Must-Read: Noah Smith (2011): Noahpinion: The liberty of local bullies

Must-Read: A promos of Nancy MacLean’s Democracy in Chains http://amzn.to/2tGUUeN: My view is that Brown v. Board of Education was not the major cause of James Buchanan’s decision to try and U VA President Colgate Darden’s decision to fund the “Virginia School of Political Economy”—Public Choice as a discipline that had only one wing, a right one, and that would, as the late Mancur Olson liked to say, “never be healthy until its left wing was as strong as its right, and it was no longer an ideological movement masquerading as an academic sub discipline”. But it was certainly a trigger, and support was always very welcome from those whose concerns about appropriate governmental decentralization, limited powers, and checks and balances started and ended with preserving white supremacy.

Noah Smith was on the case back in 2011:

Noah Smith (2011): Noahpinion: The liberty of local bullies: “I have not been surprised by any of the quotes that have recently come to light from Ron Paul’s racist newsletters. I grew up in Texas, remember… http://noahpinionblog.blogspot.jp/2011/12/liberty-of-local-bullies.html

…If you talk to a hardcore Paul supporter for a reasonable length of time, these sorts of ideas are more likely than not to come up. So does this mean that Ron Paul’s libertarianism is merely a thin veneer covering a bedrock of tribalist white-supremacist paleoconservatism? Well, no, I don’t think so. Sure, the tribalist white-supremacist paleoconservatism is there. I just don’t think it’s incompatible with libertarianism….

Libertarianism… [in] its modern American manifestation… is not really about increasing liberty…. An ideal libertarian society would leave the vast majority of people feeling profoundly constrained in many ways…. Freedom… can be curtailed… by a large variety of intermediate powers like work bosses, neighborhood associations, self-organized ethnic movements, organized religions, tough violent men, or social conventions…. There is plenty of room for people to be oppressed by… “local bullies”. The modern American libertarian ideology does not deal with the issue…. [To] Nozick, Hayek, Rand, and other foundational thinkers… if your freedom is not being taken away by the biggest bully that exists, your freedom is not being taken away at all….

Not surprisingly, this gigantic loophole has made modern American libertarianism the favorite philosophy of a vast array of local bullies…. The curtailment of government legitimacy, in the name of “liberty,” allows abusive bosses to abuse workers, racists to curtail opportunities for minorities, polluters to pollute without cost, religious groups to make religious minorities feel excluded, etc…. I see no real conflict between Ron Paul’s libertarianism and his support for the agenda of racists. It’s just part and parcel of the whole movement… as it in fact exists.

Recessions, recoveries, and racial employment gaps in the United States

Unemployed workers fill out applications during a jobs fair sponsored by Scott Lee Cohen, independent candidate for governor of Illinois, October 2010, in Rockford, Illinois.

This past Friday, the U.S. Bureau of Labor Statistics released data that show that in June, the gap between the unemployment rate for black Americans and white Americans fell to the lowest level on record. The gap stood at 3.3 percentage points and has been on a downward trend for several years as the U.S. economy has recovered. (see Figure 1) This closing gap hitting historical lows is something to cheer, but let’s not forget that the gap remains. Looking at some of the reasons the gap exists will be helpful for thinking about how to eliminate it.

Figure 1

A recent paper by staff economists at the Board of Governors of the Federal Reserve System—Tomaz Cajner, Tyler Radler, David Ratner, and Ivan Vidangos—digs into the data on racial disparities in not only the unemployment rate but also the labor force participation rate; part-time employment; and the flows among employment, unemployment, and being out of the labor force.

The four economists look at what might explain the differences in unemployment broken down by race and gender. They compare unemployment for black men and Hispanic men to unemployment for white men and unemployment for black women and Hispanic women to unemployment for white women. The technique they use breaks out how much of the difference can be attributed to observable variables—age, education level, marital status, and state of residence—and how much is “unexplained.”

The results show that the unemployment gap between black and white workers, both men and women, is almost entirely “unexplained,” meaning that none of the observable characteristics explain the gap. In other words, the gap can’t be explained by black Americans having lower levels of education or differences in demographics. The unexplained portion—in this case almost all of the gap—is likely due to either direct discrimination and bias in the labor market or unequal access to resources such as education.

