Month: September 2017

Friday assorted links

Is the great wage stagnation over?

Possibly so, though some more good years would be nice, to say the least.  To some extent this could be noise, or delayed catch-up growth.  Still, there seems to be a break in the previous trend:

In 2015, median household incomes rose by 5.2 percent. That was the fastest surge in percentage terms since the Census Bureau began keeping records in the 1960s. Women living alone saw their incomes rise by 8.7 percent. Median incomes for Hispanics rose by 6.1 percent. Immigrants’ incomes, excluding naturalized citizens, jumped by over 10 percent.

The news was especially good for the poor. The share of overall income that went to the poorest fifth increased by 3 percent, while the share that went to the affluent groups did not change. In that year, the poverty rate fell by 1.2 percentage points, the steepest decline since 1999.

…The numbers for 2016 have just been released by the Census Bureau, and the trends are pretty much the same. Median household income rose another 3.2 percent, after inflation, to its highest level ever. The poverty rate fell some more. The share of national income going to labor is now rising, while the share going to capital is falling.

That is from the new David Brooks column.

The education culture that is China

Students at a major university in Beijing are now required to scan their faces upon entering dormitory buildings, a process that may soon make security guards obsolete.

Beijing Normal University has installed 44 facial scanners on its 19 dormitory buildings, for the 18,000 students on campus.

It is the boldest move taken by a Chinese university so far to apply advanced digital technologies in campus management and has drawn attention from administrators at other universities.

The machines have been placed at all entrances to dorm buildings. Students entering the building will have to pause and look at the sensor for a few seconds. They are then required to swipe their campus ID card. If the face and card match, the machine will open the gate and say “welcome home.”

The machines also come with voice recognition. Students who forget to bring their ID cards can scan their face and say the last four digits of their card number, said Yang Hailiang, general manager of Beijing Peace and Joy Technology, which produces the machines.

The system can recognize 26 Chinese dialects and has achieved an accuracy rate of 98 percent, Yang said.

Here is the full article.

A simple point about corporate tax reform

For the most part, the empirical literature suggests that “cash flow” drives investment more than does say the real interest rate; you can take the latter as one proxy for non-massive changes in rates of return.  So a plan to cut “back taxes” for companies still might stimulate investment, even if it doesn’t appear to alter marginal incentives in the appropriate way.  It will give corporations a higher realized cash flow over the immediately prior period, and again that has had decent predictive power over investment.  But causality?  That is tougher to say, but of course there are theories that self-financed investments are more attractive to managers than having to bring in additional outside monitors.

There is a genuine question whether you should side with the theory or the empirics here, and I am myself agnostic.  Furthermore, perhaps the cash flow of the prior periods proxies for the expected rate of return more accurately than do our available measurements for the expected rate of return.  So you don’t have to take the empirical result as documenting the importance of cash flow.

Still, if you hear someone attacking a tax reform plan as a “corporate giveaway,” just ask them how well they know this literature.  There is at least some chance that “giveaways” boost investment more than do targeted marginal changes.

Canada Imports Precious Bodily Fluids

In 2004 Canada prohibited paying Canadian sperm donors, leading to a tremendous shortage as I had predicted in 2003 (see also my post, The Great Canadian Sperm Shortage). Canadian Peter Jaworski has an update (oddly enough published in USA Today):

Canada used to have a sufficient supply of domestic sperm donors. But in 2004, we passed the Assisted Human Reproduction Act, which made it illegal to compensate donors for their sperm. Shortly thereafter, the number of willing donors plummeted, and sperm donor clinics were shuttered. Now, there is basically just one sperm donor clinic in Canada, and 30-70 Canadian men who donate sperm. Since demand far outstrips supply, we turn to you. We import sperm from for-profit companies in the U.S., where compensating sperm donors is both legal and normal.

Note, by the way, that contrary to what you might expect from Titmuss et al. US sperm is considered to be of high quality because it comes with information about the donor.

