#equitablegrowth Feed

Kades: Antitrust Hearing—Noted

If you want to know what happened at the tech antitrust hearing, your best source is Michael Kades’s twitter account. I have still not thought this through, so go and read what he has to say: Michael Kades https://twitter.com/Michael_Kades/status/1288543592114462725: ‘So far, my biggest takeaway, the Republican Staff memo tried to paint this as a partisan issue. So far, between Gaetz and Buck, that framing has failed… .#equitablegrowth #noted #2020-08-01


Fischer & Gould-Werth: How Systems for Delivering Economic Relief Failed—Noted

This is very good and very important. My grandfather always mourned that, when he got his Ph.D., he thought he was getting a Ph.D. in “public administration” but found, instead, during his career that his discipline had turned into "political science”. Here Amanda Fischer and Alix Gould-Werth try to fill in this gap, and largely succeed.

Amanda Fischer & Alix Gould-Werth: Broken Plumbing: How Systems for Delivering Economic Relief Failed https://equitablegrowth.org/broken-plumbing-how-systems-for-delivering-economic-relief-in-response-to-the-coronavirus-recession-failed-the-u-s-economy/: ‘Below, we detail four delivery systems tasked with providing relief during the coronavirus recession...

...relief targeted to small and large businesses, Unemployment Insurance, direct payments to consumers, and paid leave programs—each of them emblematic of a different plumbing problem. Looking at business rescue programs, we see pipes well-designed to flow easily to people with power, while the taps of the less powerful remain dry. Looking at Unemployment Insurance, we see the failure to invest in pipes, preventing these benefits from flowing smoothly to people who need them the most.

Continue reading "Fischer & Gould-Werth: How Systems for Delivering Economic Relief Failed—Noted" »


Boushey: How to Deal with the Coronavirus Plague Recession—Noted

Where are the Republican economists? Yes, the coronavirus plague recession has a supply-shock component, but it has a larger demand-shock component as well, and a social insurance component. We should be fighting all three:

Heather Boushey: Testimony Before the Joint Economic Committee on the Coronavirus Recession https://equitablegrowth.org/testimony-by-heather-boushey-before-the-joint-economic-committee-on-the-coronavirus-recession/: ‘Addressing the administration’s failure to contain the coronavirus and COVID-19, the disease caused by the virus, is the only way to fully restore confidence and put us on the path to economic recovery...

...The United States is experiencing the most uncontrolled and deadly outbreak of any high-income country in the world. Compared to the European Union, we now record 10 times as many daily coronavirus cases and COVID-19 deaths. Until the virus is contained, however, there are key actions that can bolster economic confidence and rein in uncertainty. Specifically:

Continue reading "Boushey: How to Deal with the Coronavirus Plague Recession—Noted" »


Equitable Growth: We Need Extended Pandemic Unemployment Compensation—Noted

Continuing PUC is essential to moderating the severity of the coronavirus plague depression: Equitable Growth: Statement on Pandemic Unemployment Compensation https://equitablegrowth.org/press/statement-on-pandemic-unemployment-compensation/: ‘Federal Pandemic Unemployment Compensation (PUC), which is giving tens of millions of unemployed workers a $600 per week boost in unemployment income, has helped ease the pain of this crisis by providing much-needed income to families during an economic crisis and has boosted the economy overall. Every week for the last four months, more than twice as many workers have filed for unemployment insurance than during the worst week of the Great Recession. Meanwhile, cases of COVID-19 are once again rising across the country, and we still lack unified national leadership to give direction and stability in these unprecedented times. Congress must extend enhanced unemployment benefits or risk economic calamity… .#equitablegrowth #noted #2020-07-25


James Buchanan in the Context of Jim Tobin and Herman Wouk...

Boston busing segregation

James Buchanan: https://www.bradford-delong.com/2019/05/27/: ‘I experienced overt discrimination for being a non-Easterner, a nonestablishmentarian. In the whole group of 600 boys, there were only about twenty who were graduates of Yale, Harvard, Princeton—all Ivy League. By the end of this first boot camp period, they had to select midshipman officers. Out of the 20 boys from the establishment universities, 12 or 13 were picked, against a background of a total of 600. It was overtly discriminatory towards those of us who were not members of the establishment.... From that day forward I have shared in the emotional damage imposed by discrimination, in any form, and "fairness" assumed for me a central normative position decades before I came to discuss principles of justice professionally and philosophically…'

Charles Steindel: 'One interesting thing in this material was Buchanan's groaning about how he was discriminated against in Navy Officer training relative to Yankee Ivy Leaguers. Herman Wouk's recent passing stirred me to reflect on this process. As was mildly fictionalized in the Caine Mutiny, Work was outstripped in his training class by none other than Jim Tobin. Yes, both Wouk and Tobin were northern 'Ivy Leaguers' (Wouk Columbia and Tobin Harvard). But the Jew from New York and the Irish kid from Illinois would surely not have seen themselves as more on the 'inside' than Buchanan who, after all, had the same name as (an admittedly wildly unsuccessful) US President...'

IMHO, what Buchanan is complaining about is this: Harvard and Columbia could and did turn people like Wouk and Tobin into effective WASPs by teaching them to turn down the accent and soft-pedal the Blarney and the Yiddishkeit. Middle Tennessee State Teachers College and the University of Tennessee were not in that business at all. Yet he got another chance in the navy—serving on Admiral Spruance's staff during World War II. But that was a chance he did not want to take.

Continue reading "James Buchanan in the Context of Jim Tobin and Herman Wouk..." »


Boushey: The Link Between Structural Racism, the Coronavirus Recession, & Economic Inequality—Noted

Very much worth reading: Heather Boushey: The Link Between Structural Racism, the Coronavirus Recession, & Economic Inequality https://medium.com/@heatherboushey/the-link-between-structural-racism-the-coronavirus-recession-and-economic-inequality-c392c0d260ca: ‘The evidence that inequality harms is all around us. The vulnerability of communities of low-income, as well as Black, Latinx, and Native American families to the effects of the coronavirus and the recession is stark. The same living and working conditions that obstruct people’s economic opportunities—the lack of access to affordable housing, inadequate healthcare, unsafe working conditions, the lack of paid sick leave—expose them in greater numbers to sickness and death from COVID-19. The failure to have effective institutions that protect all workers means our entire economy is less resilient—and more economically unstable as a result.... This brings us back to trust. Government must work on behalf of low-income, Black, Latinx, and Native American people and make sure their needs are truly reflected in the policy agenda. People must see that they can both develop and deploy their talents and skills in the economy and that those at the top are not encouraged to subvert outcomes to benefit themselves rather than our economy and society writ large. People must have both confidence and proof that they are protected from oppression and state-sanctioned violence. As we look to strengthening our democracy and recovering from this coronavirus recession in the years to come, core to any economic agenda must be to confront the role that effective institutions play in fostering growth that is strong, stable, and broadly shared. If large portions of our population can’t trust the government to act on their behalves, then we need to acknowledge our government isn’t working the way it needs to… .#equitablegrowth #noted #2020-07-10


Bergquist, Mildenberger, & Stokes: Americans Want Green Spending In Federal Coronavirus Recession Relief Packages—Noted

There is potential political support for, and there is certainly both technocratic justification and fiscal space for, hitting both the economic recovery and the global warming fighting birds with the stone that is coronavirus plague depression relief:

Parrish Bergquist, Matto Mildenberger, & Leah Stokes: Americans Want Green Spending In Federal Coronavirus Recession Relief Packages https://equitablegrowth.org/americans-want-green-spending-in-federal-coronavirus-recession-relief-packages/: ‘We launched a nationally representative survey of slightly more than 1,000 people between May 15, 2020 and May 20, 2020.... The public supports green stimulus but not at the expense of broad economic relief. Our experimental results show that including green infrastructure spending increases support for a coronavirus relief package. Support for wind and solar investments and for clean transportation investments is particularly strong. Including these measures increases support by 8.5 percentage points and 6.1 percentage points, respectively. Notably, including electricity transmission investments does not cause a change in support for the package… .#equitablegrowth #noted #2020-07-10


Hipple & Fischer: Enhanced U.S. Social Insurance Will Be Necessary Until the Coronavirus Recession Recedes—Noted

Put me down as saying that we require, right now, not just additional social insurance payments but additional government purchases, additional government employment of test-&-tracers and barefoot nurses, plus powerful steps to boost all forms of investment spending while in-person consumption is depressed: Liz Hipple & Amanda Fischer: Enhanced U.S. Social Insurance Will Be Necessary Until the Coronavirus Recession Recedes https://equitablegrowth.org/new-research-finds-enhanced-u-s-social-insurance-will-be-necessary-until-the-coronavirus-recession-recedes/: ‘Raj Chetty and his Opportunity Insights colleagues... U.S. consumer spending fell dramatically over the past few months, driven by public health and safety concerns... [that] are keeping people, especially those in high-income households, away from purchasing in-person services, indicating that until people feel safe engaging again in in-person services such as dining out or getting haircuts, consumer spending on services—which accounts for 66 percent of all consumer spending—will not meaningfully rebound.... To fix the U.S. economy... [requires] first fix[ing] the U.S. public health crisis. Merely announcing that the economy is “reopened” will not make it so.... Investing in social insurance programs—such as the expanded unemployment benefits enacted by Congress in the Coronavirus Aid, Relief, and Economic Security, or CARES, Act—is the best way to mitigate economic suffering during the recession, rather than stimulus measures targeted toward businesses or the rich.... The fall-off in consumer spending is being driven by high-income households, particularly in areas with high rates of COVID-19.... As of May 31, two-thirds of the total reduction in credit card spending since January was from households in the top 25 percent of the income distribution, whereas spending by households in the bottom quartile had returned to normal levels… .#equitablegrowth #noted #2020-07-10


Equitable Growth: Unemployment Benefits—Noted

High-frequency business cycle data is rarely reliable, both because the data is unreliable and the official statistics measures that high frequency indicators are used to estimate is unreliable as well. But if I had to guess right now, I would say that the bounceback is over: that it is more likely than not that the US economy will worsen along the business cycle dimension than strengthen—at least over the next three months:

Equitable Growth: 'The week ending July 4 https://twitter.com/equitablegrowth/status/1281205517113872386, 1.4 million workers filed for regular unemployment benefits. The number of initial UI claims have declined every week since reaching a record high the first week of April, but claims have now plateaued. Another 1,038,905 workers filed for initial PUA, the program that extended eligibility to workers who do not have enough earnings history to be eligible for regular jobless benefits, such as caretakers and the self-employed. Regular continued claims, which represent the number of workers who are now insured, fell to 16.8 million the week of June 27. The share of the workforce that is receiving benefits decreased to 11.5 percent, a 0.5 percentage point increase from the week before. As @lizhipple and @amandalfischer write, policymakers should focus on "supporting the incomes of the tens of millions of workers who have lost their jobs...Most importantly, this includes extending the additional $600 in Unemployment Insurance benefits"... .#equitablegrowth #noted #2020-07-10


De Tocqueville: "Property... a... badge of fraternity. The wealthy... elder... but all... members of one family..."—Noted

Alexis de Tocqueville: Recollections. http://www.gutenberg.org/files/37892/37892-h/37892-h.htm: ‘The steward of my estate, himself half a peasant, describing what was taking place in the country immediately after the 24th of February [1848], wrote: "People here say that if Louis-Philippe has been sent away, it is a good thing, and that he deserved it...." This was to them the whole moral of the play. But when they heard tell of the disorder reigning in Paris, of the new taxes to be imposed, and of the general state of war that was to be feared... and when, in particular, they learnt that the principle of property was being attacked, they did not fail to perceive that there was something more.... I was at once struck by a spectacle that both astonished and charmed me.... In the country all the landed proprietors, whatever their origin, antecedents, education or means, had come together, and seemed to form but one class: all former political hatred and rivalry of caste or fortune had disappeared from view. There was no more jealousy or pride displayed between the peasant and the squire, the nobleman and the commoner; instead, I found mutual confidence, reciprocal friendliness, and regard. Property had become, with all those who owned it, a sort of badge of fraternity. The wealthy were the elder, the less endowed the younger brothers; but all considered themselves members of one family, having the same interest in defending the common inheritance. As the French Revolution had infinitely increased the number of land-owners, the whole population seemed to belong to that vast[116] family. I had never seen anything like it, nor had anyone in France within the memory of man... .#equitablegrowth #history #noted #politicaleconomy #politics #2020-07-07


"The Market Was Made for Man, Not Man for the Market": Time to Ramp Up Direct Cash Payments

Lord of the sabbath

The need for large redirections of financial flows to avoid large increase in poverty during this coronavirus plague is large. The need for substantial top-ups to spending flows in view of the large jump in savings rates triggered by the arrival of coronavirus is large. The U.S. government continues to be able to borrow at unbelievable terms—terms so unbelievable that, when the accounting is done correctly, a larger national debt is not a drag on the funds the government has available for its other missions but rather a source of current cash flow.

