Results for “age of em” 15650 found
*Troublemakers: Silicon Valley’s Coming of Age*
That is the new and excellent history by Leslie Berlin, substantive throughout, here is one good bit of many:
In March 1967, Robert and Taylor, jointly leading a meeting of ARPA’s principal investigators in Ann Arbor, Michigan, told the researchers that ARPA was going to build a computer network and they were all expected to connect to it. The principle investigators were not enthusiastic. They were busy running their labs and doing their own work. They saw no real reason to add this network to their responsibilities. Researchers with more powerful computers worried that those with less computing power would use the network to commandeer precious computing cycles. “If I could not get some ARPA-funded participants involved in a commitment to a purpose higher than “Who is going to steal the next ten percent of my memory cycles?”, there would be no network,” Taylor later wrote. Roberts agreed: “They wanted to buy their own machines and hide in the corner.”
You can buy the book here, here is one good review from Wired, excerpt:
While piecing together a timeline of the Valley’s early history—picture end-to-end sheets of paper covered in black dots—Berlin was amazed to discover a period of rapid-fire innovation between 1969 and 1976 that included the first Arpanet transmission; the birth of videogames; and the launch of Apple, Atari, Genentech, and major venture firms such as Kleiner Perkins and Sequoia Capital. “I just thought, ‘What the heck was going on in those years?’ ” she says.
The problem with The Process, toward a theory of management
Re: the rebuilding attempts of the Philadelphia 76ers:
[John] Wall shed light on an underrated issue when he said: “The toughest thing you have is two young players that want to be great. Sometimes it might work, and sometimes it might not work.”
Think about that. Here’s what Wall is saying: It’s easier for stars to coexist when there is more separation of age and aspiration and an understanding of the hierarchy. Wall and Beal figured it out. The Sixers have three young potential all-stars trying to mix individual accolades and team success at once.
Wizards center Marcin Gortat cited asymmetric information:
“You know what the hardest thing for the young man is?” Gortat said during a recent interview. “We all enjoy diamonds. We all enjoy women. We all enjoy cars and beautiful houses, trips, the best parties and the life. The hardest thing is to come at 6 o’clock in the morning to the gym when nobody watches you. It’s easy to play when you have 20,000 people in the stands — women, cheerleaders, actresses, models, front-row celebrities — but it’s really hard to wake up at 6 o’clock in the morning and go to the gym and work on your left hand. This is the hardest part, when nobody’s watching.”
Here is the full Jerry Bewer story. I watched two games with Philadelphia and Milwaukee, to update my knowledge of the NBA a bit, and now I’ll return to my rabbit hole for a while.
Email exchange on bank leverage, regulation, and economic growth
Emailed to me:
What do you think would happen if we returned to a world where commercial bank leverage was much reduced? (E.g. 2X max.) Or, maybe equivalently, if central banks didn’t act as a lender of last resort? Is that “necessary” for a modern economy?
Asset prices would fall a lot (presumably). What else? How much worse off would current people become? (Future people are presumably somewhat better off, growth implications notwithstanding—they are less burdened with the other side of all these out-of-the-money puts that central banks have effectively issued.) > > How should we think about the optimization space spanning growth rates, banking capital requirements, and intergenerational fairness?
My response:
First, these questions are in those relatively rare areas where even at the conceptual level top people do not agree. So maybe you won’t agree with my responses, but don’t take any answers on trust from anyone else either.
I think of the liquidity transformation of banks in terms of two core activities:
a. Transforming otherwise somewhat illiquid activities into liquid deposits. That boosts risk-taking capacities, boosts aggregate investment, and makes depositors more liquid in real terms. Those are ex ante gains, though note that more risk-taking, even when a good thing, can make economies more volatile.
b. Giving private depositors more nominal liquidity, but in a way that raises prices and thus doesn’t really increase real, inflation-adjusted liquidity for depositors as a whole. There is thus a rent-seeking component to bank activity and liquidity production.
Less bank leverage, you get less of both. In my view a) is usually much more important than b). For those who defend narrow banking, 100% fractional reserves, or just extreme capital requirements, a) is usually minimized. Nonetheless b) is real, and it means that some partial, reasonable regulation won’t wreck the sector as much as it might seem at first.
There is however another factor: if bank leverage gets too high, bank equity takes on too much risk, to take advantage of bank creditors and possibly taxpayers too. Or too much leverage can make a given level of bank manager complacency too socially costly to bear. This latter factor seems to have been very important for the 2007-2008 crisis.
