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A Lazy New Year's Eve Morn on Twitter...

School of Athens

Brad DeLong: Gee, I Have Argued Myself From Half-Agreeing With @EconMarshall To 90% Agreeing With Him, Haven’t I?_:

Suresh Naidu: Sorry that came out wrong, deleted. Straightforward: a substantial amount of economic power and inefficiency is not eliminated by deconcentration/free entry. Not clear, lots of problems are made worse by free entry/competition. Low margins mean harder to unionize. Innovation is done by big firms. On simple efficiency grounds things can get worse in market with advantageous selection (eg loans) or with any negative ext. It depends!

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Mike Konczal: If we are worried about margins being too low, boy do I have exciting news for you:

Sure, but between that, Tobin's Q, "profit share", consistent rate of return under declining real rates, and the break of investment and profitability, something is broken. One can contest any of the individual methods, but together they paint a clear picture.

Suresh Naidu: The " always more competition" fix implies we want to expand output but it is not clear we do in every market (eg airline monopoly might be 10th best emissions regulation).

(((E. Glen Weyl))): 10th best reasoning is fine for policy technocrats, but I think a pretty poor basis for thinking about imaginaries for broad social change and democratic movement building. Imaginaries that move us beyond monopolistic corporate forms, but using market mechanisms, seem promising. I am talking about building coalitions and democratic discourse rather than just being technocratic experts.

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Not Only No Wage But Minimal Investment Boosts from Trump-McConnell-Ryan...

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The so brilliant as to be goddess-like Chye-Ching Huang gets this one, I think, wrong: In response to: Jared Bernstein: "For the [Trump-McConnell-Ryan tax] cuts to have more than near-term growth impacts, they’d have to boost biz investment a lot more than we’ve seen so far, though these are early days. Both WSJ and Slate show “muted” investment results..." She writes: Chye-Ching Huang: "My concern is the frame that "growth' is what we should be focused on. If what we care about is how workers are doing—and GOP lawmakers claimed the 2017 tax law would help workers—we should focus on the metric that directly shows how they're doing! If the claimed point of tax cuts for corporations was to raise wages, we should first and foremost look at real wage rates to assess the results...

But those economists shilling for Trump-McConnell-Ryan committed not just to wage increases, but to a particular mechanism for wage increases: (1) U.S. a small open economy -> (2) tax cuts produce a huge jump in investment -> (3) faster growth -> (4) factor shares revert -> (5) higher wages.

To see whether this argument makes sense we can—and should—look at this causal mechanism at every one of its five steps.

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Would Small Minimum Wage Increases Raise or Have No Effect on Employment?

Il Quarto Stato

That is the current question—would (small) minimum wage increases have no effect on employment because labor-supply curves are steep, or would they boost employment by curbing employers with monopsony power from pushing both wages and employment below their competitive equilibirum values? Yet you would not know it from the very sharp and good-hearted ex-New York Times labor beat reporter Steven Greenhouse. What is he doing? He is, I think, reflexively saying "both sides!": Steven Greenhouse: "Some argue that it's foolish to support a higher minimum because it could reduce employment. But there's a huge debate among economists on this. One school—see David Neumark—finds that a higher minimum reduces employment. The other—see Arin Dube—finds little effect on employment...

Now this is simply wrong. The majority of economists believe that raising the minimum wage from its current level would significantly boost the incomes of the working poor and have little adverse effect on employment. A large minority of economists believe that raising the minimum wage would actually increase employment—that employers currently use their monopsony power to push wages and employment below their competitive equilibrium values, and that a higher minimum wage would reduce their ability to do this and so boost both. The majority and the large minority all, however, agree that there is uncertainty here. It is only a small minority of economists who follow David Neumark on this—who are confident that a higher minimum wage now would have a noticeable negative effect on employment. Thus Steve gets it wrong.

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