Friday , December 13 2019
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Articles by Timothy Taylor

Interview with Daron Acemoglu: Wellsprings of Growth

3 days ago

Tyler Cowen conducts one of his rich and illuminating "Conversations with Tyler" in "Daron Acemoglu on the Struggle Between State and Society" (Medium.com, December 4, 2019, both audio and transcript available). Here are a few tidbits from Acemoglu, but there’s much more at the link:On interrelationships between democracy and growth 
The early work on democracy — such an important topic, and people were really excited about understanding what democracy does. … But you have to be careful. Of course, if you judge whether democracy is successful or not by comparing China to Switzerland, you’re going to get not very meaningful answers. That’s like a chief case of comparing apples and oranges. I have written a couple of papers on this, and the econometrics here really matters for a variety

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Paul Volcker: 1927-2019

3 days ago

Paul Volcker, who was chair of the Federal Reserve from August 1979 to August 1987.has died. He is generally credited, or in some cases blamed, for the set of monetary policies which both ended the inflationary period of the 1970s but also brought on the very deep double-dip recessions of 1980 and 1981-2. The New York Times obituary is here.For an overview of those times and how Volcker perceived the choices he was facing, a useful starting point is "An Interview with Paul Volcker," conducted by Martin Feldstein, which appeared in the Fall 2013 issue of the Journal of Economic Perspectives. Here’s a flavor:
It made a profound impression on me, if nobody else, that Arthur Burns titled his
valedictory speech “The Anguish of Central Banking” (Burns 1979). That was a long lament about how, in

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Why Mississippi Deserves More Federal Aid, and Massachusetts Less

3 days ago

Imagine two school districts in a metropolitan area in the same state: one with higher incomes and property values, and the other with lower incomes and property values. Say that the schools are funded by local property taxes. Thus, if the same property tax rate applies to both school districts, children in the district with higher incomes and property values will have a lot more spent on their education than children in the district with lower incomes and property taxes.For some decades now, it has been widely accepted that it is appropriate to make some adjustments to this outcome. The general sense is that if two districts impose the same level of tax effort, as measured by the tax rate, then the per student funding in those districts should also be the same. In that spirit, many

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Revisiting the Industrial Policy Question in East Asia

7 days ago

Many of the world’s main economic growth success stories are clustered in east Asia, including Japan, South Korea, Taiwan, Malaysia, Singapore, and now of course China. Of course, everyone wants to claim credit for success stories: in particular, it’s clear that the governments of these countries have often intervened in their economies, and so they are commonly cited as examples of how "industrial policy," rather than just a "free market," is needed for rapid growth. Reda Cherif and Fuad Hasanov resurrect these arguments in "The Return of the Policy That Shall Not Be Named: Principles of Industrial Policy" (IMF Working Paper WP/19/74, March 2019)As a starting point to sorting out these arguments, it’s useful to point out that any proposed dichotomy between "industrial policy" and the

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About Millennials

9 days ago

The "Millennials" are commonly defined as the generation that grew up and came of age in the opening decades of the 21st century: that is, those born from approximately 1981 to 1996.
Every generation finds itself caught in the twists and pressures of a different set of social and economic challenges, and the Millennials are no exception. For example, those who were struggling to enter the labor market as young adults during the Great Recession of 2007-2009 and the sluggish recovery in its aftermath were Millennials. Those who were trying to buy houses and and attend college in the 2000s, after the prices of those goods had been climbing in recent decades, were Millennials. Some long-run trends, like diminished labor market opportunities for low-skilled workers, continued for Millennials

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Whose Charitable Giving (And for What Purposes) Gets a Tax Break?

10 days ago

When people who itemize deductions on their taxes donate to charity, they can take a tax deduction. When people who don’t itemize deductions donate to charity, they don’t get a tax deduction. Only about 11% of taxpayers itemize deductions, usually those with higher income levels. So the charitable priorities of this group gets a tax break, while others don’t. Robert Bellafiore lays out these facts and offers some possible policy suggestions in "Reforming the Charitable Deduction," written for the Social Capital Project of the Joint Economic Commitee (SCP REPORT NO. 5-19, November 2019). Here are some background facts:Overall charitable giving as a share of GDP (including both those who itemize deductions and those who don’t) had a step-increase in the 1990s, and has stayed at that higher

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Production, Use and Fate of All Plastics Ever Made