(Why? Because in real population-adjusted terms, people are not charging the government interest on its debt but are instead paying the government to keep their money safe, but that is a discussion for another time.)

Moreover, a plan to have the government top off spending flows by whatever large amount is necessary to immediately return to full employment is moderately conservative, and the only effective way to give American businesses their proper chance to adjust and survive the coronavirus plague. It is, as John Maynard Keynes wrote back in 1936:

moderately conservative... [to] enlarge... the functions of government... [to include] the task of adjusting to one another the propensity to consume and the inducement to invest.... [It is] the condition of the successful functioning of individual [entrepreneurial] initiative. For if effective demand is deficient, not only is the public scandal of wasted resources intolerable, but the individual enterpriser who seeks to bring these resources into action is operating with the odds loaded against him. The game of hazard which he plays is furnished with many zeros, so that the players as a whole will lose if they have the energy and hope to deal all the cards.... [Success then requires] courage and initiative... supplemented by exceptional skill or unusual good fortune. But if effective demand is adequate, average skill and average good fortune will be enough... [thus] preserving [both] efficiency and freedom...

Our financial flows and property orders are a societal accounting system to guide and manage our collective societal division of labor. If dotting the i's and crossing the t's in this societal accounting system produces mass unemployment, the right response is to adjust it to produce full employment and then reconcile the accounting entries, not to watch employment fall and then sit around with our thumbs up our butts wondering what to do.

After all, the market was made for man, not man for the market—wasn't it?:

 

Olugbenga Ajilore,​ Mark Blyth,​ J. Bradford DeLong,​ Susan Dynarski,​ Jason Furman,​ Indivar Dutta-Gupta,​ Teresa Ghilarducci,​ Robert Gordon, ​Samuel Hammond, Darrick Hamilton,​ Damon Jones, ​Elaine Maag, Ioana Marinescu,​ Manuel Pastor,​ Robert Pollin,​ Claudia Sahm, & al.: Open Letter from economists on Automatic Triggers for Cash Stimulus Payments https://www.economicsecurityproject.org/wp-content/uploads/2020/07/emp_economists_letter.pdf: We urge policymakers to use all the tools at their disposal to avoid further preventable harm to people and the economy, including​ ​recurring direct stimulus payments, lasting until the economy recovers. The widespread uncertainty created by the COVID-19 pandemic and recession calls for a multifaceted response​ ​that includes automatic, ongoing programs and policies including more direct cash payments to families; extended and enhanced unemployment benefits; substantial aid to state and local governments; stronger SNAP benefits; robust child care funding and more. These programs and policies will hasten the economic recovery far more effectively if they stay in place until economic conditions warrant their phaseout. ​Direct cash payments are an essential tool that will boost economic security, drive consumer spending, hasten the recovery, and promote certainty at all levels of government and the economy–for as long as necessary…

Continue reading ""The Market Was Made for Man, Not Man for the Market": Time to Ramp Up Direct Cash Payments" »


Negishi Prices & Social Welfare—Twitter

Twitter: _I remember back in the... spring of 1981, I think it was https://threadreaderapp.com/thread/1271237461272715267.html. I asked my professor, William Thomson, visiting from Rochester, roughly this: "The utilitarian social welfare function is Ω = U(1) + U(2) + U(3)... The competitive market economy maximizes a market social welfare function Ωm = ω(1)U(1) + ω(2)U(2) + ω(3)U(3)..., where the ω(i)s are Negishi weights that are increasing functions of your lifetime wealth W(i)—indeed, if lifetime utility is log wealth, then ω(i)=W(i).

Continue reading "Negishi Prices & Social Welfare—Twitter " »


Adam Smith Got There 250 Years Ago: "The Real Recompence of Labour..."—Twitter

Twitter: Adam Smith got there 250 years ago: "The real recompence of labour, the real quantity of the necessaries and conveniencies of… https://threadreaderapp.com/thread/1271273216850276353.html: 'The real recompence of labour, the real quantity of the necessaries and conveniencies of life which it can procure to the labourer, has, during the course of the present century, increased perhaps in a still greater proportion than its money price. Not only grain has become somewhat cheaper, but many other things, from which the industrious poor derive an agreeable and wholesome variety of food, have become a great deal cheaper. Potatoes, for example, do not at present, through the greater part of the kingdom, cost half the price which they used to do thirty or forty years ago. The same thing may be said of turnips, carrots, cabbages; things which were formerly never raised but by the spade, but which are now commonly raised by the plough...

Continue reading "Adam Smith Got There 250 Years Ago: "The Real Recompence of Labour..."—Twitter" »


Douglas & Jones: What to the Slave Is the 4th of July?—For the Weekend

Frederick Douglas & James Earl Jones: “What to the Slave Is the 4th of July?” https://www.democracynow.org/2020/7/3/what_to_the_slave_is_4th:

Fredrick douglas

'Mr. President, Friends and Fellow Citizens: He who could address this audience without a quailing sensation, has stronger nerves than I have. I do not remember ever to have appeared as a speaker before any assembly more shrinkingly, nor with greater distrust of my ability, than I do this day. A feeling has crept over me, quite unfavorable to the exercise of my limited powers of speech. The task before me is one which requires much previous thought and study for its proper performance. I know that apologies of this sort are generally considered flat and unmeaning. I trust, however, that mine will not be so considered. Should I seem at ease, my appearance would much misrepresent me. The little experience I have had in addressing public meetings, in country schoolhouses, avails me nothing on the present occasion...

Continue reading "Douglas & Jones: What to the Slave Is the 4th of July?—For the Weekend" »


Münchau: Merkel’s Successor Must Confront Germany’s Decline—Noted

Since 1945 and since 1995 Germany’s economic growth trajectory has been the most successful and impressive in the entire global north. But, with respect to individual people, there is a rule that the richest are not the wisest and smartest, but rather those who have overleveraged, underdiversified, and been very very lucky. The judgment of the richest of the superrich is, in fact, on average rather poor, and always at least tinged with Dunning-Krueger monomania that the universe has not yet called to account. Is the same true of countries? The very sharp Wolfgang Münchau fears that it is—that Germany’s economic success has led it to a place in which its institutions are in fact poorly built to manage the future, producing a “misdirected focus on fiscal surpluses” and a lack of focus on the need for innovation:

Wolfgang Münchau: Merkel’s Successor Must Confront Germany’s Decline https://www.ft.com/content/b0dc8008-4f4a-11ea-95a0-43d18ec715f5: ‘The Merkel years... as the moment when Germany lost its technological edge through a misdirected focus on fiscal surpluses and lack of innovation.... Germany’s medium-sized industrial companies… are still grappling with digitalisation. The country has not made the necessary investments in mobile telecommunications.... The car industry was unprepared for the shift to electric…. Merkel’s spontaneous decision to switch off nuclear power stations has made Germany more reliant on fossil fuels, putting the country on course to miss Paris climate targets...

Continue reading "Münchau: Merkel’s Successor Must Confront Germany’s Decline—Noted" »


Edlagan & Monroe: Equitable Growth Expert Focus—Noted

We at Equitable Growth are launching a new monthly feature: Expert Focus. Please check it out—and please tell us how we could launch it better so that it becomes more effective and more useful:

Christian Edlagan & Maria Monroe: Expert Focus: Leading Black Scholars on U.S. Economic Inequality & Growth https://equitablegrowth.org/expert-focus-leading-black-scholars-on-u-s-economic-inequality-and-growth/: ‘In this installment of “Expert Focus,” we highlight Black scholars whose cutting-edge research draws on the respective roles of history, power, and institutions.... William A. Darity, Jr... stratification economics, an approach to economics that focuses on economic disparities between persons, groups, and regions.... Dania V. Francis... socioeconomic disparities in education, wealth accumulation, and labor markets... how to design and carry out a reparations program.... Trevon D. Logan... historic links among intergenerational economic mobility, race, and the Black-White divide in income and wealth.... school segregation, disinvestment from public goods, and divergent levels of investment in education since the 1950s have combined to create a nexus of low mobility for Black Americans.... Anna Gifty Opoku-Agyeman & Fanta Traore.... As the share of Black women awarded doctorates in economics is declining, groups such as the Sadie Collective—co-founded by Opoku-Agyeman and Traore, a senior research assistant at the Federal Reserve Board—provide crucial support to help Black women thrive in fields where they are woefully underrepresented and where they can sometimes feel out of place.... Jhacova Williams... the role of structural racism in shaping racial economic disparities in labor markets, housing, criminal justice, higher education, voting, and other areas…

Continue reading "Edlagan & Monroe: Equitable Growth Expert Focus—Noted" »


Mitchell: Bold Policies to Ensure Broad-Based Recovery—Noted

This. This. This. This will be very much worth spending part of your Thursday watching; David Mitchell: Bold Policies to Ensure Broad-Based Recovery https://equitablegrowth.org/equitable-growth-webinar-will-explore-bold-policies-to-ensure-a-broad-based-economic-recovery/: ‘The recovery from the coronavirus recession must be different from the previous recovery.... To have a chance of emerging on a stronger footing, with less economic and racial inequality and more sustainable economic growth, policymakers need to respond with robust, evidence-based measures that attack the underlying problems causing inequality and help achieve economic security for all. As part of our Vision 2020 initiative to ensure that the election-year economic policy debate focuses on big ideas grounded in the latest research, the Washington Center for Equitable Growth is hosting a webinar with top economic experts on June 25 to discuss the kind of bold policy initiatives that can help transform the U.S. economy.... Two panels. The first, “Democratizing the Economy,” will focus on the need for new or drastically reformed institutions to address how financial institutions and the Federal Reserve have exacerbated inequality. The second, “Building Power for Workers and Families,” will describe how enhanced collective bargaining rights, public benefit and social insurance programs, anti-discrimination protections, and other power-building policies… .#equitablegrowth #noted #2020-06-25


Recession Ready Returns...

I am writing before this event has taken place. But I am extremely confident that it will be—was—very interesting and very useful:

Heather Boushey & co.: Recession Ready: Fiscal Policy Options to Support Communities and Stabilize the Economy https://www.hamiltonproject.org/events/recession_ready_fiscal_policy_options_to_support_communities_and_stabilize_the_economy: 'Monday, June 8, 2020 :: 2:00-3:00 p.m. EDT :: Online Chat Washington, DC: The Hamilton Project at the Brookings Institution and the Washington Center for Equitable Growth will host a webcast discussing the importance of expanding aid to state and local governments as part of the continued fiscal policy response to the COVID-19 pandemic. The webcast will begin with a fireside chat with Rep. Don Beyer, vice chair of the U.S. Congress Joint Economic Committee, and Heather Boushey of the Washington Center for Equitable Growth. The webcast will also include a roundtable discussion between Jason Furman of Harvard University, former Mayor of Philadelphia Michael Nutter, and Jay Shambaugh of The Hamilton Project. The webcast will coincide with the one year anniversary of the release of The Hamilton Project and Washington Center for Equitable Growth book, "Recession Ready: Fiscal Policies to Stabilize the American Economy"... #equitablegrowth #noted #2020-06-08


WCEG Jobs Day Charticle...

