Philip Bunn,
Jeanne Le Roux, Kate Reinold, Paolo Surico. BoE: Do consumers respond in the
same way to good and bad income surprises? If you
unexpectedly received £1000 of extra income this year, how much of it would you
spend? All? Half? None? Now, by how much would you cut your spending if it had
been an unexpected fall in income? Standard economic theory (for example the
‘permanent income hypothesis’) suggests that your answers should be symmetric.
But there are good reasons to think that they might not be, for example in the
face of limits on borrowing or uncertainty about future income. That is backed
up by new survey evidence, which finds that an unanticipated fall in income leads to consumption
changes which are significantly larger than the consumption changes associated
with an income rise of the same size.
Olivier Blanchard
, Guido Lorenzoni, Jean Paul L'Huillier, PIIE: Short-Run
Effects of Lower Productivity Growth: A Twist on the Secular Stagnation
Hypothesis. Despite interest rates being
very close to zero, US GDP growth has been anemic in the last four years
largely due to lower optimism about the future, more specifically to downward
revisions in growth forecasts, rather than legacies of the past. Put simply,
demand is temporarily weak because people are adjusting to a less bright
future. The authors
suggest that downward revisions of productivity growth may have decreased
demand by 0.5 to 1.0 percent a year since 2012. This explanation, if correct,
has important implications for policy and forecasts. It may weaken the case for
secular stagnation, as it suggests that the need for very low interest rates to
sustain demand may be partly temporary. It also implies that, to the
extent that investors in financial markets have not fully taken this
undershooting into account, the current yield curve may underestimate the
strength of future demand and the need for higher interest rates in the future.
Larry Summers, FT:
Revoking trade deals will not help American middle classes: The idea that renegotiating trade agreements will
“make America great again” by substantially increasing job creation and
economic growth swept Donald Trump into office. More broadly, the idea that
past trade agreements have damaged the American middle class and that the
prospective Trans-Pacific Partnership would do further damage is now widely
accepted in both major US political parties. ...The reality is that the impact
of trade and globalisation on wages is debatable and could be substantial. But the idea that the US trade
agreements of the past generation have impoverished to any significant extent
is absurd. ... My judgment is that these effects are considerably smaller than
the impacts of technological progress. A strategy of returning to the
protectionism of the past and seeking to thwart the growth of other nations is
untenable and would likely lead to a downward spiral in the global economy. The
right approach is to maintain openness while finding ways to help workers at
home who are displaced by technical progress, trade or other challenges
Andrés Velasco,
Project Syndicate: How Economic Populism Works. Anti-populists in
the US, the UK, and elsewhere must come to terms with the reality that bad
policies pay off, both economically and politically, long before they become
toxic. Yes, the excessive private and public debt, the loss of export
capacity, and the weakening of institutions harm the economy (and the polity) –
but only in the long run. If critics do not understand that and act accordingly,
populists will have as long (and destructive) a run in the rich countries as
they once had in Latin America.
Michael A.
Clemens, Ethan G. Lewis, Hannah M. Postel, NBER: Immigration Restrictions as
Active Labor Market Policy: Evidence from the Mexican Bracero Exclusion. An important class of active labor market policy has
received little rigorous impact evaluation: immigration barriers intended to
improve the terms of employment for domestic workers by deliberately shrinking
the workforce. Recent advances in the theory of endogenous technical change
suggest that such policies could have limited or even perverse labor-market
effects, but empirical tests are scarce. We study a natural experiment that
excluded almost half a million Mexican ‘bracero’ seasonal agricultural workers
from the United States, with the stated goal of raising wages and employment
for domestic farm workers. We build a simple model to clarify how the
labor-market effects of bracero exclusion depend on assumptions about
production technology, and test it by collecting novel archival data on the
bracero program that allow us to measure state-level exposure to exclusion for
the first time. We cannot
reject the hypothesis that bracero exclusion had no effect on U.S. agricultural
wages or employment, and find that important mechanisms for this result include
both adoption of less labor-intensive technologies and shifts in crop mix.
Gustavo A.
Marrero, Juan Gabriel Rodríguez, Roy Van der Weide, VOX: Unequal opportunities,
unequal growth. Inequality can
be both good and bad for growth. Unequal societies may be holding back one
segment of the population while helping another. This column exploits US data
to argue that inequality
affects negatively the future income growth of the poor and positively that of
the rich. This relationship is largely driven by inequality of
opportunity, which limits the growth prospects at the bottom of the income
distribution.
