Saturday , May 30 2020
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Timothy Taylor



Articles by Timothy Taylor

How Economists and Sociologists See Racial Discrimination Differently

1 day ago

Economists tend to see discrimination as based on actions of individuals, who in turn are interacting in markets and society. However, sociologists do not feel the same compulsion as economists to build their theories on purposeful decision-making by individuals: "Sociologists generally understand racial discrimination as differential treatment
on the basis of race that may or may not result from prejudice or animus
and may or may not be intentional in nature."   The Spring 2020 issue of the Journal of Economic Perspectives illustrates the difference with a two-paper symposium on "Perspectives on Racial Discrimination: "Sociological Perspectives on Racial Discrimination," by Mario L. "Race Discrimination: An Economic Perspective," by Kevin Lang and Ariella Kahn-Lang SpitzerAs most

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Fiscal Federalism: An International View

2 days ago

What is the appropriate balance of taxes and spending between the central government of a country and the subcentral governments–in the US, state and local government? Countries vary, and there’s no one-size-fits-all mode. But Kass Forman, Sean Dougherty, and Hansjörg Blöchliger provide an overview of how countries differ and some standard tradeoffs to consider in "Synthesising Good Practices
in Fiscal Federalism
Key recommendations from 15 years of country surveys" (OECD Economic Policy Paper #28, April 2020).   Here are a couple of figures to give some background on the underlying issues. On this figure, the horizontal axis is the share of spending done by subcentral governments, while the vertical axis is the share of taxes collected by subcentral governments. Being on the 45-degree

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Will Telecommuting Stick?

3 days ago

Responses to the pandemic have shifted many patterns: online education for both K-12 and higher ed, online health care consultations, online business meetings, and telecommuting to jobs. It will be interesting to see whether these shifts are only temporary, or whether they are the first step to a more permanent shift. Here are some bits and pieces of evidence.The word "telecommuting" and the emergence of the idea into public discourse happened in the early 1970s. A NASA engineer named Jack Nilles, who in fact was working remotely, is usually credited with coining the word. He was also the lead author on a 1973 book looking more closely at the idea: The Telecommunications-Transportation Tradeoff: Options for Tomorrow.Before the pandemic, the share of US workers who telecommuted on a

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Interview with Larry Summers: China, Debt, Pandemic, and More

4 days ago

Irwin Stelzer and Jeffrey Gedmin have a wide-ranging interview with Lawrence Summers in The American Interest (May 22, 2020, "How to Fix Globalization—for Detroit, Not Davos"). As always, Summers is his habitually and incorrigibly interesting and provocative self. Here re a few of many quotable remarks. 

China
In general, economic thinking has privileged efficiency over resilience, and it has been insufficiently concerned with the big downsides of efficiency. Going forward we will need more emphasis on “just in case” even at some cost in terms of “just in time.” More broadly our economic strategy will need to put less emphasis on short-term commercial advantage and pay more attention to long-run strategic advantage. …

At the broadest level, we need to craft a relationship with China

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Interview with Joshua Angrist: Education Policy and Causality Questions

7 days ago

David A. Price interviews Joshua Angrist in Econ Focus (First Quarter 2020, Federal Reserve Bank of Richmond, pp. 18-22). Angrist is well-known for his creativity and diligence in thinking about research design: that is, don’t just start by looking at a bunch of correlations between variables, but instead think about what you might be able to infer about causality from looking at the data in a specific way. A substantial share of his recent research has focused on education policy, and that’s the main focus of the interview as well.To get a sense of what "research design" means in this area,  consider some examples. Imagine that you want to know if a student does better from attending a public charter school. If the school is oversubscribed and holds a lottery (as often happens), then you

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Reconsidering the “Washington Consensus” in the 21st Century

9 days ago

The "Washington consensus" has become a hissing and a buzzword over time. The usual implication is that free-market zealots in Washington, DC, told developing countries around the world that they would thrive if they followed free-market policies, but when developing countries tried out these policies, they were proven not to work. William Easterly, who has been a critic of the "Washington consensus" in the past, offers an update and some new thinking in "In Search of Reforms for Growth New Stylized Facts on Policy and Growth Outcomes" (Cato Institute, Research Briefs #215, May 20, 2020). He summarizes some ideas from his NBER working paper of the same title (NBER Working Paper 26318, September 2019)/Before discussing what Easterly has to say, it’s perhaps useful to review how the

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Is a Revolution in Biology-based Technology on the Way?