And sperm isn’t the only precious bodily fluid that Canada imports.

Canada has never had enough domestic blood plasma for plasma-protein products, such as immune globulin. Our demand for those products, however, is increasing. Last year, we collected only enough blood plasma from unremunerated donors to manufacture 17% of the immune globulin demanded. The rest we imported from you, in exchange for $623 million, or $512 million U.S.

Reliance on your blood plasma looked like it might change a little bit when, in 2012, a company called Canadian Plasma Resources announced plans to open clinics in Ontario dedicated to collecting blood plasma. The trouble is that its business model included compensating donors. Almost immediately, groups such as the Canadian Union of Public Employees and the Canadian Health Coalition began to lobby the Ontario government to pass a law to stop CPR from opening clinics. Ontario obliged in 2014, passing the Safeguarding Health Care Integrity Act, which among other things made compensation illegal.

…As for safety, the fact that we import products made with remunerated donors should tell you that it is emphatically not an issue. Health Canada has said that there is no health concern. The CEO of Canadian Blood Services, Graham Sher, took to YouTube to explain that “it is categorically untrue to say, in 2015 or 2016, that plasma-protein products from paid donors are less safe or unsafe. They are not. They are as safe as the products that are manufactured from our non-remunerated or unpaid donors.”

As Jaworski writes:

What Canada should do is legalize compensation for renewable bodily fluids in our own country. It would be the morally right thing to do. It would help make and save more lives, without harming anybody.

Will the storms change public opinion?


Individuals experiencing extreme weather activity more likely to support climate adaptation policy.

Effect of extreme weather activity on opinion is modest and not consistent across specific adaptation policies.

Effect of extreme weather activity on opinion diminishes over time.

Here is the paper, via the excellent Kevin Lewis.

Dan Klein writes me about The Teaching Company

Here are the Teaching Company courses that I feel I have benefited most from:

Rufus J. Fears, Famous Greeks

Rufus J. Fears, Famous Romans

Bart D. Ehrman, The New Testament

Seth Lerer, The History of the English Language

Andrew C. Fix, The Renaissance, the Reformation, and the Rise of Nations

Brad S. Gregory, The History of Christianity in the Reformation Era

Robert Bucholz, The History of England from the Tudors to the Stuarts

Dale Hoak, The Age of Henry VIII

Peter C. Mancall, Origins and Ideologies of the American Revolution

Thomas L. Pangle, The Great Debate: Advocates and Opponents of the American Constitution

Patrick N. Allitt, The Rise and Fall of the British Empire

Patrick N. Allitt, The Conservative Tradition

Frederick Gregory, The Darwinian Revolution

Which do you all recommend?  Here is a Quora forum on the same issue.

The reserve army of the unemployed ant?

Social insect colonies are highly successful, self-organized complex systems. Surprisingly however, most social insect colonies contain large numbers of highly inactive workers. Although this may seem inefficient, it may be that inactive workers actually contribute to colony function. Indeed, the most commonly proposed explanation for inactive workers is that they form a ‘reserve’ labor force that becomes active when needed, thus helping mitigate the effects of colony workload fluctuations or worker loss. Thus, it may be that inactive workers facilitate colony flexibility and resilience. However, this idea has not been empirically confirmed. Here we test whether colonies of Temnothorax rugatulus ants replace highly active (spending large proportions of time on specific tasks) or highly inactive (spending large proportions of time completely immobile) workers when they are experimentally removed. We show that colonies maintained pre-removal activity levels even after active workers were removed, and that previously inactive workers became active subsequent to the removal of active workers. Conversely, when inactive workers were removed, inactivity levels decreased and remained lower post-removal. Thus, colonies seem to have mechanisms for maintaining a certain number of active workers, but not a set number of inactive workers. The rapid replacement (within 1 week) of active workers suggests that the tasks they perform, mainly foraging and brood care, are necessary for colony function on short timescales. Conversely, the lack of replacement of inactive workers even 2 weeks after their removal suggests that any potential functions they have, including being a ‘reserve’, are less important, or auxiliary, and do not need immediate recovery. Thus, inactive workers act as a reserve labor force and may still play a role as food stores for the colony, but a role in facilitating colony-wide communication is unlikely. Our results are consistent with the often cited, but never yet empirically supported hypothesis that inactive workers act as a pool of ‘reserve’ labor that may allow colonies to quickly take advantage of novel resources and to mitigate worker loss.