So bank leverage does need to be regulated in some manner, and the better it is regulated the more the system can dispense with other forms of regulation.
That said, the delta really matters. Requiring significantly less bank leverage, at any status quo margin, probably will bring a recession. The recession itself may make banks riskier than the lower leverage will make them safer. In this sense many economies are stuck with the levels of leverage they have, for better or worse. It is not easy to pop a “leverage bubble.”
I don’t find the idea of 40% capital requirements, combined with an absolute minimum of regulation, absurd on the face of it. But I don’t see how we can get there, even for the future generations. We’ll end up doing too many stupid things in the meantime; Dodd-Frank for all its excesses could have been much worse.
I also worry that 40% capital requirements would just push leverage elsewhere in the economy. Possibly into safer sectors, but I wouldn’t be too confident there. And reading any random few books on “bank off-balance sheet risk” will scare the beejesus out of anyone, even in good times.
Now, you worded your question carefully: “commercial bank leverage was much reduced.”
A lot of commercial bank leverage can be replaced by leverage from other sources, many less regulated or less “establishment.” Overall, on current and recent margins I prefer to keep leverage in the commercial banking sector, compared to the relevant alternatives. It may be less efficient but it is socially safer and held within the Fed’s and FDIC regulatory safety net, probably the best of the available politicized alternatives. That said, there is a natural and indeed mostly desirable trend for the commercial banking sector to become less important over time, in part because it is regulated and also somewhat static in basic mentality. (Note that the financial crisis interrupted this process, for instance Goldman taking up a bank charter. I would still bet on it for the longer run.)
Obviously, VC markets are a possible counterfactual. This all gets back to Ed Conard’s neglected and profound point that “equity” is what is scarce in economies, and how many troubles stem from that fact. Ideally, we’d like to organize much more like VC markets, partly as a substitute for bank leverage and the accompanying distorting regulation, and maybe we will over time, but there is a long, long way to go.
One big problem with attempts to radically restrict bank leverage is that they simply shift leverage into other parts of the economy, possibly in more dangerous forms. Should I feel better about commercial credit firms taking up more of this risk? Hard to say, but the Fed would not feel better about that, it makes their job harder. This gets back to being somewhat stuck with the levels of leverage one already has, until they blow up at least. There are pretty much always ways to create leverage that regulators cannot so easily control or perhaps not even understand. Again this bring us back to “off-balance risk,” among other topics including of course fintech.
I view central banks as “lenders of second resort.” The first resort is the private sector, the last resort is Congress. I favor empowering central banks to keep Congress out of it. Central banks are actually a fairly early line of defense, in military terms. And I almost always prefer them to the legislature in virtually all developed countries.
I fear however that we will have to rely on the LOLR function more and more often. Consider how it interacts with deposit insurance. If everything were like a simple form of FDIC-insured demand deposits, FDIC guarantees would suffice.
But what if a demand deposit is no longer so well-defined? What about money market funds? Repurchase agreements? Derivatives and other synthetic positions? Guaranteeing demand deposits is a weaker and weaker protection for the aggregate, as indeed we learned in 2008. The Ricardo Hausmann position is to extend the governmental guarantees to as many areas as possible, but that makes me deeply nervous. Not only is this fiscally dangerous, I also think it would lead to stifling regulation being applied too broadly.
But relying more and more on LOLR also makes me nervous. So I view this as a major way in which the modern world is headed for recurring trouble on a significant scale, no matter what regulators do.
I am never sure how much of the benefits of banking/finance are “level effects” as opposed to “growth effects.” It is easy for me to believe that good banking/finance enables more consumption at a sustainably higher level, in part because precautionary savings motives can be satisfied more effectively and with less sacrifice. I am less sure that the long-term growth rate of the economy will rise; if so, that does not seem to show up in the data once economies cross over the middle income trap. That said, if there were an effect, since growth rates slow down with high levels in any case, I don’t think it would be easy to find and verify.
Tesla’s Damaged Goods Problem
TechCrunch: Tesla has pushed an over-the-air update to some of its vehicles in Florida that lets those cars go just a liiiittle bit farther, thus helping their owners get that much farther away from the devastation of Hurricane Irma.
