Should-Read: Danny Yagan: EMPLOYMENT HYSTERESIS FROM THE GREAT RECESSION: “This paper uses U.S. local areas as a laboratory to test whether the Great Recession depressed 2015 employment…

..Exposure to a 1-percentage-point-larger 2007-2009 local unemployment shock caused working-age individuals to be 0.4 percentage points less likely to be employed at all in 2015, evidently via labor force exit. These shocks also increased 2015 income inequality. General human capital decay and persistently low labor demand each rationalize the findings better than lost job-specific rents, lost firm-specific human capital, or reduced migration. Simple extrapolation suggests the recession caused most of the 2007-2015 age-adjusted employment decline…

Should-Read: Barry Eichengreen: Two Myths About Automation: “Robots, machine learning, and artificial intelligence promise to change fundamentally the nature of work…

…Everyone knows this. Or at least they think they do… [that] more jobs than ever are threatened… that previously safe jobs are now at risk…. All jobs, even those of doctors, lawyers, and professors, are being transformed. But transformed is not the same as threatened. Machines, it is true, are already more efficient than legal associates at searching for precedents. But an attorney attuned to the personality of her client still plays an indispensable role in advising someone contemplating a messy divorce whether to negotiate, mediate, or go to court. Likewise, an attorney’s knowledge of the personalities of the principals in a civil suit or a criminal case can be combined with big data and analytics when the time comes for jury selection. The job is changing, not disappearing. These observations point to what is really happening in the labor market. It’s not that nurses’ aides are being replaced by health-care robots; rather, what nurses’ aides do is being redefined. And what they do will continue to be redefined as those robots’ capabilities evolve from getting patients out of bed to giving physical therapy sessions and providing emotional succor to the depressed and disabled….

The coming technological transformation won’t entail occupational shifts on the scale of the Industrial Revolution, with its wholesale redistribution of labor between the agricultural and industrial sectors. After all, the vast majority of Americans already work in the service sector. But it will be more important than ever for people of all ages to update their skills and renew their training continuously, given how their occupations will continue to be reshaped by technology. In countries like Germany, workers in a variety of sectors receive training as apprentices and then over the course of their working lives. Companies invest and reinvest in their workers, because the latter can insist on it, possessing as they do a seat in the boardroom as a result of the 1951 Codetermination Law….

So here’s an idea. Instead of a “tax reform” that allows firms to expense their capital outlays immediately, why not give companies tax credits for the cost of providing lifelong learning to their employees?

Should-Read: Nathan Jensen: Exit options in firm-government negotiations: An evaluation of the Texas chapter 313 program: “A unique economic development incentive program in the state of Texas that holds almost all elements of bargaining constant…

…leaving only the ability of firms to walk away from a given location during the bargaining process…. I document the extent to which firms that chose to locate in Texas made their decisions independent of this special economic development program. My findings suggest that only 15% of the firms participating in the program would have invested in another state without this incentive. The majority of these projects, and incentive dollars, were allocated to firms already committed to investing in Texas. Case studies of over 80 projects reveal that in many cases it was an open secret that companies had already committed to their investment locations prior to receiving the incentive. This implies the that structure of the program encourages the overuse of incentives…

Should-Read: James Kwoka: U.S. antitrust and competition policy amid the new merger wave: “This dramatic and well-documented increase in concentration raises the question about its causes…

…Could it simply be the unfortunate side effect of the rise of information technology and network industries that typically do not support numerous firms? It’s certainly the case that those sectors of the economy have grown in visibility and importance, yet consolidation has affected lots of other, more traditional industries as well. Perhaps, then, the decline in competitiveness is due to the increased prevalence of barriers to entry used by incumbent firms to forestall competition by others. There is certainly evidence of this as well—some cited by CEA—but again, this appears to be localized in specific sectors. A third possible explanation is the role of antitrust policy, specifically the ways in which it has changed and permitted the emergence of ever-larger firms….”

Should-Read: Jacob Levy: Black Liberty Matters: “‘How is it that we hear the loudest yelps for liberty among the drivers of negroes?’…

…This was Samuel Johnson’s bitter rhetorical question about the American revolution, and the conflict it identifies has never been far from the surface of American political and intellectual life. Compared with the societies of 18th and 19th century Europe, the United States was unusually obsessed with the idea of liberty and unusually economically dependent on slave labor. Sometimes Americans like to tell ourselves that the revolutionary idea of liberty is what finally made abolition possible two generations later, but that sidesteps the paradox that the U.S. was one of the last countries to abolish slavery, and did so only after a decades-long expansion.

The great historical sociologist Orlando Patterson provided an important answer to Johnson’s question in his landmark study Freedom in the Making of Western Culture. Across the centuries, from ancient Greece to modern America, “people came to value freedom, to construct it as a powerful shared vision of life, as a result of their experience of, and response to, slavery or its recombinant form, serfdom, in their roles as masters, slaves, and nonslaves.”

