This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.

Equitable Growth round-up

The landscape of competition and consumer protection has changed and the Federal Trade Commission is trying to keep up with the times, writes Jonathan Sallet. In hearings conducted between September 2018 and June 2019, the FTC heard from experts and analysts on how things have changed and what the FTC can do to adapt the full spectrum of its competition work. Sallet compiles the suggestions from the hearings under five broad categories: growing market concentration, evolving business models, protecting competition as well as consumers, utilizing modern economic tools and analysis, and taking advantage of the full range of enforcement tools at the FTC’s disposal. Integrating the knowledge from these hearings into its day-to-day work will be essential for the FTC to continue its antitrust law enforcement in the modern economy.

The U.S. Bureau of Labor Statistics issued its monthly report on the U.S. labor market for September, showing that despite employment for prime-age worker rising to near pre-Great Recession levels, these gains are mainly in healthcare and education, while manufacturing and construction employment rates have plateaued and retail employment decreased. Likewise, the data show that there is no evidence that the current tight labor market is exerting upward pressure on wages as nominal wage growth remains below healthy levels. Raksha Kopparam and Kate Bahn put together five graphs highlighting these important trends in the monthly announcement.

Head over to Brad DeLong’s latest worthy reads for his takes on must-see content from Equitable Growth and around the web.

Links from around the web

The U.S. Census Bureau recently announced that inequality has grown to its highest point in more than 50 years, meaning that the gap between the richest and poorest Americans is at its widest point in decades. The numbers indicate that “America has not become a poor country but an unfair country,” writes Sarah Jones for New York Magazine. “The poor aren’t necessarily making less money, but as the wealthy get wealthier, people on the bottom end of the income scale are running in place,” she continues, arguing that we may have finally reached the tipping point on inequality in the United States.

As California lawmakers toy with the idea of implementing a public banking system, it wouldn’t hurt to take a look at North Dakota, where the nation’s only state-owned bank has been up and running for more than a century. Obvious differences (in size, economy, and population, to name a few) between the two states aside, “many of the characteristics of the modern economic landscape are eerily similar to that of a century ago when [the Bank of North Dakota] first passed: increasing income inequality and predatory practices on the part of financial institutions,” writes Will Peischel for Vox.

It would seem that wealth taxes are all the rage, as Democratic presidential candidates Sens. Elizabeth Warren (D-MA) and Bernie Sanders (I-VT) each recently announced their proposals for increasing taxation on the rich. Former Vice President Joe Biden is reportedly also weighing his options in this area. But, argues Ashlea Ebeling in Forbes, the wealthy may want to prepare for a change in the estate tax rather than a new wealth tax. The estate tax can be applied to a larger group of people and is already in place, albeit in a highly scaled-back position thanks to the Tax Cuts and Jobs Act of 2017, which more than doubled the estate tax exemption to those estates valued at $11.4 million and higher. Of course, the two are not mutually exclusive and could be implemented together, or alongside any of the multitude of other options available for taxing wealth.

Home health aides are increasingly sought-after to provide care for elderly and retiring Americans—and they have one of the most difficult jobs in the labor market—but these workers rarely receive the pay or protections they deserve. A new bill introduced by House and Senate Democrats aims to change that, however, by creating sustainable career paths for caregivers, including apprenticeships, on-the-job training, professional development, or mentoring, reports Alexia Fernández Campbell for Vox. These supports will be essential given that the U.S. Bureau of Labor Statistics estimates a 41 percent increase in the number of available home caregiver positions—1.2 million more than the current 2.9 million—by 2026.

Friday Figure

Figure is from Equitable Growth’s “Equitable Growth’s Jobs Day Graphs: September 2019 Report Edition,” by Raksha Kopparam and Kate Bahn.

