Further progress on the wage rigidity question

From Benjamin Schoefer, bravo:

I propose a financial channel of wage rigidity. In recessions, rather than propping up marginal (new hires’) costs of labor, rigid average wages squeeze cash flows, forcing firms to cut hiring due to financial constraints. Indeed, empirical cash flows and profits would turn acyclical if wages were only moderately more procyclical. I study this channel in a search and matching model with financial constraints and rigid wages among incumbent workers, while new hires’ wages are flexible. Individually, each feature generates no amplification. By contrast, their interaction can account for much of the empirical labor market fluctuations—breaking the neutrality of incumbents’ wages for hiring, and showing that financial amplification of business cycles requires wage rigidity.

The piece is titled “The Financial Channel of Wage Rigidity.”  One of the best macro papers!  It puts all of the pieces together, including the finance channel, and the difference between incumbent and new workers, identifying the relevant counterfactuals, and is not content to simply say “wage rigidity.”

Here is more on Schoefer, who as a sideline runs the Wirtschaftspolitik-Diskussionsrunde.  Here is his (entirely sober) Twitter account.

Gordon S. Wood’s *Power and Liberty*

The subtitle is Constitutionalism in the American Revolution, and of course self-recommending.  Here is one excerpt:

The breadth and depth of popular interest in the Constitution in 1787-1788 was remarkable.  The towns of Massachusetts, for example, elected 370 delegates to the state’s ratifying convention, of whom 364 attended.  Most were eager to meet and discuss the Constitution.  It took six days for the delegates from Bath, Maine (then part of Massachusetts), to make their way south across rivers and through snow to Boston.  The people of Massachusetts believed they were involved, as the little town of Oakham told its delegates, in deciding an issue of “the greatest importance that ever came before any Class of Men on this Earth.”

And this:

Many expected the electoral college to work as a nominating body in which no one normally would get a majority of electoral votes; therefore, most elections would take place in the House of Representatives among the top five candidates, with each state’s congressional delegation voting as a unit.

You can buy it here.

Which post-1960 creators built their own sonic worlds?

Of course this question is motivated by the passing of the great Lee Perry.  Who else might make such an exclusive list?  Note here we are not talking about whether you like the style, the melodies, or whatever.  Did the creator come up with a fundamentally new way of organizing our musical universe?  (Rolling Stones, Paul Simon, ABBA, many other notables don’t come close here, despite their considerable merits.)  Here is the list off the top of my head:

Miles Davis

John Coltrane

Ornette Coleman

Sun Ra (Monk I count as pre-1960?)

The Beatles

Brian Wilson

Hendrix and Led Zeppelin?

Rap and electronica, respectively, with arguments as to where the individual credit should go


Brian Eno


Velvet Underground

Sex Pistols

Kevin Shields/My Bloody Valentine

Sonic Youth

Philip Glass

Steve Reich

LaMonte Young

Robert Ashley


And of course Lee Perry

Who cares what you like?  I would say study them to learn music!

Who else?  Kurt Cobain?  The Byrds?  Someone from MPB?  Helmut Lachenmann?  Sunn O)))?  Others?  Anyone else from psychedelic music?  Post-1960 Stockhausen and Cage (or did they bloom earlier?)?  Scelsi?  Can?  Bill Evans?  Astral Weeks?  What else?

Hispanic and White Criminality are Converging

Keith Humphreys has a good post at the excellent Slow Boring on how Hispanics and White statistics on crime are converging.

An otherwise dull new government report on incarceration contains a startling fact: Hispanics are slightly less likely to be jailed than whites. It’s one of multiple unappreciated signs of fading disparities between Hispanics and non-Hispanic whites in the criminal justice system, a phenomenon with substantial implications both for the future of reform and electoral politics.

To be clear this is about jails not prisons where there are still differences but those differences are also rapidly converging. Hispanics are also joining police forces in much higher numbers.

Parallel changes appear in who the criminal justice system employs. From 1997 to 2016, the proportion of police officers who were African-American was stable, whereas the proportion who were Hispanic increased 61%. This helps explain why a June 2021 Gallup poll found that the proportion of Hispanics expressing “a lot” or “a great deal” of trust in police was 49%, almost as high as whites (56%), and far greater than that of African-Americans (27%).  Hispanic views on policing and crime may also be similar to whites because the two groups rate of being violent crime victims is almost identical (21.3 per thousand persons for Hispanics, 21.0 for whites).

Maybe systemic racism isn’t so systemic after all.

…in an era of widespread despair about criminal justice reform and racism in America more generally, the declining disparities between Hispanics and non-Hispanic whites merit reflection. A generation ago, the idea that such disparities would dramatically shrink or even disappear within the criminal justice system would have sounded naive. The fading of disparities should inspire reformers to even greater heights and also reduce cynicism about the alleged intractability of prejudice within American society.

Against family and entourage?

Many individuals travel between countries as part of their professional routines. How do they perform during those short trips abroad? To begin to answer this question, I analyzed the outcomes of over 5 million chess games played around the world. Importantly, tournament chess provides a clean setting in which location-dependent factors are mostly irrelevant; the audiences are quiet and the referees make hardly any judgments. Controlling for differences in chess skills, I found enhanced performance among players who were competing outside of their home countries. This finding was robust to additional controls such as age, sex, and skill momentum or game practice, and to the inclusion of individual or country fixed effects. This advantage, an approximately 2% increase in game outcome, suggests that traveling has a positive effect on performance.

Here is the full paper by Uri Zak, via the excellent Kevin Lewis.

