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Timothy Taylor

Articles by Timothy Taylor

An Overview of Emergency COVID-19 Lending from the Fed

17 hours ago

The Federal Reserve, like central banks everywhere, view providing financial liquidity during a crisis (being the "lender of last resort") as one of their core functions. What has the Fed done so far in the COVID-19 recession?. Tim Sablik offers a crisp overview in "The Fed’s Emergency Lending Evolves" (Econ Focus: Federal Reserve Bank of Richmond, Second/Third Quarter 2020, pp. 14-17).  Here’s a list of the nine main lending programs the Fed has used, and to whom the credit was extended: And here’s a graph showing how much was loaned under these programs as of August 12. The Main Street Lending Program doesn’t appear on this graph because it had loaned $226 million–not enough to show up on a graph measured in tens of billions of dollars. As you can see, total Fed lending spiked very

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Advice on Writing from Ruth Bader Ginsberg

2 days ago

David Post offers some personal reminiscences about Ruth Bader Ginsberg at the Reason website ("RGB, R.I.P," September 18, 2020). As someone who has worked as an editor for a long time, several  pieces of her advice to him about writing resonated with me.  Here’s a paragraph from Post (who got to know Ginsberg while clerking for her): Most of what I know about writing I learned from her. The rules are actually pretty simple: Every word matters. Don’t make the simple complicated, make the complicated as simple as it can be (but not simpler!). You’re not finished when you can’t think of anything more to add to your document; you’re finished when you can’t think of anything more that you can remove from it. She enforced these principles with a combination of a ferocious—almost a

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Every Day is a Bad Day, Say a Rising Share of Americans

4 days ago

The Behavioral Risk Factor Surveillance System (BRFSS) is a standardized phone survey about health-related behaviors, carried out by the Centers for Disease Control and Prevention (CDC). One question asks: “Now thinking about your mental health, whicjh includes stress, depression, and problems with emotions, for how many days during the past 30 days was your mental health not good?” David G. Blanchflower and Andrew J. Oswald focus on this question in "Trends in Extreme Distress in the United States, 1993–2019" (American Journal of Public Health, October 2020, pp. 1538-1544).  I particular, they focus on the share of people who answer that their mental health was not good for all 30 of the previous 30 days, who they categorize as in a condition of "extreme distress." Here are some

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Stock Buybacks: Leverage vs. Managerial Self-Dealing

5 days ago

Consider a company that has been earning profits, and wants to pay or all of those earnings to its shareholders. There are two practical mechanisms for doing so. Traditionally, the best-known approach was for the firm to pay a dividend to shareholders. But in the last few decades, many US firms instead have used stock buybacks. How substantial has this shift been, and what concerns does it raise? Here, I’ll draw upon a couple of recent discussions of stock buybacks. Siro Aramonte writes about "Mind the buybacks, beware of the leverage," in the BIS Quarterly Review (September 2020, pp. 49-59). Kathleen Kahle and René M. Stulz tackle the topic from a different angle in "Why are Corporate Payouts So High in the 2000s? (NBER Working Paper 26958, April 2020, subscription required). Kahle and

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Why Foreign Direct Investment Was Already Sagging

6 days ago

Foreign direct investment (FDI) involves a management component. In other words, it’s not just a financial investment in stocks and bonds ("portfolio investment"), but involves partial or in some cases complete management responsibility. This distinction matters for a couple of reasons. One is that for developing countries in particular, FDI from abroad is a way of gaining local access to management skills, technology, and supply chains that might be quite difficult to do on their own. Another reason is that pure financial investments can come and go, sometimes in waves that bring macroeconomic instability in their wake, but FDI is typically less volatile and more of a commitment. FDI seems certain to plummet in 2020, given that so many global ties have weakened during the pandemic

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Africa is Not Five Countries

7 days ago

Scholars of the continent of Africa sometimes feel moved to expostulate: "Africa is not a country!" In part, they are reacting against a certain habit of speech and writing where someone discusses, say, the United States, China, Germany, and Africa–although only the first three are countries. More broadly, they are offering a reminder that Africa is a vast place, and that generalizations about "Africa" may apply only to some of the 54 countries in Africa. Economic research on "Africa" apparently runs some risk of falling into this trap. Obie Porteous has published a working paper that looks at published economics research on Africa: "Research Deserts and Oases: Evidence from 27 Thousand Economics Journal Articles" (September 8, 2020). Porteus creates a database of all articles related to