That is by Daniel Charbonneau, Takao Sasaki, and Anna Dornhaus, file under “speculative.”  For the pointer I thank Eric Durbrow.

Using tax data to measure long-term trends in U.S. income inequality

That topic has been knocking around for some time, with varying opinions.  I’ve now seen the clearest and most thorough treatment to date, namely from Gerald Auten and David Splinter.  It hasn’t received that much attention, perhaps because the results don’t have such a strong built-in constituency, but here goes:

Previous studies using U.S. tax return data conclude that the top one percent income share increased substantially since 1960. This study re-estimates the long-term trend in inequality after accounting for changes in the tax base, income sources missing from individual tax returns and changes in marriage rates. This more consistent estimate suggests that top one percent income shares increased by only about a quarter as much as unadjusted shares. Further, accounting for government transfers suggests that top one percent shares increased a tenth as much. These results show that unadjusted tax return based measures present a distorted view of inequality trends, as incomes reported on tax returns are sensitive to changes in tax laws and ignore income sources outside the individual tax system.

You’ll find the paper at the first link here.

Another estimate of the gains from deregulating building

Here is the abstract:

Counterfactual experiments show that deregulating existing urban land from 2014 regulation levels back to 1980 levels would have increased US GDP and productivity roughly to their current trend levels. California, New York, and the Mid-Atlantic region expand the most in these counterfactuals, drawing population out of the South and the Rustbelt. General equilibrium effects, particularly the reallocation of capital across states, accounts for much of these gains.

Alternatively, note from the paper that:

…deregulating all of the regions to 1980 levels would raise labor productivity by about 10 percent, and consumption by about 9 percent in the neoclassical economy, and would raise labor productivity by about 16 percent, and consumption by about 11 percent in the economy with the externality.

That is from Herkenhoff, Ohanian, and Prescott.  I’d like to make two broader points about the paper:

1. This is yet another example of real business cycle theory methods proving useful.  There are genuine problems with these approaches, but at least most of the blogosphere critics don’t understand them, and their uses, very well.

2. Sometimes you hear Texas described as a “low-wage” economy, perhaps contrasted with the high wages of California.  But there are some subtle wage effects from the Texas approach that often go unnoticed.  By drawing people out of high-rent areas, Texas keeps the lid on land rents elsewhere, thereby boosting real wages in say San Francisco.  Furthermore, San Francisco employers must pay their workers more, the more attractive is the “move to Texas” option.  So the full positive effect of the Texas model on wages is considerably higher than you can see by looking at Texas wages alone.  Once again, the distinction between the seen and the unseen turns out to be relevant.

Are Ideas Getting Harder to Find?

There is now another paper on this theme by Nicholas Bloom, Charles I. Jones, John Van Reenen, and Michael Webb, abstract:

In many growth models, economic growth arises from people creating ideas, and the long-run growth rate is the product of two terms: the effective number of researchers and their research productivity. We present a wide range of evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. A good example is Moore’s Law. The number of researchers required today to achieve the famous doubling every two years of the density of computer chips is more than 18 times larger than the number required in the early 1970s. Across a broad range of case studies at various levels of (dis)aggregation, we find that ideas — and in particular the exponential growth they imply — are getting harder and harder to find. Exponential growth results from the large increases in research effort that offset its declining productivity.

Here is the NBER link.