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Timothy Taylor

Articles by Timothy Taylor

Putting Monetary Values on Health Costs of Coronavirus

14 hours ago

W. Kip Viscusi delivered the Presidential Address at the (virtual) Southern Economic Association meetings last November on the subject "Economic Lessons for Coronavirus Risk Policies." The paper is forthcoming in the Southern Economic Journal; for now, it’s available at the SSRN website a Vanderbilt University Law School Working Paper (Number 21-04, January 21, 2021). Viscusi is known for, as he says early in the paper, attempting to "strike a meaningful balance between risk and costs," even though "[e]conomic analyses in these domains are sometimes challenging and necessarily involve treading on controversial terrain. Thus, his analysis starts with standard estimates for the "value of a statistical life" of $11 million. The idea of a VSL is discussed here and here.  But the key point to

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The Coming Evolution of Electric Power in the US

2 days ago

Even readers who are only experiencing the Texas electricity disruptions from afar may wish to consider a new report from an expert panel at the National Academy of Sciences, The Future of Electric Power in the United States (2021, prepublication copy downloadable for free).  Here’s a summary of a few of the main economic  and technological changes facing the US electricity industry. 1) A Potentially Large Increase in Demand for Electricity In the last couple of decades, per capita demand for electricity has been fairly flat in the US, while per capita demand for energy has actually declined. This is in part because of greater energy efficiency, and also in part because the US economy has been shifting to service-oriented production that is uses less energy for each dollar of output

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India: Pivoting from the Pandemic to Economic Reforms

6 days ago

Each year, the Economic Division in India’s Ministry of Finance publishes the Economic Survey of India (January 2021). The first volume is a set of chapters on different topics: the second volume is a point-by-point overview of the last year’s developments, in fiscal, monetary, and trade policy, along with developments in main sectors like agriculture, industry, and services. Here, I’ll cherry-pick some points that caught my eye in looking over the first volume. Of course, any discussion of a country’s economy 2020 will start with the pandemic. All statements about what "worked" or "didn’t work" during 2020 are of course subject to revision as events evolve. As a country with many low-income people living in high-density cities, and high absolute numbers of elderly people, India was

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Robert J. Gordon: Thoughts on Long-Run US Productivity Growth

7 days ago

Leo Feler has a half-hour interview with Robert J. Gordon on "The Rise and Fall and Rise Again of American Growth"  (UCLA Anderson Forecast Direct, February 2021, audio and transcript available). The back-story here is that Gordon has been making the argument for some years now that modern economic interventions, like the rise of information technologies and the internet, have not had and will not have nearly the same size effect on productivity as some of the major technologies of the past like the spread of electricity or motor vehicles (for some background, see here and here). Here, Gordon makes a distinction worth considering between growth in productivity and growth in consumer welfare.Let’s divide the computer age into two parts. One is the part that developed during the 1970s and

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Including Illegal Activities in GDP: Drugs, Prostitution, Gambling

8 days ago

The current international standards for how a country should compute its GDP suggest that illegal activities should be included. Just how to do this, given the obvious problems in collecting statistics on illegal activity, isn’t clear. The US Bureau of Economic Analysis does not include estimates of illegal activities in GDP. However, there is ongoing research on the subject, described by Rachel Soloveichik in "Including Illegal Market Activity in the U.S. National Economic Accounts" (Survey of Current Business, February 2021).It’s perhaps worth noting up front that crime itself is not included in GDP. If someone steals from me, there is an involuntary and illegal redistribution, but GDP measures what is produced. Both public and private expenditures related to discouraging or punishing

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The Dependence of US Higher Education on International Students

9 days ago

US higher education in recent decades had beeome ever-more dependent on rising inflows of international students–a pattern that was already in likely to slow down and now is being dramatically interrupted by the pandemic. John Bound, Breno Braga, Gaurav Khanna, and Sarah Turner describe these shifts in "The Globalization of Postsecondary Education: The Role of International Students in the US Higher Education System" (Journal of Economic Perspectives, Winter 2021, 35:1, 163-84). They write: For the United States, which has a large number of colleges and universities and a disproportionate share of the most highly ranked colleges and universities in the world, total enrollment of foreign students more than tripled between 1980 and 2017, from 305,000 to over one million students in 2017