Alex Gibney, Zero
Days: A
black ops cyber-attack launched by the U.S. and Israel on an Iranian nuclear
facility unleashed malware with unforeseen consequences. The Stuxnet virus
infiltrated its pre-determined target only to spread its infection outward,
ultimately exposing systemic vulnerabilities that threatened the very safety of
the planet. Delve deep into the burgeoning world of digital warfare in
this documentary thriller from Academy Award® winning filmmaker Alex Gibney. A
must-see for everybody, recently on Svtplay.
Tyler Cowen,
Marginal Revolution: Toni Erdmann, misunderstood masterpiece (full of
spoilers). I say the optimal time to
read this post is in the middle of the movie, not before, not after. I’ll put the rest of under the fold…First, Toni Erdmann is one of the most
stimulating and multi-faceted movies I’ve seen in years, utterly unique and
wholly indefinable. An elite
female German management consultant is called in to advise on outsourcing to
Bucharest, and during the course of the movie she discovers she cannot get away
from her father so easily. Most of the core action unfolds after the woman’s
father comes to visit her in Bucharest, and subjects her to an escalating
series of escapades, mostly with co-workers.
At least on the surface, the woman is efficient and worldly but emotionally
stunted. Her father is rude and genuine
and comic and self-destructive with his blundering interventions, unable to
stop offending people, grabbing the attention, and repeatedly undercutting his
daughter’s self-confidence. Everything
has to be about him. As the movie
progresses, however, the daughter learns she and her father are not so
different after all.
Carmen
Reinhart, Project Syndicate: Is the Deflation Cycle Over? Until the global financial crisis of 2008-2009,
deflation had all but disappeared as a concern for policymakers and investors
in the advanced economies, apart from Japan, which has been subject to
persistent downward pressure on prices for nearly a generation. And now
deflationary fears are on the wane again. If 2017 really does mark a broad
reversal of a decade of deflation, it is reasonable to expect that most major central banks will be not be
inclined to overreact if, after a decade or so (longer for Japan) of mostly
downside disappointments, inflation overshoots its target. Furthermore,
the view that higher inflation targets (perhaps 4%) may be desirable (because
they would provide central banks with more space to lower interest rates in the
advent of a future recession) has gained ground in some academic and policy
quarters.
Cecchetti &
Schoenholtz, Money&Banking: When Government Misguides. Governments play favorites. They promote residential
construction by making mortgages tax deductible. They encourage ethanol
production by subsidizing corn. They boost sales of electric cars by offering
tax rebates. These political favors usually diminish, rather than increase,
aggregate income. They’re about distribution, not production. We could stop
here and simply conclude that we are concerned that the Trump Administration has embarked down a road that
will protect high-cost inefficient firms and industries under the guise of
saving jobs. In the short term, this will drive up prices; in the long run, it
won’t save jobs. But the situation is much worse than that. Presidential
threats circumvent orderly legal processes, making the United States a less
attractive place to invest.
Daniel S.
Hamermesh, Katie R. Genadek, Michael Burda, NBER: Racial/Ethnic Differences in Non-Work at
Work. Evidence from the American Time Use Survey 2003-12
suggests the existence of small but statistically significant racial/ethnic
differences in time spent not working at the workplace. Minorities, especially men, spend a greater
fraction of their workdays not working than do white non-Hispanics. These
differences are robust to the inclusion of large numbers of demographic,
industry, occupation, time and geographic controls. They do not vary by
union status, public-private sector attachment, pay method or age; nor do they
arise from the effects of equal-employment enforcement or geographic
differences in racial/ethnic representation. The findings imply that measures
of the adjusted wage disadvantages of minority employees are overstated by
about 10 percent.
Sebastian Galiani,
Matthew Staiger, Gustavo Torrens, NBER:When Children Rule: Parenting in Modern
Families. During the 20th century there
was a secular transformation within American families from a household
dominated by the father to a more egalitarian one in which the wife and the
children have been empowered. This transformation coincided with two major
economic and demographic changes, namely the increase in economic opportunities
for women and a decline in family size. To explain the connection between these
trends and the transformation in family relationships we develop a novel model
of parenting styles that highlights the importance of competition within the
family. The key intuition is that the rise in relative earnings of wives
increased competition between spouses for the love and affection of their children while
the decline in family size reduced competition between children for resources
from their parents. The
combined effect has
empowered children within the household and allowed them to capture an
increasing share of the household surplus over the past hundred years.
