Read More Leer más Join the discussion Participa en la discusión
Wow, things just keep getting worse. Automation is taking all the jobs, and the aging of the population means we won’t have any workers. Yes, these are completely contradictory concerns, but no one ever said that our policy elite had a clue. (No, I’m not talking about Donald Trump’s gang here.)
Anyhow, the Washington Post had a front page story telling us how older people are now working at retirement homes in Japan as a result of the aging of its population. The piece includes this great line:
“That means authorities need to think about ways to keep seniors healthy and active for longer, but also about how to augment the workforce to cope with labor shortages.”
You sort of have to love the first part, since folks might have thought authorities would have always been trying to think about ways to keep seniors healthy and active longer. After all, isn’t this a main focus of public health policy?
The part about labor shortages is also interesting. When there is a shortage of oil or wheat the price rises. If there were a labor shortage in Japan then we should be seeing rapidly rising wages. We aren’t. Wages have been virtually flat in recent years. That would seem to indicate that Japan doesn’t have a labor shortage — or alternatively, it has economically ignorant managers who don’t realize that the way to attract workers is to offer higher pay.
Wow, things just keep getting worse. Automation is taking all the jobs, and the aging of the population means we won’t have any workers. Yes, these are completely contradictory concerns, but no one ever said that our policy elite had a clue. (No, I’m not talking about Donald Trump’s gang here.)
Anyhow, the Washington Post had a front page story telling us how older people are now working at retirement homes in Japan as a result of the aging of its population. The piece includes this great line:
“That means authorities need to think about ways to keep seniors healthy and active for longer, but also about how to augment the workforce to cope with labor shortages.”
You sort of have to love the first part, since folks might have thought authorities would have always been trying to think about ways to keep seniors healthy and active longer. After all, isn’t this a main focus of public health policy?
The part about labor shortages is also interesting. When there is a shortage of oil or wheat the price rises. If there were a labor shortage in Japan then we should be seeing rapidly rising wages. We aren’t. Wages have been virtually flat in recent years. That would seem to indicate that Japan doesn’t have a labor shortage — or alternatively, it has economically ignorant managers who don’t realize that the way to attract workers is to offer higher pay.
Read More Leer más Join the discussion Participa en la discusión
A Washington Post article on the future of the Consumer Financial Protection Bureau (CFPB) contrasted the arguments of supporters, that the CFPB has protected consumers from unethical practices from the industry, with arguments by opponents that it has hurt lending. (These arguments are false, small businesses report they have little trouble getting credit.) The discussion left out the economic efficiency story for the CFPB.
The basic story is that if it’s possible to make lots of money by using deceptive contracts to ripoff consumers, then many very talented and hard-working people will spend their time developing schemes to ripoff consumers. Instead of doing things that contribute to consumers’ well-being (e.g. developing better products), these people will be committing resources to redistributing from others to themselves. If the government makes it more difficult to profit from the ripoff route, then people who want to make lots of money will be forced to turn to productive routes instead.
By this logic, weakening the CFPB, and other measures designed to protect consumers, gives more incentives to businesses to design elaborate ripoff schemes. In addition to being bad for consumers, this is a waste from the standpoint of the economy as a whole and a drag on economic growth.
A Washington Post article on the future of the Consumer Financial Protection Bureau (CFPB) contrasted the arguments of supporters, that the CFPB has protected consumers from unethical practices from the industry, with arguments by opponents that it has hurt lending. (These arguments are false, small businesses report they have little trouble getting credit.) The discussion left out the economic efficiency story for the CFPB.
The basic story is that if it’s possible to make lots of money by using deceptive contracts to ripoff consumers, then many very talented and hard-working people will spend their time developing schemes to ripoff consumers. Instead of doing things that contribute to consumers’ well-being (e.g. developing better products), these people will be committing resources to redistributing from others to themselves. If the government makes it more difficult to profit from the ripoff route, then people who want to make lots of money will be forced to turn to productive routes instead.