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The Minimum Wage Controversy

11 days ago

Why has the economic research of the last few decades had a hard time getting a firm handle on the the effects of minimum wages? The most recent issue of the Journal of Economic Perspectives (where I have worked as managing editor for many years) includes a set of four papers that bear on the subject.  The short answer is that the effects of a higher minimum wage are likely to vary by time and place, and are likely to include many effects other than reduced employment. In this post, I’ll offer a longer elaboration. For reference, the four JEP papers are:"The Elusive Employment Effect of the Minimum Wage," by Alan Manning "City Limits: What Do Local-Area Minimum Wages Do?" by Arindrajit Dube and Attila Lindner"How Do Firms Respond to Minimum Wage Increases? Understanding the Relevance of

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Rural Poverty

13 days ago

Rural poverty is often overlooked. In the Spring 2021 issue of the Stanford Social Innovation Review,  Robert Atkins, Sarah Allred and Daniel Hart discuss "Philanthropy’s Rural Blind Spot," about how philanthropies have typically put much more time and attention on urban poverty than rural poverty. They write: Most large foundations are located in metropolitan areas and have built relationships with institutions and organizations in those communities. … [M]any grant makers assume that urban centers have higher rates of poverty than rural areas. Moreover, many funders believe that they maximize impact and do more good when their grants go to addressing distress in densely populated areas. The rates of poverty, however, are higher in rural areas than in urban areas. In addition, it would

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Robert Shiller on Narrative Economics

14 days ago

Robert J. Shiller (Nobel ’13) delivered the Godley-Tobin Lectures, an annual lecture delivered at the Eastern Economic Association meetings, on the subject of “Animal spirits and viral popular narratives” (Review of Keynesian Economics, January 2021, 9:1, pp. 1-10).Shiller has been thinking about the intertwining of economics and narrative at least since his presidential address to the American Economic Association back in 2017. He suggests, for example, that the key feature distinguishing humans may be our propensity to organize our thinking into stories, rather than just intelligence per se. Indeed, there are many examples in all walks of life (politics, investing, expectations of family life, careers, reactions to a pandemic) where people will often cleave to their preferred

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The Allure and Curse of Mini-Assignments

15 days ago

During the online courses, it seems that many teachers and students have the feeling that they are working harder and accomplishing less. In its own way, this feeling is a tribute to the virtues of in-person education. Betsy Barre offers some hypotheses as to why higher education has a feeling of getting less output from more input in "The Workforce Dilemma" (January 22, 2021, Center for Teaching and Learning, Wake Forest University). I recommend the short essay as a whole. But the part that resonated most with me had to do discussed how attempts by teachers to use online tools as a way of encouraging and monitoring short-term academic progress can end up making everyone feel crazy. Barre writes:  The most interesting of all six hypotheses, and the one I’ve thought the most about, is that

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Interview with Seema Jayachandran: Women and Development, Deforestation, and Other Topics

16 days ago

Douglas Clement and Anjali Nair have collaborated to produce a "Seema Jayachandran interview: On deforestation, corruption, and the roots of gender inequality" (Federal Reserve Bank of Minneapolis, February 12, 2021). Here are a couple of samples: The U-shaped relationship between economic development and women’s labor force participationThere’s a famous U-shaped relationship in the data between economic development and female labor force participation. … Historically, in richer countries, you’ve seen this U-shape where, initially, there are a lot of women working when most jobs are on the family farm. Then as jobs move to factories, women draw out of the labor force. … But then there’s an uptick where women start to enter the labor market more and not just enter the labor market, but

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The Coin Shortage: Velocity Stories

17 days ago

In high school "velocity" referred to distance travelled divide by time. In economics, "velocity" refers to the speed with which money circulates. The formula is V= GDP/M: that is, take the size of the GDP for a year and take a measure of the money supply. Then velocity will tell you how many times that money circulated through the economy in a given year. During the pandemic, the velocity of money has slowed way down. One manifestation is the shortage of coins at many retailers. Tim Sablik tells the story in "The COVID-19 pandemic disrupted the supply of many items, including cold hard cash" (Econ Focus: Federal Reserve Bank of Richmond, Fourth Quarter 2020, pp. 26-29). One signal came from the coin laundries. Sablik writes: "I started getting a few phone calls from members asking, ‘Is