14 days ago

Back in 2005, the American Film Institute released a list of the 100 most memorable and lasting bits of film dialogue of all time. The first two, for example, were ""Frankly, my dear, I don’t give a damn"
and "I’m gonna make him an offer he can’t refuse." Number 41 on the list was "Plastics." from the 1967  film The Graduate, which won Oscars for Best Picture, Best Director, Best Actor (Dustin Hoffman) and Best Actress (Anne Bancroft).In that movie, the dazed-and-confused soon-to-be college graduate Benjamin Braddock, played by Dustin Hoffman, is drifting through a dinner party full of his parents’ friends. One of his father’s well-meaning and clueless friends named Mr. Maguire, played by Walter Brooke, traps Benjamin into this conversation:
Mr. McGuire: I want to say one word to you.

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Thanksgiving Origins: Sarah Josepha Hale Writes to Abraham Lincoln

14 days ago

Thanksgiving is a day for a traditional menu, and part of my holiday is to reprint this annual column on the origins of the day:The first presidential proclamation of Thanksgiving as a national holiday was issued by George Washington on October 3, 1789. But it was a one-time event. Individual states (especially those in New England) continued to issue Thanksgiving proclamations on various days in the decades to come. But it wasn’t until 1863 when a magazine editor named Sarah Josepha Hale, after 15 years of letter-writing, prompted Abraham Lincoln in 1863 to designate the last Thursday in November as a national holiday–a pattern which then continued into the future.An original and thus hard-to-read version of George Washington’s Thanksgiving proclamation can be viewed through the Library

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The Dominance of Peoria in the Processed Pumpkin Market

14 days ago

As I prepare for a season of pumpkin pie, pumpkin bread (made with cornmeal and pecans), pumpkin soup (especially nice wish a decent champagne) and perhaps a pumpkin ice cream pie (graham cracker crust, of course),  I have been mulling over why the area around Peoria, Illinois, so dominates the production of processed pumpkin.[In honor of pumpkin pie, I’m repeating this blog published in 2017.]The facts are clear enough. As the US Department of Agriculture points out (citations omitted):
In 2016, farmers in the top 16 pumpkin-producing States harvested 1.1 billion pounds of pumpkins, implying about 1.4 billion pounds harvested altogether in the United States. Production increased 45 percent from 2015 largely due to a rebound in Illinois production. Illinois production, though highly

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An Economist Chews Over Thanksgiving

15 days ago

As Thanksgiving preparations arrive, I naturally find my thoughts veering to the evolution of demand for turkey, technological change in turkey production, market concentration in the turkey industry, and price indexes for a classic Thanksgiving dinner. Not that there’s anything wrong with that. [This is an updated, amended, elongated, and cobbled-together version of a post that was first published on Thanksgiving Day 2011.]The last time the U.S. Department of Agriculture did a detailed "Overview of the U.S. Turkey Industry" appears to be back in 2007, although an update was published in April 2014  Some themes about the turkey market waddle out from those reports on both the demand and supply sides.On the demand side, the quantity of turkey per person consumed rose dramatically from the

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Advice on Writing from Amitabh Chandra, Editor of the Review of Economics and Statistics

17 days ago

The academic economics journal where I work as Managing Editor, the Journal of Economic Perspectives, is not intended as a destination for someone’s latest research paper. Instead,  we ask authors to write an essay about an economic question which draws both on their own research and the work of others. We emphasize verbal explanations about the intuition underlying an argument. JEP articles are thus different in tone and focus from standard economics research journals.

Thus, it’s interesting to me that the advice to authors from the editor of a top research journal, the Review of Economics and Statistics, is in some ways quite similar to the advice I would give.  David Slusky presents "An Interview with Amitabh Chandra, Editor of the Review of Economics and Statistics," in the

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Workplace Wellness Policies: Disappointing Evidence

18 days ago

The idea behind workplace wellness policies is straightforward. Many workers could use a nudge toward adopting healthier lives, including diet and exercise. Employer are paying for health insurance anyway, and also experiencing costs of lower productivity and sick days for their employees. If a workplace wellness program can improve health, it could be a win for both workers and employers. However, a couple of recent studies from this year suggest that such programs don’t pay off.One study was published by Damon Jones, David Molitor, and Julian Reif, "What Do Workplace Wellness Programs Do? Evidence from the Illinois Workplace Wellness Study," in the Quarterly Journal of Economics (November 2019, 134:4, pp. 1747-1791). As background, they write (citations omitted):
The 2010 Affordable

