Friday assorted links


2. As I read the Concluding Thoughts, it reduces to "not really." That is reasonable, because while space tourists might pay their own freight, there is a big bunch of empty between that and profitable colonies anywhere outside the gravity well.

All in all, Wyoming is closer.

But who wants to live there? Meanwhile, millions of people visit Brazil every year.

I have a natural affinity for places with trout streams. YMMV.

Oh, and you don't need armed guards when you go to the market.

You do not need to bring armed guards to Brazil. Most Brazilian cities are very safe. The city my mother was born in a few decades ago has registered no murders whatsoever in 2017! My home state experienced a 60% decline in murders in the last 15 years! Places where crime has become a real problem have their issues addressed by immediate and forceful federal action. Federal troops and tanks have been dispatched to Rio de Janeiro State and are patrolling the streets day and night. Criminals have been encountering strong armed resistence and, amidst bursts of bullets, are being forced to retreat and give up their strongholds. Crime is retrearing in Brazil. Meanwhile, crime engulfs America and opioid adiction swallows whole families and communities.

Crime in America is not as high as you might believe. Most of it is in the thug and immigrant community. If you compare America's crime rate for all people of Northern European descent it is the lowest in the world compared to the lowest nations.

As for opiod deaths. most deaths are the result of fentynal being mixed with traditional hard drugs and fentynal is deadly. The drugs are supplied by the minority and immigrant thug communities and young people are groomed in our public school system.

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This FRED graph shows hourly earnings increasing,
Krugman's graph is %change from year ago which would only be a good measure for the thesis if all wage changes for every employee only occur every 365 days. If I had more time I'd dig into the methodologies to see if there were something to his chart. But I have to get back to work.

#6: Sometimes (very rare nowadays) Krugman's brain is able to step out of his political frenzy idiocy and say things that make sense. If you believe wages are "sticky" it makes sense that they are sticky both ways. Now, this is one of the reasons why I think this notion of stickiness is kind of bunk (after all, wages do vary) but I can still believe the idea is partially true.
I think financial crisis like 08 are especially traumatizing, and it might still be guiding some decisions that are not totally rational, like not raising wages high enough even when that would help your business. I think it is a matter of time until that goes away.

I don't think it's symmetrical at all. Cutting nominal wages produces internal problems for companies. Some employers may be reluctant to raise wages for fear of creating a new nominal floor that might be a problem when the next recession comes (Krugman'a argument), but enforcing this across firms requires some kind of cartel-like arrangement that I don't think is realistic.

What seems obvious to me is that the "ZMPers" that Tyler wrote off years ago continue to come back. No way the natural growth in the labor force runs 2 million per year, yet job growth has continued to maintain this pace. This return of this reserve labor pool explains slow wage growth better I think.

I was surprised that Krugman didn't consider the possibility that firms don't want to have raise wages for current employees for reasons of profitability, and so are offering bonuses instead of higher wages for new employees, with the idea being that it is a pain to find a new job and a bit of a risk too (might not be as much overtime, different bonus structure, different benefits plan, other things that aren't really transparent from a job offer).

Yes, when Krugman is trying to explain and not blame, it turns out alright.

I think his "hiring bonus" comment is a good indicator of whether or not he's right. I've seen the anecdotes, but when the tax reform was announced, did more companies give one-time bonuses or did more of them increase employee wages?

Krugman describes EXACTLY how my company hires.

Krugman and all 3 of you make sense.
I'll throw a more complicated idea into the pot.

During the Great Recession, the unemployment rate for the uncredentialed (say people who had finished high school) was some 3x higher than for those with a bachelor's degree or more. In fact that last group topped out at 5% or so, and that number seems to be about 2.5% now.

Meaning? The pool of people *with* special skills is close to empty, while the pool of people with no particular or special skills is still pretty large.
(This explains say machine shops desperate for staff who don't hire any applicant because they are all very unsuitable.)

Now, make a mild leap and conjecture that college grads, or holders of credentials like licensed electricians, are much more likely to be middle-or-better marginal product employees. But another way, non-high school grads are more likely to be ZMP.

Now observe that regardless of total labor pool tightness, there's a maximum amount an employer can pay a ZMP or SMP employee and be better off than if they left the job unfilled.

