Month: September 2013

The stunning growth in part-time employment

From Greg Mankiw:

John Lott points out the following: “So far this year there have been 848,000 new jobs. Of those, 813,000 are part time jobs…. To put it differently, an incredible 96% of the jobs added this year were part-time jobs.”

In addition to all of this underemployment, today’s job market report shows the labor force participation rate is down to its lowest level since 1978 (when fewer women wanted to work, of course).  And population growth is outpacing job growth, as indeed it had earlier in the oughties before the financial crisis and recovery.  Perhaps that is the new normal?  (Here are a few graphs from the new numbers.)  Here is a passage from my forthcoming Average is Over:

Those laid off workers have been absorbed, into new jobs, at a much slower than usual rate, following a recession.  They can’t get their old jobs back, even though the worst of the crisis is over and corporate profits are back up.  Most importantly, the new jobs being created are more likely low wage than mid wage.  In essence, the American economy is learning that — for structural reasons — it can’t afford as many mid wage jobs as it used to have.  Businesses will make higher profits by slotting those workers elsewhere, but not back in other high or mid wage jobs, where they had been before.

Monetary policy is fine, and I see no significant costs from having a higher rate of price inflation in the United States, but stimulus can fix these problems to only a limited degree.

Addendum: As Ben Engebreth points out, based on these BLS charts, the correct number seems to be 59% not 96%, though the higher estimate does still seem to hold in Lott’s (more cumbersome and less transparent) sources.

Three good new books on politics

1. Isaac William Martin, Rich People’s Movements: Grassroots Campaigns to Untax the One Percent.  He even covers Frank Chodorov.

2. Sumantra Bose, Transforming India: Challenges to the World’s Largest Democracy.  The first sentence of the last paragraph of the book is this: “In the post-1989 era, the people of India have progressively empowered regional(ist) parties and leaders.”

3. Avi Tuschman, Our Political Nature: The Evolutionary Origins of What Divides Us.  He traces differences in political views back to three underlying factors, namely attitudes toward tribalism, tolerance of inequality, and perceptions of human nature (competitive vs. cooperative).  Think of this book as the next step after Jonathan Haidt.

The American fertility rate is no longer declining

The sharp decline in the country’s fertility rate during the economic downturn has come to an end, federal data show, as an improving economy encouraged Americans to resume having babies.

The number of babies born in the United States in 2012 remained flat, the first time in five years that the number did not significantly decline, according to the National Center for Health Statistics.

The leveling off capped a 9 percent decline in the fertility rate from 2007 to 2011, a drop that demographers say began after the recession took hold and Americans started feeling less secure about their economic circumstances.

By the way, economics really does seem to be a factor in these changes:

…the only state to show a slight increase in fertility between 2008 and 2009 was North Dakota, which had one of the lowest unemployment rates in the country.

The teen birth rate is falling, which is further good news.  Here is more.

Unpopular thoughts about obstructionist Republicans

It now seems quite possible that the Syria resolution fails in the House of Representatives.  If so, that would be the fault of unreasonable, obstructionist Republicans.  (When was the last time a Presidential request to use force was denied by Congress?)

Now, I do understand that this would not be the best path to “not attacking Syria.”  (If you doubt that, imagine how such a vote would change Israeli incentives and policy toward Iran.)  Still, I can quite readily imagine that a “no” vote on the Syria resolution would be for the better, all things considered.  Much could go wrong from an attack, nor would the Congressional vote, the way the process has been conducted, represent much of a victory for constitutionalism.

In any case the net effect of having unreasonable, obstructionist Republicans could well be welfare-improving on a massive global scale, all things considered.

You might prefer to “have your cake and eat it too,” namely by having “reasonable but wise on Syria” Republicans, but that was never on the menu.  And you won’t find it among the Democrats, so you do seem to need the unreasonably obstructionist tendencies to get to…actual obstruction.

I still can imagine that the resolution will pass, in which case we could criticize Republicans for not being unreasonable and obstructionist enough.

The whole point of checks and balances is that sometimes the tendency to be unreasonable and obstructionist pays off big time.  It’s worth a lot of gridlock to get those gains.

Designing robots to work with humans

Here is the good news:

Workers generally warm to collaborative robots quickly. Employees are keen to offload the “mindless, repetitive stuff”, as one roboticist puts it. And because workers themselves do the programming, they tend to regard the robots as subordinate assistants. This is good for morale, says Esben Ostergaard, UR’s technology chief. In late 2012 Mercedes-Benz began equipping workers who assemble gearboxes at a Stuttgart plant with lightweight “third hand” robots initially designed for use in space by the German Aerospace Centre. The German carmaker’s parent company, Daimler, is expanding the initiative, which it describes as “robot farming” because workers shepherd the robots “just like a farmer tending sheep”.