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The Return of the Patent Thicket

21 days ago

Back in the early 1970s, Xerox had figured out a strategy to block competitors in the photocopying business. It took out lots of patents, more than 1,000 of them, on every aspect of the photocopy machine. As old patents expired, new ones kicked in at a rate of several hundred new patents each year. Some of the patents were actually used by Xerox in producing the photocopy machine; some were not. There was no serious complaint about the validity of any individual patent. But taken as a whole, Xerox seemed to be using the patent system to lock up its monopoly position in perpetuity.  Under antitrust pressure from the Federal Trade Commission, Xerox in 1975 signed a consent decree which, along with a number of other steps, required  licensing its 1,700 photocopier patents to other firms.

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Why Has China’s Trade Surplus (Just About) Gone Away?

22 days ago

China’s trade surpluses exploded in size after 2001, when China joined the World Trade Organization and its exports soared. But those trade surpluses peaked back before the Great Recession and have dwindled since then to near-zero. Indeed, the IMF predicts that China is likely to have small trade deficits in the next few years. What happened? Pragyan Deb, Albe Gjonbalaj, and Swarnali A.  Hannan tell the story in "The Drivers, Implications and Outlook for China’s Shrinking Current Account Surplus" (IMF Working Paper WP/19/244, November 8, 2019).
As a starting point, here’s a graph showing China’s overall trade balance (the "current account" line) falling to zero. The green line shows China’s trade balance in services. The blue line shows China’s trade balance in goods.

Clearly, one big

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Enhancing Federal Tax Collections by $100 Billion Annually

23 days ago

Maybe instead of arguing over whether or how much to raise tax rates on those with high incomes, we could start by making more of an effort to enforce the actual existing tax laws? Natasha Sarin and Lawrence H. Summers explore what’s possible in  "Shrinking the Tax Gap: Approaches and Revenue Potential" (Tax Notes, November 18, 2019).In the lingo, the "tax gap" is the amount of tax that is owed under existing law, but that for one reason or another goes uncollected. Sarin and Summer estimate that "in 2020 the IRS will fail to collect more than $630 billion, or nearly 15 percent of total tax liabilities. … Our estimates suggest that it’s reasonable to anticipate that with feasible changes in policy, the IRS could aspire to shrink the tax gap by around 15 percent."Moreover, this extra tax

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interview with Cass Sunstein: On Abrupt and Unpredictable Social Change

24 days ago

Consider some examples of social movements that led to rapid change: the French Revolution, Russian revolution/ collapse of Soviet Union, the Iranian revolution, the civil rights movements of the 1960s, the rise of environmentalist movement in the 1960s, Brexit, #MeToo, gay marriage, and others.  Robert Wiblin and Keiran Harris at the "80,000 Hours" website have a podcast interview: "Prof. Cass Sunstein on how social change happens, and why it’s so often abrupt & unpredictable" (June 17, 2019). A transcript is also available. 
Sunstein develops a theory based on "preference falsification, diverse thresholds and interdependencies." The basic notion is that many people might disagree with the status quo and be willing to change from the status quo, but they aren’t willing to come out in

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China’s Belt and Road Initiative: Could It All Come Crashing Down?

25 days ago

Brad Parks at the Center for Global Development managed to find a nice way of boiling down the ways that China’s Belt and Road Initiative could possibly become a failure and a burden in a short thought experiment ("Chinese Leadership and the Future of BRI: What Key Decisions Lie Ahead?" July 24, 2019). Here’s how he describes one possible future a decade from now (I added a couple of paragraph breaks):
It’s 2028. The Belt and Road Initiative (BRI) has been underway for 15 years, but the initial enthusiasm and momentum behind BRI has vanished. Many of the governments that initially joined the initiative have publicly withdrawn or quietly wound down their participation. China’s staunchest allies remain engaged but even they have reservations about the wisdom of the initiative. They are

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Is Opposition to Immigration Primarily Economic or Cultural?

28 days ago

It’s clear that there is a considerable hostility to immigration, both in the United States and across much of Europe. Is that opposition rooted primarily in economic factors or in cultural factors? What kind of evidence could help answer the question?One approach is to look at whether anti-immigrant attitudes are more common among occupations more threatened by immigrant competition or in local areas that have received more immigrants.  If so, this would support an economic explanation for anti-immigrant sentiment. Another approach is the "survey experiment," which involves doing a survey with several different versions that differ in  what questions are asked, and thus seeing what factors are shaping people’s attitudes. Both approaches suggest that that cultural factors than economic

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Can Job Training Work for Mature Adults?

