Brad DeLong: Worthy reads on equitable growth, October 26–November 1, 2018

Worthy reads from Equitable Growth:

  1. Signs of low social power and knowledge among Hispanic women in the United States today are evident in that many employers seem to judge that they can get away with paying Hispanic women less—that they will not find out, or will have few options if they do: Read Kate Bahn and Will McGrew, “The intersectional wage gaps faced by Latina women in the United States,” in which they write: “’Unexplained’ wage discrimination for full-time workers with the exact same job is the largest portion of the overall wage gap experienced by Hispanic women … can be addressed through … transparency within organizations … While pay transparency is rare in private-sector employment, it is common in the public sector.”
  2. The curious thing is that, at its origin, industrial organization economics at the University of Chicago was very focused on preventing the growth of and breaking up monopolies. It still is not clear to me how George Sigler reoriented it so completely. Read Jonathan Sallet, “Competitive Edge: Protecting the “competitive process”—the evolution of antitrust enforcement in the United States,” in which he writes: “ Over the past forty years, the consumer welfare standard has become closely associated with the so-called “Chicago School” of antitrust doctrine—named after the scholarship centered at the University of Chicago—a central theme of which is that a monopoly is unlikely to cause harm to consumers, either through vertical integration (the merger of companies at different points in the production process) or exclusionary conduct (for example, the kind of actions at issue in the Microsoft case that enabled the company to maintain its monopoly).”
  3. Michael Kades was part of a very sharp panel on the future of the Federal Trade Commission convened by the New America Foundation. Chicago School founder Henry Simmons once said that the FTC should be the most important part of government. It is not clear that he was wrong: Watch Michael, along with Sarah Morris, Hal Singer, Charlotte Slaiman, Brandi Collins-Dexter, and Brian Fungi, in the video “The Future of the Federal Trade Commission.”


Worthy reads not from Equitable Growth:

  1. Equitable Growth alumnus Nick Bunker continues to watch the state of the labor market in real time. Read his “That’s Not to Say That Wage Growth Is Now Adequate or at a Healthy Level,” in which he writes: “Time for our quarterly check-in on wage and compensation growth with the ECI. And here we are!”
  2. Speaking of Nick Bunker, who wrote “The Flat Phillips Curve and U.S. Labor’s Share of Income” last April (when he was still with Equitable Growth), which discussed a still-immediate issue: “The possible reasons behind the currently flat Phillips Curve are numerous, and whether this relationship will hold up for long is very much up for debate. But the fact that a higher labor share isn’t a clear-cut sign that accelerating inflation will soon arrive might give the Fed some comfort that its recent bet on a flatter Phillips Curve might pay off.”
  3. If you believe in the “plucking model”—by which the economy, when “plucked” into a state below normal employment by a negative shock, then returns to normal—there is not a strong reason to begin a recession watch until normal employment has resumed or has almost resumed. It has. So, it is time to start a “what will cause the next recession?” watch. Tim Duy argues that it will not be weakness in housing. I concur. The current weakness in housing is what the Federal Reserve wants to see and is the intended effect of its raising interest rates—a little less employment in housing construction producing a little more room for higher employment in other sectors. Read Tim Duy, “Decision Time,” in which he writes: “Remember the recession calls in 2016 when manufacturing rolled over? The thinking was that every time industrial production falls by 2 percent a recession followed, and this time would be no different. But it was different. Those calls did not play out because the shock was largely contained to that sector; recessions stems [sic] from shocks that hit the entire economy. And even if a recession could be boiled down to a single indicator, I would pick the yield curve over housing.”
  4. Lend freely at a penalty rate on collateral that is good in normal times—that would seem to be the key. It is not clear to me that we have learned that much about fighting financial crises since Bagehot. Read David Warsh, “What Have We Learned Since Bagehot?,” in which he writes: “Fighting Financial Crises: Learning from the Past … by Gary Gorton and Ellis Tallman … offers five ‘guiding principles’ for dealing with financial crises in the future. Find the short-term debt … Suppress bank-specific information … emergency lending facilities … Prevent systemically important institutions from failing … And consider that certain laws and regulations need not be applied during a financial crisis.”
  5. The earliest worry about skill-biased technical change I have found, from Friedrich Engels’s “Outlines of a Critique of Political Economy,” in which he wrote: “In the struggle of capital and land against labour, the first two elements enjoy yet another special advantage over labour—the assistance of science; for in present conditions science, too, is directed against labour. Almost all mechanical inventions, for instance, have been occasioned by the lack of labour-power; in particular Hargreaves’, Crompton’s and Arkwright’s cotton-spinning machines.”
  6. Young transpacific whippersnapper Dan Wang is thinking about Shenzhen, Silicon Valley, the American Midwest, China, and America as he tries to figure out how governments and societies should nurture economic growth. Read his “How Technology Grows (a Restatement of Definite Optimism),” in which he writes: “Technology should be understood in three distinct forms: as processes embedded into tools (like pots, pans, and stoves); explicit instructions (like recipes); and as process knowledge, or what we can also refer to as tacit knowledge, know-how, and technical experience. Process knowledge is the kind of knowledge that’s hard to write down … When firms and factories go away, the accumulated process knowledge disappears as well.”
  7. A brief meditation on the place of economics in the public sphere and on the accountability of politicians triggered by the economic catastrophe that is Venezuela today. Read Ricardo Hausmann, “The Venality of Evil,” in which he writes: “Paul Samuelson once commended macroeconomics for having transformed ‘the pre-war dinosaur into a post-war lizard’. The discovery of the mechanisms by which large economic fluctuations occur had led to an understanding of how to use fiscal and monetary policies, to tame, if not to prevent, crises such as the Great Depression.”
  8. If you believe those less-than-professional economists who still wish to be identified with the policies enacted by a Republican-dominated government, we ought to be seeing annual investment spending leaping upward by $800 billion this year, as last year’s corporate tax cut unleashes an investment and entrepreneurial bonanza. We are not. But there are no apologies going to regret, re-thinking, or even curiosity about why their forecasts have not come true. And there is very little scrutiny from the press corps about why they confidently made such predictions and how they justified making them to themselves in private. Robert Barro, Mike Boskin, John Taylor, and company: We are looking at you. There really should be an intellectual accountability moment here. Read Pedro Nicolaci da Costa, “Tax cuts fail to boost corporate investment plans, Fed survey shows,” in which he writes: “Trump claimed the tax bill would lead to a huge boost in business spending—but there’s no sign of it yet.”
  9. Evidence that the ultra-high pressure economy of World War II was a powerful emancipatory shock for discriminated-against African Americans in the United States is presented by Andreas Ferrara, “World War II and African American Socioeconomic Progress,” in which he writes: “This paper argues that the unprecedented socioeconomic rise of African Americans at mid-century is causally related to the labor shortages induced by WWII.”


November 1, 2018


Brad DeLong


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