Month: September 2017

Reducing Taxes and Regulations Can Boost Growth

(p. A2) The angst was on display this weekend at the annual conference of the American Economic Association, the profession’s largest gathering. The conference is a showcase for agenda-setting research, a giant job fair for the nation’s most promising young economists and, this year, the site of endless discussion about how to rebuild trust in the discipline.
Many academic economists have been champions of free trade and globalization, ideas under assault among rising populist movements in advanced economies around the world. The rise of President-elect Donald Trump, with his fierce rhetoric against elites, in particular, left many at this conference questioning their place in the world.
“The economic elite did many things to undermine their credibility while people’s economic fortunes were taking a turn for the worse,” said Steven Davis, an economist at the University of Chicago.
. . .
Stanford University’s John Taylor and Columbia’s Glenn Hubbard said Mr. Trump’s plans to simplify the tax and regulatory codes could indeed boost the economy’s growth. Both economists served in the past in the White House Council of Economic Advisers, long populated by academics who present at the AEA conference every January.
This year, academics are out in the cold. During the election The Wall Street Journal contacted every former member of the CEA, including those going back to President Richard Nixon. None had been tapped as an adviser to Mr. Trump’s campaign, nor did any publicly endorse him.
The president-elect is “not particularly interested in hearing from the academic economist club,” Mr. Davis said.

For the full story, see:
Josh Zumbrun. “Economists Grapple With Public Disdain.” The Wall Street Journal (Mon., Jan. 9, 2017): A2.
(Note: ellipsis added.)
(Note: the online version of the story has the date Jan. 8, 2017, and has the title “Top Economists Grapple With Public Disdain for Initiatives They Championed.”)

Best Sleep When Temperature Is 64-68 Degrees Fahrenheit

(p. 2) A poor night’s sleep is an all too common problem when you’re staying at a hotel, says Alistair Hughes, the managing director of Savoir Beds, a London-based company that sells beds and handmade mattresses to more than 50 hotels globally.
. . .
A quiet, dark, cool room is the ideal environment for sleeping well, Mr. Hughes said. Create this ambience by having ear plugs to block noise, using the blackout blinds your room likely has and setting the temperature to between 64 and 66 degrees Fahrenheit.

For the full commentary, see:
SHIVANI VORA. “Travel Tips; How to Get a Good Night’s Sleep at a Hotel.” The New York Times, Travel Section (Sun., Sept. 3, 2017): 2.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date AUG. 25 [sic], 2017. The first sentence quoted above is the slightly longer version that is online; not the slightly shorter version in the print edition.)

Courageous Grover Cleveland Belongs in “Entitlement Reform Hall of Fame”

(p. A11) Mr. Cogan has just written a riveting, massive book, “The High Cost of Good Intentions,” on the history of entitlements in the U.S., and he describes how in 1972 the Senate “attached an across-the-board, permanent increase of 20% in Social Security benefits to a must-pass bill” on the debt ceiling. President Nixon grumbled loudly but signed it into law. In October, a month before his re-election, “Nixon reversed course and availed himself of an opportunity to take credit for the increase,” Mr. Cogan says. “When checks went out to some 28 million recipients, they were accompanied by a letter that said that the increase was ‘signed into law by President Richard Nixon.’ ”
The Nixon episode shows, says Mr. Cogan, that entitlements have been the main cause of America’s rising national debt since the early 1970s. Mr. Trump’s pact with the Democrats is part of a pattern: “The debt ceiling has to be raised this year because elected representatives have again failed to take action to control entitlement spending.”
. . .
Mr. Cogan conceived the book about four years ago when, as part of his research into 19th-century spending patterns, he “saw this remarkable phenomenon of the growth in Civil War pensions. By the 1890s, 30 years after it had ended, pensions from the war accounted for 40% of all federal government spending.” About a million people were getting Civil War pensions, he found, compared with 8,000 in 1873, eight years after the war. Mr. Cogan wondered what caused that “extraordinary growth” and whether it was unique.
When he went back to the stacks to look at pensions from the Revolutionary War, he saw “exactly the same pattern.” It dawned on him, he says, that this matched “the evolutionary pattern of modern entitlements, such as Social Security, Medicare, Medicaid, food stamps.”
. . .
Who would feature in an Entitlement Reform Hall of Fame? Mr. Cogan’s blue eyes shine contentedly at this question, as he utters the two words he seems to love most: Grover Cleveland. “He was the very first president to take on an entitlement. He objected to the large Civil War program and thought it needed to be reformed.” Cleveland was largely unsuccessful, but was a “remarkably courageous president.” In his time, Congress had started passing private relief bills, giving out individual pensions “on a grand scale. They’d take 100 or 200 of these bills on a Friday afternoon and pass them with a single vote. Incredibly, 55% of all bills introduced in the Senate in its 1885 to 1887 session were such private pension bills.”.

