Category: Equitablog

Should-Read: Alex Field: Review of Marc Levinson: An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy: “1948 to 1973 has long been considered the golden age of the U.S. economy…

…And then it fell apart.  TFP growth in the United States, except for a modest revival between 1995 and 2005, experienced retardation.  Labor productivity and the material standard of living grew more slowly, with almost all of the gains going to the top.  Consumption was sustained by rising women’s labor force participation and increasing household debt levels.  Financial crises, including in developed countries, became more frequent.  And governments and all their economic advisors seemed largely powerless to change this reality. Marc Levinson provides a well written narrative of the descent from the golden age into what has become the new ordinary….

The book has many strengths. First, the narrative is based in part on original archival research…. Second, it can be thought of as a G-7 book…. The juxtaposition of narratives from different states reveals differences but also the worldwide incidence of a sea change in the developed world starting in the 1970s. Finally, Levinson’s assessments of policy regimes and policy initiatives are data driven and balanced….

There are, however, several instances in which Levinson does not quite get on top of important conceptual or accounting distinctions…. Levinson (along with many others) doesn’t understand the distinction in bank regulation between liquidity and capital requirements…. Levinson’s discussion of why labor’s share has declined is something of a mish-mash.  The main cause, he suggests (p. 142) “was most likely a speedup in the rate of technological change.”  But all the data that Levinson reviews shows that the drop in labor’s share coincided with the drop in TFP growth that marked the post-1973 period. It’s possible that if the bias of technological change altered — if it became more labor saving — it served to weaken labor’s bargaining position, and Levinson seems to be making that argument as well…. A related confusion pops up on p. 155, where he observes that politicians, in the face of the sea change, continued to offer programs devoted “to dividing up the fruits of plenty, not to reviving productivity growth and adjusting to a world of rapid technological change.”  It is difficult to imagine an economy simultaneously experiencing both declining productivity growth and an accelerating rate of technological change….

My noting of these issues should not discourage academic economists from reading this book…. The book provides a welcome introduction to very important chapters in twentieth century economic history.

Marc Levinson, An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy.  New York: Basic Books, 2016. vii + 326 pp.  $28 (cloth), ISBN: 978-0-465-06198-3.

Should-Read: Wolfgang Dauth, Sebastian Findeisen, and Jens Südekum: [Globalisation and sectoral employment trends in Germany]: “The decline of manufacturing jobs in the US has been the focus of much attention recently…

…with rising trade with China cited as one explanation. This column describes how the German economy has experienced a similar secular decline in manufacturing and rising service employment, but that growing trade with China and Eastern Europe did not speed up this trend. In fact, rising exports to the new markets have stabilised industry jobs…

Should-Read: Alan Smith and Federica Cocco: The huge disparities in US life expectancy in five charts: “Inequality means that individuals in the US have very different experiences…

…in terms of both longevity and spending on health…. Some groups in the US—the poor and middle-class women—have actually seen a decrease in life expectancy during the past three decades…

Should-Read: I believe that Mike Pence, Mitch McConnell, and Paul Ryan need to start the process of invoking the 25th Amendment in order to properly assess the situation:

Benjamin Wittes: Malevolence Tempered by Incompetence: Trump’s Horrifying Executive Order on Refugees and Visas: The malevolence of President Trump’s Executive Order on visas and refugees is mitigated chiefly…

…and perhaps only—by the astonishing incompetence of its drafting and construction. NBC is reporting that the document was not reviewed by DHS, the Justice Department, the State Department, or the Department of Defense, and that National Security Council lawyers were prevented from evaluating it. Moreover, the New York Times writes that Customs and Border Protection and U.S. Citizen and Immigration Services, the agencies tasked with carrying out the policy, were only given a briefing call while Trump was actually signing the order itself. Yesterday, the Department of Justice gave a “no comment” when asked whether the Office of Legal Counsel had reviewed Trump’s executive orders—including the order at hand. (OLC normally reviews every executive order.) This order reads to me, frankly, as though it was not reviewed by competent counsel at all…

Should-Read: David Anderson: Trump and the Global Creative Class: “Amitabh Chandra: ‘Immigration ban and the fear they create is a giant tax on US universities and US innovation… research and R&D will move abroad’…

…We’re much less attractive as a country to very smart, mobile international students and researchers this week than we were last week. And I bet that we’ll be less attractive next week than this week. Think about the incentive for a twenty something looking to do a post-doc? They could come here and work with an awesome group but when they need to travel to a conference overseas they might not be allowed back into the country? Or they could go to Canada or Japan or Australia or the EU where they don’t have that new worry as a cost to their calculus of choice.

Will this stop all international brain drain that the US massively benefits from? No, but it will impede it.

Should-Read: Bill McBride: These are Not Normal Times: “These are not normal times…

…and I can’t just post economic data and remain silent on other issues. Mr. Trump’s executive order is un-American, not Christian, and hopefully unconstitutional. This is a shameful act and no good person can remain silent.

Must-Read: The fact that the late Mickey Kantor oversold the benefits from NAFTA for the United States in 1993 does not mean that it is not on balance a good thing, and does not mean that abrogating NAFTA would be a good thing. For one thing, while the relative benefits (and drawbacks!) for the U.S. are small, the benefits for Mexico are very very large indeed. To elide that is to do no good service:

Kevin Drum: NAFTA Is Really Not a Big Deal: “How big an impact did NAFTA have on the US economy?…

…Practically every discussion of NAFTA begins with something like “advocates of NAFTA made at the outset some wildly optimistic claims about what NAFTA was going to achieve.” For example, here’s Dani Rodrik:

Remember first that many advocates of NAFTA made at the outset some wildly optimistic claims about what NAFTA was going to achieve….A recently published academic study by Lorenzo Caliendo and Fernando Parro uses all the bells-and-whistles of modern trade theory to produce the estimate that these overall gains amount to a “welfare” gain of 0.08% for the U.S….

NAFTA’s impact on the US—whether good or bad—is inevitably tiny…. Total US GDP: about $19 trillion…. Total US trade—both imports and exports—with Canada and Mexico. It’s about $1 trillion…. Increase in this trade since 1993… due to NAFTA… 20 percent or less of the total…. It’s just not a huge deal. It hasn’t accounted for very many jobs lost or gained. It hasn’t accounted for a big change in GDP. It hasn’t accounted for a significant change in price levels. Making it the centerpiece of any kind of trade story is just absurd. It’s a good hobbyhorse for populist demagoguery of trade deals, and it’s a good hobbyhorse for populist demagoguery of Mexico. But that’s about it.