Martin S. Feldstein, NBER: Why is Growth better in the United States than in other Industrial Countries. Although the official statistics imply that the rate of growth of real GDP in the United States has declined in recent years, it has still been substantially higher than the real growth rates in Europe and the other industrial countries, leading to higher real per capita incomes. In 2015, real GDP per capita was $56,000 in the United States. On a purchasing power basis, the real GDP per capita in that same year was only $47,000 in Germany, $41,000 in France and the United Kingdom, and just $36,000 in Italy. I can think of ten different features that distinguish the United States from other industrial economies. Of course, not all of these features are present to a greater extent in the United States than in all other industrial countries. Moreover, I will only list and describe these features but cannot rank them in order of their importance. And I believe that these features interact in contributing to stronger growth and are not merely additive.

Esther Duflo, NBER: The Economist as Plumber. As economists increasingly help governments design new policies and regulations, they take on an added responsibility to engage with the details of policy making and, in doing so, to adopt the mindset of a plumber. Plumbers try to predict as well as possible what may work in the real world, mindful that tinkering and adjusting will be necessary since our models gives us very little theoretical guidance on what (and how) details will matter. This essay argues that economists should seriously engage with plumbing, in the interest of both society and our discipline.

Branko Milanovic, Globalinequality: Why 20th century tools cannot be used to address 21st century income inequality? The remarkable period of reduced income and wealth inequality in the rich countries, roughly from the end of the Second World War to the early 1980s, relied on four pillars: strong trade unions, mass education, high taxes, large government transfers. Since the increase of inequality twenty or more years ago, the failed attempts to stem its further rise have relied on trying, or at least advocating, the expansion of all or some of the four pillars. But neither of them will do the job in the 21st century.

George J. Borjas, NBER: The Earnings of Undocumented Immigrants. Using newly developed methods that impute undocumented status for foreign-born persons sampled in microdata surveys, the study documents a number of findings. First, the age-earnings profile of undocumented workers lies far below that of legal immigrants and of native workers, and is almost perfectly flat during the prime working years. Second, the unadjusted gap in the log hourly wage between undocumented workers and natives is very large (around 40 percent), but half of this gap disappears once the calculation adjusts for differences in observable socioeconomic characteristics, particularly educational attainment. Finally, the adjusted wage of undocumented workers rose rapidly in the past decade. As a result, there was a large decline in the wage penalty associated with undocumented status. The relatively small magnitude of the current wage penalty suggests that a regularization program may only have a modest impact on the wage of undocumented workers.

Mark L. Egan, Gregor Matvos, Amit Seru, NBER: When Harry Fired Sally: The Double Standard in Punishing Misconduct. We examine gender discrimination in the financial advisory industry. We study a less salient mechanism for discrimination, firm discipline following missteps. There are substantial differences in the punishment of misconduct across genders. Although both female and male advisers are disciplined for misconduct, female advisers are punished more severely. Following an incidence of misconduct, female advisers are 20% more likely to lose their jobs, and 30% less likely to find new jobs relative to male advisers. Females face harsher punishment despite engaging in less costly misconduct and despite a lower propensity towards repeat offenses. Evidence suggests that the observed behavior is not driven by productivity differences across advisers. Rather, we find supporting evidence for taste-based discrimination.

Zack Beauchamp, VOX: No easy answers: why left-wing economics is not the answer to right-wing populism. Democrats would only be able to defeat Trump and others like him if they adopted an anti-corporate, unabashedly left-wing policy agenda. The answer to Trump’s right-wing populism, Sanders argued, was for the left to develop a populism of its own. The problem is that a lot of data suggests that countries with more robust welfare states tend to have stronger far-right movements. Providing white voters with higher levels of economic security does not tamp down their anxieties about race and immigration — or, more precisely, it doesn’t do it powerfully enough. For some, it frees them to worry less about what it’s in their wallet and more about who may be moving into their neighborhoods or competing with them for jobs.

Elise Bohan, Big Think: Do Smarter People Look More Intelligent? It Depends on Their Gender. Yes, smarter people look more intelligent. But not all people - just men. Kleisner discovered that “both men and women were able to accurately evaluate the intelligence of men by viewing facial photographs.” But strangely, “no relationship between perceived intelligence and IQ was found for women.” Why would this be? The study suggests that it may be beneficial for men to signal intelligence honestly. Kleisner speculates that such signalling might play well with females' "mixed mating strategy."

