Category: Economic Growth

Jobs Return to “Creative Destruction Parts of the Country”

(p. B5) “If you look, there are a heck of a lot of successful manufacturing parts of the country right now,” Kevin Hassett, the departing chairman of the White House Council of Economic Advisers, said in an interview. “But look at where they’re being created.”

Mr. Hassett drew a distinction between “creative destruction” parts of the country, where the Great Recession wiped out jobs but others sprung up to replace them, and “destruction-destruction” parts, where jobs have been slow to return. Recent factory job growth, he said, was “not necessarily disproportionately in the destruction-destruction places.”

For the full story, see:

Jim Tankersley. “Growth in Factory Jobs Skips Traditional Hubs.” The New York Times (Friday, June 14, 2019): B1 & B5.

(Note: the online version of the story has the date June 13, 2019, and has the title “In the Race for Factory Jobs Under Trump, the Midwest Isn’t Winning.”)

Clayton Christensen Wrote Well on Innovation

Clayton Christensen’s The Innovator’s Solution (co-authored with Michael Raynor) was packed with insights and examples on how entrepreneurs and incumbent firms innovate. He wrote several other thought-provoking and useful books, starting with his now-famous The Innovator’s Dilemma. Just a few days ago, I told one of my students from Africa that he should read Christensen’s latest book, which gives wonderful examples of how entrepreneurial innovation in developing countries can help them prosper.

This evening (Thurs., Jan. 24, 2020) I was discouraged to receive an email alert from the Wall Street Journal saying that Christensen died today.

A year or so ago, I sent him a late draft of my Openness to Creative Destruction, which references his work several times. He never responded. Maybe he already was too ill to look at it, or maybe he didn’t like it. I’ll never know. But either way, I thank him for all that his books taught me about innovation.

Christensen’s best book is:

Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

Christensen’s best-known book is:

Christensen, Clayton M. The Innovator’s Dilemma: The Revolutionary Book That Will Change the Way You Do Business. New York: Harper Books, 2000.

Christensen’s most recent book is:

Christensen, Clayton M., Efosa Ojomo, and Karen Dillon. The Prosperity Paradox: How Innovation Can Lift Nations out of Poverty. New York: HarperBusiness Press, 2019.

Art Carden Praises “Openness to Creative Destruction”

Economist Art Carden has written a fine review of my Openness book under the title “New Ideas Are the Key to Economic Development.” The review is fair, mostly positive, and well-written. His main reservation is that he sides with many other distinguished libertarians, but against me, on my argument that the patent system should be reformed rather than abolished.

Here is the final paragraph of Carden’s review:

I am glad to see Openness to Creative Destruction appear in print. It strikes a fine balance between detail and a big-picture perspective that, I think, can be read profitably by specialists and students alike. Anyone who wants to understand how the world grew rich and, importantly, what will sustain our enrichment would do well to have this book on the shelf.

Chinese Growth Closer to 3% than to Reported 6%

(p. A1) In the second quarter of this year, official Chinese data showed economic growth of 6.2%, close to Beijing’s target and within a percentage point of what it has reported every quarter for the past 4½ years.

A few months earlier, satellites monitoring Chinese industrial hubs suggested parts of the world’s largest trading economy were contracting. An index of Chinese industrial production created by a multinational manufacturer was pointing to lower growth than official figures. And a web-search index used to gauge how many workers return to their jobs after the Lunar New Year holidays was down sharply from a year earlier.

Beneath China’s stable headline economic numbers, there is a growing belief among economists, companies and investors around the world that the real picture is worse than the official data. That has analysts and researchers crunching an array of alternative data—from energy consumption to photos taken from space—for a more accurate reading.

Their conclusion: China’s economy isn’t tanking, but it is almost certainly weaker than advertised. Some economists who have dissected China’s GDP numbers say more accurate figures could be up to 3 percentage points lower, based on their analysis of corporate profits, tax revenue, rail freight, property sales and other measures of activity that they believe are harder for the gov-(p. A10)ernment to fudge.

For the full story, see:

Mike Bird and Lucy Craymer. “Private Data Show Sharper China Slowdown.” The Wall Street Journal (Monday, Sept. 9, 2019): A1 & A10.

