The ε-Stigler and the Other Components of Stigler: On George Stigler's 1962 Denunciation of the "Insolence" of Demonstrating Negroes, and Other Topics

Twitter Thread: Daniel Kuehn wrote: "We say something intelligent and on-point about Buchanan or Friedman or Tullock or Stigler and then we try to extrapolate a history of conservatism from it. Generally we're not equipped to do that (I'm certainly not), and should be wary of it. Wary doesn’t mean don’t cross-pollinate. I think the interaction between the two communities is great. Just something to be aware of..."

Let's take the George Stigler vector and project it onto a complete intellectual basis made up of the unit vectors ε, σ, π, β, γ:

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Historical Nonfarm Unemployment Statistics

Historical Nonfarm Unemployment Statistics: An updated graph that Claudia Goldin had me make two and a half decades ago. The nonfarm unemployment rate since 1869:

Then it was 1890-1990, now it is 1869-2015, thanks to:

• BLS (2015): http://data.bls.gov/cgi-bin/surveymost?ln

The assumption–debateable–is that “unemployment” is not a farm thing–that in the rural south or in the midwest or on the prairie you can always find a place of some sort as a hired hand, and that “unemployment” is a town- and city-based nonfarm phenomenon.

I confess I do not understand how anyone can look at this series and think that calculating stable and unchanging autocorrelations and innovation variances is a reasonable first-cut thing to do.

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Another old piece, but more true than ever. On the left, the talking heads the media puts on the TV as economists are economists. On the right, they are grifters who play economists on TV. My recent encounter with Steve Moore at the San Francisco Commonwealth Club has erased any doubts I might have had:

Paul Krugman (2015): On Econoheroes: "I gather that some readers didn’t get what I was driving at in declaring that Joe Stiglitz and yours truly are the left’s 'econoheroes', but the likes of Stephen Moore and Art Laffer play that role on the right.... What I meant—I thought this was obvious—is that Joe and I do tend to get quoted, invoked, etc. on a frequent basis in liberal media and by liberals in general, usually with (excessive) approbation. And the thing is that while there are people playing a comparable role in right-wing discussion, they tend not to be highly cited or even competent...

Ben Thompson: China, Leverage, and Values: "Tim Culpan declared at Bloomberg that The Tech Cold War Has Begun.... 'We can now expect China to redouble efforts to roll out a homegrown smartphone operating system, design its own chips, develop its own semiconductor technology (including design tools and manufacturing equipment), and implement its own technology standards. This can only accelerate the process of creating a digital iron curtain that separates the world into two distinct, mutually exclusive technological spheres...

Fairly Recently: Must- and Should-Reads, and Writings... (May 21, 2019)

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Live at Project Syndicate: Robo-Apocalypse? Not in Your Lifetime: "Will the imminent “rise of the robots” threaten all future human employment? The most thoughtful discussion of that question can be found in MIT economist David H. Autor’s 2015 paper, “Why Are There Still so Many Jobs?”, which considers the problem in the context of Polanyi’s Paradox. Given that “we can know more than we can tell,” the twentieth-century philosopher Michael Polanyi observed, we shouldn’t assume that technology can replicate the function of human knowledge itself. Just because a computer can know everything there is to know about a car doesn’t mean it can drive it. This distinction between tacit knowledge and information bears directly on the question of what humans will be doing to produce economic value in the future... Read MOAR at Project Syndicate

:I. W. Gabriel Selassie: Abram Lincoln Harris Jr. (1899-1963): "Abram Lincoln Harris, Jr., the grandson of slaves, was the first nationally recognized black economist... a Marxist.... The Black Worker was recognized as the foundation for future economic histories and assessments of the black condition. The Negro as Capitalist argued that non-racial economic reforms were the key to solving black fiscal woes. He also argued that capitalism was morally bankrupt and that employing race consciousness as a strategic way to enlighten a public was self-defeating.  W.E.B. DuBois described Harris as one of the 'Young Turks' who challenged the then existing historical theories about blacks in a capitalist society while insisting upon using modern social scientific methods to further his analyses of African American life...

