Worþy Reads: For 2021-10-01 Fr
A preview of my weekly read-around for Equitable Growth <http://equitablegrowth.org>
Worthy Reads from Equitable Growth <http://equitablegrowth.org>:
1) When you do the welfare economics, one of the most immediate an obvious conclusion is that a good society will need an extremely robust income support program. But the problem has always been that enough voters would rather see ten people who would be appropriate users not get social insurance than to see one person among the “undeserving” actually receive benefits. Curiously, however, this set of judgments is never—or rarely—applied to systems that reward the undeserving rich. Their comeuppance is limited to entertainment fantasies—episodes of Columbo, for example:
Liz Hipple & Alix Gould-Werth: Weak Income Support Infrastructure Harms U.S. Workers And Their Families & Constrains Economic Growth: ‘Economists Jesse Rothstein… and Sandra Black… argue it is inefficient to have families self-insure against unpredictable risks they cannot reasonably calculate…. Black and Rothstein explain, “The federal government can provide social insurance protections at a much lower overall cost, and… enable families to stretch their market earnings further.”… Most people will need income support at some point in their lives…. In any given month, nearly 1 in 5 people benefit from SNAP, Supplemental Security Income, TANF, public or subsidized housing, the Women, Infants, and Children, or WIC, program, or the Child Care and Development Fund…
2) Our President & CEO Emeritus Heather Boushey is doing a good job from her perch in the Executive Office Building, I think:
Heather Boushey: I’m One of Biden’s Advisers. Here’s How I Think About His Economic Agenda: ‘In the early 1980s… my father was “pink slipped” from his machinist job building 747s at Boeing, an event that upended our family finances…. We were lucky; the recession was relatively short, and between my mom’s paycheck and my dad’s benefits, we got by until the orders for planes resumed…. I recall being shocked by how much power Boeing had over our lives. When my dad was laid off, the economic security my parents had long worked for disappeared overnight…. It got me thinking about… how can… things like unions and democratic governments that respond to crises… cushion individual families against the whims of the marketplace?… Biden has set out to mend broken supply chains as aggressively as he tackled other challenges with the American Rescue Plan. But getting back to where we were is not enough. We need to emerge stronger and more resilient. And that’s why we need a more robust government…. Congress has a choice to make. Does it want to grow our economy by investing in the middle class and the public sector, and fundamentally recalibrating the relationship between government and the people it represents, or continue giving billions in tax handouts to the wealthiest Americans and multinational corporations? It’s time to build back better…
LINK: <https://www.nytimes.com/2021/09/29/opinion/government-biden-families.html>
3) I wonder if the government can be flexible enough to handle this problem, and I certainly doubt the ability of our current legal system to handle it. So I would rather focus on (a) mechanisms to give more workers more bargaining power, and (b) more channels and intermediary institutions through which they can bargain and to bargain on their behalf:
Kathryn Zickuhr: Workplace Surveillance Is Becoming the New Normal for U.S. Workers: ‘Invasive and exploitative workplace surveillance in the United States is now growing largely unchecked due to weak worker power and a lack of legal protections or regulatory restrictions…. Workplace surveillance… enables illegal discrimination, hampers worker organizing… is part of a cycle of fractured work arrangements through which firms de-skill work and misclassify employees…. The dangers posed by workplace surveillance fall most heavily on the most vulnerable…. Policy and regulatory solutions… should address… also the structural causes that fissure employment…
4) From two years ago, in the Before Times. I have been handing out these charts for what seems to me now to have been a very long time:
Austin Clemens: Eight Graphs that Tell the Story of U.S. Economic Inequality : ‘Rising economic inequality over the past 40 years has redrawn the U.S. wealth and income landscape, shifting many of the gains of prosperity into the hands of a smaller and smaller group of people and marginalizing members of vulnerable communities. This transformation is in turn reducing income mobility and opening gulfs in educational achievement and health outcomes between different levels of income. The eight graphs in the three sections below visually illustrate these findings…. The first graphic tracks the share of all earned income accrued by the top 1 percent of earners, along with the next 9 percent, the upper 40 percent (from the 50th percentile to the 90th) and the bottom 50 percent. The share of income controlled by the top 10 percent bottomed out in the 1970s but has reached new highs—the top 10 percent of all income earners now control around 38 percent of national income…