For the full interview, see:
Tunku Varadarajan. “THE WEEKEND INTERVIEW with John F. Cogan; Why Entitlements Keep Growing, and Growing, and . . ..” The Wall Street Journal (Tues., Sept. 9, 2017): A11.
(Note: ellipsis in title, in original; other ellipses added.)
(Note: the online version of the interview has the date Sept. 8, 2017, and has the title “THE WEEKEND INTERVIEW; Why Entitlements Keep Growing, and Growing, and . . ..”.)

The Cogan book, mentioned above, is:
Cogan, John F. The High Cost of Good Intentions: A History of U.S. Federal Entitlement Programs. Stanford, CA: Stanford University Press, 2017.

GDP Neglects Benefits of New Goods

(p. A13) . . . [one] source of underestimation of growth is the failure to capture the benefit of new goods and services. Here’s how the current procedure works: When a new product is developed and sold to the public, its market value enters into nominal gross domestic product. But there is no attempt to take into account the full value to consumers created by the new product per se.
Think about statins, the remarkable class of drugs that lower cholesterol and reduce deaths from heart attacks. By 2003 statins were the best-selling pharmaceutical product in history. The total dollar amount of statin sales was counted in GDP, but the government’s measure of real income never included anything for improvements in health that resulted from statins–such as a one-third decrease in the death rate from heart disease among those over 65 between 2000 and 2007.
Or consider consumer electronics. New York University economist William Easterly recently tweeted an image of a 1991 RadioShack newspaper ad and noted that all the functions of the devices on sale–clock radio, calculator, cellphone, tape-recorder, compact-disk player, camcorder, desktop computer–are “now available on a $200 smartphone.” The benefits to consumers from these advances don’t show up in GDP.

For the full commentary, see:

Martin Feldstein. “We’re Richer Than We Realize; The official economic statistics fail to account for quality improvements and new products.” The Wall Street Journal (Sat., Sept. 9, 2017): A13.
(Note: ellipsis, and bracketed word, added.)
(Note: the online version of the commentary has the date Sept. 8, 2017.)

When 4% Economic Growth Was Routine

(p. R3) Starting in 1983, when Ronald Reagan was in the middle of his first presidential term, the American economy reeled off three straight years of 4% growth. The economy went on to hit that politically important target in nine of the next 17 years. In fact, even as Mr. Bush ran for re-election, the economy actually was revving up after a two-year lull, though the surge came too late for voters to realize it.
Then, at the turn into a new millennium, that streak stopped. In the last 15 years, the American economy hasn’t grown at a 4% annual rate even once.
But it isn’t just the U.S. In the last 15 years, according to International Monetary Fund data, exactly one of the traditional seven major industrialized nations achieved annual economic growth of 4%, one time: Japan in 2010.
In sum, the kind of economic growth that used to be relatively routine in the industrialized world has become virtually extinct.
This low-growth era leaves political leaders facing two unsavory tasks. The first is to explain to unhappy voters why growth is so anemic, and the second is to convince them that they know what to do about it.