Abram L. Harris (1961): Countervailing Power, Monopoly, and Public Polic: "Combine theoretical analysis in a survey of the ideas of some leading economists who have dealt with the problem of market imperfections and monopoly along with discussions of the early trust movement.... A technical mastery of theoretical economics is not a prerequisite. One main purpose of the course is to stimulate undergraduate interest in theoretical economics, the history of economic ideas, and the relation of these ideas to current economic policy issues. The course should be open to beginning majors in economics, students who are undecided about a major in the social sciences, and to those who are just curious.... The Concept of “Countervailing Power”: Old wine in new bottles? Chamberlain... Adam Smith, John Stuart Mill, and Alfred Marshall.... John Bates Clarke and his student, Thorstein Veblen.... The Standard Oil and U. S. Steel cases and federal anti-trust legislation. Recent anti-trust cases: administrative interpretation and application of federal legislation. Marx’s thesis concerning industrial concentration.... The extent and measurement of industrial concentration.... A term essay will be required of all students who take the course for credit. The essay may take the form of a review, e.g., Berle’s Twentieth Century Capitalist Revolution, Mason’s The Corporation in Modern Society, Chamberlain’s Labor Union Monopoly or may deal with some topic... selected by the student in consultation.... P.S. The content of the course may appear be heavy and, probably, cannot be entirely covered in a single quarter. The layout will have, no doubt, to be tailored as we proceed to give the course for the first time...

#noted


Irwin Collier: Chicago. Monopoly Course Proposal by Abram Harris with George Stigler's (Dis)approval, 1961: "[TO:] Al Rees, Chairman [DEPARTMENT:] Economics [FROM:] George J. Stigle [IN RE:] propose 200 level course in the College by Abram L. Harris. Dear Al: This new course of Abe Harris arouses no enthusiasm on my part. It sounds like a protracted bull session, in which large ideas are neither carefully analysed nor empirically tested. Even if this is a correct prediction, it leaves open the question of our listing it. Abe is a nice guy, only about 3 years from retirement, and it serves no good purpose to hurt his feelings. My own inclination would be (1) to list it, with explicit proviso that it is only for as long as he teaches it, and (2) advise our majors to forget it...

Graydon: "If you're an authoritarian, you want people to do what you say...

...You necessarily hate this fact-checking, quantified analysis stuff, and you want to make sure anybody who tries that shit winds up starving in a ditch somewhere. People are supposed to do what you say, not waste time and money producing creative excuses. There are no legitimate excuses. You do what you are told to do, whatever it takes. Nothing is important except getting it done and admitting the boss was right.

I sometimes wonder if academia suffers terribly from not having to work for that person.

I mean, yeah, you don't want to work for that person, and you really don't, in a social-health systemic-utility sense, want that person in charge of anything ever, but all the academic analysis I see doesn't believe in that person, and they're ubiquitous. They make a lot of decisions, about the economy and people's lives. They mostly succeed with the starving-in-a-ditch part, too...

Against Raj Chetty et al.'s belief that school quality—rather than the fabric of society—is a key mechanism creating and blocking possibilities for upward mobility: Jesse Rothstein (2017): Inequality of Educational Opportunity? Schools as Mediators of the Intergenerational Transmission of Income: "Commuting zones (CZs) with stronger intergenerational income transmission tend to have stronger transmission of parental income...

Scott Alexander: Who By Very Slow Decay: "After a while of this, your doctors will call a meeting with your family and very gingerly raise the possibility of going to 'comfort care only', which means they disconnect the machines and stop the treatments and put you on painkillers so that you die peacefully. Your family will start yelling at the doctors, asking how the hell these quacks were ever allowed to practice when for God’s sake they’re trying to kill off Grandma just so they can avoid doing a tiny bit of work. They will demand the doctors find some kind of complicated surgery that will fix all your problems, add on new pills to the thirteen you’re already being force-fed every day, call in the most expensive consultants from Europe, figure out some extraordinary effort that can keep you living another few days...

It is not at all clear to me that quantum computers will ever be practical devices for anything other than simulating quantum-mechanical systems, at which I agree they will have an enormous edge over classical devices. Although "simulating" is perhaps the wrong word: "mirroring" or "modeling" would be better. As Scott Aaronson rightly says, they will be useful for broader purposes only to the extent that the interference properties can be harnessed for our use, as in Childs et al.:

Scott Aaronson: Quantum Computing, Capabilities and Limits: "Every quantum algorithm is... trying to choreograph things in such a way that for each wrong answer to your computational problem... the paths... cancel each other out, whereas the paths leading to the right answer should all be ‘in phase’ with each other.... If you can mostly arrange for that to happen, then when you measure the state of your quantum computer, then you will see the right answer with a large probability.... So nature... gives you a very bizarre ‘hammer’....People always want to... [say] the quantum computer just tries all of the possible answers at once. Bt the truth is that if you want to see an advantage, you have to exploit... interference...

