Lars E.O.
Svensson, VOX: Re-evaluating the result that the costs of ‘leaning against the
wind’ exceed the benefits. The IMF
and the Federal Open Market Committee have both suggested that the costs of
‘leaning against the wind’ exceed the benefits. This column responds to claims
that the results of the author's research backing up this conclusion could be
overturned. It argues that
the alternative assumptions necessary to overturn the result are unrealistic,
and that the finding that the costs of the policy exceed the benefits therefore
seems to be robust.
Daron Acemoglu,
Pascual Restrepo, NBER: Secular Stagnation? The Effect of Aging on Economic
Growth in the Age of Automation. Several recent theories emphasize the negative effects of an aging
population on economic growth, either because of the lower labor force
participation and productivity of older workers or because aging will create an
excess of savings over desired investment, leading to secular stagnation. We show that there is no such
negative relationship in the data. If anything, countries experiencing more
rapid aging have grown more in recent decades. We suggest that this
counterintuitive finding might reflect the more rapid adoption of automation
technologies in countries undergoing more pronounced demographic changes, and
provide evidence and theoretical underpinnings for this argument.
Jed Kolko, Indeed
Blog: How the Jobs That Immigrants Do Are Changing. We used the Census’s American Community Survey
(ACS), which asks respondents about their employment status, occupation,
birthplace, and citizenship, among many other topics. We analyzed the data for
all immigrants in the U.S. and then focused on those who have been in the
country less than five years. The punchline is that compared with earlier immigrants, recent
immigrants are more educated, more likely to come from Asia rather than Latin
America, and less likely to work in occupations where they might compete
directly with the native-born workers who were most supportive of Trump.
Prakash Loungani,
IMF: Inclusive Growth and the IMF. More inclusive
economic growth demands policies that address the needs of those who lose out …
Otherwise our political problems will only deepen. Trampoline policies
such as job counseling and retraining allow workers to bounce back from job
loss: they help people adjust faster when economic shocks occur, reduce long
unemployment spells and hence keep the skills of workers from depreciating.
While such programs which already exist in many advanced economies, they
deserve further study so that all can benefit from best practice. Safety net
programs have a role to play too. Governments can offer wage insurance for
workers displaced into lower-paying jobs and offer employers wage subsidies for
hiring displaced workers. Programs such as the U.S. earned income tax credit
should be extended to further narrow income gaps while encouraging people to
work.
Michael Chernew et al.,
NBER: Understanding the Improvement in Disability Free Life Expectancy in the
U.S. Elderly Population. This paper
explores changes in healthy lifespan in the U.S. over time and considers
reasons for the changes. First, we show that healthy life increased measurably
in the US between 1992 and 2008. Years of healthy life expectancy at age 65
increased by 1.8 years over that time period, while disabled life expectancy
fell by 0.5 years. The largest improvements in healthy life expectancy come
from reduced incidence and improved functioning for those with cardiovascular
disease and vision problems. Together, these conditions account for 63 percent
of the improvement in disability-free life expectancy. Third and more speculatively, we explore the role
of medical treatments in the improvements for these two conditions. We estimate
that improved medical care is likely responsible for a significant part of the
cardiovascular and vision-related extension of healthy life.
Derek Thompson,
the Atlantic: Trump’s Populism Is a Fiction. The theme of President Donald Trump’s inaugural address was the return
of power to “the people”—the forgotten Americans, the victims of “American
carnage.” It harkened back to his campaign, when Trump presented himself as a
populist who eschewed traditional conservative-liberal orthodoxies. But despite
the speech’s theme of transferring power from the cosmopolitan rich to the
everyman, his
administration’s emerging economic policy would be an unambiguous transfer of
income and power in the opposite direction: from the public to the rich.
Hunt Allcott,
Matthew Gentzkow, NYU/Stanford: Social Media and Fake News in the 2016
Election. We present new evidence on
the role of false stories circulated on social media prior to the 2016 US
presidential election. Drawing on audience data, archives of fact-checking
websites, and results from a new online survey, we find: (i) social media was
an important but not dominant source of news in the run-up to the election,
with 14 percent of Americans calling social media their “most important” source
of election news; (ii) of the known false news stories that appeared in the
three months before the election, those favoring Trump were shared a total of
30 million times on Facebook, while those favoring Clinton were shared eight million
times; (iii) the average American saw and remembered 0.92 pro-Trump fake news
stories and 0.23 pro-Clinton fake news stories, with just over half of those who recalled seeing fake
news stories believing them; (iv) for fake news to have changed the outcome of
the election, a single fake article would need to have had the same persuasive
effect as 36 television campaign ads.
