During this terrible pandemic, a silver lining has been that many inconvenient tradeoffs no longer apply. A Yale study showed that paying people not to work does not, for the time being, prevent anyone from working. Perhaps also emptying the prisons can enhance public safety. We can have social justice and safety at the same time.Figure 1 below shows points-in-time numbers of people in Illinois prisons who were convicted in Cook County and admitted to prison within the past half year. The stock of new convicts had been between 3000 and 4000, until the pandemic when it dropped to 1000. Figure 2 limits the sample to convicted murderers. They had been entering Illinois prisons at a rate of about 130 per year (65 per half year), until the first half of 2020 when the rate dropped toRead More »
Articles by Casey B. Mulligan
Last night a third release of BBB was shown to the public. Both in pages and overall economics, it is in between the 1st and 2nd editions.First-release items resurrected yesterdayRepeal of Trump’s terrible rebate rule (Section 139301). It is likely illegal so repealing it does nothing but CBO probably will credit Dems with cutting about spending by about $200B with this provision.Drug "Price Negotiation Program" (Section 139001).Rx "Drug Inflation Rebates" (Section 139101).Favors to labor unions such as allowing union dues to be tax deductible (Section 138514) and giving the National Labor Relations Board new authority to levy hefty penalties on employers (Section 21006, which was also in previous releases). E-cigarette and tobacco taxes (Section 138520).Federal family leave (SectionRead More »
Hidden Work DisincentivesI had been tracking 13 types. Three disappeared from today’s revised bill. The Medicaid expansions appear to be less. Affordable housing was cut in half (still at $150B). Dems once aspired to allow union dues to be tax deductible but that was cut. Many other pro-union provisions remain.The new childcare program has now replaced an income phaseout above 250% median income with a cliff. This change from last month’s bill to lastest draft has little effect on the average marginal tax rate because the same funds are being phased out over a narrower range. I.e., a few people see very large additions to their marginal tax rate while others disincentivized with a phaseout now see no addition.The "green energy" provisions have a lot of producer-protectionistRead More »
Section 23001 of the "Build Back Better" bill would use the Obamacare mold to create a federal childcare program.
Low-cost (a.k.a., "low quality") childcare would prohibited unless the provider were to forgo all federal dollars, which would involve something like having zero children from a family at or below $200K annual income.Childcare workers would have to be paid as much as elementary-school teachers.According to the Bureau of Labor Statistics, elementary school teachers earned an average of $55,640 annually in 2019.The same BLS data show childcare workers earning an average of $23,930. I.e., under BBB childcare would have to pay them 133% more.A 133% increase is similar to the increase in individual health insurance premiums that occurred when Obamacare came into effect.Families
Largely by stepping toward an
economy in which workers bear the burden of distributing healthcare and housing
with little regard to ability or willingness to pay, the Build Back Better bill (BBB) would implement
the single largest permanent increase in work disincentives since the income
tax came into its own during World War II.
The bill would also reduce work
by limiting competition in the labor market, imposing employer mandates, and
increasing consumer prices for telecommunications, energy, and other
products. All of
these disincentives go on top of those already in the baseline due to a continuing
portfolio of federal, state, and local tax, spending, and regulatory policies.
The implicit employment and
income taxes in BBB would increase marginal tax rates on work by about 7
Michael T. Maloney passed away this week. We both loved applied price theory and golfed to the exact same handicap.We both liked sailing too and together sailed around Long Island in less than 24 hours. He frequently asked why we had to spend so much time scouring the ocean for our competition. To this day I don’t know how to answer this question coming from a first-class IO economist, but perhaps he did not want to imitate Ahab too much.I wish to find better pictures (Skip has several on facebook) but here we are crossing the starting line first in 2011. Below we are about half way down the island on the ocean side.Our 2011 corrected finish time was the best in that year’s fleet (and many other years’ fleets). We (Mike and me and 2 others) especially liked beating the two U.S. NavyRead More »
In 2020, the City of Baltimore stopped prosecuting "minor charges" such as drug crimes. The headlines are that 2020 crime "went down a lot" from 2019. Homicides fell by 13.Not mentioned is that, over a similar time frame (2020 Q1-Q3 vs 2019 Q1-Q3), "Opioid Intoxication Deaths" increased by 48 persons (at an annual rate). That is an increase of 36 percent, compared to 21 percent for the rest of the state of Maryland or 3 percent for Baltimore 2018-2019. Of course a lot of unusual things happened during the pandemic, which was also experienced by the rest of Maryland and the world. But is there any reason to be confident that lax enforcement of drug laws would not increase activity associated with fatally dangerous drugs?Read More »
Covid-19 has disrupted much of human
life, but Operation Warp Speed has drastically mitigated the costs of the
virus. The $10 billion federal program launched in April 2020 encouraged and
accelerated the development and mass manufacturing of COVID-19 vaccines,
streamlined Federal approval for vaccines and their manufacture, and provided
Federal funds for private vaccine research and advance-purchase orders. COVID-19 vaccines are currently being
administered to the general public at least six months earlier than expected. Vaccinating the population against COVID-19
six months earlier was worth about $1.8 trillion to the U.S. alone
in terms of lives saved and accelerating the return to normal schooling, work,
socializing, etc. (Mulligan and Philipson 2020).
