Category: Economics

The Growing Pain of the Working-Class

Many of the working poor are indeed suffering. The solution is mainly to reduce government regulations, to allow a robustly redundant labor market and more opportunities for free-agent entrepreneurship. (See Openness to Creative Destruction.)

(p. 6) Ever since Bobbie Wert was 8 years old, her stomach has ached. “My tummy hurts,” was her refrain as a girl, and the discomfort was accompanied by vomiting and diarrhea that kept her out of school — sometimes for half the days in the school year.

Doctors poked and scanned but couldn’t figure out anything wrong. Over the years, they cut her open and removed bits and pieces yet couldn’t drive away the pain. So doctors prescribed opioids in increasing doses — even fentanyl patches — that left her addicted. At age 43, she now is off opioids but still suffers every single day, enduring chronic pain like an estimated 50 million other Americans.

Wert is part of a vast and mysterious panorama of pain that is increasing, sometimes with no obvious physical cause. And while chronic pain is a global problem, it is particularly puzzling in America. In other wealthy countries, it’s the elderly who report the most chronic pain, which makes some sense. But in the United States it’s the middle-aged — especially the jobless and people like Wert, who did not graduate from high school — who suffer the most. It is a plague on the less educated.

All this raises the question: Is this physical suffering a canary in the coal mine warning us of larger dysfunction in our society?

Here’s what we do know: Tens of millions of Americans are suffering pain. But chronic pain is not just a result of car accidents and workplace injuries but is also linked to troubled childhoods, loneliness, job insecurity and a hundred other pressures on working families.

. . .

“People’s lives are coming apart, and this leads to huge increases in physical pain,” said Angus Deaton, a Nobel Prize winner in economics who with Anne Case popularized the term “deaths of despair.” He, Case and Arthur Stone warn in a recent article that “the mystery of American pain reveals a warning for the future.”

Americans die from deaths of despair — drugs, alcohol and suicide — at a rate of more than a quarter-million a year, and the number of walking wounded is far greater.

For the full commentary, see:

Nicholas Kristof. “Why So Many Americans Are Feeling More Pain.” The New York Times, SundayOpinion Section (Sunday, May 7, 2023): 6-7.

(Note: ellipsis added. In the original last paragraph, the words “want” and “all” are in italics.)

(Note: the online version of the commentary has the date May 3, 2023, and has the title “Why Americans Feel More Pain.”)

The book by Deaton and Case alluded to above is:

Case, Anne, and Angus Deaton. Deaths of Despair and the Future of Capitalism. Princeton, N.J.: Princeton University Press, 2013.

Critique of Fed Claim That a Year of Above Average Temps Increases Odds of a Recession

(p. A17) . . . recently I published a critique of a study from the Federal Reserve Board claiming that a year of above-normal temperatures in countries around the world makes economic contraction more likely.

. . .

There are two main reasons why the Fed study appeared at first to show a statistically significant effect of temperatures on economic growth. First, each country in the sample had equal weight in the analysis. China had the same weight as St. Vincent though China’s population is 13,000 times as large. Equal weighting means that some small countries with unusual histories of economic growth greatly influenced the results.

The paper’s results disappeared when countries like Rwanda and Equatorial Guinea—which had economic catastrophes and bonanzas unrelated to climate change—were omitted. Omitting similar countries representing less than 1% of world gross domestic product was enough to eliminate the paper’s result. The complicated statistical techniques used in the Fed study magnified the influence of these unusual countries.

There’s a second reason why the Fed study appears to find that temperature affects growth: Many poor countries have warm climates. A warm climate doesn’t preclude economic growth, as is demonstrated by Florida, Arizona, Taiwan, Singapore and several Persian Gulf states. But the average poor country is warmer than the average rich country. Debate continues as to whether this correlation is random or causal, but the hypothesis of the Fed paper is that year-to-year increases in temperature reduce annual economic growth. The paper claims that its method controls for long-term differences in climate, but using simulated data I found that the Fed paper’s method can be fooled into finding an effect that doesn’t exist.

