1. Claims about the economics of eBooks (speculative).
From Neil Irwin at The Upshot:
Five years into the economic recovery, businesses still aren’t plowing much money into big-ticket investments for the future. Nonresidential fixed investment — what businesses spend on equipment, software, buildings and intellectual property — still hasn’t bounced back to its pre-crisis share of the economy, let alone made up for lost ground from the record lows of 2009. As Justin Lahart notes in The Wall Street Journal, equipment spending in particular has averaged 5.2 percent of the economy over the last five years, down from 6.5 percent over the previous half-century.
If firms increased their spending enough to close that gap, it would mean an extra $220 billion in annual economic activity and perhaps a couple of million more jobs. But there may be even more important and lasting consequences for this lack of spending by businesses.
Capital spending improves worker productivity. And worker productivity improves living standards. Less capital spending by businesses means less investment in the kinds of equipment, software and intellectual property that will make the economy more competitive over the long haul.
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.
Addendum: Brad DeLong considers potential gdp.
From my email:
The Washington Post today launches ‘Storyline’, a new digital initiative led by economics writer Jim Tankersley examining how U.S. public policy is affecting the lives of Americans across the nation. Storyline will feature a mix of narrative writing, data journalism and visual storytelling to explore big questions like: who’s being lifted by the economic recovery, and who’s left waiting for it to kick in? How are Americans adapting to life under Washington’s immigration deadlock?
China’s total debt load has climbed to more than two and a half times the size of its economy, underscoring the difficult challenge facing Beijing as it seeks to spur growth without sowing the seeds of a financial crisis.
The total debt-to-gross domestic product ratio in the world’s second-largest economy reached 251 per cent at the end of June, up from just 147 per cent at the end of 2008, according to a new estimate from Standard Chartered bank.
Such a rapid build-up is far more of a concern than the absolute level of debt, since increases of that magnitude in such a short period have almost always been followed by financial turmoil in other economies.
While calculations of the ratio vary depending on exactly what types of credit are included, several other economists agreed with the new figure. Even those with slightly different calculations said the general trend was clear.
…“China’s current level of debt is already very high by emerging markets standards and the few economies with higher debt ratios are all high-income ones,” said Chen Long, China economist at Gavekal Dragonomics, a research advisory. “In other words China has become indebted before it has become rich.”
The U.S. total debt-to-gdp ratio is now about 260 percent. From the FT, there is more here.
I also would like to see an estimate of the Chinese wealth-to-income ratio, relative to the U.S. ratio. I would expect a higher ratio for the United States, which would militate in favor of greater sustainability for American debt, but of course that is why we wish to have the actual numbers.
…on July 13, about four days before the actual incursion began, about 67 percent of Israelis supported a ground operation. By authorizing one, Netanyahu has given the public what it has demanded.
That is from Brent Sasley.
Fred Kaplan wonders whether Israel has lost its ability to think strategically. Even Max Boot seems to think Hamas will stay in charge of Gaza.
Or is the fear that even intercepted Hamas rockets will in the long run spur too much Israeli emigration? Are the economics of long-run rocket/shoot-down reciprocity unacceptable to Israel?
A friend of mine suggests that Israel feels the need to send a tough signal to Iran.
Or all of the above?
I am by the way not impressed by various Twitter demands that I should spend more time moralizing about this conflict. I do think it is deontologically wrong on the part of the Israelis, and I also do not understand their strategy from even a purely nationalistic point of view. But my voice will have no influence, and I would rather learn something from the comments section about why such strategies are being pursued. Call me selfish if you wish, I am.
5. Let them eat cosmopolitanism. But note: I never argue “…that egalitarianism as a political force in America is fundamentally opposed to globalisation.” I do argue that egalitarians do not usually take a consistently global perspective when framing the recent history of inequality. I also never argue “…redistribution must necessarily make the economy poorer than it otherwise would be.” I do argue wealth maximization is a good starting point for thinking about how much redistribution we should do and furthermore that will be some positive amount.
There is a new NBER Working Paper from Brianna Cardiff-Hicks, Francine Lafontaine, and Kathryn Shaw, and the abstract is this:
With malls, franchise strips and big-box retailers increasingly dotting the landscape, there is concern that middle-class jobs in manufacturing in the U.S. are being replaced by minimum wage jobs in retail. Retail jobs have spread, while manufacturing jobs have shrunk in number. In this paper, we characterize the wages that have accompanied the growth in retail. We show that wage rates in the retail sector rise markedly with firm size and with establishment size. These increases are halved when we control for worker fixed effects, suggesting that there is sorting of better workers into larger firms. Also, higher ability workers get promoted to the position of manager, which is associated with higher pay. We conclude that the growth in modern retail, characterized by larger chains of larger establishments with more levels of hierarchy, is raising wage rates relative to traditional mom-and-pop retail stores.
This is not a surprising result, but it doesn’t receive nearly enough attention in popular discussions of the subject. There is a related ungated earlier draft here.
