WORÞY READS: for 2021-02-26
Something I do every week for the wonderful Washington Center for Equitable Growth...
Home base for this: <https://equitablegrowth.org/insights-expertise/value-added/>
Worthy Reads from Equitable Growth:
1) Across a remarkably large chunk of America, employers seem to think that keeping their contract with their workers is an optional thing. It is very disturbing and distressing to me that the norm that contracts are to be observed appears to of fallen to the wayside to such a substantial degree:
Equitable Growth: AGENDA: FACT SHEET: LABOR: Executive Action to Combat Wage Theft Against U.S. Workershttps://equitablegrowth.org/wp-content/uploads/2021/02/022421-wage-theft-fs.pdf: ‘Wage theft against U.S. workers exacerbates the long-run problem of low and stagnant wages. When companies commit wage theft, they impoverish families and deprive workers of the just compensation for their hard work, robbing workers of the value they contribute to economic growth and exacerbating economic inequality. The odds that a low-wage worker will be illegally paid less than the minimum wage ranges from 10 percent to 22 percent, depending on overall economic conditions, and each violation costs that worker an average of 20 percent of the pay they deserve. Women, people of color, and noncitizens are especially vulnerable to wage theft and especially likely to feel they are not in a position to report the crime and get justice. Cracking down on lawbreaking companies that don’t pay workers what they are owed is a straightforward way for the Biden administration to raise the incomes and living standards of U.S. workers and their families…
2) Restoring the minimum wage to some thing that actually has bite in the US economy is the policy with the highest benefit cost ratio that I know of:
Kate Bahn & Will McGrew: FACTSHEET: Minimum Wage Increases Are Good For U.S. Workers & the U.S. Economy <https://equitablegrowth.org/factsheet-minimum-wage-increases-are-good-for-u-s-workers-and-the-u-s-economy/>: ‘Minimum wage increases significantly lower the poverty rate, increase earnings for low-wage workers, and decrease public expenditures on welfare programs. The earnings boost for low-wage workers from higher minimum wages extends beyond the immediate effect of the legal change and instead grows in magnitude for several years thereafter. A 10 percent increase in the minimum wage increases wages by 1.3 percent to 2.5 percent for workers in the food and beverage industry, according to a study of six cities with especially high minimum wages. Minimum wage increases can have some of the largest benefits for disadvantaged ethnic groups…
3) Big business appears to have gotten itself into the minds of the Obama administration in a way that I do not remember it getting into the minds of the Clinton administration. Yes, the Department of Justice’s antitrust unit did very well in the Obama administration. But much of the rest of the executive branch over 2009-2016—not so much. Now I fear that this pattern of forgetting that big businesses are not worthy people is taking hold in the Biden administration as well. That would not be a good thing:
Hiba Hafiz & Nathan Miller: Competitive Edge: Big Ag’s Monopsony Problem: How Market Dominance Harms U.S. Workers & Consumershttps://equitablegrowth.org/competitive-edge-big-ags-monopsony-problem-how-market-dominance-harms-u-s-workers-and-consumers/: ‘Agricultural markets are among the most highly concentrated in the United States. The markets for beef, pork, and poultry, grain, seeds, and pesticides are dominated by four firms. Three firms dominate the biotechnology industry. One or at best two firms control large farm equipment manufacturing. And a small number of firms are increasingly dominating agricultural data and information markets. Yet former Iowa Gov. Tom Vilsack (D)—President Joe Biden’s nominee for secretary of the U.S. Department of Agriculture, the same position Gov. Vilsack held during the Obama administration—has come out against breaking up Big Ag firms. “There are a substantial number of people hired and employed by those businesses,” he said last year. “You’re essentially saying to those folks, ‘You might be out of a job.’ That to me is not a winning message.” Gov. Vilsack couldn’t be more wrong on the economics…
4) Greg Leiserson is 100% right here: that tying the expiration of emergency relief to economic recovery is an indication of the scale of our problem and how much we need to do, not a reason not to do what we need to do:
Greg Leiserson: A Great Covid–19 Relief Ideahttps://www.vox.com/policy-and-politics/22277339/covid-19-relief-bill-automatic-stabilizers: ‘It’s ultimately a program we need, and to use that as a reason that we can’t have it is to confuse the indication of what we need to do with a reason not to do it. The price tag isn’t telling you whether we need it, it’s just telling you the price tag of the thing we need…
Worthy Reads from Elsewhere:
1) This was a truly excellent panel for all who are interested in why and how American economics as a discipline has made the African-American path so difficult. And everyone should be interested in this:
Damon Jones, Lisa D. Cook, Sandile Hlatshwayo, & Trevon Logan: The Black Experience in the Field of Economics https://harris.uchicago.edu/news-events/events/black-experience-field-economics: ‘Economics is one of the most important fields in academia, government, and finance—yet it is also one of the least representative. Join a community of Black economists—emerging scholars and those more advanced in their careers—for a discussion on the Black experience in economics: entering and progressing within the discipline, the academy’s racial and cultural blind spots, and what the future brings for Black economists, both with respect to the profession and the ultimate goal of driving policy change and impact…
