Worthy reads from Equitable Growth:

1. From 1.5 years ago, a primer on what tax distribution tables are good for, from Greg Leiserson, “If U.S. tax reform delivers equitable growth, a distribution table will show it,” in which he writes: “Distribution tables—estimates of who wins and who loses from changes in tax law—are central to any debate about tax reform. Such analyses frequently show the plans put forward by Republican politicians to be severely regressive, delivering large income gains for high-income families and little for the overwhelming majority of families. The blueprint for tax reform released by House Republicans in 2016, for example, would increase after-tax incomes for the top 1 percent of families by 13 percent in the first year after enactment but would increase incomes for the bottom 95 percent of families by less than half of 1 percent.”
2. Policymakers and economists do not really know how they would collect and enforce a net-worth tax—but we did not really know how we would collect and enforce a broad income tax either until Milton Friedman came up with payroll withholding. In some ways, the administrative burdens of a net-worth tax will be a lot easier since it is designed to catch only the upper tail. Read Greg Leiserson, Will McGrew, and Raksha Kopparam’s “Net worth taxes: What they are and how they work,” in which they write: “The wealthiest 1 percent of households owns about 40 percent of all wealth … Taxes on wealth are a natural policy instrument to address wealth inequality and could raise substantial revenue, while shoring up structural weaknesses in the current income tax system.”
3. Remember: The Trump-McConnell-Ryan tax cut did absolutely nothing to boost investment in America, and thus has no supply-side positive effects on economic growth. And it is another upward jump in inequality. Read Greg Leiserson’s slide show, “U.S. Inequality and Recent Tax Changes,” in which Leiserson argues that the recently enacted Tax Cuts and Jobs Act will likely increase disparities in economic well-being, after-tax income, and pretax income.
4. Three worthy reads on taxes after April 15 is enough. Let’s switch to another topic. One of the larger and more encouraging reviews of assessments of early-childhood interventions is Will McGrew’s “Investments in early childhood education improve outcomes for program participants—and perhaps other children too.”

Worthy reads not from Equitable Growth:

1. It is power and surveillance rather than worker displacement that is the principal issue on the table with respect to automation for the next decade, and probably for the next two decades. Read Brishen Rogers, “Beyond Automation: The Law & Political Economy of Workplace Technological Change,” in which he writes: “Automation is not a major threat to workers today, and it will not likely be a major threat anytime soon. Companies are, however, using new information technologies to exercise power over workers in other ways … using algorithms to monitor, direct, or schedule workers, in the process reducing workers’ wages or autonomy. Companies are also using new technologies to “fissure” employment … If the major threat facing workers is employer domination rather than job loss, then exotic reforms such as a universal basic income are less urgent.”
2. It’s not “the market or the state.” Rather, it is almost always “the market and the state.” A state that can enforce property rights is highly likely to be able to do a lot more useful things. A state that cannot do many useful things—one that is incompetent or corrupt—is highly likely to be unable to enforce the property rights that underpin markets either. Read Timothy Besley and Torsten Persson, “The Origins of State Capacity: Property Rights, Taxation, and Politics,” in which they write: “Legal and fiscal capacity are typically complements … Common interest public goods, such as fighting external wars, as well as political stability and inclusive political institutions, are conducive to building state capacity of both forms. Our preliminary empirical results uncover a number of correlations in cross-country data which are consistent with the theory.”
3. Being poor—and, more so, being poorer than you had expected you would be and having to retrench—stresses you out and makes you unhappy. David G. Blanchflower and Andrew E. Clark decompose the children-make-you-unhappy fact in Europe into a “poverty” and an “other” component, and what they report makes a lot of sense: Children in a well-functioning family setting are a source of profound happiness, and poverty in particular and stress in general are sources of profound unhappiness. Read David G. Blanchflower and Andrew E. Clark, “Children, Unhappiness and Family Finances: Evidence from One Million Europeans,” in which they write: “The common finding of a zero or negative correlation between the presence of children and parental well-being continues to generate research interest … One million observations on Europeans from 10 years of Eurobarometer surveys … Children are expensive, and controlling for financial difficulties turns almost all of our estimated child coefficients positive … Marital status matters. Kids do not raise happiness for singles, the divorced, separated, or widowed.”
4. Read the latest from Jared Bernstein at the Center on Budget and Policy Priorities: “Ch-ch-ch-changes!” He writes: “GS fiscal analyst Alec Phillips … [is] worth a close look … One of the more important policy-driven determinants of near-term U.S. growth is under debate right now: setting discretionary spending levels for 2020/21 … Even were Congress to agree to keep the levels of discretionary spending stable over the next few years, the impact will be a fading of fiscal stimulus on real GDP growth … When it comes to fiscal impulse, it’s not the level that matters. It’s the change. The last deal—the one that determined spending in 2018/19—went both well above the caps but, more important from an impulse perspective, went well above prior agreements … That’s one reason to expect 2020 growth to be closer to 2 percent than 3 percent.