MARS 9 2017

Heidi Glenn, NPR: America's 'Complacent Class': How Self-Segregation Is Leading To Stagnation. In a new book, The Complacent Class, economist Tyler Cowen argues that the United States is standing still. People have grown more risk averse and are reluctant to switch jobs or move to another state, he says, and the desire to innovate — to grow and change — has gone away. Cowen says he's worried that more and more communities are self-segregating — by income, education or race. "We're making decisions that are rational and even pleasurable from an individual point of view, but when everyone in society behaves this way — to cement in their own security, their own mobility — social mobility as a whole goes down, inequality goes up, many measures of segregation go up," he says. "And ultimately a bill for this comes due."

Lawrence Summers, FT: Robots are wealth creators and taxing them is illogical. The Microsoft co-founder is right about the gravity of the problem and need for action, but he is profoundly misguided in his proposed solution — and in ways that point up problems with the current public debate.First, I cannot see any logic to singling out robots as job destroyers. What about kiosks that dispense aeroplane boarding passes? Word processing programmes that accelerate the production of documents? Second, much innovative activity, even of a robot-like variety, involves producing better goods and services rather than simply extracting more output from the same input. Third, and perhaps most fundamentally, why tax in ways that reduce the size of the pie rather than ways that assure that the larger pie is well distributed? Imagine that 50 people can produce robots who will do the work of 100. A sufficiently high tax on robots would prevent them from being produced. Surely it would be better for society to instead enjoy the extra output and establish suitable taxes and transfers to protect displaced workers?

Mauricio Armellini, Tim Pike, BoE: Should economists be more concerned about Artificial Intelligence? This post highlights some of the possible economic implications of the so-called “Fourth Industrial Revolution” — whereby the use of new technologies and artificial intelligence (AI) threatens to transform entire industries and sectors. Some economists have argued that, like past technical change, this will not create large-scale unemployment, as labour gets reallocated. However, many technologists are less optimistic about the employment implications of AI.  In this blog post we argue that the potential for simultaneous and rapid disruption, coupled with the breadth of human functions that AI might replicate, may have profound implications for labour markets.  We conclude that economists should seriously consider the possibility that millions of people may be at risk of unemployment, should these technologies be widely adopted.

Eric Figueroa, CBPP: Unauthorized Immigrants Pay Greater Share of Income in State and Local Taxes Than Top Earners. Unauthorized immigrants pay a larger share of their income in state and local taxes than the nation’s top earners, and immigration reform would improve state and local finances across the country, a new report from the Institute on Taxation and Economic Policy (ITEP) finds.

Bernt Bratsberg, Oddbjørn Raaum, Knut Røed, IZA: Immigrant Labor Market Integration across Admission Classes. We examine patterns of labor market integration across immigrant groups. The study draws on Norwegian longitudinal administrative data covering labor earnings and social insurance claims over a 25-year period and presents a comprehensive picture of immigrant-native employment and social insurance differentials by admission class and by years since entry. For refugees and family immigrants from low-income source countries, we uncover encouraging signs of labor market integration during an initial period upon admission, but after just 5-10 years, the integration process goes into reverse with widening immigrant-native employment differentials and rising rates of immigrant social insurance dependency. Yet, the analysis reveals substantial heterogeneity within admission class and points to an important role of host-country schooling for successful immigrant labor market integration.

Robert W. Fairlie, Ariel Kalil, IZA: The Effects of Computers on Children's Social Development and School Participation: Evidence from a Randomized Control Experiment. Concerns over the perceived negative impacts of computers on social development among children are prevalent but largely uninformed by plausibly causal evidence. We provide the first test of this hypothesis using a large-scale randomized control experiment in which more than one thousand children attending grades 6-10 across 15 different schools and 5 school districts in California were randomly given computers to use at home. Children in the treatment group are more likely to report having a social networking site, but also report spending more time communicating with their friends and interacting with their friends in person. There is no evidence that computer ownership displaces participation in after-school activities such as sports teams or clubs or reduces school participation and engagement.

