That’s what a Reuters article in the NYT inadvertently told readers. The piece begins by telling readers:
“Some of the richest, smartest and most powerful humans have an important message for the rest of us as they convened this week to discuss pressing global issues: the robots are coming.
“At the Milken Institute’s Global Conference in Beverly Hills, California, at least four panels so far have focused on technology taking over markets to mining – and most importantly, jobs.”
The piece goes to blame technology for destroying large numbers of middle class jobs, which it argues is a main cause of wage stagnation. The problem is that if these smart and powerful people had access to the Bureau of Labor Statistics website (BLS) they would know that productivity growth (the rate at which robots and other technologies are taking our jobs), has been extremely slow over the last decade, as in the opposite of fast.
This means that we have to look to other causes of inequality, like boneheaded macro policy that leaves millions unemployed, trade policy that displaced millions of manufacturing workers, and longer and stronger patent and copyright protection that make the rest of us pay larger rents for drugs, software, and other protected items.
But the rich and powerful prefer the robot story, and apparently, because they are rich and powerful, they can get the media to take it seriously.
That’s what a Reuters article in the NYT inadvertently told readers. The piece begins by telling readers:
“Some of the richest, smartest and most powerful humans have an important message for the rest of us as they convened this week to discuss pressing global issues: the robots are coming.
“At the Milken Institute’s Global Conference in Beverly Hills, California, at least four panels so far have focused on technology taking over markets to mining – and most importantly, jobs.”
The piece goes to blame technology for destroying large numbers of middle class jobs, which it argues is a main cause of wage stagnation. The problem is that if these smart and powerful people had access to the Bureau of Labor Statistics website (BLS) they would know that productivity growth (the rate at which robots and other technologies are taking our jobs), has been extremely slow over the last decade, as in the opposite of fast.
This means that we have to look to other causes of inequality, like boneheaded macro policy that leaves millions unemployed, trade policy that displaced millions of manufacturing workers, and longer and stronger patent and copyright protection that make the rest of us pay larger rents for drugs, software, and other protected items.
But the rich and powerful prefer the robot story, and apparently, because they are rich and powerful, they can get the media to take it seriously.
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Eduardo Porter used his weekly column to chronicle Brazil’s economic course over the last two decades. He argues that many of its current problems are due to excessive government involvement in the economy in imposing price controls and trade barriers.
While there is likely some truth to this argument, it is worth extending Porter’s warning to patent and copyright protection. These forms of protection are equivalent to tariffs of many thousand percent, they typically raise the price of protected items by ten or even a hundred times the free market price.
The rationale for this protection is to promote innovation and creative work, but the market doesn’t care about the rationale, raising prices by 2000 percent above the free market price has the same impact whether we call the cause a “tariff” or a “patent.” And, patents and copyrights do affect a very large segment of the economy. In the case of prescription drugs alone, patents and related protection likely add close to $380 billion (@ 2.1 percent of GDP) to the what the country pays for drugs each year.
If anyone wants to give advice to developing countries, avoiding the protectionism that the United States is trying to impose in deals like the Trans-Pacific Partnership would be a good place to start. These deals would both create enormous economic distortions through their impact on the prices of protected products and also be a substantial drain on these countries economies, since the income from the patents and copyrights will mostly go to foreign corporations.
Eduardo Porter used his weekly column to chronicle Brazil’s economic course over the last two decades. He argues that many of its current problems are due to excessive government involvement in the economy in imposing price controls and trade barriers.
While there is likely some truth to this argument, it is worth extending Porter’s warning to patent and copyright protection. These forms of protection are equivalent to tariffs of many thousand percent, they typically raise the price of protected items by ten or even a hundred times the free market price.
The rationale for this protection is to promote innovation and creative work, but the market doesn’t care about the rationale, raising prices by 2000 percent above the free market price has the same impact whether we call the cause a “tariff” or a “patent.” And, patents and copyrights do affect a very large segment of the economy. In the case of prescription drugs alone, patents and related protection likely add close to $380 billion (@ 2.1 percent of GDP) to the what the country pays for drugs each year.
If anyone wants to give advice to developing countries, avoiding the protectionism that the United States is trying to impose in deals like the Trans-Pacific Partnership would be a good place to start. These deals would both create enormous economic distortions through their impact on the prices of protected products and also be a substantial drain on these countries economies, since the income from the patents and copyrights will mostly go to foreign corporations.
