Over at Equitable Growth: I have been meaning to pick on the very sharp and public-spirited Jeff Faux since he wrote this seven months ago:
Jeff Faux: NAFTA, Twenty Years After: A Disaster:
New Year’s Day, 2014, marks the 20th anniversary of the North American Free Trade Agreement (NAFTA). The Agreement created a common market for goods, services and investment capital with Canada and Mexico. And it opened the door through which American workers were shoved, unprepared, into a brutal global competition for jobs that has cut their living standards and is destroying their future. NAFTA’s birth was bi-partisan—conceived by Ronald Reagan, negotiated by George Bush I, and pushed through the US Congress by Bill Clinton in alliance with Congressional Republicans and corporate lobbyists....
NAFTA directly cost the United States a net loss of 700,000 jobs.... And the economic dislocation in Mexico increased the the flow of undocumented workers into the United States.... By any measure, NAFTA and its sequels has been a major contributor to the rising inequality of incomes and wealth that Barack Obama bemoans in his speeches.... The agreements traded away the interests of American workers in favor of the interests of American corporations.... NAFTA’s fundamental purpose was... to free multinational corporations from public regulation in the U.S., Mexico, Canada, and eventually all over the world.... The 20th anniversary of NAFTA stands as a grim reminder of how little our political leaders and TV talking heads—despite their crocodile tears over jobs and inequality—really care about the average American who must work for a living...READ MOAR
Over at Project Syndicate Ten years ago we had ridden the bust of the internet bubble, picked ourselves up, and continued on. It was true that it had turned out to be harder than people expected to profit from tutoring communications technologies. That, however spoke to the division of the surplus between consumers and producers--not the surplus from the technologies. The share of demand spent on such technologies looked to be rising. The mindshare of such technologies looked to be rising much more rapidly. READ MOAR at Equitable Growth
NIMBYism taken to extremes with astroturf "neighborhood associations":
April Gilbert: Berkeley restaurant has been approved: Let’s let it open: "I am a homeowner on Russell Street just below College...
and thus an Elmwood resident. A year ago, I heard that the owners of Comal on Shattuck Avenue were proposing a restaurant for the old Wright’s Garage space on Ashby and I was thrilled. It sounded like just the ticket to round out the dining options in our little neighborhood. Finally, we would have an upscale spot with a nice atmosphere and a small bar space--just what I felt had been missing. Then, I heard there was opposition from a group called the “Elmwood Neighborhood Association”(ENA)--strange given that I’d never heard of this organization despite living smack in the middle of Elmwood for eight years.... In all my years in Berkeley, I have never encountered this group. I have not gotten an email, a phone call, or a flyer in my mailbox. ENA is positioning itself as the voice of our neighborhood, which it is not. In contrast, I am quite familiar with CENA, the Claremont-Elmwood Neighborhood Association. CENA has not taken a stand on the proposed new restaurant on Ashby, but when it polled its members, the majority of its Elmwood resident members was enthusiastic about having a good restaurant open and supported the Comal owners’ efforts.
Over at Equitable Growth The estimable Neil Irwin and Tyler Cowen get, I think, things wrong here.
First, Tyler, commenting on Neil:
Tyler Cowen: Facts about non-residential investment: "One simple hypothesis is that it’s not worth spending more on American workers at current wage levels. As workers, while Americans are quite good, they are just not that much better than a variety of high-IQ individuals in cheaper countries, many of whom now have acceptable infrastructure to work with. READ MOAR
Robert Waldmann: Comment on Intellectual Origins of Reagan-Thatchernomics: "That is a long and interesting list...
...Somewhere the crime wave seems to have fallen between to stools (between 17 and 18). I think that, to be fair to both, especially Feldstein, you should number separately.
Huntington's willingness to criticize democracy and praise deference to superiors is amazingly frank...
Trying to be quicker on (18)-(30) which I will ascribe to "Mad Dog" (to avoid an concerns about context)
On (18) ["the democratic surge of the 1960s raised again in dramatic fashion the issue of whether the pendulum had swung too far..."]: His courage amazes me. Even George Will doesn't question Democracy so bluntly any more.
On (19) ["the vigor of democracy in the United States in the 1960s thus contributed to a democratic distemper... the expansion of governmental activity... and the reduction of governmental authority..."]: The word "distemper" is pejorative. Think of trying to tell a Tea Partier that a reduction in "government authority" is "distemper". I think they would lose their tempers. Again amazing frankness (I refer to Mad Dog, who may or may not have anything to do with a Harvard prof.)
Over at the Equitablog: John Fernald: Productivity and Potential Output Before, During, and After the Great Recession: "U.S. labor and total-factor productivity growth...
...slowed prior to the Great Recession. The timing rules out explanations that focus on disruptions during or since the recession, and industry and state data rule out “bubble economy” stories related to housing or finance. The slowdown is located in industries that produce information technology (IT) or that use IT intensively, consistent with a return to normal productivity growth after nearly a decade of exceptional IT-fueled gains. A calibrated growth model suggests trend productivity growth has returned close to its 1973-1995 pace. Slower underlying productivity growth implies less economic slack than recently estimated by the Congressional Budget Office. As of 2013, about 3⁄4 of the shortfall of actual output from (overly optimistic) pre-recession trends reflects a reduction in the level of potential.