Hannah Devlin, the Guardian: How much pee is in our swimming pools? New urine test reveals the truth.  It is an antisocial act that normally goes under the radar, but many swimmers have long suspected the truth: people are peeing in the pool. Now scientists have been able to confirm the full extent of offending for the first time, after developing a test designed to estimate how much urine has been covertly added to a large volume of water. The test works by measuring the concentration of an artificial sweetener, acesulfame potassium (ACE), that is commonly found in processed food and passes through the body unaltered. After tracking the levels of the sweetener in two public pools in Canada over a three-week period they calculated that swimmers had released 75 litres of urine – enough to fill a medium-sized dustbin – into a large pool (about 830,000 litres, one-third the size of an Olympic pool) and 30 litres into a second pool, around half the size of the first.

MARS 2 2017

Alberto Alesina, Gualtiero Azzalini, Carlo Favero, Francesco Giavazzi, Armando Miano, NBER Is it the "How" or the "When" that Matters in Fiscal Adjustments?: Using data from 16 OECD countries from 1981 to 2014 we find that the composition of fiscal adjustments is much more important than the state of the cycle in determining their effects on output. Adjustments based upon spending cuts are much less costly than those based upon tax increases regardless of whether they start in a recession or not. Our results appear not to be systematically explained by different reactions of monetary policy. However, when the domestic central bank can set interest rates -- that is outside of a currency union -- it appears to be able to dampen the recessionary effects of tax-based consolidations implemented during a recession. This finding could help understand the recessionary effects of European "austerity, which was mostly tax based and implemented within a currency union.

Annie Low, NYT: The Future of Not Working. As automation reduces the need for human labor, some Silicon Valley executives think a universal income will be the answer — and the beta test is happening in Kenya. Silicon Valley has recently become obsessed with basic income for reasons simultaneously generous and self-interested, as a palliative for the societal turbulence its inventions might unleash. Many technologists believe we are living at the precipice of an artificial-intelligence revolution that could vault humanity into a postwork future.

 David Autor, David Dorn, Gordon Hanson, NBER: When Work Disappears: Manufacturing Decline and the Falling Marriage-Market Value of Men. The structure of marriage and child-rearing in U.S. households has undergone two marked shifts in the last three decades: a steep decline in the prevalence of marriage among young adults, and a sharp rise in the fraction of children born to unmarried mothers or living in single-headed households. We exploit large scale, plausibly exogenous labor-demand shocks stemming from rising international manufacturing competition to test how shifts in the supply of young ‘marriageable’ males affect marriage, fertility and children's living circumstances. As predicted by a simple model of marital decision-making under uncertainty, we document that adverse shocks to the supply of `marriageable' men reduce the prevalence of marriage and lower fertility but raise the fraction of children born to young and unwed mothers and living in in poor single-parent households. The falling marriage-market value of young men appears to be a quantitatively important contributor to the rising rate of out-of-wedlock childbearing and single-headed childrearing in the United States.

George Borjas, NYT: The Immigration Debate We Need. I am a refugee, having fled Cuba as a child in 1962. Not only do I have great sympathy for the immigrant’s desire to build a better life, I am also living proof that immigration policy can benefit some people enormously. But I am also an economist, and am very much aware of the many trade-offs involved. Inevitably, immigration does not improve everyone’s well-being. There are winners and losers, and we will need to choose among difficult options. The improved lives of the immigrants come at a price. How much of a price are the American people willing to pay, and exactly who will pay it?

Juanna Schrøter Joensen, Helena Skyt Nielsen, Microeconomic Insigts:  Studying advanced mathematics: the potential boost to women’s career prospects. Our results suggest that neither lack of mathematical abilities nor labour market rewards discourage young women from taking advanced mathematics courses. Instead, it seems that access is deterred in part by too restrictive bundling of courses. This suggests there is a lost pool of mathematical talent among high ability young women that may be accessed by changing the costs embedded in the educational environment and the institutional set-up of mathematics teaching.

Prakash Loungani, Jonathan D. Ostry: The IMF’s Work on Inequality: Bridging Research and Reality. IMF work has made important contributions to the study of inequality. On causes, the finding that economic policies are an important determinant of inequality implies that governments can take steps to reduce inequality when it is deemed excessive. On consequences, inequality has been shown to have a direct economic cost in terms of reduced durability of growth—this puts it with in the remit of the IMF’s core work. On cures, the design of policies should take into account the distributional outcomes. This is increasingly being done in the advice that the IMF gives to it member countries.