Worthy reads from Equitable Growth:

1. Listen to Kate Bahn’s podcast, “Real talk with feminist visionaries, Season 3, No. 23, Kate Bahn.” This isn’t your Econ 101 take on the economy!
2. Read Equitable Growth grantee Ellora Derenoncourt’s new paper with co-author Claire Montialoux, “Minimum Wages and Racial Inequality,” in which they present a key finding: “20 percent of the decline in the racial earnings gap during Civil Rights era stemmed from one single reform of the minimum wage.”
3. Read Jonathan Sallet, “Competitive Edge: Five Building Blocks for Antitrust Success: The Forthcoming FTC Competition Report,” in which he writes: “Here are five building blocks for successful antitrust enforcement that the Federal Trade Commission should embrace in order to, as its Chairman Joseph Simons said (quoting his predecessor Bob Pitofsky), ‘restore the tradition of linking law enforcement with a continuing review of economic conditions to ensure that the laws make sense in light of contemporary competitive conditions’ … Pay attention to growing market concentration … Business models are evolving [and] today, multisided business models intersect with other economic trends that include network effects, the aggregation of data, and vertical integration … Antitrust enforcement protects competition, not just consumers … Modern economic analysis is up to the challenge … Congress gave the FTC broader enforcement tools than just the Sherman and Clayton Acts.”
4. Re-read Carmen Ye, “Why we need better re-employment policies for formerly incarcerated African American men,” because she makes these important points: “African American men … 33 percent of the 1.56 million Americans held in state or federal prisons … When these men are released from prison, what will their employment prospects look like? … Black applicants with no criminal record receive a callback or job offer at the same rate as white applicants with a felony conviction. Yet black applicants without a criminal record were three times as likely to get a callback as those with a record.”

Worthy reads not from Equitable Growth:

1. Once again, we have a piece by an impressively credentialed academic Republican economist that seems to me to have no contact with reality. There is no economist I know of, save for Robert Barro, who has ever said or implied that the “neutral” real interest rate today is the same 2.4 percent that the average real interest rate was from 1986–2008. To the contrary, there has been a very long and active discussion—led over the past two decades by current New York Fed President John Williams—about how far the “neutral” rate has fallen and how persistent that fall will be. And one conclusion of that debate has been that the current real federal funds rate of “only 0.7 percent” does indeed look “high” by some important metrics. So, why would anyone write as though this literature does not exist? Read Robert J. Barro, “Is Politics Getting to the Fed?,” in which he writes: “From the early 1980s until the start of the financial crisis in September 2008, the U.S. Federal Reserve seemed to have a coherent process for adjusting its main short-term interest rate, the federal funds rate. Its policy had three key components: the nominal interest rate would rise by more than the rate of inflation; it would increase in response to a strengthening of the real economy; and it would tend toward a long-term normal value. Accordingly, one could infer the normal rate from the average federal funds rate over time. Between January 1986 and August 2008, it was 4.9 percent, and the average inflation rate was 2.5 percent … The Fed’s prolonged low-interest-rate policy, which was supplemented by quantitative easing [or QE], seems misguided, considering that the economy had long since recovered, at least in terms of the unemployment rate. The nominal federal funds rate was not placed on an upward trajectory until the end of 2016 … It is hard to view today’s nominal federal funds rate of 2.4 percent as high. With an inflation rate of 1.7 percent, the real federal funds rate is only 0.7 percent. And yet the Fed’s “high”-interest-rate policy was fiercely attacked by Wall Street … That view is not crazy if you are focused solely on boosting the stock market. On average, interest-rate cuts do tend to stimulate the stock market by making real returns on bonds less competitive. But that does not mean it is good economic policy always to be cutting rates.”
2. A very nice look back at a big story from a decade ago that simply did not happen. Read Ben Casselman, “The White-Collar Job Apocalypse That Didn’t Happen,” in which he writes: “‘Where in retrospect I missed the boat is in thinking that the gigantic gap in labor costs between here and India would push it to India rather than to South Dakota,’ Mr. Blinder said in a recent interview … Adam Ozimek revisited Mr. Blinder’s analysis to see what had happened over the past decade. Some job categories that Mr. Blinder identified as vulnerable, like data-entry workers, have seen a decline in United States employment. But the ranks of others, like actuaries, have continued to grow … Overall, of the 26 occupations that Mr. Blinder identified as ‘highly offshorable’ and for which Mr. Ozimek had data, 15 have added jobs over the past decade and 11 have cut them. Altogether, those occupations have eliminated fewer than 200,000 jobs over 10 years, hardly the millions that many feared … In the jobs that Mr. Blinder identified as easily offshored, a growing share of workers were now working from home. Mr. Ozimek said he suspected that many more were working in satellite offices or for outside contractors, rather than at a company’s main location. In other words, technology like cloud computing and videoconferencing has enabled these jobs to be done remotely, just not quite as remotely as Mr. Blinder and many others assumed … Call centers [and] telemarketing jobs have declined sharply in the United States since 2007, as much of the work was sent overseas. But the number of customer service representatives has continued to grow … Telemarketers are essentially selling products and often working from a script. Customer service and other call-center work like tech support often require a more nuanced understanding of the customer experience.”
3. There are remarkably good odds that the next global recession will be triggered by the miscalculations of politicians who have no business holding any office whatsoever. I have but one quibble with Nouriel Roubini’s argument here. The situation in Argentina is dire for Argentina and the southern cone, but it is not the kind of thing that can provoke a global recession. President Donald Trump and UK Prime Minister Boris Johnson, by contrast, might. Read Nouriel Roubini, “Four Collision Courses for the Global Economy,” in which he writes: “Between U.S. President Donald Trump’s zero-sum disputes with China and Iran, U.K. Prime Minister Boris Johnson’s brinkmanship with Parliament and the European Union, and Argentina’s likely return to Peronist populism, the fate of the global economy is balancing on a knife edge. Any of these scenarios could lead to a crisis with rapid spillover effects … In each case, failure to compromise would lead to a collision, most likely followed by a global recession and financial crisis … The problem is that while compromise requires both parties to de-escalate, the tactical logic of chicken rewards crazy behavior. If I can make it look like I have removed my steering wheel, the other side will have no choice but to swerve. But if both sides throw out their steering wheels, a collision becomes unavoidable.”
4. No matter what our domestic economic problems, it is still essential to remind ourselves that for humanity as a whole, the years since 1980 have seen the greatest improvement in economic well-being, globally, of any 40-year period in human history. We have been truly blessed. Read Noah Smith, “Globalization Has Cut Inequality Between Rich and Poor Countries,” in which he writes: “Up through the 1980s, the blessings of the Industrial Revolution seemed largely confined to a handful of countries in Western Europe, East Asia, the [United States], Australia, and Canada. But in the past three decades, there has been a sea change, and developing countries have made great strides in catching up. Although inequality has risen within some nations, at the global level it’s going down: Much of this catch-up is happening in countries that are still largely poor, such as India or Indonesia. To an economist—or someone who cares about alleviating the suffering of the world’s poorest people—this still represents a miracle. But a skeptic of globalization might wonder whether it can really be called a success if broad middle-class living standards still remain the exclusive privilege of a handful of nations, many of them former colonial powers.”

