Casey Mulligan on Obamacare Tax Effects

He said,

In summary, the ACA has three major taxes in it. Two are taxes on full-time employment and the other is a tax on income. They may be implicit, they may be hidden, politicians may not call them taxes, but that’s what they are. Their economic impact on workers varies widely, affecting low-skill workers the most. They create all kinds of productivity problems and will have visible and permanent effects on the economy. I have estimated that employment will be three percent less over the long term because of the ACA, and that national income—or GDP, if you like to think of it that way—will be two percent less. If you look at the productivity costs alone—forgetting the fact that there will be a number of people not working anymore—they come to $6,000 per person who gets health insurance because of the law. And I’m not beginning to count the payments needed for health care providers.

Pointer from Don Boudreaux.

Ryan Avent on Urban Housing Supply

He writes,

Housing is more costly in the most expensive cities because so little of it is built. In the 2000s, Houston’s housing stock grew by more than 25 percent while that in the Bay Area grew just over 5 percent. In 2013 Houston approved 51,000 new homes while San Jose okayed fewer than 8,000, despite the booming Silicon Valley economy. Glaeser and Kristina Tobio find that since the 1980s, the extraordinarily rapid growth in the population of Sunbelt cities is due primarily to the receptiveness of those cities to new construction. A strengthening economy in places like Texas and Georgia leads to a construction boom and rapid population growth, while economic booms in coastal cities lead to very little population growth but soaring housing costs.

More Q where construction is allowed, higher P where it is not. Read the whole thing.

The Year of Flawed Books

Writing a “best books of the year” post for 2014 means choosing among flawed books.

Six months after Piketty’s Capital made its splash with the “law of capitalism” that r>g, we have Pikettarians saying that, of course, Piketty never said that r>g explains the rise in inequality in recent years that concerns everyone, and in fact anyone who thinks he said that is a knave who has not read the book. I was among the many who never made it through Capital (it gave a new and different meaning to the expression “widely unread”), so I will take it on faith that the whole r>g thing was a head fake. Anyway, Capital does not make my list.

I think that number 1 is Complexity, by David Colander and Roland Kupers. On many pages, I highlighted insightful passages. On many other pages, I highlighted irksome passages. Look for a longer review from me next year.

Probably number 2 is Trillion Dollar Economists, by Robert Litan. It is a great achievement, but even so I wanted a different book.

Number 3 might be Isabel Sawhill’s Generation Unbound, about the pathology of unwed motherhood (it’s not just for teenagers any more) and what to do about it. However, I think that the question of whether “society” should be trying to prevent births of a certain type (namely, from unplanned pregnancies) is more difficult than she makes it out to be. Again, I have a review forthcoming.

Number 4 might be Charles Calomiris and Stephen Haber, Fragile By Design. The financial crisis continues to stimulate books on banking and related topics, and of the recent lot I thought this one had the strongest historical and international perspective. However, in the end, I found its main thesis, that U.S. banking policy is hindered by populism, unpersuasive.

Number 5 might be Mark Robert Rank, PhD, Thomas A. Hirschl, PhD, and Kirk A. Foster, PhD, Chasing the American Dream, which provides a good empirical study of income dynamics using longitudinal data.

Finally, there is a category of books written by friends of mine, in which I recommend Russ Roberts’ How Adam Smith Can Change Your Life, Megan McArdle’s The Upside of Down, and Elizabeth Green’s How to Build a Better Teacher.

UPDATE: Here is Tyler’s list.

The End of Wallets?

Joshua Gans writes,

the main reason I carry a wallet is not because of convenience per se but because it previously represented the way by which I would be identified. Possession was my credo. Having cash identified that I had done something legitimate to acquire that cash and a right to acquire more goods and services with them. Having a card allowed my bank to verify that I had those rights. Now, I could do the same with just a phone. Moreover, the retailer wouldn’t need to do anything other that see an acknowledgment that the ‘black box’ had accepted my credentials.

Imagine a world in which you use biometric ID to authenticate yourself to your phone or watch. In principle, then, you do not need any other forms of identification to enter your work building, purchase something, confirm your identity to authorities, and so on.

