Category: Current Affairs

What is holding back employment?

The White House and congressional Democrats have argued for weeks that the lack of child care services poses a major obstacle to the economic recovery, pressing for a massive and immediate investment to get parents back to work.

But a new economic analysis led by a prominent White House ally concludes that school and daycare closures are not driving low employment levels — blunting a key Biden administration argument in favor of its American Families Plan and undercutting the view of some Democrats that investing in child care is crucial for the country to climb out of the coronavirus recession.

“School closures and lack of child care are not holding back the recovery,” said Jason Furman, a Harvard professor who chaired the Council of Economic Advisers in the Obama administration and co-authored the analysis. “And conversely, we shouldn’t expect a short-term economic bump from reopening schools and making child care more available.”

The study — which found that the employment rate for parents of young children actually declined at a lower rate than for those without kids — adds fuel to an intense national debate about what is behind a suspected worker shortage and what policy changes are needed to accelerate Americans’ return to work as the pandemic subsides.

Here is the full Politico article by Megan Cassella and Eleanor Mueller.

Emergent Ventures winners, 14th cohort

Center for Indonesian Policy Studies, Jakarta, to hire a new director.

Zach Mazlish, recent Brown graduate in philosophy, for travel and career development.

Upsolve.org, headed by Rohan Pavuluri, to support their work on legal reform and deregulation of legal services for the poor.

Madison Breshears, GMU law student, to study the proper regulation of cryptocurrencies.

Quest for Justice, to help Californians better navigate small claims court without a lawyer.

Cameron Wiese, Progress Studies fellow, to create a new World’s Fair.

Jimmy Alfonso Licon, philosopher, visiting position at George Mason University, general career development.

Tony Morley, Progress Studies fellow, from Ngunnawal, Australia, to write the first optimistic children’s book on progress.

Michelle Wang, Sophomore at the University of Toronto, Canada, to study the causes and cures of depression, and general career development, and to help her intern at MIT.

Here are previous cohorts of winners.

Inflation and the Fed

Federal Reserve officials were optimistic about the economy at their April policy meeting as government aid and business reopenings paved the way for a rebound — so much so that and “a number” of them began to tiptoe toward a conversation about dialing back some support for the economy.

Here is more (NYT).  That is yet another sign that our government (treating fiscal and monetary as a consolidated entity) made a mistake in applying too much demand stimulus.  Hardly anyone said this at the time except Summers and Blanchard, and since then few have been willing to come out and admit error.  There is an ex post attempt to redefine the debate by insisting inflation will not spiral out of control.  Quite possibly not, but whatever your view on that question, don’t let it distract you from the actual mistake.  Virtually all macroeconomic commentators in the public sphere were wrong for not realizing and stressing that too much demand stimulus was being applied.  Furthermore, we ended up spending $1 trillion (!) in ways that were pretty far from optimal.

Got that?  People, the rooftops are waiting.

My Conversation with Pierpaolo Barbieri

Here is the audio, visual, and transcript.  Here is part of the summary:

Pierpaolo joined Tyler to discuss why the Mexican banking system only serves 30 percent of Mexicans, which country will be the first to go cashless, the implications of a digital yuan, whether Miami will overtake São Paolo as the tech center of Latin America, how he hopes to make Ualá the Facebook of FinTech, Argentina’s bipolar fiscal policy, his transition from historian to startup founder, the novels of Michel Houellebecq, Nazi economic policy, why you can find amazing and cheap pasta in Argentina, why Jorge Luis Borges might be his favorite philosopher, the advice he’d give to his 18-year-old self, his friendship with Niall Ferguson, the political legacy of the Spanish Civil War, why he stopped sending emails from bed, and more.

Here is just one bit:

COWEN: Why did Argentina’s liberalization attempt under Macri fail?

BARBIERI: That’s a great question. There’s a very big ongoing debate about that. I think that there was a huge divergence between fiscal policy and monetary policy in the first two years of the Macri administration.