(Note: the online version of the story has the date Sept. 8, 2019, and has the title “China Says Growth Is Fine. Private Data Show a Sharper Slowdown.” )

Wisconsin May Have a Robustly Redundant Labor Market

From Nathan Wiese’s description, below, Wisconsin is described in as what I call a “robustly redundant labor market” in my book Openness to Creative Destruction: Sustaining Innovative Dynamism.

(p. A1) ROSENDALE, Wis.—Nathan Wiese, a third-generation dairy farmer who is struggling to get by, says even if he has to close his family’s farm, he feels confident he could hire on as a truck driver and take home more money.

“If you want a job, you can get a job,” said Mr. Wiese, who voted for Donald Trump in 2016 and plans to do so again. “I could probably get one in one day.”

. . .

. . . in an era of severe worker shortages, people losing jobs when a plant or a farm closes are quickly getting scooped up by others. This provides a safety net in the broader economy by keeping incomes and consumer spending strong.

For the full story, see:

Shayndi Raice and Jon Hilsenrath. “In Wisconsin, Demand for Workers Buffers a Slowdown.” The Wall Street Journal (Friday, November 29, 2019): A1 & A9.

(Note: ellipses added.]

(Note: the online version of the story has the date Nov. 28, 2019, and has the title “How a Strong Job Market Has Proved the Experts Wrong.”)

My book, mentioned at the top, is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

Economists Surprised by Strength of Economy

(p. B3) There are a lot of good things to say, and few bad things to say, about the November [2019] employment numbers that were published Friday morning.

Employers added 266,000 jobs, a blockbuster number even after accounting for the one-time boost of about 41,000 striking General Motors workers who returned to the job.

. . .

Still, there is a bigger lesson contained in the data, one that is important beyond any one month’s tally of the job numbers: that the American economy is capable of cranking at a higher level than conventional wisdom held as recently as a few years ago. As the economy continues to grow well above what once seemed like its potential, without inflation or other clear signs of overheating, it’s clearer that the old view of its potential was an extremely costly mistake.

The mainstream view of the economics profession — held by leaders of the Federal Reserve, the Congressional Budget Office, private forecasters and many in academia — was that the United States economy was at, or close to, full employment.

. . .

People often say that this expansion, now in its 11th year, is growing long in the tooth, or that we are late in the economic cycle. And maybe that’s right. But the biggest lesson when you contrast where the labor market stands at the end of 2019, versus where smart people thought it would stand just a few years ago, is that there’s a lot we don’t know about just what is possible and how strong the United States economy can get.

For the full story, see:

Neil Irwin. “In Hindsight, Economy Is Stronger Than It Looks.” The New York Times (Saturday, December 7, 2019): B3.

(Note: ellipses, and bracketed year, added.]

(Note: the online version of the story has the date Dec. 6, 2019, and has the title “How a Strong Job Market Has Proved the Experts Wrong.”)

Improved Stoves, Pushed by Social Entrepreneurs, Do Not Improve Health or Environment

(p. 80) Laboratory studies suggest that improved cooking stoves can reduce indoor air pollution, improve health, and decrease greenhouse gas emissions in developing countries. We provide evidence, from a large-scale randomized trial in India, on the benefits of a common, laboratory-validated stove with a four-year follow-up. While smoke inhalation initially falls, this effect disappears by year two. We find no changes across health outcomes or greenhouse gas emissions. Households used the stoves irregularly and inappropriately, failed to maintain them, and usage declined over time. This study underscores the need to test environmental technologies in real-world settings where behavior may undermine potential impacts.

Source:

Hanna, Rema, Esther Duflo, and Michael Greenstone. “Up in Smoke: The Influence of Household Behavior on the Long-Run Impact of Improved Cooking Stoves.” American Economic Journal: Economic Policy 8, no. 1 (Feb. 2016): 80-114.

With Work Ethic, but Not Much Education, “You Can Come Out Here and Still Make Six Figures”

(p. B1) When Mike Wilkinson moved to Midland, Tex., in 2017, he hoped the world’s largest oil field would change his life. His marriage was in tatters. He owed tens of thousands in credit card debt. His morale was broken.

