Worþy Reads: For 2021-09-10
A preview of my weekly read-around for Equitable Growth:
Worthy Reads from Equitable Growth:
1) 62 very good people funded for the net year. I confess that this program has been even more of a success than I had projected. It turns outa lot of very good people really were budget-constrained in doing the very good work that they wanted to do. And I confess that I had underestimated how much the research-university system as it worked a decade ago was constraining visible economic research away from policy-relevant and equitable growth-relevant topics:
Equitable Growth: [A] Record $1.39 Million in Research Grants for Scholars Examining Economic Inequality & Growth: ‘The Washington Center for Equitable Growth today announced its 2021 research grants, with funding of $1,392,795—a record-breaking level—awarded to 62 researchers. These scholars are studying the various channels through which economic inequality, in all its forms, impacts economic growth and stability…
2) It was Martha Bailey who first hammered it into me how incredibly important fertility control and child spacing is for women’s economic opportunity in America over the past century—how huge a friction the fact that you might, any year, find yourself bearing a child was. This was the case even after the demographic transition. While before the demographic transition in the time of astronomical child and maternal mortality the biosocial fertility load on women was enormous, even afterwards the inability to engage in reliable family planning was extraordinarily disruptive for women’s economic activity. Here Kate Bahn and Maryan Janani-Flores review the evidence:
Kate Bahn & Maryam Janani-Flores: Economic security & Opportunity for Women Under Threat After U.S. Supreme Court Takes Anti-Abortion Stance in Texas: ‘Nearly 1 in 4 women in the United States… will have an abortion by the age of 45, and nearly 1 in 20… will have an unintended pregnancy…. An intrinsic link between reproductive justice and economic opportunity… contraception… access to abortion…. Bodily autonomy and a person’s ability to decide when, how, and under what circumstances to plan for a family is critical to… a woman’s job opportunities and financial security…
3) Theories—very good theories—that economists were exploring around 1900 are now back again. But why did they all but vanish from, say, the 1920s through the 2000s? My view is that first the “liquidationist” ideological turn of macroeconomics toward solving the problem of finding some reason that business cycles were functional for the system and then the neoclassical synthesis’s prioritization of rational representative-agent model made such “Hobsonian” theories profoundly uncool:
Atif Mian: Understanding the Macroeconomic Consequences of Rising Income & Wealth Inequality in the United States - Equitable Growth: ‘With Ludwig Straub… and Amir Sufi… we show that when the rich save more… an increase in inequality leads to a persistent fall in the long-term interest rate and an growing reliance on credit for sustaining aggregate demand…. Downward pressure on aggregate demand… countered through increased borrowing by nonrich households. This kind of upswing in aggregate demand, however, is “indebted”…. It can only be sustained over time if interest rates fall…. The theory of indebted demand fits the empirical patterns observed in the United States…
4) Ever since the days of Alexander Hamilton, investors have regarded the debt of the U.S. government as a very valuable and safe asset. In all but rare and exceptional times, the only return return debt purchasers and holders have demanded from the U.S. government is that it maintain the real value of the wealth they have entrusted to it. The U.S. government should invest this wealth wisely and prudently, yes, in the highest societal-value projects, yes. But the main consideration and the bottom line is that—except in the 1870s and 1880s, and in the 1980s—the U.S. government has never faced a debt-financing constraint as long as long as its investments yield any possible positive return in the form of additional taxes collected downstream at all. Worried that this may change in the future if interest rates rise sharply? Then issue inflation-adjusted consols, and lock in real debt payments permanently:
Barry Eichengreen: The Coming Public Debt Scare Should Not Spook U.S. Policymakers from Investing in Physical and Social Infrastructure: ‘[In our] In Defense of Public Debt, my co-authors and I show how governments, through the ages, have resorted to issuing public debt to meet emergencies and address pressing social needs…. My co-authors and I argue [that] expenditure restraints that limit the U.S. economy’s capacity to grow would be counterproductive from even the narrow standpoint of debt sustainability…. Do our nation’s infrastructure problems rise to the level of a national emergency? Some answer yes, on the grounds that our physical infrastructure is old, dangerously vulnerable to climate change, and inadequately green and digital. A significant minority in the U.S. Senate insists otherwise…. One way of adjudicating the dispute is to ask whether additional infrastructure investments will pay for themselves…. We really should be comparing apples with apples—real returns with real returns. Currently… any investment that yields a positive real return is effectively self-financing…
Worthy Reads from Elsewhere:
1) I confess I do not understand why a President Biden should shy away from a “potentially… contentious confirmation fight…” to get the most-qualified person who agrees with the administration’s view of what America’s interest is as Chair of the Federal Reserve Board. It’s not like a “contentious” Senate debate over the nomination of Lael Brainard to be Fed Chair would reduce the number of Republican senators who vote for Biden initiatives in the future, is it? And yet the Washington Blob thinks that avoiding “contention” is a thing that has immense value—but only when Democrats do it. Supporters of a Jay Powell renomination seem overwhelmingly concerned with dodging the question of “Is Jay Powell the best possible Fed Chair for the next four years?”:
Gregg Gelzinis: ’The best case (yet still realistic) scenario with a Powell reappointment is that the ceiling on the progressive FinReg agenda is materially lowered. The worst case is that the entire progressive FinReg agenda is stymied &Trump’s FinReg agenda persists at the Fed…
Jordan Weissmann: ’It’s pretty obvious he’s not ideal on FinReg, either from the left’s or the admin’s perspective. The question is whether the status quo there is so terrible that it’s worth ditching him and facing a potentially more contentious confirmation fight. I’d say no…
LINK: <https://twitter.com/FinGregg/status/1429159236274204675>
2) I take Matthew Yglesias’s point here. But is this the right way to frame the question? The answer to “should local governments commit the additional money to make the bus free?” is almost surely yes. The answer to “should local governments that have a fixed pool of money to spend on buses provide a lower-quality free bus than the current system?” is almost surely no. To fail to distinguish between these two questions leaves Matt, I think, somewhat confused. The real question is: which of the many worthwhile things that bus systems could do with more money can be framed so as to win voter support and enthusiasm?
Matthew Yglesias: Should the Bus Be Free?: ‘In most cases, the better investment is to make the buses better…. In a very abstract way, free transit makes sense. Cars generate pollution and traffic externalities. Ideally, we would fully price those externalities with a carbon tax and congestion charges. But in the real world, both are politically difficult, so an equivalent way of addressing the issue would be to subsidize the low-externality option—the bus—by making it free…. [but] the question becomes: if you assume your transit agency has a bunch of extra money, is eliminating fares the best way to turn money into ridership? Bus riders want better buses, not cheaper…. Cutting fares is a relatively low priority compared to other things you can straightforwardly achieve with more money, like improving bus frequency and reducing bus crowding…
3) At a $2 billion/year burn rate, Uber has three more years before something big has to change. I used to think that it would end by (a) shareholders getting close to zeroed-out, (b) top managers getting stock in a reorganized company, (c) some investment bank putting in a little money in exchange for equity, and for a company that had feature parity—costs, wait times, etc.—with licensed taxicabs with the exception of a less-friction front end in the form of an app. The problem for Uber appears to be that they have done that, and the ride-hailing business still is not profitable. So I do not know how it will end in three years or so:
Cory Doctorow: End of the Line for Uber. Accounting Tricks & Tech Gimmickry: ‘Uber is a bezzle (“the magic interval when a confidence trickster knows he has the money he has appropriated but the victim does not yet understand that he has lost it”). Every bezzle ends. Uber’s time is up…. Uber didn’t need self-driving cars—it needed us to think it would have self-driving cars…. That’s the bezzle at work—a dazzle op that keeps new money flowing in…. $3.7b of its assets are actually worthless paper from failing overseas ridehail companies. Uber’s cash reserves declined by $4.7b in 2020 and $937m more in the first half of 2021. They’ve got $6.7b in the bank…. Uber’s invented a new field of accounting: “Adjusted EBITDA profitability.” EBITDA is “earnings before interest, taxes, depreciation, and amortization.” “Adjusted EBITDA”… ignored $2b in expenses…. I live in Burbank, where Ubers were never more than 5 minutes away. Now, a 30 minute wait is common—and the fare is comparable to the licensed taxi company…