Note that I would like the Multi-purpose Savings Accounts (my current name for my negative income tax proposal) to incorporate this sort of technology to the extent possible.

Some questions:

1. What would this do to illegal immigration? Would there be a way to give someone a phony social security number or other ID?

2. Would the potential to use technology to prevent voter fraud be permitted to be used?

3. How dystopian is it for people not to be able to hide their identities?

4. As commenters here have pointed out, your “biometric ID” ultimately is represented as a string of bits. What sort of security system would you need to address this?

5. Do you think people would be able to get along without digital ID, or even be permitted to do without?

Feel free to ask your own question.

Steve Teles Hearts the Koch Brothers

He writes,

It may be impossible to organize a broad, deeply mobilized grassroots coalition against upward-redistributing rent seeking. But in most cases, equaling the manpower and resources of the rent-seekers isn’t necessary — just making sure that there is someone on the other side can make a big difference. Perhaps perversely, it may be that the only answer to the problem is for the wealthy themselves to bankroll organizations that would change the political calculus that makes acceding to the demands of rent-seekers logical for politicians.

Which is what the Koch brothers do. And I could also give a shout-out to the Tea Party members of Congress, who are much more reliably hostile to wealthy interest groups than are either the Democrats or the Republican establishment.

Knowing Teles, I don’t think that he had the Koch brothers or the Tea Party in mind as solutions to the problem of crony capitalism. But I they do fit his model.

Teles is a contributor to the Cato growth forum. Another contributor, Derek Khanna, writes

One could imagine a benefit to having emerging companies pay less in taxes to help foster creative destruction; instead, U.S. policy is the opposite. Big companies have enough loopholes and lobbyists to ensure that they rarely pay the actual corporate income tax rate. The only companies that pay our full corporate income tax rate, the highest corporate tax rate in the entire world, are new companies.

Both Teles and Khanna cite patent and copyright policy as skewed in favor of special interests.

Family Structure and Income Inequality

Aparna Mathur writes,

Recently, some papers have suggested that assortative mating has a role to play in household income inequality. Empirically, it has been found that the proportion of couples who share the same level of schooling has been growing over the past few decades. This has been accompanied by a rise in household income inequality. A paper by economists at the Federal Reserve Bank found that changing family structure accounted for 52 percent of the increase in the 50-10 ratio (50th percentile to 10th percentile) and 49 percent of the increase in the 95-5 ratio. Research by Harvard economists, Chetty et al. concludes that the single strongest correlate of upward economic mobility across geographic regions of America is the fraction of children living in single-parent families.

A Great Time to Rent

Nick Timiraos writes,

Multifamily construction is now higher than it was during the peak in the previous housing cycle, reached in 2006. But back then, far more of these units were being built as condominiums, not as rentals.

Policy makers see young people reluctant to buy homes, and they respond in the usual way, by proposing government-subsidized lenient mortgage credit. Meanwhile, entrepreneurs respond by building more apartments.

How the Fed Became a Giant Hedge Fund

Jeffrey Rogers Hummel tells the story.

Phase Two of Bernanke’s policies transformed the Federal Reserve from a central bank confined primarily to managing the money supply into an institution that is now a giant government intermediary borrowing massive sums in order to allocate credit. In that respect, the Fed has become similar to Fannie or Freddie, with the important distinction that the Fed has greater discretion in subsidizing a wider variety of assets.

Problems with Spectrum Property Rights

Dale Hatfield and Phil Weiser write,

For a band like that traditionally used for AM broadcasting, it seems impractical, if not impossible, to provide licenses with anything close to certainty in terms of interference protection…a station in an adjacent–or more remote–geographic area could seek damages or injunctive relief based on a series of natural conditions that happen only infrequently…the realities of radio wave propagation in this region of the spectrum simply do not lend themselves to clear and enforceable boundaries for the geographic are dimension of the spectrum resource.

The authors do point out that the properties of the PCS band (the frequency range used by cell phones) are less problematic for a property-rights regime. Moreover,

the commonality of interest among cellular and PCS providers reflects a shared understanding that there is a mutual threat of interference and a mutual benefit to cooperation…Consequently, even though the reality of the spectrum property right is “muddy,” the affected parties are still able to agree on mutually beneficial accomodations.