Worthy Reads for April 25, 2019
Worthy Reads at Equitable Growth:
Go back and read Alyssa Fisher on the problem generated by underfunding the IRS: Alyssa Fisher: Greater IRS Funding Can Help Ensure the Wealthy Pay the Taxes They Owe: "The majority of underreported income and underpaid taxes... occurs among the top decile.... What the IRS is doing about underpayment... is less and less.... Since 2010, congressional majorities... underfund[ed] the IRS... pressured the agency to devote greater attention and resources to some of the nation’s lowest-income working families—those who claim the Earned Income Tax Credit...
Two years ago we published Owen Zidar's excellent piece on how the only tax cuts that boost aggregate demand are rate cuts for lower-income Americans: Owen Zidar: Tax cuts for Whom? Heterogeneous Effects of Income Tax Changes on Growth and Employment: "How tax changes for different income groups affect aggregate economic activity... a measure of who received (or paid for) tax changes in the postwar period using tax return data from NBER’s TAXSIM... by income group and state. Variation in the income distribution across U.S. states and federal tax changes generate variation in regional tax shocks that I exploit to test for heterogeneous effects. I find that the positive relationship between tax cuts and employment growth is largely driven by tax cuts for lower-income groups, and that the effect of tax cuts for the top 10% on employment growth is small...
A shout-out to Equitable Growth network member Eileen Applebaum, holding down the fort at CEPR. Read her stuff—especially her stuff here at Equitable Growth!: Eileen Appelbaum: "Co-Director at the Center for Economic and Policy Research and Visiting Professor in the Department of Management at the University of Leicester, UK. She has 20 years of experience carrying out empirical research on the effects of public policies and company practices on outcomes for companies and workers. She studies work processes and work-life practices of organizations and their implications for organizational effectiveness...
Ian Malcolm: "Fall List Preview #5: Heather Boushey's Unbound. One of Washington's most influential voices on economic policy shows how reducing inequality can stimulate growth. HB also explains a quiet revolution for the better in the dismal science...
Friend of Equitable Growth Josh Bevins correctly calls out as "remarkably stupid, even relative to my expectations baseline" a piece by Trump Federal Reserve nominee Herman Cain. The 1980s and 1990s simply did not see a "stable dollar" in any sense those words might ever possibly mean: https://delong.typepad.com/.a/6a00e551f0800388340240a4a39f6a200b-pi: Herman Cain: The Fed and the Professor Standard: "The 1980s and 1990s brought prosperity across the board. This success was driven by a voting bloc of Fed governors, such as Wayne Angell and Manley Johnson, who favored a stable dollar and were able to swing the consensus. The dollar is a unit of measure—like the foot or the ounce—and keeping units of measure stable is critical to the functioning of a complex economy. The result of their stable-dollar policy was prosperity...
Worthy Reads Elsewhere:
Note that even if gentrification were to boost housing demand by as much as housing supply—which is not the case—note that the general-equilibrium effects are enormously beneficial: much less pressure on non=gentrifying neighborhoods, and much larger increase in the tax base to support urban services: Brian James Asquith, Evan Mast, and Davin Reed: Does Luxury Housing Construction Increase Nearby Rents?: "There are many plausible mechanisms by which an increased concentration of wealthy households could make a neighborhood more attractive.... We study induced demand near new apartment complexes in gentrifying areas using listing-level data on rental prices from Zillow and exact household migration data from Infutor... difference-in-differences.... In neighborhoods where new apartment complexes were completed between 2014-2016, rents in existing units near the new apartments declined relative to neighborhoods that did not see new construction until 2018. Changes in in-migration appear to drive this result. Although the total number of migrants from high-income neighborhoods to the new construction neighborhoods increases after the new units are completed, the number of high-income arrivals to previously existing units actually decreases, as the new units absorb a substantial portion of these households. On the whole, our results suggest that—on average and in the short-run—new construction lowers rents in gentrifying neighborhoods...
I would note that the "boom" in capital investment we had in 2018 was on the order of 1/5 of what the Trumpets had promised. Rana and Daniel's point is that the "boom" we had was directed in directions that substitute for rather than complement labor—and thus claims it will drive wage gains are implausible: Rana Foroohar (November 2018): US Capital Expenditure Boom Fails to Live Up to Promises: "One of the key economic tales told by the Trump administration is that corporate tax cuts would spur huge investment and growth in the US economy, raising wages and ushering in a new era of bullishness. Not quite.... Nearly half... straight into stock price-bolstering share buybacks.What business is investing in has changed quite a lot... only 28.6 per cent went to structures and industrial equipment, while technology and intellectual property made up 52 per cent of all new investment...
The most dire and important question in applied behavioral economics is: How to deal with our tech giants understood as confidence game-generating machines?: TED Talks: "'My question to you is, "is this what you want? Is this how you want history to remember you? As the handmaidens to authoritarianism?"' Watch as @carolecadwalla calls out the 'gods of Silicon Valley' for being on the wrong side of history: http://t.ted.com/OuxHYs3...
Potemkin factories in Wisconsin: Josh Dzieza: Foxconn is confusing the hell out of Wisconsin: "Last summer, Foxconn announced a barrage of new projects in Wisconsin—so we went looking for them: It was summer in Wisconsin, and Foxconn seemed to be everywhere. But also: nowhere at all.... The trade war with China still looms, and Trump has personally called Foxconn CEO Terry Gou when the company wavers. This time, Foxconn can’t simply vanish without risking a backlash, but it also makes no sense for it to build what it initially promised. Shih thinks Foxconn is still figuring out what it’s going to do and that the infrastructure development, political attention, and insistence on a factory is painting the company into a corner...
Tremendously depressing. We have a huge problem here. Absolutely brilliant by Alwyn Young on the replication crisis in economics. In empirical practice, instrumental variables appears to be a very weak crutch indeed. this reinforce my judgment that it is almost always better to write down the causal structure, present the correlations, and then provide a map given the correlations and given reasonable assumptions about the possible organization for the causal network from causes to effects: Alwyn Young: Consistency without Inference: Instrumental Variables in Practical Application: "I use Monte Carlo simulations, the jackknife and multiple forms of the bootstrap... 1359 instrumental variables regressions in 31 papers.... Non-iid error processes adversely affect the size and power of IV estimates, while increasing the bias of IV relative to OLS, producing a very low ratio of power to size and mean squared error that is almost always larger than biased OLS. Weak instrument pre-tests based upon F-statistics are found to be largely uninformative.... Statistically significant IV results generally depend upon only one or two observations or clusters, excluded instruments often appear to be irrelevant, there is little statistical evidence that OLS is biased, and IV confidence intervals almost always include OLS point estimates...
Africa is the only region in which the number of people in dire poverty continues to increase. Can industrialization help? Maybe—but it may be too late for industrial firms to be a leading sector: Bright Simons: Africa’s Unsung “Industrial Revolution”: "There is an industrial revolution underway in sub-Saharan Africa’s most entrepreneurial economies—places such as Ghana, Uganda, Senegal, and Côte d’Ivoire... Alibaba industrialisation.... No one is entirely sure why protectionist and state-led industrial policies of the type described earlier seem to induce large-scale industrialisation in Vietnam, South Korea, and Taiwan but not in Nigeria, Laos, or Uzbekistan. Every theory adduced is racked with contradictions and does not survive granular examination.... Small and medium-sized Chinese suppliers provide major chunks of the industrial jigsaw and African hustlers and unconventional industrialists act as shuttle-brokers of the various factors of production between China and Africa.... Chinese SMEs are becoming sophisticated global opportunity hunters, ditching the somewhat passive role they played as cogs in the Western outsourcing wheel three decades ago.... tailoring solutions for individual African country terrains, complete with logistics, training, and support packages. The effects of the modular transformation of the African industrial sector, whilst subtle, are already fascinating: reassembled knockdown luxury cars in Ghana; cutting-edge clay brick kilns in Uganda; and milk-vending now a thing in Kenya...
Robert Bork and his ilk managed to set antitrust on a destructive path, and we badly need to recovery somehow: Jonathan B. Baker: The Antitrust Paradigm: "At a time when tech giants have amassed vast market power, Jonathan Baker shows how laws and regulations can be updated to ensure more competition. The sooner courts and antitrust enforcement agencies stop listening to the Chicago school and start paying attention to modern economics, the sooner Americans will reap the benefits of competition...
I confess I do not see how Tesla is going to survive. BYD or some others are going to dominate battery-making. And there will not be that much both valuable and scarce to an automobile besides an efficient battery in the future we are heading for: *Matthew Campbell and Ying TianEG: *: BYD, World’s Biggest Electric Car Maker, Looks Nothing Like Tesla: "BYD, which built the battery in your ’90s cellphone, now produces more EVs than anyone—and it wants to sell them to you, soon: On the floor of a cavernous factory in southern China... a sledlike robot scooted into position.... The robot carried a crucial payload: a battery about the size and shape of a double mattress, wrapped in a gray plastic casing. Suddenly, an accordion lift extended upward from the sled and inserted the battery into the car’s undercarriage. Workers in blue jumpsuits and white cotton gloves moved swiftly to the battery’s edges, carrying rivet guns connected by curling red cables to a supply of compressed air. Once the battery was rattled into place, the accordion retracted, sending its robot host scurrying off in search of fresh cargo...
If the use-case data is not (a subset of) the training data, Deep Learning blows up spectacularly. And since we do not understand why Deep Learning works, we have no clue as to how to fix this—how to make Deep Learning algorithms at all robust. A human brain has a hundred billion neurons, and each neuron and its interconnections are roughly equivalent to perhaps 100000 transistors. the iPhone's A11 has 4 billion transistors—that means 2500000 iPhones wired together to approach brain-like levels of complexity. Add to that a billion years of the genetic algorithm tuning networks of neurons... and anything like human-level intelligence, or even the robustness of behavior characteristic of insects, looks far off still: Hal Hodson: DeepMind and Google: The Battle to Control Artificial Intelligence: "The power of reinforcement learning.... But... if the virtual paddle were moved even fractionally higher, the program would fail. The skill learned by DeepMind’s program is so restricted that it cannot react even to tiny changes... a person would take in their stride.... Success within virtual environments depends on the existence of a reward function.... Unfortunately, the real world doesn’t offer simple rewards.... The focus on achieving high performance within simulated environments makes the reward-signal problem hard to tackle. Yet this approach is at the heart of DeepMind...
The differences between Clinton's NAFTA—which Trump called the worst trade deal ever—and Trump and Lighthizer's USMCA—of which Trump is very proud indeed—are either (a) trivial, (b) parts of the Trump-nuked Trans-Pacific Partnership, or (c) on the United Auto Workers' wish-list. How did this happen? Nobody I communicate has yet managed to figure this out. Why are Trump and Lighthizer so proud. Nobody I communicate has yet managed to figure this out. Go figure: Jack Caporal and William Alan Reinsch: From NAFTA to USMCA: What’s New and What’s Next?: "Automotive rules of origin... auto content... 40-45 percent must be made by workers that earn at least $16 an hour... essentially a U.S. or Canada content requirement.... The special arbitration mechanism contained in NAFTA that allowed investors to sue... will be phased out between the United States and Canada... trimmed for investors in Mexico.... access to Canada’s heavily protected dairy, egg, and poultry markets while allowing Canada to export more dairy, peanuts, and sugar...
equitablegrowth #noted #weblogs #2019-04-25