*IF* this theory is correct, we would expect to see the wage premium for middle and above marginal product employees, crudely represented by those with college degrees, to grow kind of as expected with a tight market, while the wage level for ZMP/SMP people remains low. The short hand is the "returns to a college degree" will continue to grow.

As an aside - it's also possible that zero lower bound on wage changes during the great recession means that market wages are still artificially high, and they won't begin to grow until inflation or other changes bring them back in line.

Agree that above comments are good. Almost like this is an economics blog or something.

I would add that, if among the 2 million jobs being added annually include 500,000 returning ZMPers, that will depress aggregate wage growth numbers. Kind of the opposite of what we saw in 2009, when millions of ZMPers lost their jobs and average wages jumped 3.5%, as you can see in Krugman's graph.

"Almost like this is an economics blog or something."

Sometimes, if you only read the comments, you wouldn't be able to tell that.

6. Noah Smith makes a parallel argument. Basically, if too many people believe in The Great Stagnation, they will not raise wages on expectation of productivity growth.

(I say parallel because a belief in stagnation, all that low hanging fruit stuff, is probably also a hangover from the double dip: the Dot Com crash followed by the Great Recession.)

Wouldn't there be incentives for wrong expectations to be corrected regarding productivity growth?

Firms in each sector have connections with research and innovation in that sector. If there was higher productivity growth in a sector, those firms would hear about it, and boost their demand for labour (depending on elasticities of substitution and the bias of the productivity growth). These firms don't need to know aggregate growth, just that which affects their industry.

Find out or lose out to competitors.

Assuming everyone in the industry doesn't buy the argument and reduce research and development in unison. Yes.

On a national basis, we are middle of the pack, but that may hide declines by sector. Plenty of room for improvement, regardless.

I am suddenly reminded that America used to make the best refrigerators. Now I see people deciding between LG and Samsung. Maybe that high national R&D budget matters. And maybe it reduces zero-sum thinking.

Samsung counter depth french door refrigerators suck and the service is terrible. I vowed to take advantage of every opportunity to say so.

At least you can get them fixed. My experience is that I had to junk a bosch diswasher with a minor issue cause no service person could fix it. With LG and Samsung when I had issues I got a factory service guy who could fix anything. So far under warranty, but later for a fixed rate. ($240 for a refrigerator).

I had a Samsung counter depth refrigerator and can confirm that they are not good. Fixed while under warranty, but that warranty was only a year. I threw ours away in less than three years.

Or you could just read the NY Times story in the same edition
A Fast-Food Problem: Where Have All the Teenagers Gone?

Basically, food stores have increased much faster than the population, outpacing both customers and workers, which before 1980 were gonna and the same.

Free lunch economics argues customers are not workers and workers not customers, so customers can spend more when workers are paid less.

I like the point about the teen who runs his own business just to pay for his cell phone and SUV lease payments, which working fast food wages would not cover.

#5. Lebanon steps. I am reminded of the preservation of ancient works in the East which later led to the Italian Renaissance. (Also Asimov's Foundation series.)

I guess they are OK if one never saw the Brazilian originals:

It appears to me that the unions made flight attendant a career. I wonder how many flight attendants have college degrees.

My sister works for American, and has a degree.

Seniority is a big deal for them. I'm kind of envious of her lifestyle, because she has *a lot* of flexibility -- not sure her wages are that stellar, but it's a neat lifestyle.

4. Very surprised to see Ahmedabad and Surat (both in Gujarat) among the densest cities in India. Few people in India would rank them among the densest cities.

no one in America cares about Pdiddy.

6. It is nice to see Krugman go back to straight Economics here and I think he has the closest theory to reality although I liked the ideas expanded by other economist. That both the worker and the firm are tied together much more and both are a lot more careful on wage increases, job promotions and job switches. The data point that has been the prime driver the decrease in unemployment has been the continued low levels of unemployment requests the last 5 - 6 years. In our office, I remember starting in 2012 HR started complaining about wages for new workers and how the talent pipeline was as strong as before 2009.

The weird thing of the post-Great Recession (ending 2014ish) is the economy is following the 1950 Eisenhower economy in a lot of ways. There is a limited labor supply (due to war, other nations and early 30s Baby Bust) that is keeping a lid of higher growth.

