Category: Economics

Salt Lake City’s ‘Robustly Redundant Labor Market’

(p. B1) As the pandemic raged through the U.S. in 2020, no metropolitan area in the country expanded the size of its labor force more on a percentage basis than Utah’s capital. It also had the lowest average unemployment rate and the highest share of people working or looking for jobs. These signs of strength helped it rank first among 53 large metro areas in an annual examination of U.S. labor markets conducted by The Wall Street Journal, after ranking No. 4 in 2019.

Other cities that emerged as beacons to job seekers and businesses during the pandemic were, like Salt Lake City, located far from the coasts. Hubs in the Southwest and Midwest such as Austin, Denver, Indianapolis and Kansas City minimized employment losses, kept unemployment relatively low and retained and attracted workers in a year when the U.S. lost more than 9 million jobs.

Some benefited from technology jobs that became even more critical during a time of isolation for many Americans, while others relied on older corners of the economy that were also in high demand. Workers gravitated to these places due to the job opportunities, lower costs and a quieter lifestyle that appealed to some migrants from bigger population centers who were now allowed to work remotely.

The losers were tourist hot spots such as Las Vegas or densely-populated cities such as New York, Los Angeles and Chicago that lost workers as the coronavirus spread. Even once-hot tech hubs of San Francisco, Raleigh, N.C., and Boston suffered de-(p. B8)clines. Some of these laggards were more aggressive with their business lockdowns, allowing rival metros with fewer restrictions and lower costs to capitalize on the chaos.

. . .

Salt Lake City wasn’t immune from the spread of Covid-19, but it was able to avoid multiple shutdowns that crippled other cities. It did so partly because of a shared local effort to keep businesses open. The local chamber of commerce and state health department partnered on a campaign where participating local companies committed to having their employees maintain distance from others, wear masks and stay home when they are sick.

. . .

“It appears to be exceptionally friendly to business here,” Mr. Mulligan said. His company, Pubtelly LLC, sells software to sports bars and similar establishments to manage content playing on their TVs. The Salt Lake area has a healthy (p. B9) mix of growing startups and well-established companies, he said, plus a strong local university network that serves as a pipeline for younger talent.

If his current venture doesn’t pan out, Mr. Mulligan said he would be happy to stay in the Salt Lake area, either working for a local company or launching another business. “I don’t see a challenge with either going to work for someone else, or forming a company with others,” he said.

For the full story, see:

Danny Dougherty, Hannah Lang, Kim Mackrael. “The New American Boomtowns.” The Wall Street Journal (Saturday, April 10, 2021): B1 & B8-B9.

(Note: ellipsis added.)

(Note: the online version of the story has the date April 9, 2021, and has the title “Where Can You Find a New Job? Try These U.S. Cities.”)

Mundell Thought Low Taxes Nourish Entrepreneurs

(p. B11) Robert A. Mundell, a Nobel Prize-winning economist whose theorizing opened the door to understanding the workings of global finance and the modern-day international economy, while his more iconoclastic views on economic policy fostered the creation of the euro and the adoption of the tax-cutting approach known as supply-side economics, died on Sunday [April 4, 2021] at his home, a Renaissance-era palazzo that he and his wife restored, near Siena, Italy.

. . .

. . . he provided intellectual grounding for lowering the top tax rates on the rich, whose advocates rallied under the banner of supply-side economics and won over many right-leaning politicians and policymakers in the United States, Britain and elsewhere while drawing the scorn of more progressive economists, who disputed the notion that cutting taxes for the wealthy was the best way to spur economic growth.

“Supply-side economics made the argument that steeply progressive tax rates reduced the size of the pie to be distributed,” Professor Mundell said in a 2006 interview with the American Economic Association. “The poor might be better off with a smaller share of a larger pie than with a larger share of a small pie.”

To encourage a growing economy, he argued for keeping the maximum tax rate under 25 percent. “The stimulus and rewards of the entrepreneurial group must be fed and nourished,” he said in a 1986 interview.

His ideas were promoted with evangelical fervor in the 1970s particularly by Arthur Laffer, an economist who became known for the “Laffer curve,” postulating that lower tax rates would generate higher government revenues, and Jude Wanniski, an editorial writer for The Wall Street Journal, whose opinion pages took up Professor Mundell’s cause after a series of lunches and dinners at a Lower Manhattan restaurant, Michaels 1, which were later described by Robert Bartley, The Journal’s opinion editor, in his book “The Seven Fat Years” (1992).

