What I’ve been reading

1. Annie Lowrey, Give People Money: How a Universal Basic Income Would End Poverty, Revolutionize Work, and Remake the World.  A very good book, one of the hot books of the year, and much deeper and broader and balanced than the subtitle might imply.

2. George Magnus, Red Flags: Why Xi’s China Is In Jeopardy.  The case for pessimism, based on all possible reasons.  Worth reading, but who knows?

3. Devin Fergus, Land of the Fee: Hidden Costs and the Decline of the American Middle Class.  Not a balanced treatment, but a fact-rich and handy starting point for reading about this topic.  You won’t learn how many of those fees are efficiency-based, but you will go around asking the question more.

4. François Cusset, How the World Swung to the Right:Fifty Years of Counterrevolutions.  Full of generalizations and unsupported claims, but still a better guide to reality than most of what you will find from the other big think books.  An attempt at fresh thought, in pocket-sized form.

5. Paula Fredriksen, When Christians Were Jews: The First Generation.  Yet another good social and intellectual history of the early, formative period of Christianity.

Charles Silver and David A. Hyman, Overcharged: Why Americans Pay Too Much for Health Care.  I find most books on this topic too painful to read, including this one, but it does appear to be comprehensive and the new go-to coverage on this topic.

Comments

1. Would like to see Tyler post his current thoughts on UBI. If I remember correctly, he used to be in favor of it, but recently has become more in favor of a universal jobs guarantee?

I'm certainly not an expert on the literature, but the papers/studies I've been exposed to in terms of drivers of satisfaction/happiness point towards the importance of employment and meaning.

If we take that to be true then wouldn't we be more effectively spending our resources to push for a job->income than just providing an income.

I'm not sure I'd count on the US Federal Gov to be good at knowing what jobs to create.

Seems to me that giving cash to the bottom half or so would result in demand that would create lots of new jobs.

If free stuff and free money without working for it would end poverty than America would have no poverty. Try giving up drugs, alcohol and tobacco. Seriously do you have any idea how much this costs a month, a year? The only possible result of more free stuff will be more poverty and dependence on government. Why would anyone want to do this??? The answer is simple; people dependent on welfare will vote for politicians willing to increase welfare.

+1 for the first sentence. Second sentence is dubious.

UBI has the huge advantage of being so simple and automatic that it (ideally) wouldn't need any kind of gigantic bureaucracy to administer it. No bureaucracy to decide who get what benefits under what circumstances yada yada (which all inevitably gets used as a means to deliver political favors and hire favored 'academics').

Of course, this is exactly why UBI will probably never get implemented. Few people could make their balls (or ovaries) bigger by getting it done, so its natural lobby is vanishingly small compared to other proposals which get to distribute all that tasty power to administrators.

"Annie Lowrey, Give People Money: How a Universal Basic Income Would End Poverty, Revolutionize Work, and Remake the World. "

So, is the author referring to an actual UBI, or a welfare scheme with income cutoff's, etc?

Granted, we all expect UBI to have certain limits, but it's supposed to be broadly Universal. Something like all adult citizens qualify.

Tyler has linked to a few reviews of that UBI book.

Tyler has said, in the past, that he does want people to have jobs over income, but if they are obvious make-work then the satisfaction doesn't come. I can't remember exactly where he said this, but I found this while searching: https://www.vox.com/2017/3/30/15122162/tyler-cowen-ezra-klein-interview-podcast

It feels like he wants wage subsidy, but, I am a fan of wage subsidy, so I may be seeing support where it doesn't exist.

"It feels like he wants wage subsidy, but, I am a fan of wage subsidy, so I may be seeing support where it doesn't exist"

Yes, count me as a fan of wage subsidy over both minimum wage laws and very much over government job guarantees.

The problem with a wage subsidy is that it is more expensive since some of the people who get it would have had been employed regardless.

A jobs guarantee would actually cost less. Why?

Because you'd do it as an auction. Someone applies for a 'guaranteed job'. Set a min wage and throw it up to an auction.."JWatts wants a job, how much would you offer him?". If one or more employer bids above the min wage, that's a simple job offer to JWatts and there's his guaranteed job.

