The NYT had an interesting column on how we can reduce the length of the security lines at airports. (Start with your shoes.) However, the piece left out one obvious factor lengthening security lines: carry on baggage.
Security lines would move much quicker if more people checked their luggage rather than carry it on board. Of course, there is a good reason that people want to carry their bags on board, most airlines charge them $25 per checked bag. (Southwest is a notable exception, allowing two free checked bags per passenger.) So we have airlines carrying through a policy that is making everyone’s life miserable to squeeze a few extra dollars out of their passengers.
We can counter the airlines bad behavior. Suppose that TSA charged a $10 fee for each bag that goes through security. That would give people more incentive to check their bags, thereby reducing the length of the security lines. If that is too radical, we can change an absurdity in current law under which airline tickets are subject to a 7.5 percent tax used to fund airport operations, but fees like those for checking bags are not. If there is a planet where this makes sense, I haven’t seen it.
Anyhow, trying to get more people to check their bags is a really simple way to reduce the length of the security lines. Southwest is a highly profitable airline, maybe they could provide some management training to their competitors.
Irrelevant sidebar — here’s the reference for my title.
The NYT had an interesting column on how we can reduce the length of the security lines at airports. (Start with your shoes.) However, the piece left out one obvious factor lengthening security lines: carry on baggage.
Security lines would move much quicker if more people checked their luggage rather than carry it on board. Of course, there is a good reason that people want to carry their bags on board, most airlines charge them $25 per checked bag. (Southwest is a notable exception, allowing two free checked bags per passenger.) So we have airlines carrying through a policy that is making everyone’s life miserable to squeeze a few extra dollars out of their passengers.
We can counter the airlines bad behavior. Suppose that TSA charged a $10 fee for each bag that goes through security. That would give people more incentive to check their bags, thereby reducing the length of the security lines. If that is too radical, we can change an absurdity in current law under which airline tickets are subject to a 7.5 percent tax used to fund airport operations, but fees like those for checking bags are not. If there is a planet where this makes sense, I haven’t seen it.
Anyhow, trying to get more people to check their bags is a really simple way to reduce the length of the security lines. Southwest is a highly profitable airline, maybe they could provide some management training to their competitors.
Irrelevant sidebar — here’s the reference for my title.
Read More Leer más Join the discussion Participa en la discusión
The Washington Post has an article telling readers that a former McDonald’s CEO is warning that a $15 minimum wage will lead to widespread use of robots at fast food restaurants. The piece goes on to warn about the danger that robots pose to jobs more generally:
“Robotics and artificial intelligence are hot areas in the technology sector, and the World Economic Forum estimated earlier this year that their rise would cause a net loss of 5.1 million jobs over the next five years.
“Some experts are so concerned about looming unemployment that they are calling for a basic income, a regular stipend to be paid to citizens who are likely to lose their jobs and cannot be retrained.”
When robots replace workers it is known as “productivity growth.” Productivity growth has actually been incredibly slow in the last decade and has even been negative the last two years.
It is not clear who the “some experts” are (names please), but actual experts know that the economy’s problem is too little productivity growth, not too much. Productivity growth allows for higher living standards. With more rapid productivity growth we can either have more goods or services or work fewer hours to have the same amount of goods and services.
Of course this depends on their being enough demand in the economy. Lack of demand can lead to unemployment. It is not hard to create demand. For example, we could have the government spend money. That is not hard in principle, but deficit cultists, like the Washington Post editorial board and much of the leadership in Congress (in both parties) start yelling and screaming about budget deficits.
We could try to get the trade deficit down, for example by lowering the value of the dollar against other currencies, which makes our goods and services more competitive. People in policy positions generally don’t like to discuss this policy, which would hurt manufacturers like GE which have relocated much of their production overseas and major retailers like Walmart, which has profited by establishing low-cost supply chains.
We can also take steps to reduce average work time, for example by promoting work-sharing as an alternative to layoffs. We can also push for paid family leave, sick days, and vacations, like they have in other wealthy countries.