This is a weekly post we publish on Fridays 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 the work 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

On Tuesday, the U.S. Bureau of Labor Statistics released new data on hiring, firing, and other labor market flows from the Job Openings and Labor Turnover Survey, better known as JOLTS. Check out the key graphs from the report chosen by Kate Bahn and Raksha Kopparam.

Michael Kades writes about two bills that recently cleared the House Committee on Energy and Commerce that would make it easier for generic prescription drugs to come to market.

Catch up on Brad DeLong’s latest worthy reads from Equitable Growth and around the web.

Links from around the web

With Tax Day coming up on Monday, it’s a good time to brush up on the facts about tax evasion—what it is, how it varies across different income groups, and types of taxes paid. [econofact]

Despite the attention that gentrification receives in the media, growing poverty concentration is the more prevalent challenge metropolitan areas across the country are experiencing. [citylab]

New research into why economies with older workforces are less productive points to a reluctance among older workforces to adapt new technologies, rather than because older workers are themselves less productive. This finding points to a different set of policy solutions—including competition policy and immigration reform—to address the challenge. [economist]

Columbia University economist and Equitable Growth grantee Suresh Naidu talks about Economics for Inclusive Prosperity, a new initiative he recently launched with Harvard University economist Dani Rodrik and University of California, Berkeley economist and Equitable Growth grantee Gabriel Zucman, in an interview at the Stigler Center at the University of Chicago Booth School of Business. [promarket]

A new working paper by economists Leah Boustan of Princeton University, Katherine Eriksson of the University of California, Davis, and Philipp Ager of the University of Southern Denmark on the economic position of the sons of former slaveowners offers interesting insights into the role of social capital in intergenerational mobility. [wonkblog]

Friday Figure

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

Worthy reads from Equitable Growth:

1. Best thing of the week—a must-see: an incredibly engaging interview with 2017 Equitable Growth grantee, Alexander Hertel-Fernandez of Columbia University, who discusses his research on worker and management preferences for specific aspects of labor organization.
2. I confess, I do not understand why Jeff Miron and Dean Baker disagree with Equitable Growth Executive Director and chief economist Heather Boushey’s tame observation that more information relevant to societal well-being is better than less. Read Vox’s Emily Stewart, “GDP: Democrats Want to Know Who’s Benefiting from the Economy’s Growth,” in which she writes: “Democrats are pushing for the BEA to produce a new metric, the ‘income growth indicator,’ to be reported quarterly and annually with GDP numbers starting in 2020 that would show who is and isn’t benefiting from economic growth.”
3. Methinks this oldie-but-very-goodie from Equitable Growth 2014 grantee Jesse Rothstein at the University of California, Berkeley does go a little bit too far in its enthusiasm for the fact that the Earned Income Tax Credit is in the U.S. tax code. In fact, there are pluses and minuses, and the EITC is in the tax code not because of rational reasons but because Sen. Russell Long (D-LA) chaired the Senate Finance Committee back in the day. Read Rothstein’s “The Earned Income Tax Credit,” in which he writes: “The Earned Income Tax Credit is a federal refundable tax credit designed to encourage work, offset federal payroll and income taxes, and raise living standards. … The EITC has grown to be one of the largest and least controversial elements of the U.S. welfare state, with 26.7 million recipients sharing $63 billion in total federal EITC expenditures in 2013. The placement of the EITC within the tax code has three important effects.”