2) Xi Jinping wants most of all for, after he is gone, the CCP to be an effective governing party carrying the banner of utopia forward into the future. Everything he does is, I think, focused on the accomplishment of that goal. However, it is not at all clear to me what he thinks that entails. And it is not at all clear how he has reached his conclusions about what that entails. He should be building flexibility and incentives for truth-seeking into the structure. Yet, as best I can tell, he is not:
Dan Wang: This Year I Read Every Issue of “Qiushi” (Translation: Seeking Truth) https://danwang.co/2020-letter/: ‘The party’s flagship theory journal, whose core task is to spell out the evolving idea of socialism with Chinese characteristics… reads like a cross between the New Yorker and the Federal Register…. Each issue starts in the same way: a reprint of a speech or essay by Xi Jinping—in a font distinct from the rest of the magazine’s—and then commentary and reports from the rest of the party-state…. Steady engagement with the journal throughout the year has forced me to think more deeply about the Chinese Communist Party. There are many things that Xi wants to do, I believe that his most fundamental goal is to make this Marxist-Leninist party an effective governing force for the present century… reshape the bureaucracy… aided by… propaganda to create centralized campaigns of inspiration…. The country’s governance capabilities have markedly improved, a trend that is apparent in daily life. At the same time, the state has grown much more repressive…. Propaganda might not matter to you, but it matters to the party…. The party’s role can be boiled down to two items: inspiration, by setting the ideological direction, and control, through its power to select personnel. Qiushi offers an authoritative articulation of the central government’s priorities at any moment. Its job, like the rest of the state media, consists of repetition and explication of a few phrases…. It’s up to the party center to adjust and refine slogans to signal the priorities of the moment…. Consider Deng Xiaoping… “development is the only hard truth,” “cross the river by feeling the stones,” and “practice is the sole criterion for the determination of truth”…
3) This is simply completely bizarre. At one level, Harvard's Mark Ramseyer appears to have done the historical equivalent of suppressing experimental evidence. There comes a point where the slant is so slanted that it crosses the academic dishonesty line, and it really looks to me as thought Ramseyer has done so. Plus he appears to be getting a remarkable amount of support for his claims that Korean "comfort women” during World War II were in any meaningful sense "volunteers” rather than kidnapped into forced prostitution:
Tessa Morris-Suzuki: The ‘Comfort Women’ Issue, Freedom of Speech, and Academic Integrity: A Study Aid https://apjjf.org/2021/5/MorrisSuzuki.html: ‘In December 2020, an article by J. Mark Ramseyer of Harvard University about the so-called ‘comfort women’ issue was published in the International Review of Law and Economics… widespread controversy… serious criticisms of its content. On the other hand, some commentators argued that Ramseyer’s critics were seeking to suppress his right to express controversial opinions…. This study aid aims to encourage debate about ways to maintain research integrity while protecting free speech, and uses the example of the Ramseyer article to provide illustrative material. This is the first in a series of responses on the “comfort women” issue prompted by the Ramseyer article…
4) The Texas blackout is worth studying closely. Apparently—obviously—there were insufficient market incentives in current and projected prices to incentivize and fund investments to secure reliable supply in the case of a weather event that was bound to come along sooner or later with probability one. Yet there was sufficient uncertainty and risk imposed upon consumers by the price process to make it a utility disaster for those who were not extremely nimble on their feet. It looks to me like a WOBW—a Worst of Both Worlds—situation. Was it? Where, exactly, did the market fail and why? I need to study this much much more:
John Quiggin: What Texas’s Blackouts Tell Us https://insidestory.org.au/what-texass-blackouts-tell-us-about-australias-energy-market/: ‘Texas lost power when neighbouring states, also experiencing the freeze, did not. The answer involves regulatory failures…. Most of Texas is not connected to the rest of the US power grid. This is deliberate: the Texas Interconnection has been kept separate to ensure that it remains under Texas rather than federal control…. Texas kept itself separate so it could replace its traditional integrated electricity supply with a structure that combined a pool market for the generation stage of electricity supply with a competitive market in retailing, and lightly regulated transmission and distribution. The system is run by ERCOT, the ironically titled Electric Reliability Council of Texas…. The electricity market run by ERCOT… is an electricity pool market in which generators bid to supply power to the grid each day…. When lots of power plants went offline, the market price of power soared to US$9000/MWh, producing ruinous bills for customers who had chosen supply deals based on the wholesale price rather than a fixed rate. Second, the system made it unprofitable for generators to invest in “winterising”…. The maximum price is high enough to create both risk and opportunities for market manipulation, but not high enough to provide incentives to invest in reliable supply. In response to this mess, some electricity regulators have reintroduced an element of central planning by making “capacity payments” to generators willing to guarantee supply…