And, we could discourage the Fed from raising interest rates to choke off demand. Higher interest rates are a policy explicitly designed to keep people from getting jobs.
In short, there are many ways to ensure that the economy has enough demand to employ workers, but the Washington Post would rather yell about robots.
The Washington Post has an article telling readers that a former McDonald’s CEO is warning that a $15 minimum wage will lead to widespread use of robots at fast food restaurants. The piece goes on to warn about the danger that robots pose to jobs more generally:
“Robotics and artificial intelligence are hot areas in the technology sector, and the World Economic Forum estimated earlier this year that their rise would cause a net loss of 5.1 million jobs over the next five years.
“Some experts are so concerned about looming unemployment that they are calling for a basic income, a regular stipend to be paid to citizens who are likely to lose their jobs and cannot be retrained.”
When robots replace workers it is known as “productivity growth.” Productivity growth has actually been incredibly slow in the last decade and has even been negative the last two years.
It is not clear who the “some experts” are (names please), but actual experts know that the economy’s problem is too little productivity growth, not too much. Productivity growth allows for higher living standards. With more rapid productivity growth we can either have more goods or services or work fewer hours to have the same amount of goods and services.
Of course this depends on their being enough demand in the economy. Lack of demand can lead to unemployment. It is not hard to create demand. For example, we could have the government spend money. That is not hard in principle, but deficit cultists, like the Washington Post editorial board and much of the leadership in Congress (in both parties) start yelling and screaming about budget deficits.
We could try to get the trade deficit down, for example by lowering the value of the dollar against other currencies, which makes our goods and services more competitive. People in policy positions generally don’t like to discuss this policy, which would hurt manufacturers like GE which have relocated much of their production overseas and major retailers like Walmart, which has profited by establishing low-cost supply chains.
We can also take steps to reduce average work time, for example by promoting work-sharing as an alternative to layoffs. We can also push for paid family leave, sick days, and vacations, like they have in other wealthy countries.
And, we could discourage the Fed from raising interest rates to choke off demand. Higher interest rates are a policy explicitly designed to keep people from getting jobs.
In short, there are many ways to ensure that the economy has enough demand to employ workers, but the Washington Post would rather yell about robots.
Read More Leer más Join the discussion Participa en la discusión
That’s the question millions are asking, or at least the one they should be asking. The OECD recently did an analysis of the economic consequences for the U.K. if it decides to leave the European Union. It concluded that it would cost the country 5.1 percent of GDP in its central estimate. Other analyses have arrived at similar estimates. Such estimates have been cited by right-thinking people everywhere as a powerful argument against the U.K. leaving the European Union. (It is.)
But Brexit is not the only policy that can cost the U.K. large amounts of output. Since the Cameron government came to power in 2010 it has placed a priority on reducing the budget deficit rather than restoring the economy to full employment. As a result, the U.K. economy is still well below its potential level of output. (The potential has undoubtedly fallen as a result due to weak public and private investment since the downturn and workers experiencing prolonged stretches of unemployment and thereby losing skills.)
To get a simple estimate of the output lost due to Cameron’s austerity policies, we can compare the I.M.F.’s projected growth path for the U.K. from 2008, before the severity of the recession was recognized and its current level of output. In 2008, the I.M.F. projected that the U.K. economy would be 26.2 percent larger in 2016 than it was in 2007. (Since the projection only runs to 2013 I have assumed that the growth rate for 2012 to 2013 [2.7 percent] continues for the next three years.) The most recent projection shows that 2016 GDP will be just 9.4 percent higher than the 2007 level.
If we can credit the I.M.F. research staff for knowing what they were doing in their 2008 projections, then the U.K.’s austerity policies have cost it an amount of output equal to 16.8 percentage points of 2007 GDP or more than three times the estimated cost of Brexit. This means that if Brexit is an economic disaster then Cameron’s austerity has been three times as costly as an economic disaster.