For the full commentary, see:

David Barker. “The Fed’s Climate Studies Are Full of Hot Air.” The Wall Street Journal (Monday, April 10, 2023): A17.

(Note: ellipses added.)

(Note: the online version of the commentary has the date April 9, 2023, and has the same title as the print version.)

Barker’s critique mentioned above is:

Barker, David. “Temperature and Economic Growth: Comment on Kiley.” Econ Journal Watch 20, no. 1 (March 2023): 69–84.

Political Challenges Were Greater Than Technology Challenges in Creating Geostationary Satellites

(p. A13) After the Soviet Union launched Sputnik 1, the world’s first satellite, in 1957, a 31-year-old Rosen was inspired to build “a lightweight satellite that, when launched into a high orbit above the equator, would mimic the Earth’s rotation and retain its relative position, like a spoke on a wheel.” Mr. Amelinckx goes on: “This geostationary satellite would provide twenty-four-hour global communications, something never before attempted. Rosen was excited.”

Indeed he was. Rosen was a brilliant electrical engineer who worked at Hughes Aircraft in California. His tenacity enabled him to surmount, over the following years, the seemingly endless number of infuriating obstacles that stood between him and his goal. There was the multitude of technical problems to be solved—from the satellite’s weight to its spin, antenna, solar panels and more. There were the questions from NASA, Congress, the Pentagon and aerospace companies about whether the U.S. should prefer low-orbit satellites or geostationary ones. (The latter would possess greater transmitting and receiving versatility, but many scientists were convinced that geostationary satellites, which orbit at much higher altitudes, were impractical and would “take years to develop.”)

Mr. Amelinckx notes that solving the political challenges proved more difficult than creating the necessary technologies. Fortunately for Rosen, President Kennedy was keen on communications satellites. And so in 1961, NASA began funding Hughes to create Rosen’s vision.

For the full review, see:

Howard Schneider. “BOOKSHELF; How ‘Early Bird’ Got the Worm.” The Wall Street Journal (Friday, April 14, 2023): A13.

(Note: the online version of the review has the date April 13, 2023, and has the title “BOOKSHELF; ‘Satellite Boy’ Review: How ‘Early Bird’ Got the Worm.”)

The book under review is:

Amelinckx, Andrew. Satellite Boy: The International Manhunt for a Master Thief That Launched the Modern Communication Age. Berkeley: Counterpoint, 2023.

Fuzzy Goals of ESG Firms Challenge Investors to Guess Their Future Success

(p. A13) Some movies not only entertain and inspire but convey broader lessons. “Air” is one of them. The film is about Nike’s efforts in 1984 to secure Michael Jordan’s endorsement of its basketball shoes, which soon after became the iconic Air Jordans. But it also tells anyone who will listen that ESG investing—environmental, social and governance—is a trap.

. . .

The Jordan family’s meeting with Adidas makes it apparent that the company has no clear leader or vision on how it would deal with Mr. Jordan in the future. This sense of confusion helps persuade the Jordans to sign with Nike, where leader Phil Knight is securely ensconced, ensuring against any radical change of direction in Nike’s relationship with Mr. Jordan.

. . .

Michael Jordan wasn’t willing to invest his personal brand in a fluctuating operation.

Investors should be even more wary when considering companies that pursue ESG. At the time of Mr. Jordan’s sponsorship decision, everyone at least agreed that the lone goal of a company was to maximize value for shareholders. Under ESG investing, by contrast, conflicts arise not only over how best to pursue company goals but over what the goals are.

For the full commentary, see:

Donald J. Boudreaux and David R. Henderson. “‘Air’ Is a Cautionary Tale About ESG.” The Wall Street Journal (Friday, April 14, 2023): A13.

[Note: ellipsis and bracketed year added.]

(Note: the online version of the commentary has the date April 13, 2023, and has the same title as the print version.)

The “Huge Opportunity Cost” of Congress Keeping Obsolete Warthog Planes Flying

(p. A1) The Air Force has said for years that the A-10 jets, nicknamed Warthogs for their bulky silhouette and toughness in a fight, have passed their prime and will be vulnerable in the wars of the future. The production line where they were made fell silent in the mid-1980s, and the average A-10 here is four decades old. Its job can be done by newer, more advanced planes, the Air Force says.

