In which ways is the BLS biased?
No, they do not sit around changing the numbers to serve the interests of Democratic presidents, or to harm Republican ones. The system has too many different steps, too many checks and balances, and too many people who do not want to do the wrong thing. In a sense, you could say that the BLS is too bureaucratic to do that. They are better thought of as an agency which maximizes process, and the successful execution of process, success being defined in heavily process-intensive terms.
Their ideology, if that is even the right word, is to maximize adherence to the process. And “defensibility of the estimate” is important there.
You might argue they are not very good at seeing “the big picture,” but that same emphasis makes it difficult for them to deviate much from established procedures.
If there were important reasons why we should be creating new, useful, but highly speculative estimates (how about “the number of jobs that were not created because of AI”?), the BLS would not be good at doing that. They would not do it at all. Such estimates would open them up to too much criticism, and the speculative nature of the enterprise would clash with their desire to be managing controllable and defensible processes.
Over the last twenty years, a lot of their innovations have come in the form of disaggregated, sector-specific or region-specific data, which is fine. Or more emphasis on “work from home” issues. Which is fine.
So they estimate “that which they can,” rather than producing unreliable estimates that might be highly interesting.
That is the sense in which the BLS — and many other parts of the government in fact — is biased. It can matter, but it is a mistake to be looking for partisan bias that skews the numbers.
Saturday assorted links
The Indian Wedding
Another great piece by Samir Varma on Indian marriages—where deep traditions endure, even as subtle revolutions unfold around the edges.. It starts with this kicker:
When I told my mother I was marrying my girlfriend, an Italian Jew, she called all my friends in the US asking them to break us up.
When that failed, she faxed my future father-in-law threatening to disinherit me and never speak to me again. When that failed, she tried to get my PhD advisor to “tell us to break up.” (Luckily, he was relaxed enough to laugh about it with me, though it was embarrassing and deeply unpleasant.) Then she invited my girlfriend to India to “meet the family,” where my girlfriend paid a significant fraction of her yearly income as a starting engineer to fly over.
The pièce de résistance? My mother threw a party to “introduce her to everyone” — and spent the entire time complaining about her to all the guests. About 100 of those guests came to talk to me afterward, apologizing profusely, saying Indians aren’t like this and I should explain so she doesn’t think all Indians are nuts.
At my wedding, I had exactly zero relatives present. We didn’t speak for three years.
*Taking Religion Seriously*
By Charles Murray, now forthcoming, I expect it will be very interesting. Due out October 14.
The economics of the U.S. auto industry, a brief history
The economic value of the cars being made has climbed substantially through the years. As a result, real value added and industrial production — two different ways of measuring actual output — are now at all-time highs.
And this:
What about jobs? The auto industry today employs 1 million workers. Between 1950 and the signing of NAFTA in 1993, it averaged 1.1 million workers, just slightly higher.
And this:
The deindustrialization of Detroit is typically understood as a phenomenon of the 1970s and 1980s, and it is therefore blamed on the growth of trade during this period. But the fact is that auto investment and employment had started moving out of Detroit decades earlier.
I pieced together data from a variety of sources, which shows that auto manufacturing employment in the City of Detroit had already peaked in 1950, at just over 220,000 workers.
By 1970 the biggest declines had already occurred, with employment falling by more than half, to fewer than 100,000 jobs.
An important nuance is that many of these lost jobs migrated to other parts of Michigan, at least for a while. So while auto employment was collapsing in Detroit, the rest of Michigan managed to hold auto employment stable for another five decades until the 2000s, when it started falling everywhere in the state.
And:
Michigan now has about 280,000 fewer auto jobs than it did in the 1950s, a decline of roughly 60 percent. For the United States as a whole, auto employment is only down 4.7 percent — further showing that the struggles of Detroit and Michigan are less about the decline of the American auto industry and more about its relocation elsewhere.
Another way of understanding the trend: If Michigan had simply maintained the same share of American auto jobs as it had in the 1950s, meaning it did not lose any production to other states, then it would only have lost 21,000 auto jobs since then, not the 280,000 it actually did lose.
An excellent piece, recommended.
UK (Google) fact of the day
Google now spends more on physical capital like datacentres ($85 billion / year) than the entire UK defence budget ($79 billion / year).
Here is the source.
Friday assorted links
1. Eduardo Fernandez playing Bach on guitar.
2. Lots of thriving life, 30,000 feet deep.
3. Toward a new theory of the Senate? If you do not find this puzzling, you are not paying attention.
5. I thought “Oh, Hi!” was a better than expected retelling of “Before Sunrise,” except the young man and woman are trapped with the mores and customs of 2025. Ultimately a movie about just how far apart the two sexes stand today, and why the gap is unbridgeable.
6. Crime vs. public disorderliness (FT).
The Tragedy of India’s Government-Job Prep Towns
In Massive Rent-Seeking in India’s Government Job Examination System I argued that the high value of government jobs has distorted India’s entire labor market and educational system.