Tesla owners in Florida may be grateful for this mileage boost as they escape the ravages of Irma but I suspect that some of them will be upset when they have more time to reflect. How could Tesla increase the mileage at the flick of a switch? The answer is that owners of the Tesla 60kWh version of its Model S and Model X actually have the same battery as the 75kWh vehicles but the battery has been purposely limited or “damaged” to provide only 60KWh of mileage. But why would Tesla damage its own vehicles?
The answer to the second question is price discrimination! Tesla knows that some of its customers are willing to pay more for a Tesla than others. But Tesla can’t just ask its customers their willingness to pay and price accordingly. High willing-to-pay customers would simply lie to get a lower price. Thus, Tesla must find some characteristic of buyers that is correlated with high willingness-to-pay and charge more to customers with that characteristic. Airlines, for example, price more for the same seat if you book at the last minute on the theory that last minute buyers are probably business-people with high willingness-to-pay as opposed to vacationers who have more options and a lower willingness-to-pay. Tesla uses a slightly different strategy; it offers two versions of the same good, the low and high mileage versions, and it prices the high-mileage version considerably higher on the theory that buyers willing to pay for more mileage are also more likely to be high willingness-to-pay buyers in general. Thus, the high-mileage group pay a higher price-to-cost margin than the low-mileage group. A familiar example is software companies that offer a discounted or “student” version of the product with fewer features. Since the software firm’s costs are mostly sunk R&D costs, the firm can make money selling a low-price version so long as doing so doesn’t cannibalize its high willingness-to-pay customers–and the firm can avoid cannibalization by carefully choosing to disable the features most valuable to high willingness-to-pay customers.
The classic paper in this literature is Damaged Goods by Deneckere and McAfee who write:
Manufacturers may intentionally damage a portion of their goods in order to
price discriminate. Many instances of this phenomenon are observed. It may
result in a Pareto improvement.
Note the last sentence–damaging goods can be beneficial to everyone! Consider: Without selling to the high willingness-to-pay customers at the high price the good might not be produced at all because the profit from customers who are only willing to buy at a discount aren’t enough to support the R&D. Thus, the high willingness-to-pay customers aren’t worse off from the existence of a discounted version and the low willingness to pay customers and the firm are clearly better off.
Unfortunately, I fear that Tesla may have made a marketing faux-pas. When it turns off the extra mileage boost are Tesla customers going to say “thanks for temporarily making my car better!” Or are they going to complain, “why are you making MY car worse than it has to be?”
Hat tip: Monique van Hoek.
Robin Hanson updates his forager vs. farmer schema
The post is interesting throughout, here are the closing paragraphs:
The left is more okay with people forming distinct subgroups, even as it thinks more in terms of treating everyone equally, even across very wide scopes, and including wide scopes in more divisive debates. The right wants to make redistribution more conditional, more wants to punish free riders, and wants norm violators to be more consistently punished. The left tends to presume large scale cooperation is feasible, while right tends to presume competition more. The left hopes for big gains from change while the right worries about change damaging things that now work.
Views tend to drift leftward as nations and the world gets richer. Left versus right isn’t very useful for prediction individual behavior outside of politics, even as it is the main parameter that robustly determines large scale political ciliations. People tend to think differently about politics on what they see as the largest scales; for example, there are whole separate fields of political science and political philosophy, which don’t overlap much with fields dealing with smaller scale politics, such as in clubs and firms.
I shouldn’t need to say it but I will anyway: it is obvious that a safe playful talky collective isn’t always the best way to deal with things. Its value varies with context. So sometimes those who are more reluctant to invoke it are right to be wary, while at other times those who are eager to apply it are right to push for it. It is not obvious, at least to me, whether on average the instincts of the left or the right are more helpful.
Do read the whole thing.
Why do the NYT wedding pages seem so upper crust?
Here is their own explanation:
One challenge, though, is that our published announcements are culled from the couples who submit their wedding to us through the online form. We would love to see more economic diversity and a broader range of careers represented. The biggest step in that direction would be for more readers to submit announcements, giving us a wider and deeper pool of candidates. Recently, we had a push for a more racially diverse submissions, and it has helped create a more inclusive section.
Every submission is read and seriously considered. Some weeks, we’ll have 125 to 200 submissions; other weeks we’ll have 20. It can be agonizing to pare down to only 35 couples during the heavy wedding season. (If you want to really increase your odds of getting in, try a Christmas week wedding.)