“The A-10, while it has served us well, is simply not a part of the battlefield of the future,” said Lt. Gen. Richard Moore, the Air Force’s deputy chief of staff for plans and programs.

Congress has other ideas. Bowing to members whose constituencies are dependent on the jet for jobs and the flow of federal tax dollars, it has instead insisted nearly all the planes keep flying at a cost of more than $4 billion over the past 10 years.

This kind of intervention is common—and is (p. A9) impairing the U.S.’s ability to respond to rapidly modernizing Chinese forces in a new era of great-power competition, say current and former senior defense officials and military analysts.

Efforts by lawmakers to bring military jobs and funding to their districts and keep them there are as old as Congress itself. But they come at a huge opportunity cost at a time when the U.S. is facing its most formidable adversary since the end of the Cold War. Congress is in effect forcing the Pentagon to spend billions on programs for which it sees no role in future wars.

For the full story, see:

Daniel Nasaw. “Why Is America Still Flying the A-10 Warthog, a Cold War Relic?” The Wall Street Journal (Friday, April 14, 2023): A1 & A9.

(Note: the online version of the story has the date April 13, 2023, and has the same title as the print version.)

Biden EV Goals Depend on “Troubled” Business Model for Fast Charging

(p. A13) President Biden’s EV ambitions will hinge in large part on the availability of public places to plug in and repower cars reliably, a network that largely doesn’t exist. Building it won’t be easy.

While the government is (p. A2) pouring billions of dollars into developing a national highway charging network, many companies aren’t sure how they will make money off the nascent business. Fast charging requires expensive utility infrastructure and projects often encounter supply chain hang ups and long wait times to connect to the grid.

. . .

The business model for fast charging has been troubled because there aren’t enough EVs in most places yet for charging to turn a profit. Yet EV advocates say many drivers will only be comfortable purchasing vehicles if rapid charging is widely available.

Utility companies and gas stations have been arguing across several states about who will own and operate EV chargers. The expensive utility bills that can result from delivering quick jolts of power have been a particular point of contention. Meanwhile, the young companies that provide charging gear and services have struggled with equipment on the fritz, vandalism and driver payment systems, a frequent source of failure.

For the full story, see:

Jennifer Hiller. “Fast Electric-Vehicle Chargers Get Boost, But Hurdles Lurk.” The Wall Street Journal (Friday, April 14, 2023): A1-A2.

(Note: ellipsis added.)

(Note: the online version of the story was updated April 13, 2023, and has the title “Fast EV Chargers to Nearly Double on U.S. Highways Under Expansion Plan.” In the first paragraph quoted above, the online version has “Mr. Biden’s” instead of “President Biden’s.”)

Towns Flourish When Entrepreneurs Want to Live in Them

(p. B1) SIDNEY, Neb. — The forest green roof and pair of bronze stags frozen in combat are impossible to miss as you drive down Interstate 80.

. . .

For 54 years, Cabela’s made its home here, a juggernaut that kept the town humming. But in 2017, the sporting goods store sold for $5 billion to Bass Pro Shops — a takeover that eventually made 2,000 jobs vanish in a town of roughly 6,600 residents.

. . .

But Sidney’s staying power still surprises experts, who say it’s driven by two factors.

One: Former Cabela’s employees opening their small businesses, diversifying the economy in a formerly one-company town.

Two: A recent influx of new (p. B3) residents, both retirees and remote workers.

. . .

Each spring, high schoolers from Nebraska and neighboring states flock to Sidney searching for the perfect prom dress. Their destination: Charlotte & Emerson, a downtown boutique — and one example of Sidney’s rebirth from the ashes of Cabela’s.

Co-owner Sarah Kaiser and husband Kurt Kaiser both worked at Cabela’s. When the company was swallowed by Missouri-based Bass Pro, the family relocated there as Sarah Kaiser ran the combined company’s human resources.

