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Brad DeLong: Worthy reads on equitable growth, April 20-26, 2021

Summary:
Worthy reads from Equitable Growth: 1. Greatly looking forward to listening to the most thoughtful and incisive analyst of U.S. supply chains and worker productivity and compensation patterns by Sue Helper. Register for Equitable Growth’s “Webinar: Transforming U.S. supply chains to create good jobs” on May 3, 2021, 1:30 p.m. to 2:30 p.m., when she will discuss: “One reason U.S. workers’ wages are stagnating is that large firms shifted … to buying goods and services from a complex web … Firms outsource so they can offload production onto firms with weak bargaining power and thus little ability to compete except by aggressively holding down wages. This “low-road” model … [leads to] the erosion of U.S. workers’ standard of living … High-road outsourcing … requires overcoming both

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Worthy reads from Equitable Growth:

1. Greatly looking forward to listening to the most thoughtful and incisive analyst of U.S. supply chains and worker productivity and compensation patterns by Sue Helper. Register for Equitable Growth’s “Webinar: Transforming U.S. supply chains to create good jobs” on May 3, 2021, 1:30 p.m. to 2:30 p.m., when she will discuss: “One reason U.S. workers’ wages are stagnating is that large firms shifted … to buying goods and services from a complex web … Firms outsource so they can offload production onto firms with weak bargaining power and thus little ability to compete except by aggressively holding down wages. This “low-road” model … [leads to] the erosion of U.S. workers’ standard of living … High-road outsourcing … requires overcoming both market and network failures … [and] greater collaboration between management and workers.”

2. The amount of potential talent we are—still—failing to make use of is horrifyingly large. Read Lisa Cook, “Addressing gender and racial disparities in the U.S. labor market to boost wages and power innovation,” in which she writes: “Women and African Americans continue to participate at each stage of the innovation process at lower rates than their counterparts … four policies to close these race and gender innovation divides … [are] Improve mentoring … Facilitate early education exposure to invention opportunities … Engage in blind patent reviews [and] … Address the climate in high-tech workplaces … where invention and innovation happen.”

3. Here we have a very useful and very informative deep dive into how racial discrimination spreads its effects into places in the economy that I had thought were relatively immune to it. Read Shaun Harrison, “How inequities in U.S. taxation can perpetuate systemic racism,” in which he writes: “In his in 1901 study, “The Negro Landholder of Georgia,” scholar W.E.B. Du Bois noted that “in most cases there are no tax assessors, but a county tax receiver, who receives the sworn statements of property holders as to their estates. This gives rise to wholesale undervaluation, especially in the case of the rich” … Property tax systems still place a heavier burden on Black and Latinx property owners … Carlos Fernando Avenancio-León … and Troup Howard … [find that] homeowners of color end up paying a 10 percent to 13 percent higher tax rate … [and] High degrees of residential racial segregation in the United States …[enable] White residents … to live in neighborhoods where amenities push market prices up … [but] These amenities are not properly taken into account for property tax assessments.”

Worthy reads not from Equitable Growth:

1. It now looks like the long-run effect of the coronavirus plague year will be to move 10 percent of the U.S. workforce into telecommuting—10 percent of which would otherwise have spent their days in the office. The gains in terms of reduced commute-time wasted and increased life flexibility will be substantial. These gains will remain largely uncaptured in our standard statistics. I cannot yet figure out what the further ramified consequences of this rapid rough doubling in the number of telecommuters will be. But they will be very substantial. Read Adam Ozimek, “Future Workforce,” in which he writes: “Companies continue to be remote … 41.8 percent of the American workforce … Companies say remote work is getting easier, not harder … Managers believe that 26.7 percent of the workforce will be fully remote in one year … The number of remote workers in the next five years is expected to be nearly double what it was before COVID–19: By 2025, 36.2 million Americans … Increased productivity and flexibility continue to be key benefits … reduction of non-essential meetings, increased schedule flexibility, and no commute … have worked better than expected.” 

2. This is an old but an absolute classic think through of how economies can and should be managed. It is essential reading as we try to think through how we are going to try to control global warming, given that we seem to be in a world in which it looks as though we are not going to pursue the economic-technocratic first-best regulatory strategy of carbon taxes. Read Martin Weitzman, “Prices vs. Quantities,” in which he writes: “If tastes happen to be kinked at certain critical points … it doesn’t pay to “fool around” with prices in such situations … There is, it seems to me, a rather fundamental reason to believe that quantities are better signals for situations demanding a high degree of coordination … [For] General Motors Corporation or the Soviet industrial sector as a whole, the need for balancing the output of any intermediate commodity whose production is relatively specialized to this organization and which cannot be effortlessly and instantaneously imported from or exported to a perfectly competitive outside world puts a kink in the benefit function. If it turns out that production of ball bearings of a certain specialized kind (plus reserves) falls short of anticipated internal consumption, far more than the value of the unproduced bearings can be lost.” 

3. Building communities of engineering practice is a sound goal for industrial-trade policy. Protecting rust-belt blue-collar jobs is not. Read Adam Posen, “The Price of Nostalgia: America’s Self-Defeating Economic Retreat,” in which he writes: “Populist anger is the result not of economic anxiety but of perceived declines in relative status. The U.S. government has not been pursuing openness and integration over the last two decades. To the contrary, it has increasingly insulated the economy from foreign competition, while the rest of the world has continued to open up and integrate. Protecting manufacturing jobs benefits only a small percentage of the workforce, while imposing substantial costs on the rest. Nor will there be any political payoff from trying to do so: after all, even as the United States has stepped back from global commerce, anger and extremism have mounted.”

Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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