Larry Summers
Blog: Public Infrastructure Investment in the National Interest. The Trump campaign proposals are wholly ill
conceived, I remain convinced that an increased and improved program of public
infrastructure investment would be very much in the American national
interest. The case for public investment
today rests largely on grounds of long run policy and microeconomic efficiency
given the sub-5 percent unemployment rate. Improved infrastructure has benefits
that go well beyond what is picked up in standard rate of return on investment
calculations. There is a particularly compelling case for maintenance
investment. There are important new infrastructure investment projects that
almost certainly have high rates of return. While the case for expanded infrastructure investment
does not depend on Keynesian stimulus or aggregate demand considerations,
secular stagnation risks reinforce the argument for increased public investment.
Martin Wolf, FT:
The economic peril of aggrieved nationalism. Theresa May, the UK’s Conservative prime minister, condemns its
believers as “citizens of the world”, who are citizens of nowhere. The
resentment she evokes is, to a degree, justified. Those who did well out of
globalisation and post-communist transition paid far too little attention to
those who did not. They assumed that a rising tide lifts all boats. They
prospered hugely, often with little apparent justification. They created a financial crisis
that devastated their reputation for probity and competence, with dire
political results. They assumed that bonds of belonging which meant little to
themselves meant little to those left behind. It is not surprising that those
who find the world transformed by social and economic change succumb to
aggrieved nationalism and protectionism.
Torben M.
Andersen, Journal of European Labor Studies: Automatic stabilizers—the
intersection of labour market and fiscal policies. The Great Recession has revived aggregate demand
management policies. Automatic stabilizers are not a result of macro design but
the structure of the social safety net and the taxation system. The
participation tax is a key determinant of the strength of the automatic
stabilizers. Paradoxically, the disincentive effects of high participation
taxes are often discussed at the same time as automatic stabilizers are
praised. The paper
considers the sources of automatic stabilizers and whether they
(un)intentionally have been weakened via structural reforms to strengthen work
incentives. It is considered whether it is possible to maintain strong
automatic stabilizers without jeopardizing incentives via the design of the
social safety net (workfare) or business cycle-dependent unemployment
insurance. The criticism that automatic stabilizers may prolong
downturns is also considered.
Stephan
Kampelmann, François Rycx, Journal of Migration: Wage discrimination against
immigrants: measurement with firm-level productivity data. This paper is one of the first to use
employer-employee data on wages and labor productivity to measure
discrimination against immigrants. We build on an identification strategy
proposed by Bartolucci (Ind Labor Relat Rev 67(4):1166–1202, 2014) and address
firm fixed effects and endogeneity issues through a diff GMM-IV estimator. Our
models also test for gender-based discrimination. Empirical results for Belgium suggest significant wage
discrimination against women and (to a lesser extent) against immigrants. We
find no evidence for double discrimination against female immigrants.
Institutional factors such as firm-level collective bargaining and smaller firm
sizes are found to attenuate wage discrimination against foreigners, but not against
women.
Guido Alfani, VOX:
The top rich in Europe in the long run of history (1300 to present day). Recent research into the share of wealth owned by the
richest households has given us important insights into trends in inequality.
This column shows how we can now estimate the share of wealth owned by the
richest households in Europe, and how many they numbered, from 1300 to the
present day. Throughout
this time, the only significant declines in inequality were the result of the
Black Death and the World Wars.
Ernesto Dal Bo,
Frederico Finan, Olle Folke, Torsten Persson, Johanna Rickne, IIES: Who Becomes
a Politician? Can a democracy
attract competent leaders, while attaining broad representation? Economic
models suggest that free-riding incentives and lower opportunity costs give the
less competent a comparative advantage at entering political life. Also, if
elites have more human capital, selecting on competence may lead to uneven
representation. We examine patterns of political selection among the universe
of municipal politicians in Sweden using extraordinarily rich data on
competence traits and social background for the entire population. We document
four new facts: First, politicians
are on average signicantly smarter and better leaders than the population they
represent. Second, the representation of social background, whether measured by
intergenerational earnings or social class, is remarkably even. Third,
there is at best a weak tradeoff in selection between competence and
representation. Fourth, both material and intrinsic motives matter in
selection, as does screening by political parties.
