Category: Uncategorized
The offshore bias in U.S. manufacturing
In the newest Journal of Economic Perspectives, Susan Houseman, Christopher Kurz, Paul Lengermann and Benjamin Mandel report:
In this paper, we show that the substitution of imported for domestically produced goods and services—often known as offshoring—can lead to overestimates of U.S. productivity growth and value added. We explore how the measurement of productivity and value added in manufacturing has been affected by the dramatic rise in imports of manufactured goods, which more than doubled from 1997 to 2007. We argue that, analogous to the widely discussed problem of outlet substitution bias in the literature on the Consumer Price Index, the price declines associated with the shift to low-cost foreign suppliers are generally not captured in existing price indexes. Just as the CPI fails to capture fully the lower prices for consumers due to the entry and expansion of big-box retailers like Wal-Mart, import price indexes and the intermediate input price indexes based on them do not capture the price drops associated with a shift to new low-cost suppliers in China and other developing countries. As a result, the real growth of imported inputs has been understated. And if input growth is understated, it follows that the growth in multifactor productivity and real value added in the manufacturing sector have been overstated. We estimate that average annual multifactor productivity growth in manufacturing was overstated by 0.1 to 0.2 percentage points and real value added growth by 0.2 to 0.5 percentage points from 1997 to 2007. Moreover, this bias may have accounted for a fifth to a half of the growth in real value added in manufacturing output excluding the computer and electronics industry.
In other words, Michael Mandel was right. An ungated version is here. In terms of income distribution, think of these rents as going to those individuals and institutions which are good at managing international supply chains. That’s a relatively small number of people. A lot of the offshoring is enabled by an innovation — the internet — which really does boost productivity but not in a way which much helps the median U.S. wage.
New World Bank blog on project impact evaluations
Assorted links
Assorted links
What makes you an economist?
Dominique Strauss-Kahn has been arrested, taken off a plane to Paris, and accused of a shocking crime. When I hear of this kind of story, I always wonder how the “true economist” should react. After all, DSK had a very strong incentive not to commit the crime, including his desire to run for further office in France, not to mention his high IMF salary and strong network of international connections. So much to lose.
Should the “real economist” conclude that DSK is less likely to be guilty than others will think? If you are following the social consensus estimate of p, does that make you less of an economist? A lesser economist? Is everyone else an economist anyway and thus you can agree with them? How many economists seriously use the concept of incentives — more than non-economists do — to understand everyday events? Is the notion that incentives predict individual behavior actually so central to economics? Should it be?
So run my thoughts this evening. I asked similar questions when legal charges were levied against Kobe Bryant.
Assorted links
1. An environmentalist perspective on The Great Stagnation.
2. A history of Christian rock.
3. Did the stimulus destroy jobs on net? (pdf)
4. The etymology of inflation, and also here.
5. Markets in everything: Barbara’s Bakery Peanut Butter Puffin Cereal.
Russia restaurant fact of the day
Russian tax law is so complex that Novikov Restaurant Group employs five accountants at each restaurant.
Here is more, mostly an interesting discussion of why there are so few good restaurants in Russia.
Assorted links
1. Tyler Cowen, speaking off the cuff, defines friendship, a two minute video.
2. Library of Congress launches National Jukebox.
3. Will data mining end the Great Stagnation? In any case you should major in statistics.
4. German economic growth is surging; again, real factors matter much more than fiscal policy or fiscal austerity.
Assorted links
1. Super-immigrants are low-hanging fruit, and more here.
2. Abandoned Yugoslavian brutalist war memorials.
4. The GM bailout doesn’t look so good.
5. I vote for Blattman on South Sudan.
The new Edge symposium
“What scientific concept would improve everybody’s cognitive toolkit?”
There are 159 responses, starting with Daniel Kahneman and Richard Dawkins. Kahneman starts off by sounding like Bryan Caplan:
Education is an important determinant of income — one of the most important — but it is less important than most people think. If everyone had the same education, the inequality of income would be reduced by less than 10%. When you focus on education you neglect the myriad other factors that determine income. The differences of income among people who have the same education are huge.