5) It's not just ethnic minorities that economics has a very hard time attracting. It's the majority as well—the female majority. The pipeline leaks, massively, everywhere—and economics has been stalled for a generation in a way that no other academic discipline has:
Shelly Lundberg & Jenna Stearns: Women in Economics: Stalled Progress https://www.aeaweb.org/articles?id=10.1257/jep.33.1.3: ‘By the mid–2000s, just under 35 percent of PhD students and 30 percent of assistant professors were female, and these numbers have remained roughly constant ever since. Over the past two decades, women’s progress in academic economics has slowed, with virtually no improvement in the female share of junior faculty or graduate students in decades…. While differences in preferences and constraints may directly affect the relative productivity of men and women, productivity gaps do not fully explain the gender disparity in promotion rates in economics. Furthermore, the progress of women has stalled relative to that in other disciplines in the past two decades. We propose that differential assessment of men and women is one important factor in explaining this stalled progress, reflected in gendered institutional policies and apparent implicit bias in promotion and tenure processes…
6) This is very, very good news indeed about the forthcoming robotization of the service sector. Human core capabilities appear to be straightforward to supplement, but nearly impossible to replace, in at least one slice of services:
Karen Eggleston, Yong Suk Lee, & Toshiaki Iizuka: Robots & Labour in the Service Sector https://voxeu.org/article/robots-and-labour-service-sector: ‘Firm-level studies are important for understanding how robots augment some types of labour while substituting for others, yet evidence outside manufacturing is scarce. This column reports on one of the first studies of service sector robots, which suggests that robot adoption has increased some employment opportunities, provided greater flexibility, and helped to mitigate turnover problems among long-term care workers. The wave of technologies that inspires fear in many countries may be a remedy for the social and economic challenges posed by population ageing in others…
7) Donella Meadows and company are trying to generalize what Adam Smith taught us about how to analyze the price mechanism, and that we thus have in our bones. I am not sure she gets it right. But I do think we could benefit from cross-fertilization, because the price mechanism we understand so very well is not the only complex system in what we think of as the economy:
Donella H. Meadows: Thinking in Systems: A Primer <https://github.com/braddelong/public-files/blob/master/readings/book-meadows-systems.pdf>: ‘A system is a set of things—people, cells, molecules, or whatever—interconnected in such a way that they produce their own pattern of behavior over time. The system may be buffeted, constricted, triggered, or driven by outside forces. But the system’s response to these forces is characteristic of itself, and that response is seldom simple…. Something about statements like these is deeply unsettling. Something else is purest common sense. I submit that those two somethings—a resistance to and a recognition of systems principles—come from two kinds of human experience, both of which are familiar to everyone. On the one hand, we have been taught to analyze, to use our rational ability, to trace direct paths from cause to effect, to look at things in small and understandable pieces, to solve problems by acting on or controlling…. On the other hand, long before we were educated in rational analysis, we all dealt with complex systems…. Modern systems theory… traffics in truths known at some level by everyone…. “Because of feedback delays within complex systems, by the time a problem becomes apparent it may be unnecessarily difficult to solve”—A stitch in time saves nine…. “If a reinforcing feedback loop rewards the winner of a competition with the means to win further competitions, the result will be the elimination of all but a few competitors.”—for he that hath, to him shall be given; and he that hath not, from him shall be taken even that which he hath…. “A diverse system with multiple pathways and redundancies is more stable and less vulnerable…—don’t put all your eggs in one basket…
8) 600,000 dead in the end at best, when even semi-competent governance would have made it only 200,000; and competent governance would have made it 50,000. All who supported and enabled Donald Trump have a lot of deadly cytokine storms on their hands:
Heather Cox Richardson: ’At 4:42 p.m., exactly a year ago, then-President Trump tweeted https://heathercoxrichardson.substack.com/p/february-24-2021: “The Coronavirus is very much under control in the USA. We are in contact with everyone and all relevant countries. CDC & World Health have been working hard and very smart. Stock Market starting to look very good to me!” On February 7, Trump had told journalist Bob Woodward something very different. “This is deadly stuff,” he said. The coronavirus is “more deadly than your, you know, your, even your strenuous flus.”… More than 503,000 official deaths… 4% of the world’s population and have suffered 20% of deaths…. Anthony Fauci… blamed political divisions for the horrific death toll…. The pandemic has crippled the nation’s economy, and a new The Economist/YouGov poll reveals that 66% of Americans said they support Biden’s $1.9 billion American Rescue Plan; 25% of Americans said they oppose it. This means it is the most popular piece of legislation since the 2007 minimum wage hike. Also popular is the proposed $15 minimum wage hike, which is supported by 56% of Americans and opposed by 38%, making it more popular than anything former president Trump did while in office. More than 150 of the nation’s business leaders are now backing the rescue plan, saying it is necessary for “a strong, durable recovery.” And yet, Republicans are, so far, united against the proposal…