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CEO/Worker Pay Ratios: Some Snapshots

8 days ago

Each year, US corporations are required to report the pay for their chief executive officers, and also to report the ratio of CEO pay to the pay of the median worker at the company. Lawrence Mishel and Jori Kandra report the results for 2019 pay in "CEO compensation surged 14% in 2019 to $21.3 million: CEOs now earn 320 times as much as a typical worker" (Economic Policy Institute, August 18, 2020). Back in the 1970s and 1980s, it was common for CEOs to be paid something like 30-60 times the wage of a typical worker. In 2019, the ratio was a multiple of 320. A result of this shift is that while CEOs used to be paid three times as much as the top 0,1% of the income distribution, now they are paid about six times as much. What is driving this higher CEO pay ratio? In an immediate sense, the

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100 Million Traffic Stops: Evidence on Racial Discrimination

11 days ago

A primary challenge in doing research on racial discrimination is that you need to answer the "what if" questions. For example, it’s not enough for research to show that blacks are pulled over by police for traffic stops more often than whites. What if more blacks were driving in a way that caused them to be pulled over more often? A researcher can’t just dismiss that possibility. Instead, you need to find a way to think about the available data in a way that addresses these kinds of  "what if" questions. When it comes to traffic stops, for example, one approach is to look at such stops in the shifting time window between daytime and darkness. For example, compare the rate at which blacks and whites are pulled over for traffic stops in a certain city during a time of year when it’s light

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Misperceptions and Misinformation in Elections Campaigns

13 days ago

It’s an election season, so many people are widely concerned about  how all those other voters are going to be misinformed into voting for the wrong candidate. Brendan Nyhan provides an overview of some research in this area in "Facts and Myths about Misperceptions" (Journal of Economic Perspectives, Summer 2020, 34:3, pp. 220-36). To be clear, Nyhan describes misperceptions as "belief in claims that can be shown to be false (for example, that Osama bin Laden is still alive) or unsupported by convincing and systematic evidence (for example, that vaccines cause autism)." Thus, he isn’t talking about issues of shading or emphasis. Nyhan writes: "Misperceptions present a serious problem, but claims that we live in a `post-truth’ society with widespread consumption of `fake news’ are not

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Shifts in How the Fed Perceives the US Economy

14 days ago

For the first time since 2012, the Federal Reserve  has updated its "Statement on Longer-Run Goals and Monetary Policy Strategy," and has produced a useful "Track Changes" version of the alterations. A set of 12 notes and background papers for these changes is available, too. Perhaps the main substantive change is that the specifies that if inflation has run below its 2% annual target rate for a time, it will then expect inflation to run above that 2% rate for a time. Thus, the Fed’s 2% annual rate of inflation should not be viewed as an upper bound on the inflation it will allow, but rather as a long-run average. I have nothing against this change, but I strongly suspect that it is not a fix for ails the US economy.  Here, I want to focus instead on a different set of changes that have

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What is a “Good Job”?

15 days ago

On the surface, it’s easy to sketch what a "good job" means: having a job in the first place, along with good pay and access to benefits like health insurance. But that quick description is far from adequate, for several interrelated reasons. When most of us think about a "good job," we have more than the paycheck in mind. Jobs can vary a lot in working conditions and predictability of hours. Jobs also vary according to whether the job offers a chance to develop useful skills and a chance for a career path over time. In turn, the extent to which a worker develops skills at a given job will affect whether that worker worker is a replaceable cog who can expect only minimal pay increases over time, or whether the worker will be in a position to get pay raises–or have options to be a leading

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“The Best Thing for Being Sad is To Learn Something”

18 days ago

As another school year gets underway, I feel moved to speak for the pleasure of learning something, and how learning can banish sadness. The point is more than an academic one for social scientists. There’s a body of "happiness" research, which often looks at things like income, changes in income, political/economic events, health and education levels, life events like parenting or patterns like commuting, and then tries to sort out the connections to "happiness," which is often defined by a response to a survey. The implicit message in this research is often that "happiness" is from the ability to consume or from how events (like unemployment or illness) impinge upon us. But sometimes happiness may come not from what we consume or from what happens to us, but from investing in a learning

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When Government Debt Explodes in Size, What Options Do Countries Have?