Operation Warp Speed is aRead More »
Judging from their Economic Reports, few Presidents have given much thought to the problems of fraud. When they do, typically private sector fraud is cited as a reason for government regulation. Prior to 2019, ERPs rarely included analysis of incentives to prevent fraud, and never explained why those incentives would be different when the victim of fraud is a private entity as opposed to taxpayers. Does this reflect a (noneconomic) view that fraud is a consequence of bad people rather than poor incentives?ERPs hardly mentioned fraud before Clinton. His ERPs cite financial fraud (especially credit card fraud, which had grown with the industry itself) and healthcare providers that fraudulently miscode treatments in order to enhance their receipts from government and otherRead More »
The (il)logic of Obamaeconomics has returned:Each $100 of weekly unemployment bonus has hardly any negative effect (some might say "no statistically significant effect") on employment or GDP.Food stamp benefits have hardly any negative effect on employment or GDP.Rental assistance has hardly any negative effect on employment or GDP.Obamacare subsidies have hardly any negative effect on employment or GDP.Minimum wage increases have hardly any negative effect on employment or GDP.A new negative income tax has hardly any negative effect on employment or GDP.My writings rarely express disagreement with any of the bullets by themselves. For the sake of argument, I am not disputing them here.Where I disagree is the assertion that the combination of all of the bullets, which is Biden’s pandemicRead More »
Parler is a microblogging platform that was cut off from the internet by its web hosting service, Amazon. Almost as drastic, Apple and Google took steps to prevent the use of Parler on their mobile operating systems. Unlike Twitter, Amazon, Apple and Google do not describe themselves as microblogging platforms. At first glance, these would seem to be vertical (i.e., supply chain) relationships with no potential to harm competition. Wrong!For brevity, I will not go into the competitive effects of vertical relationships; the recent guidelines jointly issued by DOJ and FTC are thought provoking. I will also not go into dynamic effects, such as the possibility that Parler’s success might ultimately prove to be complementary with "right wing"/"less woke" web hosting services that areRead More »
Amazon turned off Parler’s servers last night, disconnecting Parler.com from the internet, and with it the social media accounts of almost 20 million people.Parler CEO also reported (yesterday AM on Fox Business) that attorneys, email, and other suppliers are refusing to supply his company. Although he said that transferring the company’s software and data could be done in about 12 hours, today he wrote that "We will likely be down longer than expected" because of the time it takes to find vendors who are willing to supply the company. Parler investor Dan Bongino said today that "Parler will be back by the end of the week."The Jan 6 violence and lawbreaking was reportedly organized on Facebook, but Facebook continues uninterrupted.I estimate that Parler has 20 million members (no bots),Read More »
The Food and Drug Administration (FDA) has been part of many conversations in 2020. To the great frustration of tens of millions, it has to approve COVID tests and arguably applies the wrong (from economic and health perspectives) standards in doing so. It is also tasked with approving COVID treatments and vaccines. Vaccine approvals came much quicker than experts expected, although IMO not quickly enough.With few exceptions, economists have “long been aware that the agency causes unnecessary deaths and suffering by” its “inexcusable delays in approval” (see esp. Klein and Tabarrok’s collection). Judging from 74 years of Economic Reports of the President, the White House has not traditionally given this issue much attention. When the FDA does appear, the sentiment generally confirmsRead More »
Last March Dr.
