JANUARY 4 2017

J. Bradford DeLong, Project Syndicate: Why Low Inflation Is No Surprise. The persistence of low inflation in developed countries in recent years has confounded central bankers and economic policymakers, because they believe that declining unemployment should drive up aggregate demand, and thus prices. But what if many of the assumptions underlying the conventional wisdom about inflation no longer apply? Those who have used the prevailing economic fable about the 1970s to predict upward outbreaks of inflation in the 1990s, the 2000s, and now the 2010s have all been proven wrong. Why, then, does the narrative still have such a hold on us today?

Òscar Jordà et al., VOX: The rate of return on everything. The rate of return on capital plays a pivotal role in shaping current macroeconomic debates. This column presents findings from a new dataset covering returns of major asset classes in the advanced economies over the last 150 years. The data offer new insights on several long-standing puzzles in economics, and uncover new relationships that seem at odds with some fundamental economic tenets.

Charles R. Hulten, NBER: The Importance of Education and Skill Development for Economic Growth in the Information Era. The neoclassical growth accounting model used by the BLS to sort out the contributions of the various sources of growth in the U.S. economy accords a relatively small role to education. This result seems at variance with the revolution in information technology and the emergence of the “knowledge economy”, or with the increase in educational attainment and the growth in the wage premium for higher education. This paper revisits this result using “old fashioned” activity analysis, rather than the neoclassical production function, as the technology underlying economic growth. An important feature of this activity-based technology is that labor and capital are strong complements, and both inputs are therefore necessary for the operation of an activity. The composition of the activities in operation at any point in time is thus a strong determinant of the demand for labor skills, and changes in the composition driven by technical innovation are a source of the increase in the demand for more complex skills documented in the literature. A key result of this paper is that the empirical sources-of-growth results reported by BLS could equally have been generated by the activity-analysis model. This allows the BLS results to be interpreted in a very different way, one that assigns a greater importance to labor skills and education.

Nicholas A. Valentino et al., British Journal of Political Science: Economic and Cultural Drivers of Immigrant Support Worldwide. Employing a comparative experimental design drawing on over 18,000 interviews across eleven countries on four continents, this article revisits the discussion about the economic and cultural drivers of attitudes towards immigrants in advanced democracies. Experiments manipulate the occupational status, skin tone and national origin of immigrants in short vignettes. The results are most consistent with a Sociotropic Economic Threat thesis: In all countries, higher-skilled immigrants are preferred to their lower-skilled counterparts at all levels of native socio-economic status (SES). There is little support for the Labor Market Competition hypothesis, since respondents are not more opposed to immigrants in their own SES stratum. While skin tone itself has little effect in any country, immigrants from Muslim-majority countries do elicit significantly lower levels of support, and racial animus remains a powerful force.

Patrick Honner, Wired: Why Symmetry Continues to Beguile Mathematicians. 30 years later, string theorists—physicists studying how all fundamental forces and particles might be explained by tiny strings vibrating in hidden dimensions—are looking to connect the monster to their physical questions. What is it about this collection of more than 1053 elements that excites both mathematicians and physicists? The study of algebraic groups like the monster helps make sense of the mathematical structures of symmetries, and hidden symmetries offer clues for building new physical theories. Group theory in many ways epitomizes mathematical abstraction, yet it underlies some of our most familiar mathematical experiences. Let’s explore the basics of symmetries and the algebra that illuminates their structure.

Evan Osnos, The New Yorker: Making China Great Again. As Donald Trump surrenders America’s global commitments, Xi Jinping is learning to pick up the pieces. In the city of Shenzhen, the local government uses facial recognition to deter jaywalkers. (At busy intersections, it posts their names and I.D. pictures on a screen at the roadside.) In Beijing, the government uses facial-recognition machines in public rest rooms to stop people from stealing toilet paper; it limits users to sixty centimetres within a nine-minute period.

Yves Smith, Naked Capitalism: How Nutrition “Science” Made the US and Other Countries Fatter. The nutrition “scientists” are typical of how science operates, that it is a social enterprise, where dominant personalities, group-think, pressures to conform, fear of admitting to mistakes, create intellectual inertia. The difficulty of holding science to truly scientific standards, the pressure on young researchers to produce (and therefore over-hype or even fabricate) important findings, and in recent decades, the too-often successful efforts of industry groups to pay for flattering studies, all have eroded the image of science in the public eye, even before you get to attacks by corporate interests when scientists announce results that they see as harmful to their commercial interests. Thus when a “science” that barely deserves the name like nutrition science spectacularly blows up, and drug “research” that barely deserves the name because it is so badly manipulated by Big Pharma deservedly tarnishes the image of science, it makes it all the easier for the likes of Big Oil to foster doubt in the scientific basis of climate change. So the cost of decades of bad dietary advice is even higher than it seems.