Worthy Reads from December 6, 2018
Worthy Reads from Equitable Growth:
"Laboratories of Democracy". Heather Boushey attempts to make sense of the relative economic disaster that has been Kansas under governor Sam Brownback. It is turning out to be rather hard to find convincing channels through which Brownback's policies could plausibly and easily have had such disastrous relative effects on employment that we see suffered by the Kansas economy over the past eight years. I find myself wondering about whether it might have been the effect of Brownback's waging an aggressive rhetorical culture war against many in and many who might have moved to Kansas: telling lots of people in and out of Kansas that the governor and the power structure does not want people who think well of places like California and New York—would rather that they stayed in or moved to Colorado or Iowa or Missouri—is not something that is in our standard economic models. But perhaps it shoul be: Heather Boushey: Failed Tax-Cut Experiment in Kansas Should Guide National Leaders: “Sam Brownback’s failed “red state experiment” has truly come to an end.... In 2012 and 2013, Republican Gov. Sam Brownback signed into law the largest tax cuts in Kansas history. The top state income tax rate fell by nearly one-third and passthrough taxes that affected mainly relatively wealthy individuals were eliminated. With the decline in revenues came significant spending cuts...
Another in what is now a large series of papers finding long-run impacts from state-run pre-kindergarten programs. Once again, it is difficult to attribute such large effects to the the standard channels. Yet effects of this size are likely to turn out to be robust, rather than due to chance variation or minor details of econometric specification. Thus we are likely to have to reach for more sociological explanations. They may, perhaps, involve huge peer and cultural effects—that policies did not just change the lives of those directly affected, but also changed hearts and minds in the broader community: Mariana Zerpa: Short and Medium Run Impacts of Preschool Education: Evidence from State Pre-K Programs: “I also provide a discussion of two local average treatment effects under different counterfactual child care arrangements. I find implied effects that are very large, although not very different from the estimates found in the literature on Head Start. This finding highlights the relevance of estimating intention- to-treat effects on the full affected cohorts of children, which do not rely on any assumptions regarding who are the affected children, and particularly on whether there are any externalities on children that do not attend the programs. The relevance of externalities and peer effects in early childhood experience is an open question that is part of a promising research agenda...
As David Card once said to me when we were both standing side-by-side looking at the wall, there really is no empirical reason to justify economists' strong belief in the competitive model—in the law of one wage–for the labor market. Suresh Naidu appears to be reading every single paper by the about-to-be-newly-minted labor-economists-to-be. He is picking up those that challenge that assumption: Suresh Naidu: Imperfect Labor Markets Are a Hot Topic: “We are a long way from “concentration affects wages” and onto the much more precise “outside options affect wages” and it is awesome. Sydnee [Caldwell]... looks at variation in outside options given by hiring at firms that employ your ex-coworkers...
In what sense is the Federal Reserve's decision-making currently “data dependent“? Equitable Growth exile Nick Bunker provides an excellent thumbnail assessment: The Federal Reserve is uncertain not about the state of the economy, but about what level of interest rates is most likely to keep economy near the sweet spot over the next five years: Nick Bunker: On the Federal Reserve: “Twitter: “To use the language of Clarida’s speech yesterday, Powell seems to be signaling they being data dependent by updating estimate of r-star, not the current health of economy...
An excellent paper from Fukui, Nakamura, and Steinsso: How the American feminist revolution supported rapid business-cycle recoveries in rather 1970s and 1980s. Back then there was a huge reservoir of women who would take jobs but had not preciously held jobs only because of the lagging of social structure behind economic and cultural change. Thus increases in demand in recovery that were focused on this industrial reserve army could very easily and rapidly find good matches between unfilled jobs and unemployed workers: Masao Fukui, Emi Nakamura, and Jon Steinsson: Women, Wealth Effects, and Slow Recoveries: "A female-biased shock generating a 1% increase in female employment leads to only a 0.15% decline in male employment (and this estimate is statistically insignificant). In other words, our estimates imply very little crowding out of men by women in the labor market.... 70% of the slowdown in recent business cycle recoveries can be explained by female convergence...
Worthy Reads Elsewhere:
Trump's policies are not boosting economic growth. So the Trumpists—paid, and those who hope to cash in—are preparing the battlespace by arguing that economic growth isn't a good thing anyway—just as we have shifted from "no collusion!" to "collusion isn't illegal!" To his honor, Michael Strain pushes back: Michael Strain: Right-Wing Populists Are Wrong About Economic Growth: "Oren Cass... the Manhattan Institute... argues that the results from decades of policies designed to encourage GDP growth are 'embarrassing' and have 'steered the nation off course'. Michael Anton... Claremont... questioning the presumption that technological and economic progress is desirable and that innovation is 'per se good.... [But] growth doesn’t just help low-income and working-class households in the short term. Over longer periods, seemingly small changes in the growth rate have large consequences.... A rising tide does not lift all boats equally, and it doesn’t lift them instantaneously. But over time, all boats do rise considerably...
Very much worth reading: Henry Farrell and Bruce Schneier: Common-Knowledge Attacks on Democracy: "Democracies draw upon the disagreements within their population to solve problems.... In a well-functioning democracy, each such group vies for political influence by persuading voters that its way of understanding problems and associated solutions is the best one. This is to the democracy’s benefit. It provides a mechanism through which a polity can harness the diversity of perspectives within it, the better to solve complex problems. This requires contestation over who the rulers should be, and what broad social goals they will seek to implement. Political parties and other collective actors hope that they (or their allies) will be in control for a given period, and each vies against others to win public support to that end.... Autocracies adopt a very different approach to common and contested knowledge...
