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Timothy Taylor

Timothy Taylor



Articles by Timothy Taylor

Marijuana Policy: Choosing Between Disastrous or Unpalatable

19 hours ago

Slowly and with considerable uncertainty, the United States is altering its marijuana laws. Mark A. R. Kleiman offers an overview of the state of play and the likely tradeoffs in "The Public-Health Case for Legalizing Marijuana" (National Affairs, Spring 2019).  He writes:
John Kenneth Galbraith once said that politics consists in choosing between the disastrous and the unpalatable. The case of cannabis, an illicit market with sales of almost $50 billion per year, and half a million annual arrests, is fairly disastrous and unlikely to get better. The unpalatable solution is clear: Congress should proceed at once to legalize the sale of cannabis — at least in states that choose to make it legal under state law — for recreational as well as "medical" use. …First, as a practical matter,

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The “Right” and “Wrong” Kind of Artificial Intelligence for Labor Markets

2 days ago

Sometimes technology replaces existing jobs. Sometimes it create new jobs. Sometimes it does both at the same time. This raises an intriguing question: Do we need to view the effects of technology on jobs as a sort of tornado blowing through the labor market? Or could we come to understand why some technologies have bigger effects on creating jobs, or supplementing existing jobs, than on replacing job–and maybe even give greater encouragement to those kinds of technologies?Ajay Agrawal, Joshua S. Gans, and Avi Goldfarb tackle the issue of how artificial intelligence technologies can have differing effects on jobs in "Artificial Intelligence: The Ambiguous Labor Market Impact of Automating Prediction" (Journal of Economic Perspectives, Spring 2019, 33 (2): 31-50). Perhaps someday

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Some Snapshots of the Global Energy Situation

3 days ago

"Global primary energy grew by 2.9% in 2018 – the fastest growth seen since 2010. This occurred despite a backdrop of modest GDP growth and strengthening energy prices. At the same time, carbon emissions from energy use grew by 2.0%, again the fastest expansion for many years, with emissions increasing by around 0.6 gigatonnes. That’s roughly equivalent to the carbon emissions associated with increasing the number of passenger cars on the planet by a third." Spencer Dale offers these and other insights in his introduction to the the 2019 BP Statistical Review of World Energy. It’s one of those books of charts and tables I try to check each year just to keep my personal perceptions of economic patterns connected to actual statistics.  Here are a few figures that jumped out at me. 

One

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Where Will America Find Caregivers as its Elderly Population Rises?

5 days ago

As we look ahead two or three decades into the future, we know several demographic facts with an extremely high degree of confidence. We know that that the number of elderly people in the population will be rising, and as a result, the demand for long-term care services will rise substantially. We also know that the birthrate has been falling, and so this generation of the eventually-will-be-elderly has had fewer children than the previous generation.Put these two demographic facts together with a current social pattern: a large share of the care received by elderly adults with disabilities has been unpaid care provided by their children. But that arrangement will not be sustainable, at least not in the same way, moving forward. Three recent essays written for the Peter G. Peterson

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The Global Paper Industry: Still on the Rise

9 days ago

Paper is an old industry, dating back to 100 BC in China. For several decades now, there have been predictions that paper would decline, as businesses converted to the "paperless office" and as people moved to reading online rather than on dead tree. How is that transition going? The short answer is "only OK." For a longer answer, the Environmental Paper Network offers a review in The State of the Global Paper Industry, subtitled "Shifting Seas: New Challenges and Opportunities for Forests, People and the Climate" (April 2018).The report notes (footnotes omitted):
Paper use increases year on year and has quadrupled over the= past 50 years. In 2014, global paper production hit 400 million tonnes per year for the first time … More than half of this paper is consumed in China (106 million

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Interview with William “Sandy” Darity Jr.: Inequality, Race, Stratification, and More

10 days ago

Douglas Clement interviews William "Sandy" Darity Jr. in The Region magazine from the Federal Reserve Bank of Minneapolis (June 3, 2019). As the subtitle reads: "His recent focus has been on reparations for African Americans, but his scholarship spans decades and ranges from imperialism to psychology, from “price-specie flow” to rational expectations." Here are a few points that caught my eye, but the entire interview is worth reading.Wealth Inequality by Race
The racial wealth gap is customarily measured at the median for households to bypass the problems that are created by large outliers. At the median, when we’re taking the middle households, the most recent data from the Survey of Consumer Finances (SCF) for 2016, I believe, places the white household median at $171,000 and the black

