Results for “from the rooftops” 84 found
*Is Inequality the Problem?*
Lane Kenworthy has a book coming out next year, I have read it, and it is superb (rooftops) and also very important. Here is a brief excerpt:
Rich democratic nations with higher levels of income inequality or larger increases in income inequality haven’t tended to have slower economic growth, lower or slower-growing household income, or worse household balance sheets…
The notion that income inequality is harmful for health has recieved substantial attention from researchers, and some now take it for granted that inequality reduces longevity. But the country evidence offers very little support for this conclusion.
I will let you know when a pre-order is possible. In the meantime, it shouldn’t matter, but I can also report that Kenworthy is very much a left-leaning thinker, as you can adduce from his policy recommendations toward the end of the book.
Approval timelines really matter for housing
We provide credible estimates of the effect of duration and uncertainty in local regulatory approval times on the rate of housing production. The analysis derives from a novel dataset of development timelines for all multifamily housing projects permitted in the City of Los Angeles between 2010 and 2022. As a lower bound, simply by pulling forward in time the completion of already started projects, we estimate that reductions of 25% in approval time duration and uncertainty would increase the rate of housing production by 11.9%. If we also account for the role of approval times in incentivizing new development, we estimate that the 25% reduction in approval time would increase the rate of housing production by a full 33.0%. Both the expected value and the uncertainty in approval times are salient to incentivizing new development. The results provide new evidence that local approval processes are a significant driver of housing supply and reinforce the notion that municipal regulatory reform is an important component of housing reform.
That is from a new research paper by Stuart Gabriel and Edward Kung, via the excellent Kevin Lewis. Speed also influences total supply! (rooftops)
Not the worst news…
We find that markups increased by about 30 percent on average over the sample period. The change is primarily attributable to decreases in marginal costs, as real prices only increased slightly from 2006 to 2019. Our estimates indicate that consumers have become less price sensitive over time.
That is from a new NBER working paper by
…the empirical evidence relating to concentration trends, markup trends, and the effects of mergers does not actually show a widespread decline in competition. Nor does it provide a basis for dramatic changes in antitrust policy. To the contrary, in many respects the evidence indicates that the observed changes in many industries are likely to reflect competition in action.
Rooftops, people…
Against Historic Preservation II
In Manhattan, once famed for its ever-evolving skyline, an astonishing 27 percent of the borough’s lots now fall under the purview of the landmarks commission.
That’s from Jacob Andinder’s What Historic Preservation Is Doing to American Cities in the Atlantic. It’s a pretty good history of the movement for historic preservation focusing (of course) on some of the racist motivations and effects. But it has little to say about what to do about the consequent difficulties of building anything new. Similarly, here’s Binyamin Applebaum in the NYTimes correctly decrying the fact that historic preservation laws mean you can’t put solar panels on the rooftops of many homes in Washington, DC. Applebaum suggests a tiered approach.
I am more radical. All historical preservation laws should be repealed.
It’s one thing to require safety permits but no construction project should require a historic preservation permit. Here are three reasons:
First, it’s often the case that buildings of little historical worth are preserved by rules and regulations that are used as a pretext to slow competitors, maintain monopoly rents, and keep neighborhoods in a kind of aesthetic stasis that benefits a small number of people at the expense of many others.
Second, a confident nation builds so that future people may look back and marvel at their ancestor’s ingenuity and aesthetic vision. A nation in decline looks to the past in a vain attempt to “preserve” what was once great. Preservation is what you do to dead butterflies.
Ironically, if today’s rules for historical preservation had been in place in the past the buildings that some now want to preserve would never have been built at all. The opportunity cost of preservation is future greatness.
Third, repealing historic preservation laws does not mean ending historic preservation. There is a very simple way that truly great buildings can be preserved–they can be bought or their preservation rights paid for. The problem with historic preservation laws is not the goal but the methods. Historic preservation laws attempt to foist the cost of preservation on those who want to build (very much including builders of infrastructure such as the government). Attempting to foist costs on others, however, almost inevitably leads to a system full of lawyers, lobbying and rent seeking–and that leads to high transaction costs and delay. Richard Epstein advocated a compensation system for takings because takings violate ethics and constitutional law. But perhaps an even bigger virtue of a compensation system is that it’s quick. A building worth preserving is worth paying to preserve. A compensation system unites builders and those who want to preserve and thus allows for quick decisions about what will be preserved and what will not.