Fauci explained to a Senate committee that “a
vaccine … will take at least a year or year and a half” until it is
administered to the general public. In
his next testimony, he added, “I don’t give advice about economic things.” If Dr. Fauci had
paid more attention to economics, at least what had reached his own inbox in
the prior year via the
White House Staff Secretary, he would have understood how different vaccine
development during a pandemic would be, and should be, from that in normal
Dr. Fauci was refering
to the lengthy process that the Food and Drug Administration (FDA) has for approving
drugs, vaccines, and medical devices for use in the United States. Long ago a wide
range of economists had concluded that the FDA process was too
Article II, Section 1 of the U.S. Constitution says [emphasis added], Each state shall appoint, in such manner as the Legislature thereof may direct, a number of electors, equal to the whole number of Senators and Representatives to which the State may be entitled in the Congress….I am not a lawyer, let alone Constitutional scholar. I welcome such scholars to engage and clarify what follows (suspecting that most of these scholars are currently retained by either Rs or Ds and therefore will not comment outside of legal proceedings).My point in what follows is about free expression of reasonable ideas, which is a set of ideas that includes elements that may be ultimately rejected by the U.S. Supreme Court as valid legal arguments. I am not using the term "reasonable" as a legal opinionRead More »
Although we still do not know the
winner of the electoral college, it is clear that the polls were systematically
wrong in the swing states and several others.
Here is a recap, with links, of what we knew in advance
but few dared discuss openly.
Election forecasting became an
about this last week:
(1) Better information-aggregation
methods were showing less Biden lead and sometimes a Trump lead.
(2) The incentives for
individuals to truthfully participate in polls were skewed relative to a
neutral situation, and relative to 2016.
(3) The costs to individuals of
participating in the election are different during a pandemic. During this pandemic, perceptions of the new
costs were correlated with party affiliation.
Forecasts of this election are
certainly missing economics. However,
lacking knowledge and skills of the other tools and methods for election forecasting,
I cannot say how much the absence of economics matters. My only purpose here is to cite the missing
economics and attempt to assess the direction of the forecast bias as it
pertains to the Presidential election.
The missing economics fit into three categories: information
aggregation, voter incentives to tell the truth, and voter incentives to
participate in the general election.
At the time of writing (Oct 30),
Poll Average is Biden +7.9 (51.4-43.5) nationally and +3.1 (48.9-45.9) in
the top battleground states. Based on a very similar dataset, FiveThirtyEight
puts Biden’s chance of winning at
At the same time that a particular labor union (teachers) has successfully pushed to keep school buildings closed, we are reminded that unions are part of the "solution to inequality." As an update to an old literature on unions and inequality, let’s first look at distributional effects of closing school buildings.The chart shows that closing school buildings reduces learning for all groups, but especially low-income and minority pupils. So the actions of teacher unions today (they are far more likely to have their schools closed) will add to inequality in the future as the pupils enter the labor market.Now let’s look at today’s labor market. The weekly cash earnings of teachers are 22 percent more than those of nonteachers. As a result of being offered more and richer fringe benefitsRead More »
The traditional models of regulations and growth treat regulation as an adverse productivity shock (more inputs for the same output) in order to help the environment, fairness, or some other social good. But a productivity shock has opposing income and substitution effects on labor supply. Arguably a regulation that works as a productivity shock has no aggregate effect on jobs.Reminded how Gary Becker many times told me that "somebody benefits," I do not endorse the productivity-shock model of regulation, at least as relates to the Federal regulations added and removed over the past 20 years. In economics jargon, the "rectangle" created in a market by regulation is not entirely wasted: some of it is a transfer to special interests and therefore not an income effect in the aggregate.Read More »
An immigration Executive Order was issued two days ago. I read it yesterday and gathered my thoughts and relevant memories over the subsequent 24 hours.
The EO contains immigration regulations and purported economic justifications for the regulations.
The EO’s economic justification is essentially that it is good to suppress labor supply during a recession. I disagreed with such a conclusion when it was offered years ago by Krugman, Eggertson, and others. The conclusion is just as wrong when it comes from President Donald Trump.
The empirical fact, which is not a surprise from a theoretical point of view, is that labor supply and demand matter just as much at the margin during a recession as they do during an expansion. See Chapter 8 “Recession-era Effects of Factor SupplyRead More »
What do readers have to say?
A New York Times Review says that Bolton’s memoir "has been written with so little discernible attention to style and narrative form…."
One reader (who asked to remain anonymous because he/she fears retribution at work) finds You’re Hired! to be an "extremely well-written book." Brian Blase found it to be "enjoyable and easy to read."
Back to the review of Bolton, "Underneath it all courses a festering obsession with his enemies …the book is bloated with self-importance."
Pages xii and xviii of You’re Hired! explain how I was "the Apprentice" and that readers should be "prepared to be as amazed and humbled as I was."
