Category: Economics
Nobel Prize poll results
The MRUniversity booth at the AEA meetings polled economists on a walk-by basis, as to who should win the next Nobel Prize. The top five on the list were:
Robert Barro
Paul Romer
Esther Duflo
Partha Dasgupta
William Nordhaus
Do check out the whole list at the link. Yoram Bauman was perhaps the dark horse candidate.
China pessimists are China optimists, and vice versa
If you think a lot of China’s growth slowdown already has come, the rest should prove manageable, albeit painful. That is true for both the global economy and for China. And that is in fact my view.
But if you think China has been growing at six to seven percent over the last year…egads! The roof will be falling in all at once, and what a long and steep way it has to tumble. The previous China optimists, provided they are not asleep, should be really worried now.
If you take Australian prices as a kind of bellwether, arguably the Chinese slowdown started about four to five years ago. (Five years ago, the Australian government was forecasting Australian growth rates of seven percent, now the growth rates are at about two percent.)
I call it the Soft Hard Landing.
Obamacare in 2016
During the election season Democrats can’t admit Obamacare is broken and Republicans can’t admit it won’t be repealed.
An excellent post from Robert Laszewski, read the whole thing.
Religion is good for the poor, installment #1437
From Jessica Shiwen Cheng and Fernando Lozano:
What is the role of religious institutions and religious workers in the racial earnings gap in the United States? In this paper we explore the relationship between childhood exposure to religious density, as measured with the number of religious workers at the state level, and the labor market outcomes of the worker thirty years later. We use data that spans over fifty years to identify changes in earnings due to early exposure to religion: our first source of identification uses changes in these two variables within states, and our second source of identification uses states’ differences by following workers who moved to a different state. Our results suggest that living in a state with a an extra clergy member for each 1,000 habitants increases the earnings of black workers by 1.7 to 3.6 percentage points relative to white workers.. In addition we show that this relationship is robust to different measures of exposure to religious density, and that these estimates increase to 7.6 percentage points when the change on religious density is defined exclusively increasing an extra black religious workers for each 1,000 habitants. Finally, we estimate a series of robustness tests that suggest that these results are not due to spatial sorting across states, nor to secular time trends associated with changes in labor market outcomes for black American workers.
You can find a copy of the paper if you dig through this link to the AEA program, look under Jan 03, 2016 12:30 pm, Hilton Union Square, Powell A & B, National Economic Association/American Society of Hispanic Economist. The title of the paper is”Racial/Ethnic Differences in Self-Identification and Income Inequality,” but do any of you know a better, more direct link?
As I see things, to overgeneralize perhaps rather grossly, Democratic economists are more concerned with social and intellectual status, often in good ways, than are many conservatives. The former group therefore is led to violate strictures of science through the omission of inconvenient truths, rather than through outright denialism or simply “making things up.” The benefits of religion, including sometimes extreme religion, are one example of that. On the Left, redistribution is a popular remedy for poverty, religion much less so.
Brookings fellowship
From my inbox:
Tyler,
We’re recruiting for our next Okun-Model fellow, which is a one-year visiting position at Brookings for early career economists. Previous fellows include Melissa Kearney, Jens Ludwig, and Amanda Kowalski. If you know of anyone interested for academic year 2016-2017, or anyone who might know someone interested, please pass along the link: http://www.brookings.edu/about/employment/position/2015/es15216
Ted [Gayer]
That was then, this is now
China’s top leadership plans to push ahead with deep structural reforms of agriculture and the countryside next year, but the most pressing matter is how to deal with its huge stockpile of surplus grain.
The source is here, via Bill Bishop.
When can median income consumers afford the very best?
A random Econ ? that pops into my head: are there any goods that a US median income maker can buy that are the best available?
I can think of quite a few:
iPhones and Kindle
mineral water (Gerolsteiner)
most vaccines and antibiotics
writing paper
books
movies
basketballs and many other sporting goods
rutabagas
Coca-Cola, Mexican or otherwise
Google and Facebook
Raffi himself cites “razor blade” on Twitter.
What else?