Always smart, always interesting, always useful. I am, however, going to suggest that Kate, Carmen, and company focus more on employment rather than unemployment numbers. I am becoming increasingly skeptical of how much the unemployment rate, as the CPS questions are asked and answered, corresponds to the reality of our economy:

Kate Bahn & Carmen Sanchez Cumming: Equitable Growth's Jobs Day Graphs: May 2020 Report Edition https://equitablegrowth.org/equitable-growths-jobs-day-graphs-may-2020-report-edition/: 'On June 5th, the U.S. Bureau of Labor Statistics released new data on the U.S. labor market during the month of May. Below are five graphs compiled by Equitable Growth staff highlighting important trends in the data. As the overall unemployment rate declined to 13.3%, this was led by a decline in white unemployment from 14.2% to 12.4%. Meanwhile, Black unemployment increased slightly from 16.7% to 16.8% and Hispanic unemployment declined from a historic high of 18.9% to 17.6%.... Employment across sectors began to rebound in May, and growth was led by leisure and hospitality after this industry lost nearly half of all employment in the prior month.... After the most extreme decline in employment levels in history in April, the prime-age employment rate moved upward in May to 71.4%... #equitablegrowth #noted #2020-06-08


A Job Losers' Stimulus...

A very smart piece from Iona Marinescu. One of the frequent complaints about unemployment insurance is that it is not incentive-compatible on the job search dimension. A cash bounty for those losing their jobs whether or not they get quickly reemployed would eliminate this worry:

Ioana Marinescu: Moving from Federal Pandemic Unemployment Compensation to a Job Losers' Stimulus Program Amid the Coronavirus Recession https://equitablegrowth.org/moving-from-federal-pandemic-unemployment-compensation-to-a-job-losers-stimulus-program-amid-the-coronavirus-recession/: 'My proposed policy, the job losers' stimulus program, is a cash stimulus for workers who have lost their jobs regardless of whether they remain unemployed or find new employment. Compared to only providing higher unemployment benefits to the unemployed, the job losers' stimulus program boasts the twin benefits of providing greater support to workers who have been most affected by pandemic-related job losses while also modestly increasing overall employment. The exact size of the impact of this new stimulus program is difficult to predict, but a simple policy simulation shows that it could increase the amount of stimulus by 34 percent and allow an additional 6 percent of workers to exit unemployment and return to work within 4 months of losing their jobs... #equitablegrowth #noted #2020-06-08


Equitable Growth Shifting More into the "Race & Economic Growth" Spacer...

The WCEG, historically, has been much more of a “class” than a “race” organization—and more of a win-win pie growing than a redistribution-per-se organization. We very much need to shift more in the race and intersectionality directions. Where, I think, there is a gap we can fill is in pushing forward especially hard on research on the aggregate costs to the economy as a whole of racial prejudice, discrimination, and oppression:

Equitable Growth: Elevating Economic Research on Racist Violence & Exclusion in the United States https://equitablegrowth.org/elevating-economic-research-on-racist-violence-and-exclusion-in-the-united-states/: 'On May 25, 2020, a police officer murdered George Floyd in Minneapolis...

...one of the most recent murders of Black people either by law enforcement or by civilians who faced no immediate consequences... Ahmaud Arbery... Breonna Taylor... Tony McDade, David McAtee... far too many others... the unacceptable view of the expendability of Black lives... the undeniable harm caused by racism and the persistent damage that is present today....

The violence and repression wielded against Black people, often carried out by authorities at all levels of government in the country or implicitly sanctioned by those same authorities, is deployed in order to minimize Black Americans' political power and economic opportunity.... It is impossible to understand our economy, our failure to ensure broad-based growth and stability, and the economic connections to social and political power without addressing these forces in our policy frameworks and policymaking.

That's why the Washington Center for Equitable Growth is elevating key empirical research... on incarceration and police militarization, as well as economic consequences of racist violence, exclusion, and disenfranchisement.... Equitable Growth must still do much more...

.#equitablegrowth #inequality #noted #racism #2020-06-08

Note to Self #tickler: The works & relevance of A.C. Pigou

Note to Self #tickler: The works & relevance of A.C. Pigou:

Ian Kumekawa (2017): The First Serious Optimist: A. C. Pigou and the Birth of Welfare Economics https://www.amazon.com/Ian-Kumekawa-ebook/dp/B071R54415/...
Ian Kumekawa (2020): We Need to Revisit the Idea of Pigou Wealth Tax https://github.com/braddelong/public-files/blob/master/readings/article-kumekuwa-pigou-wealth-tax.pdf...

Arthur Cecil Pigou (1916): The Economy & Finance of the War: Being a Discussion of the Real Costs 0f the War & the Way in Which They Should Be Met https://github.com/braddelong/public-files/blob/master/readings/book-pigou-war-finance.pdf...
Arthur Cecil Pigou (1919): The Burden of War & Future Generations https://github.com/braddelong/public-files/blob/master/readings/article-pigou-burden-of-war.pdf...
Arthur Cecil Pigou (1920): A Capital Levy & a Levy on War Wealth https://github.com/braddelong/public-files/blob/master/readings/book-pigou-wealth-tax.pdf...
Arthur Cecil Pigou (1920): The Economics of Welfare https://github.com/braddelong/public-files/blob/master/readings/book-pigou-economics-of-welfare.pdf... Arthur Cecil Pigou (1940): The Political Economy of War https://github.com/braddelong/public-files/blob/master/readings/book-pigou-war.pdf...
Arthur Cecil Pigou (1946): Income: An Introduction to Economics https://github.com/braddelong/public-files/blob/master/readings/book-pigou-income.pdf...
Arthur Cecil Pigou (1947): A Study In Public Finance https://github.com/braddelong/public-files/blob/master/readings/book-pigou-public-finance.pdf...

  #economics #equitablegrowth #inequality #politicaleconomy #notetoself #moralphilosophy #tickler #2020-06-07

Pigou


Coronavirus, Wealth, & Social Power...

In a market economy, wealth is social power. In fact, in a market economy, wealth is the only form of social power. If you do not have wealth, your preferences and needs are of no account relative to those of somebody who does have wealth. Moreover, the requirement that people earn the cash with which they buy their daily bread means that no command, no control, and little exertion of force are needed in order to produce the application of social power to make the poor ignore their preferences and needs to satisfy those of the rich. Amartya Sen wrote about how we see this process at work at its sharpest edge: the so-called “entitlement families“, like that of Bengal during World War II. In the age of coronavirus, the edge is not quite as sharp. But it is plenty sharp even so:

Ellora Derenoncourt: ‘This piece captures everything you need to know about the US coronavirus labor market https://twitter.com/EDerenoncourt/status/1263604734348402689. We did not have a freely competitive labor market before the crisis. What we have now is starting to look like forced labor…. “Making employers compete with a generous unemployment insurance system... could reset bargaining power in the low-wage end of the labor market... At the least, it would be a first step toward exiting this pandemic a fairer society than the one that entered it”. By Suresh Naidu https://t.co/6y5WzGUg7k… #coronavirus #equitablegrowth #inequality #noted #2020-06-04


What To Watch For in the Employment Report

Equitable Growth alumnus Nick Bunker is closely watching the labor market in advance of this week’s employment report. The employment report will be one of our first significant clues as to the extent to which the coronavirus supply shock is turning into a demand shock as well:

Nick Bunker: May 2020 Jobs Day Preview: Tracking the Spread of the Coronavirus Shock https://www.hiringlab.org/2020/06/02/may-2020-jobs-day-preview/: ‘The coronavirus has devastated the US economy, leading to the destruction of over 21 million payroll jobs since February.... The concentration of job losses so far is unsurprising, with the leisure and hospitality sector seeing total employment drop by almost 50%. Employment in the utilities sector has barely fallen, losing less than 1% of jobs.

If the cumulative employment drop starts to pile up in utilities or other indirectly affected sectors, that could mean that more of the aggregate job loss is due to a systematic, economy-wide shock rather than a sector-specific one. Cumulative job loss will also put the eventual jobs recovery in a fuller context....

Hopes for a V-shaped recovery were already fleeting, but if more and more employers are shedding jobs, they might be gone for good. Elsewhere in the report, I’ll be looking for the answers to these questions:

  • Will unemployment due to reasons other than temporary layoff start to rise, as job loss becomes permanent?

  • Will employers continue to reduce work hours and shift more workers to involuntary part-time work?

  • How much further will the drop in the labor force participation rate hold down the rise in the unemployment rate?…

    coronavirus #equitablegrowth #labormarket #macro #noted #2020-06-02


Why Do We Need Automatic Triggers?

The first and most crucial tasks of economic policy in the coronavirus public health crisis are to keep the supply shock from becoming a distributional shock and from becoming a demand shock as well. Successfully accomplishing these ranks requires, first, a great increase in social insurance spending: in a country as rich as this one is, nobody should be thrown in the poverty and destitution and have to deal with those problems as well as with the disease. The expansion of social insurance spending cannot be precisely targeted: lots of people will wind up getting more than their fair share. Too bad: it is inappropriate to make the best the enemy of the good and the attainable here, and to make it such that in order to prevent some from getting more than their share, we ensure that many who need support get much much less.

Somewhat similarly, the necessary expansion of aggregate demand in order to maintain and return the economy to as close to full employment as possible will attract, in fact has already attracted, critics. Preventing the coronavirus shock from becoming a major and prolonged demand shock will be inconsistent with the government not spending a lot more, will be inconsistent with a stability in the value of the national debt, will be inconsistent with avoiding a long run increase in taxes, may well be inconsistent with any form of normalizing interest rates to gratify rentiers, And might be inconsistent with maintaining a 2% per year Inflation target. Once again, the proper societal response would be: too bad. As John Maynard Keynes said: what we can do, we can afford in the sense of arranging government finances to make it so.

Our task is to arrange government finances so that Americans can do as much as possible, and not to hit what are some times artificial and are sometimes intermediate policy objectives targets:

Heather Boushey: Off-Kilter Podcast: Beyer + Boushey https://medium.com/@OffKilterShow/beyer-boushey-8be89af1e80: ‘Continuing Off-Kilter’s ongoing series on poverty and inequality in the age of COVID19… This week brought the somber news that 2.1 million more Americans filed for unemployment in the past week. This brings the total number of unemployment claims over the last 10 weeks to 40.8 million — more than a quarter of the American workforce. Meanwhile, 1 in 5 families, including 1 in 3 families with children, are reporting they can no longer afford adequate food.... We run through some of our listeners’ top FAQ — like, what are automatic triggers and why do we need them?... Rebecca sat down with Democratic Congressman Don Beyer, Vice Chair of the U.S. Congress Joint Economic Committee (and self-described “econ junkie”) and Heather Boushey, president & CEO of the Washington Center for Equitable Growth and author of Unbound: How Inequality Constricts Our Economy and What We Can Do About It. This episode’s guests: Congressman Don Beyer (D-VA), vice chair, U.S. Congress Joint Economic Committee. Heather Boushey, president & CEO, Washington Center for Equitable Growth…

#coronavirus #equitablegrowth #macro #noted #socialinsurance #2020-06-02

Noted: Donna Lu: Universal Basic Income

Very good news on the praticality and usefullness of a UBI: results of a social experiment from Finland: Donna Lu: _Universal Basic Income Seems to Improve Employment & Wellbeing) https://www.newscientist.com/article/2242937-universal-basic-income-seems-to-improve-employment-and-wellbeing/: ‘Finland’s universal basic income study has revealed that the programme doesn’t seem to disincentivise work: Finland ran a two-year universal basic income study in 2017 and 2018, during which the government gave 2000 unemployed people aged 25 to 58 monthly payments with no strings attached. The payments of €560 per month were not means tested and were unconditional, meaning they were not reduced if an individual got a job or later had a pay rise. The study was nationwide and selected recipients were not able to opt out, as the test was written into legislation. Minna Ylikännö at the Social Insurance Institution of Finland announced the findings in Helsinki today via livestream.... Between November 2017 and October 2018, people on basic income worked an average of 78 days, which was six days more than those on unemployment benefits. There was a greater increase in employment for people in families with children, as well as those whose first language was not Finnish or Swedish – but the researchers aren’t yet sure why. When surveyed, people who received universal basic income instead of regular unemployment benefits reported better financial wellbeing, mental health and cognitive functioning, as well as higher levels of confidence in the future... #equitablegrowth #noted #socialinsurance #ubi #2020-05-27