By this logic, weakening the CFPB, and other measures designed to protect consumers, gives more incentives to businesses to design elaborate ripoff schemes. In addition to being bad for consumers, this is a waste from the standpoint of the economy as a whole and a drag on economic growth.
Read More Leer más Join the discussion Participa en la discusión
Read More Leer más Join the discussion Participa en la discusión
Donald Trump has indicated that he might slap high tariffs on imports from Mexico as a way to make the country pay for his border wall. While it’s not clear this makes sense, since U.S. consumers would bear the bulk of the burden from this tax, it would certainly reduce imports from Mexico. It would also would violate NAFTA and WTO rules, thereby opening the door to a trade war with Mexico and possibly other countries.
Many have seen this as taking us down a road to ever higher tariffs, leading to a plunge in international trade, which would have substantial economic costs for everyone. However, Mexico could take an alternative path that would provide far more effective retaliation against President Trump, while leading to fewer barriers and more growth.
The alternative is simple: Mexico could announce that it would no longer enforce U.S. patents and copyrights on its soil. This would be a yuuge deal, as Trump would say.
To take one prominent example, suppose that Mexico allowed for the free importation of generic drugs from India and elsewhere. The Hepatitis C drug Solvaldi has a list price in the United States of $84,000. A high quality generic is available in India for $200. There are also low cost generic versions available of many other drugs that carry exorbitant prices in the United States, with savings often more than 95 percent.
Suppose that people suffering from Hepatitis C, cancer, and other devastating and life-threatening diseases could get drugs in Mexico for a few hundred dollars rather than tens or even hundreds of thousands of dollars in the United States? That would likely lead to lots of business for Mexico’s retail drug industry, although it would be pretty bad news for Pfizer and Merck.
The same would apply to other areas. Medical equipment, like high-end scanning and diagnostic devices, would be very cheap in Mexico if they could be produced without patent protections. This should be great for a medical travel industry in Mexico.
There would be a similar story on copyright protection. People could get the latest version of Windows and other software for free in Mexico with their new computers. This is bad news for Bill Gates and Microsoft, but good news for U.S. consumers interested in visiting Mexico, along with Mexico’s retail sector. Mexico could also make a vast amount of recorded music and video material available without copyright protection. That’s great news for consumers everywhere but very bad news for Disney, Time-Warner, and other Hollywood giants.
Of course, the erosion of patent and copyright protection will undermine the system of incentives that now support innovation and creative work. This means that we would have to develop more efficient alternatives to these relics of the feudal guild system. Among other places, folks can read about alternatives in my book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer (it’s free).
Anyhow, this would be a blueprint for a trade war in which everyone, except a few corporate giants, could be big winners.
Donald Trump has indicated that he might slap high tariffs on imports from Mexico as a way to make the country pay for his border wall. While it’s not clear this makes sense, since U.S. consumers would bear the bulk of the burden from this tax, it would certainly reduce imports from Mexico. It would also would violate NAFTA and WTO rules, thereby opening the door to a trade war with Mexico and possibly other countries.
Many have seen this as taking us down a road to ever higher tariffs, leading to a plunge in international trade, which would have substantial economic costs for everyone. However, Mexico could take an alternative path that would provide far more effective retaliation against President Trump, while leading to fewer barriers and more growth.
The alternative is simple: Mexico could announce that it would no longer enforce U.S. patents and copyrights on its soil. This would be a yuuge deal, as Trump would say.
To take one prominent example, suppose that Mexico allowed for the free importation of generic drugs from India and elsewhere. The Hepatitis C drug Solvaldi has a list price in the United States of $84,000. A high quality generic is available in India for $200. There are also low cost generic versions available of many other drugs that carry exorbitant prices in the United States, with savings often more than 95 percent.
