Brad DeLong: Worthy reads on equitable growth, August 31–September 5, 2019

Worthy reads from Equitable Growth:
 

1. Looking forward to this: “Please join us Oct. 30th for Programs w/a Purpose with @HBoushey, Pres./CEO of @equitablegrowth. She will discuss her book [Unbound: How Inequality Constricts Our Economy and What We Can Do about It],” in which she will discuss how “many fear that efforts to address inequality will undermine the economy as a whole … but the opposite is true: rising inequality has become a drag on growth and an impediment to market competition. Unbound breaks down the problem and argues that we can preserve our nation’s economic traditions while promoting shared economic growth.” (An invitation to the official launch of Unbound on September 18 is here.)
2. Worth highlighting from last January, as even U.S. businesses begin to worry that our system gives too much a share of good things to shareholders. Read Greg Leiserson, “Wealth taxation: An introduction to net worth taxes and how one might work in the United States,” in which he writes: “Probably the most significant challenge in implementing a net worth tax is that determining tax liabilities requires a valuation for all of the assets subject to the tax … Such a tax would impose burden primarily on the wealthiest families—reducing wealth inequality—and could raise substantial revenues … the United States taxes wealth in several forms already. Thus, the policy debate is less about whether to tax wealth and more about the best ways to tax wealth and how much it should be taxed. A net worth tax could be a useful complement to—or substitute for—other means of taxing wealth, as well as a tool for increasing overall taxation of wealth.”
3. From 2 years ago, Liz Hipple saying very smart things about what is at stake in the debate over antitrust policy. Read her “Understanding the importance of antitrust policy for U.S. economic competitiveness and consumer choice,” in which she writes: “Changes in antitrust policy’s presumptions about the competitive consequences of increases in concentration … over the past 50 years [have] shifted from a viewpoint that held that even modest increases in concentration would result in above-competitive prices and profits to one in which it was believed that tougher merger standards sacrificed cost efficiencies, which presumably would be passed along to consumers. While antitrust policy has moderated somewhat from that so-called Chicago school view, the FTC enforcement data from 1996 through 2011 nonetheless demonstrate that there has continued to be a shift away from merger enforcement actions in all but the most concentrated markets. Furthermore, while the latest merger guidelines, published in 2010, emphasize the multiplicity of relevant factors beyond just cost efficiencies in evaluating the likelihood of possible harms from a merger, they also further relax the thresholds for the levels and changes in concentration at which a merger might be presumed to lessen competition.”

Worthy reads not from Equitable Growth:

1. There are many proposals to revamp education in economics and to get economists to their right place in the public sphere—whatever that “right place” might turn out to be. The highly estimable Martin Wolf is here, on the side of those who think that economics ought to focus on basic principles, arresting stories, and big data as a way of figuring out which stories are, in fact, representative of broader trends. He is critical of over-mathematization and, more so, of over-theorization. I, at least, am reminded of Larry Meyer’s take on Robert Lucas’s brand of economics: “In our firm, we always thanked Robert Lucas for giving us a virtual monopoly. Because of Lucas and others, for two decades, no graduate students are trained who were capable of competing with us by building econometric models that had a hope of explaining short-run output and price dynamics. [Academic economics Ph.D. programs] educated a lot of macroeconomists who were trained to do only two things—teach macroeconomics to graduate students, and publish in the journals.” Read Martin Wolf, “Why Economists Failed as “Experts”—and How to Make Them Matter Again,” in which he writes: “Michael Gove was wrong, in my view, about expertise applied in the Brexit debate. But he was not altogether wrong about the expertise of economists. If we were more humble and more honest, we might be better recognized as experts able to contribute to public debate … At bottom, economics is a field of inquiry and a way of thinking. Among its valuable core concepts are: opportunity cost, marginal cost, rent, sunk costs, externalities, and effective demand. Economics also allows people to make at least some sense of debates on growth, taxation, monetary policy, economic development, inequality, and so forth. It is unnecessary to possess a vast technical apparatus to understand these ideas. Indeed, the technical apparatus can get in the way … The teaching of economics to undergraduates must focus on core ideas, essential questions, and actual realities. Such a curriculum might not be the best way to produce candidates for Ph.D. programs. So be it. The study of economics at university must not be seen through so narrow a lens. Its purpose is to produce people with a broad economic enlightenment. That is what the public debate needs. It is what education has to provide.”
2. The very sharp Barry Eichengreen has a theory of why President Donald Trump wants to put ex-tight money advocate Judy Shelton on the Federal Reserve Board. It is certainly a more plausible and sensible theory of what he is aiming at than any other theory that I have seen put forward. But I fear that it is wrong: Understanding a word or deed of the Trump administration from the standpoint that there is a coherent vision of the world from which it is plausible and sensible seems deeply flawed to me. Read Barry Eichengreen, “Trump’s Cross of Gold,” in which he writes: “Shelton is a proponent of fixed exchange rates. Her belief in fixed rates is catnip to an administration that sees currency manipulation as a threat to winning its trade war. Team Trump wants to compress the U.S. trade deficit and enhance the competitiveness of domestic manufactures by using tariffs to raise the price of imported goods. But a 10 percent tariff that is offset by a 10 percent depreciation of foreign currencies against the dollar leaves the relative prices of U.S. imports unchanged … Thus, the challenge for Team Trump is to get other countries to change their policies to prevent their currencies from moving. That’s what the demand for stable exchange rates and an end to ‘currency manipulation’ is all about … But in the absence of a global conference—something that would be anathema to Trump—the way to get there is the same as under the 19th century gold standard … If the United States moves first, ‘preemptively’ as Shelton puts it, other countries will follow. Behind this presumption, however, lie a number of logical nonsequiturs. First, other countries show little desire to stabilize their exchange rates … Second, gold is no longer a stable anchor … Today … the stabilizing capacity of the mining industry is weaker … Arguments for a gold standard and pegged exchange rates are deeply flawed. But there is a silver lining, as it were: nothing along these lines is going to happen, Governor Shelton or not.”
3. Very interesting work on gender peer effects in U.S. graduate education. Read Valerie K. Bostwick and Bruce A. Weinberg, “Nevertheless She Persisted? Gender Peer Effects in Doctoral STEM Programs,” in which they write: “We study the effects of peer gender composition, a proxy for female-friendliness of environment, in STEM doctoral programs on persistence and degree completion. Leveraging unique new data and quasi-random variation in gender composition across cohorts within programs, we show that women entering cohorts with no female peers are 11.9 percentage points less likely to graduate within 6 years than their male counterparts. A 1 standard deviation increase in the percentage of female students differentially increases the probability of on-time graduation for women by 4.6 percentage points. These gender peer effects function primarily through changes in the probability of dropping out in the first year of a Ph.D. program and are largest in programs that are typically male-dominated.”
4. Here’s a piece of evidence that affirmative-action programs do not, in fact, harm beneficiaries via mismatch. Read Joshua D. Angrist, Parag A. Pathak, and Román Andrés Zárate, “Choice and Consequence: Assessing Mismatch at Chicago Exam Schools,” in which they write: “The educational mismatch hypothesis asserts that students are hurt by affirmative action policies that place them in selective schools for which they wouldn’t otherwise qualify. We evaluate mismatch in Chicago’s selective public exam schools … show that … mismatch arises because exam school admission diverts many applicants from high-performing Noble Network charter schools, where they would have done well … Exam school applicants’ previous achievement, race, and other characteristics that are sometimes said to mediate student-school matching play no role in this story.”