Results for “from the rooftops”
74 found

The new Covid strain and its policy implications

Here is one account, please note this investigation is in its early days:

“An increase in R of 0.4 or greater is extremely bad news. During the national lockdown in November the best we could achieve was an R value of somewhere between 0.8 and 1.0 around the UK,” said Prof Hunter. “What this means is that even if we went back to the lockdown it would still not be enough to bring the R value down to less than 1.0.”

Note also it is very likely the new mutation already has spread well beyond the UK.  And with compounding, an R increase of 0.4 is really bad as time passes.

If this all is true, what are the policy implications?  First, a lockdown with no pending vaccine will only postpone problems, a’ la the herd immunity theorists.

Second, we do have vaccines and so in any plausible model faster viral spread implies a faster timetable for vaccine approval and distribution.  And it implies we should have been faster to begin with.

If you used to say “we were just slow enough,” you now have to revise that opinion and believe that greater speed is called for, both prospectively and looking backwards.

In any plausible model.

If Godzilla is faster than you had thought, you need to start running away sooner.  And you needed to have started running away sooner.  In any plausible model.

In any plausible model.

Yet somehow I do not expect the rooftops to be so crowded over the next few days.

From David Splinter, from my email

This is all David:

A related paper by BEA came out today with their updated distributional estimates of personal income. Marina Gindelsky has done a lot of work to produce these estimates.

I have a couple new papers on tax progressivity and redistribution that may be of interest to you. Both used CBO data to avoid the PSZ-AS differences. Abstracts below.

The first paper is about the ends of the distribution: tax progressivity has increased significantly since 1979 (and steadily since 1986) due to more generous tax credits for the bottom, while average tax burdens of the top have been relatively unchanged because lower marginal rates were offset by decreased use of tax shelters. The online appendix shows why the CBO estimates differ from those of Saez and Zucman (see Fig. B7 at the end; it’s mostly due to refundable credits at the bottom and imputed income at the top) and the Heathcote et al. paper you blogged about a couple months ago (it’s technical differences and their inclusion of some transfers, but their most similar measure of tax progressivity was not flat—it increased 21 percent since 1979).

The second paper, with Adam Looney and Jeff Larrimore, is about the middle of the distribution. Since 1979, we found that non-elderly middle-class market income increased 39 percent in real per person terms. The increase was 57 percent when accounting for taxes and transfers. This seems to fit with the “updated” view of stagnation—expanding male wages to also look at untaxed compensation and including female compensation and taxes/transfers shows larger median growth. But there was a structural break in 2000. Before then, middle-class incomes grew at the same rate before and after taxes and transfers, and since then income after taxes and transfers grew three times faster (Fig. 6 on page 19). We don’t discuss the recent market income slowdown (maybe related to the debated labor share break around 2000), but we show that the additional fiscal support that filled the gap looks like an unsustainable way to boost middle-class disposable incomes going forward.”

The economic impact of the Bernie Sanders agenda

From Casey Mulligan:

If fully implemented, but otherwise implemented wisely, Senator Sanders’ agenda for the economy would reduce real GDP and consumption by 24 percent.  Real wages would fall more than 50 percent after taxes.  Employment and hours would fall 16 percent combined.  There would be less total healthcare, less childcare, less energy available to households, and less value added in the university sector.  Although it is more difficult to forecast, the stock market would likely fall more than 50 percent…

Even if without any productivity loss or increased utilization in healthcare, college, and daycare, this means that the Sanders agenda would be expanding the Federal budget by 13.25 percent of baseline consumption.  Including 19 percent additional utilization of these “free” goods and services, tax rates on labor income must increase by 23.5 percentage points (it would be more but the Sanders agenda does expand the tax base by eliminating the exclusion for employer-sponsored health insurance).  GDP falls by 16 percent (this does not yet consider productivity losses — that comes below).

You can quibble with some of the numbers on productivity decline, but that such estimates are even possible from fairly standard parameters should give a number of you some pause.  Here is my earlier post on the economic policy ideas of Bernie Sanders.

