Noah Smith writes,

economists were more likely than the public to support the U.S. auto bailouts, by 58.6 percent to 52 percent. They were also more likely to support President Barack Obama’s economic stimulus bill, by 52.8 percent to 43.4 percent. More economists — over 97 percent — were in favor of tax hikes, and fewer supported school-voucher programs.

He cites a paper by Sapienza and Zingales.

On a related note, Barry Eichengreen praises capital controls.

It’s fair to say that the vast majority of economists are deeply skeptical about (if not downright hostile toward) their imposition. Yet it is not hard to find evidence in international financial markets of the kind of distortions that are likely to lead to imperfect information and, as a result, to economically inefficient and socially undesirable outcomes.

Pointer from Mark Thoma.

In a related essay, Smith argues that the current debate in economics is between the center-left and the radical left.

The New Center-Left Consensus is attractive to academics and policy wonks. It draws on an eclectic mix of mainstream economic theory, empirical studies and historical experience. It refuses to assume, as many conservatives and libertarians do, that free markets are always the best unless there is a glaring case for government intervention. It’s more willing to entertain all kinds of ways that government can improve the economy, from welfare to infrastructure spending to regulation, but it also recognizes that these won’t always work. . .

But there’s a second strain of progressive economic thinking that is gaining attention and strength. This alternative could be called the New Heterodox Explosion. It’s basically a movement to purge mainstream economics from progressive policy-making and thought.

Smith and the left dismiss those of us who favor free markets as outmoded and simple-minded. So the real debate is between economists who believe that elite mainstream economists know best how to fix the economy and others who believe that complexity theorists or evolutionary economists know best how to fix the economy.

I think that he accurately portrays the state of the discussion. I cannot think of a period in my life when market-oriented economists had less respect, unless it was the early 1960s when “fine tuning” had yet to be discredited.

AT&T and Time-Warner

Tyler Cowen writes,

it is hard to see where the efficiencies from the deal are supposed to come from

That is an understatement. AT&T seems to have some combination of excess cash and ability to borrow at attractive interest rates. If I were a shareholder, I would want the company to pay me a large dividend, and then leave it up to me how much I want to invest in Time-Warner.

My guess is that the people who want to block the merger are concocting scenarios of bad behavior or excessive control that are highly implausible. However, I find scenarios in which the merger provides social benefits to be at least as implausible.

I see this sort of transaction as indicative of some sort of distortion in capital markets. One or both of those companies should have returned more cash to shareholders, and for some reason they didn’t.

Timothy Taylor on Home Ownership Trends

He writes,

Notice that homeownship rates tend to be much lower in large cities: indeed, if a homeownership rate below 50% seems implausible to you, you might reflect on the fact that this is already a reality in US cities. Notice also that homeownership rates in the Northeast and West regions are already below 60% (of course, this is in substantial part because there are more large cities in these regions). Thus, one’s belief about the future of homeownership is in some ways a statement about where people choose to live in the future.

In my view, the main drawback to renting (government distortions aside) is that you have to negotiate with the owner concerning maintenance and renovations. Perhaps somebody should work on contracts that address this.

As of now, one party (typically the landlord) must bear all of the costs, but maintenance and renovation is only done at the landlord’s discretion. One can imagine a different arrangement that allows the tenant to have discretion, but with incentive to protect the landlord’s interest.

For example, the cost of basic maintenance, such as fixing the HVAC system when there is a problem, could be split 80-20 between the landlord and the tenant. Because the tenant has skin in the game, the tenant gets to be in charge of getting the system fixed.

On the other hand, the cost of renovation, such as a kitchen remodeling, might be split closer to 50-50. Again, the tenant is in charge. The tenant pays a higher share than in the case of basic maintenance, because the renovation might prove less valuable to a subsequent tenant.

Another contractual possibility would be to address the state of the dwelling when the tenant leaves. In principle, the landlord could be compensated by the tenant for damage (that is what security deposits do, up to a point), and the tenant could be compensated by the landlord for increases in property value due to upgrades paid for by the tenant.

What Socialism Looks Like in America

New York state legislature effectively bans airbnb. It does so by imposing a $7500 fine on anyone who so much as advertises a short-term rental.

