Category: Equitablog

…commissioned by the city of Los Angeles… [that] found that the benefits of raising L.A.’s minimum wage would outweigh the costs. ‘If the debate were over raising the minimum wage to $13.25 per hour by 2017, we would argue that the Berkeley-IRLE-estimated impacts are the most likely scenario,’ they write…. Los Angeles’s minimum wage currently stands at $9 per hour.  After Garcetti proposed raising the minimum wage to $13.25, some members of the council proposed increasing the wage to $15.25 per hour by 2019. Wenger and von Wachter were less confident about the outcomes of that increase because that is longer time period and a larger wage increase than any city has previously experienced. ‘Whatever avenue is chosen, we highly encourage the City Council to follow the example of other city minimum wage ordinances and monitor the economic situation in the city’… developing complementary programs to aid both workers and firms that are most [adversely] affected…

…that was in effect from 1911 to 1935…. The program resulted in more education, higher earnings and lower mortality. Social Security data were used to follow program beneficiaries until as late as 2012, allowing researchers to show that the benefits of receiving even a few years of assistance as a child could persist for 80 years or more. Although we do not have 100 years of follow-on data from today’s programs, recent research following children as they entered their 20s and 30s has produced similarly striking findings… the earned-income tax credit… child poverty… low birth weight, raise math and reading scores and boost college enrollment…. The Supplemental Nutrition Assistance Program, formerly known as food stamps, has been shown to have similar benefits for child recipients that can last decades. Receiving Medicaid in childhood makes it substantially more likely that a child will graduate from high school and complete college and less likely that an African-American child will die…. For women, Medicaid participation in childhood is associated with increased earnings….

The benefits often are not captured by short-term outcomes like improvements in children’s test scores, which typically last only a few years before fading…. Second, while program design certainly matters — and can matter a lot — much of the benefit appears to derive from helping low-income families pay for basic needs…. In many cases, the additional tax revenue from the higher long-run earnings generated by the program is sufficient to repay much or even more than all of the initial cost…. Moreover, safety-net programs do not discourage work in any big way…. And child care and pre-K programs make it easier for parents to work in the first place…

Bruce Bartlett: How Fox News Changed American Media and Political Dynamics: “The creation of Fox News in 1996 was an event of deep, yet unappreciated, political and historical importance…

…For the first time, there was a news source available virtually everywhere in the United States, 24 hours a day, 7 days a week, with a conservative tilt. Finally, conservatives did not have to seek out bits of news favorable to their point of view in liberal publications or in small magazines and newsletters. Like someone dying of thirst in the desert, conservatives drank heavily from the Fox waters. Soon, it became the dominant – and in many cases, virtually the only – major news source for millions of Americans. This has had profound political implications that are only starting to be appreciated. Indeed, it can almost be called self-brainwashing – many conservatives now refuse to even listen to any news or opinion not vetted through Fox, and to believe whatever appears on it as the gospel truth.

…has to be judged a failure from a scientific perspective. In particular–and I apologize if this relies too much on the jargon of our field–monopolistic competition turns out to be just the tool for understanding…. (It also turns out to be the tool for understanding international trade, economic geography, and macroeconomics.) But there has been a series of models that are associated with the University of Chicago–from what some people call the freshwater camp in macroeconomics–that are continuing a fight that George Stigler started in the 1930s to keep monopolistic competition from being used in economics. It is hard to explain to an outsider why a whole group of economists have ended up on the wrong side of scientific progress, resisting the direction that all of modern economic theory is taking, but they are.

In the economics of ideas, we have to be willing to at least consider the possibility that someone could have some control over an idea, hence some monopoly power associated with ideas. This could come from patent or a copyright. It could also come from secrecy. Then we can ask if it is a good idea or a bad idea to have more intellectual property rights or more protection of ownership of ideas. We know that the answer here is mixed. Sometimes some amount of it can be good, but it can also be harmful if the property rights are too strong or are given to the wrong types of ideas. But if you don’t even allow for the possibility of ex post monopoly rents from the discovery of ideas, you can’t even ask the question.

So it is scientifically unacceptable to have people who say:

We will never, as a matter of principle, consider a model in which there are ever any monopolies. We will dogmatically stick only to models of price-taking competition.

I think this an untenable scientific stance. I don’t think that this critique is going to reignite interest in growth theory. But like I said, when it’s time for interest to come back, somebody have a new take on growth theory, and work in this area will start again. But in the meantime, we have to stop tolerating work that is scientifically unjustifiable.

Olivier Coibion et al: How Do Firms Form Their Expectations? New Survey Evidence: “We implement a new survey of firms’ macroeconomic beliefs in New Zealand…

…and document a number of novel stylized facts from this survey. Despite nearly twenty-five years under an inflation targeting regime, there is widespread dispersion in firms’ beliefs about both past and future macroeconomic conditions, especially inflation, with average beliefs about recent and past inflation being much higher than those of professional forecasters. Much of the dispersion in beliefs can be explained by firms’ incentives to collect and process information, i.e. rational inattention motives. Using experimental methods, we find that firms update their beliefs in a Bayesian manner when presented with new information about the economy. But few firms seem to think that inflation is important to their business decisions and therefore they tend to devote few resources to collecting and processing information about inflation.

…a hearty endorsement in one of his increasingly deranged fireside chats, suggesting that since some ‘powerhouse families’ regularly produce successful members, ‘we should be grateful that in each field of endeavor there are certain families that are breeding grounds for achievement. … I bet you can trace ways your grandparents helped shape your career,’ Brooks advises, proving once again he knows zero people who are not rich….