Worþy Reads: For 2021-07-30 Fr

A preview of my weekly read-around for Equitable Growth:

Worthy Reads from Equitable Growth:

1) From last March: Liz Hipple. The Child Allowance will be, if it becomes permanent, a—in the words of Joe Biden “Big F—-ing Deal!”:

Liz Hipple: The Child Allowance Will Pay Dividends for the Entire U.S. Economy far into the Future: ‘Economists, other social scientists, and policymakers alike already know from research into other, similar income support programs, such as the Earned Income Tax Credit and the Supplemental Nutrition Assistance Program, that increasing the economic resources that families have helps them make investments in their children’s human capital development, which, in turn, improves children’s school performance and completion and boosts their future earnings.A 2018 study finds that an extra $1,000 in the Earned Income Tax Credit increases the probabilities of children graduating high school by 1.3 percent, completing college by 4.2 percent, and being employed as a young adult by 1 percent, and grows their earnings by 2.2 percent. Other recent research finds that a $1,000 tax credit increases children’s math and reading scores by 6 percent to 9 percent of a standard deviation. These are just two examples of the extensive body of research into the positive effects of the EITC on children’s human capital, with future benefits of higher earnings accruing both to the beneficiaries, as well as the wider economy in the form of increased tax revenue on those higher earnings… 

LINK: <https://equitablegrowth.org/the-child-allowance-will-pay-dividends-for-the-entire-u-s-economy-far-into-the-future/>

2) A very important point that is often neglected. The labor market is not competitive. But to jump from there to the belief that it is monopolistically competitive is also wrong, if not as wrong:

Arindrajit Dube: ’The idea that wages are set competitively, i.e., W=MRPL, is mostly false. But the idea that wages are set based on a standard model of monopsony, MCL=MRPL, may also be false. Rather, imperfect competition in labor market means wage setting is guided by a lot of “other stuff.” So… monopsony is real! But current models of wage setting under monopsony may not be! Ultimately, imperfect competition in the labor market allows a wide range of wage policies to arise and survive. What leads those to arise and survive, however, depends on a much broader set of factors than typically considered in standard models of monopsonistic competition. These ideas were fundamentally understood by institutionalist labor economists in early/mid 20th century. Employer wage setting power (monopsony) is a starting point. But what wages are set are based also on economic and social pressures, norms, and polices. OK, one last time, in meme form. Tired: MRPL=W. Wired: MRPL=MCL. Inspired: wages are set by employers within a range, pressures arising from inside and outside of the workplace. And we need a better, more empirically accurate, description of that process… 

LINK: <https://twitter.com/arindube/status/1420940485837922307>

3) That the economic-growth news is very good does not mean that there is any sense in which economic growth is now “too fast”, or that we should ignore how far we still are from full employment. We should eat the temporary inflation that is being served us to avoid another lost half-decade like the Obama first half of the 2010s:

Austin Clemens: ‘This is a great GDP report: 6.5% annual is better than forecasters predicted early in the year, services finally got a huge bump, driven mostly by restaurants, and we caught up to 2019 GDP. We should ignore it and continue stimulative policies. There are big risks right around the corner. The eviction moratorium is ending, student loan payments are coming back, and enhanced unemployment is ending. September is a big cliff. And our labor market indicators don’t look that great. Employment is still way down from where we were. Lots of the unemployed have been unemployed for long durations, these people are often the hardest to get back into the labor market. And unemployment remains elevated for Black Americans, indicating that the recovery isn’t reaching everyone. After the Great Recession, relatively little stimulus was done, with most coming in the immediate aftermath, and the results were disastrous: 5 years of lousy labor market outcomes that hurt millions… 

LINK: <https://twitter .com/AustinClemens2/status/1420771452572389379>

4) Karl Popper, Friedrich von Hayek, Joseph Schumpeter, Victor Adler, Peter Drucker, Karl Polanyi—all extraordinarily insightful figures in the social sciences all in the intellectual ferment of the Austro-Hungarian empire early in the 1900s. A neglected member of this group, however, is Karl Polanyi’s younger brother Michael—chemist, cognitive scientist, and moral philosopher:

Brad DeLong: Suppose I wanted to drop a footnote: ‘If my editors would let me, here I would also trace the current of 20th-century thought and action for which Michael Polanyi, born in 1891 in Budapest, is a convenient marker: how society needs not just the decentralized mercenary institution of the market and definitely does not need comprehensive central planning (which can never be more than a fiction), but needs as well decentralized fiduciary institutions, focused on advancing knowledge about theory and practice, in which status is gained by teaching and learning from others—institutions like modern science, communities of engineering practice, communities of legal interpretation, honorable journalism, evidence-based politics, and others—and in which people follow rules that have been half-constructed and have half-emerged to advance not just the private interest and liberties of the participants but to advance the broader public interest and public liberties as well.’ And at the end of that I would drop a reference to where people should go to read further. What would the single best reference to drop be?

