Worthy Reads from January 3, 2019
Worthy Reads at Equitable Growth
If you have not already read all of the WCEG's top 12 of 2018, go read them now: Equitable Growth: Top 12 of 2018: "The effects of wealth taxation on wealth accumulation and wealth inequality.... Why macroeconomics should further embrace distributional economics.... The links between stagnating wages and buyer power in U.S. supply chains.... U.S. income growth has been stagnant. To what degree depends on how you measure it.... Income inequality and aggregate demand in the United States.... Presentation: U.S. Inequality and Recent Tax Changes.... The latest research on the efficacy of raising the minimum wage above $10 in six U.S. cities.... Competitive Edge: There is a lot to fix in U.S. antitrust enforcement today.... Labor Day is a time to reflect on reviving workers’ power in the U.S. economy.... Kaldor and Piketty’s facts: The rise of monopoly power in the United States.... How the rise of market power in the United States may explain some macroeconomic puzzles.... Puzzling over U.S. wage growth...
Robert Bork and his followers' belief that the test for anticompetitive behavior was whether it could be moved anticompetitive in theory beyond a reasonable doubt was poisonous. And here we see people having to argue against it again in a new context: Jonathan B. Baker and Fiona Scott Morton: Antitrust Enforcement Against Platform MFNs: "Antitrust enforcement against anticompetitive... pricing parity provisions... can help protect competition in online markets.... These contractual provisions may be employed by a variety of online platforms offering, for example, hotel and transportation bookings, consumer goods, digital goods, or handmade craft products. They have been the subject of antitrust enforcement in Europe but have drawn only limited antitrust scrutiny in the United States. Our Feature explains why MFNs employed by online platforms can harm competition by keeping prices high and discouraging the entry of new platform rivals, through both exclusionary and collusive mechanisms, notwithstanding the possibility that some MFNs may facilitate investment by limiting customer freeriding...
The Joint Tax Committee should do this, staring January 4, 2019: Greg Leiserson and Adam Looney: A framework for economic analysis of tax regulations - Equitable Growth: "The economic analysis conducted in these cases should focus on the revenues raised and the economic burden imposed on the public as a result of the agencies’ exercise of discretion or the new application of existing authority. The revenues raised and the burden imposed reflect the fundamental tradeoff in taxation, and thus determine a regulation’s costs and benefits. However, the analysis should not attempt to quantify the net benefit or net cost of a regulation as doing so would require the agencies to make controversial assumptions about the social value of revenues and the appropriate distribution of the tax burden. Treasury’s Office of Tax Analysis is well-equipped to provide estimates of revenues and burden as they can be built from analyses the Office already produces: revenue estimates, distributional analyses, and compliance cost estimates...
We here at Equitable Growth are certainly doing a good job of picking them, so far: Corey Husak: "So excited and honored that 5 of the 8 Best Young Economists named by @TheEconomist are grantees of @equitablegrowth! Its great to work with and fund the best economic minds of our generation https://twitter.com/TheEconomist/status/1075370969789882368...
And if you want to join some future such list of 8, take a look at our current Equitable Grrowth Request for Proposals at: https://equitablegrowth.org/research-paper/request-for-proposals/?longform=true
Worthy Reads Elsewhere
Perhaps Congress's Pay-as-You-Go principle made some sense in the 1990s, when there were Republican as well as Democratic legislators willing to take it seriously. And you can argue that adopting it is a public relations rather than a substantive exercise—the House can waive it with a simple majority, and the Senate can waive it as easily as it can overcome a filibuster. So if there are the votes to circumvent the other procedural hurdles, there are the votes to waive PAYGO when it is desirable. But it is a strange thing to make a priority: Josh Bivens: The Bad Economics of PAYGO Swamp Any Strategic Gain from Adopting It: "A PAYGO rule means that any tax cut or spending increase passed into law needs to be offset in the same spending cycle with tax increases or spending cuts elsewhere in the budget.... Many Washington insiders assert forcefully that committing to PAYGO rules in the House for the next Congress is good politics.... The strength of evidence supporting this political claim is debatable. What’s less debatable is that PAYGO really has hindered progressive policymaking in the not-so-recent past. For example, it was commitments to adhere to PAYGO that led to the Affordable Care Act (ACA) having underpowered subsidies for purchasing insurance and, even more importantly, having a long lag in implementation...
That neither the Bernanke nor the Yellen Fed rethought its commitment to its—asymmetric!—2% per year inflation target has always been a mystery to me. Here the ex-President of the Federal Reserve Bank of Mnneapolis outlines some of the risks: Narayana Kocherlakota: The Fed’s Risky Plan to Boost Unemployment: "The Fed is planning to raise its interest-rate target above its long-run level of around 2.8 percent. We can actually see this happening in the Fed’s rate forecasts for the next three years.... The Fed is planning to eliminate over a million jobs—and put millions more at risk—in order to avoid a tiny deviation from its inflation target. I’ll leave it for readers to judge whether this is a desirable gamble...
60 million active Facebook users—and Facebook looks like a 2.5% boost to each on average in terms of real-income equivalence over and above its contribution to GDP. And Facebook is only one of five of the magical highly-valued tech FAANG companies—Facebook, Amazon, Apple, Netflix, Google. If they have equivalent benefits we are undervaluing growth at 0.5% per year. And what share are the FAANGs of societal surplus generated by tech? It is still possible to be a techno-optimist about economic growth: Jennifer Ouelette: Economists Calculate the True Value of Facebook to Its Users in New Study: "Facebook users required more than $1000 to deactivate their account for one year...