Suppose that people suffering from Hepatitis C, cancer, and other devastating and life-threatening diseases could get drugs in Mexico for a few hundred dollars rather than tens or even hundreds of thousands of dollars in the United States? That would likely lead to lots of business for Mexico’s retail drug industry, although it would be pretty bad news for Pfizer and Merck.
The same would apply to other areas. Medical equipment, like high-end scanning and diagnostic devices, would be very cheap in Mexico if they could be produced without patent protections. This should be great for a medical travel industry in Mexico.
There would be a similar story on copyright protection. People could get the latest version of Windows and other software for free in Mexico with their new computers. This is bad news for Bill Gates and Microsoft, but good news for U.S. consumers interested in visiting Mexico, along with Mexico’s retail sector. Mexico could also make a vast amount of recorded music and video material available without copyright protection. That’s great news for consumers everywhere but very bad news for Disney, Time-Warner, and other Hollywood giants.
Of course, the erosion of patent and copyright protection will undermine the system of incentives that now support innovation and creative work. This means that we would have to develop more efficient alternatives to these relics of the feudal guild system. Among other places, folks can read about alternatives in my book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer (it’s free).
Anyhow, this would be a blueprint for a trade war in which everyone, except a few corporate giants, could be big winners.
Read More Leer más Join the discussion Participa en la discusión
A Reuters piece carried by the New York Times told readers:
“If built, TransCanada’s Keystone XL from Alberta to Nebraska would yield about $2.4 billion (C$3.2 billion) a year for Canada, split between government revenues, shareholder profits and re-investment into the still-recovering Canadian oil patch, according to a Conference Board of Canada research note prepared for Reuters on Thursday.
“That’s because the 800,000 barrels-per-day (bdp) line would provide cheaper shipping and a new outlet for the country’s vast but landlocked oil sands reserves, giving them increased access to the stronger U.S. market. Canadian producers could likely command around $2 more per barrel, analysts and investors said.”
Okay, let’s check this one. If the pipeline is used at its 800,000 barrels-per-day capacity, it will carry 292 million barrels over the course of a year. If it will lead to an additional $2 per barrel for Canadian producers, as the article reports, this implies an increase in revenue of $584 million a year. That is quite a bit less than the $2.4 billion a year touted in the first paragraph.
This looks like another case where someone is wrong on the Internet.
A Reuters piece carried by the New York Times told readers:
“If built, TransCanada’s Keystone XL from Alberta to Nebraska would yield about $2.4 billion (C$3.2 billion) a year for Canada, split between government revenues, shareholder profits and re-investment into the still-recovering Canadian oil patch, according to a Conference Board of Canada research note prepared for Reuters on Thursday.
“That’s because the 800,000 barrels-per-day (bdp) line would provide cheaper shipping and a new outlet for the country’s vast but landlocked oil sands reserves, giving them increased access to the stronger U.S. market. Canadian producers could likely command around $2 more per barrel, analysts and investors said.”
Okay, let’s check this one. If the pipeline is used at its 800,000 barrels-per-day capacity, it will carry 292 million barrels over the course of a year. If it will lead to an additional $2 per barrel for Canadian producers, as the article reports, this implies an increase in revenue of $584 million a year. That is quite a bit less than the $2.4 billion a year touted in the first paragraph.
This looks like another case where someone is wrong on the Internet.
Read More Leer más Join the discussion Participa en la discusión
Read More Leer más Join the discussion Participa en la discusión
The NYT decided to scare its readers about the budget deficit with a headline warning “[f]ederal debt [is] projected to grow by nearly $10 trillion over next decade.” While the article does put this figure in some context, expressing it as a share of GDP, readers who only look at the headline will undoubtedly be scared by this huge number.
Given the past commitments of the paper to express large numbers in context, a headline telling readers that the Congressional Budget Office (CBO) projections show the debt-to-GDP ratio rising to 89 percent of GDP, would have been more informative. Of course, it likely would have been less scary.
