J. Bradford DeLong's Blog, page 278

I would find the wise and public-spirited Ricardo Haussma...

I would find the wise and public-spirited Ricardo Haussmann more convincing here if he'd had an explanation for why mandated wage compression by John Dunlop in the U.S. during World War II was not a huge success: Ricardo Hausmann: How Not to Fight Income Inequality: "Trying to combat income inequality through mandated wage compression is not just an odd preference. It is a mistake, as Mexico's president-elect, Andr��s Manuel L��pez Obrador, will find out in a few years, after much damage has been done...

...Suppose two people hold different opinions about a policy issue. Is it possible to say that one is right and the other wrong, or do they just have different preferences? After all, what is the difference between an odd preference and a mistake? A preference influences a choice that is expected to deliver the goal the chooser wants to achieve. A mistake is a choice based on a wrong belief about how the world works, so that the outcome is not what the chooser expected. Unfortunately, this may be a costly way to learn. It also may be inconclusive, because it is always possible to attribute the mistake���s bad consequences to other factors. A case in point is the decision by Mexican President-elect Andr��s Manuel L��pez Obrador (AMLO), to lower the salaries of the higher echelons of the civil service, including himself, capping them at $5,707 per month. Many greeted the decision, announced in July, with glee. It showed that AMLO was committed to fiscal austerity and income equality. But what appears to be a well-articulated preference will prove to be a serious mistake. Unfortunately, AMLO will find out only in a few years, by which point the damage inflicted on Mexico will be huge...

#shouldread #labormarket #equitablegrowth #inequality

Seth Godin: Throat-Clearing: "Begin in the middle. The fi...

Seth Godin: Throat-Clearing: "Begin in the middle. The first paragraph, where you lay out what's about to happen. The half-apology you use to preface your comments at the meeting. The email that takes a paragraph or two to get to the point���. You can skip those. Throat clearing is a good way to make sure that people are looking at you. And an even better way to give yourself time to collect your thoughts, to indulge your fears or to get yourself warmed up. But we're already looking at you. We've clicked through to your link, given you the microphone, read your note���. Say all that stuff in your head, but, we'd really like to hear the best part first. Begin in the middle...

#shouldread

Another very good "Equitable Growth in Conversation" piec...

Another very good "Equitable Growth in Conversation" piece: Ioana Marinescu, Herbert Hovenkamp, Kate Bahn, and Michael Kades. In modern antitrust policy, the monopoly and the monopsony analyses need to proceed on two separate tracks: Equitable Growth: In conversation with Herbert Hovenkamp and Ioana Marinescu: "You can���t just do a workup on the product side and then assume you���ve gotten all the work done. If you���ve got a special class of employees, like computer engineers, those engineers might work for firms that don���t compete with each other at all on the product side, and that means that that market will end up having different boundaries than the product market has for those same firms...

Getting deeply into the weeds on whether much observed so...

Getting deeply into the weeds on whether much observed social mobility is actually error in measuring "true status". The answer ape to be "no": Martin Nybom and Kelly Vosters: Intergenerational Transmission of Socioeconomic Status: "There is no simple law of mobility: In 2014, Gregory Clark proposed a ���simple law of mobility��� suggesting that intergenerational mobility is much lower than previously believed, and relatively uniform across countries.... This column tests this... using US and Swedish data... no evidence of a rise in intergenerational persistence and no evidence of uniformity across countries...

...We argue that a methodological approach from Lubotsky and Wittenberg (2006) for combining information from multiple proxies for a single latent variable is ideally suited for this particular scenario (Vosters 2018). The basic idea is that if we believe each measure is essentially the unobserved latent status plus some noise or error���and that these errors are correlated across measures���we can include all of these in an OLS regression, and then add the resulting OLS coefficients optimally using weights. This aggregates the information from these measures in the sense that we obtain the greatest lower bound for (or least-attenuated estimate of) the persistence parameter.

To test for evidence of the simple law in the US, Vosters (2018) applies this method to data from the US Panel Study of Income Dynamics, specifically using a sample of fathers and sons very similar to those used in earlier studies about which the controversial claims are being made. Estimating regressions using income alone and then progressively adding other measures of status does not indicate that this aggregation leads to substantially higher estimates of persistence. As shown in Figure 1, the estimates relating sons��� status to fathers��� status rise only from 0.44 based on income alone, to a slightly higher 0.47 after also incorporating fathers��� education and occupation ��� still in line with prior research and far from the 0.75 proposed in the simple law...