The best available fix for real wage stagnation

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

In other words, the frontier areas for overcoming wage stagnation are several-fold. First is a greater freedom to build, so that housing supply can rise and prices can fall. That also would enable more upward mobility by easing moves to America’s more productive (but also more expensive) regions. Second are steps to lower the cost of medical care through greater competition and price transparency. Third, American higher education is hardly at its optimum point of efficiency, innovation and affordability.

If those sectors displayed some of the dynamism and innovativeness of that marks America’s tech sector, the combination of declining prices and rising quality could give living standards a boost. And since rent, health care and tuition tend to be higher shares of the incomes of poorer people, those changes would help poorer people the most.

Think of it as a rooftops piece, combined with a discussion of why wages actually have seen slow growth as of late.

Don’t blame the Fed so much

Slow labor market recovery does not have to mean the core fix is or was nominal in nature, even if the original negative shock was nominal:

Recent critiques have demonstrated that existing attempts to account for the unemployment volatility puzzle of search models are inconsistent with the procylicality of the opportunity cost of employment, the cyclicality of wages, and the volatility of risk-free rates. We propose a model that is immune to these critiques and solves this puzzle by allowing for preferences that generate time-varying risk over the cycle, and so account for observed asset pricing fluctuations, and for human capital accumulation on the job, consistent with existing estimates of returns to labor market experience. Our model reproduces the observed fluctuations in unemployment because hiring a worker is a risky investment with long-duration surplus flows. Intuitively, since the price of risk in our model sharply increases in recessions as observed in the data, the benefit from creating new matches greatly drops, leading to a large decline in job vacancies and an increase in unemployment of the same magnitude as in the data.

That is from a new NBER working paper by Patrick J. Kehoe, Pierlauro Lopez, Virgiliu Midrigan, and Elena Pastorino.  Essentially it is a story of real stickiness, institutional failure yes but not primarily nominal in nature.

Perhaps more explicitly yet, from the new AER Macro journal, by Sylvain Leduc and Zheng Liu:

We show that cyclical fluctuations in search and recruiting intensity are quantitatively important for explaining the weak job recovery from the Great Recession. We demonstrate this result using an estimated labor search model that features endogenous search and recruiting intensity. Since the textbook model with free entry implies constant recruiting intensity, we introduce a cost of vacancy creation, so that firms respond to aggregate shocks by adjusting both vacancies and recruiting intensity. Fluctuations in search and recruiting intensity driven by shocks to productivity and the discount factor help bridge the gap between the actual and model-predicted job-filling rate.

Again, a form of real stickiness more than nominal stickiness.  The claim here is not that the market is doing a perfect job, or that the Great Depression was all about a big holiday, or something about video games that you might see mocked on Twitter.  There is a very real and non-Pareto optimal coordination problem.  Still, this model does not suggest that “lower interest rates” or a higher price inflation target from the Fed, say circa 2015, would have led to a quicker labor market recovery.

Even though the original shock had a huge negative blow to ngdp as a major part of it (which could have been countered more effectively by the Fed at the time).

Rooftops!

I am not sure there is any analytical inaccuracy I see on Twitter more often than this one, namely to blame the Fed for being too conservative with monetary policy over the last few years.

And please note these pieces are not weird innovations, they are at the core of modern labor and macro and they are using fully standard methods.  Yet the implications of such search models are hardly ever explored on social media, not even on Facebook or Instagram!  You have a better chance finding them analyzed on Match.com.

Why is the United States behind on 5G?

No American company makes the devices that transmit high-speed wireless signals. Huawei is the clear leader in the field; the Swedish company Ericsson is a distant second; and the Finnish company Nokia is third.

It is almost surprising that the Defense Department allowed the report to be published at all, given the board’s remarkably blunt assessment of the nation’s lack of innovation and what it said was one of the biggest impediments to rolling out 5G in the United States: the Pentagon itself.

The board said the broadband spectrum needed to create a successful network was reserved not for commercial purposes but for the military.

To work best, 5G needs what’s called low-band spectrum, because it allows signals to travel farther than high-band spectrum. The farther the signal can travel, the less infrastructure has to be deployed.

In China and even in Europe, governments have reserved low-band spectrum for 5G, making it efficient and less costly to blanket their countries with high-speed wireless connectivity. In the United States, the low-band spectrum is reserved for the military.