And, yes, choosing our couples is subjective. Factors, in no particular order, include life achievements, job information, how-we-met stories, ages of couple, college backgrounds or not, parents’ information and other interesting anecdotes. We also strive to have as diverse a selection as we can, based on the submissions for any particular week.
While I consider that a perfectly fair response, I wonder how an NYT labor market story would evaluate a comparable response from say a top tech company in Silicon Valley.
My two favorite books about management, ever
They are:
Johnny Rogan, The Byrds: Timeless Flight Revisited, The Sequel, get the full-length edition, not the much shorter 1980 volume.
Chris Twomey, XTC: Chalkhills and Children.
…in addition to the very recent Dreaming the Beatles, which I just reviewed.
NB: These are music books and I am not even recommending them to most of you. These books only make sense if you already know a good deal about the careers of the artists involved.
Here is my advice on how to find excellent management books and management advice: pick some areas you know fairly well, be it music, sports, military campaigns, a scientific discovery, the making of a historic plane flight, or whatever. Read a very detailed book about that. Think through the lessons of that book(s). Unfortunately, books about corporations so often filter their management information through homilies, hidden agendas, NDAs, ego boosts, paybacks, and other forms of…bullshit. Music and sports books won’t, as they are too concerned with other kinds of stupid filters. But you will get the lowdown on management for the most part.
There are some special reasons why I find the Byrds and XTC fruitful areas for reading for management advice, above and beyond my knowledge of the history and the musical content. Neither group was massively profitable in a sustained manner, though they had their successes. The two histories contain both triumphs and some major mistakes. The main creators worked very consistently at their music for decades, and were not afraid to take chances or to operate with a long time horizon. Nor did they destroy themselves, even though they were fatally flawed as creators. Both histories are also studies in small group dynamics, including their eventual collapse; the Byrds are more a story of changing personnel and its costs. Both histories embody tales of retreat and also return, and an ongoing evolution of styles and media. Both stories have (relatively) happy endings, but only for those who kept at work rather than partook in indulgences. Those features may or may not apply to your own personal circumstances, choose your management books accordingly, but I those kinds of stories more interesting than say books about the Rolling Stones.
If you can find books such as these, they are among the most valuable you will read. Yet it is very hard to find them through recommendations, given the idiosyncratic nature of the content and its relevance. Of course that is precisely why they have such high marginal value.
How might agency problems limit innovation?
Holmstrom’s work has provided me with a great deal of understanding of why innovation management looks the way it does. For instance, why would a risk neutral firm not work enough on high-variance moonshot-type R&D projects, a question Holmstrom asks in his 1989 JEBO Agency Costs and Innovation? Four reasons. First, in Holmstrom and Milgrom’s 1987 linear contracts paper, optimal risk sharing leads to more distortion by agents the riskier the project being incentivized, so firms may choose lower expected value projects even if they themselves are risk neutral. Second, firms build reputation in capital markets just as workers do with career concerns, and high variance output projects are more costly in terms of the future value of that reputation when the interest rate on capital is lower (e.g., when firms are large and old). Third, when R&D workers can potentially pursue many different projects, multitasking suggests that workers should be given small and very specific tasks so as to lessen the potential for bonus payments to shift worker effort across projects. Smaller firms with fewer resources may naturally have limits on the types of research a worker could pursue, which surprisingly makes it easier to provide strong incentives for research effort on the remaining possible projects. Fourth, multitasking suggests agent’s tasks should be limited, and that high variance tasks should be assigned to the same agent, which provides a role for decentralizing research into large firms providing incremental, safe research, and small firms performing high-variance research. That many aspects of firm organization depend on the swirl of conflicting incentives the firm and the market provide is a topic Holmstrom has also discussed at length, especially in his beautiful paper “The Firm as an Incentive System”; I shall reserve discussion of that paper for a subsequent post on Oliver Hart.
That is A Fine Theorem on the work of Bengt Holmstrom, do read the whole thing.
Signaling and the evolution of female wages
How do partisans of the signaling model of education explain female wage growth over the last few decades? It’s easy for the human capital theory: female education went up and so did female productivity (plus discrimination fell, but let’s put that aside for now).
But if those women were just signaling, their productivities are about the same and yet their wages are way higher. Are they now massively overpaid? That hardly seems possible — when will the en masse firing begin?
