Category: Equitablog

Should-Read: I think T.S. Eliot hit upon the reasons for the success of Deng Xiaping and Xi Jinping’s “socialism with Chinese characteristics” back in the late 1940s: T.S. Eliot (1944): Rejection of Animal Farm:

Should-Read: We more-or-less understand how to teach people to perform a single analytical task just beyond their current competence, or demonstrate basic background familiarity with a situation—hence the disruptive success of Kahn Academy in the tutoring disruption business. But otherwise? How should we “disrupt” higher education as a whole? We need to understand why what we do here works, to the extent that it does. And we really do not: Kenneth Rogoff: When Will Tech Disrupt Higher Education?: “Universities and colleges are pivotal to the future of our societies…

…But, given impressive and ongoing advances in technology and artificial intelligence, it is hard to see how they can continue playing this role without reinventing themselves over the next two decades. Education innovation will disrupt academic employment, but the benefits to jobs everywhere else could be enormous. If there were more disruption within the ivory tower, economies just might become more resilient to disruption outside it…

Should-Read: Stan Collender: This Is The Real Reason The GOP Doesn’t Want To Do A Budget This Year: “Senate Majority Leader Mitch McConnell (R-KY) was the first high-level Republican to say Congress might not even consider let alone adopt a budget resolution this year…

…Then, at the GOP retreat last week, in what was close to his first official act as the new chairman of the House Budget Committee, Rep. Steve Womack (R-AR), let it be known that he and his committee had much better things to do than a 2019 budget resolution.

Not doing a budget resolution means there can’t be reconciliation, and without reconciliation the biggest parts of the GOP’s legislative agenda will be virtually impossible to enact…. The GOP can’t be making the decision not to do a budget—basically the equivalent of admitting that Congress and the White House aren’t going to accomplish much of anything significant this year—without a great deal of thought. So why isn’t the GOP going to do a budget? Because the vote on the 2019 budget — the last one Congress will consider before the 2018 midterm elections — will reveal that all the Republican promises on the deficit and debt, including its blind belief on dynamic scoring, were completely bogus…. no budget resolution will mean no hearings in the budget committees, no floor debate, much less media attention and, most importantly, no votes. That makes it a great..and maybe the best…way for congressional Republicans to avoid talking about or taking responsibility for the spiking deficit and debt they said wouldn’t occur.

Should-Read: A nice observation by Paul Krugman on Twitter this morning about the two Silicon Valley bubbles—NASDAQ and BitCoin. NASDAQ at least had some fundamentals underlying it. BitCoin not so much: the ability to create for free a commodity with identical qualities to BitCoin and then peg it for a while before tiptoeing away renders it unstable, in the absence of a hegemon, in a way that gold is not: Paul Krugman: “I am surely not the only person experiencing a fair bit of cryptofreude—pleasure in watching the Bitcoin etc bubble deflate…

…Bitcoin cultists tend, after all, to be nasty as well as crazy; not all of them, but surely above the average. But one thing people may wonder is, why aren’t we having a simple Wile E. Coyote moment (Wile E. Cryptocoyote?)? As we know from the laws of cartoon physics, someone who runs off a cliff is supposed to plunge as soon as he notices there’s nothing under his feet. What we see instead is a series of plunges followed by partial recoveries:

It’s worth noting, then, that you saw the same thing (in much slower motion) as the dotcom bubble burst way back when:

Back then there was a reserve of true believers who kept buying the dips, sure that the market would eventually regain its faith in techno-magic. Some of the same thing presumably happening now. Plus there are probably market manipulators now, trying to support things.

The point is that even though bubbles are, in effect, natural Ponzi phenomena, they don’t end as cleanly and suddenly as deliberate Ponzi schemes. To realize the full joy of cryptofreude, you need to be a bit patient…

Should-Read: The dominance of Malthusian factors and pressures in economists’ minds up until the late nineteenth century: John Stuart Mill (1848, 1871): Principles of Political Economy: “Hitherto it is questionable if all the mechanical inventions yet made have lightened the day’s toil of any human being…

…They have enabled a greater population to live the same life of drudgery and imprisonment, and an increased number of manufacturers and others to make fortunes. They have increased the comforts of the middle classes. But they have not yet begun to effect those great changes in human destiny, which it is in their nature and in their futurity to accomplish. Only when, in addition to just institutions, the increase of mankind shall be under the deliberate guidance of judicious foresight, can the conquests made from the powers of nature by the intellect and energy of scientific discoverers become the common property of the species, and the means of improving and elevating the universal lot…

Should-Read: A very good point from Susan Houseman—and really important: “manufacturing” in America is very different from “computer manufacturing”. The second is doing very well, in spite of offshoring of all kinds and in spite of our “Dutch Disease” produced by capital inflows and service exports. The first, not so much: Susan Houseman: Understanding the [Post-2000] Decline in Manufacturing Employment: “How did so many people erroneously point to automation as the culprit? It was, Houseman said…

…”a widespread misinterpretation of basic manufacturing data.” True, manufacturing real (inflation-adjusted) output and productivity seemed to be growing strongly. However, a closer look revealed that the apparent strong growth was driven by a single industry within manufacturing: computer and electronics products. Despite making up less than 15 percent of manufacturing, the computer industry’s incredible growth pulled up the entire sector’s productivity numbers, papering over widespread weaknesses. “This one industry ends up dominating the manufacturing statistics and gives a misleading impression about what’s going on in the sector,” Houseman said….