Worthy reads from Equitable Growth:

1. I wish to once again flag this: Recession Ready. We are not yet out of time to take steps to keep the next U.S. recession from turning into a depression. But the clock is ticking. Here is an issue are in which the sooner we take action, the better. And in this book, we at Equitable Growth and the Hamilton Project have, I think, done a very good job: Read Recession Ready, which begins: “Economic recessions are inevitable and they are painful, with harsh short-term effects on families and businesses and potentially deep long-term impacts on the economy and society. But we can ameliorate some of the next recession’s worst effects and minimize its long-term costs if we adopt smart policies now that will be triggered when its first warning signs appear. Equitable Growth has joined forces with the Hamilton Project to advance a set of specific, evidence-based policy ideas for shortening and easing the impacts of the next recession.”
2. Read this very nice piece by our young whippersnapper Raksha Kopparam summarizing the strong evidence that societal well-being is badly damaged by yet another pharmaceutical industry market failure. Read her “Killer acquisitions lead to decreased innovation and competition in the U.S. prescription drug market,” in which she writes: “Consolidation in the pharmaceutical industry is probably stifling rather than promoting innovation. Approximately 6 percent of pharmaceutical acquisitions are what the authors refer to as ‘killer acquisitions,’ in which an incumbent firm acquires a product in development that could compete with the incumbent’s own product and then subsequently terminates development of the target firm’s product, thus killing competition and innovation.”
3. Five years ago, our Steering Committee member Janet Yellen gave a very good talk on building blocks of opportunity in America. Read Janet Yellen, “Perspectives on Inequality and Opportunity from the Survey of Consumer Finances,” in which she said: “[I] identify and discuss four sources of economic opportunity in America—think of them as “building blocks” for the gains in income and wealth that most Americans hope are within reach of those who strive for them. The first two are widely recognized as important sources of opportunity: resources available for children and affordable higher education. The second two may come as more of a surprise: business ownership and inheritances. Like most sources of wealth, family ownership of businesses and inheritances are concentrated among households at the top of the distribution. But both of these are less concentrated and more broadly distributed than other forms of wealth, and there is some basis for thinking that they may also play a role in providing economic opportunities to a considerable number of families below the top.”
4. Equitable Growth Research Advisory Board member Arindrajit Dube at the University of Massachusetts Amherst writes about his long-time mentor and friend Marty Weitzman, who died by suicide last month.