29 days ago

Most workers learn additional skills throughout their work-life. In that sense, it’s obvious that job training in some contexts works for adults. But for many of us, the additional learning happens in the context of remaining in the same job, or at least on the same broad career path. The harder question is whether it’s possible to do the kind of job training with adults, perhaps adults who have just experienced a negative shock to their previous job, that jump-starts them on a career path. Paul Osterman offers a useful discussion of these issues in "Employment and training for mature adults: The current system and moving forward" (Brookings Institution Future of the Middle Class Initiative, November 2019). Here are a few themes from his report that stuck with me: 

Overall Perspectives

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Is Trade Still a Viable Path to Development? World Development Report 2020

November 13, 2019

Many of the world’s development success stories in recent decades followed a broadly similar pattern. The countries became more involved with the world economy, often by exporting manufactured goods produced by low-wage workers. The rise in exports brought economic growth and income to their economics, but perhaps just as important, it also helped to foster a range of managerial, financial and technological skills. In this way, exporting was a fundamental step on the path to economic development.The World Development Report 2020, subtitled "Trading for Development in the Age of Global Value Chains," asks whether that step is still available for countries trying to develop their economies.
International trade expanded rapidly after 1990, powered by the rise of global value chains (GVCs).

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Some Economics of the Clean Water Act

November 12, 2019

Here’s an uncomfortable set of facts about federal clean water policy in the United States: 1) People care about it a lot; 2) Over the years, total spending on clean water has been high; 3) Water quality has improved; and 4) The estimated benefits of clean water regulation in the US seem relatively low and in many cases even negative. My discussion here will draw on an essay by David A. Keiser and Joseph S. Shapiro, "US Water Pollution Regulation over the Past Half Century: Burning Waters to Crystal Springs?" Journal of Economic Perspectives, Fall 2019, 33:4, pp.  51-75.Keiser and Shapiro offer some evidence from Gallup polls that clean water is traditionally near the top of environmental concerns.

The amount spent on clean water legislation has been substantial. They write:
Over the

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The Declining Share of Veterans Among Prime-Age Men: The Centennial of Armistice Day

November 11, 2019

The armistice marking the end of World War I was signed on November 11, 1918. A year later–and 100 years ago today–the first Armistice Day celebrations were held at Buckingham Palace. The US Congress passed a resolution commemorating Armistice Day in 1926, and it became a national holiday in 1938. In 1954, after World War II, its name was changed to Veteran’s Day in the United States.But as you may have noticed when attending an event where veterans are encouraged to stand and be recognized for their service, the share of "prime-age" men (a term economists use to describe those in main working years from ages 25-54) who served as veterans has been in sharp decline.Coile, Courtney C. Coile and Mark G. Duggan raise this issue in passing in a Spring 2019 essay in the Journal of Economic

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US Dependence on Imported Minerals

November 9, 2019

This figure shows the US reliance on imports for various minerals, from the US Geological Survey. I’m fully aware that minerals are not equally distributed around the world, and I’m a pro-trade guy, so I won’t lose sleep tonight about these numbers. But during waking hours, I will wonder about whether the supplies from other countries are reasonably steady and reliable. I’ll also wonder about whether global pollution is worse because US firms are importing minerals from countries with substantially lower environmental standards than the United States.

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Minimum Wages and Overtime Rules

November 8, 2019

Perhaps the best-known provision of the Fair Labor Standards Act (FLSA) of 1938 is that it set a federal minimum wage for the first time. In addition, this is the law that established the overtime rle that if you are a "nonexempt" work–which basically means a worker paid by the hour rather than on a salary–then if you work more than 40 hours/week you must be paid time-and-a-half for the additional hours. Charles C. Brown and Daniel S. Hamermesh take a look at the evidence on both provisions in "Wages and Hours Laws: What Do We Know? What Can Be Done?" (Russell Sage Foundation Journal of the Social Sciences, December 2019, 5:5, pp.  68-87). They write:
Although wages and hours are regulated under the same law, policy developments and research on the law’s impacts could not be more

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The Roundup Case: Problems with Implementing Science-Based Policy