For the full obituary, see:

Tom Redburn. “Robert Mundell, a Father of the Euro and Reaganomics, Dies at 88.” The New York Times (Tuesday, April 6, 2021): B11.

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

(Note: the online version of the obituary was updated April 6, 2021, and has the title “Robert A. Mundell, a Father of the Euro and Reaganomics, Dies at 88.”)

The book by Bartley mentioned above is:

Bartley, Robert L. The Seven Fat Years: And How to Do It Again. New York: Free Press, 1992.

China’s Economic Surge Not Shared by Consumers and Small Businesses

(p. B1) Factories are whirring, new apartments are being snapped up, and more jobs are up for grabs. When China released its new economic figures on Friday, they showed a remarkable postpandemic surge.

The question is whether small businesses and Chinese consumers can fully share in the good times.

China reported on Friday that its economy grew by a jaw-dropping 18.3 percent in the first three months of the year compared with the same period last year. While the figure is steep, it is as much a reflection of the past — the country’s output shrank 6.8 percent in the first quarter of 2020 from a year earlier — as it is an indication of how China is doing now.

A year ago, entire cities were shut down, planes were grounded and highways were blocked to control the spread of a relentless virus. Today, global demand for computer screens and video consoles that China makes is soaring as people work from home and as a pandemic recovery beckons. That demand has continued as Americans with stimulus checks look to spend money on patio furniture, electronics and other goods made in Chinese factories.

China’s recovery has also been powered by big infrastructure. Cranes dot city skylines. Construction projects for highways and railroads have provided short-term jobs. Property sales have also helped strengthen economic activity.

But exports and property investment can carry China’s growth only so far.

. . .

(p. B3) A slow vaccination rollout and fresh memories of lockdowns have left many consumers in the country skittish.  . . .  When virus outbreaks occur, the Chinese authorities are quick to put new lockdowns in place, hurting small businesses and their customers.

. . .

Families continue to save at a higher rate than they did before the pandemic, something that worries economists like Louis Kuijs, who is head of Asian economics at Oxford Economics. Mr. Kuijs is looking at household savings as an indication of whether Chinese consumers are ready to start splurging after months of being stuck at home.

“More people still seem to not go all the way in terms of carefree spending,” he said. “At times there are still some lingering Covid concerns, but there is perhaps also a concern about the general economic situation.”

. . .

Mr. [Jinqiu] Li, who is recently married and has a baby at home, is still choosing to save instead of spend. He had planned to work for the family business, but it has been hit by the pandemic and he doesn’t think there is much opportunity for him if he stays.

“The whole family has some sense of crisis,” Mr. Li said. “Because of the pandemic and because of family business, I have a sense of crisis.”

For the full story, see:

Alexandra Stevenson and Cao Li. “China’s Gain Is Hardly Felt by the People.” The New York Times (Friday, April 16, 2021): B1 & B3.

(Note: ellipses, and bracketed first name, added.)

(Note: the online version of the article has the date April 15, 2021, and has the title “China’s Economy Is Booming. Shoppers Are Skittish Anyway.” The quote starting “More people” appeared in the print, but not in the online, version of the article.)

The Wealthy Benefit More from Lower Corporate Tax Rates than from Lower Income Tax Rates

(p. A18) The main cause of the radical decline in tax rates for very wealthy Americans over the past 75 years isn’t the one that many people would guess. It’s not about lower income taxes (though they certainly play a role), and it’s not about lower estate taxes (though they matter too).

The biggest tax boon for the wealthy has been the sharp fall in the corporate tax rate.

. . .

Since the mid-20th century, however, politicians of both political parties have supported cuts in the corporate-tax rate, often under intense lobbying from corporate America. The cuts have been so large — including in President Donald Trump’s 2017 tax overhaul — that at least 55 big companies paid zero federal income taxes last year, according to the Institute on Taxation and Economic Policy. Among them: Archer-Daniels-Midland, Booz Allen Hamilton, FedEx, HP, Interpublic, Nike and Xcel Energy.

The justification for the tax cuts has often been that the economy as a whole will benefit — that lower corporate taxes would lead to company expansions, more jobs and higher incomes. But it hasn’t worked out that way. Instead, economic growth has been mediocre since the 1970s. And incomes have grown even more slowly than the economy for every group except the wealthy.