But when I look at this graph:
The policies that enabled the creation of our Second Gilded Age were born at the end of the 1970s out of a particular reading of the political economy of that moment.
Were the ideologues and the intellectuals of the right correct back when they claimed in the late 1970s that the economic problems of the 1970s were the result of "too much government" or of "an excess of democracy"? I think not. But in order to evaluate the argument we need to remember what it was.
Over at Equitable Growth: Most of American discussion about equitable growth these days revolves around rapidly growing inequality: that the rising tide has been lifting the big boats much more than the others, that trickle-down economics has not been trickling down, that enormous plutocratic wealth explosions at the top have been accompanied by stagnant wages in the middle and the bottom. But that is not the entire story. Equally important--at least I think it is equally important--is that the American economy has underperformed in real GDP growth since the end of the Social Democratic Era back in 1979.
If you go to Sam Williamson and company's Measuring Worth website--http://measuringworth.com--and look at the numbers he has scrubbed and put together, you can learn an enormous amount--or at least learn an enormous amount about what our current guesses as to the long-run shape of economic growth are... READ MOAR
Writers with Drinks: An Evening of Oversharing About Money: 7:30 p.m. July 12 :: Make-Out Room :: 3225 22nd St. San Francisco, CA :: Price: $5-$20 http://writerswithdrinks.com: "If time is money, then consider this evening with Charlie Jane Anders, J. Bradford DeLong, Frances Lefkowitz, Farhad Manjoo, and Carol Queen to be a good investment..."
J. Bradford DeLong
A few short years ago we lived, for the school district, in Lafayette. Lafayette is close to here in space and time, but distant in attitude. Lafayette is a place an unkind observer based in and comfortable in San Francisco might describe as an unholy mix of the worst parts of northern and southern California. There we had a neighbor, Bie Bostrom. She had been the oldest Peace Corps volunteer in East Africa. She kept in touch with what had been her town: Ahero, population 10K, in Nyando District, Nyanza Province, Kenya. And there she funds and runs a one-elderly-woman one-town NGO with zero administrative overhead: Grandmothers Raising Grandchildren. That's http://grgahero.org: godzilla-rath of Khan (with an r)-godzilla-alien-hitchhiker-empire strikes back-rath of Khan-omen-dot-omen-rath of Khan-godzilla. No, I'm not going to hit you up--you've been hit up already coming here, at the door.
Over at Equitable Growth: Note that when Adam Smith says "seems at first sight", he is not signaling that he is about engaging in pointless contrarianism and about to reverse field and explain that a prosperous working class is an inconvenience rather than an advantage to society. It was an age of lower irony in which often things are as they seem: he is saying, rather, that you do not need to take more than a first glance for the answer to be "abundantly clear":
Adam Smith: Smith: Wealth of Nations, Book I, Chapter 8: "Is this improvement in the circumstances of the lower ranks of the people...
...to be regarded as an advantage or as an inconveniency to the society? The answer seems at first sight abundantly plain. Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged. READ MOAR
Whether it is highway money, Defense Department money, agricultural subsidy money, or whatever, the governments of the states have long been eager and enthusiastic to do whatever they can to attract their share and more of what the federal government is offering to spend. Even where it is worthless for our general welfare--as much of Defense Department spending programs have been worthless for our general welfare--states have actively and aggressively competed for federal dollars.
Except for Medicaid money.
Cardiff Garcia: The growth of US student loan debt: causes and consequences: "Both rising tuition and a higher share of students borrowing...
...have contributed just as much as higher student enrollment.... A recent New York Fed report:
Between 2004 and 2012, the number of borrowers increased by 70% from 23 million borrowers to 39 million. In the same period, average debt per borrower also increased by 70%, from about $15,000 to $25,000.
From 2002 to 2012, inflation-adjusted (2012 dollars) college costs—defined as the sum of room, board and “net tuition” (tuition costs after subtracting federal, state, and private [non-loan] aid, as well as any discounts offered by the institution)—rose by 41 percent within public four-year institutions, by 9 percent for private four-year institutions, and actually fell 7 percent for two-year public institutions... average college costs rose by about 16 percent....
Furthermore, there is evidence that many students and households don’t understand what they’re getting themselves into.... That’s the background against which Obama is now proposing a plan to expand the number of borrowers who can cap their loan repayments at 10 per cent of their income, along with endorsing a bill that would allow more students to refinance at lower rates. (The latter is unlikely to get through Congress, as the proposed budgetary offset is the proposed closing of loopholes for the wealthy. Republicans are already pushing back.)
From $350 billion to $1 trillion in student debt in the eight years from 2004-2012 is an extraordinary increase--so large that even though I have checked and re-checked I cannot help but fear that somewhere an apples-and-oranges comparison has crept into the mix.