#shouldread #equitablegrowth #inequality

Equitable Growth's Will McGrew makes a good catch here, a...

Equitable Growth's Will McGrew makes a good catch here, and direct us to Brendan Greely: Will McGrew: Weekend Reading: ���Monopsony and Mobility��� Edition: "Brendan Greely of the Financial Times dives into another aspect of the mobility divide: social capital. Using frequent Equitable Growth guest authors and economists Raj Chetty, Nathaniel Hendren, and John Friedman���s recently published Opportunity Atlas as a starting point, Greely explains why relationships and communities are more important than the mere availability of jobs in determining economic mobility. Beyond enhancing a neighborhood���s services and amenities such as public schools, growing up in proximity to people with a diversity of highly paid jobs provides children with role models and connections to higher quality jobs and more numerous economic opportunities...

#shouldread

It may finally be the time that we get some traction on b...

It may finally be the time that we get some traction on better measures of economic growth and prosperity than GDP. So go back and reread this from 290016: homas Piketty, Emmanuel Saez, and Gabriel Zucman: Distributional national accounts: Methods and estimates for the United States: "This paper combines tax, survey, and national accounts data to estimate the distribution of national income in the United States since 1913. Our distributional national accounts capture 100% of national income, allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth...

...We estimate the distribution of both pre-tax and post-tax income, making it possible to provide a comprehensive view of how government redistribution affects inequality. Average pre-tax national income per adult has increased 60% since 1980, but we find that it has stagnated for the bottom 50% of the distribution at about $16,000 a year. The pre-tax income of the middle class���adults between the median and the 90th percentile���has grown 40% since 1980, faster than what tax and survey data suggest, due in particular to the rise of tax-exempt fringe benefits. Income has boomed at the top: in 1980, top 1% adults earned on average 27 times more than bottom 50% adults, while they earn 81 times more today. The upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000. The government has offset only a small fraction of the increase in inequality. The reduction of the gender gap in earnings has mitigated the increase in inequality among adults. The share of women, however, falls steeply as one moves up the labor income distribution, and is only 11% in the top 0.1% today...

#shouldread #economicgrowth

This from eight years ago is still the best thing I have ...

This from eight years ago is still the best thing I have seen about "sustainability" and its proper role in economic analysis: Kenneth J. Arrow, Partha Dasgupta, Lawrence H. Goulder, Kevin J. Mumford, and Kirsten Oleson (2010): Sustainability and the Measurement of Wealth: "We develop a consistent and comprehensive theoretical framework for assessing whether economic growth is compatible with sustaining well-being over time. The framework focuses on whether a comprehensive measure of wealth���one that accounts for natural capital and human capital as well as reproducible capital���is maintained through time...

...Our framework also integrates population growth, technological change, and changes in health. We apply the framework to five countries that differ significantly in stages of development and resource bases: the United States, China, Brazil, India, and Venezuela. With the exception of Venezuela, significant increases in human capital enable comprehensive wealth to be maintained (and sustainability to be achieved) despite significant reductions in the natural resource base. We find that the value of ���health capital��� is very large relative to other forms of capital. As a result, its growth rate critically influences the growth rate of per-capita comprehensive wealth...

#shouldread #sustainability #equitablegrowth

The Fall of Rome: Am I too Much of a Malthusian-Ricardian to Understand It Properly?

Comment of the Day: in response to Brad DeLong: On Twitter: For whom was the decline and fall of the western Roman Empire that commenced with the Antonine Plague a decline https://t.co/FdZeNjvtCr: Carlos Nore��a: @carlosfnorena: "Yes, bad for all of those sectors, and devastating in systemic terms for this large-scale political economy. I also agree with Jongman that what he calls the "resilience" of the Roman central state was remarkable..." I respond: Perhaps my problem is that I am too much a Malthusian-Ricardian to see history straight, but...

...Population decline because climate change whomps agricultural productivity I understand: Everyone loses, and complex, civilized society may not survive because such societal systems have a hard time scaling down. Somebody still wants to have the same resources they had in the conflicts that produces go very negative sum very quickly.

But population decline while agricultural productivity stays constant���due to the Antonine and Justinian Plagues, or due to a temporary volcano winter, for example? Those have to raise agricultural productivity per farmer. And, yes, the upper class men will try to extract more from farmers. But if they could extract more from farmers, they would have done so back when they were riding high: they have and never had much charity. So from my perspective it is an uphill climb to clean that present material standards of living would decline.