LINK: <https://equitablegrowth.org/eight-graphs-that-tell-the-story-of-u-s-economic-inequality/>
Worthy Reads from Elsewhere:
1) This—Odd Lots—has become my second-favorite podcast recently. This was a very good conversation on supply disruptions, and whether they are guiding investment spending into the right sectors and industries:
Joe Weisenthal: Transcript: How to Understand the Inflation We’re Seeing Right Now: ’On this Odd Lots, we speak with Julia Coronado and Laura Rosner-Warburton, the co-founders of MacroPolicy Perspectives to get a greater handle on what’s going on right now…. You’re talking about it a little bit with semiconductors and, you know, we might see some greater investment and I think there’s some hope that this with tightness in the labor market, with tightness in supply chains, that we may see, supplies had expansion or a capital-deepening of some sort that companies will invest more. And that we will just have a more productive supply side sector than we would have had otherwise because tightness in various markets will result in greater building of factories; higher, more aggressive training of workers so that they are more productive; greater investment in automation and so forth…. Then maybe things won’t be so tight in six months. And then maybe some of that investment will have proven to be unnecessary. What is your outlook for a sort of sustained change? I guess I would say a sustained change in the CapEx trajectory… LINK:
2) I confess that the correlation between political polarization and COVID denialism at the state level makes me significantly more depressed about the way back than I believe Bradley and Trevon are:
Bradley L. Hardy & Trevon D. Logan: The Way Back: Assessing Economic Recovery Among Black Americans During COVID–19: ‘Varying state and local public health and economic policy choices could present clear challenges to the speed and persistence of a broader national economic recovery…. Recent federal policies will mandate that employers require employees to either be vaccinated or submit to weekly testing. Economic policy evidence and theory show that businesses value and benefit from a consistent application of regulatory policies. Federal policy is converging with a private sector that is increasingly adopting a more consistent, aggressive stance on mask-wearing and vaccination policy for employees as a mechanism to avoid another large-scale shutdown of economic activity. Black Americans have experienced an especially large, harmful public health and economic shock from COVID–19. The consequences from historically high job loss and CO- VID–19 mortality and morbidity, along with K–12 learning loss, will likely transmit a substantial intra- and intergenerational consequence onto Black families and their communities. These communities will benefit from sustained public health, economic policy, and educational interventions to moderate the effects of COVID–19…
LINK: <https://www.hamiltonproject.org/assets/files/COVID_Recovery.pdf>
3) Yes, Eric Morath does a good job in letting Michelle Holder rebut Isabel Soto. And he does put his thumb on the scale in the appropriate way. But surely he should not have given her a platform—surely there are other places to find conservatives voices who are more sensible and more reality-driven? People who are willing to claim that ending UI was a big deal because a bunch of Republican politicians glommed onto it as a cause six months ago are not people who deserve a larger megaphone in any sensible public sphere:
Eric Morath: U.S. Jobless Claims Have Remained Near Pandemic Lows in September: ‘“The ending of these programs is realigning incentives in a way that’s much more pro-work,” said Isabel Soto, director of labor market policy at American Action Forum…. Ms. Soto estimated that 37% of recipients were paid more on benefits than at prior jobs when receiving the $300 supplement. She also said she found that new applications for unemployment aid fell 14% in states that ended the programs early, while continuing claims fell 5%. “The expiration of the pandemic unemployment insurance programs should produce a boost in job creation,” she said. Labor Department data showed that states that ended benefits early had about the same level of job growth as other states this summer…. Michelle Holder, an economist and chief executive of the Washington Center for Equitable Growth, a liberal-leaning think tank [said:] “The economy remains in recovery mode, and there is still a deadly virus out there,” she said. “The thought that unemployment benefits were the primary reason people weren’t taking jobs was not correct, and now we’ve seen that.” Dr. Holder… expects the broader economic recovery to continue, [but] the strength of the expansion could lose steam…