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Japan: The Challenges of Aging, Slow Growth, and Government Debt

11 days ago

Japan is the third-largest economy in the world, behind the US and China. It’e experience seems to foretell some of the key issues facing other high-income economies, like slow productivity growth, rapid aging, and rising government deficits. But in the last few years, it also seems to have recovered to at least a moderate rate of economic growth. What are some of the main patterns and lessons in Japan?  For background, I’ll draw on the work of theOECD, which just published one of its "Economic Surveys" of Japan in April 2019.Back in the 1980s, a number of popular books and reports published in the US anointed Japan as the future leader of the global economy. A standard claim was that the disorganized competitive market forces of the US economy were unable to keep up with the

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Some Snapshots of the Economic Well-Being of U.S. Households

12 days ago

For the last six years, the Federal Reserve has been doing an annual Survey of Household Economics and Decisionmaking, which is designed to be nationally representative of the 18-and-older US population. The most recent survey was carried out in October and November 2018, and the Federal Reserve published the result in "Report on the Economic Well-Being of U.S. Households in 2018" in May 2019. Here, I’ll offer a few tables from the report that especially caught my eye. What was interesting to me is how the survey answers conveyed both a sense that the US economy is going pretty well, but also that many people felt dissatisfied.For example, "Three-quarters of adults in 2018 indicate they are either `living comfortably’ (34 percent) or `doing okay’ financially (41 percent), similar to the

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The US-Chinese Trade War: Why Now? At What Cost?

13 days ago

As a person who attempts to avoid rhetorical excess, except in my personal life, I’ve hesitated to refer to the US-China trade disputes as a "trade war." But it’s gone past being a skirmish, a tussle, or a melee. It’s gone beyond a battle, too. For those trying to gain an overall perspective, a useful starting point is Trade War: The Clash of Economic Systems Threatening Global Prosperity, a readable e-book of 11 essays plus and introduction, edited by Meredith Crowley (VoxEU.org, CEPR Press, May 2019, available with free registration).Here, I want to pass along some of the arguments as to why the US-China trade war has erupted, and what the costs are likely to be. For economists looking at trade issues, the Trump presidency is certainly part of what’s happening, but it is also operating

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Pareidolia: When Correlations are Truly Meaningless

15 days ago

"Pareidolia" refers to the common human practice of looking at random outcomes but trying to impose patterns on them. For example, we all know in the logical part of our brain that there are a roughly a kajillion different variables in the world, and so if we look through the possibilities, we will will have a 100% chance of finding some variables that are highly correlated with each other. These correlations will be a matter of pure chance, and they carry no meaning. But when my own brain, and perhaps yours, sees one of these correlations, I can feel my thoughts start searching for a story to explain what looks to my eyes like a connected pattern. 

Here are some examples from Tyler Vigen’s website, drawn from his 2015 book Spurious Correlations.

Eye-balling these kinds of

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How Economic Statistics Are Being Transformed

16 days ago

Economic statistics are invisible infrastructure, supporting better decisions by government, business, and individuals. But the fundamentals survey-based methods of US government statistics have substantially eroded, because people and firms have become less willing to fill out surveys in a timely and accurate way. There are active discussions underway about how to replace or supplement existing statistics with either administrative data from government programs or private-sector data. But these approaches have problems of their own.For a big-picture overview of these issues, a useful starting point is the three-paper "Symposium on the Provision of Public Data" in the Winter 2019 issue of the Journal of Economic Perspectives. "The Value of US Government Data to US Business Decisions,"

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Why Call it “Socialism”?

17 days ago

I’ve been coming around to the belief that most modern arguments over "socialism" are a waste of time, because the content of the term has become so nebulous. When you drill down a bit, a lot of "socialists" are really just saying that they would like to have government play a more active role in providing various benefits to workers and the poor, along with additional environmental protection.Here is some evidence on how Americans perceive "socialism" from a couple of Gallup polls, one published in May 2019 and one in October 2018. The May 2019 survey found that compared to 70 years ago, not long after World War II, both more American favor and oppose socialism–it’s the undecideds that have declined.