Alternatively, perhaps the women were considerably underpaid in 1963, because their lack of interest in educational signaling branded them as lower quality workers. (Again, this has to be an effect net of discrimination.) But why would that have been a rational inference for employers to make? If a woman didn’t go to college or graduate school back in 1963, there were plenty of obvious sociological reasons why not, and it didn’t much signal low intelligence or low conscientiousness. It shouldn’t have lowered wages, not in the signaling model. So in 1963 there was a discrimination-based underpayment, but it is hard to argue for a signaling-based underpayment to women as a class.
You also might think that female wages have gone up since 1963 because women have been socialized to desire work and money more. But if that socialization raises productivity, it still won’t support a signaling story, which treats productivity as fixed due to type. Furthermore then the door is open for socialization theories of education, even if college is not the only source of socialization.
So why then have net-of-discrimination female wages gone up so much, if not for the human capital story?
You will note that the signaling theory seems most plausible as an explanation of what happens right after people get out of college, and thus it appeals to many students and also to some academics. Signaling theories of wages are least plausible as they try to explain broad patterns of wage movements over time, and then you must bring in human capital considerations. In similar fashion, signaling theories won’t explain the relative wage stagnation since 1999 and many other longer-term puzzles; they just don’t play in this arena.
Here are some data on female wages and labor supply over this period.
Addendum: Bryan Caplan refers me to this piece of his on related issues. And here is my Econ Duel with Alex on education and signaling.
Do Democratic equity fund managers beat their Republican counterparts?
That is the topic of my latest Bloomberg column. Here is one bit:
The paper, by Marian Moszoro and Michael Bykhovsky, uses Federal Election Commission data to identify equity fund managers by their political contributions. If the managers at a fund gave to only one of the two major political parties, that fund is then classified as having an intellectual or ideological connection to that party.
…The authors find that for the years 2004 to 2014, with the exception of one period, equity fund managers of the two political affiliations did about the same. That should give pause to anyone who thinks that either political party has a monopoly on a better or more accurate view of the economy.
This is in noted contrast to Krugman’s frequent claim that the Republican fund managers are somehow unmoored from macroeconomic realities. But:
…for one critical period of time, December 2008 to September 2009, the Democratic fund managers did much better. They earned 25.25 percent on average, compared with the Republicans’ 17.17 percent — a difference that, by the authors’ back-of-the envelope calculations, amounted to about $13.7 billion.
My (unconfirmed) view is that much of this was lack of faith in President Obama, though a big market rally was to start in March 2009. Perhaps the Republican fund managers were not in the market enough. Another possibility of course was that some of the Republican managers expected high inflation, due to the Fed injecting trillions of liquid reserves into the banking system. Finally, the Democratic equity fund managers may have had better political connections and thus been better informed. The timing of the returns discrepancy, however, I think squares best with the “confidence in Obama” interpretation. And here is the Hansonian part of the column:
Another interesting finding: Most of the fund managers donated exclusively to either the Democratic or Republican Party — 44.9 percent and 46.6 percent, respectively. “Mixed” funds accounted for only 8.3 percent of the overall sample (of more than 80,000 fund-month observations). Since the choice of party doesn’t appear to provide much of a market edge, the loyalties might reflect longer-standing personal, regional, and institutional connections. Perhaps political unity within a company serves social and networking functions, even if it doesn’t provide any special economic insight.
Do read the whole thing. And if you are wondering:
Hedge-Fund Money: $48.5 Million for Hillary Clinton, $19,000 for Donald Trump
For the original pointer to the Moszoro and Bykhovsky piece I am grateful to Samir Varma.
Academic average is over sentences to ponder
The percentage of new doctorate recipients without jobs or plans for further study climbed to 39% in 2014 from 31% in 2009, according to a National Science Foundation survey released in April. Median salaries for midcareer Ph.D.s working full time fell 6% between 2010 and 2013.
The reason: supply and demand.
And this:
Ph.D.s still earn a significant premium over others in the labor market and their overall rate of unemployment remains low, though a growing number are taking jobs that don’t use their education. At the same time, their median incomes have been falling. Computer scientists earned $121,300 in 2013, down from $129,839 in 2008; engineers saw a drop to $120,000 from $125,511 and social scientists fell to $85,000 from $90,887.
Here is the WSJ piece, via the excellent Samir Varma.
Why is there a lesbian wage premium?
