Today at Equitable Growth: A workshop on distributional national accounts

Posted on by Bridget Ansel

The Washington Center for Equitable Growth today will be hosting a workshop with some of the world’s top scholars engaged in developing a system of distributional national accounts, or DINA. This new approach seeks to incorporate measures of economic inequality into existing calculations of gross domestic product and related components of our national income and product accounts.

Our current system of national accounts, produced regularly by the U.S. Bureau of Economic Analysis, looks only at the level and growth in macroeconomic variables such as national income, consumption, and investment, without any consideration as to how these economic aggregates are shared across participants in the economy. Distributional national accounts catalogue how economic output and economic growth is distributed. Properly constructed, these methods will be well-equipped to answer, for example, what share of total economic growth accrues to the top 10 percent and what share to the bottom 90 percent. A fully developed DINA would eventually allow economists to explore the impact of changes in technology, trade, or government policy across the income distribution.

Sessions at the workshop will review the state of DINA projects in the United States and in other high-income countries as well as seek to tackle a number of difficult measurement and conceptual questions that stand in the way of implementing a DINA in the United States and elsewhere.

Participants include Arjun Bruil of Statistics Netherlands; Steve Fazzari of Washington University in St. Louis; Dennis Fixler and Kevin Furlong of the Bureau of Economic Analysis; David Johnson of the University of Michigan; Nora Lustig of Tulane University; Emmanuel Saez and Gabriel Zucman of the University of California-Berkeley; Jorrit Zwijnenburg of the Organization for Economic Cooperation and Development; and Federal Reserve Bank economists Barry Cynamon, Lisa Dettling, Kevin Moore, John Sabelhaus, and Jeff Thompson.

Three of the papers to be discussed are available online:  “A Consistent Data Series to Evaluate Growth and Inequality in the National Accounts” by Dennis Fixler, David Johnson, Andrew Craig, and Kevin Furlong; “Comparing Micro and Macro Sources for Household Accounts in the United States: Evidence from the Survey of Consumer Finances” by Lisa Dettling, Sebastian Devlin-Foltz, Jacob Krimmel, Sarah Pack, and Jeffrey Thompson; and “Household Income, Demand, and Saving: Deriving Macro Data with Micro Data Concepts” by Barry Cynamon and Steven Fazzari.

Equitable Growth looks forward to engaging with scholars interested in the development of consistent distributional national accounts. The workshop will help us plan our next steps in supporting this important research.

Must-Read: Gregory Clark, Kevin Hjortshøj O’Rourke, and Alan M. Taylor: The Growing Dependence of Britain on Trade During the Industrial Revolution

Posted on by Brad DeLong

Must-Read: Gregory Clark, Kevin Hjortshøj O’Rourke, and Alan M. Taylor: The Growing Dependence of Britain on Trade During the Industrial Revolution: “Many previous studies of… the British Industrial Revolution have found little or no role for trade…

…We construct a three-region model of the world in which Britain trades with North America and the rest of the world, and calibrate the model to data from the 1760s and 1850s. We find that while trade had only a small impact on British welfare in the 1760s, it had a very large impact in the 1850s. This contrast is robust to a large range of parameter perturbations. Biased technological change and population growth were key in explaining Britain’s growing dependence on trade during the Industrial Revolution.

Must-Read: Noah Smith: Conservatism Failed

Posted on by Brad DeLong

Must-Read: Noah Smith: Conservatism Failed: “The Republican presidential candidate was usually a gray, bland figure, a stalwart conservative but not a fire-breathing one…

…who had worked his way up the ranks. Romney, McCain, Bush II, Dole, and Bush I all fit this description[, and even] Reagan… did not deviate too far from this model. As a conservative, the Republican nominee would support tax cuts, a business-friendly attitude, a tough-guy attitude toward America’s enemies and rivals, and traditional family values based on Christianity. That’s what conservatism was.