The economy here is just fine by most traditional measures. And yet:
Virginia has an unemployment rate of 5.1 per cent but average hourly wages in the year to May 2014 declined by 0.1 per cent.
That is from a probably gated piece, by James Politi, surveying the U.S. labor market more broadly.
Many people in Russia are putting their own spin on recent events:
Did you know Malaysia Air Flight 17 was full of corpses when it took off from Amsterdam? Did you know that, for some darkly inexplicable reason, on July 17, MH17 moved off the standard flight path that it had taken every time before, and moved north, toward rebel-held areas outside Donetsk? Or that the dispatchers summoned the plane lower just before the crash? Or that the plane had been recently re-insured? Or that the Ukrainian army has air defense systems in the area? Or that it was the result of the Ukrainian military mistaking MH 17 for Putin’s presidential plane, which looks strangely similar?
Did you know that the crash of MH17 was all part of an American conspiracy to provoke a big war with Russia?
There is more here from Julia Ioffe.
Yet another shibboleth of campaign finance reform appears to be in weak shape, here is a new paper (pdf):
I show that the public funding of elections produces a large decrease in the financial and electoral advantage of incumbents. Despite these effects on electoral competition, I demonstrate that public funding produces more polarization and candidate divergence|not less. Finally, I establish that this effect is at least in part due to the fact that public funding disproportionately affects the contribution behavior of access-oriented interest groups, groups who, I show, systematically support moderate incumbents. Access-oriented interest groups therefore help generate the incumbency advantage and mitigate polarization by supporting moderate legislators.
That is from Andrew B. Hall at the Department of Government at Harvard.
From Becker, Philipson, and Soares (pdf):
GDP per capita is usually used to proxy for the quality of life of individuals living in different countries. Welfare is also affected by quantity of life, however, as represented by longevity. This paper incorporates longevity into an overall assessment of the evolution of cross-country inequality and shows that it is quantitatively important. The absence of reduction in cross-country inequality up to the 1990s documented in previous work is in stark contrast to the reduction in inequality after incorporating gains in longevity. Throughout the post–World War II period, health contributed to reduce significantly welfare inequality across countries. This paper derives valuation formulas for infra-marginal changes in longevity and computes a “full” growth rate that incorporates the gains in health experienced by 96 countries for the period between 1960 and 2000. Incorporating longevity gains changes traditional results; countries starting with lower income tended to grow faster than countries starting with higher income. We estimate an average yearly growth in “full income” of 4.1 percent for the poorest 50 percent of countries in 1960, of which 1.7 percentage points are due to health, as opposed to a growth of 2.6 percent for the richest 50 percent of countries, of which only 0.4 percentage points are due to health. Additionally, we decompose changes in life expectancy into changes attributable to 13 broad groups of causes of death and three age groups. We show that mortality from infectious, respiratory, and digestive diseases, congenital, perinatal, and “ill-defined” conditions, mostly concentrated before age 20 and between ages 20 and 50, is responsible for most of the reduction in life expectancy inequality. At the same time, the recent effect of AIDS, together with reductions in mortality after age 50—due to nervous system, senses organs, heart and circulatory diseases—contributed to increase health inequality across countries.
That reminder is from Aaron Schwartz. And of course that is the Becker, yet another contribution from Gary Becker.
Do note, by the way, that medical progress is usually egalitarian per se. A common metric is something like “health outcomes of the poor” vs. “health outcomes of the rich,” and that may or may not be moving in an egalitarian direction. But very often the more incisive metric is “health outcomes of the sick” vs. “health outcomes of the healthy,” and of course most medical treatments are going to the sick. The more desperate is the lot of the sick, the more likely that medical progress is egalitarian per se.
One of the most surprising developments is the way that Bolivia has amassed foreign currency, salting away a rainy-day fund of about $14 billion, equal to more than half of its gross domestic product, or 17 months of imports, that can help it get through economic hard times.
According to the monetary fund, Bolivia has the highest ratio in the world of international reserves to the size of its economy, having recently surpassed China in that regard.
There is more here. What do you recommend as good to read on the economy of Bolivia? Please let me know in the comments. I am going there in late August.
Mann and Corrado have new work on this topic, here is a brief excerpt from the Brookings summary:
The evidence suggests that increasing the role of small donors would have little effect on partisan polarization in either direction because small donors tend to be highly polarized. Although Mann and Corrado note that a healthier mix would champion democratic ideals like civic participation and equality of voice.
Taking both points together, Mann and Corrado find that campaign finance reform is insufficient for depolarizing the parties and improving governing capacity. They argue forcefully that polarization emerges from a broader political and partisan problem. Ultimately, they assert that, “some break in the party wars is probably a prerequisite to any serious pushback to the broader deregulation of campaign finance now underway.”
I view campaign finance reform as in general an overrated idea on the Left.
3. How to make selfie toast (there is no great stagnation).
4. Roko’s Basilisk.
8. The world’s most cerebral marriage? (Parfit-relevant)