Worthy reads not from Equitable Growth:

1. One of the most intriguing anomalies in all of behavioral economics is the so-called Monty Hall problem—many people refusing to believe that revealing apparently irrelevant information can and should change your assessment of likelihoods and thus your optimal decision. Perhaps this is because we are wired at a fairly deep level to believe in “no correlation without causation.” We have to see a causal link between two phenomena in order to be willing to believe that they are correlated. Whether that is the explanation or not, it is clear that those of us who are bears of little brain need a lot of systematic help in parsing out issues of causation in complicated systems. And here, Dana Mackenzie and Judea Pearl’s The Book of Why: The New Science of Cause and Effect is going to be of enormous help in providing a gentle introduction to the issues and framework for thought. Read a review of the book by the extremely sharp Lisa Goldberg, in which she writes: “Pearl’s co-author Dana Mackenzie spoke on causal inference … It concluded with an image of the first self-driving car to kill a pedestrian … With a lead time of a second and a half, the car identified the object as a pedestrian. When the car attempted to engage its emergency braking system, nothing happened. The NTSB report states that engineers had disabled the system in response to a preponderance of false positives in test runs. The engineers were right, of course, that frequent, abrupt stops render a self-driving car useless. Mackenzie gently and optimistically suggested that endowing the car with a causal model that can make nuanced judgments about pedestrian intent might help … Professor Judea Pearl has given us an elegant, powerful, controversial theory of causality. How can he give his theory the best shot at changing the way we interpret data? There is no recipe for doing this, but teaming up with science writer and teacher Dana Mackenzie, a scholar in his own right, was a pretty good idea.”
2. Are the unmeasured societal well-being benefits of new technologies 0.02 percent a year, or 0.1 percent, 0.5 percent, or perhaps 2.5 percent or more? I tend to be on the side something between 0.5 percent and 2.5 percent—the fact that people with a poverty-line income of $25,000 for a family of four seem, to me, to live better than people with the same nominal income in any past generation is, for me, dispositive. Public and private health, entertainment, and information technologies are “seismic,” and seem, to me, to have overwhelmed the rest. But here we have smart people disagreeing. Plus—an issue that they do not raise—is Facebook actually a net plus? You can make the case that it has not been. Read Erik Brynjolfsson, Avinash Collis, W. Erwin Diewert, Felix Eggers, and Kevin J. Fox, “GDP-B: Accounting for the Value of New and Free Goods in the Digital Economy,” in which they write: “The welfare contributions of the digital economy, characterized by the proliferation of new and free goods, are not well-measured in our current national accounts. We derive explicit terms for the welfare contributions of these goods and introduce a new metric, GDP-B, which quantifies their benefits, rather than costs. We apply this framework to several empirical examples, including Facebook and smartphone cameras, and estimate their valuations through incentive compatible choice experiments. For example, including the welfare gains from Facebook would have added between 0.05 and 0.11 percentage points to GDP-B growth per year in the United States.”
3. The extremely smart Ricardo Hausmann has good ideas for the reform of public policy school education. Read his “Don’t Blame Economics, Blame Public Policy,” in which he writes: “Public policy schools, which typically have a strong economics focus, must now rethink the way they teach students—and medical schools could offer a model to follow … Economics is to public policy what physics is to engineering, or biology to medicine. While physics is fundamental to the design of rockets that can use energy to defy gravity, Isaac Newton was not responsible for the Challenger space shuttle disaster. Nor was biochemistry to blame for Michael Jackson’s death. Physics, biology, and economics, as sciences, answer questions about the nature of the world … generating … propositional knowledge. Engineering, medicine, and public policy, on the other hand, answer questions about how to change the world … Although engineering schools teach physics and medical schools teach biology, these professional disciplines have grown separate from their underlying sciences … Public policy schools, by contrast, have not undergone an equivalent transformation … Policy experience before achieving professorial tenure is discouraged and rare. And even tenured faculty have surprisingly limited engagement with the world, owing to prevailing hiring practices and a fear that engaging externally might entail reputational risks for the university. To compensate for this, public policy schools hire professors of practice, such as me, who have acquired prior policy experience elsewhere … The teaching-hospital model could be effective in public policy … Consider, for example, Harvard University’s Growth Lab, which I founded in 2006 after two highly fulfilling policy engagements in El Salvador and South Africa.”
4. This is absolutely brilliant, and quite surprising to me. I had imagined that most of discrimination in the aggregate was the result of a thumb placed lightly on the scale over and over and over again. Patrick Kline and Christopher Walters present evidence that, at least in employment, it is very different—that a relatively small proportion of employers really, really discriminate massively, and that most follow race-neutral procedures and strategies. Read Patrick Kline and Christopher Walters, “Audits as Evidence: Experiments, Ensembles, and Enforcement,” in which they write: “We develop tools for utilizing correspondence experiments to detect illegal discrimination by individual employers. Employers violate U.S. employment law if their propensity to contact applicants depends on protected characteristics such as race or sex. We establish identification of higher moments of the causal effects of protected characteristics on callback rates as a function of the number of fictitious applications sent to each job ad. These moments are used to bound the fraction of jobs that illegally discriminate. Applying our results to three experimental datasets, we find evidence of significant employer heterogeneity in discriminatory behavior, with the standard deviation of gaps in job-specific callback probabilities across protected groups averaging roughly twice the mean gap. In a recent experiment manipulating racially distinctive names, we estimate that at least 85 percent of jobs that contact both of two white applications and neither of two black applications are engaged in illegal discrimination. To assess more carefully the tradeoff between type I and II errors presented by these behavioral patterns, we consider the performance of a series of decision rules for investigating suspicious callback behavior under a simple two-type model that rationalizes the experimental data. Though, in our preferred specification, only 17 percent of employers are estimated to discriminate on the basis of race, we find that an experiment sending 10 applications to each job would enable accurate detection of 7 percent to 10 percent of discriminators while falsely accusing fewer than 0.2 percent of nondiscriminators.”