9 days ago

Sometimes, a person needs a change from feeling rotten about the pandemic and the economy. One needs a sense that, if not right away, the future holds some imaginative and exciting possibilities. A group at the the McKinsey Global Institute–Michael Chui,  Matthias Evers, James Manyika,  Alice Zheng, amd Travers Nisbet–have been working for about a year on their report: "The Bio Revolution: Innovations transforming economies,societies, and our lives" (May 2020). It’s got a last-minute text box about COVID-19, emphasizing the speed with which biomedical research has been able to move into action in looking for vaccines and treatments. But the heart of the report is that the authors looked at the current state of biotech, and came up with a list of about 400 "cases thatare scientifically

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A Wake-Up Call about Infections in Long-Term Care Facilities

11 days ago

Those live in long-term care facilities are by definition more likely to be older and facing multiple health risks. Thus, it’s not unexpected that a high proportion of those dying from the coronavirus live in long-term care facilities. But the problem of infections and deaths in long-term care facilities predates the coronavirus pandemic, and will likely outlast it, too. Here’s some text from the Centers for Disease Control website:
Nursing homes, skilled nursing facilities, and assisted living facilities, (collectively known as long-term care facilities, LTCFs) provide a variety of services, both medical and personal care, to people who are unable to manage independently in the community. Over 4 million Americans are admitted to or reside in nursing homes and skilled nursing facilities

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The Bad News about the Big Jump in Average Hourly Wages

11 days ago

Average hourly wages in April 2020 were 7.9% higher than a year earlier, a very high jump. And as a moment’s reflection will suggest, this is actually part of the terrible news for the US labor market. Of course, it’s not true that the average hourly worker is getting a raise of 7.9%. Instead, the issue is that only workers who have jobs are included in the average. So the big jump in average hourly wages is actually telling us that a much higher proportion of workers with below-average wages have lost their jobs, so that the average wage of the hourly workers who still have jobs has risen.Here’s are a couple of illustrative figures, taken from the always-useful US Economy in a Snapshot published monthly by the Federal Reserve Bank of New York. The blue line in this figure shows the rise

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Interview with Emi Nakamura: Price Dynamics, Monetary and Fiscal, and COVID-19 Adjustments

14 days ago

Douglas Clement at the Minneapolis Federal Reserve offers one of his characteristically excellent interviews, this one with Emi Nakamura, titled "On price dynamics, monetary policy, and this `scary moment in history’” (May 6, 2020, Federal Reserve Bank of Minneapolis). Here are a few of Nakamura’s comments that caught my eye, but there’s much more in the full interview.On the current macroeconomic situation
It’s a scary moment in history. I thought the Great Recession that started in 2007 was going to be the big macroeconomic event of my lifetime, but here we are again, little more than a decade later. … More than other recessions, this particular episode feels like it fits into the classic macroeconomic framework of dividing things into “shocks” and “propagation”—mainly because in this

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What Do We Know about Progress Toward a COVID-19 Vaccine?

15 days ago

There seem to me a few salient facts about the search for a COVID-19 vaccine.1) According to a May 11 count by the World Health organization, there are now 8 vaccine candidates now in clinical trials, and an additional 102 vaccines in pre-clinical evaluation. Seems like an encouragingly high number.2) Influenza viruses are different from coronaviruses. We do have vaccines for many influenza viruses–that’s the "flu shot" many of us get each fall. But there has never been a vaccine developed for a coronavirus. The two previous outbreaks of a coronavirus–SARS (severe acute respiratory syndrome) in 2002-3 and MERS (Middle East respiratory syndrome) in 2012–both saw substantial efforts to develop such a vaccine, but neither one succeeded. Eriko Padron-Regalado discusses "Vaccines for

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A Century of Suffrage for American Women

15 days ago

In August 1920, the 19th Amendment to the US Constitution became law when it was ratified by the state of Tennessee. It concisely states: "The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any State on account of sex. Congress shall have power to enforce this article by appropriate legislation."The event raises two broad sets of questions. First, why would an in-group with voting power choose to weaken its power by extending that power to others? Second, how has the vote of women changed actual US political patterns?  After all, there was some question about back in 1920 about how many women would actually vote.  If women as a group voted in pretty much the same patterns as their brothers, husbands. and fathers, would women’s