The difference this makes is stark. Google conducted an experiment for the board, placing 5G transmitters on 72,735 towers and rooftops. Using high-band spectrum, the transmitters covered only 11.6 percent of the United States population at a speed of 100 megabits per second and only 3.9 percent at 1 gigabit per second. If the same transmitters could use low-band spectrum, 57.4 percent of the population would be covered at 100 megabits per second and 21.2 percent at 1 gigabit per second.

In other words, the spectrum that has been allotted in the United States for commercial 5G communications makes 5G significantly slower and more expensive to roll out than just about anywhere else.

That is a commercial disincentive and puts the United States at a distinct disadvantage.

Here is more from Andrew Ross Sorkin (NYT).

Strict ID Laws Don’t Stop Voters: Evidence from a U.S. Nationwide Panel

U.S. states increasingly require identification to vote – an ostensive attempt to deter fraud that prompts complaints of selective disenfranchisement. Using a difference-in-differences design on a 1.3-billion-observations panel, we find the laws have no negative effect on registration or turnout, overall or for any group defined by race, gender, age, or party affiliation. These results hold through a large number of specifications and cannot be attributed to mobilization against the laws, measured by campaign contributions and self-reported political engagement. ID requirements have no effect on fraud either – actual or perceived. Overall, our results suggest that efforts to reform voter ID laws may not have much impact on elections.

By Enrico Cantoni and Vincent Pons.  Rooftops, shout, mood affiliation, etc.

Wednesday assorted links

1. Should you be an insider or an outsider?  With advice from Larry Summers.

2. Paul Krugman refers to a piece on New Deal bankers wanting higher interest rates.

3. Would leaving the EU make it easier for the UK to control its border? (no, shout from rooftops)

4. Video excerpt, Luigi Zingales on whether Pope Francis is overrated or underrated.  And lots of cheating on emissions tests, not just Volkswagen.  Speaking of cheating, Angus and I say North Carolina barbecue is in decline.

5. The polity that is New York City:”Custodians took home an average pay of $109,467 in the 2013-14 school year — and 634 of the city’s 799 custodians earned more than $100,000 in salary and overtime during that time, city payroll records show.”

6. What are the current restrictions on American travel to Cuba?

7. How Iceland managed to survive and bounce back.

Low Cost Private Schools in the Developing World

Private schools for the poor are growing rapidly throughout the developing world. The Economist has a review:

PrivateSchoolingPrivate schools enroll a much bigger share of primary-school pupils in poor countries than in rich ones: a fifth, according to data compiled from official sources, up from a tenth two decades ago (see chart 1). Since they are often unregistered, this is sure to be an underestimate. A school census in Lagos in 2010-11, for example, found four times as many private schools as in government records. UNESCO, the UN agency responsible for education, estimates that half of all spending on education in poor countries comes out of parents’ pockets (see chart 2). In rich countries the share is much lower.

Overall, there is good evidence that private school systems tend to create small but meaningful increases in achievement (e.g. herehere, here, here) and especially good evidence that they do so with large costs savings. The large costs savings suggest that with the right institutional structure, which might involve vouchers and nationally comparable testing, an entrepreneurial private sector could create very large gains. Karthik Muralidharan who has done key work on private schools and performance pay in India puts it this way:

Since private schools achieved equal or better outcomes at one-third the cost, the fundamental question that needs to be asked is “How much better could private management do if they had three times their current level of per-child spending?”

The Economist notes that another promising development is national chains which can scale and more quickly adopt best practices:

…Bridge International Academies, which runs around 400 primary schools in Kenya and Uganda, and plans to open more in Nigeria and India, is the biggest, with backers including Facebook’s chief executive, Mark Zuckerberg, and Bill Gates. Omega Schools has 38 institutions in Ghana. (Pearson, which owns 50% of The Economist, has stakes in both Bridge and Omega.) Low-cost chains with a dozen schools or fewer have recently been established in India, Nigeria, the Philippines and South Africa.

Bridge’s cost-cutting strategies include using standardised buildings made of unfinished wooden beams, corrugated steel and iron mesh, and scripted lessons that teachers recite from hand-held computers linked to a central system. That saves on teacher training and monitoring.

