Brad DeLong: Worthy reads on equitable growth, August 31–September 6, 2018

Worthy reads from Equitable Growth:

  1. A working paper that I thought was very good but that, for some reason, did not get a lot of attention is “The wages of care: Bargaining power, earnings and inequality” by Nancy Folbre and Kristin Smith, who write: “The earnings of managers and professionals employed in care industries (health, education, and social services), characterized by high levels of public and non-profit provision, are significantly lower than in other industries.” My take was always this was overwhelmingly because “feminized” occupations have low pay.
  2. Another working paper from our past that should have gotten more buzz than it did is “The U-shape of over-education? Human capital dynamics & occupational mobility over the life cycle” by Ammar Farooq, who writes: “the proportion of college degree holders working in occupations that do not require a college degree is U-shaped over the life cycle and … there is a rise in transitions to non-college jobs among prime age college workers.” Yes, “overeducation” is a thing.
  3. Applause for our attempt to focus on the broader implications of rising monopoly. Read Noah Smith, “Economists Gear Up to Challenge the Monopolies,” who writes: “The antitrust movement is making a comeback. … Think tanks like the Washington Center for Equitable Growth are starting to zero in on the issue as well.” Also read “How the rise of market power in the United States may explain some macroeconomic puzzles” by co-author and former Equitable Growth visiting fellow Jacob Robbins, who writes: “Gauti Eggertsson, Ella Getz Wold, and I at Brown University argue that these diverse trends are closely connected, and that the driving force behind them is an increase in monopoly power together with a decline in interest rates.”
  4. Homeowner bankruptcy and foreclosure are liquidity events, not solvency events, argue Peter Ganong and Pascal Noel in “Liquidity vs. wealth in household debt obligations: Evidence from housing policy in the Great Recession.” They write: “We use variation in mortgage modifications to disentangle the impact of reducing long-term obligations with no change in short-term payments (‘wealth’), and reducing short-term payments with approximately no change in long-term obligations (‘liquidity’).”

Worthy reads not from Equitable Growth:

  1. A plea for economists and policymakers to focus on unionization, societal priorities, and worker bargaining power—rather than speculate about “artificial intelligence” trends that are, really, probably 50 years away from achieving criticality. Read Sarita Gupta, Stephen Lerner, and Joseph A. McCartin’s “It’s Not the ‘Future of Work,’ It’s the Future of Workers That’s in Doubt,” in which they write: “Nearly every discussion of labor’s future in mainstream media quickly becomes mired in a group of elite-defined concerns called ‘The Future of Work.’”
  2. This former president of the Minneapolis Fed has become one of the very best Fed watchers and Fed analysts. Read Narayana Kocherlakota’s “The Fed Should Prepare for the Unexpected,” in which he writes: “The staff paper downplayed and Powell ignored what I see as the most important risk.”
  3. Read Kevin Drum’s “Technology Is the Key to Success, But Probably Not the Technology You Enjoy,” in which he writes: “I’d put it more bluntly: unless they’re forced to at the point of a metaphorical gun … service-sector managers are lazy … in a very specific way: they don’t really understand technology.” Yet, somehow, manufacturing managers learned to understand electricity in the 1920s and 1930s. How? Why? According to Kevin’s theory, it was that they were forced to learn or watch their firms disappear in the Great Depression.
  4. Sociological distance, the present and the legacy of past discrimination, and preventive treatment in Oakland, California, means that perhaps 20 percent of the black-white cardiovascular health gap is due to the fact that black patients are seen by sociologically distant white doctors. Read Marcy Alsan and her co-authors’ working paper “Does Diversity Matter for Health? Experimental Evidence from Oakland,” in which they write: “We study the effect of diversity in the physician workforce on the demand for preventive care among African-American men.”
  5. I disagree with Jeff Frankel in his column “The Depth of the Next US Recession,” in which he writes “Whatever the immediate trigger of the next US recession, the consequences are likely to be severe. … Pro-cyclical fiscal, macro-prudential, and even monetary policies … [leave] authorities …in a weak position to manage the next inevitable shock.” My take is that the Federal Reserve has not been doing a good job since 2010. Its central task as of 2010 was to get the U.S. economy rapidly back to full employment at a configuration of economic variables that would give it a short-term safe nominal interest rate of 5 percent or more so it would have room to properly fight the next recession whenever it should come. You could argue that the rest of the government makes it impossible for the Fed to do a good job. But you cannot argue that the Fed should be satisfied with the job it has done since 2010.

September 6, 2018


Brad DeLong


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