Regdata, a new database of the regulatory state
There is a new and very important regulatory database now published and on-line:
RegData: A numerical database on industry-specific regulations for all United States industries and federal regulations, 1997–2012
Omar Al-Ubaydli and Patrick A. McLaughlin
Abstract
We introduce RegData, formerly known as the Industry-specific Regulatory Constraint Database. RegData annually quantifies federal regulations by industry and regulatory agency for all federal regulations from 1997–2012. The quantification of regulations at the industry level for all industries is without precedent. RegData measures regulation for industries at the two, three, and four-digit levels of the North American Industry Classification System. We created this database using text analysis to count binding constraints in the wording of regulations, as codified in the Code of Federal Regulations, and to measure the applicability of regulatory text to different industries. We validate our measures of regulation by examining known episodes of regulatory growth and deregulation, as well as by comparing our measures to an existing, cross-sectional measure of regulation. Researchers can use this database to study the determinants of industry regulations and to study regulations’ effects on a massive array of dependent variables, both across industries and time.
Here is the published piece. Here is a working paper version. Here is the database itself. Here is background and an explanation of different versions of the data base.
The minimum wage and the Great Recession
I believe Card and Krueger will and should win Nobel Prizes, but their work is also not the last word on the minimum wage, especially during weak labor markets. Here is the most recent study, by Jeffrey Clemens:
I analyze recent federal minimum wage increases using the Current Population Survey. The relevant minimum wage increases were differentially binding across states, generating natural comparison groups. I first estimate a standard difference-in-differences model on samples restricted to relatively low-skilled individuals, as described by their ages and education levels. I also employ a triple-difference framework that utilizes continuous variation in the minimum wage’s bite across skill groups. In both frameworks, estimates are robust to adopting a range of alternative strategies, including matching on the size of states’ housing declines, to account for variation in the Great Recession’s severity across states. My baseline estimate is that this period’s full set of minimum wage increases reduced employment among individuals ages 16 to 30 with less than a high school education by 5.6 percentage points. This estimate accounts for 43 percent of the sustained, 13 percentage point decline in this skill group’s employment rate and a 0.49 percentage point decline in employment across the full population ages 16 to 64.
Do any of you see an ungated version? In any case I hope this receives the media attention it deserves. Will it?
What is the anti-austerity recommendation for Brazil?
At 70% of GDP, public debt is worryingly large for a middle-income country and rising fast. Because of high interest rates, the cost of servicing it is a crushing 7% of GDP. The Central Bank cannot easily use monetary policy to fight inflation, currently 10.5%, as higher rates risk destabilising the public finances even more by adding to the interest bill. Brazil therefore has little choice but to raise taxes and cut spending.
Too often, at the popular level, there is a confusion between “austerity is bad” and “the consequences of running out of money are bad.”
Sophisticated analysts of fiscal policy do not make this mistake.
By the way, here is a long study of how Brazilian fiscal policy has been excessively pro-cyclical (pdf).
And how is Brazilian output doing you may wonder?:
By the end of 2016 Brazil’s economy may be 8% smaller than it was in the first quarter of 2014, when it last saw growth; GDP per person could be down by a fifth since its peak in 2010, which is not as bad as the situation in Greece, but not far off. Two ratings agencies have demoted Brazilian debt to junk status. Joaquim Levy, who was appointed as finance minister last January with a mandate to cut the deficit, quit in December. Any country where it is hard to tell the difference between the inflation rate—which has edged into double digits—and the president’s approval rating—currently 12%, having dipped into single figures—has serious problems.
Don’t forget this:
Since the constitution’s enactment, federal outlays have nearly doubled to 18% of GDP; total public spending is over 40%. Some 90% of the federal budget is ring-fenced either by the constitution or by legislation. Constitutionally protected pensions alone now swallow 11.6% of GDP, a higher proportion than in Japan, whose citizens are a great deal older. By 2014 the government was running a primary deficit (ie, before interest payments) of 32.5 billion reais ($13.9 billion) (see chart).
Brazilian commodity prices have fallen 41% since their 2011 peak, so I say Ed Prescott has earned his Nobel Prize right there.
The first underlying article/op-Ed also is from The Economist. Without intending any slight to their other recent issues, the January 2-8 issue is one of their best in a long time. I am very pleased to have bought it in advance at the airport rather than waiting to get to my copy back at home.
Ontario fact of the day
Ontario is the largest sub-national debtor in the entire world, just one alarming distinction. Its debt is more than twice that of California, a state with three times the population and one that has its own severe fiscal problems. Its debt is $294 billion, or over $21,000 per capita. Net debt to GDP is up 48 per cent in the past 10 years to almost 40 per cent, second only to Quebec. Last year’s interest obligations totalled $11.4 billion, about the same as the cost of community and social services. I doubt many Ontarians realize how much they are paying just in interest on the provincial debt. It averages $840 per person every year and rising. Not surprisingly, Standard and Poor’s downgraded Ontario’s bond credit from AA- to A+, citing a very high debt burden and very weak budgetary performance.
