Playing the Status Game

Tyler Cowen writes,

So much of debate, including political and economic debate, is about which groups and individuals deserve higher or lower status. . .

I hypothesize that an MR blog post attracts more comments when it a) has implications for who should be raised and lowered in status, and b) has some framework in place which allows you to make analytical points, but points which ultimately translate into a conclusion about a).

My comments:

1. Lowering another group’s social status is the most powerful message of all. It is more powerful than raising the status of those who one likes.

2. It would be an interesting exercise in honesty for everyone who uses social media for political discussions to say, “My main purpose is to lower the status of the following three groups. . .” What would my answers be? MIT economists would be high on the list. Also progressives. And people who align entirely on one of the three axes.

3. How much of writing in the social sciences and the humanities (can you broaden this to other academic disciplines?), including research papers and journal articles, is motivated and made popular by the way that it affects relative group status?

You can take man out of tribal society, but you cannot take tribal society out of man.

Occupational Licensing

The Obama Administration reports a sort of meta-analysis. One excerpt:

Estimates suggest that over 1,100 occupations are regulated in at least one State, but fewer than 60 are regulated in all 50 States, showing substantial differences in which occupations States choose to regulate. For example, funeral attendants are licensed in nine States and florists are licensed in only one State.

Pointer from Tyler Cowen.

I have only skimmed the report, but I did not see a reform that was suggested at dinner the other night. That is, licensing should not be delegated to boards that consist solely of incumbent practitioners.

Hipster Politics

Greg Ferenstein writes,

Today, on every recent major issue that divides the Democratic Party, the side favoring highly-skilled workers has won over labor union opposition

Pointer from Tyler Cowen. Ferenstein says that the Democrats’ Silicon Valley constituency favors public charter schools, high-skilled immigration, Korean Free Trade, and Uber, while opposing the Keystone Pipeline. Unions have taken the opposite side, but at least in Congress the Democrats are going against the unions.

The article is interesting throughout. My thoughts:

1. I don’t think that the tech crowd is enthusiastic about the oppressor-oppressed axis. And yet they still consider Barack Obama to be cool. I doubt that Elizabeth Warren or Bill de Blasio do much for them. Or Hillary Clinton, for that matter. As far as I can tell, Silicon Valley does not have a dog in the Democratic race for President.

2. From the tech crowd’s perspective, Republicans are better on education and on Uber. In both cases, Republicans are more supportive of entrepreneurialism.

3. Still, I do not expect the tech crowd to defect from to the Republican Party. There will emerge some issue that makes the tech crowd hard-core Democrats. In the past, abortion rights played that role among many of my friends. They are not techie types, and they hold conservative views on some economic and foreign-policy issues, but for them Republican opposition to abortion rights was always considered a show-stopper. So what issue will play that role today in among the tech crowd? Gay marriage? Immigration?

Price Stickiness is Only One Coordination Failure

Steven Randy Waldman writes,

For both firms and individuals, resistance to downward price adjustment is often rational, even when at a macroeconomic level universal downward adjustment would be desirable (perhaps because the central bank and/or state have failed to accommodate the expected path of nominal incomes, perhaps because nominal exchange rates are rigidly misaligned). If we could wave a magic wand and have wages, prices, and especially debts all simultaneously scale downward, that might be awesome. But, unfortunately, we can’t.

I think both Tyler Cowen and Mark Thoma pointed to this post. Read the whole thing.

The problem with the macroeconomic perspective is that when you think of the economy as a GDP factory, then the only reason you can think of for it not to operate at capacity is that the ratio of M to P is too low. Instead, if you think in terms of PSST, you can think of all sorts of reasons for coordination failure.

The chains of production are really long and complex. Somebody has a job doing “business development” for a company trying to make money out of an app. That job is so far from producing widgets that it is ridiculous.

In addition, pretty much everything we buy is discretionary. The seller of almost any product or service could wake up tomorrow and find the demand for that product or service poised to fall off. Need I cite landline telephones, retail music stores, or taxi drivers?

In the PSST story, the rigidities that matter are the burdens of trying to start a new business and the reluctance of people to relocate and to change occupations. The ratio of M to P just doesn’t amount to a hill of beans in an economy that depends on deep, complex coordination in the market process.

The Virtual Library

Tyler Cowen writes,

as a very frequent user, I say libraries are getting worse. Much worse.

I say libraries should be obsolete. Much obsolete.

Imagine the set of books that people have in their homes as an enormous virtual library, with all books registered in a central registry and available to be borrowed. All we need is an app that makes it work that way.

At any one time, more than 99 percent of the books in my home should be lent out. That would be a win-win. I would have more space, and the people with the books would be reading them–or at least there is a non-zero probability that they would be reading them, which is not true for me. And if I get a sudden urge to read something I have lent out, I can borrow a copy from someone else.

Note that there could be opportunities for charging rent for books, for entrepreneurial book ownership, etc.