The fiscal consolidation was not done fast enough in 2016 and 2017 and then needed to accelerate dramatically after the taper tantrum, if you want to call it, or perceived higher global rates of 2018. So Macri had to run to the IMF and then do a lot of fiscal consolidation — that hadn’t been done in ’16 and ’17 — in’18 and ’19. Ultimately, that’s why he lost the election.

Generally speaking, that’s the short-term electoral answer. There’s a wider answer, which is that I think that many of the deep reforms that Argentina needed lack wide consensus. So I think there’s no question that Argentina needs to modify how the state spends money and its propensity to have larger fiscal deficits that eventually need to be monetized. Then we restart the process.

There’s a great scholar locally, Pablo Gerchunoff, who’s written a very good paper that analyzes Argentine economic history since the 1950s and shows how we move very schizophrenically between two models, one with a high exchange rate, where we all want to export a lot, and then when elections approach, people want a stronger local currency so that we can import a lot and feel richer.

The two models don’t have a wide acceptance on what are the reforms that are needed. I think that, in retrospect, Macri would say that he didn’t seek enough of a wider backing for the kind of reforms that he needed to enact — like Spain did in 1975, if you will, or Chile did after Pinochet — having some basic agreements with the opposition that would outlive a defeat in the elections.

And:

COWEN: The best movie from Argentina — is it Nine QueensNueve reinas?

BARBIERI: It is a strong contender, but I would think El secreto de sus ojos, The Secret in Their Eyes, is my favorite film about Argentina because of what it says about the very difficult period of modernization, and in particular, the horrors of the last military regime that marked us so much that it still defines our politics 50 years since.

Recommended.

It feels like we are living in a science fiction novel

That is the theme of my latest Bloomberg column, here is one excerpt:

Now, for the first time in my life, I feel like I am living in a science fiction serial.

The break point was China’s landing of an exploratory vehicle on Mars. It’s not just the mere fact of it, as China was one of the world’s poorest countries until relatively recently. It’s that the vehicle contains a remarkable assemblage of software and artificial intelligence devices, not to mention lasers and ground-penetrating radar.

There is a series of science fiction novels about China in which it colonizes Mars. Published between 1988 and 1999, David Wingrove’s Chung Kuo series is set 200 years in the future. It describes a corrupt and repressive China that rules the world and enforces rigid racial hierarchies.

It is striking to read the review of the book published in the New York Times in 1990. It notes that in the book “the Chinese somehow regained their sense of purpose in the latter half of the 21st century” — which hardly sounds like science fiction, the only question at this point being why it might have taken them so long. The book is judged unrealistic and objectionable because its “vision of a Chinese-dominated future seems arbitrary, ungrounded in historical process.” The Chung Kuo books don’t reflect my predictions either, but it does seem that reality has exceeded the vision of at least one book critic.

I also consider Asimov, Dogecoin, and Stephenson at the link.

Lies vs. silence?

That is the contrast in my latest Bloomberg column.  The claims about the Republicans are more widely circulated in educated circles, so here is the section on the Democrats:

Given the greater deployment of intellectual argument, smart, educated people are exposed to a more persuasive case for Democratic positions. But there is a danger in this asymmetry: when Democratic ideas are not working or are poorly designed.

Rather than constructing brazen untruths, the Democratic intelligentsia remains largely silent when it is unhappy. President Joe Biden’s recent Buy American plan is similar to protectionist ideas from Trump, but it doesn’t come in for heavy criticism on social media. If asked about it, most Democratic-leaning economists would be (correctly) critical. Yet for them this shortcoming isn’t that big a deal, given what are perceived to be the greater sins of Republicans, including their “big lie” strategy.

The continuing problems of migrant children cut off from their parents at the border receive some criticism — but the noise machine is nothing close to what it was under Trump. The new inflation data seem to indicate that Larry Summers’s criticisms of Biden’s stimulus program were largely correct, yet few if any commentators are apologizing to him on Twitter.