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What Gets Counted When Measuring US Tax Progressivity

18 days ago

The "progressivity"  of a tax refers to whether those with higher incomes pay a higher share of income in taxes than those with lower incomes. The federal income tax is progressive in this sense. However, other federal taxes like the payroll taxes that support Social Security are regressive, rather than progressive, because it applies only to income up to a limit (set at $142,800 in 2021). The justification is that Social Security taxes combine both a degree of redistribution but also a sense of contributing to one’s own future Social Security benefits. But to take it one step further, one justification for the Earned Income Tax Credit for lower-earning families and individuals serves in part to offset the Social Security payroll taxes paid by this group. So with all this taken into

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Judges and Ideology

20 days ago

When judges are going through confirmation hearings, they tend make comments about how they will act as a neutral umpire, not taking sides and following the law. As one representative example, here’s a comment from the statement of current US Supreme Court Chief Justice John Roberts when he was nominated back in 2005:I have no agenda, but I do have a commitment. If I am confirmed, I will confront every case with an open mind. I will fully and fairly analyze the legal arguments that are presented. I will be open to the considered views of my colleagues on the bench, and I will decide every case based on the record, according to the rule of law, without fear or favor, to the best of my ability, and I will remember that it’s my job to call balls and strikes, and not to pitch or bat.I will

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How to Regulate a Railroad

21 days ago

The economics of railroads poses some problems for economists. What combination of competition and regulation will keep prices low but also encourage ongoing investment in track and rolling stock? Russell Pittman provides an overview of these issues and the various regulatory responses that have been tried to address the dangers of monopolistic pricing on one side and of competition leading to repeated bankruptcies on the other side in "On the Economics of Restructuring World
Railways, with a Focus on Russia" (January 2021, US Department of Justice, Economic Analysis Group Working Paper 21-1). A version of this paper is also published in Man and the Economy (December 2020, 7:2, subscription required). The paper was originally delivered as a lecture at the Higher School of Economics in

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Some Evidence on Those Who Hold Multiple Jobs

26 days ago

There’s an old grim joke about those who hold multiple jobsComment:  "Hey, did you hear the US economy created 100,000 new jobs last month?" Response: "Yeah, I’m doing three of them."Holding multiple jobs isn’t always a bad thing: for example, a number of doctors technically have have one job at a private practice and another when they work at a hospital. But in the past, it has been hard to find detailed or consistent evidence on multiple job-holders.  For example, household survey data often asks about one’s main job, not about all jobs. Keith A. Bailey and James R. Spletzer of the US Census Bureau Have cracked this problem by finding a way to use data from  the  Longitudinal Employer-Household Dynamics (LEHD). The Census Bureau has published a readable short overview of their work in

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Winter 2021 Journal of Economic Perspectives Available Online

27 days ago

I am now in my 35th year as Managing Editor of the Journal of Economic Perspectives. The JEP is published by the American Economic Association, which decided about a decade ago–to my delight–that the journal would be freely available on-line, from the current issue all the way back to the first issue. You can download individual articles or the entire issue, and it is available in various e-reader formats, too. Here, I’ll start with the Table of Contents for the just-released Winter 2021 issue, which in the Taylor household is known as issue #135. 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 the Minimum Wage"The Elusive Employment Effect of

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Why High-Income Economies Need to Fight COVID Everywhere

29 days ago

High-income countries are pushing and squabbling as they seek to vaccinate their own populations from COVID-19, while many lower-income countries have been pushed to the sidelines and forced to watch. But it’s not clear yet clear (because not enough time has passed) to know for how long the vaccine provides protection, or for that matter, how long having had COVID provides protection against getting it again. Moreover, there is clearly some danger that at least some of the new strains of COVID emerging around the world might need different vaccines. In short, vaccinating the populations of high-income countries is a useful step. But if COVID remains prevalent and mutating into new strains in the rest of the world, we may be running on a treadmill from a public health point of view.

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Why Have Other High-Income Countries Dropped Wealth Taxes?