India’s most educated young people—precisely those it needs in the workforce—are devoting years of their life cramming for government exams instead of working productively. These exams cultivate no real-world skills; they are pure sorting mechanisms, not tools of human capital development. But beyond the staggering economic waste, there is a deeper, more corrosive human cost. As Rajagopalan and I have argued, India suffers from premature imitation: In this case, India is producing Western-educated youth without the economic structure to employ them. In one survey, 88% of grade 12 students preferred a government job to a private sector job. But these jobs do not and cannot exist. The result is disillusioned cohorts trained to expect a middle-class, white-collar lifestyle, convinced that only a government job can deliver it. India is thus creating large numbers of educated young people who are inevitably disillusioned–that is not a sustainable equilibrium.
The Economist has an excellent piece on the lives of the students including Kumar who is studying in “Musallahpur Haat, a suburb of Patna where dozens of coaching centers were concentrated, and the rent was cheap.”
…About half a million students are currently preparing for government exams in Musallahpur….For most government departments the initial tests are similar, and have little direct bearing on the job in question. Would-be ticket inspectors and train-drivers must answer multiple-choice questions on current affairs, logic, maths and science. They might be asked who invented JavaScript, or which element is most abundant in the Earth’s crust, or the smallest whole number for a if a456 is divisible by 11. Students have no idea when their preparations might be put to use; exams are not held on a fixed schedule.
…Kumar made his way to the bare, windowless room his friend had arranged for him to rent and started working. Every few days, he’d check the Ministry of Railways website to see if a date had been set for the exams. The days turned into weeks, then months. When the covid pandemic erupted he adjusted his expectations – obviously there would be delays. The syllabus felt infinite and he kept studying, shuttling between libraries, revision tutorials and mock test sessions. Before he knew it he’d been in Musallahpur nearly six years.
As his 30s approached, Kumar began to worry about running out of time. There is an upper age limit for the railway exams – for the ones Kumar was doing it was set at 30. As a lower-caste applicant he was allowed to extend this deadline by three years. His parents urged him to start thinking about alternative careers, but he convinced them to be patient. His father, who was struggling to keep up the allowance, reluctantly sold some of the family’s land to help support him, and Kumar studied harder and longer.
In my post, I emphasized the above-average wages and privileges, which is true enough, but even by Indian standards many of the jobs aren’t great and The Economist puts more focus on respectability and prestige (the sad premature imitation I discussed):
Indian society accords public-sector jobs a special respect. Grooms who have them are able to ask for higher dowries from their brides’ families. “If you are at a wedding and say you have a government job, people will look at you differently,” said Abhishek Singh, an exam tutor in Musallahpur.
Railway jobs in particular still have a vestigial glow of prestige.
…[Kumar] had been preparing for junior engineer and assistant train-driver jobs, but decided to apply for the lowest rung of positions too, the Group D roles, to increase his chance of getting something. An undergraduate degree and six years studying in Patna could lead to him becoming a track-maintenance worker. “I never imagined it would come to this,” he said sadly.
And yet he wouldn’t trade it. A short drive from his room in Musallahpur, a glitzy mall has just been built. There are jobs going there which pay close to what he might earn in a Group D role. But Kumar baulked at the suggestion he might become a barista. “I am educated with a technical degree,” he said. “My family hasn’t sacrificed so much for me to work in a coffee shop. People only work there if they have no other choice.” No one from his parents’ generation would respect a barista. But they admired, or at least understood, a job on the railways.
India’s government job system squanders talent, feeds on obsolete and socially-inefficient prestige hierarchies, and rewards years of sterile preparation with diminishing returns. It’s inefficient, of course, but behind the scenes it’s devastating to the young.
Hat tip: Samir Varma.
More on the US-EU trade deal
Here is my column from The Free Press:
But the real exercise, and critique of the tariffs, has to be a comparative one. After all, it is estimated that the tariffs will bring in between $1.5 trillion and $5.2 trillion of revenue over the next decade.
A good debate would be “the Trump tariffs” vs. “a more comprehensive VAT with lower rates and a broader base.” But, rightly or not, Democratic Party intellectuals likely would lose that debate in the eyes of the public and perhaps even in their own party. They probably would not lose it with professional economists, though in this regard I am an outlier in terms of the spending cuts I would favor.
Of course this helps explain the apparent paradox of why the stock market is these days up and not down. But many people do not wish to look too closely at that issue…
Taxes and tariffs
Here is an NBER paper from May that I do not think I covered:
We evaluate the aggregate effects of a change in tariffs on the US and world economies when tariff revenue is used to enact fiscal reform. Our model combines a standard international model of fiscal policy with taxes and a dynamic model of trade participation and tariffs that allows for uncertainty and transitions. We consider effects of permanent and temporary tariffs–with and without retaliation–when tariff revenue is used to reduce taxes on capital or labor or to subsidize investment. Compared to a lump sum redistribution, using tariff revenue for these reforms always boosts economic activity. Key to our analysis is the effect of trade dynamics on import substitution, such that tariff revenue after an increase in tariffs is higher in the short run than in the long run. When increasing the tariff by 20 percentage points, the revenue raised is largest when tariffs are temporary, unilateral, and used to subsidize investment, increasing by about 2 percent of GDP. This case also yields a large temporary increase in the trade balance. We find the welfare-maximizing unilateral tariff is close to 18 percent when tariff revenue is used to subsidize investment compared to 0 percent under a lump sum redistribution. We also find cutting capital taxes does not generate as much growth as introducing an investment subsidy since tariffs raise the price of investment substantially.
