FEBRUARY 17 2017

John Fernald, Robert E. Hall, James H. Stock, Mark W. Watson, San Francisco FED: The Disappointing Recovery in U.S. Output after 2009. U.S. output has expanded only slowly since the recession trough in 2009, counter to normal expectations of a rapid cyclical recovery. Removing cyclical effects reveals that the deep recession was superimposed on a sharply slowing trend in underlying growth. The slowing trend reflects two factors: slow growth of innovation and declining labor force participation. Both of these powerful adverse forces were in place before the recession and, thus, were not the result of the financial crisis or policy changes since 2009.

Gregory Mankiw, NYT: Why Economists Are Worried About International Trade. After analyzing the data, Mr. Frankel and Mr. Romer concluded that “a rise of one percentage point in the ratio of trade to G.D.P. increases income per person by at least one-half percent.” In other words, nations should take the theories of Smith, Ricardo and Melitz seriously. To be sure, expanding trade hurts some people in the short run, especially those in import-competing sectors who have to find new jobs. That fact may call for a robust safety net and effective retraining. But it does not undermine the conclusion that free trade raises average living standards. That is the theory and evidence regarding international trade. I don’t expect this academic work to persuade Mr. Trump. But he is said to pay more attention to briefings that contain his own name. So let’s return to Adam Smith’s birthplace and ponder these questions: Should we impose a tariff on Americans vacationing at Scotland’s Trump International Golf Links? Or should vacationers make their consumption choices free from the heavy hand of government?

Menzie Chinn, Economfact: Threats to U.S. Agriculture from U.S. Trade Policies. The Trump Administration initiated a process of renegotiating the North American Free Trade Agreement (NAFTA) with Canada and Mexico, which includes the option of exiting the deal altogether. In addition, the United States has started a series of investigations of unfair practices leveled against China, some of which have already resulted in the imposition of new tariffs. These trade policy initiatives threaten agricultural exports both because of the potential increase of tariffs on exports to Canada and Mexico that would result from a withdrawal from NAFTA as well as the very real threat of retaliation in response to other proposed policies.

Susanne Frick, Andrés Rodríguez-PoseVOX: Urban concentration and economic growth. Urban concentration is typically deemed to lead to greater national economic growth. This column challenges this view, using an original dataset covering 68 countries over the past three decades. Urban concentration levels have decreased or remained stable on average, though these averages hide widely diverging trends across countries. Although concentration has been beneficial for high-income countries, this hasn’t been the case for for developing countries.

Tim Harford, The Undercover Economist: What We Get Wrong About Technology. Blade Runner (1982) is a magnificent film, but there’s something odd about it. The heroine, Rachael, seems to be a beautiful young woman. In reality, she’s a piece of technology — an organic robot designed by the Tyrell Corporation. Los Angeles police detective Rick Deckard knows; in Rachael, Deckard is faced with an artificial intelligence so beguiling, he finds himself falling in love. Yet when he wants to invite Rachael out for a drink, what does he do? He calls her up from a payphone. There is something revealing about the contrast between the two technologies — the biotech miracle that is Rachael, and the graffiti-scrawled videophone that Deckard uses to talk to her. It’s not simply that Blade Runner fumbled its futurism by failing to anticipate the smartphone. That’s a forgivable slip, and Blade Runner is hardly the only film to make it.

Adam Davidson, The New Yorker: Money, Power, and Deer Urine. How regulators start to serve special interests. Deer farming doesn’t require as much acreage as cows or crops, and there’s little need for technology. All you have to do is throw up some fences, get pregnant does, and buy feed (the deer like beans and corn). There are roughly ten thousand deer farms in North America, and some thirty per cent are owned by the Amish. The deer are usually raised for venison or hunting, but Lapp found another specialty: he is one of America’s premier producers of deer urine. Lapp, along with the deer-farming industry as a whole, is facing a crisis in the form of chronic wasting disease, a plague that attacks white-tailed deer, elk, moose, reindeer, and other members of the cervid family. The risk-mitigation plan, like all regulation, isn’t based purely on science; it also takes into account politics and economics. The plan’s disparate treatment of urine and meat is an example of what economists call regulatory capture: the process by which regulators, who are supposed to pursue solely the public interest, instead become solicitous of the very industries they regulate.