Alison L. Booth,
Eiji Yamamura, IZA: Performance in Mixed-Sex and Single-Sex Tournaments: What
We Can Learn from Speedboat Races in Japan. In speedboat racing in Japan, women racers participate and compete in
races under the same conditions as men, and all individuals are randomly
assigned to mixed-gender or single-gender groups for each race. In this paper
we use a sample of over 140,000 observations of individual-level racing records
provided by the Japanese Speedboat Racing Association to examine how
male-dominated circumstances affect women's racing performance. We control for
individual fixed-effects plus a host of other factors affecting performance
(such as starting lane, fitness and weather conditions). Our estimates reveal
that women's race-time is
slower in mixed-gender races than in all-women races, whereas men racer's time
is faster in mixed-gender races than men-only races. In mixed-gender races,
male racers are found to be more 'aggressive' – as proxied by lane-changing –
in spite of the risk of being penalized if they contravene the rules, whereas
women follow less aggressive strategies. We find no difference in
disqualifications between genders. We suggest that gender-differences in
risk-attitudes and over-confidence may result in different responses to the
competitive environment and penalties for rule-breaking, and that gender-identity
also plays a role.
National Geographic: Before the Flood. From Academy Award-winning filmmaker Fisher Stevens
and Academy Award-winning actor, and environmental activist Leonardo DiCaprio,
Before The Flood presents a riveting
account of the dramatic changes now occurring around the world due to climate
change.
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.
Saleem Bahaj,
Jonathan Bridges, Cian O’Neill, Frederic Malherbe, BoE: Making Macroprudential
Hay When the Sun Shines. It’s not just
what you do; it’s when you do it – many decisions in life have “state
contingent” costs and benefits. The payoffs from haymaking depend crucially
upon the weather. Putting fodder away for a rainy day can be quick, cheap and
prudent when skies are blue. But results may take a soggy and unproductive
turn, if poorly timed. The financial climate is similarly important when
assessing the costs and benefits of macroprudential policy changes. We argue
that it is best to build
the countercyclical capital buffer when the macroeconomic sun is shining. We
find strong empirical evidence to support our claim.
Carola Binder,
Quantitative Ease: The Future is Uncertain, but So Is the Past. In many macroeconomic models, inflation perceptions
should be nearly perfect. After all, inflation statistics are publicly available,
and anyone should be able to access them. The Federal Reserve commissioned the
Michigan Survey of Consumers Research Center to survey consumers about their
perceptions of inflation over the past year and over the past 5- to 10-years,
using analogous wording to the questions about inflation expectations. Surprisingly, consumers seem
just as uncertain about past inflation, or even more so, as about future
inflation.
Lawrence H.
Summers, NYT: It’s Time for a Reset. We need to
redirect the global economic dialogue to the promotion of “responsible
nationalism” rather than on international integration for its own sake.
A classic example of a misguided initiative is the effort to promote a
bilateral investment treaty between the United States and China. Even in the
unlikely event that such a treaty could be negotiated, its effect would be to
trade a reduction in America’s ability to control the behavior of Chinese
companies in the United States for increased security for American global
companies when they locate production facilities or otherwise invest in China.
From the point of view of a typical middle-class American voter, the deal is
lose-lose.
David Autor et
al., NBER: Foreign Competition and Domestic Innovation: Evidence from U.S.
Patents. In this paper we empirically
examine how rising import competition from China has affected U.S. innovation.
We confront two empirical challenges in assessing the impact. We map all U.S.
utility patents granted by March 2013 to firm-level data using a novel
internet-based matching algorithm that corrects for a preponderance of false
negatives when using firm names alone. And we contend with the fact that
patenting is highly concentrated in certain product categories and that this
concentration has been shifting over time. Accounting for secular trends in
innovative activities, we find that the impact of the change in import exposure on the change in
patents produced is strongly negative. It remains so once we add an
extensive set of further industry- and firm-level controls. Rising import
exposure also reduces global employment, global sales, and global R&D
expenditure at the firm level. It would appear that a simple mechanism in which
greater foreign competition induces U.S. manufacturing firms to contract their
operations along multiple margins of activity goes a long way toward explaining
the response of U.S. innovation to the China trade shock.