For the full commentary, see:

David Leonhardt. “‘A Dirty Little Secret’: Corporate Tax Rates and the Very Rich.” The New York Times (Thursday, April 8, 2021): A18.

(Note: ellipsis added.)

(Note: the online version of the commentary has the same date as the print version, and has the title “Corporate Taxes Are Wealth Taxes.” Where the print and online versions differ, the passages above follow the print version.)

Productivity Pessimist Robert Gordon Becomes More Optimistic

(p. A2) After a decadelong drought, worker productivity might be about to accelerate thanks to pandemic-induced technological adoption, which could lift economic growth and wages in coming years while staving off inflation pressure.

. . .

Robert Gordon, a professor at Northwestern University who has studied productivity and living standards during the past century, said productivity growth slowed after 2005 because the payoff from computers faded and new inventions such as smartphones and tablets didn’t revolutionize business operations. In 2015 he had predicted productivity growth of only 1.5% a year over the next 25 years. Recent developments have made him more optimistic, and he expects annual productivity growth of about 1.8% this decade.

A shift toward e-commerce should push up productivity by eliminating workers needed in bricks-and-mortar stores, Mr. Gordon said. Videoconferencing should also help, though the public-transit sector could offset some of the gains because buses and rail transit will carry fewer riders, he said.

. . .

Remote work could deliver a one-time 4.7% lift to productivity after the pandemic, though a large share of the growth will stem from shortened commutes that government productivity data won’t fully capture, according to a working paper from Stanford University’s Nicholas Bloom and co-authors.

For the full commentary, see:

Sarah Chaney Cambon. “Productivity Looks Ready to Pick Up.” The Wall Street Journal (Saturday, April 5, 2021): A2.

(Note: ellipses added.)

(Note: the online version of the commentary has the date April 4, 2021, and has the title “U.S.’s Long Drought in Worker Productivity Could Be Ending.”)

Gordon’s pessimistic old views were most fully expressed in his much-discussed:

Gordon, Robert J. The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War. Princeton, NJ: Princeton University Press, 2016.

The working paper co-authored by Bloom is:

Barrero, Jose Maria, Nicholas Bloom, and Steven J. Davis. “Why Working from Home Will Stick.” Working Paper, April 1, 2021.

Krugman Argues Costly Universal Basic Income (UBI) Not Justified by Automation

(p. A22) [Andrew] Yang’s claim to fame is his argument that we’re facing social and economic crises because rapid automation is destroying good jobs and that the solution is universal basic income — a monthly check of $1,000 to every American adult. Many people find that argument persuasive, and one can imagine a world in which both Yang’s diagnosis and his prescription would be right.

But that’s not the world we’re living in now, and there’s little indication that it’s where we’re going any time soon.

Let’s do a fact check: Are we actually experiencing rapid automation — that is, a rapid reduction in the number of workers it takes to produce a given amount of stuff? That would imply a rapid rise in the amount of stuff produced by each worker still employed — that is, rapidly rising productivity.

But that’s not what we’re seeing. In fact, the lead article in the current issue of the Monthly Labor Review, published by the Bureau of Labor Statistics, is an attempt to understand the productivity slowdown — the historically low growth in productivity since 2005. This slowdown has been especially pronounced in manufacturing, which has seen hardly any productivity rise over the past decade.

. . .

The recently enacted American Rescue Plan gave most adults a one-time $1,400 payment, at a cost of $411 billion.

. . .

. . . the Yang proposal to pay $12,000 a year would cost more than eight times as much every year — well over $3 trillion a year, in perpetuity. Even if you aren’t much worried about either debt or inflationary overheating right now (which I’m not), you have to think that sustained spending at that rate would both cause problems and conflict with other priorities, from infrastructure to child care.

For the full commentary, see:

Paul Krugman. “Andrew Yang Hasn’t Done the Math.” The New York Times (Friday, April 16, 2021): A22.

(Note: ellipses, and bracketed first name, added.)

(Note: the online version of the commentary has the date April 15, 2021, and has the same title as the print version.)

