WORÞY READS: From 2021-04-30
A preview of my weekly read-around for the Washington Center for Equitable Growth...
Worthy Reads from Equitable Growth:
1) If you read one thing about why the Biden administration is trying to do what it is trying to do, read this:
David Mitchell: The Evidence Behind Biden’s Big Plans for Rebuilding Infrastructure, Reducing Poverty, & Combating Inequality: ‘The American Jobs Plan and the American Families Plan… designed to complement the temporary economic boosters included in the American Rescue Plan…. Many of the big ideas included in the two new plans are backed by extensive academic evidence, much of which has been funded and featured by the Washington Center for Equitable Growth. Let’s walk through the major elements of the administration’s new plans, which were outlined by the president in a joint address to Congress last night, alongside the underlying academic evidence…
2) Powerful documentation of a large-scale societal failure relative to the yardstick provided by other global-north societies:
Robert Manduca & al.: The American Dream Is Less of a Reality Today in the United States, Compared to Other Peer Nations: ‘ The hope that children will grow up to have higher standards of living than their parents is widespread around the world. In the United States, this concept is considered by many to be a core component of the American Dream…. More than 90 percent of U.S. children born in 1940 had higher real incomes at age 30 than their parents did, but only about 50 percent of children born in 1980 can say the same. This raises the question: Was this decline part of a global trend, or is the United States alone in its low rates of upward mobility? In short, does the American Dream live on, but in other countries?… Contrary to the self-conception that the United States is the “land of opportunity,” relative social mobility—the likelihood of a child born to low-income parents climbing to the top of the income distribution as an adult—is low in the United States, compared to many European countries. The United States also has a distinctive welfare state, with less social insurance and lower labor union penetration…. The variation in upward mobility rates among these countries is striking…
3) My former student Trevon Logan did a superb job here—and the Equitable Growth tweeters did a superb job of covering and summarizing it:
Equitable Growth: Livetweeting Trevon D. Logan’s Senate Banking Committee Testimony: ’Outside of mergers, market concentration, and monopsony itself is the rise of what I term 21st century Factory Discipline. E.g. incl. NCAs and non-poaching agreements among franchisees. Both of these can work to depress wages by structurally reducing labor market mobility. Recent survey evidence shows that one in five workers with a high school education or less are subject to an NCA. Non-poaching agreements have also proliferated, and today more than half of all major franchises forbid their franchisees from competing for one another’s workers. NCAs exacerbate racial wage gaps, accounting for as much as 9% of the wage differentials…. There are solutions…. The first is to understand that antitrust law should be applied to the potential labor market impacts of monopsony power via market concentration…
LINK: <https://twitter.com/equitablegrowth/status/1387775972607504390>
4) This is an important point that has always bothered me. Whenever one does the math—tries to calculate which market prices are "wrong" from the perspective of taking a well functioning market could be one in which the prices are at the correct values to guide the market-system-as-societal-calculating-machine in its task of increasing societal well-being—the wrongest prices are those whose wrongness springs from inequality in the distribution of income. Yet I—and Takasha Negishi, of course—are the only people I ever hear saying this. Why only us?:
Brad DeLong: RHETORICAL QUESTION: Why Do Economists Ignore the Greatest of All Market Failures?: ‘The Chicago School underwent an enormous change between the Midwestern Populist days of Henry Simons, for whom private monopoly was the big foe and large inequalities an enormous menace, and the monopoly-tolerant… Stigler & co. created. This transformation from Simons to Stigler was possible only by “othering” the non-rich by every means possible, so that their low weight in the market’s Negishi-weighted SWF could be dismissed as deserved. I put it to you that taking the Murray Rothbard Road in race relations… was a very important part and remains a very important part of that shift away from economics understood as a policy science that attempts to implement a Benthamite or a Millian utilitiarianism that seeks the greatest good of the greatest number…
LINK: <https://braddelong.substack.com/p/why-do-economists-ignore-the-greatest-1d7>
Worthy Reads from Elsewhere:
1) Yes, the United States has been underinvesting in science since Reagan took an axe to the federal discretionary budget. Any more questions?:
Jonathan Gruber & Simon Johnson: Infrastructure for the Next American Century: ‘Biden’s Republican opponents disagree. In their view, the United States need only renew some of its post-World War II physical infrastructure, with “roads and bridges”…. But America’s post-World War II prosperity was based on more than good roads and bridges; it drew on a much broader push to generate shared scientific knowledge and put it to work productively…. By the mid–1960s, the US government was spending nearly 2% of GDP on public science investments—and the returns were extraordinary…. And yet the US has since retreated from its commitment to public funding of basic science. Federal science spending has fallen toward 0.6% of GDP, placing the US 12th in the world…. China now spends roughly 1.3% of GDP on government-supported science…