He soon began working as a “hot shot” truck driver, carrying loads for drillers who need pipes or drums in a hurry. The United States is the world’s largest producer of oil, surpassing Saudi Arabia and Russia, and demand for “hot shots” has soared.

The epicenter of the oil boom is the Permian Basin in Texas and New Mexico, a massive layer cake of shale that’s cracked open with a blasting technique known as fracking. The country’s growing energy dominance has created tens of thousands of jobs in this part of the Southwest in recent years, many for people like Wilkinson looking for fresh starts.

. . .

(p. B4) There are now 55,000 people now work in the Permian. Mr. Wilkinson says he’s found a certain camaraderie with other transplants: “They are either escaping debt or family issues or poverty.

. . .

“I have to make money, and this is the best way I can make money,” he said. “If you’re not educated and have a good work ethic, you can come out here and still make six figures.”

For the full story, see:

Clifford Krauss. “Boom Times and Fresh Starts.” The New York Times (Thursday, Sept. 19, 2019): B1 & B4.

(Note: ellipses added.)

(Note: the online version of the story has the date Sept. 10, 2019, and has the title “‘This Is the Most Lonesome Job’: Ride With a ‘Hot Shot’ Trucker in Oil-Rich Texas.” The online version highlights photographs by Tamir Kalifa. The online and print versions have significant differences in wording and ordering. Where there are differences, the passages quoted above, follow the print version.)

Median Income Rising More Under Trump Than Under Bush and Obama

Source of graph: online version of the WSJ article quoted and cited below.

(p. A17) President Trump’s critics can’t deny that the economy is doing well, so instead they insist all the benefits have gone to the rich and large corporations. “America’s middle class is under attack,” Sen. Elizabeth Warren asserted in her presidential campaign announcement last December.

The latest data from the Census Bureau monthly surveys tell a different story. Real median household income—the amount earned by those in the very middle—hit $65,084 (in 2019 dollars) for the 12 months ending in July. That’s the highest level ever and a gain of $4,144, or 6.8%, since Mr. Trump took office. By comparison, during 7½ years under President Obama—starting from the end of the recession in June 2009 through January 2017—the median household income rose by only about $1,000.

These statistics were published by two former census income-research specialists with 50 years experience who now run Sentier Research, a nonpartisan research group.

For the full commentary, see:

Stephen Moore. “Trump’s Middle-Class Economic Progress.” The Wall Street Journal (Monday, Sept. 30, 2019): A17.

(Note: the online version of the commentary has the date Sept. 29, 2019, and has the same title as the print version.)

World Child Mortality Cut in Half

(p. A1) Two decades ago, nearly 10 million children did not live to see a 5th birthday.

By 2017, that number — about 1 in every 16 children — was nearly cut in half, even as the world’s population increased by more than a billion people.

. . .

From 2000 to 2017, all but one of the 97 low-to-middle-income countries that account for the vast majority of deaths of young children lowered their child mortality rates, according to a report released Tuesday [Sept. 17, 2019] by the Bill and Melinda Gates Foundation, along with a research team at the Institute for Health Metrics and Evaluation at the University of Washington, led by Stephen Lim, the institute’s senior director of science and engineering.

For the full story, see:

Alicia Parlapiano, Josh Katz, and Margot Sanger-Katz. “Fewer of the World’s Children Are Dying, but Many Remain at Risk.” The New York Times (Wednesday, Sept. 18, 2019): A1 & A12.

(Note: ellipsis, and bracketed date, added.)

(Note: the online version of the story has the date Sept. 17, 2019, and has the title “Almost Everywhere,Fewer Children Are Dying.” In the last paragraph quoted above, the wording follows the online version, and not the print version. The order of the authors’ names in the online version is: Josh Katz, Alicia Parlapiano and Margot Sanger-Katz.)

Low-Skilled Workers Benefit from Economic Growth

(p. A2) For years, falling wages and high unemployment seemed proof that low-wage workers needed an entirely new set of skills to succeed in an economy shaped by technological change and globalization.

It turns out what they needed most was time. As the economic expansion reaches a record age and unemployment remains near generation lows, the fortunes of low-skilled workers have turned up markedly. What looked like a permanent setback may be mostly cyclical. Continue reading “Low-Skilled Workers Benefit from Economic Growth”