2.4 Million More UI Filings

And the Bureau of Labor Statistics reports that still more workers, 2.4 million of them, lost their jobs and applied for unemployment benefits in the past week. Relaxing lockdowns looks to have increased the virus caseload. Relaxing lockdowns has not all has not yet boosted production:

Equitable Growth: ’2.4 Million Workers Applied for Unemployment Benefits in the Week of May 10–16 https://twitter.com/equitablegrowth/status/1263447742627667968: 'According to the US DOL’s Weekly Unemployment Insurance claims report released today. Since the onset of the #coronavirus crisis in mid-March, 38.6 million workers have filed initial UI claims. The number of continued claims reached 25 million the week ending May 9. The insured unemployment rate, which represents the share of workers receiving benefits as a percentage of the labor force, reached 17.2 %—a 1.5 percentage point increase from the previous week. While the additional $600 in unemployment benefits stipulated under the #CARESAct are set to expire on July 31, the #HeroesAct, which passed the House of Representatives last Friday, would extend the extra benefits through January 2021. Want to learn more about why extending additional Unemployment Insurance benefits would be good for workers and the entire economy? Check out this piece by Kate Bahn https://www.barrons.com/articles/the-good-economics-behind-generous-unemployment-benefits-51585594272… #equitablegrowth #macro #noted #unemployment #2020-05-27


Noted: Alix Gould-Werth: Unemployment Insurance

Successfully running a modern economy requires, on the political economy level, a well-functioning social insurance system. In lots of states we do not have a well-functioning social insurance system. Is centralizing functions at the federal level the solution? Before the age of Trump I would have said “yes”. Now I think, more and more, that administrative reform has to come state-by-state—the slow boring of hard boards: Alix Gould-Werth: Fool Me Once: Investing in Unemployment Insurance systems to avoid the mistakes of the Great Recession during COVID-19 https://equitablegrowth.org/fool-me-once-investing-in-unemployment-insurance-systems-to-avoid-the-mistakes-of-the-great-recession-during-covid-19/: ‘During the Great Recession of 2007–2009 and its aftermath, unemployed workers across the country struggled to access the unemployment benefits to which they were entitled, and our government—at both the state and federal levels—failed to remedy the systemic problems that prevent workers from accessing benefits and thus lead to personal financial hardship and a muted economic stimulus. In the early days of the coronavirus recession, we have seen the problems of the Great Recession echoed in the administrative failures of state Unemployment Insurance agencies. The current disarray in state unemployment benefits programs is neither a surprise nor an accident. It is the result of decades of conscious choices made by policymakers at the state and federal level…. Many states limited Unemployment Insurance benefits, made accessing the program more difficult, and refused to fully fund it…. To be able to respond nimbly to the next twists and turns in the coronavirus recession, policymakers should address three key structural flaws… #equitablegrowth #inequality #noted #socialinsurance #2020-05-18


Noted: Bahn: JOLTS

Started by Equitable Growth alumnus Nick Bunker, its monthly JOLTS Day coverage—coverage of the release of the Bureau of Labor Statistics’s latest survey results on job openings and labor turnover—should be at the very top of the must-reads in your monthly must-read lists. These survey numbers are, of course, now two months stale, so they speak of a different world than we now live in. Nevertheless, they are very interesting: Kate Bahn & Carmen Sanchez Cumming: JOLTS Day Graphs: March 2020 Report Edition https://equitablegrowth.org/jolts-day-graphs-march-2020-report-edition/: ‘The quits rate decreased sharply from 2.3% in February to 1.8% in March, as workers’ confidence about job prospects declined amid the public health crisis and requisite state shutdowns…. While both the rates of job openings and hires decreased in March, openings did more so, leading to a slight increase in the vacancy yield… #equitablegrowth #labormarket #macro #noted #2020-05-18


Noted: Logan: Inequality

Everyone knows that I have been a great fan of Trevon Logan since he showed up at Berkeley to go to graduate school. He has blossomed into a superb researcher, an impressive administrator, a gifted teacher, and a powerful intellectual voice here in America today. Listen to him: Trevon Logan & Liz Hipple: Equitable Growth in Conversation https://equitablegrowth.org/in-conversation-with-trevon-logan/: ‘Hipple, who leads Equitable Growth’s work on economic mobility, and Logan discuss: The reasons for the disparate health impacts of the coronavirus among black Americans. The historical legacies of structural inequalities in the United States. The economic inequalities faced by African Americans in the coronavirus recession. Policy recommendations to deal with the immediacy of the coronavirus recession. Policy recommendations to deal with historical structural inequalities to power a more equitable economic recovery. The historical legacy of intergenerational mobility, race, and segregation… #equitablegrowth #inequality #noted #2020-05-18


Noted: Krugman & co.: The Case Against Austerity

The best webinar on why austerity is a really bad idea that I have yet managed to see. Basically, the world needs massive social-insurance spending right now for pandemic-related reasons and the world needs substantial inflation right now for macroeconomic balance reasons: https://www.evernote.com/l/AAFb_b4l7S9Af5l5hnVycrMskm11Y61DXQ4 Equitable Growth: A Conversation on Austerity: https://twitter.com/equitablegrowth/status/1262390906222792709 ‘Why, especially in an economic crisis, it is such a dangerous idea. RSVP: https://bit.ly/3dKnnrB… #equitable growth #macro #noted #2020-05-18


Worthy Reads for May 16, 2019

Worthy Reads Here at Equitable Growth:

  1. The current scorecard on House of Representatives action on drug price reform. I do wish I had more of a sense of where he center of gravity of the U.S. Senate is on these issues. I, at least, do not understand the views of here current left-wing of the Republican Senate caucus with respect to... well, with respect to pretty much anything. So I have no idea how they are going to jump here. I wish I did: Michael Kades: U.S. Congress Continues to Make Progress on Drug Price Competition: "Measures passed by the Judiciary Committee on April 30 focus on company efforts to block or delay the development and marketing of generic drugs, medications that are essentially identical to the original brand drugs but that are sold at far lower prices, saving consumers billions of dollars on both drug purchases and insurance premiums. The introduction of generic drugs, originally made possible by the Hatch-Waxman Act 35 years ago, provides meaningful competition where there essentially was none and therefore threatens the profits of drug companies. Some companies have adopted the strategy to prevent or delay the introduction of generics. And they have used gaps in Hatch-Waxman and in other laws, as well as in enforcement standards, to develop successful tactics for preventing competition...

  2. If you missed Alyssa Fisher here on automatic stabilizers on Thrusday May 16, go back and reread it: Alyssa Fisher: Planning for the Next Recession by Reforming U.S. Macroeconomic Policy Automatic Stabilizers: "Six big idea... to be triggered when the economy shows clear, proven signs of heading into a recession...... Gabriel Chodorow-Reich... and... John Coglianese... propose to expand eligibility for Unemployment Insurance and encourage take-up.... Jason Furman and Wilson Powell III... aim to reduce state budget shortfalls during recessions... by increasing the federal matching rate for Medicaid and the Children’s Health Insurance Program.... Hilary Hoynes... and... Diane Whitmore Schanzenbach... propose to limit or eliminate work requirements for supplemental nutrition assistance during recessions.... Indivar Dutta-Gupta... proposes a countercyclical stabilization program through... Temporary Assistance for Needy Families.... Andrew Haughwout... proposes an automatic infrastructure investment program.... Claudia Sahm... proposes to boost consumer spending during recessions by creating a system of direct stimulus payments to individuals...

  3. I am not sure that it is right to say that advocate of "Mothers' Pensions" believed that "the woman’s sphere was in the home". They certainly believed that women's work was important, and beieved that the first and most dire need for social insurance was to make sure that mothers of children had the resources they needed to raise the next generation. But they—and here I am generalizing from my own family history: my great-grandmother Fonnie and my great-great-grandmother Florence—also recognized that their generations were having four pregnancies on average while their grandmothers had had eight, and that they were assisted in the home by an increasing amount of modern technology in the form of consumer durables. And my mother-in-law Barbara maintains to this day that the thing that most changed her life was the clothes-washing machine. Half the number of pregnancies plus consumer durables meant that a lot of female energy could be—and was—directed outside the home: Alix Gould-Werth: After Mother’s Day: Changes in Mothers’ Social Programs Over Time: "As Anna Jarvis was crusading to get Mother’s Day a place on the nation’s calendar, her peers—wealthy, white women who shared her progressive, reform-minded impulses—were laying foundation for our modern social safety net. Though most of these women chose to pursue social change rather than traditional family life, as architects of Mothers’ Pensions, they sided firmly with the view that the woman’s sphere was in the home. Mothers’ Pensions—which were passed into law state by state from 1911 to 1920—were targeted at widows and provided cash payments designed to simultaneously keep children out of orphanages and mothers out of the workplace...

  4. Let me direct your attention to one of the WCEG's young whippersnapper grantees writing smart things: Samir Sonti: The Politics of Inflation: "amir Sonti studies 20th century U.S. labor and economic history. Sonti’s dissertation focuses on the politics of inflation in the United States from the 1930s to the 1980s. He received a bachelor of arts degree in political science and a bachelor of science degree in economics from the University of Pennsylvania...

Continue reading "Worthy Reads for May 16, 2019" »


Noted: Boushey & Cumming: Coronavirus Recession

Much more attention should be being paid to the class skew in the economic pain being caused by the coronavirus recession: Heather Boushey & Carmen Sanchez Cumming: Coronavirus Recession Deepens U.S. Job Losses in April. Especially Among Low-Wage Workers & Women https://equitablegrowth.org/coronavirus-recession-deepens-u-s-job-losses-in-april-especially-among-low-wage-workers-and-women/: ‘many of the workers most affected by the swift economic downturn hold jobs that are not classified as essential and cannot be done from home. This month about 90 percent of job losses happened in sectors where less than one in five workers reported in a survey conducted between 2017 and 2018 that they have the option to telecommute. It is likely that this measure somewhat misrepresents the number of workers who have been able to work from home since the onset of the pandemic. Even so, with 7.7 million jobs lost in the leisure and hospitality industry alone, which makes up nearly half of all the jobs in that sector, jobs where workers previously rarely had the option to telecommute accounted for more than a third of this last month’s economy-wide decline in employment…

#coronavirus #depression #equitablegrowth #inequality #macro #noted #2020-05-13

Noted: Smalligan & Boyens: Paid Medical Leave Research

What we know about the importance and the benefits of paid medical leave, compressed and explained: Jack Smalligan & Chantel Boyens: Paid Medical Leave Research https://equitablegrowth.org/research-paper/paid-medical-leave-research/: ‘Paid medical leave may have an effect on health outcomes… [through] improved health management, earlier treatment, greater healthcare utilization, improved income stability, reduced financial stress, and enhanced return-to-work supports. Research on short-term paid sick leave shows clear societal and personal benefits…. [In] provid[ing] return-to-work services for newly ill and injured workers… the most effective programs emphasize early intervention following the onset of a new condition or worsening of a chronic condition… #equitablegrowth #noted #socialinsurance #2020-05-13


Worthy Reads for May 2, 2019

  1. There are lots and lots of business practices that could and should be ruled illegal restrains on trade: Colleen Cunningham, Florian Ederer, and Song Ma: Killer Acquisitions: "This paper argues incumbent firms may acquire innovative targets solely to discontinue the target’s innovation projects and preempt future competition. We call such acquisitions “killer acquisitions.” We develop a parsimonious model illustrating this phenomenon. Using pharmaceutical industry data, we show that acquired drug projects are less likely to be developed when they overlap with the acquirer’s existing product portfolio, especially when the acquirer’s market power is large due to weak competition or distant patent expiration. Conservative estimates indicate about 6% of acquisitions in our sample are killer acquisitions. These acquisitions disproportionately occur just below thresholds for antitrust scrutiny...