“The bill says: You can’t advertise an illegal activity,’” Assemblywoman Deborah Glick, a Manhattan Democrat who supported the bill, told the Wall Street Journal in June. “I don’t know what the big confusion is.”

Actually, those of us who favor free speech probably should argue that you should be able to advertise to sell heroin or any other illegal good or service. Prosecution should take place for the sale, not for the advertisement.

My larger point is that people who favor socialism here seem to think that it will somehow turn out to be pristine and un-corrupt. Instead, as Milton Friedman pointed out, the attempt to regulate markets eventually undermines every other form of freedom.

Doug Elmendorf on the Debt

He writes,

Together with Brookings Senior Fellow Louise Sheiner, I have analyzed alternative explanations for low Treasury rates and the implications of each for budget policy (Elmendorf and Sheiner, 2016). We found that most explanations imply that the country should have a higher debt-to-GDP ratio than otherwise. We find that most explanations also imply that federal investment should be higher than otherwise, and I will come back to that later. The intuition for these results is that interest rates show the direct cost to the Treasury of its borrowing and provide information about the indirect cost to the economy of Treasury borrowing—and if costs will be persistently much lower than we are accustomed to, then more borrowing, especially for investment, passes a cost-benefit test.

Pointer from Tyler Cowen.

Of course, one possible explanation for low interest rates is that growth prospects are poor. Another possible explanation is that we are in a bond bubble. If either of those turns out to be the case, then we are going to wish that we had less debt to contend with.

Creeping Socialism in Health Insurance

Jeffrey H. Anderson writes,

According to the Centers for Disease Control and Prevention (see table 1.2b), 66.8 percent of those living in the United States had private health insurance in 2007. Now, as of 2015 (the most recent year for which figures are available), only 65.6 percent of those living in the United States have private health insurance.

…Meanwhile, the CDC figures show that the percentage of people living in the United States who have public health coverage has risen dramatically, from 18.1 percent in 2007 to 25.3 percent in 2015 (see table 1.2a).

I was wondering how much of this reflects people aging into Medicare, but then I clicked on the link to the report and the tables are for Americans under 65. My guess is that future health care reforms (“fixing Obamacare”) will move us further in that direction.

How Fractal is High-skilled Immigration?

Sari Pekkala Kerr, William Kerr, Çaǧlar Özden, and Christopher Parsons write,

The number of migrants with a tertiary degree rose nearly 130 percent from 1990 to 2010, while low skilled (primary educated) migrants increased by only 40 percent during that time. A pattern is emerging in which these high-skilled migrants are departing from a broader range of countries and heading to a narrower range of countries—in particular, the United States, the United Kingdom, Canada, and Australia.

Pointer from Tyler Cowen.

I wonder if this pattern is fractal. That is, within the United States, do we see a net influx of high-skilled individuals to only a few metro areas? Within metro areas, do we see a net influx to only a few hot spots?

Sebastian Mallaby Interview

with Greg Ip of the WSJ.

The way that Greenspan protected and established the independence, authority and prestige of the central bank was by being more political than the politicians who criticized him. If they wanted to leak bad stories about him, he would leak three bad stories about them. If they wanted to try and entrap him in politics, you know what? He had contacts in the Senate. He would go over there and so and so, who was his enemy, suddenly would not get confirmed to a big administration position. So he knew the dark arts of politics better even than the politicians did.

…This model of the empowered expert, the political guru, is now in retreat in the era of Donald Trump, but it isn’t totally gone. I would say that’s the central legacy that Alan Greenspan has left to the United States.

Read the whole interview.

The Case for Manners

Henry Hazlitt wrote,

Too often moral codes, especially those still largely attached to religious roots, are ascetic and grim. Codes of manners, on the other hand, usually require us to be at least outwardly cheerful, agreeable, gracious, convivial—in short, a contagious source of cheer to others.

Pointer from Don Boudreaux.

I think that codes of manners also can be used to convey respect for others. You are telling people, including strangers, that you conduct yourself with them in mind.

I believe that restraint in the use of four-letter words used to serve this purpose, and it could once again serve this purpose. This puts me at odds with my fellow Baby Boomers and those who came after.