Worthy reads not from Equitable Growth:

1. Who says that workers are paid anything like their marginal products? Luck and market power seem, to me, to be much more important than anything that could be called net social value of the work. As I often say, a skilled worker is an unskilled worker with a good union. Read Paul Campos, “Talent Is Not Scarce,” in which he writes: “Existing social hierarchies, and especially the compensation structures that undergird them, require the constant denial of the fact that almost everyone is easily replaceable at any time. After all, if there are 500 people standing at the ready who could do just as good or better a job than Chairman Smith or President Jones or Senior Executive Vice President for West Coast Promotion Johnson or Distinguished Professor of the Newly Endowed Chair for the Worship of Capitalism Cowan, then why do these people get treated and most of all paid as if they were as unique as unicorns, as precious as Vermeer portraits, as irreplaceable as Billy Shakespeare or Willie Mays? Because if we didn’t treat them (us) in that way, that would mean the entire structure of our society is radically unjust, root and branch. And that can’t be true, obviously.”
2. Rather than saying, with Stigler, that industrial policy is too dangerous because it is too vulnerable to rent-seeking, more economists should be writing papers like this. Read Reda Cherif and Fuad Hasanov, “The Return of the Policy That Shall Not Be Named: Principles of Industrial Policy,” in which they write: “Industrial policy is tainted with bad reputation among policymakers and academics and is often viewed as the road to perdition … Yet the success of the Asian Miracles … stands as an uncomfortable story … We argue that one can learn more from miracles than failures. We suggest three key principles … (i) the support of domestic producers in sophisticated industries, beyond the initial comparative advantage; (ii) export orientation; and (iii) the pursuit of fierce competition with strict accountability.”
3. Noah Smith believes that if we found enough research universities in small cities, then we will have a booming economy elsewhere than on the coasts for both industrial-policy and private-entrepreneurship reasons. Read his “Universities and Colleges Can Revive Declining Rural America,” in which he writes: “Big cities aren’t the only places to benefit from knowledge industries—college towns also thrive in the new economy … College Station, Texas … Even small towns like Pikeville, Kentucky, home to the modest University of Pikeville, are doing well … Government money that gets routed to college towns via state subsidies and federal research grants, then spent locally [on] … tuition fees … university research … attracting smart people to the region, and drawing in private investment … harness the forces of knowledge-industry clustering to increase the wealth of an entire region. There’s a good chance that these forces can be harnessed to revive parts of the rural United States. It’s worth a shot.”
4. If you believe—as so many do—that one important source of the disaster of 2008–2010 was that economies had too much potentially insecure debt, you should be petrified today. Read John Authers and Lauren Leatherby, “Financial Crisis: Decade of Deleveraging Debt Didn’t Quite Work Out,” in which they write: “This was the decade of de-leveraging that wasn’t. A decade ago … there was agreement … [that] too much debt had caused the crisis, and so there must be a huge de-leveraging. It has not worked out like that … Companies, particularly in the United States, took advantage of the rock-bottom interest rates meant to bail out banks to go on their own borrowing spree. And the world found a new borrower of last resort. Ten years ago, China had been enjoying phenomenal economic growth for two decades, and largely avoided debt to fund it. No more. China’s debt has ballooned, transforming the geography of global debt in the process. It’s now bipolar, revolving around the U.S. and China.”
5. ALAS! Parents appear to value not schools that teach their children, but rather schools in which their children can rub elbows with the right kind of people. This could help make school choice a recipe for disaster. Read Atila Abdulkadiroglu, Parag A. Pathak, Jonathan Schellenberg, and Christopher R. Walters, “Do Parents Value School Effectiveness?”, in which they write: “School choice may lead to improvements in school productivity if parents’ choices reward effective schools and punish ineffective ones. This mechanism requires parents to choose schools based on causal effectiveness rather than peer characteristics … [But] parents prefer schools that enroll high-achieving peers … We find no relationship between preferences and school effectiveness after controlling for peer quality.”
6. University of California, Davis economic historian Eric Rauchway continues his long twilight struggle against the Obama administration’s claims that it did better with its crises than FDR did with his in the Great Depression-ridden 1930s. I’m with Eric here: Roosevelt knew less about how the economy worked and what to do, yet in retrospect did much better given the state of things when he took office. Read Eric Rauchway, “The New Deal Was on the Ballot in 1932,” in which he writes: “During the 1932 campaign, Franklin Roosevelt explicitly committed himself to nearly all of what would become the important programs of the New Deal. In the months before his March 4, 1933, inauguration, he made his proposed policies even clearer. Yet many Americans have forgotten this clarity of purpose … One historian [Roger Daniels] recently declared, ‘The notion that when Franklin Roosevelt became president, he had a plan in his head called the New Deal is a myth that no serious scholar has ever believed.’ Outgoing president Herbert Hoover (and voters and politicians and diplomats at the time) knew better.”
7. The China shock is not the only shock American manufacturing has experienced. Yet New England politics did not turn nativist in the 1960s. What was the difference? No Fox News? Read John F. Kennedy, “New England Industry and the South,” in which, in 1954, he wrote: “The southward migration of industry from New England has too frequently taken place for causes other than normal competition and natural advantages.”