It also very strongly suggests that the marginal borrowers do not have a handle on what they are doing. If it made no sense for borrowers to take out more than $350 billion in debt in 2004--if the marginal material and psychological benefit of college then was no greater than the marginal burden of debt repayment--then it really makes no sense for borrowers to take out $1 trillion in debt in 2012. Either of them are little borrowers in 2004 we're irrationally scared of taking on student debt loads, or them are total borrowers today are much too blasé about the burdens--and by "marginal", we mean all those holding all the tranches between $350 billion and $1 trillion.
As I have said before, the key questions are: how likely are those taking on the extra debt to actually finish their B.A. degrees in a reasonable amount of time? How quickly can we move from a regime of fixed repayments to one of income-contingent loans (or, as Aaron Edlin points out, a more attractive system of income-contingent grants)? And how then do we manage the borrowing-attending decision when potential students no longer fear landing in permanent debt peonage?
My instinct is that Clark Kerr had it right: that the best compromise is to make education free for those willing to devote the time, but to make students borrow to cover their living expenses. That treats getting educated as having positive externalities broadly understood equal to the cost of education, and my guess is that is the right order of magnitude. But that is only an instinct.
These are not questions that I can answer with clarity and confidence, or even on which I can guess in a relatively informed manner. So: a question for the internet: who should I take as my guides, and whose analyses should I trust on these questions?
Over at Equitable Growth: It is quite clear that history has not evolved over the past 25 years ago as Francis Fukuyama thought it would back when he proclaimed its end. The inadequate and disappointing North Atlantic response to the fall of the Berlin Wall plus the failures of "transition"; the coming of a new set of wars of religion, hot, lukewarm, and cold; the failure of "convergence" in emerging economies outside of the Big Two, China and India; Japan's two lost decades; America's and Europe's (so far) one lost decade; the upward-spiral in North Atlantic income and wealth inequality to Gilded Age heights. READ MOAR:
The absence these days of what I regard as high-quality critiques of my writings on the internet poses me a substantial intellectual problem, since I have this space and this feature on my weblog: the DeLong Smackdown Watch.
So what should I do with it? Counter-smacking inadequate and erroneous smack downs is not terribly satisfying.
But there is one task from April Fool's Day 2013 left undone. Then I dealt with chapter 12 of David Graeber's Debt: The First 5000 Years in the manner that that chapter richly deserved to be dealt with. But nobody has taken an equivalent look at the earlier chapters.
So, henceforth, now, until and unless my critics step up their game, I'm going to devote the Monday DeLong Smackdown space to a close reading of chapter 11 of David Graeber's Debt: The First Five Thousand Years. Let's go!
Over at Equitable Growth: Matt Rognlie has a first-rate exposition of his critique of Piketty:
Matt Rognlie: A note on Piketty and diminishing returns to capital: "Capital in the Twenty-First Century predicts...
...a rise in capital’s share of income and the gap r - g between capital returns and growth.... Neither outcome is likely given realistically diminishing returns to capital accumulation. Instead--all else equal--more capital will erode the economywide return on capital.... Piketty (2014)’s inference of a high elasticity from time series is unsound, assuming a constant real price of capital despite the dominant role of rising prices in pushing up the capital/income ratio. Recent trends in both capital wealth and income are driven almost entirely by housing, with underlying mechanisms quite different from those emphasized in Capital.... READ MOAR
From Eric Cantor:
The claim from the Republican noise machine this morning is that Eric Cantor lost his primary because he was not anti-Hispanic-immigration enough...
From Dave Brat:
I've never understood how a Randite of any form can be opposed to immigration, legal or illegal: illegal immigrants are precisely the kind of entrepreneurial people impatient with being told by government where they can go and what they can do that Ayn Rand exalted...
Ron Chernow: The Mail: Letters from Our Readers : The New Yorker: "MISTAKEN IDENTITY
Lizzie Widdicombe, in her piece about the Manhattan Institute’s Hamilton Awards, quotes a number of Republican politicians intent on promoting an image of Alexander Hamilton as representing an urban, Wall Street-friendly brand of conservatism (The Talk of the Town, May 26th). In researching my biography of Hamilton, I discovered that, in many battles with Jeffersonian foes, Hamilton proved himself to be a liberal champion. He advocated federal power against the doctrine of states’ rights and favored an expansive reading of the Constitution. He promoted abolitionism and lent his prestige to a school for Native Americans.
He was the foremost agent of economic modernity against the slavocracy of the South. When he founded Paterson, New Jersey, he espoused open immigration against the forces of nativism. Even as his Jeffersonian opponents agitated for limited government, Hamilton emerged as the chief architect of a robust executive branch. The patron saint of the Coast Guard and the Customs Service, he made the first federal investments in American infrastructure, showing the creative uses of government and paving the way for the Progressive Era and the New Deal. In his own day Hamilton was vilified for higher taxes and increased government spending—scarcely the forerunner of modern-day Republicanism, in either its Tea Party or establishment incarnations.
Over at Equitable Growth: Thomas Piketty emails:
We do provide long run series on capital depreciation in the "Capital Is Back" paper with Gabriel [Zucman] (see http://piketty.pse.ens.fr/capitalisback, appendix country tables US.8, JP.8, etc.). The series are imperfect and incomplete, but they show that in pretty much every country capital depreciation has risen from 5-8% of GDP in the 19th century and early 20th century to 10-13% of GDP in the late 20th and early 21st centuries, i.e. from about 1%[/year] of capital stock to about 2%[/year].