By Joe Grogan’s reading, You’re Hired! is an "an insightful, honest, book … free from score settling and selfRead More »
One viewer says "You play it very straight which at this point is unheard of in Washington."[embedded content]Read More »
@GlennLoury objects to what university administrators are doing. They are economic actors too, who will not benefit from a repeat of 1968, so it is predictable that their reactions might risk some scholarship, reason, and learning.But there is also competition in the industry and thereby an opportunity for an (aspiring?) administrator who expresses the interests of the many individuals who have not yet reached the fashionable conclusions. Something like the famous Zimmer letter. This competition might play out slowly given that (barring regulatory favors) universities will now compete in another important dimension: whether 2020-21 students are allowed to purchase a college education that does more than Zoom (which would have made 1968 impossible).
Moreover the Zimmer letter was not
The first chart below is an estimate of weekly US employment per adult. It suggests that the bottom was the week ending May 7, and that a recovery may have begun.
The estimated recovery may not look large on the scale of the current depression, but it is about 7.5 million employees above May 7 and 3 million employees above late April. Note that the entire recovery from the 2008-9 recession was "only" 7 million employees above population growth and took ten years rather than a week or two.
At about the same time, states began ending their stay-at-home orders. E.g., Texas May 1 and California May 8. I expect another increase in early June as more reopening occurs. A big increase will occur when UI bonuses expire, which may be as early as August.
The imputation is based on theRead More »
The Employment Situation Report by the Bureau of Labor Statistics comes only monthly. It measures only the seven-day week (or, with the establishment survey, pay period) including the 12th of the prior month, which means that this month four very interesting weeks will be skipped and that the report on that April week will not be released until May 8.
Three data sources provide employment information on at least one of the missing four weeks, with the results shown in the chart below. The results suggest that employment has fallen more than 20 million and perhaps as much as 36 million by April 11. This does not begin to count employees who had their hours reduced.
One is an attempt by Bick and Blandin (2020) to imitate the BLS household survey for the week of SundayRead More »
By all accounts, hundreds of millions of us are confined to home despite being perfectly healthy. The purpose of all of this, we’re told, is to make sure that we do not bump into people infected with the coronavirus.
The wise people forcing us to do so owe us some evidence that in fact the virus is out there in sufficient quantities to merit draconian measures. They point us to deaths in New York hospitals, and growing numbers of positive test results. But those presumably were infections that occurred weeks ago (perhaps also some false positives).
Smart thermometers suggest that hardly anyone has had a fever for a couple of weeks now. Perhaps this data is faulty or easily misinterpreted, but the wise people owe at least an explanation to the hundreds of millions of peopleRead More »
A one-size-fits-all policy, even at the state level, has been a mistake from the beginning. Instead policy should be favoring decentralized mechanisms over direct control and ensuring that the chosen regulations deliver more net benefits than less stringent alternatives. It is too bad that governments are causing so much harm at this critical moment by ignoring these longstanding principles of government regulation.
Expressed at an annual rate, the shutdown is already costing $7 trillion, or about $15,000 per household per quarter. Employment had already fallen 28 million by April 1 and continues to fall as the shutdown continues. Not only is the shutdown costly, but it is a cost-ineffective way of reducing the health harmsRead More »
New data from Alexander Bick and Adam Blandin suggest that the flow of real GDP is 28 percent less than it would be under normal circumstances. Using two entirely different methods, I previously forecasted 25 percent and 26 percent. Below are the details of my calculations from Bick and Blandin.
Bick and Blandin (2020) find that working hours per working age adult circa April 1 declined 27 percent from February. Moreover, among those working in February 2020, between 59 and 61 percent are now absent from their workplaces either due to not working or working at home. If half of the capital in those workplaces is idle and not replaced by utilizing capital located in home offices, then capital utilization has fallen by 30 percent and GDP by 28 percent.
The GDP calculation assumesRead More »
FACT: the population density of NYC is 27K per square mile
FACT: the population density of Indianapolis is 2K per square mile
FACT: COVID-19 was able to be introduced and spread in a city with only 2K susceptible people per square mile (Indianapolis is such a city).
Conclusion: COVID-19 will continue to spread in NYC until either (i) the number of susceptible people falls to 2K per square mile or (ii) a vaccine. i.e., until more than 90% of NYC has contracted and recovered from COVID-19. [This conclusion says nothing about time frame; i.e., it could be years]
Does the conclusion follow from the three facts?Read More »
This website tracks real time fevers using thermometers connected to the internet. A first glance at their map suggests to me that:
fevers spiked two week ago.
The timing of the spike is similar across the country,
but magnitude greater in those regions with more COVID-19 deaths.
The time difference in the peak across counties is at most a few days.
Does this mean that the rest of the country is not significantly lagging NYC? Or that COVID-19 fevers are a small fraction of all fevers?Read More »