The Economist is somewhat skeptical of scripted lessons, known as Direct Instruction in the education world, but in fact no other teaching method has as strong a record of proven success in randomized experiments (see also here and here).

Need I also point out that online education can bring some of the best teachers in the world to everyone, everywhere at low cost? An article in Technology Review titled India loves MOOCs points out that students from India are a large fraction of online students (fyi, we are also finding many Indian students at Marginal Revolution University)

Throughout India, online education is gaining favor as a career accelerator, particularly in technical fields. Indian enrollments account for about 8 percent of worldwide activity in Coursera and 12 percent in edX, the two leading providers of massive open online courses, or MOOCs. Only the United States’ share is clearly higher; China’s is roughly comparable.

Education is changing very rapidly and its the developing world which is leading the way.

Interpreting the results of the Oregon Medicaid experiment

There is a new and probably very important paper by Amy Finkelstein, Nathaniel Hendren, and Erzo F.P. Luttmer:

We develop and implement a set of frameworks for valuing Medicaid and apply them to welfare analysis of the Oregon Health Insurance Experiment, a Medicaid expansion that occurred via random assignment. Our baseline estimates of the welfare benefit to recipients from Medicaid per dollar of government spending range from about $0.2 to $0.4, depending on the framework, with a relatively robust lower bound of about $0.15. At least two-fifths – and as much as four-fifths – of the value of Medicaid comes from a transfer component, as opposed to its ability to move resources across states of the world. In addition, we estimate that Medicaid generates a substantial transfer to non-recipients of about $0.6 per dollar of government spending.

An implication of this is that the poor would be better off getting direct cash transfers: “Our welfare estimates suggest that if (counterfactually) Medicaid recipients had to pay the government’s cost of their Medicaid, they would not be willing to do so.”

And perhaps this sentence could use the “rooftops treatment”:

It is a striking finding that Medicaid transfers to non-recipients are large relative to the benefits to recipients; depending on which welfare approach is used, transfers to non-recipients are between one-and-a-half and three times the size of benefits to recipients.

Or this:

Across a variety of alternative specifications, we consistently find that Medicaid’s value to recipients is lower than the government’s costs of the program, and usually substantially below. This stands in contrast to the current approach used by the Congressional Budget Office to value Medicaid at its cost. It is, however, not inconsistent with the few other attempts we know of to formally estimate a value for Medicaid; these are based on using choices to reveal ex-ante willingness to pay, and tend to find estimates (albeit for different populations) in the range of 0.3 to 0.5.

Might the program in fact be a bad idea?

How much does credibility matter in foreign affairs?

Under one view, credibility is like a chain.  If the United States does not keep one of its public promises, the credibility of the chain falls apart.  In essence observers are using the behavior of the American government to draw inferences about its true underlying type.  A single act of breaking a promise or failing to honor a commitment would show we really cannot be trusted, or that we are weak and craven, and so that characterization of our true type would be applied more generally to all or most of our commitments.

Under a second view, we don’t have that much credibility in the first place.  To be sure, we can be trusted to do what is in our self-interest.  But there is not much underlying uncertainty about our true type.  So we can promise Ruritania the moon, and fail to deliver it, and still the world thinks we would defend Canada if we had to, simply because such a course of action makes sense for us.  In this setting, our violation of a single promise changes estimates of our true scope of concern, but it does not much change anyone’s estimate of the true type of the American government.

Insofar as you believe in the first view, our inability/unwillingness to honor our commitment to the territorial integrity of Ukraine is a disaster.  Insofar as you hold the second view, our other commitments remain mostly credible.

For the most part, I see the second view as more relevant to understanding U.S. foreign policy than the first.  We’ve broken promises and commitments for centuries, and yet still we have some underlying credibility.  Remember those helicopters evacuating Saigon rooftops in 1975?