This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.

Equitable Growth round-up

The evidence is clear: Public investment is an essential driver of productivity and economic growth. Sadly, the evidence also is clear that levels of U.S. public investment have now dropped to a point not seen in decades, at a time when it is most critical due to rapidly growing economic inequality. Policymakers can reverse this trend via two key pathways—investments in infrastructure and human capital—in order to boost private-sector spending in these areas as well, writes Somin Park. And, Park continues, given the current low interest-rate environment, the U.S. government should capitalize on this moment to deliver higher growth and lower inequality for everyone.

Is competition or a monopoly better at spurring innovation? The age-old question gets an answer—at least, in terms of the pharmaceutical industry—in a new working paper that looks at so-called killer acquisitions, in which an incumbent firm acquires a potentially competitive product while it’s in development and subsequently terminates the development of that product. This consolidation is probably stifling innovation, rather than boosting it, writes Raksha Kopparam in a blog post describing the working paper and its findings. Because killer acquisitions typically occur when the incumbent drug-maker has significant market power, the acquisitions are likely to prevent innovation and competition in the very markets where a new drug would have the most impact. Enforcers should be aware of this as they review these types of transactions, Kopparam concludes, to help patients access new and better products at lower costs.

Links from around the web

With Sen. Bernie Sanders (I-VT) this week releasing his plan for taxing wealth, the idea of increasing taxes on the richest Americans appears to be catching on with candidates for the Democratic presidential nomination. Though Sen. Sanders’ proposal, and Sen. Elizabeth Warren’s (D-MA) before it, would face major political hurdles prior to a potential enactment, “these proposals represent the broadest rethinking of tax policy in decades,” write Nelson D. Schwartz and Guilbert Gates in The New York Times. But, they ask, how would the ideas with the most traction at the moment—implementing a wealth tax, raising the marginal tax rate, increasing the estate tax, and rethinking the capital gains tax—actually work?