In addition to the headline, the piece is on questionable grounds when it tells readers:
“Such a high level of debt could increase the likelihood of a financial crisis and raise the possibility that investors will become skittish about financing the government’s borrowing.”
The link between levels of debt and financial crises is dubious, at best. The United States, Spain, Ireland, and Japan all had financial crises with very low levels of debt to GDP. On the other hand, Japan’s ratio of debt to GDP is now close to 250 percent, yet there are no obvious signs of financial instability.
Nor is clear that high debt-to-GDP ratios will cause investors will become skittish. Japan can currently borrow long-term at an interest rate of 0.05 percent. Other countries with high debt-to-GDP ratios like France can also borrow at very low interest rates.
It is also worth noting that much of the cause of the projected rise in deficits is due to a projected rise in interest rates. CBO projects that the 10-year Treasury rate will rise from 2.4 percent today to 3.6 percent by the end of the 10-year forecast period. While this is possible, CBO has been over-projecting interest rates ever since the recession. It did this again last year, projecting a 3.0 percent average interest rate for 2016. The number ended up being 2.1 percent.
It is also worth noting that interest payments on the debt (net of money refunded by the Fed) are projected to still be less than 2.5 percent of GDP by the end of the period in 2027. This is still lower than levels close to 3.0 percent in 1990s. It is also likely to be considerably less than the burden the government will be imposing on the public by granting patent monopolies for prescription drugs, medical equipment, and other areas. These government granted monopolies already cost us almost 2.0 percent of GDP for prescription drugs alone.
Anyone who is actually worried about the burden the government is placing on our children would be far more attentive to the burden posed by these monopolies than the much smaller burden imposed by the debt. Of course, the burden imposed by the imposition of austerity following the recession is far larger than either.
The NYT decided to scare its readers about the budget deficit with a headline warning “[f]ederal debt [is] projected to grow by nearly $10 trillion over next decade.” While the article does put this figure in some context, expressing it as a share of GDP, readers who only look at the headline will undoubtedly be scared by this huge number.
Given the past commitments of the paper to express large numbers in context, a headline telling readers that the Congressional Budget Office (CBO) projections show the debt-to-GDP ratio rising to 89 percent of GDP, would have been more informative. Of course, it likely would have been less scary.
In addition to the headline, the piece is on questionable grounds when it tells readers:
“Such a high level of debt could increase the likelihood of a financial crisis and raise the possibility that investors will become skittish about financing the government’s borrowing.”
The link between levels of debt and financial crises is dubious, at best. The United States, Spain, Ireland, and Japan all had financial crises with very low levels of debt to GDP. On the other hand, Japan’s ratio of debt to GDP is now close to 250 percent, yet there are no obvious signs of financial instability.
Nor is clear that high debt-to-GDP ratios will cause investors will become skittish. Japan can currently borrow long-term at an interest rate of 0.05 percent. Other countries with high debt-to-GDP ratios like France can also borrow at very low interest rates.
It is also worth noting that much of the cause of the projected rise in deficits is due to a projected rise in interest rates. CBO projects that the 10-year Treasury rate will rise from 2.4 percent today to 3.6 percent by the end of the 10-year forecast period. While this is possible, CBO has been over-projecting interest rates ever since the recession. It did this again last year, projecting a 3.0 percent average interest rate for 2016. The number ended up being 2.1 percent.
It is also worth noting that interest payments on the debt (net of money refunded by the Fed) are projected to still be less than 2.5 percent of GDP by the end of the period in 2027. This is still lower than levels close to 3.0 percent in 1990s. It is also likely to be considerably less than the burden the government will be imposing on the public by granting patent monopolies for prescription drugs, medical equipment, and other areas. These government granted monopolies already cost us almost 2.0 percent of GDP for prescription drugs alone.
Anyone who is actually worried about the burden the government is placing on our children would be far more attentive to the burden posed by these monopolies than the much smaller burden imposed by the debt. Of course, the burden imposed by the imposition of austerity following the recession is far larger than either.