Of course there are huge variations across industries and across assets, and depreciation rates could be a lot higher in some sectors. Same thing for capital intensity.
The problem with taking away the housing sector (a particularly capital-intensive sector) from the aggregate capital stock is that once you start to do that it's not clear where to stop (e.g., energy is another capital intensive sector). So we prefer to start from an aggregate macro perspective (including housing). Here it is clear that 10% or 5% depreciation rates do not make sense.
No, James Hamilton, it is not the case that the fact that "rates of 10-20%[/year] are quite common for most forms of producers’ machinery and equipment" means that 10%/year is a reasonable depreciation rate for the economy as a whole--and especially not for Piketty's concept of wealth, which is much broader than simply produced means of production.
No, Pers Krusell and Anthony Smith, the fact that "[you] conducted a quick survey among macroeconomists at the London School of Economics, where Tony and I happen to be right now, and the average answer was 7%[/year" for "the" depreciation rate does not mean that you have any business using a 10%/year economy-wide depreciation rate in trying to assess how the net savings share would respond to increases in Piketty's wealth-to-annual-net-income ratio.
Who are these London School of Economics economists who think that 7%/year is a reasonable depreciation rate for a wealth concept that attains a pre-World War I level of 7 times a year's net national income? I cannot imagine any of the LSE economists signing on to the claim that back before WWI capital consumption in northwest European economies was equal to 50% of net income--that depreciation was a third of gross economic product...
Over at Equitable Growth: I am once again flummoxed by the number of economists of note and reputation who have been commenting on Piketty's Capital in the 21st Century without, apparently, bothering to do the work to understand the basic arithmetic scaffolding of the book.
I think that the most fruitful way to understand the basic arithmetic is via the road I took in my "Mr. Piketty and the 'Neoclassicists'", focusing on the equilibrium rate of accumulation n+g, the wedge ω between the rate of accumulation and the warranted rate of net profit, the warranted rate of net profit rnw, and the resulting equilibrium wealth-to-annual-net-income ratio K/Yn.
But there is another road--one that goes not through prices but through the quantities of the Solow growth model: gross savings, depreciation, and population and technology growth. I think this road is less illuminating and more likely to cause confusion. But perhaps it will help some to understand the arithmetic scaffolding of the book. READ MOAR
From Vox.com: Deng Xiaoping: "Comrade Xiannian is correct.:
The causes of this incident have to do with the global context. The Western world, especially the United States, has thrown its entire propaganda machine into agitation work and has given a lot of encouragement and assistance to the so-called democrats or opposition in China — people who are in fact are the scum of the Chinese nation. This is the root of the chaotic situation we face today.
Lawrence H. Summers: The Inequality Puzzle: "His policy recommendations are unworldly....
Success in combating inequality will require addressing the myriad devices that enable those with great wealth to avoid paying income and estate taxes.... If, as I believe, envy is a much less important reason for concern than lost opportunity, great emphasis should shift to policies that promote bottom-up growth. At a moment when secular stagnation is a real risk, such policies may include substantially increased public investment and better training for young people and retraining for displaced workers, as well as measures to reduce barriers to private investment in spheres like energy production, where substantial job creation is possible. Look at Kennedy airport... if a moment when the United States can borrow at lower than 3 percent in a currency we print ourselves, and when the unemployment rate for construction workers hovers above 10 percent, is not the right moment to do it, when will that moment come? READ MOAR
Over at Project Syndicate and Equitable Growth: The best review of Thomas Piketty's Capital in the Twenty-First Century that I have read so far is the review in Michael Tomasky's Democracy Journal by my good friend and frequent co-author Lawrence Summers. Go read the whole thing. And subscribe to Democracy Journal. If you do that, you will make better use of your time than reading further here...
Still here? You are, you say, unwilling to read 5000 words? It would be time well spent, I assure you. But if you are still here, let me give not a highlight but a brief expansion of a very small and minor sidelight, an aside in Summers's review about moral-philosophy:
There is plenty to criticize in existing corporate-governance arrangements.... I think, however, that those like Piketty who dismiss the idea that productivity has anything to do with compensation should be given a little pause.... The executives who make the most money are not... running public companies... pack[ing] their boards with friends... [but] chosen by private equity firms to run the companies they control. This is not in any way to ethically justify inordinate compensation—only to raise a question about the economic forces that generate it... READ MOAR
￼￼Time to update this, as my thinking on a bunch of issues has changed over the past sixteen years. But first, as I think about how to so, let me reprint it...
I construct estimates of world GDP over the very long run by combining estimates of total human populations with largely-Malthusian estimates of levels of real GDP per capita.
I take my estimates of human population from Kremer (1993), but it would not matter if I had chosen some other authority. All long-run estimates of human population that I have found are quite close together (with the exception of estimates of population around 5000 BC, where Blaxter (1986) estimates a population some eight times that of other authorities). Note that ￼￼￼this does not mean that the estimates are correct—just that they are roughly the same.
It is here: Homepage
It has lots of new stuff on it. Let me especially recommend:
Jesse Rothstein: Extended unemployment insurance remains critical: "New analyses of recent data covering unemployed workers during the Great Recession...