The performance of the NIH during the pandemic in 2020
“A new research study by one of us and his Johns Hopkins colleagues found that of the $42 billion the National Institutes of Health spent on research last year, less than 2% went to Covid clinical research…
Here is the WSJ source. Here is the full report from Johns Hopkins, and here is the executive summary:
● Of the $42 Billion 2020 NIH annual budget, 5.7% was spent on
COVID-19 research
● Public health research was underfunded at 0.4% of the 2020 NIH
budget
● Only 1.8% of the 2020 NIH budget was spent on COVID-19 clinical
research
● Average COVID-19 NIH funding cycle was 5 months
● Aging was funded 2.2 times more than COVID-19 research
● By May 1, 2020, 3 months into the pandemic, the NIH spent 0.05%
annual budget on COVID-19 research
● Of the 1419 grants funded by the NIH:
• NO grants on kids and masks specifically
• 58 studies on social determinants of health
• 57 grants on substance abuse
• 107 grants on developing COVID-19 medications
• 43 of the 107 medication grants repurposed existing drugs
Ouch. Here is a not entirely random sentence from the report:
The COVID-19 pandemic has only exacerbated the NIH institutional challenges and inability to reallocate funds quickly to
critical research.
Here is another damning sentence, though it damns someone other than the NIH:
…to date, no research has investigated NIH COVID-19 funding patterns to the best of our knowledge.
Double ouch. Might the NIH have too much influence over the allocation of funds to be investigated properly? Rooftops, people…
Growing Oligopolies, Prices, Output, and Productivity
The real monopoly problems in our economy are not the firms that push up some very particular concentration indices, rather they are the small, local monopolies, hospitals, and the public education system. Here is a new investigation (AEA gate) from Sharat Ganapati, you will note that the bold emphasis has been added by yours truly:
American industries have grown more concentrated over the last 40 years. In the absence of productivity innovation, this should lead to price hikes and output reductions, decreasing consumer welfare. With US census data from 1972 to 2012, I use price data to disentangle revenue from output. Industry-level estimates show that concentration increases are positively correlated to productivity and real output growth, uncorrelated with price changes and overall payroll, and negatively correlated with labor’s revenue share. I rationalize these results in a simple model of competition. Productive industries (with growing oligopolists) expand real output and hold down prices, raising consumer welfare, while maintaining or reducing their workforces, lowering labor’s share of output.
That is from the new issue of American Economic Journal: Microeconomics. Rooftops! Other research has pointed in the same direction. Pennsylvania, Ave.: please do not split up America’s best and most productive firms.
My Conversation with Mark Carney
Here is the audio, video, and transcript, definitely recommended. Here is part of his closing statement:
COWEN: Last question. You wake up each morning. Surely you still think about central banking. What for you is the open question about central banking, where you don’t know the answer, that you think about the most?
CARNEY: I gave a speech at Jackson Hole on this issue, and I started — which is the future of the international monetary system and how we adjust the international monetary system.
I’ll say parenthetically that we’re potentially headed to another example of where the structure of the system is going to cause big problems for the global economy. Because it’s quite realistic, sadly, that we’re going to have a fairly divergent recovery with a number of emerging, developing economies really lagging because of COVID — not vaccinated, limited policy space, and the knock-on effects, while major advanced economies move forward. That’s a world where rates rise and the US dollar strengthens and you get this asymmetry, and the challenge of the way our system works bears down on these economies. I think about that a lot.
And this:
COWEN: If you’re speaking in a meeting as the central bank president, do you prefer to speak first or speak last?
CARNEY: I prefer — I tend to speak early. Yes, I tend to speak early. I’m not sure that’s always the best strategy, but I tend to speak early. I will say, one thing that’s happened over the years at places like the G20, I noticed, is the prevalence of social media and devices. The audience drifts away over time, even at the G20, even on a discussion of the global economy.
And from the horse’s mouth, so to speak, do note this:
CARNEY: …I think you’re absolutely right on that, there wasn’t. It is revealed that there wasn’t a liquidity trap.
Rooftops! Finally, on more important matters:
COWEN: Are the Toronto Raptors doomed to be, on average, a subpar NBA team due to higher taxes?
And:
COWEN: What’s the best Clash album?
CARNEY: Fantastic question. London Calling, and one of my best memories — I was very fortunate; they came to Edmonton when I was in 12th grade in high school. I went to the concert and that was fantastic, yes.