2) Tracking the recovery. There is going to be inflation—you cannot merge onto the superhighway without leaving skidmarks. But that is a very different thing than the stagflationary problems of the 1970s:
Neil Irwin: The Economy Is (Almost) Back. It Is Looking Different Than It Used To: ‘Americans’ spending on durable goods—cars and furniture and other goods meant to last a long time—rose at a stunning 41.4 percent annual rate in the first three months of the year. Enjoy your Pelotons and Big Green Eggs, everybody…. The economy is recovering rapidly, and is on track to reach the levels of overall G.D.P. that would have been expected before anyone had heard of Covid–19. But that masks some extreme shifts in composition…. The United States is on track to surge above that 2019 trend in the second quarter currently underway. But… spending on cars and trucks is 15.1 percent higher than it would have been on the 2019 trajectory; spending on furnishings and durable household equipment is 16.6 percent higher; and spending on recreational goods is a whopping 26 percent higher. Altogether, durable goods spending is running $348.5 billion higher annually…. The housing sector is experiencing nearly as big a surge. Residential investment was 14.4 percent above its prepandemic trend…. Spending on transportation services remains 23 percent below its prepandemic trend, recreation services 31 percent, and restaurants and hotels 19 percent. Those three sectors alone represent $430 billion in “missing” economic activity—largely equivalent… to the combined shift of economic activity toward durable goods and residential real estate…. Less widely understood is a steep pullback in the energy sector…. Consumer spending on gasoline and other energy goods is down 11 percent from its prepandemic trend line. And business spending on structures is down 19 percent…
LINK: <https://www.nytimes.com/2021/04/29/upshot/economy-gdp-report.html>
3) Economists did a lot of damage when they put forward orthodox doctrines that each tool of economic management was good for one and only one thing—financial regulation for preventing crises, monetary policy for stabilizing employment and inflation, and fiscal policy for promoting long-run growth. It was always much messier. And a large part of our failure to deal with the Great Recession properly stems from the orthodox target-instrument doctrine. As Ivan Werning and Emmanuel Farhi point out here, it does not even make theoretical sense:
Ivan Werning: Taming a Minsky Cycle: ’In a “Minsky moment”… risk is re-priced, asset prices crash, imprudent borrowers de-lever, aggregate demand falls, and a recession ensues. We… ask what policymakers should do about it. To answer this question, we build a stylized model with boom-bust financial cycles fueled by extrapolative expectations…. With extrapolative expectations during the bust… monetary policy must be conducted with an eye towards financial stability instead of focusing exclusively on macroeconomic stability…. Financial stability becomes a multidimensional target influenced by leverage and beliefs/asset prices. Macroprudential policy cannot control both at the same time and monetary policy must shoulder a share of the burden. Limiting leverage falls on macroprudential policy, and managing beliefs/asset prices on monetary policy…
LINK: <https://www.youtube.com/watch?v=B_pJsPXUVMs>
4) This is, I think, a very important point that Matthew Zeitlin makes. The biggest differences between Bill Clinton and Barack Obama’s administrations on the one hand and Joe Biden’s on the other is this: Joe Biden is a Northeastern politician, while Bill Clinton is a Southern politician and Barack Obama is an African-American meritocrat:
Matthew Zeitlin: Personnel Isn’t Policy, Policy Is Personnel: ‘Janet Yellen is a fiscal and monetary hawk. Or at least she was. Sorta. But no longer…. While on the Fed and in the Clinton White House, she supported policies that would be anathema to the current administration, she was affiliated with deficit hawk groups that, for now, have no particular hold over current Democratic Party thinking. And yet I have no doubt that Yellen will be an effective advocate and architect of exactly what the Biden administration and Democratic congress wants to do right: spend money on families, Covid relief, the environment, and not get too stressed about the deficit…. It wasn’t Larry Summers who allegedly told Romer that monetary policy had “shot its wad,” or tried to explain high unemployment with reference to bank tellers and ATMs. It was Barack Obama…. The principal shapes the advisors, or essentially farms out different “modules” of thinking to different people (a deficit hawk here, a stimulus advocate there, a health care reformer over there) and then shifts the degree to which she takes their input in accordance with what she already wants to do…. [Summers] is as on board for more spending as anyone in Greater Bidenberg…
LINK: <https://zeitlin.substack.com/p/personnel-isnt-policy-policy-is-personnel>
5) This has no relevance at all to the mission of Equitable Growth. I simply found it fascinating. The evolutionary process is very very clever indeed:
Cariad J. Williams & al.: Helically Arranged Cross Struts in Azhdarchid Pterosaur Cervical Vertebrae And Their Biomechanical Implications: ‘Trabeculae in a pterosaur cervical vertebra are helically arranged. As few as 50 trabeculae increase the buckling load by up to 90%. Subsuming the neural tube into the centrum adds stiffness to the cervical series…. Azhdarchid pterosaurs, the largest flying vertebrates, remain poorly understood…. A complex internal micro-architecture for… hyper-elongate cervical vertebrae…. Incorporation of the neural canal within the body of the vertebra and elongation of the centrum result in a “tube within a tube” supported by helically distributed trabeculae [bands or columns of connective tissue]. Linear elastic static analysis and linearized buckling analysis, accompanied with a finite element model, reveal that as few as 50 trabeculae increase the buckling load by up to 90%…. Subsuming the neural tube into the centrum tube adds considerable stiffness… permitting the uptake of heavy prey items without risking damage to the cervical series, while at the same time allowing considerable skeletal mass reduction…