...and its aftermath indicate that the impact of unprecedented extensions of Unemployment Insurance on job uptake were smaller than previously thought while the benefits were extremely important to maintaining family incomes. The program helped sustain families and communities during an unusually long period of weak labor demand, helping to promote long-term labor market resiliency and higher future prosperity by helping the long-term unemployed remain out of poverty and attached to the labor market. Extended Unemployment Insurance benefits expired at the end of 2013, and Congress is now considering whether and how to reinstate them. The new data and analysis detailed in this issue brief—based on the roll-out of extended benefits in 2008-2010 and the roll-back that began in late 2011—indicate that... the downsides of UI extensions are smaller than in past economic downturns, and there are some previously unanticipated upsides...
Extending UI benefits for the long-term unemployed is one of the largest, ripest pieces of low-hanging economic-policy fruit that we are not picking right now.
And let me especially recommend, from my step-second-cousin:
Ariel Kalil: Economic inequality and the parenting time divide: "Researchers have not until recently thought about parents’ time investments in children...
...as a mechanism for the intergenerational transmission of economic status.... Jonathan Guryan and his colleagues used data from national time diaries to show that mothers with a college education or greater spend roughly 4.5 hours more per week directly interacting with their children than mothers with a high school degree or less.... My own national time use research, with... Rebecca Ryan and... Michael Corey, finds... [that] highly educated parents not only spend more time... they spend that time differently... shift the composition of their time as the child grows in ways that adapt to children’s development at different developmental stages... preschool... reading and problem solving... middle school... management of children’s life outside the home.... We still don’t know precisely why these patterns have emerged...
And we have even more stuff on it:
Understanding how raising the federal minimum wage affects income inequality and economic growth * A Video of an Event with Thomas Piketty, Author of “Capital in the 21st Century"” * Taxes as policy: A Review of "Capital in the 21st Century: * “Expanding Economic Opportunity for Women and Families” * Thomas Piketty’s big book: What do you really need to know? * Extended unemployment insurance remains critical * Piketty’s data deserve better analysis * The aftermath of wage collusion in Silicon Valley * Economic inequality and the parenting time divide * Can letting kids watch TV make them better students?
Separate and unequal mobility * Holding inequality in reserve * Heather Boushey reviews "House of Debt" * Tax cuts for the kids * Unequal higher education * The evidence on the minimum wage * Senator Marco Rubio’s retirement plan * Bailouts for bankers or homeowners?
Robert Skidelsky: Book review: Capital in the 21st Century by Thomas Piketty: "The early 19th-century founders of the classical school of economics..
...reasoned that the distribution of a society’s income depended crucially on who owned its productive resources. David Ricardo identified three classes of producer, landlords, capitalists and workers. Each of these classes owned a factor of production—land, capital and labour. With land and capital scarce relative to labour, landlords and capitalists could claim a disproportionate share of the produce that they and the workers jointly produced. Workers’ pay would be forced to subsistence. Classical socialism, as Karl Marx conceived it, was a branch of this tree. Abolish private ownership of land and capital (and the power which this gave) and one would abolish the “rents” to their owners, enabling workers to receive their proper share of production.
Lawrence H. Summers: The Inequality Puzzle: "I have serious reservations about Piketty’s theorizing as a guide...
...to understanding the evolution of American inequality.... Piketty['s]... rather fatalistic and certainly dismal view... presumes, first, that the return to capital diminishes slowly, if at all, as wealth is accumulated and, second, that the returns to wealth are [nearly] all reinvested.... Neither of these premises is likely correct as a guide to thinking about the American economy today....
Most economists would attribute both it and rising inequality to the working out of various forces associated with globalization and technological change.... Piketty... recognizes that at this point the gains in income of the top 1 percent substantially represent labor rather than capital income... a separate issue from processes of wealth accumulation.... So why has the labor income of the top 1 percent risen so sharply relative to the income of everyone else? No one really knows. Certainly there have been changes in prevailing mores regarding executive compensation... plenty to criticize in existing corporate-governance arrangements.... I think... those like Piketty who dismiss the idea that productivity has anything to do with compensation should be given a little pause.... The executives who make the most money are not for most part the ones running public companies who can pack their boards with friends. Rather, they are the executives chosen by private equity firms.... This is not in any way to ethically justify inordinate compensation-—only to raise a question about the economic forces that generate it.... And there is the basic truth that technology and globalization give greater scope to those with extraordinary entrepreneurial ability, luck, or managerial skill. Think about the contrast between George Eastman, who pioneered fundamental innovations in photography, and Steve Jobs.... Eastman Kodak Co. provided a foundation for a prosperous middle class in Rochester for generations, no comparable impact has been created by Jobs’s innovations... READ MOAR
Elizabeth Stoker on Twitter sends us back to 2011:
J. Bradford DeLong: Libertarianism and Liberty | Boston Review: Scanlon says that there are three roads to libertarian conclusions:
The first employs the empirical assertion that libertarian policies lead to the greatest good of the greatest number. But, he says—correctly—this argument gives us no reason to accept libertarian philosophy because it is not based on the value of liberty. A utilitarian could accept libertarian policies for the same reason.