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Evolving Choices about Easing the Shutdown

16 days ago

I’ll just say up front that the question of exactly when to ease the stay-at-home orders and shutdown in response to the coronavirus is a hard one, and I don’t have a firm answer. But here’s a framework for thinking through the tradeoffs.Here are a couple of figures from Joseph Pagliari in a short and aptly-titled essay," No one has all the answers for COVID-19 policy: The trade-offs are evident, but the costs involved are ambiguous" (Chicago Booth Review, May 4, 2020). The horizontal axis is the total length of the stay-at-home orders. The vertical axis measures human and economic costs. The dark blue line shows that the effect of the stay-at-home order at the start has a relatively big effect on reducing COVID-19 costs (including both health costs and costs of delivering health care).

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Florence Nightingale: Innovator in Statistics and Data Presentation

18 days ago

I learned as a child about Florence Nightingale (1820-1910) as the founder of the modern profession of nursing and probably the single person who did the most to make it socially acceptable for women from middle- and upper-class background to become nurses. Her name became eponymous: referring to someone as "Florence Nightingale" was a way of saying that the person was a perfect nurse. For more than a century, the International Committee of the Red Cross has given an award in her name for "exceptional courage and devotion to the wounded, sick or disabled or to civilian victims of a conflict or disaster" or "exemplary services or a creative and pioneering spirit in the areas of public health or nursing education."

What I had not learned about Nightingale as a child was that she was also

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Some Economics of World War II: The Air-Sea Super Battlefield

19 days ago

World War II ended 75 years ago in 1945. Stephen Broadberry and Mark Harrison have edited an ebook that offers an overview of some economic research on this topic: The Economics of the Second World War: Seventy-Five Years On (May 2020, CEPR Press, free registration required). The ebook has short readable chapters that link to the underlying specialized research. I was struck by a comment from their introduction:
Mobilisation for the Second World War was more extensive than for the First. The First World War was fought on land in Europe and the Near East and at sea in the Atlantic, while the Second was expanded to Asia and the Pacific, and to the air. While the major economies mobilised 30-60% of their national incomes for the First World War, the Second demanded 50-70%. Both wars reached

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A Hard-Eyed Look at Mass Transit

21 days ago

Mass transit, as the name suggests, was fundamentally designed on the idea of NOT social distancing, but instead waiting in groups, walking in groups, and sitting and standing in groups. Thus, it’s taking a severe hit in the age of COVID-19. There’s even a working paper from an MIT economist suggesting that "The Subways Seeded the Massive Coronavirus Epidemic in New York City," although like all working papers, it’s subject to criticism and revision.But even before the pandemic hit, mass transit was struggling in many US cities: subsidies up, ridership down, low-income riders shifting to cars, and environmental question marks. Randal O’Toole provides a hard-eyed overview of the concerns in "Transit: The Urban Parasite" (Cato Institute, Policy Analysis #889, April 20, 2020). He begins:

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The One Trillion Trees Project and Increasing US Forest Cover

22 days ago

The World Economic Forum launched the One Trillion Trees project in January.  As it noted in a press release (January 22, 2020): "Nature-based solutions – locking-up carbon in the world’s forests, grasslands and wetlands – can provide up to one-third of the emissions reductions required by 2030 to meet the Paris Agreement targets." On one side, I like trees. On the other side, I’m by nature skeptical.As a piece of short-form writing, I’ve long been a fan of George Orwell’s tribute to trees in his 1946 newspaper essay ("A Good Word for the Vicar of Bray," Tribune, April 26, 1946) where he wrote:

The planting of a tree, especially one of the long-living hardwood trees, is a gift which you can make to posterity at almost no cost and with almost no trouble, and if the tree takes root it will

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Spring 2020 Journal of Economic Perspective Available 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 Spring 2020 issue, which in the Taylor household is known as issue #132. 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.