EurekAlert: Think
chicken -- think intelligent, caring and complex. Chickens are not as clueless or
"bird-brained" as people believe them to be. They have distinct personalities and can
outmaneuver one another. They know their place in the pecking order, and can
reason by deduction, which is an ability that humans develop by the age of
seven. Chicken intelligence is therefore unnecessarily underestimated
and overshadowed by other avian groups. So says Lori Marino, senior scientist
for The Someone Project, a joint venture of Farm Sanctuary and the Kimmela
Center in the USA, who reviewed the latest research about the psychology,
behavior and emotions of the world's most abundant domestic animal.
Le Blog de Thomas
Piketty, Le Monde: Of productivity in France and in Germany. At the start of 2017, with the elections in France in
the Spring and then in Germany in the Autumn, it may prove useful to return to
one of the fundamental issues which plagues discussion at European level, that
is the alleged economic asymmetry between Germany with its reputation as
prosperous and France which is described as on the decline. I use the term ‘alleged’
because, as we shall see, the level of productivity of the German and French
economies – as measured in terms of GDP per hour worked, which is by far most
relevant indicator of economic performance – is almost identical.
Furthermore it is at the highest world level, demonstrating incidentally that
the European social model has a bright future, despite what the Brexiters and
Trumpers of every hue might think.
Jorge Luis García,
James J. Heckman, Duncan Ermini Leaf, María José Prados, NBER: The Life-cycle
Benefits of an Influential Early Childhood Program. This paper estimates the long-term benefits from an
influential early childhood program targeting disadvantaged families. The
program was evaluated by random assignment and followed participants through
their mid-30s. It has
substantial beneficial impacts on health, children's future labor incomes,
crime, education, and mothers' labor incomes, with greater monetized benefits
for males. Lifetime returns are estimated by pooling multiple data sets
using testable economic models. The overall rate of return is 13.7% per annum,
and the benefit/cost ratio is 7.3. These estimates are robust to numerous
sensitivity analyses.
Max Roser,
Institute for New Economic Thinking: The link between health spending and life
expectancy: The US is an outlier. The graph shows
the relationship between what a country spends on health per person and life
expectancy in that country between 1970 and 2014 for a number of rich countries.
If we look at the time trend for each country we first notice that all
countries have followed an upward trajectory – the population lives
increasingly longer as health expenditure increased. But again the US stands out as the country is
following a much flatter trajectory; gains in life expectancy from additional
health spending in the U.S. were much smaller than in the other high-income
countries, particularly since the mid-1980s.
Maria Konnikova,
The New Yorker: America’s Surprising Views on Income Inequality. In 1970, the top ten per cent of the population
earned a third of the total national income. By 2012, it earned half. So one might expect to see a
rising wave of discontent during the past several years, as inequality has
increased sharply. But here’s the strange thing: in polls that have sought to
capture that rise directly, not much has changed. That is, people say they’d be
happier if there were a more equitable distribution of wealth, but they’ve
actually remained just about as happy, even as inequality has gone up. A
huge sense of national frustration did, of course, contribute deeply to the
election of Donald Trump; but, as has been widely noted, his tax policy, for
example, seems highly likely to make the problem of inequality worse. What’s
going on?
Mike Brewer et
al., IFS: 30 hours of free childcare likely to boost parental employment only
slightly. New research published today by researchers
from the Institute for Fiscal Studies, the University of Essex and the
University of Warwick suggests that the government’s plan to extend parents’ entitlement to free childcare
from 15 to 30 hours a week for 3- and 4-year-olds in England is only likely to
have a small impact on parents’ working patterns. This conclusion arises
from looking at how working patterns change when children start primary school.
One can think of this as a moment when entitlement to childcare provided free
of charge from the state increases from 15 hours a week to 30–35 hours a week.
Giovanni Facchini,
Yotam Margalit, Hiroyuki Nakata, VOX: Countering public opposition to
immigration with information campaigns. Far-right parties have made considerable electoral gains around the
world lately, fuelled in part by strong anti-immigration rhetoric. This column
presents the results of an experiment conducted in Japan to assess whether
exposure to positive information about immigration can decrease this public
hostility. Such
information exposure is found to increase an individual’s likelihood of
supporting immigration by between 43% and 72%. This suggests that information
campaigns are a very promising avenue for policymakers aiming to redress
hostility to immigration.