If not, then the employers can bid below the min wage. Gov't would chip in the difference and again the highest bidder gets it. JWatts has his offer, but he may not want to take a min/wage job. In that case the gov't has fulfilled the guarantee but it doesn't pay the subsidy so the costs are less. On the other hand if he takes the job the gov't will pay the subsidy but you get him working.

In theory the bidding could even go negative. In that case the gov't would end up paying him the subsidized full min. wage AND pay the employer to take the really horrible worker.

First, the Federal government would be directly interfering with the job market in a very substantial way.

Second, Would that approach have very high transactional costs? No one currently does that type of business with the Federal government without substantial additional costs. How much red tape would inevitably be part of the process?

"The problem with a wage subsidy is that it is more expensive since some of the people who get it would have had been employed regardless."

True to some extent, but if the subsidy were funded with an addition to FICA it could easily be revenue neutral. Indeed, it could be set up to be revenue neutral. IE everyone working would pay an extra 2% FICA (1%employee / 1% employer). Everyone working would get an extra amount per hour for every hour worked. Those at the top would pay more in the FICA tax than the amount they earned per hour, those at the bottom would pay less in FICA tax than the amount they earned per hour.

Granted, this would involve costs in rebating the money and proving the hours worked.

1. Increasing the number of jobs (net) through public expenditure can be hugely expensive. One particular program enacted to do this in 1983 it was later revealed created 35,000 net jobs for over $4 bn in expenditure, or over $120,000 per job. This was at a time when mean compensation per worker (nominal) was around $25,000 per year. I'm not sure they all work that badly, but this is something to keep in mind.

2. One feature of the labor relations regime during the 1930s was that the federal government was attempting to enforce a high minimum wage (25 c an hour; given the sum of employee compensation and the size of the population over 16 at that time, a contextually similar value today would be $20 per hour) while promoting craft and industrial unions. This was after the National Industrial Recovery Act was annulled by the federal courts. So, you have regime uncertainty + policies which reduce the demand for low skill labor.

This isn't surprising. Think about capital per worker in the US. If you want to directly create jobs with public expenditure then you're also going to have to spend a lot just to get the capital in place to do those jobs. This only makes sense if you're in a deep recession and there's lots of unused capital laying around (see WWII).

An auction based subsidy system, though, requires the employers to already have their capital in place.

1. Bhahahahah. No seriously in many ways it's actually less interfering. For example, you would be relaxing min wage laws.

2. I suspect transaction costs wouldn't be that bad. Going through the auction would be voluntary on both sides. I think most jobs would not be filled through the auction just like most jobs today are not filled by listings on the bulletin board at the local unemployment office.

3. The unemployment rate is only about 3-4%. The jobs guarantee would expand the labor market a bit but probably not by that much. Remember the subsidy is set to min wage so all you get out of it is a min wage job. The 63% or so who are not in the labor force now aren't jumping to get in for min. wage jobs.

Of course you could set it higher than the min wage, which would increase costs both by adding more people working with subsidies and bringing more people into the labor market.

Still for anything you spend on this program your money goes further because a simple wage subsidy would apply to everyone with a job and a UBI would be spread out among everyone in the population.

The idea is growing fast on me however it does seem a bit anti-innovative to me. A company has a choice to innovate with a labor saving machine or go to the 'job auction' and get a bunch of workers for free. Even under slavery, slaves were not free to plantation owners since they had to be fed, clothed and even paid some minor amounts. I suspect slavery, though, inhibited innovation and development in the south.

On the other hand you could combine this with a UBI. Basically everyone has a choice between a low UBI (say $750/mo) or guaranteed job at $1500/mo. If the magical robot future starts to get here gradually replacing all workers with robots you can gradually increase both of those amounts.

"Still for anything you spend on this program your money goes further because a simple wage subsidy would apply to everyone with a job and a UBI would be spread out among everyone in the population."

Which is a huge negative. People are going to see that as no better than welfare and the jobs will be largely considered make shift.

I don't think so. Remember the mechanism here is employers will be competing for workers in the auction. The work itself would be very, very real and I suspect you would end up with a lot of small and medium businesses doing the hiring out of this pool so it would look very different than 1,000 people standing around a huge 'ditch to nowhere'.

I think the problem here is more the underlying assumption that work is very, very fulfilling and if only we could prod more people into the workforce all good things will follow. I think something like this can help marginalized populations (low skilled, those with criminal records etc. will likely find easier employment if this is a backstop). But it isn't going to alter a cultural shift away from work due to automation and satiation. At best I suspect this would work for a generation or two before it's fully converted to straight UBI.

