Where is the Card and Krueger paper at?

by  Tyler Cowen in

Has it held up better than many people believe?  Here is a good and sure to prove controversial overview from Arindrajit Dube.  Excerpt:

Subsequent research that built on Myth and Measurement has found that while the sizeable positive effects in some of their specifications were likely due to chance, the lack of job loss was very much a robust finding. Card and Krueger’s own subsequent analysis in 2000 using Unemployment Insurance filings by firms (which was closer to the universe of firms in the two states than their original sample) over a longer period already moved towards this view, as the employment elasticities, while still positive, were smaller in magnitude and not statistically distinguishable from zero.(1) My own work with William Lester and Michael Reich (2010) demonstrated this point by comparing contiguous counties across state borders and pooling over 64 different border segments with minimum wage differences over a 17-year period (1990-2006).

There is also a lengthy discussion of whether Neumark and Wascher overturned the central Card and Krueger result.  Read the whole post.

Addendum: Tim Worstall comments.  Matt Yglesias comments.

Should our government spend (and borrow) more at negative real interest rates?

by  Tyler Cowen in

I have read so many posts saying yes.  But is it so obvious?  Let’s put aside the stimulus argument, I’d like to focus on the rate of return argument alone.

Let’s say I could borrow money at negative two percent real, but my seven cousins, three of whom are crazy, would get together and decide how to spend it.  I would get a vote too and they would agree to spend it on me.  I would have to pay it back.

I say no.

Many of the infra-marginal federal dollars are allocated by formula, such as with Social Security, and the cousins don’t have such a big say in the matter.  I am grateful for that.  But is it possible that the hypothetical new federal spending might be controlled by the cousins?  And what if four of them are crazy?

How should I feel about the exorbitant cost overruns on California high speed rail?  You know, the line connecting Fresno and Bakersfield?  That wasn’t even the crazy cousins at work.  (Or was it?)

I absolutely do not see this one as a no-brainer.  By using the “should” language in your thought experiment you can take away the crazy cousins, at least hypothetically.  But in the real world they are still there, and the non-crazy cousins screw up pretty often too.

How close in your family would the spending decisions have to get before you would accept a deal like that outlined above?  How many people would turn it down, even with their spouse in charge of spending the money?

Robin Hanson is forming a forecasting team, Kling and Schulz have a new edition

by  Tyler Cowen in

In response to the Philip Tetlock forecasting challenge, Robin is responding:

Today I can announce that GMU hosts one of the five teams, please join us! Active participants will earn $50 a month, for about two hours of forecasting work. You can sign up here, and start forecasting as soon as you are accepted.

There is more detail at the link.  Let’s see if he turns away the zero marginal product workers.

There is also a new paperback edition out of the excellent Arnold Kling and Nick Schulz book out, now entitled Invisible Wealth: The Hidden Story of How Markets Work.  The book has new forecasts…

*Leningrad: The Epic Siege of World War II*, by Anna Reid

by  Tyler Cowen in

The point at which an entire family was doomed was when its last mobile member became too weak to queue for rations.  Heads of households — usually mothers — were thus faced with a heartbreaking dilemma: whether to eat more food themselves, so as to stay on their feet, or whether to give more to the family’s sickest member — usually a grandparent or child — and risk the lives of all.  That many or most prioritised their children is indicated by the large numbers of orphans they left behind.  The lucky ones were put into children’s homes; the unlucky had their cards stolen by neighbours, took to thieving on the streets or simply died alone.

And:

The Russian language makes the morally vital distinction between trupoyedstvo — ‘corpse-eating’ — and lyudoyedstvo — ‘person-eating’, or murder for cannibalism.

This is an excellent book, you can order it here.  You can find reviews here.

Markets in everything the law of one price?

by  Tyler Cowen in

As an investment, cash is considered a conservative bet. Tonight in Melbourne, a confident buyer took a punt that sometimes, in certain company, cash is worth more as art than money in the bank.

As the opening lot of the Deutscher and Hackett auction, a single wad of $20,000 cash – an artwork called Currency – was sold for $17,500. When the 22 per cent buyer’s premium is added, the total cost comes to $21,350.