For the full commentary, see:
Gerald F. Seib. “Politicians Pine for Elusive Solution to Voters’ Discontent: 4% Growth.” The Wall Street Journal (Tues., Jan. 17, 2017): R3.
(Note: the online version of the commentary has the date Jan. 16, 2017.)

Lower 50% Have Largely Stagnated in Recent Decades

(p. B1) Even with all the setbacks from recessions, burst bubbles and vanishing industries, the United States has still pumped out breathtaking riches over the last three and half decades.
The real economy more than doubled in size; the government now uses a substantial share of that bounty to hand over as much as $5 trillion to help working families, older people, disabled and unemployed people pay for a home, visit a doctor and put their children through school.
Yet for half of all Americans, their share of the total economic pie has shrunk significantly, new research has found.
This group — the approximately 117 million adults stuck on the lower half of the income ladder — “has been completely shut off from economic growth since the 1970s,” the team of economists found. “Even after taxes and transfers, there has been close to zero growth for working-age adults in the bottom 50 percent.”
. . .
(p. B3) By 2014, the average income of half of American adults had barely budged, remaining around $16,000, while members of the top 1 percent brought home, on average, $1,304,800 or 81 times as much.
That ratio, the authors point out, “is similar to the gap between the average income in the United States and the average income in the world’s poorest countries, the war-torn Democratic Republic of Congo, Central African Republic and Burundi.”
The growth of incomes has probably increased a bit since 2014, the latest year for which full data exists, said Mr. Zucman, who, like Mr. Saez, also teaches at the University of California, Berkeley. But it is “not enough to make any significant difference to our long-run finding, and in particular, to affect the long-run stagnation of bottom-50-percent incomes.”
. . .
Mr. Piketty, Mr. Saez and Mr. Zucman concluded that the main driver of wealth in recent years has been investment income at the top. That is a switch from the 1980s and 1990s, when gains in income were primarily generated by working.

For the full story, see:
PATRICIA COHEN. “”A Bigger Pie, but Uneven Slices; Research Shows Slim Gains for the Bottom 50 Percent.” The New York Times (Weds., DEC. 7, 2016): B1 & B3.
(Note: ellipses added.)
(Note: the online version of the story has the date DEC. 6, 2016, and has the title “A Bigger Economic Pie, but a Smaller Slice for Half of the U.S.” The print article shares the title “A Bigger Pie, but Uneven Slices” with a commentary by Eduardo Porter. The Cohen article has the unique subtitle “Research Shows Slim Gains for the Bottom 50 Percent.”)

The July 7, 2017 draft of Piketty, Saez and Zucman’s working paper, mentioned above, is:
Piketty, Thomas, Emmanuel Saez, and Gabriel Zucman. “Distributional National Accounts: Methods and Estimates for the United States.” Working Paper, July 6, 2017.

“We Liberals” Oppose Diversity of Ideas

(p. 11) We liberals are adept at pointing out the hypocrisies of Trump, but we should also address our own hypocrisy in terrain we govern, such as most universities: Too often, we embrace diversity of all kinds except for ideological. Repeated studies have found that about 10 percent of professors in the social sciences or the humanities are Republicans.
We champion tolerance, except for conservatives and evangelical Christians. We want to be inclusive of people who don’t look like us — so long as they think like us.
I fear that liberal outrage at Trump’s presidency will exacerbate the problem of liberal echo chambers, by creating a more hostile environment for conservatives and evangelicals. Already, the lack of ideological diversity on campuses is a disservice to the students and to liberalism itself, with liberalism collapsing on some campuses into self-parody.
. . .
Whatever our politics, inhabiting a bubble makes us more shrill. Cass Sunstein, a Harvard professor, conducted a fascinating study of how groupthink shapes federal judges when they are randomly assigned to three-judge panels.
When liberal judges happened to be temporarily put on a panel with other liberals, they usually swung leftward. Conversely, conservative judges usually moved rightward when randomly grouped with other conservatives.
It’s the judicial equivalent of a mob mentality. And if this happens to judges, imagine what happens to you and me.
Sunstein, a liberal and a Democrat who worked in the Obama administration, concluded that the best judicial decisions arose from divided panels, where judges had to confront counterarguments.
Yet universities are often the equivalent of three-judge liberal panels, and the traditional Democratic dominance has greatly increased since the mid-1990s — apparently because of a combination of discrimination and self-selection. Half of academics in some fields said in a survey that they would discriminate in hiring decisions against an evangelical.
The weakest argument against intellectual diversity is that conservatives or evangelicals have nothing to add to the conversation. “The idea that conservative ideas are dumb is so preposterous that you have to live in an echo chamber to think of it,” Sunstein told me..