Eduardo Porter,
NYT: A Dilemma for Humanity: Stark Inequality or Total War. Mr. Obama has led the most progressive administration
since Lyndon B. Johnson’s half a century ago, raising taxes on the rich to
expand the safety net for the less fortunate. Still, by the White House’s own
account, eight years of trench warfare in Washington trimmed the top
1-percenters’ share, after taxes and transfers, to only 15.4 percent, from 16.6
percent of the nation’s income. So what does this leave us with? Another world
war, with or without thermonuclear weapons? Let’s hope not. State collapse
looks highly unlikely outside of some bits of sub-Saharan Africa. Revolution?
Little chance, given the absence of any powerful ideological challenge to
capitalism. “The world of
the future is likely to be quite stable and have very high inequality,” Mr.
Scheidel told me. Maybe we should just learn to stop worrying and love it.
David Card, Ana
Rute Cardoso, Patrick Kline, Microeconomic insights: The gender wage gap: how
firms influence women’s pay relative to men. Employers’ pay policies can contribute to the gender wage gap if women
are less likely to work at high-paying firms or if women negotiate worse wage
bargains then men. Analysing data from Portugal’s labour market, this research
finds that differences
among firms can explain up to 20% of the gender wage gap. Women tend to be
employed at less productive firms that offer lower wages to their employees.
Moreover, when women are hired by better-paying firms, their wages rise less
than men, possibly because they are less effective negotiators. These findings
call for renewed attention to equal pay and fair hiring laws.
Deborah M. Gordon,
OECD: Ants, algorithms and complexity without management. The process that generates simple interactions from
colony behavior is what computer scientists call a distributed algorithm. No
single unit, such as an ant or a router in a data network, knows what all the
others are doing and tells them what to do. Instead, interactions between each
unit and its local connections add up to the desired outcome. The
correspondences between the regulation of collective behaviour and the changing
conditions in which it operates might provide insight, and even inspire
thinking about policy, in human social systems.
For ants or
neurons, the network has no content. Studying natural systems can show us how
the rhythm of local interactions creates patterns in the behaviour and
development of large groups, and how such feedback evolves in response to a
changing world.
Joel Mokyr,
Project Syndicate: Is Our Economic Future Behind Us? In fact, pessimism has reigned over economists’
outlooks for centuries. In 1830, the British Whig historian Thomas Macaulay
observed that, “[i]n every age, everybody knows that up to his own time,
progressive improvement has been taking place; nobody seems to reckon on any
improvement in the next generation.” Why, he asked, do people expect “nothing
but deterioration”? Soon, Macaulay’s perspective was vindicated by the dawn of
the railway age. Transformative advances in steel, chemicals, electricity, and
engineering soon followed. When
it comes to our technological future, I would expect a similar outcome. Indeed,
I would go so far as to say, “We ain’t seen nothin’ yet.” Technological
advances will create a tailwind of hurricane-like proportions to the world’s
most advanced economies.
Robert J. Shiller,
Economic View: Trump, and Great Business Ideas for America. A businessman with a lifetime of experience in
management has been elected president of the United States. Donald J. Trump’s
administration may be viewed as an experiment — an opportunity to discover
whether one particular businessman’s perspective and skills will be assets in
governing a nation. A
business-oriented president could be helpful in this intellectual world, too,
by taking actions like doubling the budget for the National Science Foundation,
which was created in 1950 when Harry S. Truman was president, and infusing the
National Institutes of Health, the National Endowment for the Arts and the
National Endowment for the Humanities with more cash. In the best of
outcomes, Mr. Trump will find a way to live up to this opportunity in the
coming years, carefully fulfilling a promise to bring in the “best and most
serious people” in the business community rather than the most loyal.
Eduardo Porter,
NYT: Earth Isn’t Doomed Yet. The Climate Could Survive Trump Policies. It’s certainly possible that a Trump administration
will drop the Clean Power Plan and renege on the Paris accord. But as long as it keeps the
nation’s nuclear power plants online, continues tax incentives for wind and
solar energy and stays out of the way of the shale energy revolution, the U.S.
might outperform the commitments that the Obama administration made in Paris.
For all his promises to bring back coal jobs in Appalachia, Mr. Trump might be
drawn in a different direction by his own objectives of promoting natural gas
and achieving energy independence. If he gives those goals high priority, he
could well end up pursuing policies that would ultimately lower carbon
emissions.