The work – by Sydney artist Denis Beaubois, and brought to life with a $20,000 grant from the Australia Council – was divided into two lots of 100 uncirculated $100 banknotes.

Deutscher and Hackett had given it an estimate of $15,000-$25,000, with both extremes sending competing messages about the inflationary value of the work. The notes can still be used as legal tender, according to the artist.

You will note that the winning bidder was not a Swiss bank.  Here is more and for the pointer I thank Zac Gross.

How ineffective was the stimulus really?

by  Tyler Cowen in

Kevin Drum has a very thoughtful response to the new Jones and Rothschild papers.  I am still more skeptical about the job-creating magic of stimulus, however, and here are a few reasons why:

1. Labor market polarization.  This is a very popular idea among the Progressive Left and rightly so; it seems to be true and increasing in importance.  Yet it gets dropped like a hot potato when discussions of stimulus come up.  A simple interpretation of the data, consistent with labor market polarization, is that we have a larger sum of money chasing the same set of well-qualified, easily-employable workers.  Polarization also means not so much substitutability and there is plenty of evidence in the Jones-Rothschild paper of employers finding labor markets — for what they want — somewhat tight.

2. The Jones-Rothschild paper has an estimate that only 42 percent of the job offers went to the unemployed.  A lot of the money also was spent on capital, land, raw materials, and other factors of production.  I’ve never seen good estimates here, but labor’s share is about seventy percent of gdp, actually a bit shy of that.  Let’s say seventy percent of the stimulus gets spent on labor at all, and only forty-two percent of that gets spent on unemployed labor.  (It’s actually worse than that because it is 42 percent of the job offers and may well be less than 42 percent of the revenue, most likely so if you think of the unemployed as bringing lower wage offers.)  That’s less than thirty percent of the initial expenditure being spent on unemployed labor and that is before any other problems with the expenditures kick in.  It’s hard for me to see that as a triumph of the program (NB: we are only talking about one part of ARRA here); would direct government employment have overhead costs that high?  How about monetary stimulus?  What’s the new calculation for cost per job saved per year?

3. Cutting nominal wages of workers hurts their morale and firing people hurts the morale of everyone left behind.  Employers weigh these morale costs carefully when making personnel decisions.  To get to the matter in question, when times are tight employers are often quite relieved when workers leave the firm voluntarily.  It eases their cash flow, prevents a firing, and everyone is happy, sort of.  Bad times are precisely when replacements of these workers do not happen.  (Another version of that argument: If Keynesians are right about labor hoarding, job shifters don’t get replaced very often.)  So the claim that an ARRA hire of an already-employed worker led to a replacement for that worker at the original firm is not so strong.  This happened during down times and very often replacement is postponed, perhaps indefinitely.  The Keynesian view, after all, stresses how AD problems hit virtually the entire economy.

4. Very often when the replacement does happen, the replacement is drawn from the pool of workers who are doing well.  Some of those workers will be unemployed.  But they are the unemployed who least need the help.  Their average search time goes down, and that is somewhat of a social gain, but it is hardly the goal of a fiscal stimulus program.  We’ve failed very badly at reemploying the hard-core unemployed and that is borne out by other numbers.  So of the forty-two percent of offers going to the unemployed, how many were going to the “don’t so much need the help but were searching” unemployed?  That will make the calculation look uglier yet.

Labor market polarization, labor market polarization, labor polarization.  Market-oriented economists don’t like to stress this theme, but it’s true and it’s a big reason why the stimulus didn’t work better.  It’s not an idea we should suddenly leave behind.

Caleb says I haven’t blogged music lately

by  Tyler Cowen in

I agree with the Simon Reynolds thesis of aesthetic musical stagnation, nonetheless I’ve been listening to: Abigail Washburn, City of Refuge, Cecil Taylor Feel Trio, 2 T’s for a Lovely T (lots of discs, all wonderful, lasts for years), Rose of Sharon (American vocal music),  Scarlatti vol. I by Carlo Granta (my favorite of any Scarlatti recording), anything by Isabelle Faust, Diabelli Variations by Paul Lewis, Ravinahitsy, by Damily (acoustic guitar music from Madagascar, an underrated category), Juju in Trance, and Khyam Allami’s Resonance/Dissonance.