Chris Giles, Sarah
O’Connor, FT: Sir Tony Atkinson, economist and campaigner, 1944-2017. When academic economics was obsessed by free markets
and a ruthless search for efficiency, while simply seeing societies as populated
by multiple copies of one representative individual, the study and measurement
of inequality was deeply unfashionable. Sir Tony Atkinson, who died aged 72 on New Year’s Day,
was the British economist who kept that flame alive through the 1980s and
1990s, surviving to see it return to the centre of economic concerns on both
the political left and right.
Maria Cubel, VOX:
Women in competitive environments: Evidence from chess. Recent explanations for the persistence of both the
gender wage gap and the under-representation of women in top jobs have focused
on behavioural aspects, in particular on differences in the responses of men
and women to competition. This column suggests that it may not be competition
itself that affects women, but the gender of their opponent. Analysis of data from thousands
of expert chess games shows that women are less likely to win compared with men
of the same ability, and that this is driven by women making more errors
specifically when playing against men.
Hugh Eakin, The
New York Review of Books: The Swedish Kings of Cyberwar. Significantly, while WINTERLIGHT was a joint effort
between the NSA, the Swedish FRA, and the British GCHQ, the hacking attacks on computers and computer
networks seem to have been initiated by the Swedes. The FRA was setting up the
implants on targeted computers—known in NSA parlance as “tipping”—to redirect
their signals to the surveillance servers, thus allowing the GCHQ and the NSA
to access their data, in what are called “shots.” At the time of the
April 2013 meeting, the NSA reported that “last month, we received a message
from our Swedish partner that GCHQ received FRA QUANTUM tips that led to 100
shots.”
Gavyn Davies, FT:
How should we compensate the losers from globalisation? The rise in political “populism” in 2016 has forced
macro-economists profoundly to re-assess their attitude towards the basic
causes of the new politics, which are usually identified to be globalisation
and technology. The consensus on the appropriate policy response to these major
issues – particularly the former – seems to be changing dramatically and, as
Gavin Kelly persuasively argues, probably not before time. Unless economists can develop a
rational response to these revolutionary changes, political impatience will
take matters completely out of their hands, and the outcome could be
catastrophic.
Maurice Obstfeld,
IMF: Get on Track with Trade. Trade and
trade policies have not, however, been the only factors behind these
changes—they probably were not even the most important—nor are they the reason
for slower growth. Technological changes as well as idiosyncratic national
developments also have played major roles. The political consensus that drove trade policy over much
of the postwar period will dissipate without a purposeful policy framework that
spreads the risks of economic openness; ensures flexible labor markets
and educated, agile workforces; promotes job matching; improves the functioning
of financial markets; and directly addresses inequality of incomes. This same
framework is needed to address a range of other economic changes, which, like trade,
can harm some and require adjustment within the economy
Danny Leipziger,
VOX: Make globalisation more inclusive or suffer the consequences. Despite
lifting millions out of poverty, globalisation is facing growing political
opposition. This column surveys the successes and failures of globalisation,
and some of the critical policy implications. Globalisation has reached a stage where its benefits have
been captured but its costs have been largely ignored. Going forward,
governments need to address inequality and social inclusion, boost global
investment, and restore confidence.
Dani Rodrik,
Project Syndicate: Don’t Cry Over Dead Trade Agreements. We should not mourn their passing. What purpose do
trade agreements really serve? The answer would seem obvious: countries
negotiate trade agreements to achieve freer trade. But the reality is
considerably more complex. It’s
not just that today’s trade agreements extend to many other policy areas, such
as health and safety regulations, patents and copyrights, capital-account
regulations, and investor rights. It’s also unclear whether they really have
much to do with free trade.
Branko Milanovic,
globalinequality, Should some countries cease to exist? Pushing this logic further, and using the results of
the Gallup poll that show the
percentage of people who desire to move out of their countries, we find that in
the case of unimpeded global migration some countries could lose up to 90
percent of their populations. They may cease to exist: everybody but a few
thousand people might move out. Even the few who might at first remain,
could soon find their lives there intolerable, not least because providing
public goods for a very small population may be exceedingly expensive. So,
what?—it could be asked. Would not disappearance of countries also mean
disappearance of distinct cultures, languages and religions? Yes, but if people
do not care about these cultures, languages and religions, why should they be
maintained?