Is that like MorganWastler's Uber4Welfare? https://medium.com/@morganwarstler/guaranteed-income-choose-your-boss-1d068ac5a205 I think the program's a decent start but has some fatal flaws, like thinking that you can keep Fortune 500 companies from using it.

I worry that it could harm the low-end laborers that it is intended to help, if those employers fire everyone to hire off of the auction pool, which is suddenly huge.

If we create a $1/hour wage subsidy, the marginal effect will be small. Low-wage employers will pay slightly less, but more people will be brought into the labor pool -- not everyone at once. Then turn it up to $2/hour.

$1/hour for 200 M people is $400B per year. The government collects about $4T per year in income taxes, so as a rough estimate it will push up my tax bill by 10% but I'll get $2000 of it back. I'm sure I come out negative, but my costs will be going down. What are the costs

I wouldn't keep Fortune 500 companies out of it, I just suspect they won't be the majority of workers.

Firing everyone to rehire them off the auction is not likely to happen IMO. If it does you'd have a huge demand for labor which means many auctions might clear with a wage above the subsidy level, maybe even with a wage higher than what was previously being paid.

Here's the thing, why is expanding our labor force so obviously a good idea?

Taking the long view, https://fred.stlouisfed.org/graph/?id=LNS11300028,LNS11300031,LNS11300032,LNS11300025,LNS11300029,LNS11300026, is an interesting graph combined with https://www.bls.gov/opub/mlr/2016/images/hipple-fig1.png

What I'm getting is that naturally between 60-65% of adults will participate in the labor force. Trying to push that up dramatically is not going to do anything great for the economy IMO and in the long run odds are automation is probably going to shift the economy towards even fewer people participating. If you push a lot of people into the workforce with work requirements I suspect the only thing you're going to accomplish is decrease some productivity in low end work (such as fast food) where employers will discover it's cheaper to hire more workers rather than expensive machines.

Many years ago I had Confirmation Classes for the Catholic Church. Me and other HS aged kids had to do something like two hours of volunteering. They put us in the Church basement and had a bunch of donated Christmas gifts to wrap. 45 minutes later we were done but had to sit there for another hour and 15 minutes...all of us getting annoyed and antsy.

I don't see how a 'jobs guarantee' doesn't eventually evolve into a UBI when you consider automation.

What is a jobs guarantee? What do you do if the worker doesn't or can't do the work? Fire him? Who would then be required to give the worker a different job? Or do you just pay him not to work? How is that different from a basic income?

One way it might be different is a set of subsidies for the long term unemployed, the disabled, those with low skills etc. to drive down the unemployment rate as much as possible.

After that one option might be some type of auction system. Let's say the min/living wage is set $1500/month. Person puts their resume in. Employers can bid on them. If they bid above the min. then the job offer(s) go to the employee and that's your 'guaranteed job'.

If they bid less, the gov't kicks in the difference. In theory the price could even go negative where the gov't pays the employer. For example, Joe Screw Up gets local farm to bid $0 per month. Gov't kicks in $1500/month and local farm gets a worker for free. His brother, Bob Super Screw Up, has the local farm bit negative $500/month. Then gov't pitches in $1500/month to Bob and gives the farm $500/month.

In theory the market should clear. If you don't take the job offer you don't get the job and that's all the guarantee gives you. The auction aspect keeps the gov't from getting fleeced. In the example above some other farm could big negative $250 for Bob. In that case they get a free worker plus a subsidy of $250/month as long as Bob takes the job and they keep him on payroll.

The only problem here is keeping fraud at bay for jobs below the min. wage. I could, for example, create a company and bid $0 for my wife, who is home bound. She then gets $1500 a month. Likewise if Bob is really bad, the farm may simply tell him to stay home and then keep the $250 subsidy for the no show job while Bob keeps his $1500.

If everyone makes the same take home pay, why does Bob Super Screw-Up have any incentive to raise his skill level up to that of Joe Screw-Up? You have a marginal 100% income tax rate just below the minimum wage.