Income is an important determinant of people’s satisfaction with their lives, but it is far less important than most people think. If everyone [TC: in the US?] had the same income, the differences among people in life satisfaction would be reduced by less than 5%.
I’ll read the rest now…
*The Anatomy of Influence: Literature as a Way of Life*
That’s the new Harold Bloom book, which has all the strengths and weakness of Harold Bloom books (I am a fan). Excerpt:
Picasso is reputed to have said he did not care who influenced him but he did not want to influence himself.
Bloom’s books are very good for motivating rereads of classics, in this case Walter Pater, Paul Valery, Shakespeare, Hart Crane, Walt Whitman, Leopardi, and Montaigne’s essay “On Experience,” among others. Here is a weaker passage:
I recall first reading the poem when I was thirteen, thrilling to Satan and falling in love with Eve. In those years I fell regularly in love with fictive heroines and encountered Eve after a year of infatuation with Thomas Hardy’s heroines, particularly Eustacia Vye…and Marty South… I all but wept when Marty South cut off her long, beautiful hair, while I joined Milton and Satan in their lust for Eve’s wanton tresses.
Still, he is one of the greatest readers ever, this is probably his last major book, he truly believes in his project, and the point about prompting rereads makes this — whatever its flaws — better than almost anything else you can pick up.
Assorted links
1. Betsey Stevenson on Bryan Caplan and unhappy parents.
2. What Abhijit Banerjee would do for South Sudan.
3. What death means to primates.
4. Ten year old food critic, he is better and more authentic than most.
Assorted links
1. Restaurants cherry pick parties by size.
2. Interview on the new Tim Harford book.
4. Josh Barro on The Great Stagnation and goofing off.
5. I believe you can watch my Wednesday debate with Roger Scruton here.
6. Philadelphia Orchestra puts subscription money into escrow, not a good sign.
Nominal shocks
Samoa, the tiny Pacific Ocean island state, is travelling through time to improve its economic prospects.
In a vote of confidence for the Asian century, the country has decided to shift the jagged International Date Line to its east at the end of this year, which will bring it a day closer to Asia and Australasia.
The clocks in Apia, the capital, are 21 hours behind Canberra but only four hours behind San Francisco.
That reverses a decision 119 years ago to move the line to the west, following lobbying by Samoa’s merchants who wanted better to accommodate business with trading ships from the US and Europe.
It is not the first overhaul of a long-standing convention by Tuilaepa Sailele Malielegaoi, prime minister, who in 2009 switched the nation from driving on the right to the left, to align it more closely with the practice in Australasia and Japan.
“In doing business with New Zealand and Australia we’re losing out on two working days a week,” Mr Tuilaepa said. “While it’s Friday here, it’s Saturday in New Zealand and when we’re at church Sunday, they’re already conducting business in Sydney and Brisbane.”
Australia and New Zealand combined account for more than half of Samoa’s imports and more than 85 per cent of total exports, which largely consist of coconut products and fish.
…However, the move has not been universally welcomed, particularly in tourism, as the island will no longer be the last place on earth to see sunset. It will be joining the countries that see the sunrise first.
“After the date change, it will just be another sunset, no longer that special,” said Andrew Tiatia, a tour guide.
Mr Tuilaepa, however, points to another advantage. By flying one hour from American Samoa, on the other side of the date line, it will be possible to celebrate the same day twice and mark birthdays or wedding anniversaries twice over.
I enjoy stories like this more than is reasonably justified.
New York tips
1. Tulsi, 211 E. 46th, between 1st and 2nd. The most authentic Indian food I’ve had in the U.S., ever, get the vegetables. Not a cheap mom and pop, but by Manhattan standards this is reasonably priced for its quality. Jones Wood Foundry is an excellent gastropub.
2. Incendies joins Of Gods and Men and Even the Rain as one of my favorite films of the year. It is French-Canadian, set in Lebanon, and involves a journey of family discovery; I read it as an explicitly Christian movie.
3. Flushing, Queens, Golden Mall, go eat the Chinese food in the basement food court. For visitors, convenient from LaGuardia airport by taxi.
If you live in New York, or visit frequently, this is my best blog post ever.