The new releases by Malkmus/Beck and Kanye/Jay-Z haven’t stuck with me.

How to annoy Canadians

by  Alex Tabarrok in

After almost a decade of rule, Vancouver has been dethroned as the most livable city by The Economist. One of the reasons for the downgrade was “recent intermittent closures of the key Malahat highway [which] resulted in a 0.7 percentage point decline in the Canadian city’s overall livability rating.” The only problem is that the Malahat is on Vancouver island, a 1.5 hour ferry ride and at least an hour or so of driving from Vancouver. Rating agencies, eh?

Hat tip: Monique van Hoek.

Why didn’t the stimulus create more jobs?

by  Tyler Cowen in

There are many studies of the stimulus, but finally there is one which goes behind the numbers to see what really happened.  And it’s not an entirely pretty story.  My colleagues Garett Jones and Daniel Rothschild conducted extensive field research (interviewing 85 organizations receiving stimulus funds, in five regions), asking simple questions such as whether the hired project workers already had had jobs.  There are lots of relevant details in the paper but here is one punchline:

…hiring people from unemployment was more the exception than the rule in our interviews.

In a related paper by the same authors (read them both), here is more:

Hiring isn’t the same as net job creation. In our survey, just 42.1 percent of the workers hired at ARRA-receiving organizations after January 31, 2009, were unemployed at the time they were hired (Appendix C). More were hired directly from other organizations (47.3 percent of post-ARRA workers), while a handful came from school (6.5%) or from outside the labor force (4.1%)(Figure 2).

One major problem with ARRA was not the crowding out of financial capital but rather the crowding out of labor.  In the first paper there is also a discussion of how the stimulus job numbers were generated, how unreliable they are, and how stimulus recipients sometimes had an incentive to claim job creation where none was present.  Many of the created jobs involved hiring people back from retirement.  You can tell a story about how hiring the already employed opened up other jobs for the unemployed, but it’s just that — a story.  I don’t think it is what happened in most cases, rather firms ended up getting by with fewer workers.

There’s also evidence of government funds chasing after the same set of skilled and already busy firms.  For at least a third of the surveyed firms receiving stimulus funds, their experience failed to fit important aspects of the Keynesian model.

This paper goes a long way toward explaining why fiscal stimulus usually doesn’t have such a great “bang for the buck.”  It raises the question of whether as “twice as big” stimulus really would have been enough.  Must it now be four times as big?  The paper also sets a new standard for disaggregated data on this macro question, the data are in a zip file here.

Ticket to Ride (Taxes in Everything)

by  Alex Tabarrok in

BERLIN (Reuters) – Germany’s first “sex tax meters,” from which prostitutes can purchase a ticket for 6 euros (5.31 pounds) per night, will ensure the tax system is fairly implemented, a city spokeswoman said.

“Inspectors will monitor compliance — not every evening but frequently,” the spokeswoman told Reuters.

If caught without a valid ticket, offenders will first be reprimanded, then face fines and later even a ban.

Hat tip Daniel Lippman.

Was there ever a Chinese tea party?

by  Tyler Cowen in

…best estimates are that during the second half of the 18th century imperial taxes captured only 5 percent of the gross national product in China, compared to 12-15 percent in Russia, 9-13 percent of national commodity production in France, and 16-24 percent of national commodity production in Britain.  During the 18th century in Russia, moreover, corvees and military service were far more onerous than in China, where most labor services had been commuted.  If we consider that under the Northern Song in 1080, imperial revenue averaged about 13 percent of national income, and under the Ming in 1550 6-8 percent, we find some support for Skinner’s thesis that percentage of the surplus captured in imperial taxes shrank steadily relative to the share retained by local systems.

Victor Lieberman presents “philosophical commitment to low taxes” as a major reason for this pattern.  Further explanations are a lack of foreign threats and that the Chinese state did not always have the capacity to collect much more.

Those points can be found in Lieberman’s quite interesting Strange Parallels, Southeast Asia in Global Context, c.800-1830, volume 2, Mainland Mirrors: Europe, Japan, China, South Asia, and the Islands.  The book is even longer than that title, clocking in at 947 pp. and that is only the second part of the whole.