You're right, if Bob increases his skill to exactly equal Joe, he gets no particular benefit. However if he goes beyond Joe then he gets more pay. In many cases just showing up at a job will increase your skill at it over time so I think Bob would have a hard time plotting his skill increases just right so he never exceeds Joes. The '100% tax rate' is a bit less dramatic when you consider that some portion of acquiring skills is essentially costless.

If you raise the min wage higher and higher, though, this effect starts to become more important.

While I'd be open in theory to any employer using the guaranteed job auction idea, I suspect many of the jobs will be lower skilled.

Well, his older thoughts include the idea of favelas in America, at least in Average Is Over (within the quotes), as commented here - 'And let both the poorly paid and unemployed move to cheaper accommodation far from expensive real estate. "...in a few parts of... the warmer states... [w]e would build some 'tiny homes'... about 400 square feet and cost in the range of $20,000 to $40,000. ... very modest dwellings, as we used to build in the 1920s. We also would build some makeshift structures, similar to the better dwellings you might find in a Rio de Janeiro favela. The quality of the water and electrical infrastructure might be low by American standards, though we could supplement the neighborhood with free municipal wireless (the future version of Marie Antoinette's famous alleged phrase will be 'Let them watch internet!')." http://www.b-eye-network.com/blogs/devlin/archives/business_uninte/

They now live on the street. Isn't a 400 square foot house a big improvement, for both the person in it and society at large?

The Magnus book looks to be an interesting and timely addition to our understanding of China. Although there have been a series of China pessimists that have all been proven wrong before, this does feel to me like a bit of a turning point.

The world seems to have viewed China as infallible; shared its own view of the inevitability of its rise; and been willing to overlook episodes of horrible behaviour.

But I suspect the virtuous cycle is going to turn vicious. It will be very interesting to see how China reacts if the countries foreign policy, trade practices, and internal repression come under new scrutiny at a point where its economy seems to be wavering and some big programs (Belt and Road) seem at risk of failing.

The book of François Cusset seems weird, and frankly what I read on it didn't give me the desire to read it. But I realized that François Cusset is the brother of Catherine Cusset, a very good French novelist (also prof at NYU), whom I recommend.

Kindle version the book of "Give people money".
https://www.amazon.com/Give-People-Money-Surprisingly-Revolutionise/dp/0753545772/ref=sr_1_2?s=books&ie=UTF8&qid=1533194486&sr=1-2&dpID=41RzF1O0WvL&preST=_SY291_BO1,204,203,200_QL40_&dpSrc=srch=books&ie=UTF8&qid=1533194486&sr=1-2

Conservatism may be on the upswing, but pessimism, like the poor, has been and always will be with us. Is there any reason to be optimistic? It seems not judging from these books (although the failing of China will make some people happy, just as the severance of Jews from Christianity made some people happy - happiness only seems to occur at someone else's misery). I've been thinking about pessimism a lot lately, ever since Cowen wrote that pessimistic essay in Bloomberg. But that was during the dark days of closed comments. Now that Cowen has opened comments to the "wise ones", I'm feeling a wave of optimism coming my way. For the pessimists among us, here is a review of two very pessimistic books - seriously, books about the religion of pessimism (the religion of pessimism being my construct, not the authors' or the reviewer's): https://www.nytimes.com/2018/08/01/books/review-were-doomed-now-what-roy-scranton-infinite-resignation-eugene-thacker.html

5. As a Jew who converted to Catholicism, this will be a very interesting read for me.

My only knowledge on the topic was a debate within the early church whether to continue with Jewish traditions and strictures (Christianity as a sect of Judaism) or begin new traditions as a separate religion. I think the latter choice had much to do with how Christianity spread quickly among non-Jews. Christian appropriation or displacement of pagan practices also helped. Rather than proselytize people into novel beliefs, they sought to fit the Jesus story into existing beliefs.

Still no time to read the Art of the Deal, Professor?

Not even a hint of irony in selling a book about giving money away?

Thanks. I ordered Lowrey from the library and was able to find two other books by Fredriksen. I've said it before, but I find these the most useful posts on MR, both in the moment that they're posted and years later when I search for writers and topics.

1. You should probably mention that Annie Lowrey is Ezra Klein’s wife. You’ve appeared on his podcast, and he’s appeared on yours. I’m not saying you’re biased, but I’m not saying you’re not biased either. Disclosure is good.

