Saturday , November 28 2020
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Timothy Taylor



Articles by Timothy Taylor

When Hamilton and Jefferson Agreed! On Fisheries

14 hours ago

As all of us who learn our US history from Broadway musicals know, Thomas Jefferson and Alexander Hamilton disagreed on everything. But in the aftermath the US Revolutionary War, when George Washington had become the first US president, he asked Jefferson and Hamilton to work together in creating a plan to rescue the fisheries off the New England coast, which had suffered greatly during the Revolutionary War. Jefferson and Hamilton agreed on an incentive-based plan–although for distinctively different reasons. The result of their collaboration was February 1791 "Report on the American Fisheries by the Secretary of State," produced by Jefferson but with the assistance of staff loaned to the project by Hamilton. Although I’ve seen this episode mentioned in passing in several place, the

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An Economist Chews Over Thanksgiving

2 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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Thanksgiving Origins

2 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

2 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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What If All Jobs Were Potentially Part-time?

3 days ago

Some jobs in business and law seem to require exceptionally long hours and being perpetually on-call. Indeed, one main reason for the remaining wage gap between college-educated it’s mostly men who end up in these jobs, while professional women are more likely to end up in careers where the work is full-time or part-time, but not extreme overtime (for discussion, see here and here). This pattern raises an obvious question: is it really so impossible to divide up these extreme overtime jobs into more than one job, like two part-time or even two full-time (but only full-time) jobs?  Zurich Insurance UK gave it a try: specifically, the company shifted to a policy in which all jobs in the firm, right up to the top of the C-suite, were advertised within the firm as potentially part-time. The

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Where Does Increased Revenue from Men’s College Football and Basketball Go?

3 days ago

College sports can be readily divided into two groups: in one group, sports are an extracurricular activity mainly subsidized by the institution; in the other group, the big-revenue sports of football and men’s basketball generate large and revenues far beyond the existing costs of those programs–which is money that can be spent in other ways. Craig Garthwaite, Jordan Keener, Matthew J. Notowidigdo and Nicole F. Ozminkowski examine these issues in "Who Profits From Amateurism? Rent-Sharing in Modern College Sports" (NBER Working Paper #27734, October 2020, subscription required, but a readable summary is here). Here’s a way of dividing up the college sports landscape. Each point represents one of the 229 colleges and universities categorized as "Division I" for athletics purposes.  The

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Futures and Options for Farmers, But Why Not for Homeowners?

5 days ago

One of the difficulties in explaining about futures and options is that they can seem detached from reality–just games that rich people play with money. However, the farm sector offers some extremely practical examples of how these tools are used. Daniel Prager, Christopher Burns, Sarah Tulman, and James MacDonald explain in "Farm Use of Futures, Options,
and Marketing Contracts" (US Department of Agriculture, Economic
Information
Bulletin
Number 219, October 2020). I’ll walk through a few of their examples, but of course most of us aren’t farmers. Thus, I’ll raise a question of greater relevance to many of us: Why can’t homeowners (and banks and mortgage-lenders) use futures and options to hedge against the risk of large shifts in housing prices, like what occurred in the lead-up to the

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Are Editors Just Failed Writers?

8 days ago

Robert Giroux was the editor for T.S. Eliot for many years. In "A Personal Memoir" (Sewanee Review, Winter 1966, 74:1, pp. 331-338, available via JSTOR),  Giroux tells anecdotes about knowing Eliot indeed, for Eliot buffs, the entire issue is devoted to people talking about their interactions with Eliot. But as someone who has worked as editor of the Journal of Economic Perspectives for many years, the story that caught my eye was Eliot’s response to the question of whether editors are just failed writers. Here’s Giroux: I first met T. S. Eliot in 1946, when I was an editor at Harcourt, Brace under Frank Morley. I was just past thirty, and Eliot was in his late fifties. As I remember it he had come into the office to have lunch with Morley, who had been his close editorial colleague at

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Jane Haldimand Marcet and the “Conversations on Political Economy”

9 days ago

Jane Haldimand Marcet (1769-1858) was one of the most prominent and successful popularizers of science writing of her time, with books on chemistry, natural philosophy, botany, and other topics that often went through many editions.  Her 1806 book on chemistry is commonly credited with being the first chemistry textbook, and was famously praised by Michael Faraday for introducing him to the topic. Marcet also wrote the 1816 book "Conversations on Political Economy; in which the elements of that science are familiarly explained." The work was a substantial commercial success, but rather than have a woman’s name listed as the author, it was published as being written "By the author of Conversations on Chemistry." For those who would like to know more about Marcet’s life and work, Evelyn L.

