Worþy Reads: For 2021-10-29 Fr
A preview of my weekly read-around for Equitable Growth
Worthy Reads from Equitable Growth:
1) The excellent Anna Stansbury makes a very good point here: the size of the penalties multiplied by the likelihood of enforcement are such that a firm can, in all probability, make higher profits by violating than by complying with the FLSA and the NLRA. To the extent that firms do comply with these legal obligations, it is as part of a brother social contract of expectations of cooperative behavior. But that social contract has been degrading and decaying at least since the late 1960s:
Anna Stansbury: Do US Firms Have an Incentive to Comply with the FLSA & the NLRA?: ‘To what extent do US firms have an incentive to comply with the Fair Labor Standards Act (FLSA) and the National Labor Relations Act (NLRA)? I examine this question through a simple comparison of the expected costs of noncompliance (in terms of legal sanctions) to the profits firms can earn through noncompliance. In the case of the FLSA minimum wage and overtime provisions, typical willful violators are required to pay back wages owed and in some cases additional penalties, if detected by the Department of Labor (DOL). Based on available data on the penalties levied, a typical firm would need to expect a chance of at least 78–88 percent that its violation would be detected in order to have an incentive to comply with the FLSA. In practice, the probability of detection many firms can expect to face is likely much lower than this. In the case of the NLRA, a firm that fires a worker illegally is required to reinstate the worker with back pay if the violation is detected. Based on empirical estimates of the effect of unionization on firm profits, a typical firm may have an incentive to fire a worker illegally for union activities if this illegal firing would reduce the likelihood of unionization at the firm by as little as 0.15–2 percent. These analyses illustrate that neither the FLSA nor the NLRA penalty and enforcement regimes create sufficient incentive to comply for many firms. In this context, the substantial evidence of minimum wage and overtime violations, and of illegal employer behavior toward unions, is not surprising…
2) This, I think, went very well. I certainly learned an enormous amount. And, indeed, it made me think of that I had underestimated for nearly my entire career how important nowcasting was (relative to forecasting):
Equitable Growth: Presents: Opportunities & Challenges of Real-Time Economic Measurement_: ‘This event convened experts on the analysis and application of real-time data…. Austin Clemens, Director of Economic Measurement Policy, Washington Center for Equitable Growth; Erica Groshen, Senior Economics Advisor, Cornell University; Jeehoon Han, Assistant Professor, Zhejiang University; Dana Peterson, Chief Economist, The Conference Board…. The coronavirus recession led to a crop of economics working papers trying to understand the effects of the pandemic in real time…. The incredibly short turnaround time of much of this research was unprecedented…. The severity of the COVID–19 crisis, the availability of administrative data sources, and new statistical tools combined to produce an enormous amount of nearly real-time data…. Though future crises may not cause the precipitous economic gyrations that the coronavirus did, the lessons economists are learning now may help us respond more effectively to future recessions, guiding policymakers’ response to the next recession by using empirical results from the current one…
3) The Biden administration knows what needs to be done. The problem is that the center caucuses of the currently elected congress does not see the necessity. At least, they do not believe that those who they are functionally in the business of representing see the need::
Michelle Holder: ’Pleased to see the Build Back Better Act framework today—it’s a historic & imperative policy step to strengthen our massively underfunded Social Infrastructure. But it’s just 1 step. We’ll need many more steps to create an equitable, inclusive economy. There is much-needed funding for universal pre-K & a #LivingWage for childcare workers. This will reduce costs for families, revolutionize access to high-quality Early Education AND protect workers. Investments in childcare = investing in workers & kids: win-win. This is BIG…. Millions have benefited from the Child Tax Credit, and expanding it for another year will continue to protect against childhood poverty. The next step beyond the #BuildBackBetterAct is to make it permanent. Build Back Better also makes key investments in Climate Change mitigation, health care, housing, tax enforcement, and home care—investments that will help combat racial, gender, and economic inequality. BUT the framework also misses some major opportunities to help even more families and the economy overall. There is still much work to be done…
LINK:
Worthy Reads from Elsewhere:
1) Russia’s economic future does not look bright: an economy of rent-seeking and rent-extraction, rather than of win-win productivity improvement and equitable growth. Russia’s economic failure is, I think, a consequence of its political failure. The logic of rule in Russia involves those currently at the top of the state pyramid maintaining their power by rewarding friends and supporters and punishing enemies and opponents. That political logic of coalition construction and maintenance is not one in which equitable growth is at all likely. Was there an alternative road? I think prioritizing democracy and voice early on, and building institutions for grassroots representation, would have given Russia a better chance over the past generation. Michael McFaul has seen this process up close. He has lots that is thought-provoking to say:
Michael McFaul: Russia’s Road to Autocracy: ‘Russia’s democratic collapse must rank as one of the most consequential setbacks among the third and fourth waves of democratization. A comprehensive explanation for Russia’s transition from autocracy and back again counts on both structure and agency, but leans toward agency. Structurally, Russia was forced to navigate democratic and market reforms while managing the dissolution of the Soviet empire. Yet the agency of individual actors may have played a more decisive role: It was Mikhail Gorbachev, not weakening state institutions or a failing command economy, who triggered regime change in the Soviet Union. Following Gorbachev, Boris Yeltsin made decisions that undermined democratic consolidation and to some extent paved the way for future autocratic restoration. The most notable of these was Yeltsin’s naming of Vladimir Putin as his successor. While Russians may be shaped by historical legacies, immutable cultural norms, or static institutions, they are not trapped forever by them. If some Russians in the past made decisions that produced autocracy, others in the future might make choices that engender democracy…
2) I did not see this when people were looking for people to sign on, and that leaves me a little bit sad. The only thing I would add is that the social-spending package is only going to counter a small proportion of the harm done by the substantial decades of underinvestment by the public sector that began back in the days of Richard Nixon. It will take a much greater effort, and be a much heavier lift, to get the public capital stock and its pace of growth back to where it really ought to be:
Juliana Kaplan & Ben Winck: 61 Economists, Nobel Laureate Joseph Stiglitz Say Pass Social Spending: ‘The package would “counteract decades of underinvestment,” the group said in a letter organized by Invest in America Action. The plan includes funding for universal preschool, affordable housing, and clean-energy projects, among other provisions…
3) I do find myself puzzled by the failure to find total factor productivity gains from the Korean Heavy Industry Drive of the 1970s. It certainly was a remarkable success for output, for wages, and for profits. The authors see it as a successful coordination effort that got South Korean heavy industry to a desirable high-investment equilibrium. But that should have brought with it learning by doing and business model experimentation as well. Yet apparently Korea got only the capital deepening benefits. I will have to look much more closely at this puzzle:
Minho Kim, Munseob Lee, & Yongseok Shin: The Korean Heavy Industry Drive of 1973: ‘Industrial policy has divided economists for decades. This column evaluates Korean government’s policy of promoting heavy and chemical industries in the 1970s, using plant-level output and productivity data. It shows that output and input use of targeted industries/regions grew significantly faster than those of non-targeted ones. However, total factor productivity did not increase because the misallocation of resources across plants within targeted industries/regions got significantly worse.…
LINK: <https://voxeu.org/article/korean-heavy-industry-drive-1973>
4) And now the Center for American Progress also has a new head. Patrick Gaspard is a highly qualified and extremely energetic guy. I am very pleased to see this:
Center for American Progress: A New Era of American Progress: ‘We welcome our new president and CEO, Patrick Gaspard. With an introduction by CAP founder John Podesta and closing remarks by CAP board member Secretary Julián Castro, the event will highlight Gaspard’s vision for CAP and the progressive movement as a whole. It will address how we, as progressives, can move policy that alleviates inequality, uplifts underserved communities, and creates a more equitable and just world for all…
LINK: <https://www.americanprogress.org/events/2021/09/24/504109/new-era-american-progress/>
5) Only once in my lifetime—1994—has the US Federal Reserve successfully attain a “soft landing“: maintaininn price stability and tighten monetary policy without sending the economy into a recession, and so prematurely cutting short a useful and beneficial expansion. The fear of a repeat of the inflationary 1970s has indeed imposed heavy long-term costs on American economic growth:
Antonio Fatás: The Short-Lived High-Pressure Economy: ‘In 2019, the US economy had reached levels of employment that ensured that the gains of the economic expansion were shared across many segments of the labour market. Unfortunately, the benefits of this high-pressure economy were short-lived thanks to the recession that started in March 2020. This column argues that this pattern fits all previous US cycles. Expansions end too early to allow for long periods of stable and low unemployment…
LINK: <https://voxeu.org/article/short-lived-high-pressure-economy>
6) What is the relationship between “alternative facts” and “alternate reality”?
Jason Koebler: Zuckerberg Announces Fantasy World Where Facebook Is Not a Horrible Company: ‘Facebook’s new name is “Meta,” and its new mission is to invent a ‘metaverse’ that will make us all forget what it’s done to our existing reality: Moments before announcing Facebook is changing its name to “Meta” and detailing the company’s “metaverse” plans during a Facebook Connect presentation on Thursday, Mark Zuckerberg said “some people will say this isn’t a time to focus on the future,” referring to the massive, ongoing scandal plaguing his company relating to the myriad ways Facebook has made the world worse. “I believe technology can make our lives better. The future will be built by those willing to stand up and say this is the future we want”…
LINK: <https://www.vice.com/en/article/qjb485/zuckerberg-facebook-new-name-meta-metaverse-presentation>
The FLSA and NLRA are hardly unique in being ineffective because their fines are too low. The fines should have, at the very least, been increasing since the acts' passage at the rate of inflation (just as should the minimum wage). Criminal penalties would be good, too.
Manchin and Sinema have no interest in making things better for their constituents. They want to please their donors. Someone, please, show me that there's an alternative explanation.
META has some very disturbing implications. Imagine MAGAs wearing Oculus glasses undergoing training on insurrection and indoctrination by Steve Bannon et. al., hundreds of thousands at a time, with NO possibility of "moderating the content" because we're not talking about static posts on Facebook. This could be the final straw. What the living Hell is the matter with Zuckerberg- everything he does just makes things worse.