Earlier this week, Rep. Alexandria Ocasio-Cortez (D-NY) unveiled a package of bills aimed at cutting poverty in the United States by expanding access to federal benefits and updating the federal poverty line to include expenses such as childcare and internet access, as well as adjusting the poverty limit based on a person’s location. “If we can acknowledge how many Americans are actually in poverty, I think that we can start to address some of the more systemic issues in our economy,” Rep. Ocasio-Cortez told NPR’s Steve Inskeep this week. For the record, the U.S. Census Bureau estimates that approximately 40 million Americans live in poverty, including more than 13 million children.

The federal family and medical leave system in the United States has not changed since President Bill Clinton signed the Family and Medical Leave Act of 1993—more than 26 years ago—and that law leaves much to be desired, writes Daria Dawson for Essence. For one thing, it only provides 12 weeks of unpaid leave to a very restricted group of workers. “Paid leave is not just a women’s issue. Nor just a white women’s issue. Nor just a family issue. It is a healthcare issue. It is an economic issue,” and, she continues, “paid leave is an issue that voters care very deeply about.” So, why is it that only 15 percent of American workers have access to a paid family leave program through their employers? As Dawson concludes, it’s time to give federal family and medical leave a 21st century makeover.

Under current law, the secretary of Health and Human Services is unable to negotiate directly on the costs of prescription drugs covered by Medicare, which leads to higher drug costs for patients because private insurers don’t have the same leverage that the federal government does in these negotiations. But a new bill proposed by House Democrats seeks to change this practice for up to 250 of the most expensive drugs without generic or biosimilar competition while also penalizing companies that refuse to negotiate with HHS. The bill comes amid increasing bipartisan momentum on the topic of prescription drug regulation, reports Li Zhou for Vox, largely due to voter pressure on lawmakers to act.

Noncompete agreements hinder millions of U.S. workers from accessing better jobs and lower the wages of these workers by reducing competition. A handful of states have banned noncompete agreements, including Oregon, which passed a law in 2008 to prevent the practice across the board—and a recent study shows that wages for workers no longer bound by noncompete clauses increased by as much as 21 percent as a result. “Put plainly,” writes The New York Times Editorial Board in a piece lamenting the broad use of noncompetes, “the old rule allowed employers to suppress their workers’ pay.”

Friday Figure

Figure is from Equitable Growth’s “Public investment is crucial to strengthening U.S. economic growth and tackling inequality,” by Somin Park.

Worthy reads from Equitable Growth:

1. Heather Boushey in Politico provides a platform to argue for distributional national accounts. Read “How To Fix Inequality: Publish Distributional, Not Just Aggregate, Growth Data,” in which Boushey writes: “To tell us how Americans—low-, middle- and high-income alike—are faring in the current economy, relative to other groups and to the average, federal agencies need to produce distributional statistics alongside the aggregate ones. That means offering not just one estimate of growth but several: growth for those with different levels of income, of different races and ethnicities, and also for variation by state or other levels of geography. Legislation has been passed that encourages the [Bureau of Economic Analysis] to add the disaggregated data, but the law provides no new funding and doesn’t go beyond encouragement. If we do not change the way we conceptualize and analyze economic progress, we are unlikely to have very much of it. Better, fairer growth measures are a vital step toward better, fairer growth.”
2. This is very, very much worth reading: “Research on Tap: Unbound,” a Twitter round up of the event earlier this week in which “Equitable Growth celebrated the release of Heather Boushey’s book, Unbound: How Inequality Constricts Our Economy and What We Can Do About It. She was joined by Sandra Black, Atif Mian, and Angela Hanks for a conversation moderated by Binyamin Appelbaum.”
3. This is key to why distributional national accounts are becoming increasingly essential for understanding what is going on in the U.S. economy. Read Heather Boushey’s written “Testimony before the House Budget Committee,” in which she writes: “National economic statistics are becoming less representative of the experience of most Americans. The implication for how policymakers and economists alike evaluate the economy is that average economic progress is pulling away from median economic progress. We see these same divergent trends across multiple measures of economic well-being: wages, income, and wealth.”