For the curious ones out there, the I.M.F’s projections showed the U.S. economy being 26.4 percent larger in 2016 than in 2007. The most recent projection shows the economy being 12.6 larger. The implied loss of 13.8 percentage points of 2007 is a bit less than the three times Brexit measure.
That’s the question millions are asking, or at least the one they should be asking. The OECD recently did an analysis of the economic consequences for the U.K. if it decides to leave the European Union. It concluded that it would cost the country 5.1 percent of GDP in its central estimate. Other analyses have arrived at similar estimates. Such estimates have been cited by right-thinking people everywhere as a powerful argument against the U.K. leaving the European Union. (It is.)
But Brexit is not the only policy that can cost the U.K. large amounts of output. Since the Cameron government came to power in 2010 it has placed a priority on reducing the budget deficit rather than restoring the economy to full employment. As a result, the U.K. economy is still well below its potential level of output. (The potential has undoubtedly fallen as a result due to weak public and private investment since the downturn and workers experiencing prolonged stretches of unemployment and thereby losing skills.)
To get a simple estimate of the output lost due to Cameron’s austerity policies, we can compare the I.M.F.’s projected growth path for the U.K. from 2008, before the severity of the recession was recognized and its current level of output. In 2008, the I.M.F. projected that the U.K. economy would be 26.2 percent larger in 2016 than it was in 2007. (Since the projection only runs to 2013 I have assumed that the growth rate for 2012 to 2013 [2.7 percent] continues for the next three years.) The most recent projection shows that 2016 GDP will be just 9.4 percent higher than the 2007 level.
If we can credit the I.M.F. research staff for knowing what they were doing in their 2008 projections, then the U.K.’s austerity policies have cost it an amount of output equal to 16.8 percentage points of 2007 GDP or more than three times the estimated cost of Brexit. This means that if Brexit is an economic disaster then Cameron’s austerity has been three times as costly as an economic disaster.
For the curious ones out there, the I.M.F’s projections showed the U.S. economy being 26.4 percent larger in 2016 than in 2007. The most recent projection shows the economy being 12.6 larger. The implied loss of 13.8 percentage points of 2007 is a bit less than the three times Brexit measure.
Read More Leer más Join the discussion Participa en la discusión
The NYT apparently wants its readers to believe that the economic policies put in place by Shinzo Abe, Japan’s prime minister, have been a failure. In an article on G-7 summit meeting it quoted Kenneth S. Courtis, chairman of Starfort Holdings and a former Asia vice chairman at Goldman Sachs Group Inc., as saying that Abe’s policies are “viewed mainly as a ‘marketing slogan.'” According to Courtis:
“Japan needs to ‘take a blowtorch’ to regulations and red tape that discourage competition.”
It would have been useful to include some actual data in the piece instead of just presenting readers with disparaging comments from someone in the financial industry. According to the OECD, Japan’s employment rate has increased by 3.2 percentage points since Abe took office in the fall of 2012. This would be equivalent to an increase in employment in the United States of more than 6.4 million workers.
By comparison, the employment rate in the United States has risen by just 1.9 percentage points over this same period. Articles in the New York Times and elsewhere have often praised the pace of job growth in the United States over this period.
While it is clear that Mr. Courtis is unhappy with the regulatory structure in Japan, the data seem to indicate less need for change than he implies in this article.
The NYT apparently wants its readers to believe that the economic policies put in place by Shinzo Abe, Japan’s prime minister, have been a failure. In an article on G-7 summit meeting it quoted Kenneth S. Courtis, chairman of Starfort Holdings and a former Asia vice chairman at Goldman Sachs Group Inc., as saying that Abe’s policies are “viewed mainly as a ‘marketing slogan.'” According to Courtis:
“Japan needs to ‘take a blowtorch’ to regulations and red tape that discourage competition.”