Justin Fox,
Bloomberg: From Peak Oil to Peak Oil Demand in Just Nine Years. Simon Henry, the chief financial officer of Royal
Dutch Shell, recently predicted a demand peak "between five and 15 years
hence.” And as Bloomberg's Javier Blas and Laura Blewitt pointed out last week,
even the IEA thinks that demand from passenger cars, long the biggest users of
oil, has already peaked. So that's pretty exciting! The peaking of oil demand would mark a major
historic turning point.
Ted Nordhaus, Jessica Lovering, The Breakthrogh: Does
Climate Policy Matter? The results as
elaborated below have been decidedly mixed. For the most part, emissions signals from climate
policies have consistently been overwhelmed by exogenous macro-economic and technological
developments. The impact of climate policies has proven difficult to
disentangle from other emissions drivers such as population growth, economic
expansions and recessions, the collapse of the former Soviet Union, German
reunification, the shale revolution in the United States and the shuttering of
large nuclear fleets in Japan and Germany, to name just a few prominent factors
and examples.
Nouriel Roubini,
Project Syndicate: The Taming of Trump. But it is actually more likely that Trump will pursue pragmatic,
centrist policies. For starters, Trump is a businessman who relishes the “art
of the deal,” so he is by definition more of a pragmatist than a blinkered
ideologue. His choice to run as a populist was tactical, and does not
necessarily reflect deep-seated beliefs. Indeed, Trump is a wealthy real-estate
mogul who has lived his entire life among other rich businessmen. He is a savvy
marketer who tapped into the political zeitgeist by pandering to working-class
Republicans and “Reagan Democrats,” some of whom may have supported Vermont
Senator Bernie Sanders in the Democratic primary. This allowed him to stand out
in a crowded field of traditional pro-business, pro-Wall Street, and
pro-globalization politicians. Once in office, Trump will throw symbolic red meat to his supporters
while reverting to the traditional supply-side, trickle-down economic policies
that Republicans have favored for decades.
Andrew Prokop,
VOX: Will economic populism lead Democrats to victory? Senate results should make us skeptical. Interestingly
enough, in two of those
crucial Midwestern states that flipped to Trump, Democratic Senate candidates
campaigned on economically populist platforms — but they did notably worse than
Hillary Clinton. Russ Feingold underperformed Clinton by 2.4 points in
Wisconsin, and Ted Strickland underperformed her by 12.8 points in Ohio. Feingold
amassed a populist record of challenging big money and special interests when
he was in the Senate, and Strickland harshly condemned trade deals during his
campaign against Rob Portman (who served as George W. Bush’s US trade
representative).
Kenneth M. Langa,
JAMA: A Comparison of the Prevalence of Dementia in the United States in 2000
and 2012. The aging of the US
population is expected to lead to a large increase in the number of adults with
dementia, but some recent studies in the United States and other high-income
countries suggest that the age-specific risk of dementia may have declined over
the past 25 years. We used data from the Health and Retirement Study (HRS), a
nationally representative, population-based longitudinal survey of individuals
in the United States 65 years or older from the 2000. The prevalence of dementia in the United States
declined significantly between 2000 and 2012. An increase in educational
attainment was associated with some of the decline in dementia prevalence, but
the full set of social, behavioral, and medical factors contributing to the
decline is still uncertain.
Jessi Hempel,
Backchannel: According to Snopes, Fake News Is Not the Problem. But as managing editor of the fact-checking site
Snopes, Brooke Binkowski believes Facebook’s perpetuation of phony news is not
to blame for our epidemic of misinformation. “It’s not social media that’s the
problem,” she says emphatically. The misinformation crisis, according to
Binkowski, stems from something more pernicious. In the past, the sources of accurate information were
recognizable enough that phony news was relatively easy for a discerning reader
to identify and discredit. The problem, Binkowski believes, is that the public
has lost faith in the media broadly.
International
Number Ones. Every country is the best at something: Even if it’s a bad thing, like murder, child
marriages or spam email. The aptly-named Information is Beautiful website has
sifted through piles of data from the UN, the CIA, the Guardian and a bunch of
other places to compile a
world map that awards a gold star to just about every country on the planet.
Patrick Schneider,
BoE: There are two productivity puzzles. Much has been written about the productivity puzzle. But there are actually two
puzzles apparent in the data – one in the level that hit at the crisis and the
other in the growth rate, which is a more recent phenomenon – and they could be
driven by completely different sources. Distinguishing between the two
puzzles is important precisely because of these potential differences – if
anyone analyses the puzzle as a whole looking for the force driving it, the
actual underlying variety will confound our estimates of the relative
importance of these drivers.