Worthy reads not from Equitable Growth:

1. Perhaps the most interesting thing to happen in U.S. political economy over the summer was the Business Roundtable’s declaration that it no longer believed in “shareholder primacy,” the doctrine that a corporation’s managers have a twofold—and only twofold—duty: obey the law and maximize the stock market value possessed by its shareholders. All other considerations are, according to shareholder primacy, not the proper business of the corporation. Instead, they are the business of the government officials who make the laws and write the regulations to enforce them, the politicians who compete to boss around government officials, and the voters who elect them. The alternative view was always that shareholders were just one of the groups of stakeholders—albeit one of the most important groups by virtue of their status as residual claimants and their powers to choose corporate officers—whose interests were to be advanced and balanced. Here, my old teacher Mike Spence has smart things to say about the possible advantageous consequences that opening the door to the possibility of moving away from shareholder primacy might produce, in his “The End of Shareholder Primacy?” In this essay, he writes: “An even more exciting feature of the shift toward socially conscious corporate governance is that it opens the door for new, more creative business models … Alibaba [was] founded with the goal of expanding market access for small and medium-size companies. … [and] remain[s] committed … Mukesh Ambani … identified Reliance’s stakeholders as the ‘Indian economy, Indian people, our customers, employees, and shareowners’ … Digital technologies tend to come with high fixed costs, but low to negligible variable costs. Once established, a firm like Alibaba or Jio can thus provide a platform for countless other business models built around social objectives. And this effect is especially powerful in potentially large markets like China, India, Indonesia, Brazil, and the United States. The Business Roundtable’s recent declaration represents a major step forward for the multistakeholder model. The example set by industry leaders matters. And it is no accident that some of today’s most successful global companies were explicitly conceived and built on the basis of multistakeholder values.”
2. Nixon, Reagan, Trump—the truth is that Republican presidents have never regarded the independence of the Federal Reserve as something to be respected. They did, however—before President Trump—regard “appearing” to respect the independence of the Federal Reserve as something to try to accomplish. Read Bob Bryan, “Trump’s attacks on the Fed may be intense, but they’re nothing compared to a wild new story about Ronald Reagan from former Fed Chairman Paul Volcker,” in which he writes: “Trump’s attacks on the Fed may be intense, but they’re nothing compared to a wild new story about Ronald Reagan from former Fed Chairman Paul Volcker … Volcker recounts being privately ordered by Reagan’s chief of staff [James Baker] to not raise interest rates prior to the 1984 election while Reagan was in the room. Volcker was not planning to raise interest rates at the time, but said he was ‘stunned’ by the direct violation of the Fed’s independence … According to Volcker, Reagan did not say a word, but Baker delivered a strong message: ‘The president is ordering you not to raise interest rates before the election,’ Baker told Volcker … Reagan’s apparent intimidation also echoed former President Richard Nixon’s disastrous pressure on former Fed Chair Arthur Burns to keep rates low, which is seen as one of the reasons for the inflation of the 1970s.”
3. It is a very curious thing that preindustrial societies were, by and large, about as unequal in terms of relative income as we are today. It does suggest that something like Vilfredo Pareto’s Iron Law is operating, although how it could operate is beyond me. And it does suggest that Thomas Piketty was correct in his fear that the post-World War II “trentes glorieuses” age of social democracy from 1945 to 1975 was a fragile anomaly. This, however, fits less well with Piketty’s recent argument that our current second gilded age was generated by the descent of the center-right into neofascism and the descent of the center-left into cultural liberalism as it took its eye off the important ball that is the distribution of wealth and hence of social power. It is also worth noting that preindustrial inequality was much more vicious than modern inequality: Push preindustrial inequality up by an additional fifth or more, and large numbers of people start dying from malnutrition. Read Branko Milanovic, Peter H. Lindert and Jeffrey G. Williamson, “Pre-Industrial Inequality,” in which they ask and answer: “Is inequality largely the result of the Industrial Revolution? Or, were preindustrial incomes as unequal as they are today? This article infers inequality across individuals within each of the 28 preindustrial societies, for which data were available, using what are known as social tables. It applies two new concepts: the inequality possibility frontier and the inequality extraction ratio. They compare the observed income inequality to the maximum feasible inequality that, at a given level of income, might have been ‘extracted’ by those in power. The results give new insights into the connection between inequality and economic development in the very long run.”