4) I think Paul Krugman has this right. That is, I think there is a 75% chance he has this right:
Paul Krugman: I’m Still on Team Transitory: ‘Consumer prices have risen… over the past six months… [by] an annualized inflation rate of almost 9 percent…. There are plenty of people out there proclaiming the return of stagflation…. What was the difference between the ’70s inflation and the inflationary spikes associated with World War I, the end of World War II or the Korean War? The answer is that those earlier bursts of inflation were easy come, easy go…. What explained that difference? In the 1970s inflation became “embedded” in the economy…. The question is whether inflation is similarly becoming embedded now…. The best way to figure out whether inflation is getting embedded is to ask the people who would be doing the embedding. That is, are companies acting as if they expect sustained inflation in the future? The answer, so far, seems to be no…. Companies aren’t acting as if they expect lots of future inflation, where they can hike wages without losing competitive advantage. They’re acting, instead, as if they see current inflation as a blip. So far, then, I’m still on Team Transitory: I think things are looking more like 1951, when inflation briefly hit 9.3 percent, than 1979. And if we finally get this pandemic under control, the inflation of 2021 will soon fade from memory… L
LINK: <https://messaging-custom-newsletters.nytimes.com/template/oakv2>
5) This is not an existential threat to the pharmaceutical industry. It is an existential threat to a PhRMA CEO who has pushed the line of maximum confrontation vis-a-vis a government seeking to reduce the growth rate of the cost of the pharmaceutical part of the public health care programs:
Margot Sanger-Katz: Biden Administration Goes Bigger on Cutting Drug Prices: ‘The administration endorses a proposal for the government to negotiate on prices for all U.S. purchasers, not just Medicare…. It amounts to a signal to congressional Democrats…. Senators working on the package have released few policy details as they wrestle with their approach. Steve Ubl, the C.E.O. of the industry trade group PhRMA, called the policy “an existential risk to the industry.” Major across-the-board price reductions would result in reduced revenues for drug companies, and could hurt companies’ ability to spend on research as well as cause smaller companies to close if investors leave the sector, he said. His group and the companies it represents have mobilized to fight such a plan…
6) This is an extremely good introduction to what the Chinese government is hoping to do with respect to semiconductor independence, and now nearly impossible it will be for the Chinese government to do it:
Jordan Nel: China, Semiconductors, & the Push for Independence: ‘China is chasing technological independence. Broadly, they’re doing a remarkable job at it barring perhaps in the field of semiconductors. And what is the crux of all modern tech? Semiconductors….. The 14th 5YP is the first to emphasise complete self-reliance and suggest building a near end-to-end chain locally. It is also the first time where China is in a strong enough position nationally to fund this foray and the first time where it is considered a matter of national security….. Process nodes (chips) come in a range of sizes, for a range of use cases: Large nodes (>180nm) are usually analog. Generally, they are used for taking in non-binary input and converting it to binary (like how sensors in EVs “see” the road and disseminate that information across the rest of the system). Medium nodes (28nm–180nm) are majority logic nodes… process computation, like for CPUs and GPUs. Small nodes (10nm to 22nm) are split 80/20 between memory and logic respectively…. The minimum for 5G rollout at scale is 5nm nodes, so their production underpins AI advancement, 5G, and much of the datacentre progression….. Each type of node is dominated by specific producers, with specific expertise. Because analog chips (the large ones) are far easier to make, the competitive advantages of firms in this domain come from their breadth of products, reach of marketing channels, and scale-derived cost advantages…. The only way China can become technologically independent is… China needs foundries. But foundries need equipment, processes, a large talent pool, clients, and an incredible amount of know-how. While money goes a long way to creating these, there are some things money can’t buy. Each equipment manufacturer has built up expertise developing that particular equipment (and maintenance) stack over decades of cycles and consolidation. For real independence, China needs to be self-sufficient not just in producing foundries, but also producing the equipment that foundries rely on. Otherwise, the chokepoint just moves further up the chain…