COWEN: I also saw them, I think in what would have been 12th grade had I been in school that year. But London Calling is too commercial for me. I much prefer the Green album, like “Career Opportunities,” “Janie Jones.”
CARNEY: Well, “I Fought the Law” was the best song at the concert. I have to say, they had got to Combat Rock by this time, which was relative — [laughs] Combat Rock was more commercial, I thought, than London Calling, although they threw it all out the door with Sandinista!
Again, here is Mark’s new book Value(s): Building a Better World For All.
Facts about recessions and unemployment (and matching)
Not everyone is going to like this one:
During a recovery, unemployment seems little responsive to demand disturbances. Economic policy should focus on preventing recessions rather than trying to ameliorate their effects.
That is from the new slides/paper by Robert E. Hall and Marianna Kudlyak on the consistency of recovery from recessions, lots of evidence behind that claim, as employment recovery occurs at a remarkably consistent rate across recessions, regardless of policy response. Furthermore explanation of the micro-data mostly follows from the supply of employment, not the demand, and no that doesn’t require any kind of weird DSGE model, nor does it involve aggregate demand denialism about the initial cause of the problem. Links are here, including other papers by Kudlyak, many good papers in there, sadly these rooftops are nearly empty.
Inflation and the Fed
Federal Reserve officials were optimistic about the economy at their April policy meeting as government aid and business reopenings paved the way for a rebound — so much so that and “a number” of them began to tiptoe toward a conversation about dialing back some support for the economy.
Here is more (NYT). That is yet another sign that our government (treating fiscal and monetary as a consolidated entity) made a mistake in applying too much demand stimulus. Hardly anyone said this at the time except Summers and Blanchard, and since then few have been willing to come out and admit error. There is an ex post attempt to redefine the debate by insisting inflation will not spiral out of control. Quite possibly not, but whatever your view on that question, don’t let it distract you from the actual mistake. Virtually all macroeconomic commentators in the public sphere were wrong for not realizing and stressing that too much demand stimulus was being applied. Furthermore, we ended up spending $1 trillion (!) in ways that were pretty far from optimal.
Got that? People, the rooftops are waiting.
Let the AZ Vaccine Go!
Finally the NYTimes has picked up on a story I have been shouting from the rooftops for months.
Tens of millions of doses of the coronavirus vaccine made by the British-Swedish company AstraZeneca are sitting idly in American manufacturing facilities, awaiting results from its U.S. clinical trial while countries that have authorized its use beg for access.
…About 30 million doses are currently bottled at AstraZeneca’s facility in West Chester, Ohio, which handles “fill-finish,” the final phase of the manufacturing process during which the vaccine is placed in vials, one official with knowledge of the stockpile said.
Emergent BioSolutions, a company in Maryland that AstraZeneca has contracted to manufacture its vaccine in the United States, has also produced enough vaccine in Baltimore for tens of millions more doses once it is filled into vials and packaged, the official said.
…But although AstraZeneca’s vaccine is already authorized in more than 70 countries, according to a company spokesman, its U.S. clinical trial has not yet reported results, and the company has not applied to the Food and Drug Administration for emergency use authorization. AstraZeneca has asked the Biden administration to let it loan American doses to the European Union, where it has fallen short of its original supply commitments and where the vaccination campaign has stumbled badly.
The administration, for now, has denied the request, one official said.
Some federal officials have pushed the White House to make a decision in the next few weeks. Officials have discussed sending doses to Brazil, which has been hard hit by a worsening coronavirus crisis, or the European Union or Britain.
The AZ vaccine could have saved thousands of lives in the US, if it had been approved earlier. But it’s not going to be approved in the US for months at best and with the ramp up in production of Pfizer, Moderna, J&J and now Novavax it’s no longer needed in the US. Let it go! Send it to Canada or Mexico or Brazil or COVAX.
In our Science Paper we estimate that another 1 billion courses of vaccine capacity are worth $1 trillion of additional global benefits. AZ has on the order of 50 million doses nearly ready to go and can produce in the US around 25 million doses a month so over a year that production is worth over $100 billion to the world economy, far higher than the modest cost of production! Instead of idling this capacity we should expand it even further as part of a plan to vaccinate the world.
It’s a Biden Plan to vaccinate the world or a Xi Jinping Plan and I’d rather it be a Biden Plan.
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
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.