  2. William Darity Jr., Darrick Hamilton, Mark Paul, Alan Aja, Anne Price, Antonio Moore, and Caterina Chiopris: What We Get Wrong About Closing the Racial Wealth Gap: "The white household living near the poverty line typically has about 18,000 in wealth, while black households in similar economic straits typically have a median wealth near zero.... The 99th percentile black family is worth a mere $1,574,000 while the 99th percentile white family is worth over 12 million dollars. This means over 870,000 white families have a net worth above 12 million dollars, while, out of the 20 million black families in America, fewer than 380,000 are even worth a single million dollars.... We... contend that a number of ideas frequently touted as 'solutions' will not make headway in reducing black-white wealth disparities... are wholly inadequate to bridge the racial chasm in wealth...

  3. An event coming on May 16: Preparing for the next recession is perhaps the most productive and urgent policy-analysis task op[en today: Equitable Growth: Preparing for the Next Recession: Policies to Reduce the Impact on the U.S. Economy - : "A Hamilton Project and Washington Center for Equitable Growth Policy Forum.... Historically, the U.S. has responded to recent recessions with a mix of monetary policy action and discretionary fiscal stimulus. However, since monetary policy options may be limited during the next recession, policymakers should consider adopting a range of fiscal policy measures now to help stabilize the economy when a future downturn inevitably occurs. This can be achieved with a range of fiscal policy responses aimed at expediting the next recovery through strengthening job creation and restoring confidence to businesses and households...

  4. In the real world, sometimes threats need to be exercised to move price, and sometimes they don't. I have high hopes that we will learn a lot about this from Antoine Arnoud's forthcoming dissertation: Equitable Growth: Automation Threat and Wage Bargaining: "One doctoral grant will support research on how economic inequality affects the quantity and quality of innovation, and whether technological innovations, in turn, impact inequality: Antoine Arnoud (Ph.D. candidate, Yale University) proposes to study a novel mechanism through which automation in the labor market might have an impact on wages through the threat, rather than the actuality, of automation...

  5. Greatly looking forward to what comes out of this: Equitable Growth: Equitable Growth Announces 2018 Class of Grantees: The impact of Antitrust on Competition: "Fiona Scott Morton (Yale University School of Management) will collect empirical metrics of antitrust enforcement outcomes to create a novel dataset, which she will use to analyze merger effects beyond prices such as employment, and to determine whether mergers in the high-tech sector are motivated by increased efficiencies or by the elimination of competitors...

Continue reading "Worthy Reads for May 2, 2019" »


Worthy Reads for April 25, 2019

Worthy Reads at Equitable Growth:

  1. 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...

  2. 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...

  3. 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...

  4. 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...

  5. 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...

Continue reading "Worthy Reads for April 25, 2019" »


Lecture Notes: East Asian Miracles

4149 words: https://github.com/braddelong/public-files/blob/master/lecture-east-asia-text.pdf

East Asia was on the downside of the Malthusian cycle when western Europe erupted into the eastern Pacific in the 1800s: populous, with many ingenious and efficient non-machine technologies for squeezing output out of very limited resources, but desperately poor. “The West” brought machine technologies and the global market. It also brought a measure of contempt for east Asia. Nearly all western observers thought the idea that the Mysterious East might catch up to the north Atlantic in any reasonable historical timeframe was absolutely ludicrous.

Malthusian poverty meant no domestic middle-class to demand domestic manufactures, and productivity levels in Asia were hopeless as far as manufactured exports were concerned. The military and political power gradient vis-à-vis the north Atlantic meant no ability to impose tariffs, even had a domestic middle class on whose demand one might be able to build a community of engineering practice and progress existed. The lack of a powerful domestic bourgeoisie meant rule by princes for whom broad-based economic growth was simply not a priority. And in general a “Confucian” religious orientation meant that right moral attitude was more important than the rationalization of techniques and methods.

As Melissa Dale says: If we were sitting here in the 1950s, we would not have predicted anything like east Asia’s miracles.

Yet we have had four: first the early industrialization of Japan, then the extraordinary drive of Japan to global north status from 1950 to 1975, then the four east Asian tigers, and now coastal China.

All that surprises...

Continue reading "Lecture Notes: East Asian Miracles" »


Lecture Notes: The Development of Underdevelopment and W. Arthur Lewis

3086 words https://github.com/braddelong/public-files/blob/master/lecture-inequality-text.pdf

The large populations and low levels of material wealth and agricultural productivity in China and India checked the growth of wages. Workers could be cheaply imported and employed at wages not that far above the physical subsistence level. Low wage costs meant that commodities produced in countries open to Asian immigration were relatively cheap. And competition from the Malaysian rubber plantations checked growth and even pushed down wages of the Brazilian rubber tappers as well. The late nineteenth century saw living standards and wage rates become and remain relatively low (although higher than in China and India) throughout the regions that were to come to be called the third world. And as wages in economies that were to become the global periphery were checked, the prospects for having a rich-enough middle class to provide demand for a strong domestic industrial sector ebbed rapidly.

As a result, the chain of causation went thus:

  • The openness of some places where tropical goods could be produced to migration from China and India pushed down their prices in world markets.
  • Low prices in the world markets meant low wages everywhere tropical goods were produced.
  • Low wages meant no prosperous middle-class anywhere tropical goods were produced.
  • No prosperous middle-class meant no mass domestic demand for manufactures.
  • No domestic demand for manufactures meant no chance of starting industrialization.
  • No chance of starting industrialization meant no building a community of engineering practice.
  • No community of engineering practice meant no taking the next step and advancing in industrialization.
  • No advancing in industrialization meant no walking onto the escalator to modernity and prosperity.

That, in a nutshell, is the story of the relative underdevelopment of the global south. It was not that globalization left the global south alone in the years before World War I. It was that globalization put it on a road that made its industrialization more difficult, even though the openness of world markets made it more prosperous in that pre-World war I half century seen rightly as a global El Dorado.


Continue reading "Lecture Notes: The Development of Underdevelopment and W. Arthur Lewis" »


Lecture Notes: Inequality

14487 words https://github.com/braddelong/public-files/blob/master/lecture-inequality-text.pdf

Philosophers, of course, if there are any in the audience here, will have winced by now. Perhaps they will have done more than winced—although I did not see any philosophers rise and run, screaming, from the room.

I have drawn strong conclusions about how high and important a priority reducing inequality should be for making a good society by being a bad philosopher. Philosophers would presumably say that I should first be a good philosopher. They would say that only after having reached good philosophical conclusions should I then use those conclusions as a springboard to derive “oughts” for political economy.

The problem, of course, is that there is no agreement on what the good philosophical conclusions are.

I maintain that my bad philosophy is a very useful middle ground. I draw conclusions for society from it. As you decide on what your view of good philosophy is, you move from my bad philosophy to yours, and that movement will carry with it a move of your political economy conclusions from the baseline I have established to those that you will think best. You will start with my conclusions, and adjust them in light of the difference between my bad and your good moral philosophy. My bad philosophy thus provides you with a convenient basecamp from which you—with your good philosophy—can begin your climb of the mountain of truth...

Continue reading "Lecture Notes: Inequality" »


Worthy Reads from February 13, 2019

Worth Reads at Equitable Growth:

  1. Excellent testimony from Heather Boushey. But am I allowed to whimper that focusing too much on the EITC and the CTC may distract attention from the fact that SSI and SSDI are broken, and that the interface between the safety net for the employed and the safety net for the non-employed is very broken?: Heather Boushey: Testimony Before the Ways and Means Committee: "At the bottom end, one easy step is to preserve and expand evidence-backed refundable tax credits like the Earned Income Tax Credit and the Child Tax Credit, which lifted 8.9 million American out of poverty in 2017. In the middle, it is important to make sure the fruits of growth are widely shared and to make the economy work for workers and families. Some proven ways to do this include making sure every family can afford to send their children to high quality, affordable childcare and offering a national paid family and medical leave. It can also mean investing in infrastructure. And we need to know much more about the top. Many of the statistics we rely on to inform us about the state of our economy are measures of the average...

  2. And it is time for Equitable Growth's monthly charticle about the most useful monthly employment report—not the (usually) first-Friday report, but rather the JOLTS report: Kate Bahn and Raksha Kopparam: JOLTS Day Graphs: December 2018 Report Edition: "Every month the U.S. Bureau of Labor Statistics releases data on hiring, firing, and other labor market flows from the Job Openings and Labor Turnover Survey, better known as JOLTS. Today, the BLS released the latest data for December 2018. This report doesn’t get as much attention as the monthly Employment Situation Report, but it contains useful information about the state of the U.S. labor market. Below are a few key graphs using data from the report...

  3. An excellent catch from Equitable Growth's Michael Kades here. The debate over hospital mergers was mostly about whether scale-driven improvements in quality and reductions in cost would or would not be outweighed by the harm done by greater monopoly-power margins in charges to insurance companies and to patients. But it is looking increasingly likely that there are no scale driven improvements in quality or reductions in costs. He sends us to the extremely sharp Austin Frakt: Michael Kades: "The hospital industry, perhaps more than any other, had argued that consolidation will improve quality. Data increasingly says no: Austin Frakt: Hospital Mergers Improve Health? Evidence Shows the Opposite: "The claim was that larger organizations would be able to harness economies of scale and offer better care...

  4. Kate Bahn sends us to Equitable Growth alumnus Nick Bunker. Nick continues his campaign to get people to look not at inflation but at wage growth—which has been slowly inching up since 2014—to gauge how close we are to that mysterious "full employment". Bottom line: we are not there yet: Nick Bunker: "Inflation-adjusted average hourly earnings up 1.7% over the past year. A friendly-reminder that real wage growth isn’t a good metric for assessing short-term health/slack of labor market. (Unless, of course, you think swings in energy prices are telling you something very important about the US labor market.) Far less volatility when you look at core inflation, but at this point why not just look at nominal wage growth?...

  5. I must confess that my knee-jerk reaction given my socialization into the neoliberal cult when young to paid leave programs is to worry that loading responsibility for providing social insurance onto employers is a hazardous activity—it is not the 1920s, and we are not the tarry-eyed Edward Filene certain that paternalistic companies engaged in welfare capitalism can do more to enhance societal well-being than the ardent socialists and social democrats. But evidence is piling up from the laboratories of social insurance that are the states that my knee-jerk reaction is wrong: Heather Boushey: Increasing Evidence of the Benefits of Paid Leave Means Congress Needs to Consider a Federal Program like the FAMILY Act: "The existing state programs—the oldest, in California, dates back to 2004—have provided a laboratory for researchers to study labor and health outcomes for individuals, performance and productivity outcomes for firms, and broader macroeconomic outcomes of paid family and medical leave. This work builds on a considerable body of research from long-established programs in some European countries. The answers to many questions are already coming into focus.... In states with paid leave insurance programs, mothers who use paid leave are more likely to remain in the workforce in the year following a birth. The women experiencing the benefits of these new programs are more likely to be less educated, which makes sense given that they are less likely to have had access to paid leave in the absence of a state program.... In instances where paid leave is provided there is less reliance on public assistance to contend with family medical emergencies. Moreover, there has been no evidence of higher employee turnover or rising wage costs for businesses. Research on parental leave programs abroad also suggests that paid leave of the length contemplated by the FAMILY Act, up to 12 weeks, has a positive effect on women’s income and likelihood of remaining in the workforce...

Continue reading "Worthy Reads from February 13, 2019" »


Worthy Reads from January 3, 2019

stacks and stacks of books

Worthy Reads at Equitable Growth

  1. 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...

  2. 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...

  3. 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...

  4. 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...