For the full commentary, see:
Kristof, Nicholas. “The Dangers of Echo Chambers on Campus.” The New York Times, SundayReview Section (Sun., DEC. 11, 2016): 11.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date DEC. 10, 2016.)

Cass Sunstein’s research on the effect of political orientation on federal judges’ decisions, mentioned above, was most fully reported in:
Sunstein, Cass R., David Schkade, Lisa M. Ellman, and Andres Sawicki. Are Judges Political?: An Empirical Analysis of the Federal Judiciary. Washington, D.C.: Brookings Institution Press, 2006.

Warren Buffett: High-Tech Especially Hard to Predict

(p. 1D) Turns out that Warren Buffett spoke out in IBM’s favor, sort of, 37 years ago when the government accused “Big Blue” of illegal
anti-competitive practices.
. . .
But Buffett was one of 87 witnesses who testified on behalf of the International Business Machines Corp. during the federal government’s antitrust trial.
. . .
In his testimony, Buffett said he asked the Price, Waterhouse accounting firm to calculate the debt levels of 104 other computer-oriented companies that, according to federal prosecutors, were harmed by IBM’s low prices and other alleged anti-competitive actions.
Buffett said his hypothesis was that the competing companies had trouble raising money to finance their growth because they had too much debt. The accounting analy-(p. 2D)sis, Buffett said in court, “bore that hypothesis out in a very conclusive manner.”
So why didn’t he buy IBM stock in 1980?
Because, he told the court, with high-tech companies it’s “particularly difficult to have a clear view of a long-term future. … High-technology companies are ones where both the product and the customer’s use of it are (areas in which) I don’t feel I have a full understanding.”

For the full commentary, see:
Steve Jordon. “WARREN WATCH; What Buffett said in court about IBM in 1980.” Omaha World-Herald (Sun., Jan 22, 2017): 1D-2D.
(Note: ellipses added.)
(Note: the online version of the commentary has the title “WARREN WATCH; What Warren Buffett said in court about IBM in 1980.”)

Half of Today’s 36-Year-Olds Earn Less Than Their Parents Did at Same Age

FadingAmericanDreamGraph2017-09-08.pngSource of graph: http://www.equality-of-opportunity.org/

(p. 2) These days, people are arguably more worried about the American dream than at any point since the Depression. But there has been no real measure of it, despite all of the data available. No one has known how many Americans are more affluent than their parents were — and how the number has changed.

The beginnings of a breakthrough came several years ago, when a team of economists led by Raj Chetty received access to millions of tax records that stretched over decades. The records were anonymous and came with strict privacy rules, but nonetheless allowed for the linking of generations.
The resulting research is among the most eye-opening economics work in recent years.
. . .
After the research began appearing, I mentioned to Chetty, a Stanford professor, and his colleagues that I thought they had a chance to do something no one yet had: create an index of the American dream. It took them months of work, using old Census data to estimate long-ago decades, but they have done it. They’ve constructed a data set that shows the percentage of American children who earn more money — and less money — than their parents earned at the same age.
The index is deeply alarming. It’s a portrait of an economy that disappoints a huge number of people who have heard that they live in a country where life gets better, only to experience something quite different.
. . .
About 92 percent of 1940 babies had higher pretax inflation-adjusted household earnings at age 30 than their parents had at the same age.
. . .
For babies born in 1980 — today’s 36-year-olds — the index of the American dream has fallen to 50 percent: Only half of them make as much money as their parents did.