The authors take another path to seeing what’s causing unemployment gaps. They see how the unemployment rate would be different for different groups by changing certain labor market flows—for example, from employment to unemployment or from not in the labor force to employment—to see how much the unemployment rate changes. What they find is that the job-separation rate—moving from employment to unemployment—is the biggest driver of the racial differences in the unemployment rate and accounts for the increases in the gap during recessions.

The importance of the job-separation rate would mean that a strong labor market reduces the racial unemployment gap not because it’s boosting hiring rates disproportionately more for black workers but rather because it’s preventing the disproportionate firing that black workers experience during recessions.

Historically, the importance of a tight labor market and full employment to reducing racial disparities has been well-acknowledged. Policymakers would be well-served to remember this as they debate how much tighter the labor market can get.

Must-Read: Maarten de Ridder and Coen Teulings: Endogenous growth and lack of recovery from the Global Crisis

Must-Read: Maarten de Ridder and Coen Teulings: Endogenous growth and lack of recovery from the Global Crisis: “The crisis [is] a quasi-natural experiment to test the endogenous growth hypothesis… http://voxeu.org/article/endogenous-growth-and-lack-recovery-global-crisis

…suggests that output has not recovered because the crisis affected the rate of technological progress. Firms that preferred a bank that was more severely affected by the crisis experienced a large fall in R&D investment and a persistent fall in output in subsequent years. This suggests a direct link between R&D and future productivity, as predicted by endogenous growth models…

Posted in Uncategorized

Should-Read: Christian Odendahl: The Hartz Myth

Should-Read: Christian Odendahl: The Hartz Myth: “Germany’s labour market and welfare reforms of the early 2000s have gained an outsized importance over time… http://www.cer.eu/sites/default/files/pbrief_german_labour_10.7.17.pdf

…For some, these reforms put an end to Germany’s social market economy and pushed millions into insecure, low wage jobs. For others, notably many international observers, these ‘Hartz reforms’ are one if not the main reason why Germany–formerly known as the ‘sick man of Europe’–is now Europe’s export powerhouse and strongest economy…. A sober look at the German reforms shows that their economic impact was modest. They targeted weaknesses in Germany’s labour market and benefits system… combined unemployment and social assistance into a single system, to help more people find jobs or retrain; curbed incentives to ‘retire early’ by preventing people from claiming generous unemployment
benefits… made job search, training and job centres more efficient, which helped to reduce unemployment… and provided more incentives to take up work, which increased temporary and marginal employment. There were fewer negative side effects than are commonly attributed to the reforms…. But the number of people in insecure jobs and at risk of poverty increased after the reforms. The effect on income inequality is ambiguous…

Posted in Uncategorized

Should-Read: Ann Marie Marciarille: Those Pesky Pre-Dispute Arbitration Agreements for Skilled Nursing Facilities

Should-Read: Ann Marie Marciarille: Those Pesky Pre-Dispute Arbitration Agreements for Skilled Nursing Facilities: “Assisting a parent or loved one in seeking skilled nursing facility admission is no joke… http://www.marciarille.com/2017/05/those-pesky-pre-dispute-arbitration-agreements-for-skilled-nursing-facilities.html

…which is part of the reason it may be so liberating to laugh about what the snf admissions process may ask of adult sons and daughters of potential patients. Oh, the machinations for admission in an industry where admittance is not guaranteed and where trying to put your best foot forward (easy family to deal with; uncomplicated patient; commercially insured and so on) can bear some resemblance to a fraternity or sorority rush-with all the frantic pleas to “please like me!”  I have never seen this depicted more accurately and more achingly than in the 2007 movie “The Savages.” Laugh-out-loud funny scenes where the adult brother and sister, played by Philip Seymour Hoffman and Laura Linney, try to work the system to get their Dad admitted….

In light of all of this… why be taken back that many if not most snfs include a clause in their nursing home admission agreements requiring the signing party (capacitant older individual or responsible family member) to waive the right to a jury trial on many possible future claims against the snf and to agree to be bound, instead, by binding (often secret) arbitration?  These are  pre-dispute arbitration agreements and their scope extends to bar jury trial on claims of substandard care, as in the Kindred Nursing Centers opinion issued today by the Supreme Court. Enforcement of contractual waiver of pre-dispute arbitration agreements is strongly favored under the Federal Arbitration Act….