No, he shouldn’t - and for the same reason that he didn’t mention that Ezra Klein was Annie Lowrey’s husband when on his podcast.

Lowrey just wrote a piece in The Atlantic that describes Jeff Bezos' exceptionally high net worth as a "policy failure". It was so batty that I Googled her name to find out who she was, as I had not heard of her before. When I saw she was married to Ezra Klein, it explained a lot.

I just find it hard to believe that someone who reads The Atlantic and posting on Marginal Revolution wouldn't know who Annie Lowrey was. Besides her obviously being half of a "power couple", she's been one of the most famous economics journalists since her time at Slate.

My parents were the first of their families who gained post-secondary educations and participated in an economy past the "you eat what you kill" situations their ancestors had known.

My maternal grandmother, a widow, supported herself and her children by doing laundry and cleaning the church. She resented intensely the rich guy who (through the church) gave her a house and probably arranged her income. My guess is that her belief that she had earned her way was more satisfying to her than a check in the mail ever would have been.

We should be very careful of the hazards of UBI. People want meaningful lives -- this is one of the reasons we have gangs fighting for honor in inner-city streets after generations of welfare programs.

1. No one reading this is going to be able to figure out if your grandparents were hunter-gatherers or your grandmother was a laundress and cleaning lady. Except that they're going to figure that if you're an adult of ordinary age, your grandparents were born just prior to the 1st World War and weren't likely inhabitants of the Arctic.

2. Your grandmother was performing unskilled labor. There were certainly other options if she resented her employer.

3. Gang warfare was fairly common in the 1920s, when 'welfare' consisted of institutionally delivered services like public schools, municipal hospitals, veterans hospitals, and almshouses.

4. Combat between organized gangs is a modest fraction of violent crime in the slums.

5. TANF beneficiaries account for 1.3% of the population as we speak, and some don't live in the slums. By and large, adults who live in slums are impecunious wage earners, elderly, or disabled. There is, of course, a small career criminal population running drugs. turning tricks, burgling homes, and robbing people.

Not related to the book (all I saw was the table of contents) specifically, but computing has led to an epidemic of hiding fees and overcharging in ways that customers can't understand or control. Take credit cards - when I was a kid, all bills were due at months end. I had a credit card with a 17 day billing cycle once. Why? There is no efficiency reason for that. The only reason is to get late fees. Or take the credit card contract. I worked in the LBO industry as a financial analysts when I was young I cannot explain a credit card contract to a friend. The best example of all, however, is comcast. Sign up for their service then check 18 months later how much you are paying. Way more than you understood based on the marketing materials and the discount period. As a former financial analyst I went thru my records (back in the day, cut the cord along time ago) and was unable to figure out what I was promised, how I developed my expectation, and how I am paying more than I understood. There is o way a regular consumer can make good financial decisions with credit cards, cable contracts, etc. Not possible. Our nation would be wealthier, and have higher growth, if the CFPB was able to protect consumers balance sheets. We also would avoid another President like this.
Don't you love long, one paragraph rants?

Why expect the government to protect us from sneaky arbitrary fees when they are busy loading the same bills with sneaky arbitrary fees and taxes of their own?

One of the things I've learned to look for when you (and others) post lists of books is to see if there are any podcast interviews with the authors. My book budget - not to mention my available time - is too limited to read them all, so an interview is a great way to get the gist of the work. There are way too few, however.

Also a lot of books started out as magazine articles or are excerpted by magazines for publicity pre-publication. These might be available online and save time and money.

Who has time for a podcast? Shouldn't you be looking for interview transcripts?

I listen to podcasts while exercising & driving, so I have at least 10 hours a week to listen—& I stack this on top of the time I already dedicate to reading. I can’t read very well while exercising or driving, so it works well for me.

1. Obviously, the author has never been to Illinois or Chicago. The Federal government has given trillions of dollars away to women to have children out of wedlock, feed people too lazy to work and created an entire underclass of people. The Feds have lent billions to people to buy homes and most of them have defaulted leaving the bills to the taxpayers to pay after the banks, title companies and real estate brokers have pocketed their points, fees and commissions. Billions in health insurance and they still use the emergency room. Socialism is the source of all poverty, ignorance and violence. Such academic nonsense.

4. I assume Cussett is a Marxist. Lefties love to blame capitalists for socialism's failures. You really think this is non-fiction?

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