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The Super-rich and How to Tax Them

10 days ago

How might one define the super-rich and how might the government tax them? Florian Scheuer tackles these questions in "Taxing the
superrich: Challenges of a
fair tax system" (UBS Center Public Paper #9, November 2020). Also available at the the website is a one-hour video webinar by Scheuer on the subject. Those who want a more detailed technical overview  might turn to the article by Scheuer and Joel Slemrod, Taxation and the Superrich," in the 2020 Annual Review of Economics (vol. 12, pp. 189-211, subscription required).When discussing the superrich in a US context, there are two common starting points. One is to focus on the Forbes 400, an annual list of the 400 wealthiest Americans.  Another is to focus on the very top of the income distribution–that is, not just the top 1%. but the

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Public-Private Partnerships: The Importance of Contract Design

12 days ago

Most transportation infrastructure in most countries is funded by government. But in a public-private partnership, a private company puts up at least some the money to build the project in exchange for being able to earn a return from that project in the future–typically through some combination of tolls or other charges to those using the infrastructure. For cash-strapped governments, a public-private partnership can sound enticing.  Reduced need for public spending up front! Those who pay in the future will be users of the system after it is built! But unsurprisingly, whether a PPP is a good deal for the public turns out to depend on the details of the contractual arrangement. Eduardo Engel, Ronald Fischer, and Alexander Galetovic provide a readable overview of what we know in in

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Extraordinary Spending in the 2020 Campaign

15 days ago

When you want information about campaign spending, the place to turn is the Open Secrets website run by the Center for Responsive Politics. It will take a few weeks longer to get a final tally on campaign spending for the 2020 elections, but some patterns are already pretty clear, as they point out in "2020 election to cost $14 billion, blowing away spending records" (October 28, 2020). They write: The 2020 election is more than twice as expensive as the runner up, the 2016 election. In fact, this year’s election will see more spending than the previous two presidential election cycles combined. The massive numbers are headlined by unprecedented spending in the presidential contest, which is expected to see $6.6 billion in total spending alone. That’s up from around $2.4 billion in the

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The Work/Family Balance for College-Graduate Women: From a Century Ago to the COVID Era

16 days ago

Claudia Goldin delivered the 2020 Martin Feldstein Lecture at the National Bureau of Economic Research on the topic "Journey across a Century of Women" (NBER Reporter, October 2020).  Much of her talk is focused on the changing work/family balance for college graduate women over time.Five distinct groups of women can be discerned across the past 120 years, according to their changing aspirations and achievements. Group One graduated from college between 1900 and 1919 and achieved “Career or Family.” Group Two was a transition generation between Group One, which had few children, and Group Three, which had many. It achieved “Job then Family.” Group Three, the subject of Betty Friedan’s The Feminine Mystique, graduated from college between 1946 and 1965 and achieved “Family then Job.” Group

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Some Economics of Collectibles

17 days ago

Collectibles is the broad name given to ownership of goods including fine art, antiques, watches and jewelry, wines classic cars, luxury handbags, and even musical instruments. Credit Suisse gives some insights into the market for collectibles among the very rich in "Collectibles: An integral part of wealth" (October 2020, available at the website of the Credit Suisse Research Institute). The report has separate chapters on the collectibles mentioned above. Here, I’ll jus focus on some "Collectibles Facts and Figures" from an opening chapter by Nannette Hechler-Fayd’herbe and Adriano Picinati di Torcello. They carry out a small-scale survey of 55 ultra-high-net worth individuals, defined here as households with net worth of more than $30 million, and then do some extrapolating: However,

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Revisiting March 2020: What Were Epidemiologists Thinking about Masks?

18 days ago

A basic part of building credibility is not to flip-flop on your advice. But early in the pandemic, public  health authorities at first advised against wearing masks, and then shifted over to recommending but not requiring masks. Now masks are required in many states in public and indoor settings. What were public health authorities and epidemiologists thinking when they were recommending against masks? As one example of such a recommendation, the World Health Organization published on January 29, 2020, "Advice on the use of masks in the community, during home care and in health care settings in the context of the novel coronavirus (‎‎‎‎‎‎2019-nCoV)‎‎‎‎‎‎ outbreak: interim guidance." Here’s a taste of the recommendations: Wearing a medical mask is one of the prevention measures to limit

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Revisiting March 2020: What Was Wrong With the Very High Early Death Estimates?