It would have been useful to include some actual data in the piece instead of just presenting readers with disparaging comments from someone in the financial industry. According to the OECD, Japan’s employment rate has increased by 3.2 percentage points since Abe took office in the fall of 2012. This would be equivalent to an increase in employment in the United States of more than 6.4 million workers.
By comparison, the employment rate in the United States has risen by just 1.9 percentage points over this same period. Articles in the New York Times and elsewhere have often praised the pace of job growth in the United States over this period.
While it is clear that Mr. Courtis is unhappy with the regulatory structure in Japan, the data seem to indicate less need for change than he implies in this article.
Read More Leer más Join the discussion Participa en la discusión
In an article that reports on plans by a new coalition to challenge the financial industry, the Washington Post implied that the financial transaction tax (FTT) supported by the coalition would hurt ordinary investors. The piece told readers:
“The proposed so-called transaction tax has already raised concerns among some on Wall Street. Such a tax would also effect pension funds or other large investors who sometimes trade thousands of stocks a day, they say.
“‘While some politicians claim this tax is directed at high frequency trading, the truth is that it would directly hit the pension funds of hard-working teachers, nurses and teamsters,’ said Bill Harts, chief executive of Modern Markets Initiative, which represents high frequency trading firms.
“‘We don’t understand why unions would support something that would so clearly hurt their membership’s pension funds.'”
It’s interesting that the Washington Post chose to turn to a representative of the financial industry as its major source on this proposal. This would be comparable to relying on a spokesperson from the tobacco industry as the main source on tobacco taxes.
If the Post had turned to a more neutral source, like the Tax Policy Center of the Brookings Institution and the Urban Institute, it would have discovered that Mr. Harts is completely wrong. According to the Tax Policy Center’s analysis of a FTT, the volume of trading would actually decline by a larger percentage than the increase in trading costs due to a FTT. (In other words, the demand for trading is elastic.)
This means that on average the pension funds of hard-working teachers, nurses, and teamsters would be paying less money on trading costs after the tax was put in place than they do now. The tax would be more than fully offset by lower trading fees paid to the people that Mr. Harts represents.
In an article that reports on plans by a new coalition to challenge the financial industry, the Washington Post implied that the financial transaction tax (FTT) supported by the coalition would hurt ordinary investors. The piece told readers:
“The proposed so-called transaction tax has already raised concerns among some on Wall Street. Such a tax would also effect pension funds or other large investors who sometimes trade thousands of stocks a day, they say.
“‘While some politicians claim this tax is directed at high frequency trading, the truth is that it would directly hit the pension funds of hard-working teachers, nurses and teamsters,’ said Bill Harts, chief executive of Modern Markets Initiative, which represents high frequency trading firms.
“‘We don’t understand why unions would support something that would so clearly hurt their membership’s pension funds.'”
It’s interesting that the Washington Post chose to turn to a representative of the financial industry as its major source on this proposal. This would be comparable to relying on a spokesperson from the tobacco industry as the main source on tobacco taxes.
If the Post had turned to a more neutral source, like the Tax Policy Center of the Brookings Institution and the Urban Institute, it would have discovered that Mr. Harts is completely wrong. According to the Tax Policy Center’s analysis of a FTT, the volume of trading would actually decline by a larger percentage than the increase in trading costs due to a FTT. (In other words, the demand for trading is elastic.)
This means that on average the pension funds of hard-working teachers, nurses, and teamsters would be paying less money on trading costs after the tax was put in place than they do now. The tax would be more than fully offset by lower trading fees paid to the people that Mr. Harts represents.
Read More Leer más Join the discussion Participa en la discusión
It is a question that goes unasked in a NYT piece that touted the Trans-Pacific Partnership (TPP) as providing the glue for an alliance of the U.S. and East Asian countries against China. While the deal will increase trade between the member countries in some areas, a major thrust of the deal is to increase patent and copyright protections. These increased protections will raise prices in many areas, most importantly prescription drugs.