But when people say they are in favor of "socialism" or opposed to it, what do they

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Why Did the US Labor Share of Income Fall So Quickly?

19 days ago

The share of US national income going to labor was sagging through the second half of the century, but then plunged starting around 2000. The McKinsey Global Institute takes "A new look at the declining labor share of income in the United States" in a report by James Manyika, Jan Mischke, Jacques Bughin, Jonathan Woetzel, Mekala Krishnan, and Samuel Cudre (May 2019).Here’s a figure showing basic background. From 1947-2000, the labor share of income fell from 65.4% to 62.3%. There already seemed to be a pattern of decline in the 1980s and 1990s in particular, which was then reversed for a short time at the tail end of the dot-com boom. But since 2000, the labor share has sunk to 56.7% in 2016.

Why did this happen? The MGI analysis looks at 12 different sectors of the economy and how

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What if the Argument Was About Whether to Remove Congestion Pricing?

23 days ago

When economists talk about "congestion pricing"–the idea of charging tolls during rush-hour periods to reduce congestion–it ends up sounding to a lot of people like an unpleasant combination of tangible costs and nonexistent benefits. But what if we turned the question upside down. Instead of thinking about adding congestion tolls, what if we were having an argument about removing them?Michael Manville offers an interesting speculation along these lines in "Longer View: The Fairness of Congestion Pricing: The choice between congestion pricing fairness and efficiency is a false one," in the Spring 2019 issue of Tranfers magazine. He writes:
"Suppose we had a world where all freeways were priced, and where we used the revenue to ease pricing’s burden on the poor. Now suppose someone

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Time for Fiscal Rules?

24 days ago

Should governments set rules to constrain the size of government borrowing on an annual basis or government debt accumulated over time? Pierre Yared discusses the question in "Rising Government Debt: Causes and Solutions for a Decades-Old Trend," in the Spring 2019 issue of the Journal of Economic Perspectives.There’s really no economic case to be made for the plain-vanilla rule that national governments should balance their budget every year. During a recession, for example, tax revenues will fall as income falls, and government spending on  programs like unemployment insurance, Medicaid, and food stamps will rise. If in the face of these forces the government wanted to keep a balanced budget during a recession, it would thus need to find ways to raise its tax revenues and cut other

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Origins of “Microeconomics” and “Macroeconomics”

25 days ago

Economists have written about topics that we would now classify under the headings of "microeocnomics" or "macroeconomics" for centuries. But the terms themselves are much more recent, emerging only in the early 1940s. For background, I turn to the entry on "Microeconomics" by Hal R. Varian published in The New Palgrave: A Dictionary of Economics, dating back to the first edition in 1987.The use of "micro-" and "macro-" seems to date back to the work of Ragnar Frisch in 1933, but he referred to micro-dynamics and macro-dynamics. As Varian writes:
Frisch used the words ‘micro-dynamic’ and ‘macro-dynamic’, albeit in a way closely related to the current usage of the terms ‘microeconomic’ and ‘macroeconomic’: 

"The micro-dynamic analysis is an analysis by which we try to explain in some

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Strengthening Automatic Stabilizers

26 days ago

For economists, "automatic stabilizers" refers to how tax and spending policies adjust without any additional legislative policy or change during economic upturns and downturns–and do so in a way that tends to stabilize the economy. For example, in an economic downturn, a standard macroeconomic prescription is to stimulate the economy with lower taxes and higher spending. But in an economic downturn, taxes fall to some extent automatically, as a result of lower incomes. Government spending rises to some extent automatically, as a result of more people becoming eligible for unemployment insurance, Medicaid, food stamps, and so on. Thus, even before the government undertakes additional discretionary stimulus legislation, the automatic stabilizers are kicking in.Might it be possible to

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Daniel Hamermesh: How Do People Spend Time?

27 days ago

For economists, the idea of "spending" time isn’t a metaphor. You can spend any resource, not just money. Among all the inequalities in our world, it remains true that every person is allocated precisely the same 24 hours in each day. In "Escaping the Rat Race: Why We Are Always Running Out of Time," the [email protected] website interviews Daniel Hamermesh, focusing on themes from his just-published book Spending Time: The Most Valuable Resource.The introductory material at the start quotes William Penn, who apparently once said, “Time is what we want most, but what we use worst.” Here are some comments from Hamermesh:Time for the Rich, Time for the Poor

The rich, of course, work more than the others. They should. There’s a bigger incentive to work more. But even if they don’t work,

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Time for a Return of Large Corporation Research Labs?