Made me want to very much read a book I had not gotten to. Now I have. It's excellent. I endorse Noah's review:

Noah Smith: Book Review: The Revolt of the Public, by Martin Gurri: "Social media, Gurri asserts, has both empowered and emboldened the public, freeing it from the control of centralized, hierarchical push-media.... The public's goal is negation-denunciation of respected leaders, derailment of political programs, overthrow of parties or governments, discrediting of institutions, etc.... The usefulness of this book is in drawing parallels between a bunch of things that might seem unrelated.... If Gurri is right, these things are fundamentally about a technology-social media-and the way it changes power relations between the public and elites, then we can expect today's explosions of anger to be followed by others tomorrow, and then others the day after tomorrow, and on and on and on. Gurri may not convince you-in fact, if he does, you're probably not enough of a skeptic-but he will give you a new framework with which to usefully think about the political chaos of the modern world...

Paul Krugman: Don’t Blame Robots for Low Wages: "Participants just assumed that robots are a big part of the problem—that machines are taking away the good jobs, or even jobs in general. For the most part this wasn’t even presented as a hypothesis, just as part of what everyone knows.... So it seems like a good idea to point out that in this case what everyone knows isn’t true.... We do have a big problem—but it has very little to do with technology, and a lot to do with politics and power.... Technological disruption... isn’t a new phenomenon. Still, is it accelerating? Not according to the data. If robots really were replacing workers en masse, we’d expect to see the amount of stuff produced by each remaining worker—labor productivity—soaring.... Technological change is an old story. What’s new is the failure of workers to share in the fruits of that technological change...

I would not say that new technologies were "geared toward maintaining the role of human labor in value creation". I would say that new technologies required microcontrollers—and the human brain was the only available microcontroller—and software 'bots to manage materials and information flows—and the human brain provided the only available 'bot hardware. Now neither of these are the case:

Daron Acemoglu and Pascual Restrepo: The Revolution Need Not Be Automated: "For centuries after the Industrial Revolution, automation did not hinder wage and employment growth, because it was accompanied by new technologies geared toward maintaining the role of human labor in value creation. But in the era of artificial intelligence, it will be up to policymakers to ensure that the pattern continues...

In a time of bubble, raising interest rates and restricting the lending of regulated institutions may be counterproductive if there are unregulated institutions as well. This is an old lesson. We forgot it, and relearned it yet again in the 2000s:

Itamar Drechsler, Alexi Savov, and Philipp Schnabl: How Monetary Policy Shaped the Housing Boom: "Between 2003 and 2006, the Federal Reserve raised rates by 4.25%. Yet it was precisely during this period that the housing boom accelerated, fueled by rapid growth in mortgage lending. There is deep disagreement about how, or even if, monetary policy impacted the boom. Using heterogeneity in banks' exposures to the deposits channel of monetary policy, we show that Fed tightening induced a large reduction in banks' deposit funding, leading them to contract new on-balance-sheet lending for home purchases by 26%. However, an unprecedented expansion in privately-securitized loans, led by nonbanks, largely offset this contraction. Since privately-securitized loans are neither GSE-insured nor deposit-funded, they are run-prone, which made the mortgage market fragile. Consistent with our theory, the re-emergence of privately-securitized mortgages has closely tracked the recent increase in rates...

In England, at least, if "middle class" as defined as not-rich who can nevertheless expect some support from their parents and pass a nest egg down to their grandchildren, there was no real, lsubstnail, and numerous "middle class" in the twentieth century:

Neil Cummins: The Missing English Middle Class: Evidence From 60 Million Death And Probate Records: "Using a combination of old-fashioned archival research, mass scripted downloading, optical character recognition, text parsing, and sets of algorithmic programming tools, I have digitised every individual entry, 18 million records with estate values, from the Principal Probate Calendar from 1892 to 1992. To this I have added all 60 million adult English deaths.... This simple finding is quite stark: despite the great equalisation of wealth over the 20th century, most English have no significant wealth at death...

A Year Ago on Equitable Growth: Twenty Worthy Reads from the Week Before May 24, 2018

Hoisted From the Archives**: Worth Reading from A Year Ago

Five Things Worthy at Equitable Growth:

1. Austin Clemens and Heather Boushey: Disaggregating growth: "NIPA... were a radical advance in economic measurement when they were instituted.... The lack of data on how income is distributed is especially glaring now in the face of rapidly increasing economic inequality.... Instead of revolutionizing GDP, U.S. policymakers should evolutionize it... add an explicitly distributional component to GDP..."

2. Hold it! Why does the spread of Microsoft Office shift workers away from "non routine analytic" and toward "routine cognitive and routine manual" tasks?: Enghin Atalay et al.: New technologies and the labor market: "Most new technologies are associated with an increase in nonroutine analytic tasks, and a decrease in nonroutine interactive, routine cognitive, and routine manual tasks.... Through the lens of the model, the arrival of ICTs broadly shifts workers away from routine tasks, which increases the college premium. A notable exception is the Microsoft Office suite, which has the opposite set of effects..."

