Brad DeLong: Worthy reads on equitable growth, May 18-24, 2018

Worthy reads at Equitable Growth:

  1. Austin Clemens and Heather Boushey: “Disaggregating growth: Measuring who prospers when the economy grows.” Equitable Growth’s computational social scientist and its executive director and chief economist write: “NIPA… were a radical advance in economic measurement when they were instituted…. The lack of data on how income is distributed is especially glaring now in the face of rapidly increasing economic inequality…. Instead of revolutionizing GDP, U.S. policymakers should evolutionize it… add an explicitly distributional component to GDP…”
  2. Hold it! Why does the spread of Microsoft Office shift workers away from “non-routine analytic” and toward “routine cognitive and routine manual” tasks? Read Enghin Atalay et al., “New technologies and the labor market,” in which the authors write that “most new technologies are associated with an increase in nonroutine analytic tasks, and a decrease in nonroutine interactive, routine cognitive, and routine manual tasks…. Through the lens of the model, the arrival of ICTs broadly shifts workers away from routine tasks, which increases the college premium. A notable exception is the Microsoft Office suite, which has the opposite set of effects…”
  3. I think that grappling with the work and legacy of John Kenneth Galbraith is a very important but rarely operated railway line within economics. So I put a signpost to it here: Brad DeLong: Galbraithian economics: Countervailing power edition.
  4. Jacob Robbins: “How the rise of market power in the United States may explain some macroeconomic puzzles,” in which the Brown University Ph.D. candidate in economics and doctoral fellow at Equitable growth writes: “Surprising… facts about… growth and rising… inequality…. 1. Financial wealth has increased… despite no real increase in… investment…. 2. The financial value of many firms now is permanently higher than the cost of their assets…. 3. These more valuable firms haven’t invested more…. 4. The average rate of return on capital has stayed steady while interest rates have dropped. 5. The share of income going to labor… has declined…. The driving force behind them is an increase in monopoly power together with a decline in interest rates…

Worthy reads not at Equitable Growth:

  1. Once again, from the University of Oregon, Mark Thoma’s Economists’ View continues to be the single best link aggregator in economic policy and theoretical economics: read him, and the things he links to.
  2. If you are in search of a very shrewd and informative take on the global tech industry, you ought to be reading—and perhaps subscribing to—the extremely sharp Ben Thompson. Read his Stratechery: “On the business, strategy, and impact of technology…”
  3. Interesting notes on how has degraded the quality of the public sphere because of (1) the addictive immediacy of its call-and-response, parry-and-thrust; (2) its counterproductive extreme brevity; and (3) its failure to invest in proper twitter aggregation tools can be found as asides in Paul Krugman: ”Monopsony, Rigidity, and the Wage Puzzle.”
  4. Women’s and Children’s Liberation Front Edition: Martha Bailey: “More Power to the Pill: The Impact of Contraceptive Freedom on Women’s Labor Supply.” These effects are remarkably large, and have held up to everything statistical that has been thrown at them: “The release of Enovid in 1960, the first birth control pill, afforded U. S. women unprecedented freedom to plan childbearing and their careers. This paper uses plausibly exogenous variation in state consent laws to evaluate the causal impact of the pill on the timing of first births and extent and intensity of women’s labor-force participation. The results suggest that legal access to the pill before age 21 significantly reduced the likelihood of a first birth before age 22, increased the number of women in the paid labor force, and raised the number of annual hours worked…”
  5. Daniel Schneider, Kristen Harknett, and Matthew Stimpson: “What Explains the Decline in First Marriage in the United States? Evidence from the Panel Study of Income Dynamics, 1969 to 2013.” The co-authors write that “Us[ing] individual and contextual measures of employment and incarceration to predict transitions to first marriage in the Panel Study of Income Dynamics (1969–2013)… [we] find that men’s reduced economic prospects and increased risk of incarceration contributed… although these basic measures… cannot explain the entire decline…
  6. David Glasner: “On Equilibrium in Economic Theory.” He writes that “F. A. Hayek… first articulated the concept… three noteworthy, but very different, versions… (1) an equilibrium of plans, prices, and expectations, (2) temporary equilibrium, and (3) rational-expectations equilibrium…. Hicks’s concept of temporary equilibrium… provides an important bridge connecting the pure hypothetical equilibrium of correct expectations and perfect consistency of plans with the messy real world in which expectations are inevitably disappointed and plans… revised…. Temporary-equilibrium… provide[s] the conceptual tools with which to understand how financial crises can occur and… be propagated…. The Lucasian idea of rational expectations… simply assumes away the problem of plan expectational consistency with which Hayek, Hicks and Radner and others who developed the idea of intertemporal equilibrium were so profoundly concerned…”
  7. Paul Krugman explains why the Trump administration is wrong in thinking our trade deficit with China means we would “win” a trade war, in “Why a Trade War With China Isn’t “Easy to Win.” He writes:It goes without saying that Trump is wrong about the economics of bilateral trade imbalances. But he’s also wrong about the political economy…. The political economy of trade is… mercantilist… driven largely by producer interests…. The genius of the postwar international trading system was that it harnessed this special-interest reality…. [But] in an era of complex international value chains… producers should care about… not how much they export but how much income they derive from exporting…”
  8. Very good people are working hard to explain Germany today. But put me down as suspecting strongly that not stressing the benefits of joining the euro at an undervalued parity leads this effort to be a Hamlet without the Prince of Denmark—Dalia Marin: “Explaining Germany’s exceptional recovery.” She writes that “Germany has transformed itself from ‘the sick man of Europe’ to an ‘economic superstar’, accounting for almost 8% of world exports. This column introduces a new VoxEU eBook that explores how Germany‘s extraordinary recovery came about. The contributors to the eBook find that changes in the labour market institutions and in firms’ business models as a result of trade liberalisation with Eastern Europe after the fall of communism explain Germany’s exceptional export performance. They also explain why Germany absorbed the ‘China shock’ more easily than other countries and why globalisation did not contribute to the rise in voting for the far right in Germany…”
  9. The person who may well be the leading candidate for the next president of the Federal Reserve Bank of San Francisco is Mary Daly. She says in “Economics is falling behind Stem on diversity” that “the discipline must stop treating women as if they were rare birds…”
  10. Mark Thoma sends us to Michael Strain telling businesses that if they want to hire more and better quality workers, they need to raise wages: “Don’t Fall for Employers’ Whining About a ‘Skills Gap.’” He points out that “wage growth is picking up, but it is lower than what many economists expect in light of overall economic conditions, and it is not soaring for specific industries. Simply put, if businesses can’t find workers… they should raise their wage offers…. So unless wage growth picks up, the warnings about labor shortages will fall flat…”

May 24, 2018


Brad DeLong
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