November 7, 2019

Imagine, just for the sake of argument, that you are open-minded about the question of whether the weed-killer Roundup (long produced by Monsanto, which was recently acquired by Bayer AG) causes cancer. You want to make a decision based on scientific evidence. However, you aren’t a scientist yourself, and you don’t feel competent at trying to read scientific studies.Geoffrey Kabat asks "Who’s Afraid of Roundup?" in the Fall 2019 issue of Issues in Science and Technology. More broadly, he uses the controversy over Roundup as a way to ask about the role of science in decision-making.When it comes to Roundup and its active ingredient glyphosate, the Environmental Protection Agency has continually said that "there are no risks to public health when glyphosate is used in accordance with its

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Flexible vs. Deep: What are the Ties that Bind a Firm Together?

November 6, 2019

One of the classic questions in economics is about what determines what is inside or outside a company: that is, why do companies buy some inputs or higher some workers from outside their firm through market transactions, but hire other workers to produce certain inputs inside the firm? Economists will recognize this as the central question posed by Roland Coase (Nobel ’91) in his famous 1937 essay, "The Nature of the Firm" (Economica, November 1937, pp. 386-405). Coase points out that economic activity within firms is coordinated by conscious administrative action, while economic activity between firms is coordinated by supply and demand. In one passatge that always makes me smile, Coase writes (footnotes omitted):
As D. H. Robertson points out, we find "islands of conscious power in

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Some Thoughts about Populism

November 4, 2019

"Populism" is remarkably slippery to define, but many people claim to know it when they see it–and to worry about its resurgence. Here, I’ll offer some thoughts about the current populist moment. I’ve spent some time thinking about this lately because the Journal of Economic Perspectives, where I work as Managing Editor, published a four-paper "Symposium on Modern Populism" in the Fall 2019 issue. The papers are:"On Latin American Populism, and Its Echoes around the World," by Sebastian Edwards
"Informational Autocrats," by by Sergei Guriev and Daniel Treisman
"The Surge of Economic Nationalism in Western Europe," by Italo Colantone and Piero Stanig
"Economic Insecurity and the Causes of Populism, Reconsidered," by Yotam Margalit

Also, the Centre for Economic Policy Research in London

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Interview with Maureen Cropper: Environmental Economics

October 31, 2019

Catherine L. Kling and Fran Sussman have "A Conversation with Maureen Cropper" in the
Annual Review of Resource Economics (October 2019, 11, pp. 1-18). As they write in the introduction: Maureen has made important contributions to several areas of environmental economics, including nonmarket valuation and the evaluation of environmental programs. She has also conducted pioneering studies on household transportation use and associated externalities." There also is a short (~ a dozen paragraphs) overview of some of Cropper’s best-known work,I had not know that Cropper identified as a monetary economist when she was headed for graduate school. Here is her description of her early path to environmental economics:
My first formal introduction to economics was in college. I entered Bryn Mawr

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Fall 2019 Journal of Economic Perspectives Available Online

October 30, 2019

I was hired back in 1986 to be the Managing Editor for a new academic economics journal, at the time unnamed, but which soon launched as the Journal of Economic Perspectives. The JEP is published by the American Economic Association, which back in 2011 decided–to my delight–that it would be freely available on-line, from the current issue back to the first issue. You can download it various e-reader formats, too. Here, I’ll start with the Table of Contents for the just-released Fall 2019 issue, which in the Taylor household is known as issue #130. Below that are abstracts and direct links for all of the papers. I will probably blog more specifically about some of the papers in the next week or two, as well.
_________________Symposium on Fiftieth Anniversary of the Clean Air and Water

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The Hearing Aid Example: Why Technology Doesn’t Reduce Trade

October 29, 2019

Will the new technologies of 3D printing and robotics  lead to a reduction in international trade? After all, IF countries can use 3D printing and robotics to make goods at home, why import from abroad?But there is a fascinating counterexample to these fears: the case of hearing aids. Around the world, they are nearly 100% produced by 3D printing. But international trade in hearing aids is rising, not falling. Caroline Freund, Alen Mulabdic, and Michele Ruta discuss this and other examples in "Is 3D Printing a Threat to Global Trade? The Trade Effects You Didn’t Hear About" (World Bank Policy Research Working Paper 9024, September 2019). For a readable summary, the authors have written a short overview article at VoxEU as well.The authors point to a prediction that 3D printing could

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