LINK: <https://www.wsj.com/articles/weekly-jobless-claims-09-30-2021-11632938796>
4) Some very high quality thoughts about how to do good statistical empirical work in economics:
Michael Roberts: ’Many papers I see… are not clear about the source of identification…. I will try to explain…. Identification comes from comparing outcomes (Y) that face different treatments (X). Old school econometrics uses theory about Y and what determines it, and then calibrates with data. New school econometrics focuses on what drives variation in X. David Card (maybe others) called these the “model based” and “design based” approaches. There is a video online, and slides. It’s very good…. The crux of the new school is to think like experimentalist, even if you have observational data…. Can you defend the idea that variation in X is “as if” random, like an experiment? We use fixed effects and other tools to pinpoint a particular part of the variation in X, variation that we can EXPLAIN, and persuasively ARGUE is “as if” randomly assigned. Thus, having lots of fixed effects, or using any particular technique, is not what makes your paper compelling. You need to know and explain the circumstances that give rise to variation in your key X variable, and use that to develop a compelling comparison of outcomes. If you’re doing difference in differences, you need to be clear about the events that drive changes in X for treatment group and not for the control group. The fundamental comparison should be clear. Then worry about parallel pre-trends…. You need to make the comparison groups and times, and events driving treatment very clear for the broadest possible audience. This clarity will provoke the kinds of scrutiny from identification police that every paper really needs. You will need to answer all the questions that arise…. “Mystery meat” identification—variation in X left over after all the “controls” you can think of, is dubious…
LINK: <https://twitter.com/mikejrob/status/1443366871948955651>
5) Remember, Lehman should not have been a Lehman moment. There is no good reason that Evergrande should be. Whether what I now tend to think of as the safe-asset-shortage problem is about to come to China bigtime, and trigger an example of the middle-income trap—that is a very interesting idea that I think I need to spend significant amounts of time trying to assess:
Paul Krugman: Wonking Out: This Might Be China’s ‘Babaru’ Moment: ‘Suppose that the conventional wisdom is right and that Evergrande isn’t another Lehman moment. That still won’t mean that things are OK. For it seems quite possible, at least to me, that China is having a “babaru” moment… the Japanese bubble economy—or as the Japanese themselves called it, the “babaru economy”—of the late 1980s, when prices of many assets, above all commercial real estate, went completely crazy. At one point it was widely claimed that the land under the Imperial Palace was worth more than the whole state of California. Then everything crashed…. The bursting of the Japanese bubble didn’t lead to a financial meltdown. But it was followed by a prolonged period of economic weakness. At first many observers attributed that weakness to a hangover from previous financial excess: Japanese corporations had too much debt, they argued, or Japanese banks had too many nonperforming loans. But the weakness went on and on, and indeed in some ways continues to this day…. Japan has been able to maintain more or less full employment only through constant economic stimulus: ultralow interest rates and persistent budget deficits that have pushed the national debt above 200 percent of G.D.P. True, that debt hasn’t posed any problems so far, and the Japanese arguably deserve praise for managing a difficult economic situation with relatively little mass suffering…. Here’s the thing: While China is vastly different from Japan in many ways, China’s macroeconomic situation bears a striking resemblance to that of Japan around the time the Japanese bubble burst…
6) It is hard to believe that this book is now a decade old. It seems to me to become more and more relevant with each passing day:
Geoffrey Kabaservice: Rule and Ruin: The Downfall of Moderation and the Destruction of the Republican Party: ‘Moderate Republicans’ downfall began not with the rise of the Tea Party but about the time of President Dwight Eisenhower’s farewell address. Even in the 1960s, when left-wing radicalism and right-wing backlash commanded headlines, Republican moderates and progressives formed a powerful movement, supporting pro-civil rights politicians like Nelson Rockefeller and William Scranton, battling big-government liberals and conservative extremists alike. But the Republican civil war ended with the overthrow of the moderate ideas, heroes, and causes that had comprised the core of the GOP since its formation. In hindsight, it is today’s conservatives who are “Republicans in Name Only.” Writing with passionate sympathy for a bygone tradition of moderation, Kabaservice recaptures a time when fiscal restraint was matched with social engagement; when a cohort of leading Republicans opposed the Vietnam war; when George Romney–father of Mitt Romney–conducted a nationwide tour of American poverty, from Appalachia to Watts, calling on society to “listen to the voices from the ghetto.” Rule and Ruin is an epic, deeply researched history that reorients our understanding of our political past and present…
LINK: <https://www.amazon.com/Rule-Ruin-Moderation-Destruction-Development-ebook/dp/B005UFCPHG>
7) I am not sure that this is Galbraith so much as Keynes himself: he did call his theory "moderately conservative". The question is whether he understood how radical he was being, and was just trolling the conservative elements of his audience—the “19th century publicists in American financiers”—or whether he is deadly in earnest. And there are not enough clues left in the historical record for us to judge this for certainty. It depends on what imaginative gestalt you impose on his character as you try to reconstruct the man and his mind:
Zach Carter: Why Are Moderates Trying to Blow Up Biden’s Centrist Economic Plan?: ‘John Kenneth Galbraith, the great liberal economist, once referred to his hero Keynes as an avatar of “enlightened conservatism.” In Galbraith’s telling, Keynes so revered the institutions around him—the British Empire, the Bank of England, the opera—that he was willing to break with economic orthodoxy to defend them. Mr. Biden’s agenda does represent a break with the policy agenda of the past 30 years, just as Keynes’s and Roosevelt’s did nearly 90 years ago. But it ultimately demands very little from those in power. They need only act according to their own best interests, supporting a program that already conforms to their ideological predilections. Trimming Mr. Biden’s agenda for the sake of trimming it is neither enlightened nor conservative; it’s just a waste of time and democracy…
LINK: <https://www.nytimes.com/2021/09/22/opinion/biden-moderate-democrats.html>
8) Outside of my wheelhouse, but I think that this is exactly right. What I do not understand is how Trump has escaped the “loser” classification that all previous unsuccessful Republican candidates have suffered from—and why Republicans in the party establishment, whatever remains of it, have not done more to pin that label on him. That they have not means that the next four years are a very dangerous time indeed for America:
Robert Kagan: Our Constitutional Crisis Is Already Here: ‘Trump came close to bringing off a coup earlier this year. All that prevented it was a handful of state officials with notable courage and integrity, and the reluctance of two attorneys general and a vice president to obey orders they deemed inappropriate. These were not the checks and balances the Framers had in mind when they designed the Constitution, of course, but Trump has exposed the inadequacy of those protections. The Founders… anticipated the threat of a demagogue, but not of a national cult of personality…. “Petty” demagogues might sway their own states, where they were known and had influence, but not the whole nation with its diverse populations and divergent interests…. The Framers put in place… the separation of the three branches of government, each of which, they believed, would zealously guard its own power and prerogatives. The Framers did not establish safeguards against the possibility that national-party solidarity would transcend state boundaries because they did not imagine such a thing was possible. Nor did they foresee that members of Congress, and perhaps members of the judicial branch, too, would refuse to check the power of a president from their own party…
LINK: <https://www.washingtonpost.com/opinions/2021/09/23/robert-kagan-constitutional-crisis/>
If only I could snap my fingers and have everyone be a subscriber, and think deeply about these links you post, and then act appropriately!
Since obsessing about immanent inflation is all the rage these days, let me suggest a rapid supply side remedy for some insipient inflation. Joe Biden should declare the ports of LA/Long Beach and Savannah COVID disaster areas. The respective state national guards ought to be mobilized to aid in improving throughput of these ports. One area the military can be expected to be expert at is logistics. (Between them, these three ports have about eighty ships waiting to unload offshore). Getting the goods trapped in these ports to their inland destinations will reduce price pressures throughout the supply chain.