May 17, 2019

It often takes a number of intermediate steps to move from a scientific discovery to a consumer product. A few decades ago, many larger and even mid-sized corporations spent a lot of money on research and development laboratories, which focused on all of these steps. Some of these corporate laboratories like those at AT&T, Du Pont, IBM, and Xerox were nationally and globally famous. But the R&D ecosystem has shifted, and firms are now much more likely to rely on outside research done by universities or small start-up firms. These issues are discussed in "The changing structure of American innovation: Cautionary remarks for economic growth," by Ashish Arora, Sharon Belenzon,  Andrea Patacconi, and Jungkyu Suh, presented at conference on  "Innovation Policy and the Economy 2019," held on on

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Does the Federal Reserve Talk Too Much?

May 16, 2019

For a long time, the Federal Reserve (and other central banks) carried out monetary policy with little or no explanation. The idea was that the market would figure it out. But in the last few decades, there has been an explosions of communication and transparency from the Fed (and other central banks), consisting both of official statements and an array of public speeches and articles by central bank officials. On one side, a greater awareness has grown up that economic activity isn’t just influenced by what the central bank did in the past, but on what it is expected to do in the future. But does the this "open mouth" approach clarify and strengthening monetary policy, or just muddle it?Kevin L. Kliesen, Brian Levine, and Christopher J. Waller present some evidence on the changes in Fed

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Alice Rivlin, 1931-2019, In Her Own Words

May 15, 2019

Alice Rivlin, who died yesterday, was a legend in the Washington policy community. In "Alice Rivlin: A career spent making better public policy," Fred Dewes interviewed Rivlin for the Brookings Cafeteria Podcast on March 8, 2019. If you would like some additional detail about Rivlin’s career, there’s a shorter interview from 1998 by Hali J. Edison, originally published in the newsletter of the Committee on the Status of Women in the Economics Profession (although a more readable reprint of the interview is here). A 1997 interview David Levy of the Minneapolis Fed is here. If you want more Rivlin, here’s an hour-long podcast she did with Ezra Klein, Alice Rivlin, queen of Washington’s budget wonks," from May 2016.

Rivlin was an economics major at Bryn Mawr College. From the Edison

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Are Firms Doing a Lousy Job in How they Hire?

May 14, 2019

In a lot of economic models, firms decide to hire based on whether they need more workers to meet the demand for their products; in the lingo, labor is a "derived demand," derived from the desired level of output. Beyond that, economic models often don’t pay much attention to the details of how hiring happens, assuming that profit-maximizing firms will figure out relatively cost-effective ways of gathering and keeping the skills and workers they need. But what if that hypothesis is wrong?Peter Cappelli thinks so, and writes "Your Approach to Hiring Is All Wrong" in the May-June 2019 issue of the Harvard Business Review.  He writes:
Only about a third of U.S. companies report that they monitor whether their hiring practices lead to good employees; few of them do so carefully, and only a

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The Origin of “Third World” and Some Ruminations

May 13, 2019

Back in the late 1970s when I was first reading about the world economy in any serious way, it was still common to describe the world as divided into "first world" market-driven high income economies, "second world" command-and-control economies, and "third world" low-income countries. Jonathan Woetzel offers a commentary on the sources of that nomenclature, and how outdated it has come to sound, in "From Third World To First In Class: Rapid economic growth is blurring the distinctions among developing, emerging and advanced countries," appearing in the most recent Milken Institute Review (Second Quarter 2019, pp. 22-33).  Woetzel writes:
When historians in the distant future look back at our era, the name Alfred Sauvy may appear in a footnote somewhere. Sauvy was a French demographer who

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How To Cut US Child Poverty in Half

May 10, 2019

Back in the 1960s, the poverty rate for those over-65 was about 10 percentage points higher than the poverty rate for children under 18. For example, in 1970 the over-65 poverty rate was about 25%, while the under-18 poverty rate was 15%. But government support for the elderly rose substantially, and  in the 1970s, the over-65 poverty rate dropped below the under-18 rate. For the last few decades, the under-18 poverty rate has been 7-9 percentage points higher than the over-65 poverty rate. In 2017, for example, the under-18 poverty rate was 17.5%, while the over-65 poverty rate was 9.2%.   (For the numbers, see Figure 6 in this US Census report from last fall.)Poverty is always distressing, but poverty for children has the added element that it shapes the lives of future citizens,