But in the past fifteen years, the three pillars of conservatism–economic, foreign-policy, and social conservatism–have all had huge, dramatic failures…. The Bush tax cuts failed to reverse [middle-class] income stagnation… [and] a lax regulatory climate appeared to give rise to a financial crisis that devastated the job market…. The formula of ‘cut taxes[, deregulate,] and let businesses do as they see fit’ is now pretty discredited…. Older intellectuals [who] continue to fight doggedly for this economic program… are rightfully ignored….

Foreign policy conservatism… failed… when Bush turned bellicose rhetoric into bellicose reality with the disastrous Iraq War…. A more minor failure was the seeming emptiness of Bush’s bellicose rhetoric when it came to actual threats. Under Bush’s watch, Putin’s power grew inexorably, and North Korea got nukes, while Bush barked impotently…. Finally, social conservatism… [which] promised to restore family values by promoting Christianity and resisting things like gay marriage. But… Americans have resoundingly rejected the values pushed on them by Christian conservatives in the 80s, 90s, and 00s…. Add all this up, and what do you get? A massive, total failure of all three pillars of modern conservatism within a 15-year period….

The collapse of the conservative ideology… is what inevitably happens to an ideology when it succumbs to overreach, dogmatism, and an echo chamber. I hope I don’t ever have to watch the same thing happen to the American left.

Must-Reads: July 22, 2016

Posted on by Brad DeLong

Should Reads:

Must-Read: Peter Thiel: The Optimistic Thought Experiment

Posted on by Brad DeLong

Must-Read: The very sharp Dan Wang sends me to the several-screws-loose Peter Thiel. He has, apparently, not marked his beliefs to market over the past eight years. He has not drawn the lesson that Ben Bernanke and company might know more than he does about some things:

Peter Thiel (2008): The Optimistic Thought Experiment: “In every possible future, all of today ’s bubbles will burst…

…their ideological scaffolding will prove to be but lint in the winds of history…. Bubbles have begun to implode across the globe, laying bare the fraudulence of ‘China,’ ‘technology,’ ‘hedge funds,’ and their like. As the world’s economy weakens, so will support for the globalist orthodoxy, the political tenability of which rests heavily on the ability of the doctrine to literally deliver the goods. Some policymakers seem to sense this already, with the most immediately obvious of these being the Fed…. [But] the Fed’s morally hazardous accommodations are best understood not as a perplexing and facile sop to bankrupt homeowners but as a desperate effort to stave off a recession that will end the debate on globalization for years to come…. The Fed’s gambit entails several potentially catastrophic trade-offs, chief among them the revival of inflation. Whatever may be said of the soundness of the Fed’s policy in the faltering United States, loose monetary conditions are not appropriate for the near-runaway economies of other nations with dollar-linked economies, notably China and much of the Middle East. The Fed’s iatrogenic policies have already caused considerable inflation in these economies and, especially disturbing for students of history, a massive spike in the price of oil. At some point, the tensions caused by wild inflation, collapsing currency accords, and expensive oil will resolve…

Must-Read: Charles Feinstein (1998): Pessimism Perpetuated: Real Wages and the Standard of Living in Britain during and after the Industrial Revolution

Posted on by Brad DeLong

Must-Read: Charles Feinstein (1998): Pessimism Perpetuated: Real Wages and the Standard of Living in Britain during and after the Industrial Revolution: “New estimates of nominal earnings and the cost of living…

…make a fresh assessment of changes in the real earnings of male and female manualworkers in Britain from 1770 to 1870. Workers’ average real earnings are then adjusted for factors such as unemployment, the number of their dependents, and the costs of urbanization. The main finding is that the standard of living of the average working-class family improved by less than 15 percent between the 1780s and 1850s. This long plateau is shown to be consistent with other economic, political, and demographic indicators.