19 days ago

The "curse of knowledge" refers to a well-known behavioral bias: when you know something, it’s hard to remember what is was like not to know it. One standard example is a teacher who knows the subject extremely well, but fails to communicate with students because the teacher can no longer remember what it was like not to know the subject. At this point, we all know that the COVID-19 pandemic has caused more than 200,000 deaths in the United States alone. Along with the health costs, we have experienced the businesses closing, the lockdowns affecting schools and churches, and the many disruptions of everyday life. It’s hard to avoid our own "curse of knowledge," and think back to those long-age moments of February and early March 2020 when at least most of us didn’t know what to make of

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Entering the Labor Market in a Recession: Some Findings and Advice

22 days ago

Trying to get a job during a period of recession and high unemployment is hard for everyone, bit for those just entering the labor market for the first time it can leave scars on their lifetime earnings and even their personal health. Till von Wachter discussed the evidence from past recessions–and offers some advice for those currently living through this experience, in "The Persistent Effects of Initial Labor Market Conditions for Young Adults and Their Sources." Journal of Economic Perspectives, 34:4, pp. 168-94). In describing the longer-term effects of entering the labor market in a recession, he writes: Over the last 15 years, an increasing number of studies have analyzed the short- and long-term effects on individuals entering the labor market in a recession, and this article will

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Fall 2020 Journal of Economic Perspectives Online

23 days ago

I am now in my 34th 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 it various e-reader formats, too. Here, I’ll start with the Table of Contents for the just-released Fall 2020 issue, which in the Taylor household is known as issue #134. 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: How Much Income and Wealth Inequality? "The Rise of Income and Wealth Inequality in America: Evidence from

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The Dam Removal Problem

24 days ago

One of the many highlights of my fatherhood experience was when one of my children was assigned a paper on the Hoover Dam. This meant that for a couple of weeks I could ask during family dinnertime conversations: "How is the dam paper going? Is the dam first draft ready yet? What are you learning from your dam school project?" Years later, my children still wince about the experience. Well, the dam topic is back again. Researchers at Resources for the Future have been looking at the issue of old and outdated dams. The National Inventory of Dams (NID) from the US Army Corps of Engineers counts 91,500 dams in the United States with an average age of 57 years. Some of the dams continue to serve useful purposes: carbon-free power generation, flood protection, drinking water supply,

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Max Weber: “He Who Lets Himself in for Politics … Contracts with Diabolical Powers”

25 days ago

As Election Day approaches, I find myself mulling over some comments from the century-old essay by Max Weber on "Politics as a Vocation" (1919, available various places on the web, like here). Weber discussed the connection from good intentions to ultimate results in politics, and offers some warnings that politics is not a morality play where good intentions always lead to good results, or vice versa.  For example, he writes: [T]he world is governed by demons and that he who lets himself in for politics, that is, for power and force as means, contracts with diabolical powers and for his action it is not true that good can follow only from good and evil only from evil, but that often the opposite is true. Anyone who fails to see this is, indeed, a political infant.More broadly, Weber

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Bertrand Russell: Thoughts on Politics, Passion, and Skepticism

26 days ago

In Bertrand Russell’s essay “On the Value of Scepticism” (from in his 1958 book The Will to Doubt), he suggests that when opinions are expresses with great passion, including political opinion, it is often because the rational grounds for those opinions are limited.  Russell wrote: When there are rational grounds for an opinion, people are content to set them forth and wait for them to operate. In such cases, people do not hold their opinions with passion; they hold them calmly, and set forth their reasons quietly. The opinions that are held with passion are always those for which no good ground exists; indeed the passion is the measure of the holder’s lack of rational conviction. Opinions in politics and religion are almost always held passionately.Russell also offered an interesting

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Is Political Polarization a Rise in Tribalism?

26 days ago

What if our political differences are not first-and-foremost about different policies or priorities, but instead are about increased feelings of attachment to a political tribe? Jonathan Rauch put forward this thesis in "Rethinking Polarization" (National Affairs, Fall 2019):Assuredly, Democrats and Republicans are much more purely left-wing and right-wing, respectively, than they were 50 years ago. Certainly, Republicans are more hostile to government than are Democrats. Ideologically, the parties stand on opposite shores. But they still are far from internally coherent in any philosophical sense. Democrats are divided between market-oriented technocrats and self-declared democratic socialists. Republicans are in the grip of a populist takeover that defies the relatively libertarian,

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Henry Adams: “Politics … Had Always Been the Systematic Organization of Hatreds”

26 days ago

The great historian Henry Adams had a US President as a grandfather and also as a great-grandfather: John Quincy Adams and John Adams. His 1907 autobiography, The Education of Henry Adams is written from an outside perspective, as if his older self was a separate person watching his younger self grow up.  Some of Adams’s description of the political climate in which he grew up as a boy in the 1840s had some resonance for me as the 2020 election season draws to an end: The atmosphere of education in which he lived was colonial, revolutionary, almost Cromwellian, as though he were steeped, from his greatest grandmother’s birth, in the odor of political crime. Resistance to something was the law of New England nature; the boy looked out on the world with the instinct of resistance; for

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Reflections on Editing from the Podhoretz Clan, Father and Son

