It’s standard practice in news stories to refer to France’s economy as a basket case. The NYT went this route in an article on President Emmanuel Macron’s efforts to rewrite the country’s labor laws.
The article refers to Macron’s efforts to “revitalize” the French economy and then tells readers:
“The code is regarded by many as the wellspring of the country’s malaise and the chief obstacle to generating jobs, leaving the country with an unemployment rate that hovers persistently around 10 percent.”
Of course, many economists regard the German government’s insistence on austerity in spite of low interest rates and low inflation as “the wellspring of the country’s malaise,” but apparently there was no room to mention this fact. Anyhow, it is worth noting that while France has a considerably higher unemployment rate than the United States a larger portion of its prime-age population (ages 25 to 54) have jobs than in the United States.
According to the OECD, the employment-to-population ratio for this age group is 79.6 percent in France, compared to 78.2 percent in the United States. For this age group, the French economy is doing better producing jobs than the U.S. economy, in spite of its malaise.
It does have lower employment rates for younger and older workers, but this is largely the result of deliberate policy. A college education is largely free in France, and as a result, few students work. France also has a more generous social security system than the United States, which discourages older workers from staying in the labor force. It’s arguable whether these are good policies but it is these policies, rather than the state of the economy, that explain differences in employment rates between the U.S. and France for these age groups.
The piece also includes this interesting paragraph:
“The Macron changes would help employers set the rules on hiring and firing, ignore the crippling restraints in the code that discourage taking on new workers, and limit unions’ ability to get in the way. Instead, individual agreements would be negotiated at the company or industry level between bosses and workers.”
It is interesting that NYT thinks that unions “get in the way” between workers and employers. This is, of course, true just as when we allow defendants to have lawyers, the lawyer “gets in the way” of discussions between police and prosecutors and the accused.
It’s standard practice in news stories to refer to France’s economy as a basket case. The NYT went this route in an article on President Emmanuel Macron’s efforts to rewrite the country’s labor laws.
The article refers to Macron’s efforts to “revitalize” the French economy and then tells readers:
“The code is regarded by many as the wellspring of the country’s malaise and the chief obstacle to generating jobs, leaving the country with an unemployment rate that hovers persistently around 10 percent.”
Of course, many economists regard the German government’s insistence on austerity in spite of low interest rates and low inflation as “the wellspring of the country’s malaise,” but apparently there was no room to mention this fact. Anyhow, it is worth noting that while France has a considerably higher unemployment rate than the United States a larger portion of its prime-age population (ages 25 to 54) have jobs than in the United States.
According to the OECD, the employment-to-population ratio for this age group is 79.6 percent in France, compared to 78.2 percent in the United States. For this age group, the French economy is doing better producing jobs than the U.S. economy, in spite of its malaise.
It does have lower employment rates for younger and older workers, but this is largely the result of deliberate policy. A college education is largely free in France, and as a result, few students work. France also has a more generous social security system than the United States, which discourages older workers from staying in the labor force. It’s arguable whether these are good policies but it is these policies, rather than the state of the economy, that explain differences in employment rates between the U.S. and France for these age groups.
The piece also includes this interesting paragraph:
“The Macron changes would help employers set the rules on hiring and firing, ignore the crippling restraints in the code that discourage taking on new workers, and limit unions’ ability to get in the way. Instead, individual agreements would be negotiated at the company or industry level between bosses and workers.”
It is interesting that NYT thinks that unions “get in the way” between workers and employers. This is, of course, true just as when we allow defendants to have lawyers, the lawyer “gets in the way” of discussions between police and prosecutors and the accused.
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The NYT had an article on Amazon’s job fairs which were set up to recruit workers for 50,000 new jobs nationwide. At the end of the piece, the article discusses concerns that robots may soon replace the jobs that Amazon is now hiring for in its warehouses:
“Amazon is more aggressively using robots to help make the operations inside its warehouses more efficient. For now, the company said machines are not replacing people. Instead, they mostly move large shelves of merchandise to stations where orders are manually picked.
“Many academic researchers and start-ups are working on robots that have the dexterity to pick orders automatically. Amazon sponsors a competition to encourage engineers to build more advanced warehouse robots.
“When those technologies are perfected, the employment picture inside Amazon’s warehouses could look very different. That day could be a decade or more away, though.”