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Thomas Friedman really is a gift to the world. As a long established New York Times columnist and author of many widely touted books, he is a great source of insight into establishment thinking. He comes through brilliantly in his column today.
Friedman’s basic story is that the two parties need to work out compromises, like the “Grand Bargain” on the budget, that President Obama tried to negotiate in 2011 with then Speaker John Boehner. Friedman blames the intransigence of the Republicans for failing to come to an agreement on this and other important issues. He argues that Trump is where this extremism gets them. His hope is that now the Republicans will move to the center and work out the deals that Friedman would like to see.
It’s good to see that Friedman is looking forward to working with Republican centrists again, but let’s look at the nature of his argument. Basically his story is that the truth lies in the center and these know nothing types need to be chased out of the political debate:
“In this vortex [the 2008 economic collapse and the political polarization that followed] a lot of the public got unmoored and disoriented, opening the way for populists with simple answers. Get rid of immigrants, end trade with China or eliminate big banks and all will be fine. It’s nonsense.”
Friedman is right that it is nonsense, but it is also not what anyone is saying. Even Donald Trump doesn’t propose getting rid of all immigrants, which is not to say that his plan for departing 11 million unauthorized immigrants is not absurd and inhumane. And neither Trump nor Sanders proposed ending trade with China. And, while Sanders agrees with many leading economists that breaking up the big banks is important, he has certainly never implied that this would somehow make everything fine.
In short, Friedman is making up absurd positions, attributing them to the people he doesn’t like, and using this as an excuse to throw them out of the discussion. He wants to leave it to the real experts.
Okay, let’s see how the experts have done, starting with some of the details of the “Grand Bargain.” As Friedman reminds us, a big part of the Grand Bargain was cutting Social Security and Medicare. Is it really true, that in a world where few workers now have traditional pensions and most are not able to accumulate substantial sums in 401(k)s or other savings, Social Security is too generous? The vast majority of the public does not hold this view. On what basis has Thomas Friedman decided it is true?
With Medicare the problem is a wasteful health care system, not the coddling of the over 65 population. One of the ironies, that has apparently escaped Friedman’s attention, is that the slowdown in health care cost growth over the last six years has actually led to more savings in Medicare than had been sought by Bowles and Simpson in their deficit cutting plan that was the basis for the Grand Bargain.
Of course the whole idea that we needed to reduce the deficit in an economy that was and is still well below its full employment level of output is wrong. Had the Grand Bargainers gotten their way in 2011, the recovery would have been even slower and weaker.
But this is the real story of the establishment. After all, the 2008 crash was not a rare weather event that struck the country and the world unexpectedly. It was the result of the incompetence of our country’s leading economists in both parties. They could not see the dangers in an $8 trillion housing bubble.
A similar story applies in foreign policy circles, where many foreign policy experts were prepared to believe the Bush administration’s transparent lies about Saddam Hussein’s weapons of mass destruction. And, they actually thought that the United States could go into Iraq and put in place a stable government that enjoyed popular support.
The amazing part of the story is that the establishment types pay no price for being wrong in really big ways in their areas of expertise. This is best exemplified by Friedman himself. He can be wrong on every single thing he writes, every day of his life, and it will not in any way jeopardize his standing as one of the country’s most respected commentators on policy and politics.
And he wonders why the public is angry.
Thomas Friedman really is a gift to the world. As a long established New York Times columnist and author of many widely touted books, he is a great source of insight into establishment thinking. He comes through brilliantly in his column today.
Friedman’s basic story is that the two parties need to work out compromises, like the “Grand Bargain” on the budget, that President Obama tried to negotiate in 2011 with then Speaker John Boehner. Friedman blames the intransigence of the Republicans for failing to come to an agreement on this and other important issues. He argues that Trump is where this extremism gets them. His hope is that now the Republicans will move to the center and work out the deals that Friedman would like to see.
It’s good to see that Friedman is looking forward to working with Republican centrists again, but let’s look at the nature of his argument. Basically his story is that the truth lies in the center and these know nothing types need to be chased out of the political debate:
“In this vortex [the 2008 economic collapse and the political polarization that followed] a lot of the public got unmoored and disoriented, opening the way for populists with simple answers. Get rid of immigrants, end trade with China or eliminate big banks and all will be fine. It’s nonsense.”