This is a weekly post we publish on Fridays 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 the work 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 March 2019 jobs report was released today, and you can check out analysis and charts from Equitable Growth’s Raksha Kopparam and Kate Bahn here.

Women’s Equal Pay Day on April 2 coincided with a recent court victory for pay transparency, as Equitable Growth’s Raksha Kopparam and Kate Bahn noted. On March 5, a judge ruled in favor of a lawsuit to reinstate the requirement that large employers must report pay data by gender and race to the U.S. government’s Equal Employment Opportunity Commission. The Obama administration originally introduced the requirement in 2016, but the Trump administration had reversed it in 2017. The rule is now back in place.

Somin Park of Equitable Growth highlighted the valuable research done by Janet Currie, an economist at Princeton University and member of Equitable Growth’s Steering Committee, on the importance of early childhood experiences for adult outcomes. Currie’s research finds that children’s early years affect their educational attainment, criminal behavior, probability of having a job, and earnings, and that early childhood programs such as Head Start can help improve these outcomes.

Every week, Brad DeLong, a professor at the University of California, Berkeley and Equitable Growth columnist, blogs about worthy reads from both within Equitable Growth and around the web. You should check out this week’s edition if you’re interested in how to cut the child poverty rate in half or how national income inequality is contributing to regional economic disparities in the United States, among other topics.

Alexander Hertel-Fernandez, a professor at Columbia University and Equitable Growth grantee, presented new research at Equitable Growth on April 4 on what workers want from labor organizations. Equitable Growth compiled relevant research that it has published on unions and firms’ monopsony power in prelude to his presentation.

Links from around the web

Three members of Congress—Senate Minority Leader Chuck Schumer (D-NY), Sen. Martin Heinrich (D-NM), and Rep. Carolyn Maloney (D-NY-12)—sent a letter to Bureau of Economic Analysis Director Brian Moyer last week urging his agency to report how gross domestic product growth is distributed across the income distribution. Their letter notes that the 2019 appropriations law encourages the BEA to report income growth for each income decile, starting no later than 2020. They ask how soon the agency can start and request a response by April 12. Equitable Growth has been a longtime supporter of reporting GDP growth across the income distribution. [Vox]

President Trump has threatened to shut down the U.S.-Mexico border, and USA Today reports that a border shutdown, if implemented, would have a significant impact on the economy. It could bring U.S. auto manufacturing to a halt and put U.S. factories at risk of shutting down, since important supply chains are deeply integrated between the United States and Mexico. There also would be food shortages and price hikes, particularly for avocadoes, tomatoes, and berries. About 5 million U.S. jobs depend on border trade. Mexico would be at risk of falling into a recession if there is a prolonged border shutdown, since 37 percent of Mexico’s GDP depends on border trade. [USA Today]

Choosing a college major is one of the most consequential decisions that a young person will make. The Washington Post’s Andrew Van Dam highlights new research showing that students often choose their majors for sub-optimal reasons. Students are influenced by factors such as the time of day they’re taking a class and whether they’re taking a certain class the same semester that they need to choose a major. On top of that, 37 percent of college students end up switching majors. [Washington Post]