We can sleep well tonight knowing that snfs may enforce pre-dispute arbitration agreements signed by adult children of snf applicants under general power of attorney authority without any specific language authorizing jury trial waiver provisions. It would after all, make it “trivially easy” for a state like Kentucky to require under state law  a clear statement of such authority as a way to undermine the FAA. And there you have it.  All contracts, including those often  made in extremis in the face of overwhelming health care need, are just contracts after all. Strike the language you say? Refuse to sign off on that pre-dispute arbitration clause for Mom or Dad’s snf? Ah, but the clause is essential for admission, as is the POA itself for many facilities. You, as adult child of an individual needing speedy admission to a snf, are the supplicant here. And don’t forget it.


Nicholas Bagley: Nursing homes and mandatory arbitration: “Emboldened by a string of aggressive Supreme Court decisions, businesses are increasingly turning to arbitration to shield themselves from civil litigation… http://theincidentaleconomist.com/wordpress/nursing-homes-and-mandatory-arbitration/

…Arbitration does have its advantages. It’s cheaper and faster than civil litigation, and arbitrators can be selected who have some relevant expertise. In a competitive market, the benefits of arbitration should accrue to consumers in the form of lower prices. But the extraordinary growth of mandatory arbitration over the past couple of decades is one of the more unnerving developments in modern American law. Genuine consent to arbitration is often fictional. Arbitrators tend to favor the repeat players who hire them—companies, not consumers. Arbitration agreements can forestall class action lawsuits, making it difficult or impossible to hold companies to account for small-in-size but widespread injuries. And where civil litigation can shine a light on shoddy business practices, arbitration is shrouded in secrecy.

In October 2016, the Centers for Medicare and Medicaid Services (CMS) decided to push back on mandatory arbitration. By rule, CMS adopted a novel “condition of participation” for Medicare and Medicaid. Nursing homes that participate in the programs—which is to say, all nursing homes—could no longer ask their residents to sign away their right to sue upon entering the nursing home…. Predictably, the nursing home industry sued, arguing that the rule exceeded CMS’s authority…. It’s a big deal, for reasons I’ll explore over the next few weeks in a series of posts. What does the research say about civil litigation and nursing home safety? Can nursing home residents really make informed decisions about surrendering their constitutional right to a jury trial? And is it true that CMS lacks authority to regulate arbitration agreements?

Is declining competition causing slow U.S. business investment growth?

An exhibitor stands near a tool machine on display at an exhibition featuring the science and technology achievement in China at the National Convention Center in Beijing, March 7, 2011.

Business investment in the United States has been disappointing this century compared with the amount of profits that companies have pulled in. Since 2000, the amount of business investment is significantly below where economists and financial market analysts might expect given the level of profits. Could this perhaps be just a benign trend? After all, the U.S. population is getting older, and perhaps the economy just needs less investment. The same could be said if the trend is due to cheaper capital goods. But new research suggests that a more malignant force may well be behind weak investment growth—declining competition.

The new paper by economists Germán Gutiérrez and Thomas Philippon of New York University is a follow-up to their paper from late last year. The earlier paper documented the divergence between investment and profits, detailed why the trend was significant, and tried to figure out roughly what was behind the investment decline. Their results suggested that a lack of competition in the U.S. economy was a primary driver. Their new paper looks for evidence of a causal relationship between competition and investment.

One of the potential problems with trying to show that one thing causes another with econometrics is that researchers often face a trade-off between results that show clear causal links and results that are likely applicable to other cases. Gutiérrez and Philippon face such a dilemma here but end up choosing both options. They employ a so-called natural experiment where the entrance of competition from China changed investment decisions in the manufacturing sector, which is likely to generate clear results. The two economists then ran an analysis that looks at how more firms entering an industry than expected affects competition and then investment. This technique isn’t going to be as crisp or clear as a natural experiment, but it’s likely to be a general result that holds up in a number of cases.

In both cases, the researchers find a causal link between competition and investment. The increase in competition resulting from increased Chinese manufacturing imports led to increased investment among leading firms facing this overseas competition. Industries that saw more “excess entry” also were the industries that showed rising investment. Furthermore, other research by Gutiérrez and Philippon shows that investment in the United States is weaker than in Europe, where competition is higher. The case that declining competition is causing, at least in part, the reduction in investment growth seems quite strong.

If this is the case, then the question is: What’s causing this decline in competition? The two economists look at three potential explanations: increasing regulation; the rise of “superstar” firms; and an aging U.S. population. They find a fair amount of evidence for the role of regulation, slightly less for superstar firms, and not much evidence at all for changing demographics.