This is interesting too:

It turns out, for example, that people are more trusting of robots that use metaphors rather than abstract language, says Bilge Mutlu, the head of the robotics laboratory at the University of Wisconsin-Madison. He has found that robots are more persuasive when they refer to the opinions of humans and limit pauses to about a third of a second to avoid appearing confused. Robots’ gazes must also be carefully programmed lest a stare make someone uncomfortable. Timing eye contact for “intimacy regulation” is tricky, Dr Mutlu says, in part because gazes are also used in dialogue to seize and yield the floor.

When a person enters a room, robots inside should pause for a moment and acknowledge the newcomer, a sign of deference that puts people at ease, says the University of British Columbia’s Dr Croft. Robots also appear friendlier when their gaze follows a person’s moving hands, says Maya Cakmak of Willow Garage, the California-based maker of the PR2, a $400,000 robot skilled enough to make an omelette—albeit slowly.

This is more discomforting:

The world’s largest compiler of voluntary industrial standards, the International Organisation for Standardisation (ISO) in Geneva, has yet to work out safety standards for collaborative robots, such as how much force a robot can safely apply to different parts of a human worker’s body.

The story is interesting throughout, hat tip goes to FT Alphaville.  By the way, humans prefer working with robots which sometimes make mistakes.

Chile fact of the day

 …the average eighth grader in Ghana has a test score that would place her in the bottom 0.2 percent of US students. Even in considerably richer developing countries, the learning gap is large: the average Chilean student would be in the bottom 6.4 percent of US students, based on TIMSS scores.

That is from the Center for Global Development, via Charles Kenny, via Reihan, there is more here.  By the way, here is the teacher response to recent educational reforms in Mexico.

Assorted links

1. Alex on Quora does Q&A on international trade economics.  And Raghuram Rajan, staring at things.

2. In praise of Malcolm Gladwell.

3. How to become an early riser?

4. Does unemployment hurt Protestants more? (Not exactly the Protestant work ethic, I might add).

5. Green energy in Germany, an update.

6. Jumbo mortgage rates fall below traditional ones (what can you infer from that?)

7. Computers playing poker, excellent piece.

South Koreans are turning more toward study in China

The number of South Koreans studying in China more than doubled to 62,855 in 2012 from 2003, according to South Korea’s Ministry of Education. The number of U.S.-bound students grew 50 percent to 73,351 in the same period.

Perhaps this has something to do with it:

Trade with China climbed an average 20 percent per year between 1992 and 2012, faster than the 6 percent growth with the U.S., according to Korea Customs Service. South Korea exported more to China than to the U.S. and European Union combined last year. China overtook the U.S. for South Korean foreign direct investment in the first quarter, the finance ministry said.

There is more here, and for the pointer I thank KunLung Wu.

*The Bet*

The author is Paul Sabin and the subtitle is Paul Ehrlich, Julian Simon, and Our Gamble over Earth’s Future.  I found this book informative, charming, and highly readable.  Here are a few excerpts:

Ehrlich later described his political development as a “natural progression.”  “I didn’t stand up one day and say ‘My God, I’m going to get everybody to stop [fuck]ing.’  It’s sort of one thing led to another.”

But Julian had a very different temperament:

…Simon also helped support himself in college with the winnings he took away from a regular poker game, often staying up until dawn during his senior year.  He did not suffer fools lightly, but his close college friends thought him a terrific companion.  Simon was curious and funny.  He was interested in a broad range of people…

And my favorite part is this (with apologies to Bryan Caplan):

“You can’t choose your relatives,” Simon later wrote.  “But one can imagine.”  His dream family consisted of a roster of famous theorists, some of them notable conservatives: “William James as my father, Hayek as my uncle, Milton Friedman as my older brother, Theodore Schultz as my thesis adviser, and David Hume as my idol.”

Recommended (who was the dream mother?).  There is a good WSJ review of the book here.

Addendum: Here is a new research paper on testing the Prebisch-Singer hypothesis about resource prices over time.

The global decline of the labor share

That is the new paper by Loukas Karabarbounis and Brent Neiman, and the abstract is this:

The stability of the labor share of income is a key foundation in macroeconomic models. We document, however, that the global labor share has signi cantly declined since the early 1980s, with the decline occurring within the large majority of countries and industries. We show that the decrease in the relative price of investment goods, often attributed to advances in information technology and the computer age, induced fi rms to shift away from labor and toward capital. The lower price of investment goods explains roughly half of the observed decline in the labor share, even when we allow for other mechanisms influencing factor shares such as increasing pro fits, capital-augmenting technology growth, and the changing skill composition of the labor force. We highlight the implications of this explanation for welfare and macroeconomic dynamics.

In other words, capital-labor substitutability is very real.  The full piece is here (pdf).

