Worthy Reads from January 29, 2019
Worthy Reads from Equitable Growth:
Equitable Growth's Heather Boushey is engaging with Jonathan Ostry, Prakash Loungani, Andrew Berg, and Jason Furman at the Peterson Instute on Thursday January 31: Peterson Institute: Book discussion: Confronting Inequality: How Societies Can Choose Inclusive Growth: "Book discussion with Jonathan Ostry, @LounganiPrakash, and Andrew Berg of @IMFNews on Confronting Inequality: How Societies Can Choose Inclusive Growth with additional comments with @jasonfurman of PIIE & Heather Boushey of @equitablegrowth. January 31, 12:15 pm...
Greg Leiserson has an excellent piece over at MarketWatch for everybody who wants to rapidly get up to speed on what a net-worth wealth tax might be and how it could work: Greg Leiserson: How a wealth tax would work in the United States: "Policy makers looking for a highly progressive tax instrument that raises substantial revenue would find a net-worth tax appealing. Such a tax would impose burden primarily on the wealthiest families—reducing wealth inequality—and could raise substantial revenues. As noted above, the United States taxes wealth in several forms already. Thus, the policy debate is less about whether to tax wealth and more about the best ways to tax wealth and how much it should be taxed. A net-worth tax could be a useful complement to—or substitute for—other means of taxing wealth, as well as a tool for increasing overall taxation of wealth...
I have been waiting for this from Piketty-Saez-Zucman to show up for a while, and here it is now in our WCEG working paper series. This is the simplified and streamlined version on their take on how we should do national income statistics for the twenty-first century—how we can and should take advantage of our data to go beyond averages and seriously track issues of distribution. READ IT! Thomas Piketty, Emmanuel Saez, and Gabriel Zucman: Simplified Distributional National Accounts: "This paper develops a simplified methodology that starts from the fiscal income top income share series and makes very basic assumptions on how each income component from national income that is not included in fiscal income is distributed.... It can be used to create distributional national income statistics in countries where fiscal income inequality statistics are available but where there is limited information to impute other income.... This simplified methodology can also be used to assess the plausibility of the Piketty, Saez, and Zucman (2018) assumptions. In particular, we will show that the simplified methodology can be used to show that the alternative assumptions proposed by Auten and Splinter (2018) imply a drastic equalization of income components not in fiscal income which does not seem realistic...
Equitable Growth's Will McGrew has a pinned tweet pushing back against the meme that there are "really" no worrisome ethnicity or gender wage gaps because researchers can make such gaps disappear by adding sufficient variables to the right-hand side of a regression analysis. But when you add additional explanatory variables—when you "control"—you need to be very careful that you are only controllin for things that confound the relationship you are trying to study. When you control for things that mediate that relationship, you land up in garbage-in-garbage-out territory: Will McGrew: Wage Gaps: "Some claim that the wage gap disappears if you control for all relevant variables. This is 100% false. According to the evidence, workplace segregation and discrimination are the largest causes of the wage gap faced by Black women...
Equitable Growth's Heather Boushey schools our friend, smart young whippersnapper Noah Smith formerly of Stoneybrook and now of Bloomberg: There is a lot of evidence from political scientists as to how loudlyt money talks in political democracies, and it is very well laid out in Elisabeth Jacobs's contrivbut9ion to our After Piketty: Elisabeth Jacobs (1017): Everywhere and Nowhere: Politics in _Capital in the Twenty-First Century...
Worthy Reads Elsewhere:
The idea that "global warming" means simply that the climate in the northern hemisphere marches north by 3 miles a year over the next century is simply wrong: Stefan Rahmstorf: “Earth is anomalously warm, but North America is cold. A huge blob of icy Arctic air, usually corralled up north by the polar vortex, has escaped and moved south. You can check the data here: http://cci-reanalyzer.org/wx/DailySummary/#t2anom Is this becoming more common, and why?... Marlene Kretschmer... has just finished her PhD thesis... has found that over the last decades, the stratospheric polar vortex has become weaker and less stable, so Arctic air masses can escape more easily towards the North American and Eurasian continents...
Over the past three centuries success at economic development has always gone with an absolute conception of property rights. in China today, however ,your property rights are always conditional on your service to the state and on the power of your friends in the party. Thus American corporations and their American shareholders are going to find serving China’s market a very interesting thing indeed over the next generation: Ben Thompson: China Blocks Bing; Tencent, China, and Apple: “The warning signs for Apple are flashing bright red: not only is Apple the most successful hardware company in China (and, relatedly, the most successful software company), the company also runs by far the most profitable service. China is the biggest market for the App Store, and it is fair to wonder how long China will tolerate Apple’s total control of app installation for the iPhone. Certainly Apple is doing its best to foreclose that possibility: the company kicked out VPN apps in 2017, and purged an additional 25,000 apps that state media claimed were illegal last fall. Then again, Microsoft did its best to keep Bing in China’s good graces as well: now we know how that turned out. If I were Apple I would pretty nervous about the long-term viability of, at minimum, that 30% share of purchases in the App Store, and potentially the exclusivity of the App Store completely...
While the Federal Reserve may not believe that the slowling economy will relieve inflationary pressures, financial markets believe that the economy will slow so much as to perhaps produce a recession. This strongly suggests that the Federal Reserve is right now getting the balance of risks wrong: Tim Duy: Fed Holding Steady For Now: “I think the Fed will on net conclude that there exists reason to believe that the economy will slow in 2019 relative to 2018 but the degree of slowing remains uncertain and not clearly sufficient to relieve inflationary pressures. As such, I doubt that the Fed will drop its internal bias toward further tightening.... That bias is clearly evident externally in the Fed’s Summary of Economic Projections. It is also evident in the statement with this sentence: 'The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term'...
Big oligopolistic companies conduct research and development to produce technologies that benefit them—which typically means technologies In which capital substitutes for labor and allows them to shed jobs from their value chain. Enhancing societal well-being, however, requires the development of technologies that do not substitute for but that complement human capabilities. It is becoming increasingly clear to me that the private sector cannot get this balance right: Tim O’Reilly: Gradually, Then Suddenly: “Neural interfaces: One of my biggest ‘Wow!’ moments of 2018 took place in the offices of neural interface company CTRL-labs. The company's demo involves someone playing the old Asteroids computer game without touching a keyboard, using machine learning to interpret the nerve signals.... But that’s just the first stage. Essentially, users of this technology 'grow' another virtual hand, which they can move independently of their physical hands.... Humanity is already going cyborg.... Don’t fall into the trap of thinking that AI will replace humans when it can be used even more powerfully to augment them...
There do not appear to be many examples of governments that both increase inequality and raise the standard of living of the bottom 10%. Instead, it appears to be one or the other: Dan Davies (2015): Up and Down, Left and Right: “Inequality in the UK against the income of the poorest 10%, as a time series.... It hits you right between the eyes. It’s all up-and-down or left-and-right. The sort of thing that generates the difficult cases for liberal political philosophy–increases in inequality which nevertheless benefited the worst-off, which would have showed up as a southwest-to-northeast upward slope–never happened...
Yet more evidence that inflation builds very slowly. There appears to be no such thing as a red line that prudent economies dare not cross: Sylvain Leduc, Chitra Marti, and Daniel J. Wilson: Does Ultra-Low Unemployment Spur Rapid Wage Growth?: "The unemployment rate ended 2018 at just under 4%, substantially lower than most estimates of the natural rate. Could such an ostensibly tight labor market lead to a sharp pickup in wage growth from its recent moderate pace, such that the relationship between wage growth and unemployment is not always linear? Investigations using state-level data show no economically significant nonlinearity between wage growth and unemployment that would predict an abrupt jump in wage growth...
On this question, these days I tend to go the full MMT: the bond market will tell us when it is time to worry about the deficit and the debt, and that time is not now: Jason Furman and Larry Summers: Why Washington Should Worry Less About the Deficit: "As policymakers set budgets in the coming years, a lot will depend on what interest rates do. Financial markets do not expect the increases in interest rates that budget forecasters have priced in. If the markets prove right, that will strengthen the case against deficit reduction. If, on the other hand, interest rates start to rise well above what even the budget forecasters expect, then, as in the early 1990s, more active efforts to cut the deficit could make sense...
Highest-quality economic theory on how to do the analysis of societal well-being right, and in the process nest utilitarianism in a broader sensible framework: Emmanuel Saez and Stefanie Stantcheva (2016): Generalized Social Marginal Welfare Weights for Optimal Tax Theory: "Evaluat[ing] tax reforms by aggregating money-metric losses and gains of different individuals using 'generalized social marginal welfare weights.' Optimum tax formulas take the same form as standard welfarist tax formulas.... Weights directly capture society’s concerns for fairness without being necessarily tied to individual utilities. Suitable weights can help reconcile discrepancies between the welfarist approach and actual tax practice, as well as unify in an operational way the most prominent alternatives to utilitarianism.... There is no social-welfare objective primitive.... Instead, our primitives are generalized social marginal-welfare weights which represent the value that society puts on providing an additional dollar of consumption to any given individual. These weights directly reflect society’s concerns for fairness.... We define a tax system as locally optimal if no small reform is desirable... Slides
A snippet on the history of GPS systems: Carmen Roxana: Dr. Gladys West, The Black Woman Who Invented The GPS, Gets Honored By U.S. Air Force At The Pentagon: "In 1986, West published 'Data Processing System Specifications for the Geosat Satellite Radar Altimeter', a 60-page illustrated guide, which was based off data created from the radio altimeter on the Geosat satellite, which went into orbit on March 12, 1984. She worked at Dahlgren for 42 years and retired in 1998...
For the first time ever, to my knowledge, the Congressional Black Caucus corresponds to the African-American share of the US population: Denise Oliver Velez: The Congressional Black Caucus has expanded in size and clout: "We’ve come a long way from the days when the Congressional Black Caucus (CBC) was founded 48 years ago. Back in 1971, 13 black members of Congress came together to found the organization. The CBC now has 55 members...
#noted #weblogs #2019-01-29