LINK: <https://www.cell.com/iscience/fulltext/S2589-0042(21)00306-0>
6) When things become important, it seems easier for humans to create a machine-readable data format than for machines to read raw human complexity and messiness. Will this always be true? When the stakes are high enough, yes—until we have Turing-class AI entities. And then, as Paul Krugman says, we will not have AI assistants and intelligence amplifiers, but rather partners—or slaves:
Cal Paterson: We Were Promised Strong AI, But Instead We Got Metadata Analysis: ‘Perhaps the best measure of this problem is how often I have to append the search terms “reddit” or “site:reddit.com” to a query. Increasingly this is the only way to find the opinions of people who aren’t being paid to give them…. When you search with Google … you are really just searching the sum total of things that people have put, and managed to keep, on the web since about 1995. Perhaps this is one reason why commercial “content sites” appear often in searches: they put a lot of stuff on the web…. When your elected government snoops on you, they famously prefer the metadata of who you emailed, phoned or chatted to the content of the messages themselves. It seems to be much more tractable to flag people of interest to the security services based on who their friends are and what websites they visit than to do clever AI on the messages they send…. Artificial Intelligence is used when first doing some new thing. Then, once the value of doing that thing is established, society will find a way to provide the necessary data in a machine readable format, obviating (and improving on) the AI models…
LINK: <https://calpaterson.com/metadata.html>
7) I do not understand the transformation of the Republican Party over the past 70 years. It was the party of the rich and those who intended to become rich. It believed that its principal policy goal was to boost the pace of economic growth, so that its large relative slices of the economic pie would be even larger an absolute magnitude. It is now the party of those who are terrified of change and growth because they think they cannot compete and will lose out. Some of it is that when you are no longer able to minimize lines of economic cleavage you shift instead to maximizing fear. But I do not think that is an adequate explanation. Here is John Quiggin’s take. I am not sure that it is right. I am not sure that it is wrong:
John Quiggin: Republicans & the End of Hard Neoliberalism: ‘In the 1980s and 1990s, the Republicans were a hard neoliberal party…. Now the situation is reversed. The Republicans are a white grievance party… [that] still attempt to attract support from corporations by advocating tax cuts…. Think of the Eisenhower-era Republican party as a complicated mixture… and the Trump era party as a crystalised mass of plutocratic economics, racism and all-round craziness. The development over the 60 years… keeping the mixture simmering, while adding more and more appeals to racial animus and magical thinking…. Boiling off is the process by which various groups (Blacks and Northeastern liberal Republicans in C20, liberaltarians more recently) have left the Republican coalition in response to its racism and know-nothingism. The dregs that have precipitated out are ideas that were supposed to be important to Republicans (free trade, scientific truth, classical liberalism, moral character and so on) that turned out not to matter at all. Trump’s arrival is the catalyst seed crystal that produces the phase change…
LINK: <https://crookedtimber.org/2021/04/26/republicans-and-the-end-of-hard-neoliberalism/>
8) There is something profoundly… I shouldn’t say it… I really shouldn’t say it… I have to say it: There is something profoundly stupid about arguments that voter-suppression laws are unimportant because they trigger counter-mobilizations that then wash out the distorting effects of voter suppression on who wins elections. This happens only when peopole think voter suppression laws are important. That is what triggers counter-mobilization. To claim that voter-suppression laws are not important is, frankly, to tell a lie. And to claim that voter-suppression laws are not important is to powerfully assist them in accomplishing their intended goal of changing the winners of elections. Voter-suppression laws are important. And it is only by understanding how they are important that we can accurately assess and deal with them:
Ryan Teague Beckwith: What Everyone’s Getting Wrong About Mail-In Ballots and Early Voting in 2020: ‘Recent studies have confirmed that changes to voting in 2020 had little or no effect on turnout…. If there was a partisan benefit from expanding voting by mail, it probably helped Republicans…. Myth 1: Voter fraud is a big problem: It isn’t…. Myth 2: Early voting boosts turnout…. In 20 studies reviewed by the U.S. Government Accountability Office, five found mixed evidence, seven found no significant effect, and eight found that early voting actually decreased turnout. One theory: It reduces the significance of Election Day, which otherwise spurs some halfhearted voters to show up. Myth 3: Strict voter ID laws hurt minority turnout: The evidence is inconclusive…. Some studies show no statistical link, and others show they hurt turnout somewhat. Some scholars suggest they may even inadvertently motivate people in minority groups to vote, or spur campaigns to do more outreach to them. Myth 4: Strict voter ID laws boost confidence in elections: They don’t seem to have any effect on confidence…
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