For the full commentary, see:
Leonhardt, David. “The American Dream, Quantified at Last.” The New York Times, SundayReview Section (Sun., DEC. 11, 2016): 2.
(Note: ellipses added.)
(Note: the online version of the commentary has the date DEC. 8, 2016.)

The Chetty co-authored paper mentioned above, is:
Chetty, Raj, David Grusky, Maximilian Hell, Nathaniel Hendren, Robert Manduca, and Jimmy Narang. “The Fading American Dream: Trends in Absolute Income Mobility since 1940.” Science 356, no. 6336 (2017): 398-406.

Venture Capital Stars Invested in Over-Hyped “Symbol of Silicon Valley’s Insular Excess”

(p. B2) MONTEREY, Calif. — From the moment it started, Juicero stood out as a symbol of Silicon Valley’s insular excess.
The company sold a $700 Wi-Fi-enabled juicer, trying to solve a problem that did not exist. It also raised some $120 million, and attracted a mountain of attention.
But on Friday, the company said it was shutting down operations — joining the hordes of other Silicon Valley start-ups that could not deliver business results to match the hype.
Started by a health fanatic with a checkered history as an entrepreneur, Juicero devised an elaborate scheme to deliver small glasses of expensive cold pressed juice to kitchens around the country. The machine scanned codes printed on pouches of chopped produce to help assess the freshness of the contents inside. Doug Evans, the founder, hired engineers, food scientists and fashionable industrial designers to work alongside him.
The company was a particularly bold bid to capitalize on the hype around the so-called internet of things and interest in the juice business. Mr. Evans believed there was a legion of customers who, once they tasted his juice, would find it superior to the many varieties that can be bought at convenience stores, juice bars or even Walmart.
Top venture capital firms including Google’s venture capital spinoff and Kleiner Perkins Caufield & Byers, as well as big companies like Campbell Soup, invested heavily in the company.

For the full story, see:

DAVID GELLES. “Start-Up That Sold $700 Juicer Shuts Down.” The New York Times (Sat., SEPT. 2, 2017): B2.
(Note: the online version of the story has the date SEPT. 1, 2017, and has the title “Juicero, Start-Up With a $700 Juicer and Top Investors, Shuts Down.” )

“Bankruptcies and Losses Concentrate the Mind on Prudent Behavior”

(p. A18) Allan H. Meltzer, an influential conservative economist who strongly opposed government bailouts and was credited with coining the anti-bailout slogan, “Capitalism without failure is like religion without sin,” died on Monday in Pittsburgh. He was 89.
. . .

In books like “Why Capitalism?” (2012), Dr. Meltzer promoted the view that countries and investors should suffer the consequences of their mistakes, whether flawed fiscal measures or bad lending decisions.
In coining the slogan “Capitalism without failure is like religion without sin,” he added another maxim: “Bankruptcies and losses concentrate the mind on prudent behavior.”
. . .
In recent years Mr. Meltzer found a new interest in law and regulation. He and other scholars were working on a book, “Regulation and the Rule of Law.”

For the full obituary, see:
ZACH WICHTER. “Allan H. Meltzer, Economist Averse to Bailouts, Dies at 89.” The New York Times (Sat., MAY 13, 2017): A18.
(Note: ellipses added.)
(Note: the online version of the obituary has the date MAY 12, 2017, and has the title “Allan H. Meltzer, Conservative Economist, Dies at 89.”)

Meltzer’s book on capitalism, mentioned above, is:
Meltzer, Allan H. Why Capitalism? New York: Oxford University Press, 2012.