The second road uses the claim that human autonomy is the greatest good.
The third rests on the Lockean right of non-interference. But, Scanlon argues, neither of these latter paths gets you to libertarian policies.
What I want to argue here is that there is a sense in which much of Scanlon’s argument is not necessary, for the the second and third roads are largely, if not completely, superfluous.
...achieves about 20% higher GDP per capita over the subsequent three decades... between 1960 and 2010.... These are large but not implausible effects, and suggest that the global rise in democracy over the past 50 years (of over 30 percentage points) has yielded roughly 6% higher world GDP.... We predict the probability of democratizing based on 4 years of GDP, and then reweight country-years so that we are effectively comparing the path of GDP following a democratization with the path of GDP following an 'almost democratization'.... We develop an instrument for democracy based on regional waves of democratization.... The IV coefficients are much larger than the OLS coefficients compared to our measure, suggesting that we have reduced the measurement error in the democracy variable....
David Brooks defending the Egyptian military coup: 'It’s not that Egypt doesn’t have a recipe for a democratic transition. It seems to lack even the basic mental ingredients.' Judge Posner also agrees with this conclusion and writes: 'Dictatorship will often be optimal for very poor countries. Such countries tend not only to have simple economies but also to lack the cultural and institutional preconditions to democracy.' Is there any evidence that democracy is only good for already developed economies? The answer is no.... So why does democracy increase growth?... We find that civil liberties are what seem to be the most important. We also find positive effects of democracy on economic reforms, private investment, the size and capacity of government, and a reduction in social conflict...
Diane Stafford: Tom McDonnell is stepping down as Kauffman Foundation CEO: "After 18 months on the job, Kansas City business leader Tom McDonnell...
...will step down as president and chief executive officer of the $2 billion Ewing Marion Kauffman Foundation. The announcement by the foundation Wednesday that McDonnell, 68, will give up the top position on June 30 and leave the foundation at the end of the year surprised much of the civic community. McDonnell, former chairman of the Kauffman board, took the post after a yearlong effort by fellow trustees to reassess the foundation’s reason for existence and return some attention to its Kansas City roots. As board chairman, he had led the December 2011 ouster of the foundation’s previous CEO, Carl Schramm. Kauffman’s current board chair, Janice Kreamer... declined to say whether trustees knew McDonnell would stay only two years. In announcing the change, the foundation said McDonnell’s “personal plans do not allow for a long-term commitment in his current role” consistent with the foundation’s five-year strategic plan...
I could never understand why the Kauffman Foundation's Board of Directors defenestrated Carl Schramm in December 2011. The two reasons that people who might or might not be familiar with the Board's thinking often gave were:
The Board was annoyed that Carl Schramm was a Tuesday-Thursday President, spending Friday-Monday in Washington, Baltimore or New York.
The Board was annoyed that Carl Schramm had reacted to the 2007-2009 losses on the Foundation's portfolio by proportionately cutting back its funding for other Kansas City charities.
But nobody seemed to think that these were especially good reasons, or--if they were good reasons--they were good reasons not to hire Carl Schramm in the first place back in 2001...
If I were running the Kauffman Foundation, and if I had a mandate to focus it on Kansas City (rather that, say, focusing it on nurturing American entrepreneurship generally), I would:
Note that Kansas City lacks the interconnected culture of entrepreneurial practice found on the east and west coasts and around the Great Lakes, and spend money trying to connect the region with the kinds of older-generation entrepreneurial advisors--formal and informal--that entrepreneurs elsewhere run serendipitously into at the Flea Street Cafe, Balduccis, or Chez Panisse...
Attempt to seriously partner with Google Fiber as a demonstration of what massive broadband connectivity can mean for twenty-first century life...
Note that Kansas City no longer has a future as a transportation value-added hub or a manufacturing value-added hub, and that if it has a future it is rather one as a regional health-care hub, and try to coordinate local health care stakeholders--KU, Truman, Cerner--to make sure that the Kansas City health-care sector has the human, organizational, and physical infrastructure it needs to thrive...
Note that Kansas City has a future as a regional health-care hub only if there is a prosperous agricultural prairie around it, that the economic and ecological health of the prairie is at serious generational threat from global warming, and so spearhead the regional research and adaptation process as global warming comes to the Missouri Valley...
Those are, I think, what it would be good to spend EMK's Marion Laboratories money on...
Joanna Foster: Missouri's Solar Problem: Too Many People Like It | ThinkProgress: "Missouri... is on the cusp of a solar revolution.
The state had just 39 megawatts of solar installed at the end of 2013, putting it in 17th place nationally. But by mid-2014, as much as 110 megawatts of solar is expected to be online, potentially making Missouri a solar leader in the Midwest. Unfortunately that could be the end of the solar story in Missouri.... The solar rebates that have helped propel the growth are abruptly ending, six years before the gradual phase-out that had been planned....
Susan Suzanne Berger: How Finance Gutted Manufacturing: "In May 2013 shareholders voted to break up the Timken Company—a $5 billion Ohio manufacturer of tapered bearings, power transmissions, gears, and specialty steel—into two separate businesses.
