Should-Read: J. Vernon Henderson, Adam Storeygard, Tim L. Squires, and David N. Weil: The Global Spatial Distribution of Economic Activity: Nature, History, and the Role of Trade

Should-Read: A very nice paper indeed: J. Vernon Henderson, Adam Storeygard, Tim L. Squires, and David N. Weil: The Global Spatial Distribution of Economic Activity: Nature, History, and the Role of Trade: “We study the distribution of economic activity, as proxied by lights at night, across 250,000 grid cells of average area 560 square kilometers…

…Nearly half of the variation can be explained by a parsimonious set of physical geography attributes…. Geographic characteristics… two groups… agriculture… trade…. Agriculture variables have relatively more explanatory power in countries that developed early and the trade variables have relatively more in countries that developed late…. Two technological shocks occur, one increasing agricultural productivity and the other decreasing transportation costs…. Agglomeration economies lead to persistence in urban locations. In countries that developed early, structural transformation due to rising agricultural productivity began at a time when transport costs were still relatively high…. When transport costs fell, these local agglomerations persisted. In late developing countries, transport costs fell well before structural transformation… [so] manufacturing agglomerated in relatively few, often coastal, locations….

The base covariates are… malaria and ruggedness…. Our agricultural covariates… temperature, precipitation, length of growing period, land suitability for agriculture, elevation, and latitude… 14 biome indicators…. Five trade variables… distances… to the nearest coast, navigable river, major lake, and natural harbor…

Predicted Lights Nighttime Lights

Should-Read: Martin Feldstein: The Real Reason for Trump’s Steel and Aluminum Tariffs

Should-Read: This makes no sense at all. There is nothing in the formal or informal record suggesting that any of the potential deciders and influencers inside the Trump Administration support the steel and aluminum tariffs as some kind of Xanatos Gambit to persuade China to adopt intellectual property rules more to the liking of U.S. firms doing business in China. Absolutely nothing: Martin Feldstein: The Real Reason for Trump’s Steel and Aluminum Tariffs: “The US tariffs will… increase the likelihood that China will accelerate the reduction in subsidized excess capacity…

…It will be possible to exempt imports from military allies in NATO, as well as Japan and South Korea, focusing the tariffs on China…. The administration has not yet said that it will focus the tariffs in this way….

For the US, the most important trade issue with China concerns technology transfers, not Chinese exports… The Chinese government was using the Peoples Liberation Army’s (PLA) sophisticated cyber skills to infiltrate American companies and steal technology…. President Barack Obama and President Xi Jinping met in California in June 2013…. Xi then agreed that the Chinese government would no longer use the PLA or other government agencies to steal US technology…. It appears that such cyber theft has been reduced dramatically….

Current technology theft takes a different form. American firms that want to do business in China are often required to transfer their technology to Chinese firms as a condition of market entry. These firms “voluntarily” transfer production knowhow because they want access to a market…. The US cannot use traditional remedies for trade disputes or World Trade Organization procedures to stop China’s behavior…. US negotiators will use the threat of imposing the tariffs on Chinese producers as a way to persuade China’s government to abandon the policy of “voluntary” technology transfers…. [Then] the threat of tariffs will have been a very successful tool of trade policy.

Should-Read: Dan Shaviro: Another new publication!

Should-Read: Dan Shaviro: Another new publication!: “‘Evaluating the New U.S. Pass-Through Rules’…

…The pass-through rules that the U.S. Congress enacted in 2017-permitting the owners of unincorporated businesses in favored industries to escape tax on 20 per cent of their income-achieved a rare and unenviable trifecta, by making the tax system less efficient, less fair, and more complicated. It lacked any coherent (or even clearly articulated) underlying principle, was shoddily executed, and ought to be promptly repealed. Given the broader surrounding circumstances, the mere fact of its enactment sends out a disturbing message about disregard among high-ranking US policymakers for basic principles of competence, transparency, and fair governance….

This article is a bit on the candid and unvarnished side-even though it’s been toned down significantly from earlier drafts. But I think the tone is justified given the passthrough rules’ egregiousness-at least leaving aside the old maxim that, if you can’t say something nice, you shouldn’t say anything at all. (That maxim would tend to hold down the quantity of writing about the passthrough rules.) It also addresses the 2017 act’s negligence or worse (it appears to have been deliberate) in cutting the corporate rate without addressing the use of C corporations as tax shelters that can be used to lower the rate on labor income. Read the article and you’ll find a few well-chosen (I’d like to think) words about that…

Should-Read: Noah Smith: How Universities Make Cities Great

Should-Read: Noah Smith: How Universities Make Cities Great: “Abel and Deitz find that university research expenditures have a strong effect on the number of educated people in a region—over four times as strong as the effect of degree production…

…Skilled workers come to do research at the university itself. But most of the effect comes from private-sector activity in the surrounding economy. When a university spends a lot on research, ideas and technology leak out to surrounding businesses in myriad ways. Universities cross-license technologies to the private sector. Academics consult for local businesses. Grad students, researchers, and professors start local businesses of their own. Companies establish research centers and hire smart people away from their Ph.D. programs or campus jobs. Some universities provide forums for local entrepreneurs, inventors and academics to meet each other, exchange ideas and offer employment.