  5. 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

Continue reading "Worthy Reads from January 3, 2019" »


Comment of the Day: Kaleberg: Feminism https://www.bradford-delong.com/2019/12/feminism-1.html?cid=6a00e551f0800388340240a4fd48d2200b#comment-6a00e551f0800388340240a4fd48d2200b: 'I think your tone is good enough, but I think that a lot more was going on than simply rising productivity. (1) Women do better in monetized societies, that is, in places where there is an objective measure of value that can translate into social status. (2) Women do better in urbanized societies, that is, in places with a variety of trades and where one is forced to accept one's interdependence. (3)Women do better in demilitarized societies, that is, in places where the use of armed force is a less important component of citizenship. These all overlap. The Enlightenment ideas of the early 18th century encouraged thinking in terms of objective measures of value being more important than ancestry, recognizing that no man is an island unto himself and the increasing professionalization of armed forces...

Continue reading "" »


Feminism: I Need to Include Something Like This in My Twentieth Century History Book. But I Would Like Something from 1870-1950—Not Something from 1776 and 1700 and Before...

Hogarth-marriage-a-la-mode

Plus I am worried that I am, somewhere in here, striking the wrong tone. Yes, many people will find what is below annoying. But will the people annoyed be the people I want this to annoy, or will they be people whom I desperately do not want to read my work and then be annoyed?


2.5: The Arrival of Feminism: In 1764 in Britain’s Massachusetts colony Abigail Smith was 20, and had had no formal education at all: girls weren’t worth it. In that year married a man she had known for five years: the up-and-coming 30-year-old lawyer John Adams. Their daughter Nabby was born the following year, in 1765. There followed John Quincy (1767), Suky (1768, who died at the age of 2), Charles (1770, who died at the age of 10), Thomas (1772), with high probability a couple of (very early) miscarriages from 1774-6, then the stillborn Elizabeth (1777), and (perhaps) another miscarriage afterwards—but I suspect not. She ran their Boston-Braintree household and property operations while he played his role on the large political-intellectual stage, becoming second president of the United States.

Death and disease were, as was the case in the Agrarian Age, omnipresent. Her most famous letter to her husband was written in 1776. A part of it that is rarely—I would say never—excerpted contains these: “our Neighbour Trot whose affliction I most sensibly feel but cannot discribe, striped of two lovely children in one week…”, “Betsy Cranch has been very bad…”, “Becky Peck they do not expect will live out the day…”, “The Mumps… Isaac is now confined with it…”, and “your Brothers youngest child lies bad with convulsion fitts…”

Her letters tell us that she badly wanted to know what was going on in the world outside her household and the Boston-Braintree circle:

I wish you would ever write me a Letter half as long as I write you; and tell me if you may: Where your Fleet are gone? What sort of Defence Virginia can make against our common Enemy? Whether it is so situated as to make an able Defence? Are not the Gentery Lords and the common people vassals? Are they not like the uncivilized Natives Brittain represents us to be?…” and “I have sometimes been ready to think that the passion for Liberty cannot be Eaquelly Strong in the Breasts of those who have been accustomed to deprive their fellow Creatures of theirs…”

And note how she cannot say "I think...", even to her ten-years-older husband: she has to say "I have sometimes been ready to think..."

Continue reading "Feminism: I Need to Include Something Like This in My Twentieth Century History Book. But I Would Like Something from 1870-1950—Not Something from 1776 and 1700 and Before..." »


What Is the Political-Economic Agenda After Piketty?

Introduction: Let me write, overwhelmingly, about inequality understood as inequality between people who regard themselves as members of a common culture, economy, nation. There is the separate issue of inequality between the different cultures, economies, nations that make up the world, but let me leave that for the very end, and then deal with it only briefly.

History of Inequality: For most of human history since the invention of agriculture, typical settled human societies have been about 80% as unequal as they could possibly be: were anything to stretch out the distribution of income and wealth by more than an additional 20%, and working-class women would have become too skinny to ovulate regularity and working-class children would have had compromised immune systems, and so the population would have failed to reproduce itself. The typical economy's Gini index was about 45 or so (the same Gini value as if 72% of wealth and income were evenly divided among the top 28%, and the rest evenly among the rest)—with New Spain in the eighteenth century estimated up at above 60 (the same Gini value as if 4/5 were evenly divided among the top 1/5, and the rest evenly among the rest) and the Kingdom of Naples and China estimated down below 30 (the same Gini value as if 65% were evenly divided among the top 35%, and the rest of income evenly among the rest).

Continue reading "What Is the Political-Economic Agenda After Piketty?" »


If You Are So Rich, Why Aren't You Smart?: Hoisted from the Archives from Ten Years Ago

Hoisted from the Archives: If You Are So Rich, Why Aren't You Smart? http://www.bradford-delong.com/2009/08/if-you-are-so-rich-why-arent-you-smart.html: A correspondent emails me a link to https://web.archive.org/web/20090830190212/http://gregmankiw.blogspot.com/2009/08/least-surprising-correlation-of-all.html... Greg Mankiw looks at:

Mankiw-wealth-and-iq

And says:

The Least Surprising Correlation of All Time: So what? This fact tells us nothing about the causal impact of income on test scores.... This graph is a good example of omitted variable bias, a statistical issue discussed in Chapter 2 of my favorite textbook. The key omitted variable here is parents' IQ. Smart parents make more money and pass those good genes on to their offspring.... Suppose we were to graph average SAT scores by the number of bathrooms a student has in his or her family home. That curve would also likely slope upward.... But it would be a mistake to conclude that installing an extra toilet raises yours kids' SAT scores. It would be interesting to see the above graph reproduced for adopted children only. I bet that the curve would be a lot flatter...

The explicit argument, of course, is that the parents are rich because they are genetically smart, and that the children test well because they have inherited smartness genes from their parents, and all is good because it is right that the worthy should be rich and the most important part of being worthy is being smart. And Mankiw drops it there—without even acknowledging that, say, being able to afford an extra bathroom is a good signal that you can afford to spend more money on your children's education. Without trying to do a quantitative calculation of the expected slope. But, rather, hingeing the entire thing on "good genes".

IMHO, merely saying that correlation is not always causation and dropping the issue is profoundly unhelpful—moreover, it shows a... certain lack of work ethic as well. Off the top of my head...

Continue reading "If You Are So Rich, Why Aren't You Smart?: Hoisted from the Archives from Ten Years Ago" »


Orlando Letelier (1976): The ‘Chicago Boys’ in Chile: Economic Freedom’s Awful Toll: Hoisted from the Archives

6a00e551f08003883401b8d062ecc7970c pi 275×125 pixels

Orlando Letelier (1976): The ‘Chicago Boys’ in Chile: Economic Freedom’s Awful Toll: 'It would seem to be a common-sensical sort of observation that economic policies are conditioned by and at the same time modify the social and political situation where they are put into practice. Economic policies, therefore, are introduced in order to alter social structures. If I dwell on these considerations, therefore, it is because the necessary connection between economic policy and its sociopolitical setting appears to be absent from many analyses of the current situation in Chile. To put it briefly, the violation of human rights, the system of institutionalized brutality, the drastic control and suppression of every form of meaningful dissent is discussed (and often condemned) as a phenomenon only indirectly linked, or indeed entirely, unrelated, to the classical unrestrained “free market” policies that have been enforced by the military junta. This failure to connect has been particularly characteristic of private and public financial institutions, which have publicly praised and supported the economic policies adopted by the Pinochet government, while regretting the “bad international image” the junta has gained from its “incomprehensible” persistence in torturing, jailing and persecuting all its critics...

...A recent World Bank decision to grant a $33 million loan to the junta was justified by its President, Robert McNamara, as based on purely “technical” criteria, implying no particular relationship to the present political and social conditions in the country. The same line of justification has been followed by American private banks which, in the words of a spokesman for a business consulting firm, “have been falling all over one another to make loans.”

But probably no one has expressed this attitude better than the U.S. Secretary of the Treasury. After a visit to Chile, during which he discussed human rights violations by the military government, William Simon congratulated Pinochet for bringing “economic freedom” to the Chilean people. This particularly convenient concept of a social system in which “economic freedom” and political terror coexist without touching each other, allows these financial spokesmen to support their concept of “freedom” while exercising their verbal muscles in defense of human rights.

The usefulness of the distinction has been particularly appreciated by those who have generated the economic policies now being carried out in Chile. In Newsweek of June 14, Milton Friedman, who is the intellectual architect and unofficial adviser for the team of economists now running the Chilean economy, stated: “In spite of my profound disagreement with the authoritarian political system of Chile, I do not consider it as evil for an econ omist to render technical economic advice to the Chilean Government, any more than I would regard it as evil for a physician to give technical medical advice to the Chilean Government to help end a medical plague.”

It is curious that the man who wrote a book, Capitalism and Freedom, to drive home the argument that only classical economic liberalism can support political democracy can now so easily disentangle economics from politics when the economic theories he advocates coincide with an absolute restriction of every type of democratic freedom. One would logically expect that if those who curtail private enterprise are held responsible for the effects of their measures in the political sphere, those who impose unrestrained “economic freedom” would also be held responsible when the imposition of this policy is inevitably accompanied by massive repression, hunger, unemployment and the permanence of a brutal police state.

The Economic Prescription & Chile’s Reality: The economic plan now being carried out in Chile realizes an historic aspiration of a group of Chilean economists, most of them trained at Chicago University by Milton Friedman and Arnold Harberger. Deeply involved in the preparation of the coup, the “Chicago boys,” as they are known in Chile, convinced the generals that they were prepared to supplement the brutality, which the military possessed, with the intellectual assets it lacked.

The U.S. Senate Select Committee on Intelligence has disclosed that “CIA collaborators” helped plan the economic measures that Chile’s junta enacted imme diately after seizing power. Committee witnesses maintain that some of the “Chicago boys” received CIA funds for such research efforts as a 300-page economic blueprint that was given to military leaders before the coup. It is therefore understandable that after seizing power they were, as The Wall Street Journal put it, “champing to be unleashed” on the Chilean economy.

Their first approach to the situation was gradual; only after a year of relative confusion did they decide to implement without major modification the theoretical model they had been taught at Chicago. The occasion merited a visit to Chile by Mr. Friedman himself who, along with his associate, Professor Harberger, made a series of well-publicized appearances to promote a “shock treatment” for the Chilean economy—something that Friedman emphatically described as “the only medicine. Absolutely. There is no other. There is no other long-term solution.”

These are the basic principles of the economic model offered by Friedman and his followers and adopted by the Chilean junta: that the only possible framework for economic development is one within which the private sector can freely operate; that private enterprise is the most efficient form of economic organization and that, therefore, the private sector should be the predominant factor in the economy. Prices should fluctuate freely in accordance with the laws of competition. Inflation, the worst enemy of economic progress, is the direct result of monetary expansion and can be eliminated only by a drastic reduction of government spending.

Except in present-day Chile, no government in the world gives private enterprise an absolutely free hand. That is so because every economist (except Friedman and his followers) has known for decades that, in the real life of capitalism, there is no such thing as the perfect competition described by classical liberal economists. In March 1975, in Santiago, a newsman dared suggest to Friedman that even in more advanced capitalist countries, as for example the United States, the government applies various types of controls on the economy. Mr. Friedman answered: “I have always been against it, I don’t approve of them. I believe we should not apply them. I am against economic intervention by the government, in my own country, as well as in Chile or anywhere else.”

This is not the place to evaluate the general validity of the postulates advanced by Friedman and the Chicago School. I want to concentrate only on what happens when their model is applied to a country like Chile. Here Friedman’s theories are especially objectionable—from an economic as well as a moral point of view—because they propose a total free market policy in a framework of extreme inequality among the economic agents involved: inequality between monopolistic and small and medium entrepreneurs; inequality between the owners of capital and those who own only their capacity to work, etc. Similar situations would exist if the model were applied to any other underdeveloped, dependent economy.

It is preposterous to speak about free competition in Chile. The economy there is highly monopolized. An academic study, made during President Frei’s regime, pointed out that in 1966 “284 enterprises controlled each and every one of the subdivisions of Chilean economic activities. In the industrial sector, 144 enterprises con trolled each and every one of the subsectors. In turn, within each of ‘these 144 manufacturing enterprises which constituted the core of the industrial sector, a few shareholders controlled management: in more than 50 percent of the enterprises, the ten largest shareholders owned between 90 and 100 percent of the capital.”