Marieka Klawitter of the University of Washington looked at 29 studies on wages and sexual orientation last year.* On average, they found a 9% earnings premium for lesbians over heterosexual women, compared with a penalty of 11% for gay men relative to straight men. This discrepancy has been borne out by research on America, Britain, Canada, Germany and the Netherlands. Even after adjusting for the fact that lesbians are on average more educated than straight women, and less likely to have children, the gap persists.
Note the evidence suggests lesbians are not more competitive than non-lesbian women, and lesbians receive no wage premium in the public sector. Here are some possible hypotheses:
…they work more hours per day and weeks per year than straight women, on average (see chart). Over time this could translate into more experience and better chances of promotion. There is a clue in a paper from Nasser Daneshvary, C. Jeffrey Waddoups and Bradley Wimmer of the University of Nevada, which finds that lesbians who have previously been married to men receive a smaller premium than those who have not.
Finally, it could be that in same-sex couples women do not feel obliged to do as much childcare or housework, giving them more freedom to fulfil their potential in the workplace. Lesbian couples tend to work more equal hours, even when they have children, and several studies find that same-sex households share chores more evenly than heterosexual ones.
That is all from The Economist.
Ben Bernanke’s memoir *The Courage to Act*
1. When it comes to South Carolina, he is a cornball, but a likable one.
2. He played Strato-O-Matic baseball as a kid. No mention of Jim Bunning in that context.
3. After two years at Harvard, he had taken only Econ 101. Later Dale Jorgensen became his mentor.
4. He is a fan of Borges, with the influence coming from his wife, who has taught Spanish literature.
5. He regrets his earlier tough rhetoric on the Japanese central bank.
6. Greenspan’s marriage proposal to Andrea Mitchell was riddled with his trademark ambiguity. Bernanke, in contrast, proposed after two months of courtship.
7. Bernanke underestimated the extent of the housing bubble. Various negative consequences were to ensue from the collapse of housing prices.
8. “I had never gone overboard on libertarianism…”
9. Ben got really, really mad at the AIG chief executives, in fact he “seethed.”
10. The Fed did not have a good, legal way to bail out Lehman. It needed a buyer, and no buyer was to be found. A short-term infusion of cash would not have sufficed. And Ben was afraid at the time that if he confessed the Fed’s impotence in this regard, the market reaction would have been negative.
11. The idea of a mortgage cram down made good sense but was never politically feasible.
12. “So, by setting the interest rate we paid on reserves high enough, we could prevent the federal funds rate from falling too low.”
13. I found the discussions of Wachovia and WaMu came the closest to offering new perspective and information. Perhaps he was able to say more because these actions did not skirt the possibility of the Fed exceeding its mandate.
14. He had a favorable impression of the frankness of John McCain.
15. He thought QE should been done through the purchase of corporate bonds, but the Fed didn’t have the right kind of authority at that time.
16. He argues that the idea of ngdp targeting is too complicated and could not easily be made credible, given that the Fed has built up its reputation as an inflation fighter. It also raises the risk that a non-credible ngdp target wouldn’t boost output, but would deliver price inflation, thereby resurrecting stagflation as a potential problem. (By the way, here is Scott’s response.)
17. He is still upset at the coverage he received from Paul Krugman.
18. In Nunavut he passed on raw seal meat and a dogsled ride.
The bottom lines: This book has way, way more economics than I expected and probably more than the publisher wanted. It really is Ben’s attempt to defend his place in history, and yes the book does deliver a huge dose of Bernanke. This is not ghostwritten fluff. It does not however dish much “dirt” or shed much new light on the key episodes of the financial crisis. Both in public and in the book Ben has been extremely gentlemanly. Still, as I kept on reading I could not escape the feeling that he is deeply, deeply annoyed by many of his critics, and very much determined to tell the story from his point of view. That is what you get from this book.
Wage stickiness and unflattering accounts of the unemployed and poor
It is common for left-wing progressives to complain that conservatives serve up unflattering accounts of the unemployed and poor, such as by calling them “moochers” and the like.
But many versions of the standard Keynesian account, once we deconstruct them a bit, don’t paint such a flattering picture of the unemployed either. In one Keynesian scenario, many of the unemployed have lacked jobs for years because they have sticky nominal wage demands. Under one scenario, they could find jobs for $x an hour but won’t take the work. If government policy could reflate the economy enough, those jobs in nominal terms would offer more and the unemployed would be in essence fooled into taking the offer. The job would be paying the same in real terms, so the ex ante stubbornness is a big mistake, at least under this account of the matter.