That is from
I’ll say it again: tariffs bad, bad, bad! But they are bad because they are a revenue grab, which will lead to consumption taxes being a new and major source of enhancement of government power and influence. Current policy may well evolve into some sick, distorted version of a VAT, with larger government to boot. But from a normal “Democratic Party, economics PhD view of government,” there is nothing so especially terrible about tariffs, at least not compared to other modes of taxation.
Berthold and Emanuel Lasker
A fun rabbit hole! Berthold was world chess champion Emanuel Lasker’s older brother, and also his first wife was Elsa Lasker-Schüler, the avant-garde German Jewish poet and playwright.
In the 1880s (!) he developed what later was called “Fischer Random” chess, Chess960, or now “freestyle chess,” as Magnus Carlsen has dubbed it. The opening arrangement of the pieces is randomized on the back rank, to make the game more interesting and also avoid the risks of excessive opening preparation and too many draws. He was prescient in this regard, though at the time chess was very far from having exhausted the possiblities for interesting openings that were not played out.
For a while he was one of the top ten chess players in the world, and he served as mentor to his brother Emanuel. Emanuel, in due time, became world chess champion, was an avid and excellent bridge and go player, invented a variant of checkers called “Lasca,” made significant contributions to mathematics, and was known for his work in Kantian philosophy.
Of all world chess champions, he is perhaps the one whose peers failed to give him much of a serious challenge. Until of course Capablanca beat him in 1921.
Thursday assorted links
1. “Here, we apply econometric causal inference techniques to 740,249 hours of human discourse from 360,445 YouTube academic talks and 771,591 conversational podcast episodes across multiple disciplines. We detect a measurable and abrupt increase in the use of words preferentially generated by ChatGPT, such as delve, comprehend, boast, swift, and meticulous, after its release.” I wonder if this is more true since this 2024 paper? Here is a related tweet thread. I do hear Alex using the word “delve” more.
2. New start-up with claims about embryo screening.
3. A report from “the fast-growing Canadian poor” (not my term).
4. Helsinki goes a full year without a traffic fatality.
5. Noam Brown on the new reasoning models and agnosticism.
6. Claims about Korean studying.
7. Dean Karlan on foreign aid and DOGE, with transcript. Very good piece, credit to Santi Ruiz.
The Australian Josh Szeps interviews me
Here is the video.
It was too hot to Spinoza to make an appearance, alas.
Say it ain’t so, Cecil…
New British cars may have to be fitted with breathalyser technology and black box-style recorders under Labour plans to align with EU vehicle safety laws.
The Government said copying European rules would drive down costs…
Here is the full Telegraph article. It seems more complicated than that, instead the car has to allow for the possibility of installation of such a device, without the use of the device, or the device, being required per se. So the black box is more concerning to me. It would mean that a complete monitoring of your whereabouts and driving behavior could become possible. There are Event Data Recorders in most newer US cars, but to date they are not used for very much. Perhaps the American ethos prevents slippery slope on this one?
These are not just extreme paranoid fears. When driving with a Spanish rental car this summer, the car issued an annoying, recurring beep every time it was being driven over the speed limit, even by small amounts. For one thing, the road synchs with the beeping device do not always accurately reflect the posted speed limits. For another, often the speed limit would suddenly fall by 20km, but of course you should decelerate rather than slamming on the brakes. For another, it can be dangerous to always drive below or even at the speed limit, especially when overtaking and I do mean sane rather than crazy overtaking.
So on these issues matters could indeed get much worse.
What does consulting do?
It is actually pretty useful:
This paper provides the first systematic and comprehensive empirical study of management and strategy consulting. We unveil the workings of this opaque industry by drawing on universal administrative business-to-business transaction data based on value-added tax links from Belgium (2002-2023). These data permit us to document the nature of consulting engagements, take-up patterns, and the effects on client firms. We document that consulting take-up is concentrated among large, high-labor-productivity firms. For TFP and profitability, we find a U-shaped pattern: both high and low performers hire consultants. New clients spend on average 3% of payroll on consulting, typically in episodic engagements lasting less than one year. Using difference-in-differences designs exploiting these sharp consulting events, we find positive effects on labor productivity of 3.6% over five years, driven by modest employment reductions alongside stable or growing revenue. Average wages rise by 2.7% with no decline in labor’s share of value added, suggesting productivity gains do not come at workers’ expense through rent-shifting. We do observe organizational restructuring with small increases in dismissal rates, and higher services procurement but reduced labor outsourcing. Our heterogeneity analysis reveals larger productivity gains for initially less productive firms, suggesting improvements in allocative efficiency. Our findings broadly align with ex-ante predictions from surveyed academic economists and consulting professionals, validating the productivity-enhancing view of consulting endorsed by most practitioners though only half of academics, while lending less support to a rent-shifting view favored by many economists.
That is from a new NBER working paper by