It is important to remember that productivity growth has been at record low levels in the last five years, meaning that we are seeing very few workers displaced by robots. Furthermore, the Federal Reserve Board has been raising interest rates over the last year and a half because it is concerned the economy is creating too many jobs. The concern about budget deficits is also a concern about inadequate productivity growth (too much demand and not enough supply).
In other words, in almost every other economic debate our concern is the opposite of having robots replacing workers. The concern is that we won’t have enough goods and services to go around.
If robots create a distributional issue, that is because of policies like patent monopolies that give all the money to owners of robots. These policies can be changed, but not if the media has a policy of never talking about them.
The NYT had an article on Amazon’s job fairs which were set up to recruit workers for 50,000 new jobs nationwide. At the end of the piece, the article discusses concerns that robots may soon replace the jobs that Amazon is now hiring for in its warehouses:
“Amazon is more aggressively using robots to help make the operations inside its warehouses more efficient. For now, the company said machines are not replacing people. Instead, they mostly move large shelves of merchandise to stations where orders are manually picked.
“Many academic researchers and start-ups are working on robots that have the dexterity to pick orders automatically. Amazon sponsors a competition to encourage engineers to build more advanced warehouse robots.
“When those technologies are perfected, the employment picture inside Amazon’s warehouses could look very different. That day could be a decade or more away, though.”
It is important to remember that productivity growth has been at record low levels in the last five years, meaning that we are seeing very few workers displaced by robots. Furthermore, the Federal Reserve Board has been raising interest rates over the last year and a half because it is concerned the economy is creating too many jobs. The concern about budget deficits is also a concern about inadequate productivity growth (too much demand and not enough supply).
In other words, in almost every other economic debate our concern is the opposite of having robots replacing workers. The concern is that we won’t have enough goods and services to go around.
If robots create a distributional issue, that is because of policies like patent monopolies that give all the money to owners of robots. These policies can be changed, but not if the media has a policy of never talking about them.
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It’s popular among economists and policy types to wisely note that technology is leading the rich to get richer. Many of them consider this unfortunate, but hey, should we be Luddites and try to stop technology?
This is, of course, silly propaganda, but it passed for sophisticated thinking in policy circles. It is not technology, but our policy around it, like patent and copyright protection, that redistributes income upward. We got yet another lesson along these lines in an NYT article reporting that the Trump administration is beginning a major investigation on China’s trade practices which will focus on its treatment of U.S. patents, copyrights, and other forms of intellectual property (IP). The implication is that we would impose retaliatory measures because China was hurting Bill Gates, Elon Musk, and other major beneficiaries of these government-granted monopolies in the United States.
The decision to focus on IP is striking since there is little dispute at this point that China’s decision to deliberately keep down the value of its currency in the last decade badly hurt U.S. manufacturing. The result was the loss of millions of manufacturing jobs. This ruined the lives of many of these workers and devastated communities in places like Ohio and Pennsylvania. It also put downward pressure on the wages of non-college educated workers throughout the economy.
Furthermore, the trade deficit that resulted from China’s currency practices is the main reason that the United States suffers from secular stagnation (a.k.a. inadequate demand). This is the reason growth was slow following the collapse of the housing bubble and even today, almost ten years after the start of the recession, we are still not back to full employment.
Anyhow, the plight of the bulk of the country’s workers was apparently not a sufficient reason to get upset over China’s trade policy. But not honoring Bill Gates’ copyrights? That’s serious stuff. And the folks who write and talk about economics will tell us it is just technology.
It’s popular among economists and policy types to wisely note that technology is leading the rich to get richer. Many of them consider this unfortunate, but hey, should we be Luddites and try to stop technology?
This is, of course, silly propaganda, but it passed for sophisticated thinking in policy circles. It is not technology, but our policy around it, like patent and copyright protection, that redistributes income upward. We got yet another lesson along these lines in an NYT article reporting that the Trump administration is beginning a major investigation on China’s trade practices which will focus on its treatment of U.S. patents, copyrights, and other forms of intellectual property (IP). The implication is that we would impose retaliatory measures because China was hurting Bill Gates, Elon Musk, and other major beneficiaries of these government-granted monopolies in the United States.
The decision to focus on IP is striking since there is little dispute at this point that China’s decision to deliberately keep down the value of its currency in the last decade badly hurt U.S. manufacturing. The result was the loss of millions of manufacturing jobs. This ruined the lives of many of these workers and devastated communities in places like Ohio and Pennsylvania. It also put downward pressure on the wages of non-college educated workers throughout the economy.