LINK: <https://twitter.com/delong/status/1419678330039635972>

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Worthy Reads from Elsewhere:

1) This is very strange: we are now moving to public-health policymaking via leaked draft powerpoint document. The bottom line is that minimally burdensome non-pharmaceutical measures—universal indoor masking, social distancing, no large crowds gathering and singing in hot, moist, unventilated batcaves—are necessary to give the U.S. time to convince the currently unvaccinated to get vaccinated before the Delta Variant comes for them. That will be difficult—even though it remains unclear just what the grifters who are feeding vaccine-resistance think the profitable endgame for them is:

Meredith McMorrow: Improving Communications Around Vaccine Breakthrough & Vaccine Effectiveness: ‘Vaccine breakthrough cases are expected and increase as a proportion of total cases as vaccine coverage increases…. Vaccine breakthrough cases will occur more frequently in congregate settings, and in groups at risk of primary vaccine failure…. Greater risk of disease, hospitalization and death among unvaccinated vs. vaccinated people: National estimates [of vaccine effects:]…. Disease Incidence: 8-fold reduction. Hospitalization Incidence: 25-fold reduction. Death Incidence: 25-fold reduction…. Delta variant is as transmissible as: chicken pox…. Delta variant vaccine breakthrough cases may be as transmissible as unvaccinated cases…. Delta variant may cause more severe disease…. Canada: Higher odds of hospitalization… 2.20… and death… 2.37…. Singapore: Higher odds of oxygen… ICU… death… pneumonia…. Scotland: Higher odds of hospitalization…. Given increased transmissibility, lower VE [Vaccine Effectiveness], and current vaccine coverage, NPIs [Non-Pharmaceutical Interventions] needed to reduce transmission of Delta variant…. Model Assumptions: Vaccine effectiveness 75-85%. 50% infections reported. Masking: Source control 40-60% effective. Personal protection 20-30% effective…. UNIVERSAL MASKING IS ESSENTIAL TO REDUCE TRANSMISSION OF DELTA VARIANT…

LINK: <https://github.com/braddelong/public-files/blob/master/cdc.pdf>

2) A very good point from Diane Lim. The Biden administration needs to be thinking less of where the aggregate demand sweet spot is and thinking more of what the optimal demand sectoral mix is:

Diane Lim: Will the Infrastructure Bill Fail to Create Jobs Where We Most Need Them?: ‘Two months. That’s how long our most recent economic recession… lasted… February to April 2020…. Does the latest policy effort focused on physical infrastructure (predominately roads and bridges) funding make sense given the economic condition it is intended to treat?… Consumer demand is largely back, especially in the leisure and hospitality sector…. The trouble with… leading with the physical infrastructure investments and not the family investments in caregiving and other “human infrastructure” is that it might not create the kinds of jobs in the industries and occupations where our economy is still operating below our full capacity… 

LINK: <https://www.avisonyoung.us/sightline/-/article/2021/07/28/will-the-infrastructure-bill-fail-to-create-jobs-where-we-most-need-them->

3) Smart words about how to create a robust wafer sector underlying our post-industrial economy:

Laura Tyson & John Zysman: America’s Vital Chip Mission: ‘This year’s semiconductor shortages underscore the need for a comprehensive strategy…. Competitive market conditions must prevail throughout the industry, because excessive market power in any one segment can jeopardize supply…. What CRSS does mean is that the US should cooperate closely with the European Union, Japan, Singapore, Israel, and others who form core parts of its secure supply base. CRSS also does not mean preventing China from purchasing or selling semiconductors on global markets, or from developing its own semiconductor industry in ways that do not violate global trade and investment rules. Weaponizing trade and investment restrictions to thwart China’s long-run semiconductor ambitions will be costly and counterproductive…. There is a danger that generous fiscal support will end up subsidizing private investments that are already being planned…. US… ability to prototype and scale innovations has been hampered by the “lab-to-fab valley of death” … prohibitively expensive to demonstrate, leaving them starved of the private investment needed to achieve scale. A promising approach to address this problem is a pre-competitive public-private R&D partnership… 

LINK: <https://www.project-syndicate.org/commentary/us-semiconductor-strategy-by-laura-tyson-and-john-zysman-2021-07>

4) One of the more interesting young moral philosophers in early 1900s Vienna came to the United States and became the U.S.’s BOSS management consultant and managerial theorist. Peter F. Drucker sought the reconciliation between the advantages of capitalism—bold entrepreneurship and growth—and socialism—redistribution, common concern, and all pulling in the same direction—in the figure of the manager, whose social role was precisely to arrange things so that society could be an “association, in which the free development of each is the condition for the free development of all”. J.D. Connor found for me a quote from the “The Once and Future Manager” <https://www.oreilly.com/library/view/peter-f-drucker/9781647820275/10394/OEBPS/xhtml/chapter006.xhtml>: “The professional manager has not one job, but three. The first is to make economic resources economically productive. The manager has an entrepreneurial job, a job of moving resources from yesterday into tomorrow; a job, not of minimizing risk, but of maximizing opportunity. Then there is a managerial or ‘administrative’ job of making human resources productive, of making people work together, bringing to a common task their individual skills and knowledge; a job of making strengths productive and weaknesses irrelevant which is the purpose of organization. Organization is a machine for maximizing human strengths. Then there is a third function…. They are public. They are visible. They represent. They stand for something in the community. In fact, they are the only leading group in society…. Managers have a public function… Royal Commissions … the local Boy Scout troop…. within their own business by leadership and example. But they always do discharge it. Nothing anybody who is a manager does is private, in the sense that one can say: ‘This is my own affair. It does not concern anybody else. What I do is, therefore, of no real interest to anybody.” Managers are on the stage, with the spotlight on them’:

Peter F. Drucker: Management: ‘Friedman’s argument that business is an economic institution and should stick to its economic task is well taken…. But it is also clear that social responsibility cannot be evaded. It is not only that the public demands it. It is not only that society needs it. The fact remains that in modern society there is no other leadership group but managers. If the managers of our major institutions, and especially of business, do not take responsibility for the common good, no one else can or will…

LINK: <https://archive.org/details/management0000druc/mode/2up>

5) I am not sure that this is correct. Perhaps it ascribes more rationality and concern for long-run societal well-being to the doings of the Chinese government that has always been focused primarily on maintaining the effective power monopoly of the Chinese Communist Party. But it is definitely a possibility:

Noah Smith: Why Is China Smashing Its Tech Industry?: ‘China never really shifted out of survival mode…. Growth has always been toward the telos of comprehensive national power. China’s young people may be increasingly ready to cash out and have some fun, but the leadership is just not there…. China’s leaders look at what kind of technologies they want the country’s engineers and entrepreneurs to be spending their effort on, [and] they… don’t want… stuff… for fun and convenience…. Their consumer internet sector[’s]… link… [to] geopolitical power had simply become too tenuous to keep throwing capital and high-skilled labor at it. And so, in classic CCP fashion, it was time to smash… 

LINK: <https://noahpinion.substack.com/p/why-is-china-smashing-its-tech-industry>

6) Coming back to this, from a year ago, as truly the most bizarre thing I have seen an economist with a tenured job at a research university say—shades of Paul Sweezy receiving lessons on economic history and political economy from Josef Stalin. Moreover, if the advisors were “weak” how were they able to keep Tomas Philipson out of the room? And if Tomas Philipson really thinks Trump by himself has “instincts” “on par with many Nobel economists”, doesn’t that say that economists are unnecessary for Trump to waste his time listening to—that he already knows what they have to say? And what reason is there to believe that the world would be a better place if Tomas Philipson were allowed into the Oval Office, ever? And even if it is cult-membership dynamics, I can understand why a careerist might want to work towards (or beyond) a leader whose armies command from the North Cape of Norway to the sands of Libya. But what is in it for Philipson to embarrass himself so completely in front of his colleagues and professional peers?

Nick Timiraos & Andrew Restuccia (2020–06–26): White House Economist Tested Positive for Covid–19: ‘[Tomas] Philipson praised Mr. Trump’s economic instincts as “on par with many Nobel economists I have worked with at Chicago,” but he said other officials had marginalized the CEA, which normally has three members but will be down to just one with Mr. Philipson’s departure. “Weak advisers” excluded “good advice by the CEA, even though the president would have benefited from it,” he said…

LINK: <https://www.wsj.com/articles/white-house-economist-tested-positive-for-covid-19-11593212011>

7) Paul Krugman is thinking, productively, about similarities and differences between post-COVID plague and post-WWII civilian economic reopening:

Paul Krugman: What Inflation Risks & My Intermittent Fasting Have in Common: ‘This creates a situation very different from the one that prevailed after World War II. Then, people rushed to buy the cars and home appliances they had been prevented from buying under rationing…. There really was a lot of pent-up demand. But you can’t suddenly eat all the restaurant meals you didn’t get to eat during lockdown; people will probably spend a few months dining out more than usual, and they may engage in some revenge vacation and travel. But there’s a limit to how much of that you can do—just as there’s a limit to how much you can stuff yourself after a fast day…. So my guess is that there’s less to those huge excess savings numbers and big stimulus numbers than meets the eye. Overheating is still possible, and the Fed should keep its eye on that possibility. But the big numbers aren’t as scary as they seem… 

LINK: <https://messaging-custom-newsletters.nytimes.com/template/oakv2>

8) Class and ethnic stumpling-blocks to easy vaccine access are in need of attention:

Scott Lemieux: The Tucker/Berenson Corridor, & the Blue State Holdouts: ‘The COVID surge is of course concentrated heavily among the unvaccinated—the vaccines are extremely effective!—and so it’s not surprising which states are seeing the worst numbers…. Still… lower vaccination rates in the Black community have concentrated cases there to an extraordinary degree. Before vaccines, Black people represented about one-third of new coronavirus cases in Maryland and half in D.C. In the latest data, Black people represent just under half of the new cases in Maryland and more than 80 percent in D.C. In jurisdictions where it’s politically viable, we need more vaccine mandates and more positive incentives to take the vaccines. Solving the problem of MAGA non-vaccination is harder but there’s still plenty of lower-hanging fruit out there in absolute numbers… 

LINK: <https://www.lawyersgunsmoneyblog.com/2021/07/the-tucker-berenson-corridor-and-the-blue-state-holdouts>

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