Aline Bütikofer, Sissel Jensen, and Kjell G. Salvanes: The Role of Parenthood on the Gender Gap Among Top Earners: "A recent literature argues that a ‘motherhood penalty’ is a main contributor to the persistent gender wage gap in the upper part of the earnings distribution. Using Norwegian registry data, this column studies the effect of parenthood on the careers of high-achieving women relative to high-achieving men in a set of high-earning professions. It finds that the child earnings penalty is substantially larger for mothers with an MBA or law degree than for mothers with a STEM or medical degree...
Sam Bell: "Curiosly, the Wall Street Journal editorial page no longer so enthusiastic about running down the balance sheet or hiking interest rates... and is suddenly interested in prime age epop... https://www.wsj.com/articles/the-feds-welcome-rethink-1543450104 #WelcomeToThePartyYouAreADecadeLate>...
Nathaniel Rakich: What The Heck Is Happening In That North Carolina House Race?: "Affidavits... in which voters said that people came to their doors to collect their unsealed absentee ballots. One voter alleged that her ballot was incomplete at the time and that the collector said 'she would finish it herself'. Another claimed to have received an absentee ballot that she did not request.... Something unusual happened in absentee-by-mail voting in Bladen County.... In six of the district’s eight counties, fewer than 3 percent of total votes were absentee-by-mail ballots. But in Bladen County, that number was 7.3.... Absentee-by-mail ballots tended to be much better for McCready than other ballots—except in Bladen County... [where] absentee-by-mail ballots were more Republican-leaning than the rest of Bladen’s votes by 8 percentage points. But if we look at the whole district, absentee-by-mail ballots were 24 points more Democratic-leaning...
Antonio Fatas: Global Rebalancing: "Prior to the Global Financial Crisis the world economy experienced a period of increasing global imbalances.... Today the world displays smaller imbalances than at the peak of 2008 but what it was more interesting is the extent to which rebalancing had happened between different country groups...
Barry Ritholtz: How to Use Behavioral Finance in Asset Management, Part I: "Annual Mea Culpas: I learned this from Ray Dalio about a decade ago: every year I make a list of what I got wrong and what I learned from the experience.... Acknowledging your mistakes...
Andreas Beerli, Jan Ruffner, Michael Siegenthaler, and Giovanni Peri: The Abolition of Immigration Restrictions and the Performance of Firms and Workers: Evidence from Switzerland: "We study a reform that granted European cross-border workers free access to the Swiss labor market.... Regions close to the border were affected more intensely and earlier. The greater availability of cross-border workers increased their employment but also wages and possibly employment of highly educated native workers although the new cross-border workers were also highly educated... the reform increased the size, productivity, innovation performance of some incumbent firms, attracted new firms, and created opportunities for natives to pursue managerial jobs...
Tom Nichols: "Counter-Intuitive Though It May Seem, Trump winning was a political disaster for the white working class, especially older whites. They were once pandered to in elections; now it's no longer possible to indulge the pretense that their concerns are economic-or fixable. That's because there's no ground for a policy fix or a compromise with people whose basic position is that they want America to be white, sorta Christian, and frozen in 1963-except with 2018's drugs, sexual liberty, government transfer payments, ESPN channels, and internet porn...
Ramesh Ponnuru: Recession Is a Far Larger Threat Than Inflation: "We should use this moment of relative monetary calm to consider deeper questions, such as whether that target is the right one.... The real failing of the current monetary regime is not that it generates too much inflation. We haven’t had ruinous levels of inflation since the early 1980s (something for which Volcker’s own chairmanship deserves great credit)...
Niskanen Center (December 11, 2018): Starting Over: The Center-Right After Trump: "Donald Trump has had a hurricane-like effect on the Republican Party. The 2018 midterm elections have forced center-right Americans to reconsider their relationship to the Trump-driven conservative populism that has come to dominate the GOP. The Niskanen Center will present an important public analysis of this new political reality...
Olivier Blanchard: The French "Yellow Vest" Movement and the (Current) Failure of Representative Democracy: "Go back to the end of communism and the failure of central planning as an alternative to the market economy.... With the end of communism, it became clear that there was no alternative, only a muddle between market intervention and free markets. So long as growth was strong, and all boats were indeed lifted, the problem was manageable. Then growth slowed down, and inequality and insecurity became more salient...
Lina Glick: "Excellent new paper by economist Mark Glick arguing that the consumer welfare standard has "unduly circumscribed how advances in our understanding of the economy can be translated into competition policy https://www.scribd.com/document/392624312/The-Unsound-Theory-Behind-the-Consumer-and-Total-Welfare-Goal-in-Antitrust...
Noah Smith: Trump's Embrace of Tariffs Hurts U.S. Consumers More Than China: "Trump’s goal of making the U.S. more competitive isn’t bad, but he needs to stop using bad tools. Tariffs... raise costs for American manufacturers and prices for American consumers. Tariff Man needs to cool his jets...
Paul Krugman (January 26, 2010): Obama Liquidates Himself: "A spending freeze? That’s the brilliant response of the Obama team to their first serious political setback? It’s appalling on every level... bad economics, depressing demand when the economy is still suffering from mass unemployment... bad long-run fiscal policy... a betrayal of everything Obama’s supporters thought they were working for. Just like that, Obama has embraced and validated the Republican world-view.... This looks like pure disaster...
#noted #weblogs #2018-12-06