Not a major cause for concern in terms of systemic risk, but not good news either.
That is from Joe Oliver, via Felix Salmon.
Why not sell a portion of your home?
Mr. [Alex] Rampell sees further opportunities in new asset classes. One example, he said, might be selling an equity stake in homes. “Why not sell a portion of your home?” he asks.
Ample capital exists around the world, as in the deep coffers of the Norwegian sovereign wealth fund, with $870 billion in assets, thanks to North Sea oil and a small population. With the right financial vehicle, Mr. Rampell said, such a fund could invest to co-own houses in, say, pricey Palo Alto, Calif., making it easier for prospective home buyers to make down payments and reduce their mortgage burden. “They could own 10 percent or 15 percent of your house, so you don’t have to borrow as much,” Mr. Rampell said. “I think there’s a lot of room for more of those kind of new asset classes.”
Here is the short NYT blog post.
What was 19th and early 20th century TFP? Which was America’s most inventive decade?
There is a new paper (pdf) on this question by Bakker, Krafts, and Woltjer, here is the abstract:
We present new estimates of TFP growth at the sectoral level and an amount of sectoral contributions to overall productivity growth. We improve on Kendrick (1961) in several ways including expanding the coverage of sectors, extending estimates to 1941, and better accounting for labor quality. The results have important implications including that the pattern of productivity growth was generally ‘yeasty’ rather than ‘mushroomy’, that the 1930s did not experience the fastest TFP growth of the 20th century, and that the role of electricity as a general purpose technology does not explain the ‘yeastiness’ of manufacturing in the 1920s.
They instead suggest that TFP growth is rising throughout the 1920s through the 1960s, a view which I cannot quite agree with. I view the 1960s as a time when previous ideas spread widely, rather than the key years of invention.
My strictly intuitive, historical guess is that TFP growth peaked in the 1890-1930 period, give or take.
More generally, the TFP concept is most useful, and most exact, when TFP growth is low rather than high. The bigger TFP growth might be, the more you have to worry about unmeasured changes in labor quality, and also worry about what is “technical progress embodied in capital goods” as opposed to “sheer accumulation.” When there is less progress, these measurement issues are smaller too.
I am most skeptical of TFP estimates for China, even if you believe the underlying statistics. Compared to “the global frontier,” TFP growth for China has been pretty close to zero, for centuries. Compared to “the frontier within China”…er…Chinese TFP growth and “embodied accumulation of foreign ideas through savings and investment” become pretty much the same thing. The distinction theory was trying to create then has been abolished.
So I’m not convinced by the results of this paper, but they are a useful corrective to excess certainty about Alexander Field and the previous view that the peak of American TFP was the 1930s.
In any case, thumbs up to any paper which uses the word “yeasty.”
Fermat’s Library
Here is Fermat’s Library:
Fermat’s Library is a platform for illuminating academic papers. Just as Pierre de Fermat scribbled his famous last theorem in the margins, professional scientists, academics and citizen scientists can annotate equations, figures and ideas and also write in the margins. Every week we send you a new paper annotated by the community.
Here is Fermat’s Library on John Nash on ideal money.
For the pointer I thank Ashok Rao.
Best business/economics podcast award
I am pleased that my Conversations with Tyler chat with Jeffrey Sachs won this award from Quartz, here is their description:
Smart economist Tyler Cowen interviews smart economist Jeffrey Sachs in the new and infrequently released series Conversations with Tyler. The conversation is wide-ranging—they discuss China, anthropologists, the Cuban Missile Crisis, and more—but centers around Sachs’ belief that well-intentioned humans can solve even the most difficult problems. Sachs offers:”So I pulled an all-nighter, and I wrote a plan for transforming Poland from a communist, central-planned economy to a market economy.” Arguably, this is the best single podcast episode to listen to if you want to be smarter about economics.
The transcript, audio and video versions are here, the entire series of chats is here; next up is Kareem Abdul-Jabbar.
For the pointer I thank Russ Roberts, who won an award for Excellence in Podcasting Overall, which of course he well deserves.
Addendum: You can help other people discover the podcast by rating it on iTunes and leaving a review.