19 days ago

US government debt is exploding in size. The Congressional Budget Office lays out the patterns in "An Update to the
Budget Outlook:
2020 to 2030" (September 2020). As usual, the baseline CBO estimates are based on currently existing law–for example, they do not take into account additional debt that would be incurred if one more fiscal stimulus bill was to pass before the election. Thus, the CBO estimates are focused on the large short-term spike in spending has already been legislated. Here’s the pattern of total revenues and spending. That sharp spike in spending is being matched by a much larger annual budget deficit. The orange line shows the projection from March 2020; the darker line shows the change. Again, you’ll notice that the CBO forecast is essentially for a short-term blip.

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Have Americans Been Overworking?

20 days ago

There was a time, about 60-70 years ago, when the typical American worker spent several hundred fewer hours on the job each year compared with worked in major European economies. But for the last few decades, American workers now spend several hundred hours more on the job each hear. This shift was not a self-aware political decision.  No prominent US political leader advocated that Americans should work more hours than those in other high-income countries. But it has happened, and the question is what might be done about it. Isabel V. Sawhill and Katherine Guyot  lay out the background and offer some policy ideas in "The Middle Class Time Squeeze" (August 2020, Brookings Institution). Here’s a figure showing historical data on annual hours per worker for the US and four European

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George Orwell: “Vagueness and Sheer Incompetence is the Most Marked Characteristic of Modern English Prose”

21 days ago

Many readers of this blog are surely already familiar with George Orwell’s famous 1946 essay, "Politics and the English Language," where he makes a case that a "mixture of vagueness and sheer incompetence is the most marked characteristic of modern English prose." Orwell is talking primarily about how, when writing on politics and public affairs, there is apparently an enormous temptation to succumb to crappy writing. He notes: [A]n effect can become a cause, reinforcing the original cause and producing the same effect in an intensified form, and so on indefinitely. A man may take to drink because he feels himself to be a failure, and then fail all the more completely because he drinks. It is rather the same thing that is happening to the English language. It becomes ugly and inaccurate

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The Wellspring of Economics: “The Social Enthusiasm which Revolts from the Sordidness of Mean Streets and the Joylessness of Withered Lives “

22 days ago

A.C. Pigou offers not a definition of economics, but rather an account of the source of economics as a field of interest,  near the start of his classic 1920 book, The Economics of Welfare. He writes: It is not wonder, but rather the social enthusiasm which revolts from the sordidness of mean streets and the joylessness of withered lives, that is the beginning of economic science.Here’s the quotation in its fuller orotund context: When a man sets out upon any course of inquiry, the object of his search may be either light or fruit–either knowledge for its own sake or knowledge for the sake of good things to which it leads. … But there will, I think, be general agreement that in the sciences of human society, be their appeal as bearers of light never so high, it is the promise of fruit

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Wearing Face-masks: The Mixed Evidence

24 days ago

What does the actual scientific literature say about wearing a face mask to prevent the spread of COVID-19? It’s less clear than a non-scientist like me might prefer. Indeed, a lot of the discussion seems to be happening in real time in working papers that have not yet been peer-reviewed or published in a journal. Ultimately, the case for wearing face-masks lacks a clear-cut scientific base–but it may still be a good idea. Let’s stroll through some of the studies. Several recent reviews of the existing literature on studies of face masks that use random controlled trial methods do not find a reason to wear a mask. For example, Julii Brainard, Natalia Jones, Iain Lake, Lee Hooper, and Paul R Hunter have published "Facemasks and similar barriers to prevent respiratory illness such as

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Jacob Viner: A Modest Proposal for Some Scholarship in Graduate Training

25 days ago

Academic specialization has its tradeoffs. On one side, extreme specialization and focus helps to develop insights and discoveries that would otherwise be  unlikely to occur. On the other side, it’s possible, as the old saying goes, to know more and more about less and less until you end up knowing everything about nothing. Recognizing this tradeoff isn’t a new insight, but it has rarely been addressed with more grace than by the economist Jacob Viner in a speech entitled "A Modest Proposal for Some Stress on Scholarship in Graduate Training," given at the Graduate Convocation at Brown University on June 3, 1950, and then published a few yeas later in the Quarterly Journal of Speech (February 1954, 40:1, pp. 15-23). Viner’s talk is the source of one of my own favorite comments about

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Hewitt’s 10 Commandments for Academic Writing