Now peasant life expectancy and security could decline: the pax Romana was a real thing, and so was the Viking blood eagle. Now landlords could fail to recognize the new situation, and dissipate huge amounts of resources in ���wars of attrition trying to extract more than could sustainably be extracted, thus leaving everybody worse off. And as cities take it in the neck the loss of economies of scale and Smithian division of labor could transform the city countryside relationship from one of extraction plus trade-for-conveniences to one of simple extraction.

But I still cannot help but think that it was better to be a serf of Pemmo son of Billo Duke of Friuli in the 8th century than of Marcus Tullius Cicero in the -1st (unless you were Tiro) or (shudder) Marcus Porcius Cato in the -2nd.

#shouldread #commentoftheday

The most both-sidesee bothsidism ever is in���where else?...

The most both-sidesee bothsidism ever is in���where else?���the New York Times!

And it is Ross Douthat!

#journamalism

For whom was the decline and fall of the western Roman Em...

For whom was the decline and fall of the western Roman Empire that commenced with the Antonine Plague a decline and fall?

It was a decline and fall for:

Those at the top of the state apparatus who saw their resources collapse, and their ability to avoid barbarian power projection into the empire decline.

Those who were rich.

Those who were urban, dependent on the flow of resources from the countryside to the city.

Those in the countryside who had been prosperous and free, and who were now enserfed.

Those who benefited from large-scale efficient production and distribution of conveniences.

Those for whom the maintenance of the pax Romana was really important.

The question is: what happened to those on the bottom in the countryside? They now are much more productive. Yet they face increased pressures from above to exploit them more in order to compensate for the reduced rent flow from depopulation, and they suffer from increased dissipative violence���both from their superiors and from barbarian invasions. Yet on the other hand their increased value might have given them increased leverage: that was the case for western European serfs in the aftermath of the Black Death.

My view: slave ���> serf a definite improvement. For everyone else, a decline: loss of conveniences with the end of large-scale efficient production, loss of resource flow to city-dwellers, loss of resources that had underpinned the pax Romana. What is uncertain is the relative numbers of the winners and losers���and whether even the winners in terms of consumption were better off facing the barbarian rather than the slavemaster.

In any event, very interesting: Willem Jongman (2006): Gibbon Was Right: The Decline and Fall of The Roman Economy: "For the naive historian, it would seem that we now have all we need: we have a range of examples of catastrophic decline, and some potential causes. What we do not yet have, however, are the mechanisms by which this shock propagated through the economic and social system. Imagine a pre-industrial and largely agricultural economy in a fairly stable equilibrium. Next that equilibrium is disturbed by mortality.... The biggest economic and social change, however, was to the land-labour ratio...

...More land per person inevitably means a lower aggregate production: production per hectare must have gone down since there was more land to work in the same amount of time.... Production per man hour must have gone up.... Rents must have gone down, and therefore the incomes of elite land-owners. The Roman
Empire should have turned into a world of happy and prosperous peasants, and much greater social equality than before. The theory is impeccable, but reality was, of course, very different....

A change in rural social relations... from the late second century... a new social, political and legal regime... honestiores and humiliores.... Demand for slaves declined because citizens could now be exploited more fully... the non-economic force of oppression.... The coloni of the Saltus Burunitanus of 180 are not alone to complain to the emperor about increased oppression and growing abuse. When pushed hard enough. they could have moved, but that was precisely what was to become illegal.... The declining legal status of citizens was... an instrument imposed in the face of what would have been an improved economic position for the peasantry....

For me, the interesting thing is the resilience of the Roman state. For more than half a century, the Severan regime maintained... integrity and continuity.... The surprise is... that it survived... for so long that the crisis later became known as the crisis of the third century, rather than the crisis of the second century that I think it was.... As remarkable... is the recovery from Diocletian....

The real beginnings of that decline and fall... in... a period of much colder and dryer weather, and in the scourge of the Antonine Plague. With the growth of its Empire, with the growth of its cities, and with the growth of a system of government and transportation based on those cities, Rome and created the perhaps most prosperous and successful pre-industrial
economy in history. The age of Antoninus Pius was indeed probably the best age to live in pre-industrial history.

https://github.com/braddelong/NOTEBOOK-Economic-Growth-in-Historical-Comparative-Perspective/blob/master/Willem_Jongman-Gibbon_Was_Right.ipynb