Such a mistake is made throughout years of material suffering and psychological deprivation, including serious problems for one’s children. Yet a mere nominal trick, by boosting pride just a bit, will move them back into a job.
It is of course a well-known stylized fact that, at least in America, unemployment rates for the poor and undereducated are much higher than for wealthier or better educated people. So a general citation of “money illusion” won’t rescue the victims from the rather unflattering Keynesian portrait painted here.
Alternatively, the relevant mechanism may operate through the demand for labor, rather than the supply. Perhaps low-skilled workers cannot be employed at lower wages because their resentment at the low wage would be so high that they would impose unacceptable morale costs on the organizations employing them. In other words, insult them with a sub-par wage offer and they turn destructive toward the entire organization. Companies of course prefer to keep these workers at arms’ length under this hypothesis.
If Charles Murray had come up with that hypothesis, he would have been savagely attacked for it. Yet there is growing evidence, for instance from the work of Alan Blinder, that it is a major cause of wage stickiness.
Left-wing Keynesians are reluctant to acknowledge their own implicit unflattering treatment of the poor, which I should add came (in part) from snobby and elite British economists, including Keynes. Often microfoundations are considered an embarrassing topic, and the emphasis is on “well, we know that wages are sticky,” with a desire not to look too closely under the hood, or to consider how those stories jive with other deeply held views, many of which try to raise the relative status of the poor and unemployed.
Bryan Caplan is consistent and is also happy to satisfy the publicity condition. He believes in nominal stickiness as a driver of unemployment (under many circumstances) and he holds a relatively skeptical view of the decision-making capabilities of many (by no means all) of the poor.
The most flattering macro theories toward the poor, undereducated, and unemployed are the complementarity, increasing returns, and RBC “the poor are maximizing given some bad constraints” approaches. Insider-Outsider models make the unemployed victims of exclusion who don’t even get a chance, rather than potential troublemakers ready to sabotage an enterprise at a moment’s notice. The same can be said for Scott Sumner’s “musical chairs” account. As for schools of thought, the rational expectations theorists provide the most flattering picture of the poor, yet in the context of macroeconomics they are very frequently mocked for their unrealistic assumptions. Search theory models of unemployment, which for instance I have tried to promote, also paint a not unfavorable picture of the jobless, but they too are not very popular in the New Old Keynesian economics. If I were to generalize, and yes there are many exceptions, but still I would say that these more flattering pictures of the unemployed are more likely to be associated with or embraced by the political Right.
Consistency is hard to come by, and probably always will be.
How bad is age discrimination in academia?
I believe it is very bad, although I do not have data. I believe that if a 46-year-old, with an excellent vita and newly minted Ph.D in hand, applied for academic economics jobs at the top fifty research universities, the individual would receive very few “bites.” Unless of course he or she managed to cover up his or her age. (I am very pleased with the openness of my own university, I will add in passing.)
Perhaps there are not many examples of this kind of age discrimination (do you know of any?). In part that is because older individuals are so discouraged from going down that path in the first place. Furthermore it is likely harder for older individuals to go down that path. In addition to life-cycle considerations, there may be age discrimination at the stage of graduate admissions.
I rarely hear complaints about age discrimination in academia, though I often hear complaints about gender and race discrimination. I believe all of these phenomena are real (and unfortunate), and I wonder what exactly this discrepancy indicates. If anything, I suspect age discrimination is far more extreme, at least when it comes to the final stage of the process, namely the actual interview and hiring decisions.
Is age discrimination less of a concern because “older people as a class” face fewer, other general handicaps than do women or African-Americans? Or is there some other reason for this difference in worry?
I believe also that older, newly minted doctoral candidates bring useful differences in perspective, as can women and ethnic minorities, due to their differing life experiences.
Here is an article about age discrimination in academia, although I find the cited evidence inconclusive. Here is an interesting short piece from someone who is arguably the victim of age discrimination in academia.
Even for similarly-aged candidates, is there a bias in academic hiring to prefer “potential” over a solid/good but perhaps not fully inspiring track record? I believe so. This is related to the causes of age discrimination, which are not always about age per se.
I found very interesting the new book by Joseph Coleman, Unfinished Work: The Struggle to Build an Aging American Workforce, which deals with some related issues though not primarily in the academic context.