But in 2020, they decided to return to Sidney, her hometown. Sarah Kaiser opened Charlotte & Emerson with her sister. Her husband launched an online fitness store, Frost Giant Fitness. They’re two of many Sidney-based companies run by ex-Cabela’s employees who decided to stick around and start something new.

“The corporate experience of these young folks really was key to this particular recovery,” said David Iaquinta, a Nebraska Wesleyan University sociology professor who has researched Sidney’s economic development. “. . . they combined that talent with a strong desire for the lifestyle that they had. They said, ‘We’re here. We’re rooted here.’”

Budding companies are being boosted by E3, a Nebraska Community Foundation program meant to aid entrepreneurship in rural Nebraska.

Already, new businesses have remodeled once-dilapidated buildings, said Sarah Sinnett, the program’s community lead.

. . .

Economic development in Nebraska “used to be about cheap land, cheap labor and cheap incentives” to nab big companies, Stinnett said.

Now: “If you want small towns to start thriving … really it needs to be focused on entrepreneurship,” she said.

For the full story, see:

Natalia Alamdari, Flatwater Free Press. “Sydney Shows Staying Power.” Omaha World-Herald (Sunday, April 23, 2023): B1 & B3.

(Note: ellipses between paragraphs, and bracketed date, added; ellipsis internal to paragraph, in original.)

(Note: the online version of the story was updated April 28, 2023, and has the title “Six years after ‘Cabela’s debacle,’ Sidney’s lights are still on.”)

Majority Doubt College Degree Is Good Investment

(p. A3) A majority of Americans don’t think a college degree is worth the cost, according to a new Wall Street Journal-NORC poll, a new low in confidence in what has long been a hallmark of the American dream.

The survey, conducted with NORC at the University of Chicago, a nonpartisan research organization, found that 56% of Americans think earning a four-year degree is a bad bet compared with 42% who retain faith in the credential.

Skepticism is strongest among people ages 18-34, and people with college degrees are among those whose opinions have soured the most, portending a profound shift for higher education in the years ahead.

For the full story, see:

Douglas Belkin. “More Say Colleges Aren’t Worth the Cost.” The Wall Street Journal (Saturday, April 1, 2023): A3.

(Note: the online version of the story has the date March 31, 2023, and has the title “Americans Are Losing Faith in College Education, WSJ-NORC Poll Finds.”)

“Race-Conscious Affirmative Action” Creates “Racial ‌Animosity”

(p. A1) Since picking up a memoir of Robert F. Kennedy at a garage sale his senior year of high school, Mr. Kahlenberg, 59, has cast himself as a liberal champion of the working class. ‌ For three decades, his work, largely at a progressive think tank, has used empirical research and historical narrative to argue that the working class has been left behind.

That same research led him to a conclusion that has proved highly (p. A17) unpopular within his political circle: that affirmative action is best framed not as a race issue, but as a class issue.

In books, ‌articles and academic papers, Mr. Kahlenberg has spent decades‌ ‌arguing for a different vision of diversity, one based in his 1960s idealism. He believes that had they lived, Kennedy and the Rev. Dr. Martin Luther King Jr. would have pursued a multiracial coalition of poor and working class people, a Poor People’s ‌Campaign that worked together toward the same goal of economic advancement in education, employment and housing. ‌ ‌

Race-conscious affirmative action, while it may be well intentioned,‌ ‌does just the opposite, he says — aligning with the interests of wealthy students‌ and creating racial ‌animosity.

With class-conscious affirmative action, “Will there be people in Scarsdale who are annoyed that working-class people are getting a break? Probably,” he said in an interview. “But the vast majority of Americans support the idea, and you see it across the political spectrum.”

His advocacy has brought him to an uncomfortable place. The Supreme Court is widely expected to strike down race-conscious affirmative action this year in cases against Harvard and the University of North Carolina. He has joined forces with the plaintiff, Students for Fair Admissions, run by a conservative activist; the group has paid him as an expert witness and relied on his research to support the idea that there is a constitutional “race-neutral alternative” to the status quo.