LINK: <https://lillianli.substack.com/p/china-semiconductors-and-the-push>
7) Out of my lane, but I cannot let this pass by without noting it:
John Scalzi: An Actual Party of Death, Now : ‘Had any other Republican been president when COVID hit, that person would likely have been reasonably sensible…. But Trump was (and is) a smugly ignorant poltroon, so of course the rest of the GOP, craven and spineless as it is, fell into line. The result is that now it’s murdering its own constituency, and dragging this out for the rest of us…. The majority of the people hospitalized and dying are the unvaccinated, and the people who are willfully unvaccinated are the people who have been lied to by the GOP and their media outlets about vaccines and masks and “personal freedom” and so on. When GOP politicians in Florida or Texas (or Ohio!) block a local masking or vaccination policy, the people most at risk for that policy (aside from, you know, children and those who actually have a legit medical reason not to be vaccinated) are Republicans and conservatives…. The GOP messaging machine has for decades done a fine job at making poor and middle-class white people vote against their own economic interests through the clever use of aspirational messaging and veiled racism, but the fact it is now actively working to kill off its base…. Now, I’m aware that the GOP is simultaneously trying to blame Joe Biden for trying to contain the pandemic, and trying to blame him for when its constituents die, and some of the most committed constituents are with their dying breaths denying that what they have is actually COVID at all…. I’m going to leave you with this: An article on the CNN site, about a conservative county in Missouri, where the vaccination rate is 27% and if you wear a mask, you’re branded as a Democrat. Are people dying there? Oh, yes, they are, and still people are hesitant to get a simple, free and effective vaccine because now it’s been made political, and because they’re told, in so many ways, not to. Here’s a quote from the piece: “’I had both shots of the vaccine, and people just acted like, “Oh, it doesn’t help,”’ Cheryl Wetton said. ‘It bothers me sometimes that people act like Covid is a big joke. I always want to say, ‘Well, why don’t you just come right up here to the cemetery, and I’ll show you my husband’s grave? And I can show you it’s no joke.’ Wetton actually did say that to a guy in town, she later confirmed. ‘He just got real quiet.’" They’re killing their own people because of politics. Not anyone else. Not any more. And they’ll keep doing it. For as long as it takes. Because this is how they think they will win…
LINK: <https://whatever.scalzi.com/2021/09/10/an-actual-party-of-death-now/>
8) Out of my lane. But I remember Jim Stock telling me in February 2020 that unless everyone greed afterthe fct that our Covi response had been overkill, we would not have done enough. The Biden administration did not hear this message. And so last March, I presume, they decided then that these measures would be overkill. Better late than never:
Heidi Przybyla: ’The Full Biden Plan Here: 1. Requiring All Employers with 100+ Employees to Ensure their Workers are Vaccinated or Tested Weekly 2. Requiring Vaccinations for all Federal Workers and for Millions of Contractors. 3. Requiring vax for over 17 Million Health Care Workers at Medicare and Medicaid Participating Hospitals and Other Health Care Settings 4. Calling on Large Entertainment Venues to Require Proof of Vaccination or Testing for Entry 5. Requiring Employers to Provide Paid Time Off to Get Vaccinated 6. Requiring Staff in Head Start Programs, DOD Schools, and Bureau of Indian Education-Operated Schools to be Vaccinated 7. Calling on All States to Adopt Vaccine Requirements for All School Employees 8. Providing Additional Funding to School Districts for Safe School Reopening, Including Backfilling Salaries and other funding withheld by states for implementing COVID Safety Measures 9. Using the Dpt of Education’s Full Legal Authority to increase access to in-person instruction 10. Getting Students and Staff Tested Regularly 11. Making At-Home Tests More Affordable Sending Free Rapid, At-Home Tests to Food Banks and Community Health Centers Expanding Free, Pharmacy Testing 12. Bigger push on monoclonal antibodies, more support for small businesses affected…. These are the primary takeaways…
LINK: <https://twitter. com/heidinbc/status/1436050623439548424?s=21>