Take out computers and the trends become clearer: real gross domestic product growth in manufacturing has been only 12 percent of the private sector average since 2000…. Trade issues, in fact, have left a big dent in manufacturing employment, Houseman said, citing recent research. Exchange rates, tariffs and other trade issues have made domestic manufacturing less competitive, while policy changes have made it easier and cheaper to import products, especially from China. People have been buying more manufactured products, Houseman said, but these products are increasingly made overseas…

Should-Read: John Austin: A tale of two Rust Belts: Diverging economic paths shaping community politics: “Some communities have assets (and have advanced strategies to build on those assets)…

…that now find them and their residents not only participating in, but actually leading the move to a more knowledge-based, technology-driven and urbanized economy. Pittsburgh, Columbus, Indianapolis, Minneapolis, and Milwaukee are today economically diversified, dynamic and growing metro economies. Big university towns like Madison, Ann Arbor, and Bloomington are magnets of state talent, innovation centers, and largely recession-proof. All of these communities are attracting and keeping highly educated populations, producing rising incomes, and maintain a diversified economic base. They are no longer beholden as manufacturing monocultures, as was the norm across the region fifty years ago when Minneapolis was “Flour City,” or Pittsburgh as the “Steel City.” And these communities all voted “blue” last fall.

It’s a very different story in many other Rust Belt communities, however. The small- and medium-sized factory towns that dot the highways and byways of Michigan, Indiana, Ohio and Wisconsin have lost their anchor employers and are struggling to fill the void. Many of these communities, including once solidly Democratic-voting, union-heavy, blue collar strongholds, flipped to Trump in 2016…

Should-Read: Good advice from Chris Dillow about how economists can try to avoid degrading the quality of the discussion in the public sphere: Chris Dillow: Stumbling and Mumbling: Economists in public: “There was a debate on Twitter this morning about how economists can better engage with the public….

…Our efforts to do so have not been wholly futile. Granted, economists’ influence on the debate about Brexit and austerity hasn’t been as great as we would like. But on the other hand, Tim Harford and Steve Levitt have gotten a wide public audience–one perhaps more deservedly so than the other, And my attempts to bring proper economics to the albeit niche readership of the Investors Chronicle have not been met with complete derision…. It is possible for economists to gain some influence. What follows are some suggestions as to how or when this can be done:

First, economists cannot hope to challenge beliefs that are part of people’s self-identity. If you tell someone “economics says you’re a twat” you’ll not get a sympathetic hearing even if you are bang right. This helps explain the success of Freakonomics and the failure over Brexit: nobody had strong prior beliefs about whether Sumo wrestlers cheat, but they did about the EU. In this context, I have it easy at the IC. People might not want to hear they are fools but they do want to know ways of making money, or at least to stop losing it egregiously. I can therefore try to be Keynes’ dentist, offering humble but competent advice without telling them they are fools. Secondly, try to appeal to facts rather than the consensus…

Should-Read: State-of-the-art, and very best thing I have seen recently on what potential output really is in the United States today: Olivier Coibion, Yuriy Gorodnichenko, and Mauricio Ulate: Real-Time Estimates of Potential GDP: Should the Fed Really Be Hitting the Brakes?: “CBO’s and other similar estimates of potential output are too pessimistic… Continue reading “Should-Read: Olivier Coibion, Yuriy Gorodnichenko, and Mauricio Ulate: Real-Time Estimates of Potential GDP: Should the Fed Really Be Hitting the Brakes?“ →

Should-Read: Amazon—and other employers—have become very good at squeezing money out of mayors and others in relatively depressed areas in return for job-creation headlines. This does not mean that it is a pure winners’s curse situation: agglomeration economies are very real. but it does mean that the premium on not electing a stupid and corrupt mayor has just gone way up: Janelle Jones and Ben Zipperer: Unfulfilled promises: Amazon fulfillment centers do not generate broad-based employment growth: “When Amazon opens a new fulfillment center, the host county gains roughly 30 percent more warehousing and storage jobs but no new net jobs overall…

…jobs created in warehousing and storage are likely offset by job losses in other industries. Why it matters: State and local governments give away millions in tax abatements, credits, exemptions, and infrastructure assistance to lure Amazon warehouses but don’t get a commensurate “return” on that investment. What we can do about it: Rather than spending public resources on an ineffective strategy to boost local employment (luring Amazon fulfillment centers), state and local governments should invest in public services (particularly in early-childhood education and infrastructure) that are proven to spur long-term economic development…