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Symposium: One Hundred Years of Women’s Suffrage

"Votes for Women: An Economic Perspective on

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A New Real-Time Journal: COVID Economics

23 days ago

Want to keep up to speed on what economists have to say about the pandemic? The Centre for Economic Policy Research has started a new journal, Covid Economics: Vetted and Real-Time Papers, with VERY short publication lag-times. The first issue of the journal, with six papers, appeared April 5. The 14th issue (not a typo) of the journal appeared today, May 6, with these eight papers: OPTIMAL LOCKDOWNFernando Alvarez, David Argente and Francesco LippiPOLICY INCENTIVESRoberto Chang and Andrés VelascoMISSING EMERGENCIESJorge Alé-Chilet, Juan Pablo Atal and Patricio DomínguezHEALTH VS. WEALTH?Peter Zhixian Lin and Christopher M. MeissnerMARKETS GET COVIDMariano Massimiliano Croce, Paolo Farroni and Isabella WolfskeilHEALTH VS. GDP: NO TRADE-OFFSangmin Aum, Sang Yoon (Tim) Lee and Yongseok

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The Federal Reserve Gets Ready to Buy Corporate Bonds

24 days ago

A few years back, the question "should the Federal Reserve buy corporate bonds?" was a hypothetical. Right now, the Fed is poised to plunge into doing so. For details, the New York Federal Reserve has a FAQs webpage: "Primary Market Corporate Credit Facility and Secondary Market Corporate Credit Facility" (dated May 4, 2020). The Fed notes:
In general, the availability of credit has contracted for corporations and other issuers of debt while, at the same time, the disruptions to economic activity have heightened the need for companies to obtain financing. These disruptions have been felt by even highly rated companies that need liquidity in order to pay off maturing debt and sustain themselves until economic conditions normalize.

The PMCCF will provide a funding backstop for corporate

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Why Is the Health Care System Going Broke During a Pandemic?

24 days ago

You might think that a pandemic would lead to larger revenues for the health care industry. But one of the stranger aspects of the lockdown/shelter-in-place reaction to the pandemic is that in order to help society address a severe health problem, it seemed necessary to drive the health care industry into deep financial hardship. Dhruv Khullar, Amelia M. Bond, and William L. Schpero discuss "COVID-19 and the Financial Health of US Hospitals" in the May 4 issue of the Journal of the American Medical Association. In pretzel-shaped logic, they write:
To limit the spread of disease and create additional inpatient capacity and staffing, many hospitals are closing outpatient departments and postponing or canceling elective visits and procedures. These changes, while needed to respond to the

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Paul Romer: From Pin Factory to Chaos Monkey

25 days ago

Isaac Chotiner has a short interview with Paul Romer in the New Yorker (May 3, 2020, "Paul Romer on How to Survive the Chaos of the Coronavirus"). Lots of interesting comments, but I was especially struck by Paul’s comment about  how the pandemic poses a challenge for economists when thinking about the benefits of specialization and the division of labor. The usual concerns raised about division of labor, by economists since Adam Smith and Karl Marx, is that workers can be trapped for life in mindless repetitive labor. However, Romer raises a different concern about the tradeoff between specialization and resiliency: 
The gains from specialization go all the way back to Adam Smith. He talked about the advantage of a bigger market being that we could have a finer division of labor and be

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Journal of Economic Theory: Fifty Years, Fifty Articles

26 days ago

The Journal of Economic Theory is commemorating 50 years of publication with a special issue that includes 50 of the most prominent papers the journal has published, all of which appear to be open access. As seems appropriate for such lists, only one of the included papers is from the last decade. Instead, these JET papers were a key inflection point for ideas that, guided by the structure and insights from these papers, then developed a substantial follow-up literature of their own. The well-educated economist will already be somewhat familiar with the core findings of many of these papers, so this issue offers a chance to get reacquainted with old favorites and make some new friends, too. 

Karl Shell, the first editor of JET, also contributes a short essay with some memories of the

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China’s Vanishing Trade Surplus

28 days ago

I wrote "China’s vanishing trade surplus: Now you see it, now you don’t," for the most recent issue of the Milken Institute Review (Second Quarter 2020).  Here are the opening paragraphs: 
When you think of China, images of R95 face masks, deserted streets and makeshift hospitals no doubt come to mind. But coronavirus notwithstanding, the dominant reality of contemporary China is its formidable economic footprint on the global economy — and its legendary trade surplus, in particular.We all know that China’s economic success depends on running gigantic trade surpluses. Well, not any more. China’s surplus has been small relative to the size of its economy for a decade and has been approaching zero in the past few years. Indeed, a November 2019 working paper from the International Monetary