February 1, 2021

Advocates of a wealth tax for the United States need to confront a basic question: Why have  other high-income countries decided to drop their own wealth taxes? Sarah Perret explores this issue in "Why did other wealth taxes fail and is this time different? (Wealth and Policy Commission, Working Paper #6, 2020). Perret writes;  In 1990, there
were twelve OECD countries, all in Europe, that levied individual net wealth taxes. However,
most of them repealed their wealth taxes in the 1990s and 2000s, including Austria (in 1994),
Denmark and Germany (in 1997), the Netherlands (in 20012
), Finland, Iceland, and Luxembourg
(in 2006) and Sweden (in 2007). Iceland, which had abolished its wealth tax in 2006, reintroduced it as a temporary ‘emergency’ measure between 2010 and 2014. Spain, which

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Interview with Benjamin Friedman on Religion, Economic Growth, and Much Else

January 28, 2021

Tyler Cowen has one of his "Conversations" with "Benjamin Friedman on the Origins of Economic Belief" (January 27, 2021, audio, video, and transcript at the link). It starts from Friedman’s recent book, Religion and the Rise of Capitalism, but then expands to touch on many other topics.  Here are some snippets: On American belief in religion and markets[C]ompared to other high-income countries, Americans are more inclined to say they believe in religious doctrines, and the Americans are much more likely to participate in religious activities — going to church, for example.I think this is not at all unrelated to the fact that Americans have a deeper and more active commitment to the ideas of market competition. It goes back to the question that I was raising a minute ago of where do our

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The Importance of Unimportant Inventions

January 27, 2021

Here’s a paradox: If your firm produces a good or service that is a large part of the overall value of a final product, you may have a hard time keeping your price high or raising it. After all, precisely because you are a large part of total costs, any attempt to raise the price will be noticeable when passed on to customers, and those using your product have a strong incentive to take a tough line when negotiating terms. On the other side, if your firm produces a good or service that is necessary to a final product, but only a small share of total costs, you may be much more successful in keeping your price high or raising it further. When the price of your input climbs, it makes a relatively small difference to total costs. Aggressive competition from others to supplant your market

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Could Environmentalists Just Buy What They Want?

January 22, 2021

Under a "marketable permits" approach to controlling pollution, firms have permits to emit a certain amount of pollution. If a firm has extra permits, it can sell them; if it needs additional permits, it can buy them. The idea is that firms that have lower-cost methods of reducing pollution now have an incentive to do so, because they can sell the permits. But here’s a question that’s obvious to economists: Could an environmental group purchase a bunch of these pollution permits and not use them or sell them, just for the purposes of reducing pollution? Similarly, what if government auctioned off a bunch of oil leases. Could an environmentalist group purchase them, and not drill? Or what if government auctions off leases for grazing cattle or cutting timber on federal lands. Could an

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The Reproducibility Challenge with Economic Data

January 22, 2021

One basic standard of economic research is surely that someone else should be able to reproduce what you have done. They don’t have to agree with what you’ve done. They may think your data is terrible and your methodology is worse. But as a minimal standard, they should be able to reproduce your result, so that the follow-up research can then be in a position to think about what might have been done differently or better.  This standard may seem obvious, but during the last 30 years or so, the methods for reproducibility have been transformed. Lars Vilhuber describes the shift in "Reproducibility and Replicability in Economics" in the Harvard Data Science Review (Fall 2020 issue, published December 21, 2020). Vilhuber is the Data Editor for the journals published by the American Economic

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Interview with Valerie Ramey: Fiscal Policy, Time Use, and More

January 20, 2021

David A. Price serves as interlocutor in an "Interview with Valerie Ramey On fiscal stimulus, technological lull, and the rug-rat race" (Econ Focus: Federal Reserve Bank of Richmond, Fall 2020, pp. 20-24). Here are a couple of excepts: On looking at news records to measure historical effects of fiscal stimulusI started looking at news records when I realized that changes in government spending are often announced at least several quarters before the government spending actually occurs. That’s really important, because the empirical techniques that researchers were using previously to measure the effect of government spending implicitly assumed that any change in government spending was essentially unanticipated. But our models tell us that individuals and firms are forward-looking and

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How Cities Stopped Being Ladders of Opportunity