High-productivity technology businesses therefore tend to cluster around universities, in order to take advantage of the rich flow of ideas and skilled workers. That, in turn, draws smart educated people from other regions, boosting productivity and raising wages even for less-educated locals.

The policy implication is clear. In order to boost local economies, universities should stop seeing themselves only as educators, and start seeing themselves as platforms for local economic activity. Cleveland State University researchers Richey Piiparinen, Jim Russell, and Charlie Post call the former a “consumer university” model, and the latter a “producer university” model. They apply the distinction to explain the diverging performances of Cleveland and Pittsburgh. Cleveland’s colleges, they say, are still too focused on educating locals, while Pittsburgh’s—especially Carnegie Mellon—have taken an active role in boosting the city’s technology industry…

Should-Read: Jane Humphries (2013): The lure of aggregates and the pitfalls of the patriarchal perspective: a critique of the high wage economy interpretation of the British industrial revolution

Should-Read: A rather odd piece in its rhetorical pose. It really is not a critique of Allen’s hypothesis about the especially strong incentives in Industrial Revolution England to invent and innovate in coal energy and machine intensive ways: it is a reinforcement of it: an argument that British patriarchy reinforced and augmented the imperial, coal-resource, cultural, scientific, and technological forces converging to make the British Industrial Revolution: Jane Humphries (2013): The lure of aggregates and the pitfalls of the patriarchal perspective: a critique of the high wage economy interpretation of the British industrial revolution: “The lure of aggregates and the pitfalls of the patriarchal perspective…

…a critique of the high wage economy interpretation of the British industrial revolution…

…The account of the high wage economy is misleading because it focuses on men and male wages, underestimates the relative caloric needs of women and children, and bases its view of living standards on an ahistorical and false household economy. A more accurate picture of the structure and functioning of working-class households provides an alternative explanation of inventive and innovative activity in terms of the availability of cheap and amenable female and child labour and thereby offers a broader interpretation of the industrial revolution…

Should-Read: Barry Ritholtz: Inflation: Price Changes 1997 to 2017

Should-Read: Hospital services are somewhat misleading, because they buy us a lot more today than they bought us back in the 1990s. College tuition as well: it is a decline in financial aid as a proportion to cost that has driven the cost up so much. College textbooks is a monopoly intellectual property story. It is an extraordinary-shift-in-relative-prices story. But a large part of that story is a political story: Barry Ritholtz: Inflation: Price Changes 1997 to 2017: “It is notable that the two big outliers to the upside are health care (hospital, medical care, prescription drugs) and college (tuition, textbooks, etc.)…

…Clothes, cars, TVs, cell phones, software—technology in general—showed disinflation or outright deflation in prices. (Housing and food & beverage have been right at the middle of inflation levels). Wages have  barely ticked over the median inflation measure, but that did not stop some people from blaming the correction on rising wages. Reading the pundits, I cannot tell which fate awaits us: the robot-driven apocalypse where we are all out of work, or the inevitable spike in wages that sends rates much higher and kills the market. Perhaps both — higher wages sends employers into the waiting arms of our automated future. Regardless, I expect wages are ticking higher, but not appreciably so that the Fed must do anything drastic. And the increased comp should accrue to sectors like retail, housing, durable goods, travel, automobiles, etc. We are a long ways from the sort of wage push inflation of the 1990s..

Price Fan Chart

Should-Read: Jason Del Rey: Amazon is creating a health care company with the help of Warren Buffett and JPMorgan Chase

Should-Read: Jason Del Rey: Amazon is creating a health care company with the help of Warren Buffett and JPMorgan Chase: “Amazon… plans to work with Warren Buffett’s Berkshire Hathaway and JPMorgan Chase to create a new health care company…

…with the aim of “reducing healthcare’s burden on the economy while improving outcomes for employees and their families…. [The] initial focus… will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.” The announcement proclaimed that the company would be “free from profit-making incentives and constraints,” but an Amazon spokesperson declined to comment on whether the entity would be a nonprofit…. Even without many details, the news had an immediate impact on sector leaders; UnitedHealth’s stock was down 7 percent in pre-market trading, while Anthem and Cigna each fell 5 percent…

Should-Read: Pamela Jakiela and Owen Ozier: Gendered Language

Should-Read: Pamela Jakiela and Owen Ozier: Gendered Language: “Gender languages assign many—sometimes all—nouns to distinct sex-based categories, masculine and feminine…