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Some Thoughts on Commodification

28 days ago

"Commodification" is a high-sounding has several quite different meanings.One meaning has Marxist overtones, because in fact it traces to the discussion in Karl Marx’s Capital: for example, see "Section 4: The Fetishism of Commodities and the SecretThereof." Marx argues that "the products of labour become commodities."  He offers the homely example of a table. He argues that when commodities are bought and sold, society tend to forget that then only have value because of the labor embedded within them, and instead treat these inanimate objects as if they they were meaningful or valuable in themselves ("fetishization"). In this way, Marx argues, the commodification of labor conceals the underlying realities that all value is produced by labor and also about social relationships of

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US Population Growth at Historic Lows

29 days ago

The 2010s are the slowest decade for population growth in US history, slower even than the 1930s. And it looks as if the next few decades will be even slower.  William Frey offers an historical perspective in "Demography as Destiny" (Milken Institute Review, Second Quarter 2020, pp. 56-63).

For a forward-looking projection, Jonathan Vespa, Lauren Medina, and David M. Armstrong have written "Demographic Turning Points for the
United States: Population Projections
for 2020 to 2060" (US Census Bureau, Issued March 2018, revised February 2020). The US population growth rate in the decades of the 2010s was 7.1%, as shown in the graph above. The Census predictions are for US population growth of 6.7% in the 2020s, 5.2% in the 2030s, and 4.1% in the decade of the 2040s. They write (references

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1957: When Machines that Think, Learn, and Create Arrived

April 28, 2020

Herbert Simon and Allen Newell were pioneers in artificial intelligence: that is, they were among the first to think about the issues involved in designing computers that were not just extremely fast at doing the calculations for well-structured problems, but in designing computers that could learn from their own mistakes and teach themselves to do better. Simon and Newell shared the Turing prize, sometimes referred to as thfe "Nobel prize in computing" in 1975, and Simon won the Nobel prize in economics in 1978.Back in 1957, Simon and Newell made some strong claims about the near-term future of these new steps in computing technology. In a speech co-authored by both, but delivered by Simon, he said:
[T]he simplest way I can summarize the situation is to say that there are now in the

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Homelessness, Temperatures, Shelter Rate, Bed Rate

April 27, 2020

How does the homelessness situation vary across states? Brent D. Mast offers some basic facts in "Measuring Homelessness and Resources to Combat Homelessness with PIT and HIC Data" (Cityscape, vol 22, no. 1, published by US Department of Housing and Urban Development, pp. 215-225).The article offers useful quick overview and critique of the PIT and HIC data. The Point-in-Time (PIT) data is a national survey about the number of homeless conducted each year during the last 10 days in January. It is widely believed to understate the total number of homeless–a group it is of course difficult to count–but if the degree of understatement is similar from year to year, it can still offer a useful measure. The Housing Inventory Count (HIC) data is an "annual inventory of the beds, units, and

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Some Thought on US Pharmaceutical Prices and Markets

April 24, 2020

There’s a broadly shared idea of how US pharmaceutical markets ought to work, I think. Innovative companies invest large amounts in trying to develop new drugs. Sometimes they succeed, and when they do, the company can then earn high profits for a time. But eventually, the new products will go off patent, and inexpensive generic equivalents will be produced.Describing the basic story in that way also helps to organize the common complaints about what is seems to be wrong. During the time period when new drugs are under patent, it seems as if their prices rise so quickly and to such high levels that it feels exploitative. Companies focus on taking actions to put off the time when competition from generic drugs can enter the market. Meanwhile, we find ourselves in the position of

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Product Longevity and Planned Obsolecence

April 22, 2020

Do profit-making firms plan to produce products that will be come obsolete sooner than necessary, so that they can keep sales high over time? And would it be better for both consumers and the environment if they stopped doing so? J. Marcus, Georg Zachman, Stephen Gardner, Simone Tagliapietra, and Elissavet Lykogianni investigate these questions in "Promoting product longevity," subtitled "How can the EU product safety and compliance framework help promote product durability and tackle planned obsolescence, foster the production of more sustainable products, and achieve more transparent supply chains for consumers (March 2020, European Parliament, Policy Department for Economic, Scientific and Quality of Life Policies
Directorate-General for Internal Policies).As the report points out:

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