Clarity Is Rewarded, at Least Among Cave Experts

After Deirdre McCloskey published her classic “Economical Writing” in Economic Inquiry, Jack High published a critique in the same journal arguing that young economists would ruin their careers if they followed McCloskey’s advice to write clearly. High claimed that clear writing would be less published and economists who wrote more clearly would therefore be less likely to receive tenure. McCloskey published a rebuttal saying that clear writing was more likely to be published, to be read, and to help the writer receive tenure. But she added that even if she was wrong about that, we should try to write clearly because it is the right thing to do.

The study mentioned below provides some evidence to support McCloskey’s claim that clarity is rewarded.

(p. D2) . . . a team of researchers has analyzed jargon in a set of over 21,000 scientific manuscripts. The study focused on manuscripts written by scientists who study caves, . . .

They found that papers containing higher proportions of jargon in their titles and abstracts were cited less frequently by other researchers. Science communication — with the public but also among scientists — suffers when a research paper is packed with too much specialized terminology, the team concluded.

For the full story, see:

Katherine Kornei. “Confused by All That Scientific Jargon? So Are the Scientists.” The New York Times (Tuesday, April 13, 2021): D2.

(Note: ellipses added.)

(Note: the online version of the article has the date April 9, 2021, and has the title “Are You Confused by Scientific Jargon? So Are Scientists.” Where the wording in the online version differs from the wording in the print version, the passages quoted above follow the print version.)

The study discussed in the passages quoted above is:

Martínez, Alejandro, and Stefano Mammola. “Specialized Terminology Reduces the Number of Citations of Scientific Papers.” Proceedings of the Royal Society of Britain (April 7, 2021)
https://doi.org/10.1098/rspb.2020.2581.

The McCloskey classic article, and the exchange with Jack High, are:

McCloskey, Deirdre. “Economical Writing.” Economic Inquiry 23, no. 2 (April 1985): 187-222.

High, Jack C. “The Costs of Economical Writing.” Economic Inquiry 25, no. 3 (July 1987): 543-45.

McCloskey, Deirdre. “Reply to Jack High.” Economic Inquiry 25, no. 3 (July 1987): 547-548.

Still Plenty of Fruit to Pick from the Tree of Science

Some pessimists have argued for imminent economic stagnation on the grounds that technological progress depends on new scientific knowledge and that we already pretty much know all there is to know about science. One way in which they are wrong is that the process of scientific discovery still has a long way to go before we fully understand the world. (If C.S. Peirce was right in saying that truth is the result of infinite inquiry, then we will never fully understand the world.)

(p. A1) Evidence is mounting that a tiny subatomic particle seems to be disobeying the known laws of physics, scientists announced on Wednesday, a finding that would open a vast and tantalizing hole in our understanding of the universe.

The result, physicists say, suggests that there are forms of matter and energy vital to the nature and evolution of the cosmos that are not yet known to science. The new work, they said, could eventually lead to breakthroughs more dramatic than the heralded discovery in 2012 of the Higgs boson, a particle that imbues other particles with mass.

“This is our Mars rover landing moment,” said Chris Polly, a physicist at the Fermi National Accelerator Laboratory, or Fermilab, in Batavia, Ill., who has been working toward this finding for most of his career.

The particle célèbre is the muon, which is akin to an electron but far heavier, and is an integral element of the cosmos. Dr. Polly and his colleagues — an international team of 200 physicists from seven countries — found that muons did not behave as predicted when shot through an intense magnetic field at Fermilab.

The aberrant behavior poses a firm challenge to the Standard Model, the suite of equations that enumerates the fundamental particles in the universe (17, at last count) and how they interact.

“This is strong evidence that the muon is sensitive to something that is not in our best theory,” said Renee Fatemi, a physicist at the University of Kentucky.

. . .

(p. A19) For decades, physicists have relied on and have been bound by the Standard Model, which successfully explains the results of high-energy particle experiments in places like CERN’s Large Hadron Collider. But the model leaves many deep questions about the universe unanswered.

Most physicists believe that a rich trove of new physics waits to be found, if only they could see deeper and further. The additional data from the Fermilab experiment could provide a major boost to scientists eager to build the next generation of expensive particle accelerators.

For the full story, see:

Dennis Overbye. “A Particle’s Tiny Wobble Could Upend the Known Laws of Physics.” The New York Times (Friday, April 16, 2021): A1 & A19.

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

(Note: the online version of the article was updated April 9, 2021, and has the title “A Tiny Particle’s Wobble Could Upend the Known Laws of Physics.”)