Technology platforms that classify their workers as independent contractors instead of employees, such as Uber Technologies Inc., Lyft, Inc. and Handy.com, are trying to ensure that they can keep things that way, according to Noam Scheiber of The New York Times. If these companies had to classify their workers as employees, it is estimated that their costs would rise by 20 percent to 30 percent, since they would have to pay at least minimum wage, pay for overtime, and more. These platforms have successfully lobbied Texas and other states to continue to classify their workers as independent contractors. Lyft went public last week, and Uber plans to go public later this year. [New York Times]

Sen. Ron Wyden (D-OR), the top Democrat on the Senate Finance Committee, has proposed an overhaul of the U.S. tax system that would more heavily tax wealth. Under current law, people are taxed on the appreciation of their assets only when they are sold, at a lower rate than for other forms of income. Under Wyden’s plan, people would be taxed on gains in the value of their assets every year even when they have not been sold, and at the same rate as other income. [Wall Street Journal]

Friday Figure

Figure is from Equitable Growth’s “Disaggregating growth” by Austin Clemens and Heather Boushey.

Worthy reads from Equitable Growth:

1. This is brilliant. It has, I think, the implication that a lot of people in rich areas are not benefitting from the region’s wealth—which is what David Autor found in his Ely Lecture. Read Robert Manduca, “National income inequality in the United States contributes to economic disparities between regions,” in which he writes: “In 1980, just 12 percent of Americans lived in metropolitan areas with a mean family income more than 20 percent higher or lower than the national average. By 2013, more than 30 percent did. Today a handful of metros—cities such as San Francisco and Washington, DC—have mean family incomes 40 percent or 50 percent greater than average and more than double the average incomes in many rural areas … Most previous research has emphasized the role of income sorting … I show, however, that a much bigger portion of the growing disparities is due to rising income inequality at the national level.”
2. Halving child poverty is attainable, and remarkably cheap, says Janet Currie, in “We can cut child poverty in the United States in half in 10 years.” She argues for: “Means-tested supports and work incentives … [m]ore universal benefits … a combination of work incentives, economic security programs, and social inclusion initiatives … [expanding] the Earned Income and Child and Dependent Care tax credits, while adding a $2,000 child allowance to replace the current Child Tax Credit … an increase in the minimum wage, and a nationwide roll-out of a promising demonstration program called ‘Work Advance.’”
3. Why it is that “stress” is so debilitating in the long run is something I have never understood—especially since the forms of stress we face are not those that ought to induce a fight-or-flight use-up-the-organism’s-resources response. Is it that our brains are just too good at making long-run peril real and then transmitting that to the rest of the body? But it is clear that, here in America, “race” appears doubly poisonous. Read Kyle Moore, “Linking racial stratification and poor health outcomes to economic inequality in the United States,” in which he writes: “Racial disparities in life expectancy and incidences of sickness … are only partially explained by differences in access to economic resources … I investigate the role that stress plays in increasing the risk of hypertension and inflammation among older black and white Americans’ exposure to potential psychosocial stressors in excess of economic resources that could mitigate or offset the effects of those stressors—modifying an approach taken by the American Psychological Association.”
4. A very nice look indeed at the current state of our broken antitrust system—including an excellent retrospective on the historical process by which we got here. Read Andrew I. Gavil, “Crafting a monopolization law for our time,” in which he writes: “If Section 2 is to be an effective tool for policing and deterring anti-competitive conduct in today’s economy, then it will need to be adjusted for the needs of our time. But first it is important to understand how Section 2 became so limited in scope … Choosing the language of the Sherman Act, the Congress of 1890 turned to common law, which had long prohibited ‘unreasonable restraints of trade’… [into] a statute that included prohibitions of concerted action (Section 1), as well as monopolization, attempts to monopolize, and conspiracy to monopolize (Section 2).”
5. Pay transparency is perhaps the most powerful anti-pay-discrimination tool there is in America as it is today. Read Raksha Kopparam and Kate Bahn, “A judicial victory for pay transparency in the United States in the run-up to Women’s Equal Pay Day,” in which they write: “It’s important to consider the importance of a judge’s ruling last month that reinstated the collection of pay data by firms who report their employment practices to the EEOC to boost pay transparency … On March 5, 2019, the judge … order[ed] the EEOC to collect pay data in the next EEO-1 report … The ruling could not have been more timely. Just one case in point: In a survey of employees at large technology firms, 60 percent of respondents said that their employer either banned or discouraged discussion of wages.”