Friedman is right that it is nonsense, but it is also not what anyone is saying. Even Donald Trump doesn’t propose getting rid of all immigrants, which is not to say that his plan for departing 11 million unauthorized immigrants is not absurd and inhumane. And neither Trump nor Sanders proposed ending trade with China. And, while Sanders agrees with many leading economists that breaking up the big banks is important, he has certainly never implied that this would somehow make everything fine.
In short, Friedman is making up absurd positions, attributing them to the people he doesn’t like, and using this as an excuse to throw them out of the discussion. He wants to leave it to the real experts.
Okay, let’s see how the experts have done, starting with some of the details of the “Grand Bargain.” As Friedman reminds us, a big part of the Grand Bargain was cutting Social Security and Medicare. Is it really true, that in a world where few workers now have traditional pensions and most are not able to accumulate substantial sums in 401(k)s or other savings, Social Security is too generous? The vast majority of the public does not hold this view. On what basis has Thomas Friedman decided it is true?
With Medicare the problem is a wasteful health care system, not the coddling of the over 65 population. One of the ironies, that has apparently escaped Friedman’s attention, is that the slowdown in health care cost growth over the last six years has actually led to more savings in Medicare than had been sought by Bowles and Simpson in their deficit cutting plan that was the basis for the Grand Bargain.
Of course the whole idea that we needed to reduce the deficit in an economy that was and is still well below its full employment level of output is wrong. Had the Grand Bargainers gotten their way in 2011, the recovery would have been even slower and weaker.
But this is the real story of the establishment. After all, the 2008 crash was not a rare weather event that struck the country and the world unexpectedly. It was the result of the incompetence of our country’s leading economists in both parties. They could not see the dangers in an $8 trillion housing bubble.
A similar story applies in foreign policy circles, where many foreign policy experts were prepared to believe the Bush administration’s transparent lies about Saddam Hussein’s weapons of mass destruction. And, they actually thought that the United States could go into Iraq and put in place a stable government that enjoyed popular support.
The amazing part of the story is that the establishment types pay no price for being wrong in really big ways in their areas of expertise. This is best exemplified by Friedman himself. He can be wrong on every single thing he writes, every day of his life, and it will not in any way jeopardize his standing as one of the country’s most respected commentators on policy and politics.
And he wonders why the public is angry.
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A NYT article on Donald Trump’s threats to impose high tariffs on Chinese imports discussed the possibility that Trump might seek rules that addressed policies aimed at currency management. The piece included the strange assertion that:
“A central problem is defining currency manipulation in a way that excludes the United States — in particular, the Federal Reserve’s post-recession stimulus campaign, which had the effect of weakening the dollar much in the same way that other countries do to their currency.”
Actually it is difficult to see the problem here. Currency management (“manipulation” is a peculiar term, since it is generally done in the open) involves buying another country’s bonds, the Fed’s quantitative easing program involved buying U.S. bonds. It’s not clear what the basis for confusion is.
A NYT article on Donald Trump’s threats to impose high tariffs on Chinese imports discussed the possibility that Trump might seek rules that addressed policies aimed at currency management. The piece included the strange assertion that:
“A central problem is defining currency manipulation in a way that excludes the United States — in particular, the Federal Reserve’s post-recession stimulus campaign, which had the effect of weakening the dollar much in the same way that other countries do to their currency.”
Actually it is difficult to see the problem here. Currency management (“manipulation” is a peculiar term, since it is generally done in the open) involves buying another country’s bonds, the Fed’s quantitative easing program involved buying U.S. bonds. It’s not clear what the basis for confusion is.
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My guess is that many people reading this NYT article on Europe’s GDP growth will think that its 0.6 percent rate was only slighly better than the anemic 0.5 percent rate the U.S. had just reported for the first quarter. Actually, it is a lot better, because the the European Union (EU) rate is a quarterly growth rate, while the U.S. rate is an annualized growth rate. If the EU growth rate were also annualized, it would be approximately 2.4 percent.
In Europe and many other parts of the world it is standard to report growth figures at quarterly rates. In the United States they are always reported at annualized rates. This is no big deal as long as everyone is clear which rates they are using, but it is likely that many NYT readers will see the 0.6 percent figure and assume it is an annualized number. (The piece does indicate it is quarterly growth.)
The simplest solution would seem to be to just report all numbers as annual rates. It’s a pretty simply conversion that NYT economics reporters should be able to do in a second.