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Low-Skill Male Workers: A Black Spot on the Rosy Employment Outlook

May 9, 2019

The monthly unemployment rate in April fell to 3.6%, the lowest monthly rate since December 1969. It’s now been a 4.0% or less for more than a year. But in this generally quite positive employment environment, low-skill male workers have been an ongoing sore spot. The issues are discussed in a three-paper symposium in the Spring 2019 issue of the Journal of Economic Perspectives:"The Declining Labor Market Prospects of Less-Educated Men," by Ariel J. Binder and John Bound
"When Labor’s Lost: Health, Family Life, Incarceration, and Education in a Time of Declining Economic Opportunity for Low-Skilled Men," by Courtney C. Coile and Mark G. Duggan
"The Tenuous Attachments of Working-Class Men," by Kathryn Edin, Timothy Nelson, Andrew Cherlin and Robert Francis

Binder and Bound set the

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Snapshots of US Income Taxation Over Time

May 8, 2019

As Americans recover from our annual April 15 deadline for filing income taxes, here are a series of figures about longer-term patterns of taxes in the US economy. They are drawn from a series of blog posts by the Tax Foundation over the last few months.  The Tax Foundation is a nonpartisan group whose analysis typically leans toward side that taxes on those with high incomes are already high enough. However, the figures that follow are compiled from fairly standard data sources: IRS data, the Congressional Budget Office, and the like.For example, here’s a figure showing what taxes are the main sources of federal income over time from Erica York. She writes: "Before 1941, excise taxes, such as gas and tobacco taxes, were the largest source of revenue for the federal government, comprising

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The High Costs of Renewable Portfolio Standards

May 7, 2019

A "renewable portfolio standard" is a rule that a certain percentage of electricity generation needs to come from renewable sources.  Such rule have been spreading in popularity. But Michael Greenstone and Ishan Nath argue in "Do Renewable Portfolio Standards Deliver?" that they are an overly costly way of reducing carbon emissions (Becker Friedman Institute, University of Chicago, April 21, 2019). As they explain in the Research Summary (a full working paper is also available at the link):
"29 states and the District of Columbia have been successful in passing Renewable Portfolio Standards (RPS), which require that a percentage of the electricity generation come from renewable sources. These programs currently cover 64 percent of the electricity sold in the United States. 2. Until now,

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Is Something Different this Time about the Effect of Technology on Labor Markets?

May 6, 2019

There’s a well-worn conversation about the relationship between new technology and possible job displacement which goes something like this:Concerned person: "New developments in information technology and artificial intelligence are going to threaten lots of jobs."Skeptical person: "Economies in developed countries have been experiencing extraordinary developments and shifts in new technology for literally a couple of centuries. But as old jobs have been dislocated, new jobs have been created."Concerned person: "This time seems different."Skeptical person: "Every time is different in the specific details. But there’s certainly no downward pattern in the number of jobs in the last two centuries, or the last few decades."Concerned person: "Still, the way in which information technology and

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How Single Payer Requires Many Choices

May 4, 2019

I sometimes hear "single payer" spoken as if it was a complete description of a plan for revising the US health care system. But "single payer" actually involves a lot of choices. The Congressional Budget Office walks through the options in their report "Key Design Components and Considerations for Establishing a Single-Payer Health Care System" (May 2019).As a preview of some of these issues, its worth noting that a some prominent countries with universal health coverage and reasonably good cost control (at least by US standards!) use regulated multipayer systems, like Germany, Switzerland and Netherlands. For those who like the sound of "Medicare for All," it’s worth remembering that a certain number of analysts don’t consider Medicare to be a single-payer system, because of the large

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Spring 2019 Journal of Economic Perspectives Available Online

May 3, 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 Spring 2019 issue, which in the Taylor household is known as issue #128. Below that are abstracts and direct links for all of the papers. I may blog more specifically about some of the papers in the next week or two, as well.

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Symposium on Automation and Employment

"Automation and New

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