26 days ago

Richard M. Hewitt worked as an editor for the Journal of the American Medical Association, among other publications. He wrote a pithy essay about some shortcomings he commonly observed in an essay in the medical literature: "Exposition as Applied to Medicine: A Glance at the Ethics of It" (JAMA, October 2, 1954, 156:5, pp. 477-479). Hewitt wrote: Physicians are under obligation to teach, and teaching is done largely by means of the printed page. When I chose medical editing as my full-time contribution to that educational effort, I entered an occupation that W.  Albert NoyesJr. recently said is a way to lose old friends and to make no new ones. True enough, an editor is paid to find fault. The faultfinding here, however, will be broadly based. First in work on The Journal of

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Milan Kundera: The Primeval Attraction of Circle Dancing

27 days ago

In The Book of Laughter and Forgetting (published in English in 1980), the Czech novelist Milan Kundera wrote about the deep human desire of character in the novel–Madame Raphael–to combine with a group of other people who have unified set of thoughts and statements and actions (from p. 89): 

Circle dancing is magic. It speaks to us through the millennia from the depths of human memory. Madame Raphael had cut the picture out of the magazine and would stare at it and dream. She too longed to dance in a ring. All her life she had looked for a group of people she could hold hands with and dance with in a ring. First she looked for them in the Methodist Church (her father was a religious fanatic), then in the Communist Party, then among the Trotskyites, then in the anti-abortion movement

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The History of the Fish Stick: The Ocean’s Hot Dog

28 days ago

There comes a time in the life of every parent where you are trying to toss together a dinner in the next 20 minutes that you already have in the house, that can stand to serve your small children, and that your small children are willing to eat.   For us, as for many parents, fish sticks were one item in our rotation of possibilities. How were fish sticks invented? As is so often true when looking at any innovation in detail, a mixture of false starts, new technology, marketing, and broader social developments is at play. Paul Josephson tells the tale in "The Ocean’s Hot Dog: The Development of the Fish Stick" (Technology and Culture, January 2008).  The postwar years witnessed a rapid increase in the size of merchant marines in many countries, with these merchant fleets adopting new,

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Free Expression of Professors and Its Prudential Limits

29 days ago

About a century ago, there was a tussle in higher education policy about the freedom of professors to express opinions. Academic tenure was not yet well-established, and so the prospect of professors being fired because they openly disagreed with someone in academic or political power was quite real. In 1915, the "General Report of the Committee on Academic Freedom and Academic Tenure" was presented at the annual meetings of the American Association of University Professors. It was published in the Bulletin of the American Association of University Professors (December 1915, pp. 15-43), and is readily available through the magic of HathiTrust. In my reading, the report sought to strike a balance. It affirmed in strong terms that professors had a right to speak out, conclude what they

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Origins of the Body Mass Index

August 21, 2020

Body Mass Index is commonly used as an indicator of obesity, and thus as a sign that a person might be a risk for various health problems (including worse health effects from contracting COVID-19).  But where did the measure come from? The definition is straightforward. As the Centers for Disease Control notes: "Body Mass Index (BMI) is a person’s weight in kilograms divided by the square of height in meters." For adults (of any age or gender), the usual guideline is that below 18.5 is "underweight" 18.5-24.9 is "normal or healthy weight," 25.0-29.9 is "overweight," and 30 or above is "obese." For an adult is who is 5′ 9" (or 1.8 meters), the range for a normal or healthy weight would be 125-168 pounds (or 57 to 76 kilograms). The original formula dates back to a Belgian statistician

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“Socialism is the Name of Our Desire”

August 20, 2020

Lewis Coser and Irving Howe started a magazine called Dissent back in 1954. They called themselves socialists, but they were also strongly opposed certain others who called themselves socialists, like the the leadership of the Union of Soviet Socialist Republics. Thus, in the second issue they co-authored an essay called "Images of Socialism," subtitled "At so late and unhappy a moment, can one still specify what the vision of socialism means or should mean? Is the idea of utopia itself still a tolerable one?" The essay rewards re-reading, but the opening paragraphs always strike me forcefully. Coser and Howe write:  “God,” said Tolstoy, “is the name of my desire.” This remarkable sentence could haunt one a lifetime, it reverberates in so many directions. Tolstoy may have intended partial

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Thomas Schelling: “A Person Cannot … Draw Up a List of Things That Would Never Occur to Him”