If the TPP results in some of the poorer countries in the pact paying much higher prices for their drugs (to U.S. drug companies), imposing a large burden on government health care programs or possibly making drugs unaffordable for many citizens, it is not clear that it will make the countries closer allies with the United States. The NYT article does not consider this possibility.
It is a question that goes unasked in a NYT piece that touted the Trans-Pacific Partnership (TPP) as providing the glue for an alliance of the U.S. and East Asian countries against China. While the deal will increase trade between the member countries in some areas, a major thrust of the deal is to increase patent and copyright protections. These increased protections will raise prices in many areas, most importantly prescription drugs.
If the TPP results in some of the poorer countries in the pact paying much higher prices for their drugs (to U.S. drug companies), imposing a large burden on government health care programs or possibly making drugs unaffordable for many citizens, it is not clear that it will make the countries closer allies with the United States. The NYT article does not consider this possibility.
Read More Leer más Join the discussion Participa en la discusión
Read More Leer más Join the discussion Participa en la discusión
Paul Krugman used his column this morning to point out how strong the economy was in the 1990s and how the low unemployment in the second half of the decade allowed for strong wage and income gains at the middle and bottom end of the income distribution. This is all very much on the mark. However, he also distinguished the impact of the stock bubble from the housing bubble by saying that the collapse of the latter had more serious consequences because of the growth of private debt.
There are a few points worth making on this assessment. First the collapse of the stock bubble did have very severe consequences for the labor market. The economy did not gain back the jobs lost in the recession until January of 2005. At the time, this was the longest period without net job growth since the Great Depression. The weakness of the labor market was the reason the Fed kept the federal funds rate at 1.0 percent until the middle of 2004.
If Krugman is pointing to the financial crisis as fallout, then of course the issue of private debt is correct. There were a huge amount of mortgage loans and derivative instruments that could go bad with the collapse of house prices. This was not true in the case of stock prices. It’s much more difficult to borrow against stocks than housing. (The evil regulators at work.)
However, when it comes to the real economy, as opposed to the fun of watching collapsing financial behemoths, we don’t have any reason to look to debt. The investment boom sparked by the stock bubble was much smaller than the construction boom sparked by the housing bubble. The share of non-residential investment in GDP fell by 2.6 percentage points from its 2000 peak to its 2003 trough. Residential construction fell by 4.0 percentage points of GDP from 2005 to 2010.
In addition, the housing wealth effect on consumption is much larger than the stock wealth effect. This is due to the fact that it is much easier to borrow against wealth and also that housing wealth is much more evenly distributed. Bill Gates probably doesn’t increase his consumption much when the value of his stock doubles. Middle income homeowners are likely to spend much more when the value of their house doubles.
In short, while it has become fashionable to cite the importance of debt in explaining the severity of the downturn following the collapse of the housing bubble, it really doesn’t fit. The severity of the downturn can easily be explained by the loss of wealth and the end of the construction boom, debt is at most a secondary consideration.
Paul Krugman used his column this morning to point out how strong the economy was in the 1990s and how the low unemployment in the second half of the decade allowed for strong wage and income gains at the middle and bottom end of the income distribution. This is all very much on the mark. However, he also distinguished the impact of the stock bubble from the housing bubble by saying that the collapse of the latter had more serious consequences because of the growth of private debt.
There are a few points worth making on this assessment. First the collapse of the stock bubble did have very severe consequences for the labor market. The economy did not gain back the jobs lost in the recession until January of 2005. At the time, this was the longest period without net job growth since the Great Depression. The weakness of the labor market was the reason the Fed kept the federal funds rate at 1.0 percent until the middle of 2004.
If Krugman is pointing to the financial crisis as fallout, then of course the issue of private debt is correct. There were a huge amount of mortgage loans and derivative instruments that could go bad with the collapse of house prices. This was not true in the case of stock prices. It’s much more difficult to borrow against stocks than housing. (The evil regulators at work.)