Their goal was to raise stock prices. The company, which makes complex and difficult products that cannot be easily outsourced, employs 20,000 people in the United States, China, and Romania. Ward “Tim” Timken, Jr., the Timken chairman whose family founded the business more than a hundred years ago, and James Griffith, Timken’s CEO, opposed the move.
Moderator: James K. Galbraith, UNIVERSITY OF TEXAS AT AUSTIN
Panelists: J.Bradford DeLong, UNIVERSITY OF CALIFORNIA, BERKELEY. Dick Easterlin, UNIVERSITY OF SOUTHERN CALIFORNIA
Marx, Rostow, Kuznets, Gerschenkron
We might as well start with Karl Marx. "De te fabula narratur! Marx wrote in the preface to the first edition of the first volume of Capital: it is about you. Why should Marx's German audience read the details of the industrial and social history of England mixed up with pieces of classical economic theory and a coquette's flirtation with Hegelian philosophy? Because, Marx wrote: "The country that is more developed industrially only shows, to the less developed, the image of its own future." --Karl Marx, Capital, preface. In short, it is about you.
Over at the WCEG: The intelligent and thoughtful Ricardo Hausmann wants to make
two three four points:
First, that what economists know about long-run economic growth is a Sokratic form of "knowledge": they know that they do not know--that the secret to long-run economic growth is neither market allocations that capture Harberger triangles, education, infrastructure, buildings, or machines:
Ricardo Hausmann: Technological Diffusion and Economic Theory: "One idea about which economists agree almost unanimously is that...
...beyond mineral wealth, the bulk of the huge income difference between rich and poor countries is attributable to neither capital nor education, but rather to “technology.” So what is technology?... “Technology” is measured as a kind of “none of the above” category, a residual.... So, while agreeing that technology underpins the wealth of nations sounds more meaningful than confessing our ignorance, it really is not. And it is our ignorance that we need to address... READ MOAR
I presume that the Piketty galleys have been lost in internal Berkeley mail hell for some months now...
Over at the Washington Center for Equitable Growth: One from the left that I like:
Jedediah Purdy: To Have and Have Not: "Piketty recommends a small, progressive global tax on capital to draw down big fortunes and press back against r > g. He admits this idea won’t get much traction at present, but recommends it as a... measure of what would be worth doing and how far we have to go to get there. It’s an excellent idea, but it also shows the limits of Piketty’s argument. He has no theory of how the economy works that can replace the optimistic theories that his numbers devastate. Numbers — powerful ones, to be sure — are what he has.... Without a theory of how the economy produces and allocates value, we can’t know whether r > g will hold into the future. This is essential to whether Piketty can answer his critics, who have argued that we shouldn’t worry much... [because other economic forces will] blunt r > g. Piketty doesn’t really have an answer to these challenges, other than the weight of the historical numbers....
"We should grope toward a more general theory of capitalism by getting more systematic about two recurrent themes in Piketty’s work: a) power matters and b) the division of income between capital and labor is one of the most important questions.... The period of shared growth in the mid-20th century was not just the aftermath of war and depression. It was also the apex of organized labor’s power in Europe and North America....
"Piketty shows that capitalism’s attractive moral claims — that it can make everyone better off while respecting their freedom — deserve much less respect under our increasingly 'pure' markets than in the mixed economies that dominated the North Atlantic countries in the mid-20th century. It took a strong and mobilized left to build those societies. It may be that capitalism can remain tolerable only under constant political and moral pressure from the left, when the alternative of democratic socialism is genuinely on the table.... Reading Piketty gives one an acute sense of how much we have lost with the long waning of real political economy, especially the radical kind.... Ideas need movements, as movements need ideas. We’ve been short on both..." READ MOAR
Sponsored by the Berkeley Economic History Laboratory and the Blum Center for Developing Economies
Paper: April 2014 Draft
Over at the Washington Center for Equitable Growth: As Thomas Piketty Day at the University of California at Berkeley comes to an end, we eat Hawaiian poke and sausage-stuffed mushrooms catered from the truly excellent Assemble, and watch the sunset over the Golden Gate from the back patio of the Gourinchas/Fourcade palazzino. We muse on the extent to which Thomas Piketty's patterns of movement for the rate of profit r minus the economy's growth rate g are at bottom patterns of changing land valuation, with the fall of European agriculture as a source of wealth and the rise of urban location as the source of wealth.
What was supposed to be a 20-person economics departmental seminar turned into a 400-person public lecture extravaganza--we really should have made him give two talks at least...
