Brad DeLong: Worthy reads on equitable growth, November 2-8, 2018

Worthy reads from Equitable Growth:

  1. If I did not have to teach next Wednesday, I would be at this event: “Building a New Consensus on Antitrust Reform” Wednesday, November 14, 2018 at noon. Here’s the invite pitch: “Please join the Washington Center for Equitable Growth … for a conversation on reforming federal antitrust law [with] Sen. Amy Klobuchar (D-MN), Ranking Member of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights, [who] will deliver keynote remarks. … RSVP is required by Friday, November 9.”
  2. This is a remarkably nihilistic column from Bob Solow, a member of Equitable Growth’s Steering Committee. Read his “A Theory Is a Sometime Thing,” in which he writes: “One can speculate. Maybe a patchwork of ideas like eclectic American Keynesianism, held together partly by duct tape, is always at a disadvantage compared with a monolithic doctrine that has an answer for everything, and the same answer for everything. Maybe that same monolithic doctrine reinforced and was reinforced by the general shift of political and social preferences to the right that was taking place at about the same time. Maybe this bit of intellectual history was mainly an accidental concatenation of events, personalities, and dispositions. And maybe this is the sort of question that is better discussed while toasting marshmallows around a dying campfire.”
  3. The U.S. unemployment rate continues to be a relatively bad indicator of how many workers are available for employers to hire at the currently prevailing wage. The flows of workers from out of the labor force directly into employment without their ever being a week in which they say they are unemployed and looking for a job continue to be large and continue to astound me in magnitude. This metric continues to be a relatively better indicator of how many workers are available for employers to hire at the currently prevailing wage. Check out Equitable Growth’s Jobs Day Graphs for this tidbit: “Workers previously out of the labor force are re-entering at higher rates, continuing the long-term upward trend.”
  4. Definitely read (or re-read) Sarah Jane Glynn from this past April, “Gender wage inequality: What we know and how we can fix it,” in which she writes: “Policies … could help reduce … pay inequality between men and women … The future economic competitiveness of the nation is under threat due to the lack of policies that would boost the labor force attachment, productivity, and wages of workers now and their children tomorrow.”


Worthy reads not from Equitable Growth:

  1. More evidence that unions are not at all anti-productivity. I first saw this point made a generation ago in Freeman and Medoff’s book What Do Unions Do?. Now, very much worth reading is Harald Dale-Olsen, “Wages, Creative Destruction, and Union Networks,” in which he writes: “Do unions promote creative destruction? … Increased unionization yields a positive impact on regional productivity, exceeding the wage growth, partly due to the closure of less productive firms, but also enhanced productivity of the survivors and new entrants.”
  2. The massive technological improvements in information technology that have made it much easier to write articles and publish journals have had surprising and counterintuitive effects on health academic economists, at least, seeking to gain reputation. Here we have some not so modest proposals for reform from James Heckman and Sidharth Moktan, “The Tyranny of the Top Five,” in which they write: “The appropriate solution requires a significant shift from the current publications-based system of deciding tenure to a system that emphasizes departmental peer review of a candidate’s work. Such a system would give serious consideration to unpublished working papers and to the quality and integrity of a scholar’s work.”
  3. I still find it surprising that this argument is not conventional wisdom inside the Federal Reserve among its governors, bank presidents, and staff. I do not understand what they are seeing in the data flow that I am not seeing. Read Neel Kashkari, “Pause Interest-Rate Hikes to Help the Labor Force Grow,” in which he writes: “The Fed has raised the federal-funds rate eight times in the past three years, and inflation now stands right at the 2 percent goal. A hard inflation ceiling would justify pre-emptive rate increases to ensure inflation doesn’t climb any higher. But the symmetric objective gives the Federal Open Market Committee the flexibility to see how the economy evolves before determining if further rate increases are necessary. The FOMC should seize this opportunity for a pause.”
  4. This is absolutely brilliant, both on the difficulties in forecasting technology and also on the difficulties of forecasting uses to which we will put technology. Read Rodney Brooks, “The Seven Deadly Sins of AI Predictions,” in which he writes: “Imagine we had a time machine and we could transport Isaac Newton from the late 17th century to today, setting him down in a place that would be familiar to him: Trinity College Chapel at the University of Cambridge. Now show Newton an Apple. Pull out an iPhone from your pocket, and turn it on so that the screen is glowing and full of icons, and hand it to him.”
  5. Up until 2000, it looked like we had an unemployment-rate (or vacancy-rate) adaptive-expectations price Phillips curve. Since the mid-1990s, we had a nonemployment-rate static-expectations wage Phillips curve. How long before another structural shift? We do not know. But right now Team Slack has the empirical evidence. And Team Slack says: The economy still has plenty of room to grow. Check out Jay C. Shambaugh’s tweet, “Score One for Team Slack,” in which he notes: “As @ModeledBehavior notes, it is not clear how long this relationship will hold, but it looks really good in 2018 (even better than in 2017). Almost impossible to argue slack is not part of wage growth story even if you don’t think it is whole story.”
  6. While Paul Krugman believes that “old-fashioned macroeconomics” did very well from 2005 to 2015, I have significant doubts. The gap between the short-term safe interest-rate that the Federal Reserve controls and the long-term risky real interest rate, which is what matters for the economy, was never and is not now well-understood. But here we do have substantial progress being made. Read Ricardo J. Caballero, “Risk-Centric Macroeconomics and Safe Asset Shortages in the Global Economy: An Illustration of Mechanisms and Policies,” in which he writes: “In these notes I summarize my research on the topic of risk-centric global macroeconomics. Collectively, this research makes the case that a risk-markets dislocations perspective of macroeconomics provides a unified framework to think about the mechanisms behind several of the main economic imbalances, crises, and structural fragilities observed in recent decades in the global economy. This perspective sheds light on the kind of policies, especially unconventional ones, that are likely to help the world economy navigate this tumultuous environment.”


November 8, 2018


Brad DeLong


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