Jayson Lusk: Does everybody prefer organic? Demand for organic milk is lower for people that placed a higher relative importance on food safety than it was for people who placed a lower relative importance on food safety.  In these controlled studies, we find that if organic were priced the same as conventional (a price premium of 0%), not everyone would buy organic.  Priced evenly with conventional, organic would pick up only about 60% of the apple market (the remaining 40% going to conventional), and organic would pick up only about 68% of the milk market (the remaining 32% going to conventional). Given differences in yield and production costs, organic is almost surely going to be routinely higher priced than conventional. But, even if this weren't the case and organic could be competitively priced, these survey results show us that not every prefers organic food.

FEBRUARY 23 2017

Lucia Quaglietti, BoE: Is economic uncertainty holding back growth in the euro-area? This blog discusses the impact of economic uncertainty on euro-area activity. To do that, we built on the methodology developed for the UK by Haddow et al. (2013). Our analysis suggests that elevated economic uncertainty has been an important driver of euro-area GDP during the financial and sovereign crisis, detracting (on average) around 0.5 pp from annual euro-area growth in the period between 2008Q3 and 2011Q3.  As the shock unwound, GDP was boosted during the subsequent recovery. This analysis suggests that any further increase in uncertainty could have a materially negative impact on euro-area activity. Therefore, it needs to be carefully monitored by policy makers, particularly in the context of the upcoming political elections in a number of countries.

Gauti B. Eggertsson, Neil R. Mehrotra, Jacob A. Robbins, NBER: A Model of Secular Stagnation: Theory and Quantitative Evaluation. This paper formalizes and quantifies the secular stagnation hypothesis, defined as a persistently low or negative natural rate of interest leading to a chronically binding zero lower bound (ZLB). Output-inflation dynamics and policy prescriptions are fundamentally different than in the standard New Keynesian framework. Using a 56-period quantitative lifecycle model, a standard calibration to US data delivers a natural rate ranging from -1% to -2%, implying an elevated risk of ZLB episodes for the foreseeable future. We decompose the contribution of demographic and technological factors to the decline in interest rates since 1970 and quantify changes required to restore higher rates.

Italo Colantone, Piero Stanig, VOX: Globalisation and economic nationalism. The revival of nationalism in western Europe, which began in the 1990s, has been associated with increasing support for radical right parties. This column uses trade and election data to show that the radical right gets its biggest electoral boost in regions most exposed to Chinese exports. Within these regions communities vote homogenously, whether individuals work in affected industries or not.

John Bound, Gaurav Khanna, Nicolas Morales, NBER: Understanding the Economic Impact of the H-1B Program on the U.S. Over the 1990s, the share of foreigners entering the US high-skill workforce grew rapidly. This migration potentially had a significant effect on US workers, consumers and firms. To study these effects, we construct a general equilibrium model of the US economy and calibrate it using data from 1994 to 2001. Built into the model are positive effects high skilled immigrants have on innovation. Counterfactual simulations based on our model suggest that immigration increased the overall welfare of US natives, and had significant distributional consequences. In the absence of immigration, wages for US computer scientists would have been 2.6% to 5.1% higher and employment in computer science for US workers would have been 6.1% to 10.8% higher in 2001. On the other hand, complements in production benefited substantially from immigration, and immigration also lowered prices and raised the output of IT goods by between 1.9% and 2.5%, thus benefiting consumers. Finally, firms in the IT sector also earned substantially higher profits due to immigration.

Eric A. Hanushek et al, JHR: General Education, Vocational Education, and Labor-Market Outcomes over the Lifecycle. Policy proposals promoting vocational education focus on the school-to-work transition. But with technological change, gains in youth employment may be offset by less adaptability and diminished employment later in life. To test for this tradeoff, we employ a difference-in-differences approach that compares employment rates across different ages for people with general and vocational education. Using microdata for 11 countries from IALS, we find strong and robust support for such a tradeoff, especially in countries emphasizing apprenticeship programs. German Microcensus data and Austrian administrative data confirm the results for within-occupational-group analysis and for exogenous variation from plant closures, respectively.