On the other hand, studies also conducted during the pre-Allende period demonstrated the extent to which the Chilean economy has been dominated by foreign-based multinationals. As Barnet and Müller put it in Global Reach, “In pre-Allende Chile, 51 percent of the largest 160 firms were effectively controlled by global corporations. In each of the seven key industries of the economy one to three firms controlled at least 51 percent of the production. Of the top twenty-two global corporations operating in the country, nineteen either operated free of all competi tion or shared the market with other oligopolists.”

From 1971 to 1973, most of the monopolistic and oligopolistic industries were nationalized and transferred to the public sector. However, the zeal with which the military dictatorship has dismantled state participation in the economy and transferred industries to foreign ownership suggests that levels of concentration and mo nopolization are now at least as high as they were before the Popular Unity (Allende) Government.

An International Monetary Fund Report of May 1976 points out:

The process of returning to the private sector the vast majority of the enterprises which over the previous fifteen years, but especially in 1971-73, had become part of the public sector continued [during 1975]…. At the end of 1973 the Public Development Corpo ration (CORFO) had a total of 492 enterprises, includ ing eighteen commercial banks…. Of this total, 253 enterprises…have been returned to their former owners. Among the other 239 enterprises…104 (among them ten banks) have been sold; sixteen (including two banks) have already been adjudicated, with the completion of the transfer procedure being a matter of weeks; the sale of another twenty-one is being negotiated bilaterally with groups of potential buyers.

Competitive bidding is still to be solicited for the remaining enterprises. Ob viously the buyers are always a small number of powerful economic interests who have been adding these enter prises to the monopolistic or oligopolistic structures with in which they operate. At the same time, a considerable number of industries have been sold to transnational corporations, among them the national tire industry (INSA), bought by Firestone for an undisclosed sum, and one of the main paper pulp industries (Celulosa Forestal Arauco), bought by Parsons & Whittemore.

There are many other examples to show that, as far as competition goes, Mr. Friedman’s prescription does not yield the economic effects implicit in his theoretical model. In the first half of 1975, as part of the process of lifting regulations from the economy, the price of milk was exempted from control. With what result? The price to the consumer rose 40 percent and the price paid to the producer dropped 22 percent. There are more than 10,000 milk producers in Chile but only two milk processing companies, which control the market. More than 80 percent of Chilean paper production and all of certain types of paper come from one enterprise—the Compañia Manufacturera de Papeles y Cartones, controlled by the Alessandri interests—which establishes prices without fear of competition. More than fifteen foreign brands are offered in the Chilean home appliances market, but they are all in the hands of only three companies, which assemble them in Chile and determine their retail prices.

Of course, any of the followers of the Chicago School would say that, with the liberalization of the interna tional market, as prescribed by the model, Chilean monopolies and oligopolies would be exposed to competition from abroad. However, that does not happen. Chile so lacks foreign currency that it cannot import what it needs, of even the most essential goods. Still more important is the fact that foreign enterprises are not interested in sending to Chile goods which could compete with those, manufactured by their own Chilean subsidiaries. Besides, in Chile the economic interests which control the manu facturing industry also control the financial apparatus and import activities. These groups are not disposed to compete with themselves. In short, the application of Friedman’s theories to the real world of Chile means that the industrialists can freely “compete” at whatever price levels they choose.

Other aspects of the brand of economics taught at the University of Chicago are conveniently ignored by the junta’s economic advisers. One is the importance of wage contracts freely negotiated between employers and workers; another is the efficiency of the market as an instrument to allocate resources in the economy. It is sardonic to mention the right of the workers to negotiate in a country where the Central Workers’ Federation has been outlawed and where salaries are established by the junta’s decree. It may also seem grotesque to speak of the market as the most effective instrument for allocating resources when it is widely known that there are practi cally no productive investments in the economy because the most profitable “investment” is speculation. Under the slogan “We must create a capital market in Chile,” selected private groups enjoying the junta’s protection have been authorized to establish so-called “financieras,” which engaged in the most outrageous financial specula tions. Their abuses have been so flagrant that even Orlando Saez, former president of the Chilean Indus trialists’ Association and a staunch supporter of the coup, could not refrain from protesting. “It is not pos sible,” he said, “to continue with the financial chaos that dominates in Chile. It is necessary to channel into productive investments the millions and millions of finan cial resources that are now being used in wild-cat specu lative operations before the very eyes of those who don’t even have a job.”

But the crux of Friedman’s prescription, as the junta never ceases to emphasize, is control of inflation. It should, according to the junta, enlist “the vigorous efforts of all Chileans.” Professor Harberger declared categori cally in April 1975: “I can see no excuses for not stop ping inflation: its origins are well known; government deficits and monetary expansion have to be stopped. I know you are going to ask me about unemployment; if the government deficits were reduced by half, still the rate of unemployment would not increase more than 1 percent.” According to the junta’s official figures, between April and December 1975, the government deficit was reduced by approxi mately the 50 percent that Harberger recommended. In the same period, unemployment rose six times as much as he had predicted. The remedy he continues to advocate consists of reducing government spending, which will reduce the amount of currency in circulation. This will result in a contraction of demand, which in turn will bring about a general reduction of prices. Thus inflation would be defeated. Professor Harberger does not say explicitly who would have to lower their standard of living to bear the casts of the cure.

Without a doubt, excessive monetary expansion con stitutes an important inflationary factor in any economy. However, inflation in Chile (or any underdeveloped country) is a far more complex problem than the one presupposed by the mechanical models of the monetarist theorists. The followers of the Chicago School seem to forget, for example, that the monopolistic structure of the Chilean economy allows the dominant firms to maintain prices in the face of falling demand. They also forget the role that so-called inflationary expectations play in generating price increases. In Chile, inflationary expecta tions have lately been approximating 15 percent per month. Looking ahead, firms prepare for rising costs by raising their own prices. This continuous price “leap-frogging” feeds a general inflationary spiral. On the other hand, in such an inflationary climate, no one with liquid assets wants to hold them. Powerful interest groups, operating without government control, can thus manipulate the financial apparatus. They create institutions to absorb any available money and use it in various forms of speculation, which thrive on and propel inflation.

The Economic Results: Three years have passed since this experiment began in Chile and sufficient information is available to con clude that Friedman’s Chilean disciples failed—at least in their avowed and measurable objectives—and particu larly in their attempts .to control inflation. But they have succeeded, at least temporarily, in their broader purpose: to secure the economic and political power of a small dominant class by effecting a massive transfer of wealth from the lower and middle classes to a select group of monopolists and financial speculators.

The empirical proof of the economic failure is over whelming. On April 24, 1975, after the last known visit of Messrs. Friedman and Harberger to Chile, the junta’s Minister of Finance, Jorge Cauas, said: “The Hon. junta have asked me to formulate and carry out an economic program primarily directed to eradicate inflation. To gether with a numerous group of technicians, we have presented to the Chilean authorities a program of eco nomic revival which has been approved and is begin ning. The principal objective of this program is to stop inflation in the remainder of 1975.” (The “group of technicians” is obviously Friedman and company.)

By the end of 1975 Chile’s annual rate of inflation had reached 341 percent—that is, the highest rate of inflation in the world. Consumer prices increased that same year by an average 375 percent; wholesale prices rose by 440 percent. Analyzing the causes of Chilean inflation in 1975, a recent report of the International Monetary Fund (IMF) says: “The cutback in government spending, with its adverse effects on employment, in housing, and public works, went significantly further than programmed in order to accommodate the large credit demands of the private sector.” Later on it states:

Overall monetary management remained expansionary in 1975. Moreover, continued high inflationary expectations and the public’s attendant unwillingness to increase its real cash balances greatly complicated the implementation of the monetary program.

Referring to private organizations which have begun to operate without any control, the report adds that the “financieras” have been allowed to operate beside the commercial banking system and at interest rates up to 59 percent higher than the maximum permissible banking rate. According to the same source, the “financieras” were operating in 1975 at an interest rate of 14 percent a month, or 168 percent a year; they obtained loans in New York at 10 percent to 12 percent a year.

The implementation of the Chicago model has not achieved a significant reduction of monetary expansion. It has, however, brought about a merciless reduction of the income of wage earners and a dramatic increase in unemployment; at the same time it has increased the amount of currency in circulation by means of loans and transfers to big firms, and by granting to private financial institutions the power to create money. As James Petras, an American political scientist, puts it: “The very social classes on which the junta depends are the main instrumentalities of the inflation.”

Concentration of wealth is not the marginal outcome of a difficult situation, but the base for a social project. The inflationary process, which the junta’s policies stimulated immediately after the coup, was slightly reduced in 1975 as compared to the unbelievable rate of 375.9 percent in 1974. Such a minor reduction, however, does not indicate any substantial approach to stabilization and seems on the whole utterly irrelevant to the majority of Chileans who must endure the total collapse of their economy. This situation recalls the story of a Latin Amer ican dictator at the beginning of this century. When his advisers came to tell him that the country was suffer ing from a very serious educational problem, he ordered all public schools closed. Now, more than seventy years into this century, there still remain disciples of the anec dotal dictator who think that the way to eradicate pov erty in Chile is to kill the poor people.

The exchange rate depreciations and the cutbacks in governmental expenditures have produced a depression which, in less than three years, has slowed the country’s rate of development to what it was twelve years ago. Real Gross Domestic Product (GDP) contracted during 1975, by nearly 15 percent to its lowest level since 1969, while, according to the IMF, real national income “dropped by as much as 26 percent, leaving real per capita income below its level ten years earlier.” The decline in the overall 1975 GDP reflects an 8.1 percent drop in the min ing sector, a 27 percent decline in the manufacturing indus tries and a 35 percent drop in construction. Petroleum extrac tion declined by an estimated 11 percent, while transport, storage and communications declined 15.3 percent, and com merce fell 21.5 percent. In the agricultural sector production appears virtually stagnant in 1975-76, with only an 0.4 percent variation from the previous agricultural year.

This stagnation has been caused by a combination of factors, including the con tinued rise in the cost of imported fertilizers and pesticides. The use of fertilizer dropped by an estimated 40 percent in 1975-76. The increase in import prices also accounted for the decline in production of pork and poultry, which are almost entirely dependent on imported feed. The re turn to the former owners of several million hectares of farm land that had been expropriated and transferred to peasant organizations under the 1967 Agrarian Re form Law, has also reduced agricultural production. As of the end of 1975 almost 60 percent of all agricultural es tates affected by the land reform—equivalent to about 24 percent of total expropriated land—has been subject to the junta’s decisions. Of this total, 40 percent of the agricul tural enterprises (75 percent of the physical acreage and more than 50 percent of the irrigated land) have entirely reverted to former owners.

In the external sector of the economy, the results have been equally disastrous. In 1975 the value of exports dropped 28 percent, from $2.13 billion to $1.53 billion, and the value of imports dropped 18 percent, from $2.24 billion to $1.81 billion, thus showing a trade deficit of $280 million. Imports of foodstuffs dropped from $561 mil lion in 1974, to $361 million in 1975. In the same period domestic food production declined, causing a drastic reduction in food for the masses of the popula tion. Concurrently, the outstanding external public debt repayable in foreign currency increased from $3.60 bil lion on December 31, 1974, to $4.31 billion on Decem ber 31, 1975. This accentuated Chile’s dependence on ex ternal sources of financing, especially from the United States. The junta’s policies have burdened Chile with one of the highest per capita foreign debts in the world. In the years to come the nation will have to allocate more than 34 percent of its projected exports earnings to the pay ment of external debts.