However, when it comes to the real economy, as opposed to the fun of watching collapsing financial behemoths, we don’t have any reason to look to debt. The investment boom sparked by the stock bubble was much smaller than the construction boom sparked by the housing bubble. The share of non-residential investment in GDP fell by 2.6 percentage points from its 2000 peak to its 2003 trough. Residential construction fell by 4.0 percentage points of GDP from 2005 to 2010.
In addition, the housing wealth effect on consumption is much larger than the stock wealth effect. This is due to the fact that it is much easier to borrow against wealth and also that housing wealth is much more evenly distributed. Bill Gates probably doesn’t increase his consumption much when the value of his stock doubles. Middle income homeowners are likely to spend much more when the value of their house doubles.
In short, while it has become fashionable to cite the importance of debt in explaining the severity of the downturn following the collapse of the housing bubble, it really doesn’t fit. The severity of the downturn can easily be explained by the loss of wealth and the end of the construction boom, debt is at most a secondary consideration.
Read More Leer más Join the discussion Participa en la discusión
Read More Leer más Join the discussion Participa en la discusión
The NYT had a piece assessing which of Donald Trump’s promises he would be able to keep if he got in the White House. When discussing trade the piece implied that most workers would be hurt by his efforts to reduce the trade deficit since it would mean higher prices for a wide range of imports. This is faulty logic.
To see the point, suppose that our “free trade” deals had been focused on subjecting doctors, dentists, lawyers, and other highly paid professionals to international competition instead of manufacturing workers. (Yes, there are tens of millions of smart people in the developing world who would be happy to train to U.S. standards and work in the United States for half of the pay of U.S. professionals. We just don’t allow this inflow of foreign professionals because our trade policy is designed by protectionists.) In this case, we would be paying much less for health care and other services provided by these professionals. (The savings from paying doctors European wages would be around $100 billion a year or around 0.6 percent of GDP.)
Suppose our trade deals had gone the route of free trade in professional services. Then Donald Trump promised to restrict the number of foreign doctors who could enter the country. The NYT would say that U.S. doctors would be hurt by this restriction since they would be paying more for health care.
Of course they would pay more for health care, just like everyone else. However their increase in pay would almost certainly dwarf the higher cost of health care.
The same would almost certainly be the case for manufacturing workers and likely a large segment of non-manufacturing workers whose wages have been depressed by competition by displaced manufacturing workers. The NYT is misrepresenting the story by implying that these workers would be losers in this scenario simply because they would have to pay more for imported goods.
The NYT had a piece assessing which of Donald Trump’s promises he would be able to keep if he got in the White House. When discussing trade the piece implied that most workers would be hurt by his efforts to reduce the trade deficit since it would mean higher prices for a wide range of imports. This is faulty logic.
To see the point, suppose that our “free trade” deals had been focused on subjecting doctors, dentists, lawyers, and other highly paid professionals to international competition instead of manufacturing workers. (Yes, there are tens of millions of smart people in the developing world who would be happy to train to U.S. standards and work in the United States for half of the pay of U.S. professionals. We just don’t allow this inflow of foreign professionals because our trade policy is designed by protectionists.) In this case, we would be paying much less for health care and other services provided by these professionals. (The savings from paying doctors European wages would be around $100 billion a year or around 0.6 percent of GDP.)
Suppose our trade deals had gone the route of free trade in professional services. Then Donald Trump promised to restrict the number of foreign doctors who could enter the country. The NYT would say that U.S. doctors would be hurt by this restriction since they would be paying more for health care.
Of course they would pay more for health care, just like everyone else. However their increase in pay would almost certainly dwarf the higher cost of health care.
The same would almost certainly be the case for manufacturing workers and likely a large segment of non-manufacturing workers whose wages have been depressed by competition by displaced manufacturing workers. The NYT is misrepresenting the story by implying that these workers would be losers in this scenario simply because they would have to pay more for imported goods.
Read More Leer más Join the discussion Participa en la discusión