Worthy reads not from Equitable Growth:

1. Noah Smith’s plan for reviving rural and small-city America is to spend a fortune establishing research universities that will attract graduate students from abroad. A good many of them will then settle where they went to school. And they will then figure out how to use local factors of production to generates value in the world economy, and so revive the area. But that would require boosterish elites in the South, in the prairie, and in the Midwest. And part of the social pathology for those regions is that they do not have boosterish elites. Read Paul Krugman, “Getting Real About Rural America,” in which he writes: “Nobody knows how to reverse the heartland’s decline … Rural lives matter—we’re all Americans, and deserve to share in the nation’s wealth … But it’s also important to get real. There are powerful forces behind the relative and, in some cases, absolute economic decline of rural America—and the truth is that nobody knows how to reverse those forces. Put it this way: Many of the problems facing America have easy technical solutions; all we lack is the political will. Every other advanced country provides universal health care. Affordable childcare is within easy reach. Rebuilding our fraying infrastructure would be expensive, but we can afford it——and it might well pay for itself. But reviving declining regions is really hard. Many countries have tried, but it’s difficult to find any convincing success stories … Southern Italy … the former East Germany…. Maybe we could do better, but history is not on our side.”
2. Paul Krugman makes the point, which I believe is correct, that we should not be fearing robots and Artificial Intelligence yet—that, while they may (and while I think it highly likely that they will) pose society very hard problems of income distribution in the future, there is no sign that they are at work yet on any significant scale. Our income-distribution problems today are generated by our politics, and by the resulting economic mismanagement that our politics has produced. Read Paul Krugman, “Don’t Blame Robots for Low Wages,” in which he writes: “Participants just assumed that robots are a big part of the problem—that machines are taking away the good jobs, or even jobs in general. For the most part this wasn’t even presented as a hypothesis, just as part of what everyone knows … So, it seems like a good idea to point out that in this case what everyone knows isn’t true … We do have a big problem—but it has very little to do with technology, and a lot to do with politics and power … Technological disruption … isn’t a new phenomenon. Still, is it accelerating? Not according to the data. If robots really were replacing workers en masse, we’d expect to see the amount of stuff produced by each remaining worker—labor productivity—soaring … Technological change is an old story. What’s new is the failure of workers to share in the fruits of that technological change.”
3. I would not say that new technologies were “geared toward maintaining the role of human labor in value creation.” I would say that new technologies required microcontrollers—and the human brain was the only available microcontroller—and software ‘bots to manage materials and information flows—and the human brain provided the only available ‘bot hardware. In the future—but not yet now—it may become that neither of these are the case. Read Daron Acemoglu and Pascual Restrepo, “The Revolution Need Not Be Automated,” in which they write: “For centuries after the Industrial Revolution, automation did not hinder wage and employment growth because it was accompanied by new technologies geared toward maintaining the role of human labor in value creation. But in the era of artificial intelligence, it will be up to policymakers to ensure that the pattern continues … In the past three decades, the accompanying changes needed to offset the labor-displacement effects of automation have been notably absent. As a result, wage and employment growth has remained stagnant, and productivity growth anemic.”
4. In a time of bubble, raising interest rates and restricting the lending of regulated institutions may be counterproductive if there are unregulated institutions as well. This is an old lesson. We forgot it and relearned it yet again in the 2000s. Read Itamar Drechsler, Alexi Savov, and Philipp Schnabl, “How Monetary Policy Shaped the Housing Boom,” in which they write: “Between 2003 and 2006, the Federal Reserve raised rates by 4.25 percent. Yet it was precisely during this period that the housing boom accelerated, fueled by rapid growth in mortgage lending. There is deep disagreement about how, or even if, monetary policy impacted the boom. Using heterogeneity in banks’ exposures to the deposits channel of monetary policy, we show that Fed tightening induced a large reduction in banks’ deposit funding, leading them to contract new on-balance-sheet lending for home purchases by 26 percent. However, an unprecedented expansion in privately securitized loans, led by nonbanks, largely offset this contraction. Since privately securitized loans are neither GSE-insured nor deposit-funded, they are run-prone, which made the mortgage market fragile. Consistent with our theory, the re-emergence of privately securitized mortgages has closely tracked the recent increase in rates.”