Eduardo Porter,
NYT: Where Were Trump’s Votes? Where the Jobs Weren’t. Only 472 counties voted for Hillary Clinton on
Election Day. But according to Mark Muro of the Brookings Institution, they
account for 64 percent of the nation’s economic activity. The 2,584 counties
where Mr. Trump won, by contrast, generated only 36 percent of America’s
prosperity. The political divide between high-output and low-output parts of
the country also meshes with the
cleavage between urban America — largely won by Mrs. Clinton — and the vast,
less-populous rural stretches where Mr. Trump racked up large numbers of votes.
Christopher
Ingraham, Washington Post: Today’s teens are way better behaved than you were. Teen
drug and alcohol use has fallen to levels not seen since the height of the drug
war in the 1990s, according to new federal survey data. The Monitoring
the Future survey of about 50,000 high school students found that “considerably
fewer teens reported using any illicit drug other than marijuana in the prior
12 months — 5 percent, 10 percent and 14 percent in grades 8, 10 and 12,
respectively — than at any time since 1991.” The survey's third full year of
data since the first recreational pot shops opened in 2014 shows that changing
attitudes toward marijuana appear to have little effect on teens' inclinations
to use the drug.
Jorge Luis García,
James J. Heckman et al., HCEO: The Life-cycle Benefits of an Influential Early
Childhood Program. This paper
estimates the large array of long-run benefits of an influential early child-
hood program targeted to disadvantaged children and their families. It is
evaluated by random assignment and follows participants through their mid-30s.
The program is a prototype for numerous interventions currently in place around
the world. It has sub-
stantial beneficial impacts on (a) health and the quality of life, (b) the
labor incomes of participants, (c) crime, (d) education, and (e) the labor
income of the mothers of the participants through subsidizing their childcare.
There are substantially greater monetized benefits for males. The overall rate
of return is a statistically significant 13.0% per annum with an associated
benefit/cost ratio of 6.3. These estimates account for the welfare costs of
taxation to finance the program. They are robust to a wide variety of
sensitivity analyses. Accounting for substitutes to treatment available to
families randomized out of treatment shows that boys benefit much less than
girls from low quality alternative childcare arrangements.
MIT Technology
Review: AI Machine Attempts to Understand Comic Books ... and Fails. The results are eyebrow-raising. While humans can predict the
next piece of text or the next image correctly more than 80 percent of the
time, the machines never come close to this level of accuracy. “None of
the architectures outperform human baselines, which speaks to the difficulty of
understanding comics,” say Iyyer and co. “Image features obtained from models
trained on natural images cannot capture the vast variation in artistic styles,
and textual models struggle with the richness and ambiguity of colloquial
dialogue highly dependent on visual contexts.”
Eugene Soltes, The
Atlantic: The Psychology of White-Collar Criminals. Two leading executive headhunters once wrote a book
called Lessons From the Top: The Search for America’s Best Business Leaders
that celebrated 50 titans of industry. Readers were encouraged “to learn from
and pattern themselves” after the leadership qualities displayed by these
executives. Yet within a
few years of the book’s 1999 publication, three of those 50 were convicted of
white-collar crimes and headed to prison, and three more faced tens of millions
of dollars in fines for illicit activity. It was an extraordinary rate of
failure for executives once deemed the “very best—and most successful—business
leaders in America.” I’ve spent much of the last seven years
investigating why so many respected executives engage in white-collar crime.
Why is it that fraud, embezzlement, bribery, and insider trading often seem
like disturbing norms among the upper echelons of business?
John Danaher, The
New Rambler: The Shame of Work. Review of The Refusal of Work: The Theory and
Practice of Resistance to Work, by David Frayne. If ever a book was designed to help you question the value of the work
ethic and look anew at our modern obsession with productivity and promotion,
this is it. Frayne has accomplished something worthy of admiration. He has written the best primer
and introduction to the anti-work philosophy; a fascinating ethnography of
people who actively try to resist work; and has married this to some original
and provocative insights into the contemporary workplace. What’s more,
he has done all this without resorting to the stodgy, jargon-laden prose that
is common among left-wing critics of work. It is all conveyed in a fluid and
assured manner.