Thomas Piketty,
The Guardian: We must rethink globalization, or Trumpism will prevail. Let it be said at once: Trump’s victory is primarily due to the explosion in
economic and geographic inequality in the United States over several decades
and the inability of successive governments to deal with this. It is
time to change the political discourse on globalization: trade is a good thing,
but fair and sustainable development also demands public services,
infrastructure, health and education systems. In turn, these themselves demand
fair taxation systems. If we fail to deliver these, Trumpism will prevail.
Simen Markussen, Knut Røed, IZA: Leaving Poverty
Behind? The Effects of Generous Income Support Paired with Activation. We evaluate a comprehensive activation program in
Norway targeted at hard-to-employ social assistance claimants with reduced work
capacity. The program offers a combination of tailored rehabilitation, training
and job practice, and a generous, stable, and non-meanstested benefit. Its main
aims are to mitigate poverty and subsequently promote selfsupporting employment.
Our evaluation strategy exploits a geographically staggered program introduction,
and the causal effects are
identified on the basis of changes in employment prospects that coincide with
local program implementation in a way that correlates with the predicted
probability of becoming a participant. We find that the program raised
employment prospects considerably.
David M. Cutler,
Wei Huang, Adriana Lleras-Muney, NBER: Economic Conditions and Mortality:
Evidence from 200 Years of Data. Using data covering over 100 birth-cohorts in 32 countries, we examine
the short- and long-term effects of economic conditions on mortality. We find that small, but not
large, booms increase contemporary mortality. Yet booms from birth to age 25,
particularly those during adolescence, lower adult mortality. A simple
model can rationalize these findings if economic conditions differentially
affect the level and trajectory of both good and bad inputs into health.
Indeed, air pollution and alcohol consumption increase in booms. In contrast,
booms in adolescence raise adult incomes and improve social relations and
mental health, suggesting these mechanisms dominate in the long run.
Justin R. Pierce
and Peter K. Schott, FED: Trade Liberalization and Mortality: Evidence from
U.S. Counties. We investigate
the impact of a large economic shock on mortality. We find that counties more exposed to a
plausibly exogenous trade liberalization exhibit higher rates of suicide and
related causes of death, concentrated among whites, especially white males.
These trends are consistent with our finding that more-exposed counties
experience relative declines in manufacturing employment, a sector in which
whites and males are disproportionately employed. We also examine other causes
of death that might be related to labor market disruption and find both positive
and negative relationships. More-exposed counties, for example, exhibit lower
rates of fatal heart attacks.
Christopher
Chabris, WSJ: Does Chess Make You Smarter? To test the independent effect of playing chess, the Educational
Endowment Foundation in the United Kingdom sponsored an experiment last year in
which fifth-grade classrooms in 100 schools were randomly chosen either to
incorporate chess lessons into their regular schedule or to continue
instruction as usual. The
students weren’t given IQ tests at the end of the year, but their performance
in math, science and reading was evaluated. Those who had studied chess did no
better than those who had not. A similar but slightly less rigorous 2011
study in Italy found, however, that adding chess instruction to third-grade
classrooms improved the performance of students on math tests.
Lynn Vavreck, NYT:
This Election Was Not About the Issues. Blame the Candidates. I compared the content of campaign ads with the
content of news articles about two specific topics: candidate traits or
characteristics, and the economy or jobs. Both the candidates and news organizations spent more
time discussing the candidates’ fitness for office (or lack of it) than they
did the nation’s economy. And the imbalance grew more lopsided as the election
approached. Using analytic tools provided by Crimson Hexagon, I
categorized the campaign news coverage of 23 media outlets. This consisted of
four broadcast networks; three cable news networks; National Public Radio and
Hugh Hewitt on the radio; two online news sites; and 12 newspapers. I
specifically searched for news about Mrs. Clinton’s campaign and her email
server or her campaign and WikiLeaks, and several controversies connected to
Mr. Trump’s campaign. From this point, 53 percent of the campaign articles
mentioning either controversies or the economy discuss Mrs. Clinton’s email,
while only 6 percent mention her alongside jobs or the economy. As for Mr.
Trump, 31 percent mention his entanglements, while 10 percent mention him
related to jobs and the economy.