6. The corporate tax cut did not increase investment in productive capital, which is the sina qua non of productivity growth and higher wages. We have become a nation of investors seeking returns from higher asset prices not productive capital. Why is that? Could it be that higher levels of wealth inequality have depressed the rate of return from productive capital? Some economists think so. Could it be that investors expect the Fed to inflate asset prices in the event of a downturn or worse but don't expect much in the way of an improvement in the rate of return from productive capital? Experience is believing. In many industries workers are being converted to employers: the former employer then subcontracts work to the former employee, thus the employee who was paid wages becomes a worker dependent on profits, with the former employee now responsible for the wages and benefits of his workers. It's the gig economy gone viral! Much has changed since Krugman (and Cowen) studied economics.

1. Nick Land's "The Lure of the Void" is the final word on the economics of space.

6. If this hypothesis is true, shouldn't there be a corollary, that reluctance to raise wages also explains the low unemployment rate?

In other words, instead of competing for higher quality workers with higher compensation, companies are instead hiring lower quality workers who will settle for current wages. This would also explain the low job turnover: changing jobs won't likely result in a raise.

I should have said "partially explains the low unemployment rate", say, why it's 3.9% instead of 4.5%.

5. Without paying real close attention, it appears that the steps are arranged in order of human progress, from Plato at the bottom (and the beginning of civilization) to more recent works of civilization near the top. A few Muslims weren't happy about the order based on their Twitter posts.

3. What is the meaning of MIE? I looked up the meaning on the web and none of the urban dictionaries make sense in the context and I have asked young more hip people and they do not have an answer.

Markets In Everything

only used on this blog

I had a neighbor who was a flight attendant, and I would characterize his job, the way he practiced it, as about 50% working as a flight attendant and 50% day trading on the market described in the article.

A percentage of blue collar wages is determined by contractual obligations, usually union jobs, that can span a year or more. This has an influence on non-union employment as well. In fact, union wage levels are often a ceiling for their non-union counterparts. It's unlikely that a no-union carpenter would make significantly more than his union rival, actually it would generally be less.

5. Why is English the preferred language for the European books (most of which are translations anyway)?

Presumably they were hoping for just this sort of Internet publicity. Good on 'em.

Krugman seem to believe there is vast pile of money companies ‘could’ use to raise wages..

Walmart’s ENTIRE annual profit for example, if used to boost employee wages would only result in approx ~$2.20/hr increase (so that is basically the ceiling)

Rarely (never?) have I agreed with anything Paul Krugman has written, but I think he's on to something here.

Further, perhaps downward stickiness means wages are still somewhat above the market-clearing level, so slower wage growth would be expected.

1. A response to the "fetishism of commodities"? In a world filled with disposable Chinese goods, microbrands display the resourceful, entrepreneurial spirit of everyday Americans. The farmers, the seamstresses and tailors, artists, cooks and other tradesmen who persist in spite of market forces. It may seem quaint but there is value in microbrands beyond their marketability to the masses.

Krugman. The premise is we have a competitive market for labor, so everyone scratches their head when it stubbornly refuses to even pretend to respond to basic supply and demand.

Maybe they should check their premise.

6. Paul Krugman’s theory as to why wages haven’t risen more.

No, Paul didn't quite get it. He discovered wage quantization is a double sided bound.
The real theory is the workers in the firm know the entry and exit queue for the firm, and the uncertainty of that queue forms the algebraic structure, the point of symmetry, over which the firm wage settings are stable. If that entry and exist queue shifts to another setting, the firm has to resort all its wage settings as workers want wage settings to match the entry and exit queue uncertainty.

I suspect some of the wage stickiness is factor price equalization.

The future costs of non-wage expenses for workers may be harder to predict, so wages do not fully capture the potential cost of new employees.

Workers have become more risk-averse, searching for stability over maximizing income.

Society has become less mobile and switching jobs is more expensive.

As more women enter the workforce, they tend to prefer flexibility over extra compensation.

Younger workers entering the workforce are not that productive on average. Waste too much time on blogs.

#1 Reason

The policies that Krugman preferred during the great recession led to much greater slack in the economy then he admitted. The number of drop-outs and underemployed was much greater than thought.

More women aren't entering the workforce. In fact, it's going the other way.

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