3. And I do think that grappling with the work and legacy of John Kenneth Galbraith is a very important but rarely operated railway line within economics. So I put a signpost to it here: Brad DeLong: Galbraithian economics: Countervailing power edition | Equitable Growth

4. Is this a worthwhile and successful way of doing something roughly aligned with but substantially different from not only Mark Thoma but also Liz Hipple: Weekend Reading: a weekly post... with links to articles that touch on economic inequality and growth...? Brad DeLong: Worthy reads on equitable growth, May 10-17, 2018

5. Jacob Robbins: How the rise of market power in the United States may explain some macroeconomic puzzles: "Surprising... facts about... growth and rising... inequality.... 1. Financial wealth has increased... despite no real increase in... investment.... 2. The financial value of many firms now is permanently higher than the cost of their assets.... 3. These more valuable firms haven’t invested more.... 4. The average rate of return on capital has stayed steady while interest rates have dropped. 5. The share of income going to labor... has declined.... The driving force behind them is an increase in monopoly power together with a decline in interest rates...

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Economist: What to Do If The Usual Weapons Fail: "If the usual weapons fail, there are plenty of new policy responses for governments to turn to. From the robots that help care for an ageing population to holographic pop stars, the future always arrives early in Japan. Economic policy is no exception. When the massive Japanese financial bubble of the 1980s imploded, the Bank of Japan (BOJ)... tested many of the policies, such as QE, that would enter the toolkit of other central banks during the financial crisis. Yet Japan was seen as an example of central-bank incompetence, until smug Western central banks discovered after 2008 that getting an economy to perk up when interest rates were near zero was harder than it looked...

Gareth Campbell, Richard S. Grossman and John Turner: Before the Cult of Equity: New Monthly Indices of the British Share Market, 1829-1929: "We splice our blue-chip capital gains index with the Financial Times 30 (FT30) index to create a new blue-chip index that covers nearly two centuries, 1829 to 2018. By 1940, our blue-chip index is below its 1829 level, but during the next six decades it experiences an almost 80-fold increase.... There have been at least seven sharp contractions in the stock market over nearly 200 years and that most of these have been associated with major economic downturns.... During our sample period, investors earned an average nominal return of about five per cent per year, which suggests the existence of a modest equity risk premium by modern standards. This indicates that the emerging phase of UK stock market development was not associated with particularly high returns. Almost all of the gains experienced by investors arose from dividends, suggesting that profitable nineteenth century firms returned their gains to shareholders via dividends, in contrast to modern firms, which are more likely to return to shareholders through capital gains while smoothing dividends...

In large part, this desire to resort to high marginal tax rates is a counsel of despair: an admission that we cannot think of policy tools that would command congressional assent and that would restructure the economy that would "predistribute" income in a significantly more egalitarian way. But to the extent that people assign market prices some special moral status—as what you "earn"—this may well be a moral-philosophical mistake, even if it is not a utilitarian-economic mistake:

Dylan Matthews: How to Tax the Rich, Explained: "It’s no accident that the Democratic Party went from wanting a 39.6 percent top tax rate to wanting much more. The 1990s Democratic Party made friends with the rich. The 2008 Democratic Party was eager to bail them out. The 2019 Democratic Party seems ready to declare war.... The Democratic urge to tax the rich isn’t a wholly new development. In the 2016 general election, Hillary Clinton embraced Sanders’s proposal for a 65 percent top estate tax rate, and both Bill Clinton and Barack Obama were able to raise the top income tax rate by a few points...

It is pretty clear that the post-2008 U.S. labor market is such that it totally deranged the unemployment rate as a meaningful measure of labor market slack, and we now need to look at primate-age EPOP. But it also deranged prime-age EPOP—only not as badly:

Josh Bivens: Predicting Wage Growth with Measures of Labor Market Slack: It’s Complicated: "Why have wages grown so slowly in recent years despite relatively low unemployment rates? This puzzle has dominated economic commentary.... Since 2008, the share of adults between the ages of 25 and 54 who are employed (or the 'prime-age EPOP') has predicted wage growth better than the unemployment rate. But even the prime-age EPOP has done a poor job at predicting wage growth since 2008 compared with both its own predictive power pre-2008 and the predictive power of the unemployment rate in earlier periods...

I should long ago have told people to read this pinned tweetstorm from Equitable Growth's Will McGraw. A great many people who should know better—especially people on the ideological right—do not understand that when one assesses factors, one wants to control only for those complications that confound the effects you are trying to study, and that you have no business controlling for those complications that mediate the effects you are trying to study: Will McGrew: "Some claim that the wage gap disappears if you control for all relevant variables. This is 100% false. According to the evidence, workplace segregation and discrimination are the largest causes of the wage gap faced by Black women...