Furthermore, the trade deficit that resulted from China’s currency practices is the main reason that the United States suffers from secular stagnation (a.k.a. inadequate demand). This is the reason growth was slow following the collapse of the housing bubble and even today, almost ten years after the start of the recession, we are still not back to full employment.
Anyhow, the plight of the bulk of the country’s workers was apparently not a sufficient reason to get upset over China’s trade policy. But not honoring Bill Gates’ copyrights? That’s serious stuff. And the folks who write and talk about economics will tell us it is just technology.
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Greg Mankiw had a short NYT piece outlining the problems in providing health care. While some of what he said was reasonable, he ended with the tired cliche:
“The best way to navigate the problems of the health care marketplace is hotly debated. The political left wants a stronger government role, and the political right wants regulation to be less heavy-handed.”
This is not at all true. The right tends to want stronger and longer patent and related protections for prescription drugs and medical equipment. These government-granted monopolies can raise prices by several thousand percent above the free market price. As any economist would expect, these monopolies create enormous problems of enforcement and lead to a wide variety of rent-seeking behavior, such as drug companies lying about the safety and effectiveness of their drugs in order to sell more of them.
While longer and stronger patent protection does redistribute income upward, it can hardly be described as “less heavy-handed” in a world where the government pays for research upfront and then allows drugs and medical devices to be sold in a free market. (Discussion of alternatives are here and here.)
Greg Mankiw had a short NYT piece outlining the problems in providing health care. While some of what he said was reasonable, he ended with the tired cliche:
“The best way to navigate the problems of the health care marketplace is hotly debated. The political left wants a stronger government role, and the political right wants regulation to be less heavy-handed.”
This is not at all true. The right tends to want stronger and longer patent and related protections for prescription drugs and medical equipment. These government-granted monopolies can raise prices by several thousand percent above the free market price. As any economist would expect, these monopolies create enormous problems of enforcement and lead to a wide variety of rent-seeking behavior, such as drug companies lying about the safety and effectiveness of their drugs in order to sell more of them.
While longer and stronger patent protection does redistribute income upward, it can hardly be described as “less heavy-handed” in a world where the government pays for research upfront and then allows drugs and medical devices to be sold in a free market. (Discussion of alternatives are here and here.)
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The NYT had a piece touting the recent run up in Amazon’s stock which briefly made Jeff Bezos the world’s richest person. It then turns to Hendrik Bessembinder, a finance professor at Arizona State University, who describes the company as “one of the greatest wealth creators since 1926.”
This designation as a “wealth creator” is based on its market capitalization of almost $500 billion. While this is a huge amount of money, it is not clear that Amazon’s current or likely future profits justify this price. Ultimately, stockholders value a company based on the profits it makes for shareholders and its current profits nowhere near justify its $500 billion market capitalization.
There have been other companies in the recent past that had stock prices that bore no relationship to their profits. AOL and Priceline are two that stand out, both with market capitalizations of well over $100 billion at the peak of the stock bubble in 2000. In both cases, the shareholders in these companies would have seen a huge amount of wealth destroyed if they bought them near their peak price.
The question is whether Amazon will be able to join the elite group of wealth destroyers if its stock price falls to a level more in line with its profits.
The NYT had a piece touting the recent run up in Amazon’s stock which briefly made Jeff Bezos the world’s richest person. It then turns to Hendrik Bessembinder, a finance professor at Arizona State University, who describes the company as “one of the greatest wealth creators since 1926.”
This designation as a “wealth creator” is based on its market capitalization of almost $500 billion. While this is a huge amount of money, it is not clear that Amazon’s current or likely future profits justify this price. Ultimately, stockholders value a company based on the profits it makes for shareholders and its current profits nowhere near justify its $500 billion market capitalization.
There have been other companies in the recent past that had stock prices that bore no relationship to their profits. AOL and Priceline are two that stand out, both with market capitalizations of well over $100 billion at the peak of the stock bubble in 2000. In both cases, the shareholders in these companies would have seen a huge amount of wealth destroyed if they bought them near their peak price.
The question is whether Amazon will be able to join the elite group of wealth destroyers if its stock price falls to a level more in line with its profits.