My TechCrunch interview about *Average is Over*

It was done with the excellent Andrew Keen, here is part of their write-up:

…Cowen isn’t a dystopian and he doesn’t believe that smart machines are taking jobs from human beings. ‘The smartest and most successful people in the future, he believes, will manage the smart machines. And as these smart machines become more central in how we manage our education and healthcare, he says, “human psychology” – the art and science of motivation – will become increasingly valuable. This is what he calls “the next big thing.” In the future, Cowen insists, power will lie with the humans who partner with rather than own the algorithm. And in this age of the smart human/machine partnership, traditional algorithm-centric companies like Google will be old businesses – “like GM”, he predicts.

“Marketing”, Cowen writes in Average Is Over, is the “seminal sector for our future economy.” But Cowen’s intriguing definition of marketing lies in figuring out how to motivate people and to get them to feel better about themselves. Everyone in the future economy – from doctors to educators to entrepreneurs – will be coaches. But who is going to own the operating platform in the age of the smart machine? That’s the trillion-dollar question which even Tyler Cowen isn’t smart enough to answer.

You can pre-order my book on Amazon here.  On Barnes and Noble here.  On here.  And from Penguin here.

Assorted links

1. Do markets care who chairs the central bank? (pdf)

2. Indian banks are possibly in trouble.

3. al Qaeda is looking for ways to counter drone attacks.

4. Urbanization and China’s unbalanced growth.

5. Perry Mehrling’s Coursera course on money and banking.

6. How lucky are chess world champions? (this research is done by an economist, by the way).

7. Why Ronald Coase was chased out of UVA.

It’s the success stories that worry me

Also known as “the economy that is Germany,” Adam Posen offers a very good analysis:

Since 2003 a falling unemployment rate has been the consequence of the creation of a large number of low-wage and part-time or flexitime jobs, without the benefits and protections afforded earlier postwar generations. Germany now has the highest proportion of low-wage workers relative to the national median income in western Europe. Average wages increased by more than inflation and productivity growth in the past year for the first time after more than a decade of stagnation.

…Germany’s productivity growth has been low compared with its peers. Growth in gross domestic product per hour worked is 25 per cent below the OECD average, whether one goes back to mid-1990s or looks at just the past decade – and whether or not one excludes the bubble years for the US and UK. With these productivity numbers, it is no wonder German business is competing only by reducing relative wages and moving production east.

There is much more here at the FT, the piece is interesting throughout, though I am skeptical of Posen’s claim they could have done much better than they did.

Quantitative Economics

Quantitative Economics is a new online text from John Stachurski and Thomas J. Sargent that looks phenomenal.

This website contains a sequence of lectures on economic modeling, focusing on the use of programming and computers for both problem solving and building intuition. The primary programming language used in the lecture series is Python, a general purpose, open source programming language with excellent scientific libraries.

…At this stage, the level of the lectures varies from advanced undergraduate to graduate, although we intend to add more elementary applications in the near future. The lectures are suitable for courses in quantitative methods and computational techniques, and also for self study and independent study groups. To aid self study, all exercises have solutions. Our solutions are not the last word on each exercise — instead they provide one approach that demonstrates good coding practices

If you work through the majority of the course and do the exercises, you will learn

  • how to analyze a number of fundamental economic problems, from job search and neighborhood selection to optimal fiscal policy
  • the core of the Python programming language, including the main scientific libraries
  • good programming style
  • how to work with modern software development tools such as debuggers and version control
  • a number of mathematical topics central to economic modeling, such as
  1. dynamic programming
  2. finite and continuous Markov chains
  3. filtering and state space models
  4. Fourier transforms and spectral analysis

I recommend you take the advanced undergraduate bit with a grain of salt.

Hat tip: Nathan Palmer.

The Autor, Dorn, and Hanson paper on trade and technology

Several other bloggers already have covered this important paper, but there remain underexplored details.  Overall the main result is that trade has had more of a negative impact on employment than we used to think.  I won’t attempt a summary, but here are a few further results of note:

1. In the Providence, Rhode Island area the trade exposure to China for 2000-2007 went up by $3,490 per worker.  For New Orleans the same increase was only $490 per worker.

2. Technology gains and mechanization in a region do not predict employment declines, but they do predict polarization of wage returns.  (I do think that automation will create problems for labor markets, but I think that issue is more about our future.  It also was true, for a while, in our more distant past, as outlined by David Ricardo.)

3. The negative employment effects of technology on manufacturing jobs peaked in the 1980s, and since have declined.  The negative employment effects of technology on service sector jobs have been rising.  On net the effect on employment across all sectors has stayed roughly constant over the last few decades.

4. Women and older workers are those most likely to lose their jobs because of technology.

5. The employment effects of exposure of a region to Chinese imports are significant.  A good deal of this effect works through the labor force participation rate rather than through measured unemployment per se.  This by the way is one indication that the labor force participation rate does contain relevant information about the health of the labor market.

6. The authors classify jobs into the categories of abstract, routine, and manual, and suggest that routine jobs are most vulnerable to automation.  Maybe, but I would not take this for granted.  Better software in a car can forestall mechanical problems, and thus replace the manual labor of the automobile mechanic, even if we cannot imagine how a robot could itself do the car repair work.