades suggests the Federal Trade Commission examine are: yes, no, and no, respectively. But it is very good that the FTC is thinking about this. Read Michael Kades in “Equitable Growth comments to the Federal Trade Commission on the agency’s proposed competition hearings,” in which he writes: “Equitable Growth suggests that the hearings include the following three topics: Is monopoly power prevalent in the U.S. economy? Do the antitrust laws as applied by the courts correctly balance the benefits and costs of deterring anticompetitive conduct and permitting procompetitive conduct? Does the Federal Trade Commission have the resources it needs to fulfill its competition mission?”
  2. Paul Krugman, in “How’s That Tax Cut Working Out” writes that “As Greg Leiserson of the Washington Center for Equitable Growth points out, ‘every month in which wage rates are not sharply higher than they would have been absent the legislation, and investment returns are not sharply lower, is a month in which the benefits of those corporate tax cuts accrue primarily to shareholders’. A tax cut that might significantly raise wages during, say, Cynthia Nixon’s second term in the White House, but yields big windfalls for stock owners with only trivial wage gains for the next five or 10 years, is not what we were promised.” See Greg Leiserson, “Assessing the economic effects of the Tax Cuts and Jobs Act,” in which he writes: “Key takeaways: An assessment … should focus on the impact … on wage rates … [on] the return on business investment, and … [on] future federal budget deficits, as these will determine the impact … and the fiscal sustainability of the law.”
  3. Very much worth listening to are Heather Boushey, Helaine Olen, and Katie Denis on WHYY’s Radio Times: “Americans vs Vacations,” in which they note: “Half of American workers didn’t take all the paid vacation days they were entitled to in 2017. Why are so many of us unwilling or unable to take the vacation days that we’ve earned?”
  4. Pooling multiple case studies using synthetic controls: An application to minimum wage policies” was the first working paper the Washington Center for Equitable Growth published. It did not get the attention it deserved then. So why not hoist it? In it, Arindrajit Dube and Ben Zipperer write: “We assess the employment and wage effects of minimum wage increases between 1979 and 2013 by pooling 29 synthetic control case studies.”
  5. Darrick Hamilton is asking the right questions. And he might have the right answers. But I suspect not. Yes, there is something very deep in America’s culture that discourages public responsibility for the conditions of poor and especially poor black Americans, to the country’s shame. Adam Smith in 1776 wrote in The Wealth of Nations that: “no society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity … that they who feed, clothe, and lodge … the people, should … be themselves tolerably well fed, clothed, and lodged.” We today can replace his “greater part” with “substantial part,” and it is still true. But I suspect that the health gaps between high-status, high-income, and high-wealth African Americans and their white peers have other origins—not that I know what those other origins are, mind you. Read Darrick Hamilton, “Post-racial rhetoric, racial health disparities, and health disparity consequences of stigma, stress, and racism,” in which he writes: “High achieving black Americans, as measured by education, still exhibit large health disparities.”
  6. Adam M. Guren, Alisdair McKay, Emi Nakamura, and Jon Steinsson, in “Housing wealth effects: The long view” write that they “exploit systematic differences in city-level exposure to regional house price cycles” in their recent Equitable Growth working paper. Really surprised that there is no evidence of boom-bust asymmetry here. I am going to have to dig into what reasonable alternatives are and how much power they have.

Worthy reads not from Equitable Growth:

  1. Noah Smith wonders if he can make a supply-and-demand argument to people who are allergic to “supply and demand” with a spoonful of sugar. He has three types of housing: newly built yuppie fish tanks, old housing that can switch between working class and yuppie, and newly built “affordable housing” unattractive to yuppies. Read Noah Smith, “Yuppie Fishtanks: YIMBYism explained without ‘supply and demand’,” in which he writes: “YIMBYism is the idea that cities need to build more housing in order to relieve upward pressure on rents.”
  2. One year ago today, Alice Wu’s research about sexism at an online economics forum made the news. Read Claudia Sahm: “Alice in Wonderland.”
  3. Dick Schmalensee says in “Handicapping the High-Stakes Race to Net-Zero” that “Economists argue that a broadly applicable incentive-based system … could reduce emissions at a much lower total cost than any alternative regime. Incentives to reduce emissions could be produced directly by a tax on emissions or through … cap-and-trade system. But the argument for relying primarily on financial incentives has historically not been very persuasive. … Even in California and the European Union, where cap-and-trade systems for CO₂ have been established, so-called “ancillary” or “belt-and-suspenders” policies that target particular sectors or sources have also been deployed.”
  4. Read Kimberly Adams, “The disturbing parallels between modern accounting and the business of slavery,” in which she writes: “The common narrative is that today’s modern management techniques were developed in the factories in England and the industrialized North. … According to … Caitlin Rosenthal, that narrative is wrong.”
  5. Yuriy Gorodnichenko, Debora Revoltella, Jan Svejnar, and Christoph Weiss, in “Dispersion in productivity among European firms,” employ “firm-level data from all EU countries to explore how the dispersion of resources affects macroeconomic performance.”
  6. This is the most hopeful take on American productivity growth relative stagnation I have seen. I thought it was coherent and might well be right 20 years ago. I think it is coherent and might possibly be right today. But is that just a vain hope? Read Michael van Biema and Bruce Greenwald (1997), “Managing Our Way to Higher Service-Sector Productivity,” in which they write: “ What electricity, railroads, and gasoline power did for the U.S. economy between roughly 1850 and 1970, computer power is widely expected to do for today’s information-based service economy.”
  7. Thiemo Fetzer in “Did Austerity Cause Brexit?” finds that “the rise of popular support for … UKIP … strongly and causally associated with an individual’s or an area’s exposure to austerity since 2010.”
  8. Interesting. The question is always: do you make money by devoting effort to selling people things they will be happy they bought, or do you make money by devoting effort to selling people things they will be unhappy they bought—by grifting them? And what determines the balance of providing value versus deception in selling commodities aimed at different income classes? I am not sure they have it right here, but I am sure that this is very important. Read James T. Hamilton and Fiona Morgan, “Poor Information: How Economics Affects the Information Lives of Low-Income Individuals,” in which they explore “how information is produced for, acquired by, and utilized by low-income individuals.”
  9. I concur with Noah Smith here that the biggest dangers of machine learning are not on the labor but on the consumer side. They won’t make us obsolete as producers. They could make us easier to grift as customers. Read Noah Smith, “Artificial Intelligence Still Isn’t All That Smart,” in which he writes: “Machine learning will revolutionize white-collar jobs in much the same way that engines, electricity and machine tools revolutionized blue-collar jobs.”

August 23, 2018


Brad DeLong
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