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In their NYT piece on the possibilities for people switching jobs mid-career, Clair Cain Miller and Quoctrung Bui link to a piece by M.I.T. economist David Autor to support the assertion that extensive research shows middle skills jobs are disappearing. Actually, more careful research showed the opposite. In the last decade, both middle- and high-skills jobs (using Autor’s definition) were declining as a share of total employment. Only the least skilled jobs had an increasing share.
It is also worth noting that there is little evidence for the “skills shortage” discussed in this piece. While businesses like to complain about not being able to get qualified workers, the ordinary response to a shortage is a rise in price. In other words, if businesses really were seeing a skills shortage, we would expect to see rapidly rising wages for significant groups of workers. We don’t, which suggests that businesses are just whining because they think it will help them get something from the government — not because they actually can’t get qualified workers.
In their NYT piece on the possibilities for people switching jobs mid-career, Clair Cain Miller and Quoctrung Bui link to a piece by M.I.T. economist David Autor to support the assertion that extensive research shows middle skills jobs are disappearing. Actually, more careful research showed the opposite. In the last decade, both middle- and high-skills jobs (using Autor’s definition) were declining as a share of total employment. Only the least skilled jobs had an increasing share.
It is also worth noting that there is little evidence for the “skills shortage” discussed in this piece. While businesses like to complain about not being able to get qualified workers, the ordinary response to a shortage is a rise in price. In other words, if businesses really were seeing a skills shortage, we would expect to see rapidly rising wages for significant groups of workers. We don’t, which suggests that businesses are just whining because they think it will help them get something from the government — not because they actually can’t get qualified workers.
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Since several people have asked me why I bothered to write about Amazon’s stock price possibly being overvalued, let me get out the sledge hammer and hit people over the head with the issue.
Let’s imagine that this week the god of Wall Street comes down and announces that Amazon’s proper valuation is half of its current level. (This is a hypothetical, not my target price for the stock.) Since the god of Wall Street is never wrong, we would expect that Amazon’s stock price would quickly plunge, eliminating $240 billion in market value.
Has this information destroyed any wealth? Well, the folks who owned Amazon stock have $240 billion less than they did previously, so they clearly have less wealth. But the god of Wall Street knows the true value of Amazon stock, so there really was not any basis for this $240 billion in wealth. In effect, they would have this wealth and be able to spend based on it, as long as other investors did not realize that Amazon’s stock was hugely over-valued.
In this sense, it can be seen as very similar to counterfeit money. Suppose Amazon stock was priced in line with the god of Wall Street’s assessment, but Amazon shareholders collectively held $240 billion in counterfeit money that everyone accepted as though it was real. If the government suddenly discovered a way to detect these counterfeits so no one would ever be able to spend this money again, it would be the same story as the Amazon stock losing half its price.
The moral of the story is that there is no reason for those of us who don’t hold large amounts of Amazon stock to be happy about it being overpriced if this is the case. It is the same story as people having large amounts of counterfeit money. It’s good for them, but when they price the rest of us out of the housing market and their spending causes the Fed to raise interest rates and slow growth, it’s not good for everyone else.
Since several people have asked me why I bothered to write about Amazon’s stock price possibly being overvalued, let me get out the sledge hammer and hit people over the head with the issue.
Let’s imagine that this week the god of Wall Street comes down and announces that Amazon’s proper valuation is half of its current level. (This is a hypothetical, not my target price for the stock.) Since the god of Wall Street is never wrong, we would expect that Amazon’s stock price would quickly plunge, eliminating $240 billion in market value.
Has this information destroyed any wealth? Well, the folks who owned Amazon stock have $240 billion less than they did previously, so they clearly have less wealth. But the god of Wall Street knows the true value of Amazon stock, so there really was not any basis for this $240 billion in wealth. In effect, they would have this wealth and be able to spend based on it, as long as other investors did not realize that Amazon’s stock was hugely over-valued.
In this sense, it can be seen as very similar to counterfeit money. Suppose Amazon stock was priced in line with the god of Wall Street’s assessment, but Amazon shareholders collectively held $240 billion in counterfeit money that everyone accepted as though it was real. If the government suddenly discovered a way to detect these counterfeits so no one would ever be able to spend this money again, it would be the same story as the Amazon stock losing half its price.
The moral of the story is that there is no reason for those of us who don’t hold large amounts of Amazon stock to be happy about it being overpriced if this is the case. It is the same story as people having large amounts of counterfeit money. It’s good for them, but when they price the rest of us out of the housing market and their spending causes the Fed to raise interest rates and slow growth, it’s not good for everyone else.
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