My point at the start of this entry is directly relevant to my argument in the first half of the last chapter of:

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

Where Hospitals Charge Higher Prices for C-Sections, More C-Sections Are Performed

(p. B6) The more a hospital profits from a cesarean delivery, the more likely a woman is to get one, a new analysis suggests.

For the study, published in JAMA Network Open, researchers analyzed records of 13.2 million deliveries nationwide from 2010 to 2014, using a large database of generally healthy women.

. . .

During that period, profit from C-sections varied, from an average of $4,969 for the one-quarter of hospitals with the lowest charges to $26,129 for the quarter that charge the most.

The researchers found that compared with the one-quarter of hospitals that averaged the lowest profit per cesarean, those that made the most per formed 8 per cent more C-sections.

For the full story, see:

Nicholas Bakalar. “In Brief; Making Profits From C-Sections.” The New York Times (Tuesday, April 13, 2021): D6.

(Note: ellipsis added.)

(Note: after considerable search, I could not find this article in the online version of the NYT as of 4/24/21.)

The JAMA Network Open article discussed in the passages quoted above is:

Sakai-Bizmark, Rie, Michael G. Ross, Dennys Estevez, Lauren E. M. Bedel, Emily H. Marr, and Yusuke Tsugawa. “Evaluation of Hospital Cesarean Delivery–Related Profits and Rates in the United States.” JAMA Network Open 4, no. 3 (2021): e212235-e35.

Zoning Regulations Restrict Building Affordable Homes

(p. A25) Although zoning may seem like a technical, bureaucratic and decidedly local question, in reality the issue relates directly to three grand themes that Joe Biden ran on in the 2020 campaign: racial justice, respect for working-class people and national unity. Perhaps no single step would do more to advance those goals than tearing down the government-sponsored walls that keep Americans of different races and classes from living in the same communities, sharing the same public schools and getting a chance to know one another across racial, economic and political lines.

Economically discriminatory zoning policies — which say that you are not welcome in a community unless you can afford a single-family home, sometimes on a large plot of land — are not part of a distant, disgraceful past. In most American cities, zoning laws prohibit the construction of relatively affordable homes — duplexes, triplexes, quads and larger multifamily units — on three-quarters of residential land.

For the full commentary, see:

Richard D. Kahlenberg. “Zoning Is a Social Justice Matter.” The New York Times (Tuesday, April 20, 2021): A25.

(Note: the online version of the commentary has the date April 19, 2021, and has the title “The ‘New Redlining’ Is Deciding Who Lives in Your Neighborhood.”)

Mundell and Laffer Agreed High Taxes Hurt Poor

(p. A12) Robert A. Mundell began to make his name in the 1960s as a maverick economist eager to challenge his more orthodox colleagues. He ended up influencing mainstream economic policy in the U.S. and Europe in profound ways that few of his peers could have imagined.

. . .

Dr. Mundell’s influence on U.S. economic policy also dates to the 1960s. He was teaching at the University of Chicago when he met Arthur Laffer in 1967. Dr. Laffer, a Stanford-educated economist, later recalled their first meeting as a shock. “In walked a sallow, tousle-headed, pipe-smoking figure wearing a faded trench coat belted with a clothesline cord,” Dr. Laffer wrote.

The disheveled Dr. Mundell and the buttoned-down Dr. Laffer agreed that steeply progressive taxes were deterring investment and employment in ways that hurt the poor.

In the 1970s, Dr. Mundell argued that the U.S. should defy conventional economic wisdom by raising interest rates to protect the dollar’s value while reducing taxes to stimulate the economy. “I knew I was in the minority,” he said in an 1988 interview. “But I thought my vote should count much more than the others because I understood the subject.”

Dr. Laffer introduced Dr. Mundell and his ideas to Jude Wanniski and Robert Bartley of The Wall Street Journal editorial pages, whose work influenced Republican politicians including Jack Kemp and Mr. Reagan.

For the full obituary, see:

James R. Hagerty. “Canadian Economist Inspired U.S. Tax Cuts.” The Wall Street Journal (Saturday, April 6, 2021): A12.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date April 9, 2021, and has the title “Robert Mundell Helped Inspire U.S. Tax Cuts and the Euro.” In the last paragraph quoted above, the online version mentions Jack Kemp. The print version did not.)