Marc Piopiunik, Jens Ruhose, IZA: Immigration, Regional Conditions, and Crime: Evidence from an Allocation Policy in Germany. After the collapse of the Soviet Union, more than 3 million people with German ancestors immigrated to Germany under a special law granting immediate citizenship. Exploiting the exogenous allocation of ethnic German immigrants by German authorities across regions upon arrival, we find that immigration significantly increases crime. The crime impact of immigration depends strongly on local labor market conditions, with strong impacts in regions with high unemployment. Similarly, we find substantially stronger effects in regions with high preexisting crime levels or large shares of foreigners.

Robby Berman, Big Think: How About a New Theory of Evolution with Less Natural Selection? The modern synthesis emerged in the 1930s and 1940s, and it’s what’s taught in schools today. It states that evolution is the product of small genetic variations (Mendel’s contribution) that survive, or not (Darwin’s process of natural selection). Some of the scientists at the Royal Society’s “New Trends in Evolutionary Biology” meeting say that this isn’t quite the case, and that there’s a third element that needs to be incorporated: Behavior and environment can also cause evolutionary changes. Carl Zimmer of Quanta, who attended the conference, says, "The researchers don’t argue that the modern synthesis is wrong — just that it doesn’t capture the full richness of evolution.”

Lexington, The Economist: The rise of the Herbal Tea Party. Some years ago David Wasserman, an analyst with the Cook Political Report, spotted a way to predict the political leanings of any given county: check whether it is home to a Whole Foods supermarket, purveyor of heirloom tomatoes and gluten-free dog biscuits to the Subaru-owning classes; or to a Cracker Barrel Old Country Store, a restaurant chain that offers chicken and dumplings and other comfort foods to mostly rural, often southern customers. Mr Trump won 76% of Cracker Barrel counties and 22% of Whole Foods counties, the Cook Political Report calculates. That 54 percentage-point gap is the widest ever: when George W. Bush was elected in 2000 it was 31 points. Eight years later when Barack Obama took office, it was 43. Trump opponents must decide whether they can live with so wide a Whole Foods-Cracker Barrel gap.

FEBRUARY 16 2017

Cecchetti, Schoenholtz, Money & Banking: The Future of the Euro. European economic and monetary union (EMU) is not now, nor has it ever been, primarily an economic endeavor. Instead, its founders viewed EMU as a step toward political union in Europe. Helmut Kohl famously elevated the importance of European integration to a question of war and peace in the 21st century. Some (and perhaps many) EMU advocates understood that a common currency would lead to stresses—financial, economic and political. Yet, their experience with the disaster of 20th century European nationalism (and with the policy developments that preceded the euro) led them to expect that these stresses would push future European leaders to make greater sacrifices of sovereignty to save and advance political union. Now, it seems, the public’s will to continue is more uncertain than it has ever been. When asked, the British have voted to leave the European Union. Will the French, when they are given the opportunity in a few months, opt to leave the euro? Will the nationalism that led to repeated 20th century catastrophes resurface? We surely hope not. But markets price risk, not hope.

David Autor, David Dorn, Gordon H. Hanson, Gary Pisano, Pian Shu, NBER: Foreign Competition and Domestic Innovation: Evidence from U.S. Patents. Manufacturing is the locus of U.S. innovation, accounting for more than three quarters of U.S. corporate patents. The rise of import competition from China has represented a major competitive shock to the sector, which in theory could benefit or stifle innovation. 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.

Dave Donaldson, Microeconomic Insights: Economic benefits of transportation infrastructure: historical evidence from India and America. Recent research finds that the economic benefits of transportation infrastructure investment can be significant. To measure some of these benefits I analyzed two of the most ambitious transportation projects in history: the building of the vast railroad system in India by the British government from 1870 to 1930 and the dramatic expansion of the railroad network in America from 1870 to 1890. Railroad infrastructure reduced trade costs and increased the shipment of goods. When observing the railroad network in India, I estimated that in a typical district, the arrival of railroad access caused real Gross Domestic Product (GDP) in the agricultural sector (the largest sector of India’s economy at that time) to increase by around 17 percent. My estimates with my colleague, Richard Hornbeck, imply that a counterfactual 1890 U.S. economy without railroads would have seen a 60 percent reduction in the value of aggregate farmland. While these are only two historical case studies, and extrapolating from them to a full understanding of the returns of modern-day investments cannot be done without great care, these lessons from history teach us not to underestimate the economic benefits of transportation infrastructure.