There is much more at the link, including about Republicans.  And to be clear, when it comes to the Democrats, the “in fact this wasn’t left wing enough” is an almost obligatory form of self-criticism, serving also as a kind of repeated affirmation of relative moral superiority.  Or the “I/we was even more right than I had thought” criticism is common as well.  The actual self-criticism of “our value schema led us astray on this issue altogether”? — you almost never hear that one.

What should I ask Alexander the Grate?

No typo there, nor has backward time travel been invented.  I will be doing a Conversation with him, and here is a brief summary:

He has lived on various heating grates in Southwest D.C. for almost all of his homeless life, which is why he introduced himself as “Alexander the Grate,” when he and I first met in 1983. Several years ago, he told me this: “The bottom line is that the urban homeless in Washington, D.C., don’t create structures. We can’t because of the restrictions. Rather, we impose ourselves into the interstices of the infrastructure.”

So what should I ask him?

India Delays the 2nd Dose; Delaying 2nd Dose Improves Immune Response; Fractional Dosing

India has delayed the second dose to 12-16 weeks.

In other news, delaying the second dose of the Pfizer vaccine appears to improves the immune response (as was also found for the AstraZeneca vaccine). The latter is a news report based on a press release so some caution is warranted but frankly this was always the Bayesian bet since most vaccines have a longer time between doses as that helps the immune system. As Tyler and myself both argued, the short gap between the first and second dose was chosen to speed up the clinical trials not to maximize immunity. That was the right decision in the emergency but it was never the case that following the clinical trial regimen was “going by the science” no matter what Fauci said.

Many lives have been lost by not going to first doses first earlier, both here and in India.

Every country should move to a regimen in which the second dose comes at 12-16 weeks, even the United States, as this may improve the immune response and help other countries get a little bit ahead in their vaccine drives.

May I now also beat the drum some more on fractional dosing? Many people (not everyone) report that the second mRNA dose packs a wallop. I suspect that a half dose at 12-16 weeks would be plenty and that would free up significant capacity to vaccinate more people with first doses. We could also run some trials on half-doses for the young as a way to balance dosing and risk. Again this will matter for the rest of the world more than the United States but stretching doses in the United States will help the rest of the world and the arguments against stretching doses are now much diminished.

The Economist on Patent Waivers

A good statement from The Economist:

We believe that Mr Biden is wrong. A waiver may signal that his administration cares about the world, but it is at best an empty gesture and at worst a cynical one.

A waiver will do nothing to fill the urgent shortfall of doses in 2021. The head of the World Trade Organisation, the forum where it will be thrashed out, warns there may be no vote until December. Technology transfer would take six months or so to complete even if it started today. With the new mRNA vaccines made by Pfizer and Moderna, it may take longer. Supposing the tech transfer was faster than that, experienced vaccine-makers would be unavailable for hire and makers could not obtain inputs from suppliers whose order books are already bursting. Pfizer’s vaccine requires 280 inputs from suppliers in 19 countries. No firm can recreate that in a hurry.

In any case, vaccine-makers do not appear to be hoarding their technology—otherwise output would not be increasing so fast. They have struck 214 technology-transfer agreements, an unprecedented number. They are not price-gouging: money is not the constraint on vaccination. Poor countries are not being priced out of the market: their vaccines are coming through COVAX, a global distribution scheme funded by donors.

In the longer term, the effect of a waiver is unpredictable. Perhaps it will indeed lead to technology being transferred to poor countries; more likely, though, it will cause harm by disrupting supply chains, wasting resources and, ultimately, deterring innovation. Whatever the case, if vaccines are nearing a surplus in 2022, the cavalry will arrive too late.

Elsewhere in this issue they draw on my work with Kremer et al.

The increase in capacity seen over the past year was brought about in large part because of government interventions, most notably Operation Warp Speed in America and the activities of the Vaccine Taskforce in Britain, which guaranteed payments and drove the expansion of supply chains.