My guess is that many people reading this NYT article on Europe’s GDP growth will think that its 0.6 percent rate was only slighly better than the anemic 0.5 percent rate the U.S. had just reported for the first quarter. Actually, it is a lot better, because the the European Union (EU) rate is a quarterly growth rate, while the U.S. rate is an annualized growth rate. If the EU growth rate were also annualized, it would be approximately 2.4 percent.
In Europe and many other parts of the world it is standard to report growth figures at quarterly rates. In the United States they are always reported at annualized rates. This is no big deal as long as everyone is clear which rates they are using, but it is likely that many NYT readers will see the 0.6 percent figure and assume it is an annualized number. (The piece does indicate it is quarterly growth.)
The simplest solution would seem to be to just report all numbers as annual rates. It’s a pretty simply conversion that NYT economics reporters should be able to do in a second.
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Neil Irwin noted the incredibly weak productivity growth of the last six years and then considered three possible explanations. Unfortunately, he left out what may be the plausible one: labor is cheap.
The high unemployment of the last seven years has left many people desperate for work. As a result, they are willing to work for very low wages. If businesses can get people at very low wages, they don’t mind having them do relatively low productivity tasks. For example, Walmart will have large numbers of workers standing around waiting to help customers. Convenience stores will remain open all night even though only a few people an hour may come in between midnight and 5:00AM.
If these stores had to pay workers higher wages, then many of these jobs would disappear. This would raise average productivity by eliminating many of the least productive jobs. If the Fed doesn’t raise rates to reduce the pace of job creation, we may get a chance to test this theory.
Neil Irwin noted the incredibly weak productivity growth of the last six years and then considered three possible explanations. Unfortunately, he left out what may be the plausible one: labor is cheap.
The high unemployment of the last seven years has left many people desperate for work. As a result, they are willing to work for very low wages. If businesses can get people at very low wages, they don’t mind having them do relatively low productivity tasks. For example, Walmart will have large numbers of workers standing around waiting to help customers. Convenience stores will remain open all night even though only a few people an hour may come in between midnight and 5:00AM.
If these stores had to pay workers higher wages, then many of these jobs would disappear. This would raise average productivity by eliminating many of the least productive jobs. If the Fed doesn’t raise rates to reduce the pace of job creation, we may get a chance to test this theory.
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Sorry couldn’t resist, but the lecture on why we should not care about manufacturing jobs from Eduardo Porter brought it out in me. Porter makes many valid points. Manufacturing has been declining as a share of total employment in the United States for half a century. The same is happening almost everywhere else in the world. And, he’s right that the main cause has been productivity growth.
But that doesn’t change the fact that the huge explosion in the trade deficit in the decade following 1997 led to a collapse of manufacturing unemployment. This drop in employment had a huge impact on large segments of the workforce.
Manufacturing Employment
Source: Bureau of Labor Statistics.
The surge in the trade deficit, which did not have to happen (i.e. it was the result of policy) and could be reversed, cost 20 percent of manufacturing employment in a very short period of time. It is reasonable for politicians to talk about this policy even if the pundits don’t like it.
The other point is that opponents of “walls” should pay attention to patents. These are not god-given or natural features of the market. U.S. policy has been focused on making patent and copyright protection longer and stronger for the last four decades. To engage in this sort of policy and then wonder why income is being redistributed upward is a bit like filling a body with bullets and then wondering why the person is dead.
Sorry couldn’t resist, but the lecture on why we should not care about manufacturing jobs from Eduardo Porter brought it out in me. Porter makes many valid points. Manufacturing has been declining as a share of total employment in the United States for half a century. The same is happening almost everywhere else in the world. And, he’s right that the main cause has been productivity growth.
But that doesn’t change the fact that the huge explosion in the trade deficit in the decade following 1997 led to a collapse of manufacturing unemployment. This drop in employment had a huge impact on large segments of the workforce.
Manufacturing Employment
Source: Bureau of Labor Statistics.
The surge in the trade deficit, which did not have to happen (i.e. it was the result of policy) and could be reversed, cost 20 percent of manufacturing employment in a very short period of time. It is reasonable for politicians to talk about this policy even if the pundits don’t like it.
The other point is that opponents of “walls” should pay attention to patents. These are not god-given or natural features of the market. U.S. policy has been focused on making patent and copyright protection longer and stronger for the last four decades. To engage in this sort of policy and then wonder why income is being redistributed upward is a bit like filling a body with bullets and then wondering why the person is dead.
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