Read More Leer más Join the discussion Participa en la discusión
Eduardo Porter used his NYT column to discuss how Mexico could put pressure on Donald Trump in a renegotiation of NAFTA. After discussing different pressure points he then turns to the ways in which the deal could be modernized. High on the list was fully opening long-distance trucking, which would put truckers in the United States even more directly into competition with much lower paid Mexican truck drivers. (NAFTA already allows Mexican truck drivers to carry many loads into the United States.)
It is interesting that Porter has no interest in removing the protectionist barriers that help our most highly paid professionals. Under current law, even well established Mexican doctors would get arrested if they practiced in the United States. To be eligible to practice they must complete a U.S. residency program.
If we had free traders involved in this negotiation process, surely they would be able to design an evaluation system that would ensure Mexican doctors met U.S. standards, and then could be allowed to practice in the United States. In the same vein, Mexican dentists are also prohibited from practicing in the United States unless they graduate from a U.S. dental school. (Recently, graduates of Canadian schools have also been allowed.)
Doctors in the United States are paid on average more than $250,000 a year, roughly twice the average in other wealthy countries. Dentists are paid on average $200,000 a year, also twice the average in wealthy countries like Germany and Canada. This protectionism costs patients in the United States more $100 billion a year in higher health care costs (more than $700 per family, per year).
It is striking that the debate over NAFTA is so dominated by protectionists that measures that would reduce the barriers that privilege our most highly paid workers are never even discussed. It should not be surprising that truck drivers and manufacturing workers who do have to face competition would not be happy about trade deals.
Eduardo Porter used his NYT column to discuss how Mexico could put pressure on Donald Trump in a renegotiation of NAFTA. After discussing different pressure points he then turns to the ways in which the deal could be modernized. High on the list was fully opening long-distance trucking, which would put truckers in the United States even more directly into competition with much lower paid Mexican truck drivers. (NAFTA already allows Mexican truck drivers to carry many loads into the United States.)
It is interesting that Porter has no interest in removing the protectionist barriers that help our most highly paid professionals. Under current law, even well established Mexican doctors would get arrested if they practiced in the United States. To be eligible to practice they must complete a U.S. residency program.
If we had free traders involved in this negotiation process, surely they would be able to design an evaluation system that would ensure Mexican doctors met U.S. standards, and then could be allowed to practice in the United States. In the same vein, Mexican dentists are also prohibited from practicing in the United States unless they graduate from a U.S. dental school. (Recently, graduates of Canadian schools have also been allowed.)
Doctors in the United States are paid on average more than $250,000 a year, roughly twice the average in other wealthy countries. Dentists are paid on average $200,000 a year, also twice the average in wealthy countries like Germany and Canada. This protectionism costs patients in the United States more $100 billion a year in higher health care costs (more than $700 per family, per year).
It is striking that the debate over NAFTA is so dominated by protectionists that measures that would reduce the barriers that privilege our most highly paid workers are never even discussed. It should not be surprising that truck drivers and manufacturing workers who do have to face competition would not be happy about trade deals.
Read More Leer más Join the discussion Participa en la discusión
The NYT ran a front page story on the drop in women’s labor force participation rates (LFPR) since 2000. The decline in LFPR for women is noteworthy because many economists have sought to blame the decline in LFPR for men on various problems unique to men. The fact that the LFPR for women has declined also suggests that the problem is on the demand side of the labor market, not the pathologies that afflict the men who are dropping out.
The NYT ran a front page story on the drop in women’s labor force participation rates (LFPR) since 2000. The decline in LFPR for women is noteworthy because many economists have sought to blame the decline in LFPR for men on various problems unique to men. The fact that the LFPR for women has declined also suggests that the problem is on the demand side of the labor market, not the pathologies that afflict the men who are dropping out.
Read More Leer más Join the discussion Participa en la discusión