But the most dramatic result of the economic policies has been the rise in unemployment. Before the coup, unemployment in Chile was 3.1 percent, one of the lowest in the Western Hemisphere. By the end of 1974, the jobless rate had climbed beyond 10 percent in the Santiago metro politan area and was also higher in several other sections of the country. Official junta and IMF figures show that by the end of 1975 unemployment in the Santiago metro politan area had reached 18.7 percent; the corresponding figure in other parts of the country was more than 22 percent; and in specific sectors, such as the construction industry, it had reached almost 40 percent. Unemployment has con tinued to climb in 1976 and, according to the most conservative estimates, in July approximately 2.5 million Chileans (about one-fourth of the population) had no income at all; they survive thanks to the food and cloth ing distributed by church and other humanitarian organi zations. The attempts by religious and other institutions to ease the economic desperation of thousands of Chilean families have been made, in most cases, under the sus picion and hostile actions of the secret police.

The inhuman conditions under which a high percentage of the Chilean population lives is reflected most dramati cally by substantial increases in malnutrition, infant mortality and the appearance of thousands of beggars on the streets of Chilean cities. It forms a picture of hunger and deprivation never seen before in Chile. Families re ceiving the “minimum wage” cannot purchase more than 1,000 calories and 15 grams of protein per person per day. That is less than half the minimum satisfactory level of consumption established by the World Health Organization. It is, in short, slow starvation. Infant mortality, reduced significantly during the Allende years, jumped a dramatic 18 percent during the first year of the military government, according to figures provided by the U.N. Economic Commission for Latin America. To deflect criticism from within its own ranks against the brutal consequences of layoffs, the junta in 1975 established a token “minimum employment program.” However, it covers only 3 percent of the labor force, and pays salaries amounting to less than $30—a month!

Although the economic policies have more mercilessly affected the working classes, the general debacle has sig nificantly touched the middle-class as well. At the same time, medium-size national enterprises have had their expectations destroyed by the reduction in demand, and have been engulfed and destroyed by the monopolies against which they were supposed to compete. Because of the collapse of the automobile industry, hundreds of machine shops and small industries which acted as sub contractors have faced bankruptcy. Three major textile firms (FIAD, Tomé Oveja and Bellavista) are working three days a week; several shoe companies, among them Calzados Bata, have had to close. Ferriloza, one of the main producers of consumer durables, recently declared itself bankrupt. Facing this situation, Raul Sahli, the new president of the Chilean Industrialists’ Association, and himself linked to big monopolies, declared earlier in the year: “The social market economy should be applied in all its breadth. If there are industrialists who complain because of this, let them go to hell. I won’t defend them.” He is so quoted by André Gunder Frank in a “Second Open Letter to Milton Friedman and Arnold Harberger,” April 1976.

The nature of the economic prescription and its results can be most vividly stated by citing the pattern of domestic income distribution. In 1972, the Popular Unity Govern ment employees and workers received 62.9 percent of the total national income; 37.1 percent went to the propertied sector. By 1974 the share of the wage earners had been reduced to 38.2 percent, while the participation of property had in creased to 61.8 percent. During 1975, “average real wages are estimated to have declined by almost 8 percent,” according to the International Monetary Fund. It is probable that these regressive trends in income distribution have con tinued during 1976. What it means is that during the last three years several billions of dollars were taken from the pockets of wage earners and placed in those of capi talists and landowners. These are the economic results of the application in Chile of the prescription proposed by Friedman and his group.

A Rationale for Power: The economic policies of the Chilean junta and its re sults have to be placed in the context of a wide counter revolutionary process that aims to restore to a small minority the economic, social and political control it gradually lost over the last thirty years, and particularly in the years of the Popular Unity Government.

Until September 11, 1973, the date of the coup, Chilean society had been characterized by the increasing participation of the working class and its political parties in economic and social decision making. Since about 1900, employing the mechanisms of representative democ racy, workers had steadily gained new economic, social and political power. The election of Salvador Allende as President of Chile was the culmination of this process. For the first time in history a society attempted to build socialism by peaceful means. During Allende’s time in office, there was a marked improvement in the conditions of employment, health, housing, land tenure and education of the masses. And as this occurred, the privileged do mestic groups and the dominant foreign interests perceived themselves to be seriously threatened.

They have failed to destroy the consciousness of the Chilean people. The economic plan has had to be enforced. Despite strong financial and political pressure from abroad and efforts to manipulate the attitudes of the middle class by propaganda, popular support for the Allende government increased significantly between 1970 and 1973. In March 1973, only five months before the military coup, there were Congressional elections in Chile. The political parties of the Popular Unity increased their share of the votes by more than 7 percentage points over their totals in the Presidential election of 1970. This was the first time in Chilean history that the political parties supporting the administration in power gained votes dur ing a midterm election. The trend convinced the national bourgeoisie and its foreign supporters that they would be unable to recoup their privileges through the democratic process. That is why they resolved to destroy the demo cratic system and the institutions of the state, and, through an alliance with the military; to seize power by force.

In such a context, concentration of wealth is no acci dent, but a rule; it is not the marginal outcome of a difficult situation—as they would like the world to believe—but the base for a social project; it is not an economic liability but a temporary political success. Their real failure is not their apparent inability to redistribute wealth or to generate a more even path of development (these are not their priorities) but their inability to convince the majority of Chileans that their policies are reasonable and necessary. In short, they have failed to destroy the consciousness of the Chilean people. The economic plan has had to be enforced, and in the Chilean context that could be done only by the killing of thousands, the estab lishment of concentration camps all over the country, the jailing of more than 100,000 persons in three years, the closing of trade unions and neighborhood organizations, and the prohibition of all political activities and all forms of free expression.

While the “Chicago boys” have provided an appearance of technical respectability to the laissez-faire dreams and political greed of the old landowning oligarchy and upper bourgeoisie of monopolists and financial speculators, the military has applied the brutal force required to achieve those goals. Repression for the majorities and “economic freedom” for small privileged groups are in Chile two sides of the same coin.

There is, therefore, an inner harmony between the two central priorities announced by the junta after the coup in 1973: the “destruction of the Marxist cancer” (which has come to mean not only the repression of the political parties of the Left but also the destruction of all labor organizations democratically elected and all opposition, including Christian-Democrats and church organizations), the establishment of a free “private economy” and the control of inflation à la Friedman.

It is nonsensical, consequently, that those who inspire, support or finance that economic policy should try to present their advocacy as restricted to “technical consid erations,” while pretending to reject the system of terror it requires to succeed.


#equitablegrowth #hoistedfromthearchives #politicaleconomy #fascism #notebookslouching #2019-10-28

Note to Self: Industrial Policy in Korea: Readings:

Alice Amsden (1989): Asia's Next Giant https://www.google.com/books/edition/Asia_s_Next_Giant/j0E9qKIqD-cC chs. 1-6...

Nathan Lane (2019): Manufacturing Revolutions: Industrial Policy and Networks in South Korea https://delong.typepad.com/lane-korea.pdf...

L.E. Westphal: (1990): Industrial Policy in an Export Propelled Economy: Lessons from South Korea’s Experience https://delong.typepad.com/files/westphal.pdf

Ha-Joon Chang (1993): The political economy of industrial policy in Korea." Cambridge Journal of Economics 17.2 (1993): 131-157 https://delong.typepad.com/files/chang.pdf

Rodrik, Dani. "Getting interventions right: how South Korea and Taiwan grew rich." Economic Policy 10.20 (1995): 53-107 https://delong.typepad.com/files/rodrik-korea-taiwan.pdf

Continue reading "" »


From October 11, 2018: Worthy Reads

stacks and stacks of books

Worthy Reads from Equitable Growth:

  1. I remember debating Columbia is Glenn Hubbard in Houston about the inheritance tax a few years ago. He claimed that the cultural and educational transmission of wealth from him to his children was more important then inheritance, hence there should be no inheritance taxes. That argument did not seem to make sense to me. And it now looks as though his initial claim that inheritance was less important was wrong: Elisabeth Jacobs and Liz Hipple: Are Today’s Inequalities Limiting Tomorrow’s Opportunities?: “An individual’s place on the economic distribution is supposed to reflect individual effort and talent, not parental resources and privilege. Yet this perspective ignores the mounting evidence of the myriad ways that poverty and economic inequality foreclose equality of opportunity...

  2. I have never understood why the other justices on the Supreme Court do not differ to Justice Breyer on antitrust issues. They really ought to. They do not: Howard Shelanski and Michael Kades: Competitive Edge: Judge Kavanaugh-Would he increase the divide between the public and judicial debate over antitrust enforcement?: "Over the past decade, the Supreme Court has, with one exception that we discuss below, followed a path of reduced enforcement, reflected in decisions weakening prohibitions against vertical restraints...

  3. Our Gabriel Zucman Is getting a very welcome increasing share of global attention for his very important tax haven work. His is a research team very much worth supporting an expanding: Matt O’Brien: Inequality is worse than we know. The super-rich really do avoid a lot of taxes: "On the legal end of the spectrum... companies shift their profits to show up in low-tax jurisdictions.... According to Berkeley economist Gabriel Zucman and his co-researchers... as much as 40 percent of all multinational profits and 50 percent of U.S. ones...

  4. As Hal Varian of Google and Berkeley said a decade ago, the right solution to the housing finance crisis was for everybody in the United States to default on their mortgage and move one house to the right. The policies pursued by the Obama administration wound up being very effective at rescuing banks and their shareholders, option holders, and executives, keeping them from experiencing financial harm. They proved totally ineffective at helping homeowners in distress: Corey Husak: How Not To Help Distressed Mortgage Borrowers: Evidence From The Great Recession In The United States: "The federal government has been criticized by many for failing to provide adequate assistance to U.S. homeowners who were financially devastated by the housing crisis and subsequent Great Recession and its aftermath in the late 2000s. New evidence suggests that even when assistance was given, it was poorly designed...

  5. We do not have to have a society in which the most important economic decision you make in your life is your choice of parents: Lily Batchelder: The “Silver Spoon” Tax: How to Strengthen Wealth Transfer Taxation: "30 percent of the correlation between parent and child incomes—and more than 50 percent of the correlation between the wealth of parents and the wealth of their children— is attributable to financial inheritances. This is more than the impact of IQ, personality, and schooling combined...

Continue reading "From October 11, 2018: Worthy Reads" »


Income and Wealth Distribution, or, Watching Professional Republicans Sell Their Souls Back in 1992: Hoisted from the Archives

Inbox 31 brad delong gmail com Gmail

I have long wanted an undergraduate to write a senior thesis about this episode. I have never found one to advise to do so:

Hoisted from the Archives: The income distribution came on to the stage that is America's public sphere between February 14 and December 12, 1992. And the rhetoric of "X% of gains in per capita income over years Y-Z went to the top W%-iles of the income distribution" became a one in American political-economic discourse over that time period as well. Over those ten months then-New York Times economics reporter Sylvia Nasar wrote eight stories about income inequality in America. All of them were pitched at a high substantive and intellectual level—they would have fit into the New York Times's later Upshot (which has recently refocused at a less analytically-substantive level as concerned with "politics, policy, and everyday life"). This was, needless to say, very unusual for the New York Times.

Sylvia's first story addressed the peculiar fact that the "80's Boom", as Reagan Republicans and the New York Times called it, had seen the poverty rate not diminish but rise. Sylvia attributed that rise to union-busting, and a growing disparity between high- and low-wage jobs springing from a decline in relative manufacturing employment and possibly from boosted high-wage white-collar productivity from computerization. Her second story, on March 5, took a turn. Instead of continuing to investigate the causes of rising poverty and wage stagnation in a decade of supposed boom, it focused on "who had reaped the gains" from "the prosperity of the last decade and a half". It highlighted the "Krugman calculation". It began:

Populist politicians, economists and ordinary citizens have long suspected that the rich have been getting richer. What is making people sit up now is recent evidence that the richest 1 percent of American families appears to have reaped most of the gains from the prosperity of the last decade and a half. An outsized 60 percent of the growth in the average after-tax income of all American families between 1977 and 1989—and an even heftier three-fourths of the gain in average pretax income—went to the wealthiest 660,000 families, each of which had an annual income of at least $310,000 a year...

Continue reading "Income and Wealth Distribution, or, Watching Professional Republicans Sell Their Souls Back in 1992: Hoisted from the Archives" »