January 19, 2021

One of the archetypal stories of the American experience involves the person who moves from a rural area or a smaller metro area to a big city, and after starting off in a humble role and having some ups and downs, becomes a big success. But the role of cities as ladders of opportunity have changed dramatically in the last few decades. David Autor tells the story in "The Faltering Escalator of Urban Opportunity" (appearing as a chapter in Securing Our Economic Future, edited by Melissa S. Kearney and Amy Ganz, and published by the Aspen Institute Economic Strategy Group late last year). Autor begins: For much of modern U.S. history, workers were drawn to cities by opportunities for the more enriching work offered there and the higher pay that came with it. As the eminent urban economist

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The Broken Promises of the Freedman’s Savings Bank: 1865-1874

January 18, 2021

The Freedman’s Savings Bank lasted from 1865 to 1874. It was founded by the US government to provide financial services to former slaves: in particular, there was concern that if black veterans of the Union army did not have bank accounts, they would not be able to receive their pay. In terms of setting up branches and receiving deposits, the bank was a considerable success. However, the management of the bank ranged from uninvolved to corrupt, and together with the Panic of 1873, the combination proved lethal for the bank, and tens of thousands of depositors lost most of their money. Luke C.D. Stein and Constantine Yannelis offer some recent research on lessons the grim experience in "Financial Inclusion, Human Capital, and Wealth Accumulation: Evidence from the Freedman’s Savings Bank"

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More on the Origins of “Pushing on a String”

January 16, 2021

Tie a string to an object. When you pull on a string, the object on the other end comes toward you. But when you push on a string, the object at the other end of the string is unaffected, because the string just crumples up. For economists, "pushing on a string" refers to the idea that monetary policy may (in certain circumstances) be more effective at reducing inflation even at the cost of a recession than it is at stimulating an economy. Back in 2015, I posted about an early use of the "pushing on a string" metaphor during Congressional hearings in March 1935. However, Samuel Demeulemeester has recently written to me with several example from the same time frame, but slightly earlier. Jeff Busby was at the time a Congressman from Mississippi. Willford King was a professor of economics

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An Interview with John Roemer on Inequality of Opportunity

January 14, 2021

The editors of the Erasmus Journal for Philosophy and Economics, Akshath Jitendranath and Marina Uzunova, have prepared "What Egalitarianism Requires: An Interview with John Roemer" (Winter 2020, 13: 2, pp. 127–176).  As they note in the introduction: "Roemer’s work spans the domains of economics, philosophy, and political science, and, most often, applies the tools of general equilibrium and game theory to problems of political economy and distributive justice—problems often stemming from the discussions among political philosophers in the second half of the twentieth century."A substantial chunk of the interview covers Roemer’s background; how his professor parents left the US to work work in Switzerland and Canada for several years in the early 1950s after the State Department found

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Facing the Long-Term Problem of Low Interest Rates

January 11, 2021

Interest rates have been declining for several decades, both in the US economy and around the world. Why has this happened, what problems is it causing, and what monetary and fiscal policy responses might be appropriate? Elga Bartsch, Agnès Bénassy-Quéré, Giancarlo Corsetti and Xavier Debrun tackle many of these issues in "It’s All in the Mix: How Monetary and Fiscal Policies Can Work or Fail Together" (December 2020, Geneva Reports on the World Economy 23). As a starting point, here are a few examples of falling interest rates. The first figure shows the interest rate for borrowing money for a 30-year fixed-rate mortgage in the US.This figure shows the "federal funds" interest rate, which is the interest rate targeted by the US Federal Reserve when it conducts monetary policy. As a third

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Some Economics of the Middle Class

January 6, 2021

There are two things that "everyone knows" about the US middle class: it’s shrinking in size and the government isn’t helping. However, when one digs into the data, the evidence for these claims and some implications of that evidence are considerably more nuanced. Here, I draw upon a collection of essays called Securing Our Economic Future, edited by Melissa S. Kearney and Amy Ganz, and published by the Aspen Institute Economic Strategy Group late last year. In h first essay, Bruce Sacerdote asks, "Is the Decline of the Middle Class Greatly Exaggerated?" In the second essay, Adam Looney, Jeff Larrimore, David Splinter look at "Middle-Class Redistribution: Tax and Transfer Policy for Most Americans." For a flavor of Sacerdote’s argument, define the middle class as those with between 75%

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