That alliance has cost him his position as a senior fellow at the Century Foundation, the liberal-leaning think tank where he had found a home for 24 years, according to friends and colleagues.

. . .

Mr. Kahlenberg studied government and went on to Harvard Law School, where he wrote a paper about class-based affirmative action, advised by Alan Dershowitz, his professor, known for defending unpopular causes and clients.

The paper inspired him to write his influential 1996 book, “The Remedy,” which developed his theory that affirmative action had set back race relations by becoming a source of racial antagonism.

“If you want working-class white people to vote their race, there’s probably no better way to do it than to give explicitly racial preferences in deciding who gets ahead in life,” he said. “If you want working-class whites to vote their class, you would try to remind them that they have a lot in common with working-class Black and Hispanic people.”

For the full story, see:

Anemona Hartocollis. “Acolyte of the Left Aims to Kill Race-Based College Admission.” The New York Times (Thursday, April 6, 2023): A1 & A17.

(Note: ellipsis added.)

(Note: the online version of the story was updated April 3, 2023, and has the title “The Liberal Maverick Fighting Race-Based Affirmative Action.”)

Kahlenberg’s “influential” book mentioned above is:

Kahlenberg, Richard D. The Remedy: Class, Race, and Affirmative Action. New York: Basic Books, 1997.

For Musk, Buying Twitter “Needed to Be Done”

(p. A8) LONDON — Billionaire Elon Musk told the BBC that running Twitter has been “quite painful” but claimed the social media company is now roughly breaking even after he acquired it late last year.

In an interview also streamed live late Tuesday [April 11, 2023] on Twitter Spaces, Musk discussed his ownership of the online platform, including layoffs, misinformation and his work style.

. . .

After acquiring the platform, Musk carried out mass layoffs as part of cost-cutting efforts. He said Twitter’s workforce was slashed to about 1,500 employees from about 8,000 previously.

“It’s not fun at all,” Musk said. “The company’s going to go bankrupt if we don’t cut costs immediately. This is not a caring-uncaring situation. It’s like if the whole ship sinks, then nobody’s got a job.”

Asked if he regretted buying the company, he said it was something that “needed to be done.”

For the full story, see:

Associated Press. “Musk says owning Twitter ‘painful’ but needed to be done.” Omaha World-Herald (Tuesday, April 13, 2023): A8.

(Note: ellipsis, and bracketed date, added)

(Note: the online version of the story has the date April 12, 2023, and has the same title as the print version.)

National Public Radio (NPR) Is “U.S. State-Affiliated Media”

Nobel-Prize-winner F.A. Hayek in The Road to Serfdom wisely worried about the independence of the press when it is funded by the government.

(p. B6) Twitter on Tuesday [April 5, 2023] evening added a label to National Public Radio’s account on the social network, designating the broadcaster “U.S. state-affiliated media.”

. . .

Twitter’s guidelines define state-affiliated accounts as “outlets where the state exercises control over editorial content through financial resources, direct or indirect political pressures, and/or control over production and distribution.” Other news media accounts with the label include RT of Russia and Xinhua of China.

According to cached versions of Twitter’s published policy, for much of Tuesday the guidelines noted that NPR and the BBC of Britain did not receive the label because they were “state-financed media organizations with editorial independence.” The reference to NPR has since been deleted from that policy.

. . .

Mr. Musk did not respond to a request for comment, and an email to Twitter’s communications department was returned with a poop emoji autoreply. Mr. Musk tweeted in apparent support of the move, posting a passage from Twitter’s policy and saying it “seems accurate” in a reply to a user pointing out the label on NPR’s account.

For the full story, see:

Lora Kelley. “In Policy Shift, Twitter Calls NPR ‘State-Affiliated Media.” The New York Times (Thursday, April 6, 2023): B6.

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

(Note: the online version of the story has the same date April 5, 2023, and has the title “Twitter Labels NPR ‘State-Affiliated Media,’ in Change to Policy.”)

Hayek’s book mentioned above is:

Hayek, Friedrich A. von. The Road to Serfdom. Chicago: University of Chicago Press, 1944.