Yankee Scandinavian Dandy

Nima Sanandaji writes,

The descendants of Scandinavian migrants on the other side of the Atlantic live in a very different policy environment compared with the residents of the Scandinavian countries. The former live in an environment with less welfare, lower taxes and (in general) freer markets. Interestingly, the social and economic success of the descendants of Scandinavian migrants in the US is on a par with or even better than their cousins in Scandinavia

Pointer from Tyler Cowen. This is political incorrectness, squared. It argues that the Scandinavian welfare state is not the success that its reputation advertises. And it implicitly assumes that some groups enjoy genetic and/or cultural advantages relative to others.

My guess is that few progressives would accept the factual claims and analysis of the author. But if they did, and they wanted to maintain the oppressor-oppressed axis, might they argue that moving to America enables Scandinavians to profit more from being an oppressor class than they are able to profit from remaining in Scandinavia?

The Trade Slowdown

Bernard Hoekman writes,

Slow trade growth has led to worries that the world economy has run into a ‘peak trade’ constraint, i.e. the ratio of global trade to GDP has reached a limit (Economist 2014). Global trade increased 27-fold between 1950 and 2008, three times more than the growth in global GDP. As a result, according to the World Bank’s World Development Indicators database, the trade-to-GDP ratio for the world as a whole rose from roughly 25% in the 1960s to 60% today. The slow (absence of) growth in trade since 2009 has meant no change in this ratio since 2008. If the recent decline in trade is sustained, this 60% may turn out to be a peak for the world as a whole.

Pointer from Tyler Cowen.

To be clear, “trade” is not slowing down. All economic activity is trade. The ratio of “trade to GDP” is the ratio of trade across borders to total trade, which includes trade that takes place inside national borders. Some thoughts:

1. As the share of GDP devoted to the New Commanding Heights (education and health care) increases, we might see a slowdown in cross-border trade. Note, however, that cross-border trade could pick up if distance learning and distance health care catch on.

2. As incomes rise in China and India, the “Samuelson effect” starts to kick in. That is, the comparative advantage of cross-border trade is reduced. That is, you do more production in China when American wages are 10 times Chinese wages than when they are only 4 times Chinese wages (using made-up numbers here).

3. As the cost of robots comes down, they displace workers in all countries, and this also reduces the comparative advantage of cross-border trade.

Vickies, Thetes, and Artisans

Allison Schrager writes,

Harvard economist Lawrence Katz thinks that when the economy shifts, those who lose out experience “retroactive unemployment” in pursuit of jobs that no longer exist; however, he anticipates a bright future for men in the new economy. As an expert in the ways technology affects the middle class, Katz predicts the rise of the “new artisan” as a substantial trend in middle-class employment.

His theory holds that technology will commoditize and cheapen products in all industries but that artisanal workers will offer a superior interpersonal experience coupled with unique goods and services, commanding premium prices in turn. Men, he notes, are especially well suited to such roles.

Pointer from Tyler Cowen. This sounds like something straight out of Neal Stephenson’s The Diamond Age, except that Katz’s vision strikes me as more fictional.

Ideology and Keynesian Economics

Scott Sumner posts on the controversy, which was recently re-ignited by what I thought was a reasonable post by Russ Roberts. My thoughts.

1. There is a correlation between belief in Keynesian economics and preference for a larger government. Economists who advocate for higher government spending to fight recessions also tend to argue at other times either to increase or not reduce every non-military component of government spending.

2. Nonetheless, those economists who believe in Keynesian economics and generally support higher government spending usually will insist that they are not ideological. In their view, they are merely scientists, who are free from confirmation bias.

3. Any online discussion that employs the term “Keynesian economics,” “macroeconomic facts,” or “Paul Krugman” will, with probability one, be un-constructive and uncharitable.

I am becoming increasingly convinced that the Internet is making us stupid politically. On the Internet, there is an impulse to react immediately to political comments, which means engaging your emotions rather than any self-critical reasoning. There is an impulse to be uncharitable to those with whom you disagree. Some of my responses:

1. I try to schedule blog posts at least a day in advance. My goal is to react less to the “threat” posed by political disagreement.

2. I look for opportunities to challenge the views of other libertarians, although not as often as Tyler does.

3. Recently, I made a determination to avoid commenting on political issues on Facebook. In fact, I would love an app that filters out all political posts on Facebook. I prefer even the pointless cute animal posts. But I mostly just like pictures and personal status updates of friends’ weddings, travel, anniversaries, etc. At some point I may have to sort through and unfriend the folks who only post on politics.

More Essential Hayek

Again, the book will be released next week.

Another point Boudreaux makes is that in a specialized economy, our production activities are much narrower than our consumption activities. This makes rent-seeking more prevalent on the production side.

This point is easily missed. For example, Stephen G. Cecchetti and Kermit L. Schoenholtz write about the mortgage interest deduction as if its political strength comes entirely from home owners. (Pointer from Mark Thoma.) In fact, I would argue that it is the NAR, NAHB, and the MBA that make it inviolable.

We know that food stamps are popular with the farm lobby. And perhaps Medicaid does not benefit recipients as much as it does providers of medical services.