…Drawing on a broad range of historical and linguistic sources, we estimate the proportion of each country’s population whose native language is a gender language. At the cross-country level, we document a robust negative relationship between prevalence of gender languages and women’s labor force participation. We also show that traditional views of gender roles are more commons in countries with more native speakers of gender languages. In African countries where indigenous languages vary in terms of their gender structure, educational attainment and female labor force participation are lower among those whose native languages are gender languages. Cross-country and individual-level differences in labor force participation are large in both absolute and relative terms (when women are compared to men), suggesting that the observed patterns are not driven by development or some unobserved aspect of culture that affects men and women equally. Following the procedures proposed by Altonji, Elder, and Taber (2005) and Oster (forthcoming), we show that the observed correlations are unlikely to be driven by unobservables. Gender languages appear to reduce women’s labor force participation…

Should-Read: Matt Townsend et al.: America’s ‘Retail Apocalypse’ Is Really Just Beginning

Should-Read: Matt Townsend et al.: America’s ‘Retail Apocalypse’ Is Really Just Beginning: “The reason isn’t as simple as Amazon.com Inc. taking market share…

…or twenty-somethings spending more on experiences than things. The root cause is that many of these long-standing chains are overloaded with debt—often from leveraged buyouts led by private equity firms. There are billions in borrowings on the balance sheets of troubled retailers, and sustaining that load is only going to become harder—even for healthy chains. The debt coming due, along with America’s over-stored suburbs and the continued gains of online shopping, has all the makings of a disaster. The spillover will likely flow far and wide across the U.S. economy. There will be displaced low-income workers, shrinking local tax bases and investor losses on stocks, bonds and real estate. If today is considered a retail apocalypse, then what’s coming next could truly be scary. Until this year, struggling retailers have largely been able to avoid bankruptcy by refinancing to buy more time. But the market has shifted, with the negative view on retail pushing investors to reconsider lending to them. Toys “R” Us Inc. served as an early sign of what might lie ahead…

Should-Read: By and large a good statement. However, while free speech extends to statements made with “conscious indifference to their truth content”, I do not believe that academic freedom does. Professors who make and reiterate and decide to die on the hill that is statements made with “conscious indifference to their truth content” are violating the norms of academic responsibility as much as those who commit plagiarism or falsify experimental results. I do not believe that the Trustees of the University of Pennsylvania should continue to employ Professor Wax: Ted Ruger (Dean): Lawyers, Guns & Money: “Dear members of the Penn Law community…

…I write to share with you information about a development of great concern to our intellectual and professional community. In the past two weeks, students and alumni have brought to my attention a number of public claims made last fall by one of our tenured faculty, Amy Wax, during a video interview. Specifically, Professor Wax stated that, “I don’t think I’ve ever seen a black student graduate in the top quarter of the class, and rarely, rarely in the top half.” Moreover, she claimed that the University of Pennsylvania Law Review, a prestigious law journal whose editorial board is composed of Penn Law students, has a racial diversity mandate, suggesting that black students on Law Review had not earned their place. Speaking about black law students at Penn and peer schools, she went on to say that “some of them shouldn’t” even go to college.​

It is imperative for me as dean to state that these claims are false: black students have graduated in the top of the class at Penn Law, and the Law Review does not have a diversity mandate. Rather, its editors are selected based on a competitive process. And contrary to any suggestion otherwise, black students at Penn Law are extremely successful, both inside and outside the classroom, in the job market, and in their careers.

I want to make absolutely clear that Professor Wax, like every member of the faculty and the student body, is protected by Penn’s policies of free and open expression as well as academic freedom, and I will steadfastly defend the rights of Law School community members to openly express their views. This has been the position of the Law School throughout my tenure as dean, and before, and it is the consistent message I have articulated in handling protests involving provocative figures speaking on campus, student-led panels on controversial topics, and other free speech debates including those involving Professor Wax. I will maintain this position moving forward. Professor Wax enjoys the same status as every other tenured colleague here: her job, salary, seniority, and opportunity to teach a full load of courses remains secure. She is scheduled to teach a full course load in the next academic year….

Law schools are not free-standing debating societies or think tanks; we are also demanding professional schools dedicated to training hundreds of students each year…. Professor Wax has chosen to speak publicly, disparagingly, and inaccurately about the performance of these students, some of whom she has taught and graded confidentially at Penn Law. As a scholar she is free to advocate her views, no matter how dramatically those views diverge from our institutional ethos and our considered practices. As a teacher, however, she is not free to transgress the policy that student grades are confidential, or to use her access to those Penn Law students who are required to be in her class to further her scholarly ends without students’ permission. Penn Law does not permit the public disclosure of grades or class rankings, and we do not collect, sort, or publicize grade performance by racial group. The existence of these policies and practices, while constraining this response, is not an invitation to statements made with conscious indifference to their truth content…

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