August 19, 2020

Thomas Schelling (Nobel 2005) once wrote: "One thing a person cannot do, no matter how rigorous his analysis or heroic his imagination, is to draw up a list of things that would never occur to him.” It’s a comment that perhaps rings especially true given the events of 2020. Here, I want to explain why I see the comment as a defense of structured economic analysis. These comments comes from Schelling’s essay "The Role of War Games and Exercises," published in the 1987 book Managing Nuclear Operations, edited by Ashton B. Carter, John D. Steinbruner, and Charles A. Zraket (pp. 426-444). Schelling is explaining why,when thinking about questions of strategy, it is useful to play through games that represent actual scenarios, because in playing such games and then talking about them

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Supply and Demand: The Scissors, Banana, and the Parrot

August 18, 2020

The time for introducing a fresh group of students to supply and demand is soon to be upon us. In a spirit of sympathy and support, here us some background on three images used by prominent economists about supply and demand: the scissors, the banana, and the parrot.A common question for students, and a common error for teachers, is to discuss situations of supply and demand as if only one of these forces was relevant at a certain time. But of course, when it comes to considering the effects of a shift in demand on equilibrium price and quantity, the shape of the supply curve is highly relevant, because a shift in demand happens along a supply curve. Similarly, when it comes to considering the effects of a shift in supply on equilibrium price and quantity, the shape of the demand curve is

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Christopher Walton, William Law, and the 296-Page Footnote

August 17, 2020

It has been my tradition at this blog to take a break from current events in late August. Instead, I offer a series of posts about academia, economics, and editing, focusing on comments or themes that caught my eye in the last year. I start with the story of the 296-page footnote, and how its author cried out for an editor. The story of our footnote begins with Christopher Walton (1809-1877), a businessman who made a fortune dealing in silk, jewelry, and goldsmithing, and his fascination with a Church of England priest named William Law (1686-1761). In turn, Law is perhaps best-known today for his 1728 book, A Serious Call to a Devout and Holy Life, and more generally for his arguments that religion should include be fully lived in action and spirit, including a deeply felt and mystical

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Cities as Economic Engines: Is Lower Density in our Future?

August 14, 2020

When studying urban economics, a common starting point is to make the obvious observation that economic activity does not have an even geographic distribution. Instead, it  clusters in metropolitan areas. To put it another way, even with higher real estate costs, higher wages and prices, traffic congestion, pollution, and crime, businesses find it economically worthwhile to locate in urban areas. For such firms, there must be some offsetting productivity benefit. The Summer 2020 issue of the Journal of Economic Perspectives includes a four paper symposium on "Productivity Advantages of Cities." "The Economics of Urban Density," by Gilles Duranton and Diego Puga (pp. 3-26)"How Close Is Close? The Spatial Reach of Agglomeration Economies," by Stuart S. Rosenthal and William C. Strange (pp.

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Sounding an Alarm on Data Mining

August 13, 2020

Back in 2013, someone going under the nom de plume of Economist Hulk wrote on Twitter (all caps, natch): "WHEN FACTS CHANGE, HULK SMASH FACTS UNTIL THEY FIT HIS PRE-CONCEIVED THEORY. HULK CALL THIS ‘ECONOMETRICS’."Gordon Tullock offered an aphorism in a similar spirit, which he attributed to verbal comments from Ronald Coase ("A Comment on Daniel Klein’s "A Plea to Economists Who Favor Liberty,"  Eastern Economic Journal , Spring, 2001, 27: 2, pp. 203- 207). Tullock wrote: "As Ronald Coase says, `if you torture the data long enough it will confess.’"Ronald Coase (Nobel 1991) put the point just a little differently in a 1981 lecture, "How Should Economists Choose?", while attributing a similar point to Thomas Kuhn. Coase wrote (footnotes omitted): In a talk I gave at the University of

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The Rise of the US Social Insurance State

August 11, 2020

One sometimes hears a reference to "the rise of the welfare state," but for the US in the 20th century, the pattern is more accurately described as a "rise of the social insurance state"–which isn’t quite the same thing. Price V. Fishback uses this insight as a stepping-stone in "Social Insurance and Public Assistance in the Twentieth-Century United States," which he delivered as the Presidential Address to the Economic History Association last year, and now has been published in the Journal of Economic History (June 2020,  80:2, pp. 311-350).  Fishback’s argument unfolds in three parts: First, what many people call the rise in the welfare state in the United States might better be described as the “Rise of the Social Insurance State.”  “Rise of the Welfare State” could be seen as a rise

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