Still, when it comes to Taiwan, or those Japanese islands, or other Pacific islands, I think the first view plays a role.  That is, I think the world does not know our true type.  How much are we willing to risk conflict to limit Chinese influence in the Pacific?  Whatever you think should be the case, what is the case is not clear, perhaps not clear even to our policymakers themselves.  (In contrast there are plenty of data on the parameters of American preferences toward Middle East and Israel-linked outcomes, and our willingness to incur costs to alter those outcomes.)

That is another way of thinking about why the Ukraine crisis is scary for the Pacific.  It is one reason why the Nikkei was down 2.5% shortly after market opening Monday morning (Asia time) and ended up 1.3% down for the day.  The Chinese stock market did just fine.

Private Schooling In India: Results from a Randomized Trial

Karthik Muralidharan runs very large, randomized controlled trials on education in India. His previous work showed that performance pay for teachers in India has large and significant improvements on student learning. In his latest paper (with Venkatesh Sundararaman) he reports on the results of The Andhra Pradesh School Choice Project, a long-term randomized controlled trial covering over 6,000 students in 180 villages for four years (2008-2012). The study offered students a lottery for a private school scholarships and lottery winners were compared with non-winners. The results show modest improvements in learning for private school students and big increases in school productivity.

We find that private school teachers have lower levels of formal education and training than public-school teachers, and
are paid much lower salaries. On the other hand, private schools have a longer school day, a longer
school year, smaller class sizes, lower teacher absence, higher teaching activity, and better school
hygiene. After two and four years of the program, we find no difference between the test scores of
lottery winners and losers on math and Telugu (native language). However, private schools spend
significantly less instructional time on these subjects, and use the extra time to teach more English,
Science, Social Studies, and Hindi. Averaged across all subjects, lottery winners score 0.13 σhigher,
and students who attend private schools score 0.23 σhigher. We find no evidence of spillovers on
public-school students who do not apply for the voucher, or on students who start out in private schools
to begin with, suggesting that the program had no adverse effects on these groups. Finally, the mean
cost per student in the private schools in our sample is less than a third of the cost in public schools.
Our results suggest that private schools in this setting deliver (slightly) better test score gains than
their public counterparts, and do so at substantially lower costs per student.

As Karthik notes in a Ideas for India short article that summarizes:

Since private schools achieved equal or better outcomes at one-third the cost, the fundamental question that needs to be asked is “How much better could private management do if they had three times their current level of per-child spending?”

Is any economist doing more important work with greater potential for real improvement in the lives of millions than Karthik Muralidharan?

Assorted links

1. The rooftops and the rich, from Kevin Drum.

2. Speculative claims about the Haitian earthquake.

3. Bankruptcies in the U.S. vs. bankruptcies in Mass., since Romneycare.

4. Iran jails Jafar Panahi (The White Balloon, Circle) for six years and bans him from filmmaking for twenty.

5. Old and new: a photo essay of Mongolia.

6. Via Chris F. Masse, top ten CEO wealth creators, and destroyers, from 2010.

7. "inappropriate"

Haitian update

Can it get worse? With Haiti the answer is always yes. This is from The Independent:

It now looks certain that more than 2,000 Haitians lost their lives in the flooding that followed Tropical Storm Jeanne last weekend. A similar number drowned in floods in May…simply a light rainstorm that swept away their shanty homes.

That is just the beginning. At least a quarter of a million Haitians face two more coming storms. They have no food and many are still living on rooftops. Human and animal corpses are drifting down the dirty river, which currently provides the only source of drinking water. Starving dogs have been seen tearing off the limbs of human corpses. The morgues are not working and there is risk of a large-scale epidemic. And social cooperation has broken down. The Washington Post reports:

Hungry, thirsty and increasingly desperate residents attacked each other in a panic Thursday to get scarce food and water as workers struggled to bury hundreds of corpses five days after the city was struck by Tropical Storm Jeanne.

To make matters worse, radical deforestation, caused by ill-defined property rights, may make Haiti a virtual desert by the end of the decade. In the 1950s, 25 percent of the country was forest, now it is 2 percent. Floods of this kind will only get worse.

Outside of wartime, Haiti represents new depths in how bad things can get. The current standard of living is well below that of most hunter-gatherer societies. We don’t spend much time studying economies with negative real rates of return; I am sorry to report that developing such a theory is becoming increasing relevant.