It is precisely in slave societies, confronted with the reality of slavery, that people most acutely perceive the importance of freedom, most clearly articulate defenses of it,  and most passionately demand it. Sometimes it is slaves or ex-slaves who do so. But often it is masters. Understanding all too well how they rule over other human beings, they identify being ruled like that as the great social evil, and they fiercely refuse to be subjected to it. Slaveowners and their neighbors can see what unfreedom is like, and they resist it for themselves. This is only partly because they come to identify their freedom as their freedom to own and rule slaves, and are desperate to protect their status as masters. In a more general way, they become very sensitive to anyone proposing to treat them as they treat slaves…

I would cite Edmund S. Morgan (1975): American Slavery, American Freedom http://amzn.to/2yGhqao as well…

Should-Read: Jerry Taylor (2016): Is There a Future for Libertarianism?: “The Rand Paul campaign and its (admittedly uneven) agenda of social tolerance, military restraint, and fiscal conservatism is little more than a very small pile of smoking embers…

…Paul was crushed by candidates caught up in a bidding war to meet voter demands for nativism, know-nothing economics, know-nothing Dr. Strangelove foreign policy, and bigotry. Libertarian-minded Americans have every reason, once again, to cry in their beer. Why is the oft-prophesied libertarian moment in American politics so elusive?… Bryan Caplan… consumers in the marketplace of ideas… demand comfort and entertainment, not strict morality or empirical truth. While there is some validity to what Caplan says, he is too quick to conclude that libertarian ideas are true but simply too vexatious to bear….

Years ago, libertarian political theorist Jeffrey Friedman… a devastating critique. The bundled libertarian product…is an incoherent vacillation between a theory of rights that most people do not accept and lazy, unpersuasive utilitarian arguments for laissez faire capitalism. And he’s right. Moreover, the kind of libertarianism that is hostile to social insurance sits uncomfortably with our moral intuition. So much of who we are and where we end up is due to chance…. How morally compelling is it for libertarians to say: Tough!… Were libertarians to ungrudgingly accept the case for a more adequate social safety net (a case, after all, accepted to some extent by libertarian heroes F. A. Hayek, Milton Friedman) and give up on their blanket, dogmatic opposition to all regulation and market intervention (a perfect example is their remarkable hostility to mainstream climate science), they’d find a ticket to intellectual respectability. They would also find a ticket to political relevancy—something that is being well demonstrated by the Bernie Sanders campaign….

Libertarians are right to cringe at Sanders’ regulatory zeal, his romanticization of governmental power, and his domestic-spending plans…. Were we to leaven Sanders’ commitment to civil liberties, his anti-interventionist foreign policy, and his instincts regarding the social safety net with a proper respect for the wealth creation produced by free markets—someone, after all, has to make enough money to pay all the bills that Sanders would impose—we would have an agenda that would be entirely consistent with social and economic liberty. Libertarianism thus repurposed is the creed of honest, thoughtful liberalism. It is a creed that can appeal to the intellectually rudderless center-left and center-right… in stark contrast to the stale tribal dogmas that dominate the two parties. That’s the future of libertarianism. And it’s a worthy and powerful contender for being the future of America.

Should-Read: Guido Menzio and Shouyong Shi: Efficient Search on the Job and the Business Cycle: “A model of directed search… in which transitions… between unemployment and employment and across employers are driven by heterogeneity in the quality of firm-worker matches…

…Agents’ value and policy functions are independent of the endogenous distribution of workers across employment states. Hence, the model can be solved outside of the steady state and used to measure the effect of cyclical productivity shocks on the labor market. Productivity shocks… generate large fluctuations in workers’ transitions, unemployment, and vacancies when matches are are experience goods, but not when matches are inspection goods…

Must-Read: Ahem! If Robert Barro seriously and carefully thought the long-run boost to national income from the tax “reform” bill was 7% rather than the 3% of the Nine Republican Economists Being Unprofessional, he should have said so then.

It is not good to say now: “our critics are right and we should have divided by 25 rather than 10 to get an 0.12% per year growth boost rather than an ‘as much as 0.3%’ growth boost, so let me multiply the 3% by 25 to get 7%”. That is neither “serious” nor “careful”. It is, instead, delivering a piece that nails the 0.3% per year growth boost that the Republican political spinmasters have settled on as the talking point.

Larry and Jason, please do not ascribe “seriousness” and “carefulness” to work unless it is both serous and careful. I do not believe either the work of the Nine Republican Economists Being Unprofessional or to the work of Robert Barro alone here qualifies: Jason Furman and Larry Summers: Robert Barro’s Tax-Reform Advocacy: A Response: “Now Barro has provided Project Syndicate with an analysis that uses his own estimates to conclude that the long-run level of output would increase by 7%…

…Assuming the economy converges to its long-run steady state at 5% per year,… an additional 0.3-percentage-point increase in the annual growth rate…. (Under his convergence assumptions, the 3% increase in output in his previous group letter would translate into a 0.1-percentage-point increase in the annual growth rate over the next decade. As we argued in our response to that letter, this is also consistent with the annual growth rates implied by the papers Barro and his co-signers cited.)… Barro… makes errors in modeling the actual tax provisions and in choosing parameters…. We believe that Barro’s method, correctly applied, would yield an increase in the level of long-run GDP of about 1%. This works out to a 0.05-percentage-point increase in the annual growth rate…. That this conclusion is similar to the JCT estimate should not be a surprise, because the JCT already incorporates most of the economic relationships that Barro is modeling, but correctly models the actual tax provisions and appropriate economic parameters….

Instead of being used to justify this tax bill, Barro’s insights could have helped to shape a much better tax bill. Such a bill would include permanent instead of temporary expensing, apply expensing to structures as well as equipment, and reduce the statutory tax rate by a smaller margin…

Tuning one’s analysis to hit a pre-specified political spinmaster mark—that is never a good game to play…