Civility makes for a better society. But expectations of civility are easily maintained only when violations are sanctioned, ummm..., in an uncivil fashion. This is a paradox of social life. But it has long been clear to me that those complaining about SJWs and "virtue signaling" are the bad guys here: Jeffrey A. Sachs: The SJWs Are Winning and You're All Just Going to Have to Deal With It: A thread.": "Reading this @JohnHMcWhorter piece is an exercise in vertigo. The central claim is that "third wave anti-racism" (i.e. the broad nexus of PC, social justice, and ID politics) is doomed to failure. That the aims are good, but strategically it's a dead end. This is a common view among centrist liberals and libertarians: 'Yes, racism and sexism are serious problems and must be addressed, but the SJW Left is going about it all wrong. In fact, its tactics are actually making these problems worse, not better'...
I confess I was split between thinking that (small) increases in minimum wages have no noticeable effect lowering employment because labor-supply curves are typically nearly vertical and thinking that (small) increases in minimum wages raise employment because they curb employer market power. But the evidence continues to pile up that Card and Krueger are right, and that it is the second—that there is no downside to raising minimum wages at all: Barry Ritholtz: What Minimum-Wage Foes Got Wrong About Seattle: "An initial study said the increase to $15 would cost workers jobs and hours. That didn’t happen.... The increase was an 'economic death wish' that was going to tank the expansion and kill jobs, according to the sages at conservative think tanks. The warnings were as unambiguous as they were specific...
The English-language public sphere broke a century after Gutenberg, with the coming of the cheap pamphlet and the resulting domination of the public sphere by the God-maddened, the bought-and-paid-for, the attention-seekers, and combinations of those categories. From John Knox's frantic denunciations of the wielding of political power by people with uteruses named Mary (Mary of Guise, Mary Tudor, and Mary Stuart) to Jonathan Swift's assuming the role of Breitbart to denounce the personal moral and the financial probity of the Whig politicians his Tory paymasters wanted out of office, the ability of the public sphere to separate wheat from chaff collapsed—and then, in the eighteenth century, recovered. We seem to have similar currents at work today: Bijan Parsia: Blocked on Twitter: "Noted author and literary journalist Ron Rosenbaum... made a mistake: https://twitter.com/RonRosenbaum1/status/1079006088522067969. The thread is hilarious: https://twitter.com/maxkennerly/status/1078777955562729472?s=21.... Ron did not handle this well.... I decided to jump in but to do so without mockery and with some attempt at sympathy: https://twitter.com/bparsia/status/1079073455725862913?s=21 In particular: https://twitter.com/bparsia/status/1079080278155579392?s=21 Welp, Ron did not like this and went down the insult trail until he blocked me.... Note that one move I made that definitely didn’t help was not giving him any way of being right. Of course, there is in fact no way for him to be right but it’s even harder for people to get out of those situations without a way of feeling that they were right about something...
If you are having trouble figuring out how to manage your information flow, consider what you would do if you wanted to make it as useless as possible—and then do the opposite: Barry Ritholtz: More Noise, Less Signal: "What would happen if you purposefully tried to assemble a “How-to” list to pursue the exact opposite goal—how to get more noise, and less signal? In other words, what are the exactly wrong things to do as an investor? I took last week’s list, and updated it to be the anti-list...
The very sharp Barry Ritholtz pleading for us to take what we can learn from different state experiences seriously: Barry Ritholtz (2016): The Counterfactual: "States, those so-called laboratories of democracy, have been engaging in a variety of different policy experiments.... Consider the following... fourteen states begin the new year with higher minimum wages... and, during the next few years, minimum wage increases are scheduled to take place in California, New York, Oregon and elsewhere. Regardless of your views... we will get a huge run of data in the coming years. Whatever your beliefs may be, you should pay attention to this data to learn if they are well-supported or not. We also see similar experiments taking place in tax policy.... During the past few years, we saw big tax cuts in Kansas, Louisiana and New Jersey, with big tax increases in others...
Why do people do this? Because it gets you invited back on to CNN. Why does it get you invited back on to CNN? That remaions a mystery to me, and to others: Brad Reed: Trump-Loving Economist Caught Red-Handed 'Making Up Numbers' by Ann Guest: "... >...Washington Post columnist Catherine Rampell busted Trump-loving economist Stephen Moore on Friday when he falsely claimed that we are seeing vast 'deflation' in the United States economy thanks to interest rate hikes by the Federal Reserve.... 'Wait, wait, wait!' interjected Rampell. 'There is no deflation!' 'Yeah there is', Moore replied. 'No there is not', she shot back. 'Look at the Consumer Price Index!'... Rampell then nailed Moore for his false warnings during the Obama presidency that it was unwise for the Fed to keep interest rates low because it would lead to hyperinflation—despite the fact that the economy at the time was deeply depressed and much more in need of easy money...
And why do people do this? Yes, if you assume that the U.S. economy is as proportionally tied in to the world economy and has as little weight in the world economy as Canada—and further assume falsely that the Federal Reserve has a hard target for the real exchange rate—you could "reasonably" argue that a policy like Trump's tax cuts would increase growth by as much as a quarter of percentage point per year. But a quarter is not a half. The U.S. is not like Canada in its size in and openness to the world economy. And the Federal Reserve is not fixing the exchange rate. An argument that requires three grossly false and important arguments to make it fly is not a reasonable one; Greg Mankiw: The Bad Economics Behind Trump's Policies: "One might reasonably argue that Trump’s tax cuts will increase growth over the next decade by as much as half a percentage point per year...
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