This morning's Daily Piketty brings two especially interesting things: a very nice interview from Matt Yglesias, and PEG pointing out that a Benjamin Disraeli-style conservative would see Piketty as an ally pointing the way to how to successfully implement a market economy that was a genuine opportunity society:
One thing I had not fully realized before yesterday: READ MOAR
Over at the Washington Center for Equitable Growth: It's Piketty Day here at Berkeley. So let me note that Robert Solow has another good Piketty review:
Robert Solow: 'Capital in the Twenty-First Century' by Thomas Piketty, Reviewed: "Inequality... has been worsening...
the widening gap between the rich and the rest.... A rational and effective policy for dealing with it... will have to rest on an understanding of the causes... the erosion of the real minimum wage; the decay of labor unions and collective bargaining; globalization and intensified competition from low-wage workers in poor countries; technological changes and shifts in demand that eliminate mid-level jobs.... Each of these candidate causes seems to capture a bit of the truth. But even taken together they do not seem to provide a thoroughly satisfactory picture.... They do not speak to the really dramatic issue: the tendency for the very top incomes—the “1 percent”—to pull away from the rest of society. Second, they seem a little adventitious, accidental; whereas a forty-year trend common to the advanced economies of the United States, Europe, and Japan would be more likely to rest on some deeper forces.... READ MOAR
Over at the WCEG: Dirk Hanson: Drowning in Light: "William D. Nordhaus calculated that the average citizen of Babylon would have had to work a total of 41 hours to buy enough lamp oil to equal a 75-watt light bulb burning for one hour.
At the time of the American Revolution, a colonial would have been able to purchase the same amount of light, in the form of candles, for about five hour’s worth of work. And by 1992, the average American, using compact fluorescents, could earn the same amount of light in less than one second....>Jeff Tsao... and his coworkers at Sandia have concluded that “the result of increases in luminous efficacy has been an increase in demand for energy used for lighting that nearly exactly offsets the efficiency gains—essentially a 100% rebound in energy use.”... Tsao calculates that, as a result, light represents a constant fraction of per capita gross domestic product (GDP) over time; the world has been spending 0.72 percent of its GDP for light for 300 years now... READ MOAR
Annalee Newitz: The io9 Manifesto: Science Is Political: "io9 started out in 2007 as the germ of an idea for a site about futurism...
...with a name that was a joke about brain implants. Six and a half years later, we've grown in size--but we've also grown up. Our 2008 manifesto still holds true, but in 2014 we've got some amendments. Here they are.
Please join the Economic Policy Institute and the Washington Center for Equitable Growth: "for a presentation by Thomas Piketty...
...economist from the Paris School of Economics and ground-breaking researcher on income inequality—of the findings in his new book, Capital in the Twenty-First Century.
His presentation will be followed by a panel discussion moderated by Heather Boushey, Executive Director and Chief Economist of the Washington Center for Equitable Growth, with Josh Bivens, Research and Policy Director of the Economic Policy Institute, Robert M. Solow, Professor Emeritus at the Massachusetts Institute of Technology and Betsey Stevenson, Member of the White House Council of Economic Advisers, serving as discussants.
When: Tuesday, April 15, 2014 from 9:30 AM to 11:00 AM (EDT)
Where: 1333 H St NW; Suite 300, East Tower; Washington, DC 20005...
Over at the Washington Center for Equitable Growth: When I look at Thomas Piketty's big book, I see one thing that he failed to do that I think he really should have done. A large part of the book is about the contrast between "r", the rate of return on wealth, and "g" the growth rate of the economy. However, there are four different r's. And in his book he failed to distinguish between them.
The four different r's are:
The real interest rate at which metropolitan governments can borrow: call this r1.
The real interest rate that is the actual average return on wealthin the society and economy: call this r2.
The real interest rate that is the average risky net rate of accumulation--what capital receives, minus the risk of confiscation or destruction or taxation, plus appreciation in valuation multiples, minus what is spent in order to keep the world in the appropriate social position: call this r3.
A measure of the extent to which capital and wealth serve as an effective claim on income independent of how much capital there is--a standardized measure of what the society and economy's return on wealth would be at some standardized ratio of wealth to annual income: say, 4: call this ρ.
These four r's are very different animals. READ MOAR
Janet Yellen: What the Federal Reserve Is Doing to Promote a Stronger Job Market: "I am here today to talk about what the Federal Reserve is doing to help our nation recover from the financial crisis and the Great Recession,
the effects of which were particularly severe for the people and the communities you serve.
Over at the Washington Center for Equitable Growth: A Few Finger Exercises with the Saez and Zucman Wealth-Concentration Estimates...: From Emmanuel Saez and Gabriel Zucman (March 2014): The Distribution of US Wealth, Capital Income and Returns since 1913:
From today's perspective, the $800K per capita in today's purchasing that the circa-1949 average member of the "merely rich"--those between the 99%ile and the 99.9%ile--had looks extraordinarily small. Why, a 3% rate of spending relative to assets would leave them with only $24K per capita to spend! Barely enough to give you the median standard of living in 2014! (OK, OK: a much bigger house and a much more comfortable commute than the median today--but no electronic toys and air travel a very exceptional treat.) Even the truly rich of 1949--the upper 15,000--would find that a 3% rate of spending relative to assets would give them only the upper-middle class standard of living today or, well, me: the kind of style of life at which one stays at the Crowne Plaza or the Holiday Inn Express because more fancy seems not worth it given other demands on one's cash.
Looking at it the other way, our truly rich today--the top 0.01%, the top 30,000--have a standard of living that, if one trusts the real income figures, was only matched by the top 0.0003%--the top 400 in 1949...
Feel free to click on, play with, and edit the spreadsheet if you want to--but do play nice, please... READ MOAR