28 days ago

The Journal of Economic Perspectives, where I have worked as Managing Editor since 1986, is in many ways quite different from Commentary magazine. JEP is sponsored by the American Economic Association and aimed primarily at an audience of academic economists and their students, along with a wider circle of interested policy-makers and journalists. Commentary was sponsored by the American Jewish Committee for its first 60 years, although it has now been a free-standing journal for the last 15 years.  The current editor describes its purpose as "defense of the West and its institutions, defense of Israel, serving as a bulwark against anti-Semitism, and reflecting in its pages the cultural legacy of the West …" Commentary is now commemorating its 75th anniversary. Norman Podhoretz was the

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Some 12-Grader Education Inequalities by Race

29 days ago

One of the most concerning US racial inequalities is the one embodied in K-12 academic preparation, which often sets the stage for additional education, jobs, income levels, the neighborhood where you live, and more. The National Assessment of Educational Progress is often referred to as the "Nation’s Report Card." It’s a nationally representative test. The results for 12th graders who graduated in 2019 are now available. On the math side, the median score (that is, half scored higher and half scored lower) was 150. The 25th percentile score was 125, and the 75th percentile score was 150. Here’s the breakdown by race/ethnicity. As the chart shows, average math scores are up for some groups. But the gap between white and black scores is just a bit larger in 2019 than in 2005.  Remember, an

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Return of the Tontine?

October 29, 2020

I first learned about tontine contracts as a child reading from Agatha Christie mysteries, like 4.50 From Paddington and The Pale Horse. A "tontine" is a financial contract where a certain sum of money is set aside and invested for the benefit of a group of people–but if some of those people die, their share of the funds pass to the survivors. If the group is relatively small and the members of group are known to alll, it’s an excellent set-up for a murder mystery. But a tontine-style contract might also has some genuine practical advantages in retirement planning. J. Mark Iwry, Claire Haldeman, William G. Gale, and David C. John tell the story in "Retirement Tontines: Using a Classical Finance Mechanism as an Alternative Source of Retirement Income" (Brookings Institution, October

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The Need for Large Firms in Developing Countries

October 28, 2020

The US economy had about 6 million firms in 2017 (the most recent data). About 20,000 of those firms employed more than 500 people, and those 20,000 firms (about one-third of 1 percent of the total) accounted for 53% of all US employment by firms. Another 90,000 firms employed between 100 and 499 workers, and those 90,000 firms (about 1.5% of the total) accounted for another 14% of all US employment by firms. The job totals here don’t take into account employment by the public sector and by nonprofits. But the point I’m making is that an important social function of firms is to coordinate production in a way that provides a bridge between workers and suppliers on one hand and the desires of customers on the other hand. In high-income economies, large firms coordinating the efforts of

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Thinking about Better Graphs and Use of Color

October 27, 2020

When I started working as the Managing Editor of the Journal of Economic Perspectives back in 1986, making figures for academic articles was still relatively expensive. The changeover to software-generated figures was getting underway, but with lots of hiccups–for example, we had to purchase a more expensive printer that could produce figures as well as text. At my home base at the time,  Princeton University still employed a skilled draftsman to create beautiful figures, using tools like plotting points and tracing along the edge of a French curve, which have now gone the the way of the slide rule.  Generating figures has now become cheap: indeed, I see more and more first drafts at my journal which include at least a dozen figures and often more. I sometimes suspect that the figures

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Will China Be Caught in the Middle-Income Trap?

October 26, 2020

The "middle-income trap" is the phenomenon that once an economy has made the big leap from being a lower-income country to being a middle-income country, then it may find it difficult (although not impossible) to make the next leap from being middle-income to high-income. Matthew Higgins considers the situation of China in "China’s Growth Outlook: Is High-Income Status in Reach?" (Federal Reserve Bank of New York, Economic Policy Review, October 2020, 26:4, pp. 68-97). Higgins provides the basic backdrop for China’s remarkable economic growth in the last four decades. China’s growth performance has been remarkable following the introduction of economic reforms in the late 1970s. According to the official data, real GDP growth has averaged 9.0 percent since 1978. … Rapid economic growth

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interview with Sandra Black: Education Outcomes and A Stint in Politics

October 22, 2020

Douglas Clement has an interview with Sandra Black in the Fall 2020 issue of For All, a publication of the  Opportunity & Inclusive Growth Institute at the Minneapolis Federal Reserve. The title sums up the topics: "Seeing the margins: An interview with Columbia University economist Sandra BlackSandra Black on education, family wealth, her time at the White House, COVID-19, and the cost of bad policy." Like a lot of the interviews done by Clement, the interviewee is encouraged to describe the basic insight behind some of their own prominent research, which in turn gives a look into how economists think about research. For example, Black wrote an article back in 1999 on the subject of how much value parents place on living in a school district with higher test scores (Sandra E. Black, "Do

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