This piece is proving to have legs

We develop a framework to theoretically and empirically analyze the fluctuations of the aggregate stock market. Households allocate capital to institutions, which are fairly constrained, for example operating with a mandate to maintain a fixed equity share or with moderate scope for variation in response to changing market conditions. As a result, the price elasticity of demand of the aggregate stock market is small, and flows in and out of the stock market have large impacts on prices.

Using the recent method of granular instrumental variables, we find that investing $1 in the stock market increases the market’s aggregate value by about $5. We also develop a new measure of capital flows into the market, consistent with our theory. We relate it to prices, macroeconomic variables, and survey expectations of returns. We analyze how key parts of macro-finance change if markets are inelastic. We show how general equilibrium models and pricing kernels can be generalized to incorporate flows, which makes them amenable to use in more realistic macroeconomic models and to policy analysis. Our framework allows us to give a dynamic economic structure to old and recent datasets comprising holdings and flows in various segments of the market. The mystery of apparently random movements of the stock market, hard to link to fundamentals, is replaced by the more manageable problem of understanding the determinants of flows in inelastic markets. We delineate a research agenda that can explore a number of questions raised by this analysis, and might lead to a more concrete understanding of the origins of financial fluctuations across markets.

Here is the link, by Xavier Gabaix and Ralph S.J. Koijen.  I worry that the hypothesis implies excess returns from monitoring the trading behavior of others (or even yourself?), but that’s just me.  It is in any case one of the more interesting (and ambitious) pieces in finance over the last few years.

More Saturday assorted links

1. Papua New Guinea fact of the day.

2. Progress Studies in San Francisco.  What it looks like “on the street.”

3. “But in Stockholm, the average waiting time for a rent-controlled property is now nine years, says the city’s housing agency Bostadsförmedlingen, up from around five years a decade ago.

4. Crypto companies wish to access the payments network, banks are resisting (WSJ).

5. Tsai Ming-liang (New Yorker).

U.S.A. fact of the day

Hispanics are slightly less likely to be jailed than whites…

Council on Criminal Justice analysis found that in 2000, the rate of being on probation was 1.6 times higher and the rate of being parole was 3.6 times higher for Hispanics than non-Hispanic whites. But by 2016, the probation disparity had disappeared and the parole disparity had shrunk by 85%. Hispanics still faced a 60% higher risk of being incarcerated in a state prison. This is an enormous and worrying disparity, but the Council noted that it decreased by 60% since 2000…

The dwindling of Hispanic-white disparities is even more remarkable in light of criminal behavior being so heavily concentrated in adolescence and young adulthood,. The median age for Hispanics is 29.8 years versus 43.7 for whites, meaning even in a system free of prejudice that punished solely on the basis of crimes committed, we would expect criminal justice disparities between the populations to be growing, not shrinking.

That is from the Matt Yglesias Substack, but the actual writer is Keith N. Humphreys.

Saturday assorted links

1. The Chinese war against celebrity (NYT).  And how much of the burden of The Woke falls upon (Western) female pop stars? Very important point in this piece, and oft neglected, about the incidence of Wokeness.

2. The most translated book from every nation?

3. Robin now sees a more fundamental problem in society.  Perhaps I would focus more on cruelty?

4. Drinking the Peter Leeson Kool-Aid.  And more here, why not?  I’d love to go.

5. The protest culture that is New Zealand.

“When did we all become women?”

Here is an essay by Kathryn Robinson, from 2006 (!), via “Chad”, here is the opening excerpt:

Hang around the zeitgeist long enough and a pattern will emerge. You flip on the TV and there’s a young woman announcing that Eagle Hardware is her social life. Change the station and see the newest Nike ad: no more the command to Just Do It, but now a ringing paean to self-esteem: I Can. Maybe another station will be broadcasting OlympicGames human-interest stories; maybe the winning American wrestler will be weeping lavishly.

Or maybe the vice president of the United States will be the one weeping, standing on the dais of the Democratic convention relating the tragedy of his sister’s lung cancer. You open a men’s magazine and read about the Nine Steps to a Toned Derriere. You log on to the Internet where designer Donna Karan reports that the top fashion trends are not wide lapels or sheer skirts, but “Compassion. Caring. Embracing.” You go to church and pray to God the Mother. You flee to a restaurant for a scotch and a steak, but find yourself in a cafe with wine and low-fat beefalo.

You wonder when we all became female.

If you cast a critical eye backward, you will see that it’s happened over the last three decades, in a shift as gradual and inevitable as the changing tide, surging over everything from business, education, and religion to politics, fashion, and interpersonal relations. One of the great cultural revolutions of our time, it’s also been as invisible as the air we breathe, shifting the default position of our behavior to “feminine” as imperceptibly as our evolution toward light eating, self-empowerment, and public intimacy…

The upshot, discovered in that campaign and exploited ever since: men vote for policies, women vote for symbols. Handlers found that where men’s voter turnout is dictated by political attentiveness, women’s voting has increased more rapidly than their interest or knowledge warrant. Therefore, women are more susceptible to campaigns waged through potent emotional symbols. Sick of the mudslinging and soundbiting that have since come to characterize political campaigning? Blame feminization.

Way too much generalization of course, that one is from Seattle Weekly (!…but where else?).  Interesting throughout.

Friday assorted links

1. How much do cam girls make?

2. Will California pay people to remain sober?

3. Arnold Kling responds on inflationSummers is skeptical about QE.

4. Which investors are most likely to freak out and engage in panic selling?

5. Singapore pulls the plug on Yale-NUS.  Here is the response of the Yale president.  So Singapore basically just told them to get lost?

6. “Visualizing the Expanding Space of Consecration in American Sociology, 1980–2020.