These efforts splashed around a lot of money which, if none of the vaccines had worked, would have been lost. But with the benefit of hindsight it is now hard not to wish they had been more generous still. In March Science, a journal, published estimates from a group of economists of the total global economic loss that would have been avoided if enough money to produce vaccines for the entire world had been provided up front, rather than enough for most of the rich world. They calculated that if the world had put in place a vaccine-production infrastructure capable of pumping out some 1.2bn doses per month by January 2021, it would have saved the global economy almost $5trn (see chart).

Eric Budish of the Chicago Booth School of Business, one of the model’s authors, explains the situation using a plumbing metaphor: it is faster to lay down a wider-bore pipe at the start of a project than to expand a narrow one later. The rich world succeeded in producing effective vaccines remarkably quickly in quantities broadly sufficient to its needs: an extraordinary achievement. But the capacity of the system it built in order to do so created constraints that the rest of the world must now live with. That was a choice, not destiny.

David Brooks on how wokeness will get watered down

But as the discourse gets more corporatized it’s going to get watered down. The primary ideology in America is success; that ideology has a tendency to absorb all rivals.

We saw this happen between the 1970s and the 1990s. American hippies built a genuinely bohemian counterculture. But as they got older they wanted to succeed. They brought their bohemian values into the market, but year by year those values got thinner and thinner and finally were nonexistent.

Corporations and other establishment organizations co-opt almost unconsciously. They send ambitious young people powerful signals about what level of dissent will be tolerated while embracing dissident values as a form of marketing. By taking what was dangerous and aestheticizing it, they turn it into a product or a brand. Pretty soon key concepts like “privilege” are reduced to empty catchphrases floating everywhere.

Here is the full NYT link.

Ezra Klein on UFOs

What if they turn out to be “a thing”?  Here is one excerpt, to be clear this is not the only view or possibility he is putting forward:

One immediate effect, I suspect, would be a collapse in public trust. Decades of U.F.O. reports and conspiracies would take on a different cast. Governments would be seen as having withheld a profound truth from the public, whether or not they actually did. We already live in an age of conspiracy theories. Now the guardrails would truly shatter, because if U.F.O.s were real, despite decades of dismissals, who would remain trusted to say anything else was false? Certainly not the academics who’d laughed them off as nonsense, or the governments who would now be seen as liars.

And this:

One lesson of the pandemic is that humanity’s desire for normalcy is an underrated force, and there is no single mistake as common to political analysis as the constant belief that this or that event will finally change everything. If so many can deny or downplay a disease that’s killed millions, dismissing some unusual debris would be trivial. “An awful lot of people would basically shrug and it’d be in the news for three days,” Adrian Tchaikovsky, the science fiction writer, told me. “You can’t just say, ‘still no understanding of alien thing!’ every day. An awful lot of people would be very keen on continuing with their lives and routines no matter what.”

Excellent column, do read the whole thing (NYT).

Where Next? Forecasting COVID in India

The Development Data Lab has put together a real-time forecast of COVID by district in India.

The underlying dataset of the portal is open-access and has information on total cases, deaths, estimated reproductive rate, total clinics and hospitals at the district level. Our hope is that residents of high-risk district will adjust behavior if their area has a precariously increasing reproduction rate over time. Even better if aid and medical support that many organizations are mobilizing at an impressive pace could be allocated based on district-level evidence. District-level bureaucrats can incorporate this additional information in planning their pandemic response (most of us have read about the striking example of what the District Collector of Nandurbar was able to achieve to prepare against the second wave). Finally, central and state governments could tailor their pandemic response given the obvious paucity of resources and time based on district-level risk estimates.

Overall, knowing where the virus will strike next can help save lives — by guiding behavior change, local public health measures, and allocation of scarce resources.

This is an important resource. Anup Malani, Satej Soman, Sabareesh Ramachandran, Ruchir Agarwal, Sam Asher, Tobias Lunt, Paul Novosad, and Aditi Bhowmick are some of the people working on this.