Pointing to regulation as the chief culprit is only the start of an answer to this important question. It sparks other queries, such as what kinds of regulations are harming competition. And what about the role of enforcement? This is a factor that the authors discuss but don’t look at in the data. This paper is an important start for highlighting and thinking through the role of declining competition in reducing business investment. Let’s hope it’ll cause academics and policymakers to align to spend more time and resources investigating this problem.

Making antitrust work for the 21st century

Equitable Growth’s series on antitrust, competition, and equitable growth

Mergers and acquisitions are increasing apace in the U.S. economy. This means fewer choices in many industries—from airlines and communications to manufacturing and retail— for consumers and businesses alike. But what are the consequences for economic growth and competitiveness, particularly for employment and wages and family checkbooks? In October, 2016, Equitable Growth began a conversation about the role of antitrust and competition policy in promoting more equitable economic growth. Prominent academics and practitioners offered their perspectives on the current state of antitrust enforcement and where law and regulatory practices need to head to keep pace with a rapidly changing economy.

We are continuing that conversation through a series of essays, reports, and future events that lay the groundwork for debate and informed solutions by shedding light on an under-researched area of economic policy—one with serious implications for economic growth and inequality. Together, this series will establish a direct link between antitrust enforcement and the economic well-being of American workers and consumers.


Making Antitrust Work for the 21st Century
series of events, essays and reports

Presentation: Merger Enforcement Statistics
By Michael Kades, Equitable Growth

Equitable Growth Seminar Series: Rise of Monopoly Power in the United States
November 14, 2017 (video)

Recap: Unlocking the Promise of Antitrust Enforcement
By Liz Hipple, Equitable Growth

Unlocking the Promise of Antitrust Enforcement event
October 27, 2017 (video)

New federal antitrust legislation recognizes U.S. workers are not only consumers
By Liz Hipple, Equitable Growth

Issue brief: U.S. antitrust and competition policy amid the new merger wave
By Equitable Growth

U.S. mergers & acquisitions policy amid the new merger wave
By John Kwoka, Northeastern University

Issue Brief: A communications oligopoly on steroids
By Equitable Growth

A communications oligopoly on steroids: Why antitrust enforcement and regulatory oversight in digital communications matter
By Gene Kimmelman and Mark Cooper

Market power in the U.S. economy today
By Jonathan Baker, American University Washington College of Law

Dirksen Senate Office Building event
October 6, 2016 (video)

Should-Read: Nancy Folbre: Why current definitions of family income are misleading, and why this matters for measures of inequality

Should-Read: Nancy Folbre: Why current definitions of family income are misleading, and why this matters for measures of inequality: “Researchers studying income distribution in the United States seem reluctant to acknowledge the family as an important unit of production and distribution… https://equitablegrowth.org/research-analysis/why-current-definitions-of-family-income-are-misleading-and-why-this-matters-for-measures-of-inequality/

…Incomplete definitions of both family and income either obscure or render invisible transfers between and within households, including the value of housework and family care. Evidence from specialized surveys—such as the Health and Retirement Survey, the Panel Survey of Income Dynamics, the Survey of Income and Program Participation, and the American Time Use Survey—clearly demonstrate the quantitative relevance of these omissions….

Overall, such transfers may have an equalizing effect because they generally flow from those with more market income to those with less. But young white adults are more likely to receive transfers from relatively affluent parents, while young black adults are more likely to transfer income to those closer to the bottom of distribution….

Changes in the family economy of the United States have probably had only small effects on the relative income of the top 1 percent or the top 5 percent. They have larger implications for both the reality and the perception of relative income among households with divergent patterns of female labor-force participation and family responsibility…

Must- and Should-Reads: July 17, 2017


Interesting Reads:

Should-Read: John Maynard Keynes (1924): Obituary for Alfred Marshall

Should-Read: John Maynard Keynes (1924): Obituary for Alfred Marshall: “The study of economics does not seem to require any specialised gifts of an unusually high order… https://todayinsci.com/K/Keynes_John/KeynesJohn-Quotations.htm

…Is it not, intellectually regarded, a very easy subject compared with the higher branches of philosophy and pure science? Yet good, or even competent, economists are the rarest of birds. An easy subject, at which very few excel! The paradox finds its explanation, perhaps, in that the master-economist must possess a rare combination of gifts. He must reach a high standard in several different directions and must combine talents not often found together. He must be mathematician, historian, statesman, philosopher—in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician…