Worthy Reads for June 20, 2019
Worthy Reads from Equitable Growth:
Relationships between user and supplier firms were never arms-length. But while the assumption that they were may have been a minor error three generations ago, it is a major error today. We need more people like Susan Helper thinking about the consequences of the information and technology flows generated in today's value-chain economy. Such flows are a very important piece of our community of engineering practice: Susan Helper: Building High-Road Supply Networks in the United States: "A different kind of outsourcing is possible—'high-road' supply networks that benefit firms, workers, and consumers... collaboration between management and workers and along the length of the supply chain, sharing of skills and ideas, new and innovative processes, and, ultimately, better products that can deliver higher profits to firms and higher wages to workers. Firms could take a key step by themselves, since it could improve profits. Collaboration among firms along a supply chain can lead to greater productivity and innovation. Lead firms can raise the capabilities of supplier firms and their workers such that even routine operations can benefit from collaboration for continuous improvement...
This is exactly the kind of work we at Equitable Growth want to see carried out by exactly the kind of young people we ought to be financing. Very well done: Ellora Derenoncourt and Claire Montialoux: Minimum Wages and Racial Inequality: "The earnings difference between black and white workers fell dramatically in the United States in the late 1960s and early 1970s. This paper shows that the extension of the minimum wage played a critical role in this decline. The 1966 Fair Labor Standards Act extended federal minimum wage coverage to agriculture, restaurants, nursing homes, and other services which were previously uncovered and where nearly a third of black workers were employed...
Inequality leads to leverage. Leverage leads to instability. Instability leads to depression: Heather Boushey: A New Economic Paradigm: "We should let go of the workhorse macroeconomic models.... [that] have all but ignored inequality in their thinking... [making the] 'implicit, if not explicit, assumption... that inequality doesn’t matter much when gauging the macroeconomic outlook'.... [In] the long-term picture or consider[ing] the potential for the system to spin out of control... higher inequality increases the likelihood of instability...
I am trying to think through what the issues we should be talking about when we talk about "manufacturing jobs" really are. I am not having a great deal of success: Resonse to Noah Smith: Yes, Susan [Houseman] is right; yes, the index-number problem rears its ugly head; yes, there are absolute numbers and there are employment shares; yes, there is manufacturing; yes, there is non-computer manufacturing; yes, there are traditional blue-collar occupations. One reading of Susan is "traditional blue-collar occupations are of special concern, and manufacturing excluding computers is important because computer manufacturing is not really a blue-collar semi-skilled easy-to-unionize source of employment". That characterization of computer manufacturing is increasingly true over time—but it also applies increasingly over time to sunbelt manufacturing as well...
Worthy Reads from Elsewhere:
The Fed now seems to be saying: "We misjudged the situation late last year. We are going to reverse our policy. But not quite yet." And I do not understand the frame of mind in which that is a coherent system of thought. I wish they would explain: Tim Duy: Rate Cut On The Way: "The Fed turned... dovish... basically announcing a July rate cut.... The proximity to the lower bound coupled with low inflation was always going to lead the Fed to err on the side of a rate cut. It just took them some time to find their way there.... It would be exceedingly difficult to pull back on a rate cut now. Nor is there any reason to...
The evidence for the position that minimum wage increase can often be an effective policy for equitable growth continues to pile up: Péter Harasztosi and Attila Lindner: Who Pays for the Minimum Wage?: "A large and persistent minimum wage increase in Hungary.... Employment elasticities are negative but small even four years after the reform... 75 percent of the minimum wage increase was paid by consumers and 25 percent by firm owners; that firms responded to the minimum wage by substituting labor with capital; and that dis-employment effects were greater in industries where passing the wage costs to consumers is more difficult...
I am with David Autor here: individual tasks that are components of jobs will be automated, but human thought and judgment will continue to be able to add value throughout the economy. There is, however, nothing to require that a world of abundant capital and sophisticated computers will be a world in which the income distribution will be relatively equal: David Autor: Polanyi’s Paradox: Will It Be Overcome?: "Jobs are made up of many tasks.... Understanding the interaction between technology and employment requires thinking about... how human labor can often complement new technology.... The tasks that have proved most vexing to automate are those demanding flexibility, judgment, and common sense—skills that we understand only tacitly. I referred to this constraint above as Polanyi’s paradox.... Is Polanyi’s Paradox soon to be at least mostly overcome, in the sense that the vast majority of tasks will soon be automated? My reading of the evidence suggests otherwise...
In very important dimensions, Europe is handling the coming of the Second Gilded Age significantly better than we are handling it here in America: Thomas Blanchet, Lucas Chancel, and Amory Gethin: Forty Years of Inequality in Europe: "Despite the growing importance of inequalities in policy debates, it is still difficult to compare inequality levels across European countries and to tell how European growth has been shared across income groups. This column draws on new evidence combining surveys, tax data, and national accounts to document a rise in income inequality in most European countries between 1980 and 2017. It finds that income disparities on the old continent have increased less than in the US and shows that this is essentially due to ‘predistribution’ policies...
One very peculiar thing about America is majorities that believe that government doesn't have our back and indeed, shouldn't have our back. This is a very puzzling attitude to see in a democracy: Gillian Tett: Why Japan Isn’t Afraid of Robots: "The social safety net.... 63 per cent of people in Japan think that it is up to the government... to help the population adapt to automation.... In the US, however, only about 30 per cent of the public expect the government to help.... A recipe for anxiety: some of America’s current problems can be traced to the sense of abandonment felt by many workers in deindustrialised regions...
Anybody who has spent any time looking at the data knows that it is in the boom, not in the depression, that the work of sectoral readjustment is done. Indeed, that work cannot be done in the depression. In the depression nothing is profitable. So how could entrepreneurs possibly judge then what will be profitable when the depression is past? They must wait for the boom to see: Robert Heilbroner (1996): The Embarrassment of Economics: "Schumpeter arrived in his famous riding habit and great cloak, of which he divested himself in a grand gesture. He greeted us in a typically Schumpeterian way: 'Gentlemen, a depression is for capitalism like a good, cold douche'. The remark shocked us...
Judea Pearl and Dana Mackenzie: Simpson's Paradox: "Any claim to resolve a paradox... should explain why people find the paradox surprising or unbelievable.... When the paradox does occur, and we have to make a choice between two plausible yet contradictory statements, it should tell us which statement is correct.... A paradox... should entail a conflict between two deeply held convictions...
When "Prince of Whales: suddenly shows up in my timeline, only one thing can possibly be gong on: Darth: "😹 u know it wasn’t even a typo: he really thinks it is prince of whales: https://delong.typepad.com/.a/6a00e551f0800388340240a4b31ac9200b-pi
.#noted #weblogs #2019-06-20