Scott Alexander, Slate Star Codex: Considerations On Cost Disease. My impression is that most people still don’t know about cost disease, or don’t realize the extent of it. So I thought I would make the case for the cost disease in the sectors health care and education – plus a couple more. Per student spending has increased about 2.5x in the past forty years even after adjusting for inflation. At the same time, test scores have stayed relatively stagnant. High school students’ reading scores went from 285 in 1971 to 287 today – a difference of 0.7%. The cost of health care has about quintupled since 1970. It’s actually been rising since earlier than that, but I can’t find a good graph; it looks like it would have been about $1200 in today’s dollars in 1960, for an increase of about 800% in those fifty years. This time I can’t say with 100% certainty that all this extra spending has been for nothing. Life expectancy has gone way up since 1960. We could tell a story like this to explain rising costs in education, health care, etc. If technology increases productivity for skilled laborers in other industries, then less susceptible industries might end up footing the bill since they have to pay their workers more. There’s only one problem: health care and education aren’t paying their workers more; in fact, quite the opposite. What’s happening? I don’t know and I find it really scary.

Tyler Cowen, Bloomberg: Feisty, Protectionist Populism? New Zealand Tried That. What would you think of a Western democratic leader who was populist, obsessed with the balance of trade, especially effective on television, feisty and combative with the press, and able to take over his country’s right-wing party and swing it in a more interventionist direction? Meet Robert Muldoon, prime minister of New Zealand from 1975 to 1984. For all the comparisons of President Donald Trump to Mussolini or various unsavory Latin American leaders, Muldoon is a clearer parallel case. Some of the similarities are striking. Muldoon often made rude or unusually frank comments about foreign leaders (including U.S. President Jimmy Carter and the Australian prime minister), and his diplomats worked hard to undo them. When Muldoon spoke, he so often made the issue about him. His slogan was “New Zealand -- The Way You Want It.” One lesson from the comparison is that a leader like Muldoon can be fairly popular, as he stayed in power from 1975 to 1984, winning three terms despite mistakes, antagonisms and policy failures. He was a plain-speaker who related well to many Kiwi voters, and he was masterful at defusing or rechanneling opposition within his own party.

Andreas Bergh, Milken Institute Review: The Swedish Economy. Triumph of Social Democracy — or Serendipity? By now, the debate regarding the Swedish model had shifted. Chronic economic problems (especially slow productivity growth) were now seen as proof that socialism didn't work – not even in Sweden. A new center-right government was elected in 1991, and this time the mandate was to make fundamental changes in the Swedish model, rather than to polish the one that Sweden had long embraced. In some areas the government succeeded; in others it hit a wall of resistance. Simply put, competition and economic freedom increased in many areas of the Swedish economy. But key areas, notably the labor market and the housing market, remained highly regulated. The winding road Sweden has taken has made it difficult to say whether being more like Sweden involves increasing taxes and government intervention in the economy – or whether it means liberalization, deregulation and welfare-state retrenchment. So, before other countries try too hard to become more like Sweden, it is wise to look back at how Sweden came to be Sweden. The answers may surprise you – they certainly surprise a lot of Swedes.

Robert Frank, NYT: Why Aren’t There More Female Billionaires? Women have been rapidly climbing the employment and wage ladders in recent decades. But only a small fraction have made it to the top rungs — and their progress may be slowing. New research shows that after making big strides in the 1980s and ’90s, the number of women breaking into the top 1 percent of earners has stalled. Women account for only 16 percent of the 1 percent, a number that has remained essentially flat over the past decade, according to a paper by three economists. And they account for only 11 percent of the top 0.1 percent of earners.

Dan Jones, Nature: Cognitive science: Dennett rides again. As Dennett and others argue, genetic evolution is not enough to explain the skills, power and versatility of the human mind. Over the past 10,000 years, human behaviour and our ability to manipulate the planet have changed too quickly for biological evolution to have been the driving force. In Dennett's view, our brains turned into fully fledged modern minds thanks to cultural memes: 'ways of behaving' — pronouncing a word this way, dancing like so — that can be copied, remembered and passed on. Some memes are better than others at getting passed on. This drives natural selection, fashioning memetic design without a designer.

FEBRUARY 9 2017

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.

FEBRUARY 2 2017

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.

JANUARY 26 2017

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.

JANUARY 19 2017

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.