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Must-Read: Susan Athey and Guido W. Imbens: The State of Applied Econometrics–Causality and Policy Evaluation

Posted on by Brad DeLong

Must-Read: Susan Athey and Guido W. Imbens: The State of Applied Econometrics–Causality and Policy Evaluation: “Important for empirical researchers working on policy evaluation questions…

…[are, first,] new research on identification strategies in program evaluation… synthetic control methods, regression discontinuity, external validity, and the causal interpretation of regression methods. Second… supplementary analyses to make the identification strategies more credible… placebo analyses as well as sensitivity and robustness analyses. Third… recent advances in machine learning methods… to adjust for differences between treated and control units in high-dimensional settings, and… for identifying and estimating heterogenous treatment effects…

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Must-Read: Kevin Hjortshøj O’Rourke: Deserting the Battle for Britain

Posted on by Brad DeLong

Must-Read: Kevin Hjortshøj O’Rourke: Deserting the Battle for Britain: “Former ‘Remainers’–those who wished to stay in the EU–seem to have given up…

…As we saw in 2008, when Irish referendum voters refused to ratify the Treaty of Lisbon, there is a potential anti-immigrant voting bloc in the poorer parts of Dublin… the same kind of voters who turned out for the UK’s Brexit referendum…. The question, then, is why the Irish haven’t developed UK levels of animosity toward EU immigrants… Much of the blame… lies with British political leaders… those who have made careers out of attacking the EU, often on entirely specious grounds… [and] lukewarm Remainers, such as former Prime Minister David Cameron, who never made a strong case…. Now, even committed Remainers are failing to make the case for continued two-way labor mobility between the UK and the EU, and for membership in the European Economic Area (EEA). Ireland hasn’t had this problem. Notably, Sinn Féin, Ireland’s nationalist party and the former political arm of the Irish Republican Army, has not indulged in the kind of xenophobic rhetoric used by the UK Independence Party….

Put plainly, English animosity toward the presence of fellow Europeans has a lot to do with some of the worst aspects of English society…. Remainers must continue to explain to the English why the free exchange of goods, services, and people with Europe is good for Britain…. Brexit comes in two flavors: membership in the EEA, with access to Europe’s single market and free movement of people, or an exit from the single market, followed by unpredictable trade negotiations. There is still a huge amount to play for: we don’t know which of these two outcomes English voters would choose…. For Remainers not to make the case for EEA membership, when they had previously been in favor of remaining in the EU, is an astonishing abdication of responsibility.

Must-Read: Nick Bunker: Technological change and Future Labor Demand

Posted on by Brad DeLong

Must-Read: As I say: labor is actually six dimensions: (1) backs, (2) fingers, (3) brains as routine cybernetic controls for mechanisms, (4) brains as routine cybernetic mechanisms for accounting operations, (5) smiles, and (6) creative ideas. (1) has been–slowly–becoming less valuable since the domestication of the horse. (2) has been–more rapidly–becoming less valuable since the start of the British Industrial Revolution. But diminished value in (1) and (2) has, so far, always, within a generation, been offset by greatly increased value in (3), (4), (5), and (6) as capital complements those other dimensions of labor. Now (3) is falling to the robots and (4) is falling to the ‘bots–leaving us with only (5) and (6). This is qualitatively different from previous episodes of technological change. Will it have different consequences for overall capital-labor complementarity? How can anyone know yet?

Nick Bunker: Technological change and Future Labor Demand: “How concerned should we humans be about the impact of future technological change on our economy and society?…

…A few more robots might be a good thing for the economy… insofar as more artificial intelligence would boost productivity…. Yet most of the concerns about the rise of the robots are… distributional…. Will they displace large swaths of workers? Maybe permanently?… Imagine an economy-wide version of robots on factory floors. Past experience with technological change, Furman argues, shows that new technologies don’t reduce demand for all labor, but rather shift the composition…. David Autor agrees… that commentators overstate the ability of robots to substitute for labor and forget how capital acts as a complement to labor…. Yet advances in artificial intelligence definitely change the kind of  skills that labor needs…. Deep technological change could reduce demand for, say, middle-skilled workers while boosting demand for less-skilled workers and more highly-skilled workers…