Regular readers of the NYT opinion pages must really be wondering what is going on in China. Just a few days ago the paper ran a piece giving us the terrible news that robots are taking all the jobs. According to a column by Martin Ford, China is rapidly bringing robots into its factories, leading to massive displacement of manufacturing workers. Ford tells readers:
“Chinese factory jobs may thus be poised to evaporate at an even faster pace than has been the case in the United States and other developed countries.”
This left us all wondering what China would do with all these workers displaced by robots. But today we discover that China is relaxing its one-child policy, not out of human rights considerations but because it doesn’t have enough people:
“Something had to be done. China’s population has stabilized at around 1.4 billion, but people over 60 now make up more than 13 percent of the population, and the percentage of people 14 years of age and under shrunk at least 6 percent between 2000 and 2010, reaching a new low of 16.4 percent in 2013. The rapid decline of China’s fertility rate — which has plunged to 1.6 percent, way below the 2.1 percent replacement rate — could stunt the country’s future economic growth. The declining working-age population will no longer be able to support the increasingly older Chinese population.”
Let’s contemplate that last sentence for a moment: a declining working-age population won’t be able to support a growing population of retirees. This is the sort of tripe that gets repeated endlessly by the folks who want to cut Social Security. Remember the robots? We don’t need as many workers to support retirees today as we did 20 or 30 years ago because of productivity growth. That has always been true. The robots and other improvements in technology allow each worker to be more productive.
In fact, productivity growth has occurred at an incredibly rapid pace in China over the last three decades so there is no reason that retirees can’t maintain the standard of living they had during their working years while still allowing future generations of workers to experience rapid increases in living standards. The people who can’t understand this fact need to do some more homework in economics before they start writing op-ed columns on the topic.
Regular readers of the NYT opinion pages must really be wondering what is going on in China. Just a few days ago the paper ran a piece giving us the terrible news that robots are taking all the jobs. According to a column by Martin Ford, China is rapidly bringing robots into its factories, leading to massive displacement of manufacturing workers. Ford tells readers:
“Chinese factory jobs may thus be poised to evaporate at an even faster pace than has been the case in the United States and other developed countries.”
This left us all wondering what China would do with all these workers displaced by robots. But today we discover that China is relaxing its one-child policy, not out of human rights considerations but because it doesn’t have enough people:
“Something had to be done. China’s population has stabilized at around 1.4 billion, but people over 60 now make up more than 13 percent of the population, and the percentage of people 14 years of age and under shrunk at least 6 percent between 2000 and 2010, reaching a new low of 16.4 percent in 2013. The rapid decline of China’s fertility rate — which has plunged to 1.6 percent, way below the 2.1 percent replacement rate — could stunt the country’s future economic growth. The declining working-age population will no longer be able to support the increasingly older Chinese population.”
Let’s contemplate that last sentence for a moment: a declining working-age population won’t be able to support a growing population of retirees. This is the sort of tripe that gets repeated endlessly by the folks who want to cut Social Security. Remember the robots? We don’t need as many workers to support retirees today as we did 20 or 30 years ago because of productivity growth. That has always been true. The robots and other improvements in technology allow each worker to be more productive.
In fact, productivity growth has occurred at an incredibly rapid pace in China over the last three decades so there is no reason that retirees can’t maintain the standard of living they had during their working years while still allowing future generations of workers to experience rapid increases in living standards. The people who can’t understand this fact need to do some more homework in economics before they start writing op-ed columns on the topic.
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The media seem to be getting better about referring to the Trans-Pacific Partnership as a “free-trade” agreement. Many articles now refer to it more neutrally as a “trade pact.” The Washington Post sort of split the difference today in describing it as a “a sweeping free-trade and regulatory pact,” but this still requires some further push back.
We know that the TPP will increase patent and copyright protections. These protections cover a large portion of the economy, most importantly prescription drugs, but also a wide variety of chemicals, tech products, and recorded movies, music, and video games.
We don’t know how much trade barriers will be reduced by the TPP. (The deal is secret.) Since the United States already has trade deals with most of the countries in the TPP, it is unlikely that it will lead to a further reduction in the barriers with these countries. This means the TPP will likely only reduce the barriers with the remaining five countries which include Japan, with whom the barriers are already relatively low, and four countries with whom the U.S. has relatively little trade.
There is no basis for assuming that the reduction in barriers with this group of countries will have greater economic significant than the increase in patent and copyright protection. Therefore, the reporters who call the TPP a “free-trade” agreement are simply editorializing, expressing their support for the pact. They do not have any evidence to support this characterization.
The media seem to be getting better about referring to the Trans-Pacific Partnership as a “free-trade” agreement. Many articles now refer to it more neutrally as a “trade pact.” The Washington Post sort of split the difference today in describing it as a “a sweeping free-trade and regulatory pact,” but this still requires some further push back.
We know that the TPP will increase patent and copyright protections. These protections cover a large portion of the economy, most importantly prescription drugs, but also a wide variety of chemicals, tech products, and recorded movies, music, and video games.
We don’t know how much trade barriers will be reduced by the TPP. (The deal is secret.) Since the United States already has trade deals with most of the countries in the TPP, it is unlikely that it will lead to a further reduction in the barriers with these countries. This means the TPP will likely only reduce the barriers with the remaining five countries which include Japan, with whom the barriers are already relatively low, and four countries with whom the U.S. has relatively little trade.
There is no basis for assuming that the reduction in barriers with this group of countries will have greater economic significant than the increase in patent and copyright protection. Therefore, the reporters who call the TPP a “free-trade” agreement are simply editorializing, expressing their support for the pact. They do not have any evidence to support this characterization.
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The NYT has a fascinating piece on how a Chinese drug company appears to have developed a successful treatment for Ebola, the use of which is being threatened by U.S. researchers complaining about patent infringement. The basic story is that the Chinese company used information in a U.S. patent to help develop their drug, which appears to be an effective treatment for Ebola. The patent holders are now upset that the Chinese company is making their drug widely available to Ebola victims, in some cases to people who would otherwise be taking part in controlled clinical trials. (In a controlled trial, half of the people are given a placebo, which can be a serious issue when treating a disease with a high fatality rate.)
Anyhow, it is difficult to believe that progress would not advance more rapidly if researchers did not try to bottle up their findings with patent protection. This is the sort of protection that will be increased in the Trans-Pacific Partnership (TPP). The impact of this protectionism in raising drug prices and impeding scientific progress has not been considered in the widely cited analysis of the TPP’s impact.
The NYT has a fascinating piece on how a Chinese drug company appears to have developed a successful treatment for Ebola, the use of which is being threatened by U.S. researchers complaining about patent infringement. The basic story is that the Chinese company used information in a U.S. patent to help develop their drug, which appears to be an effective treatment for Ebola. The patent holders are now upset that the Chinese company is making their drug widely available to Ebola victims, in some cases to people who would otherwise be taking part in controlled clinical trials. (In a controlled trial, half of the people are given a placebo, which can be a serious issue when treating a disease with a high fatality rate.)
Anyhow, it is difficult to believe that progress would not advance more rapidly if researchers did not try to bottle up their findings with patent protection. This is the sort of protection that will be increased in the Trans-Pacific Partnership (TPP). The impact of this protectionism in raising drug prices and impeding scientific progress has not been considered in the widely cited analysis of the TPP’s impact.
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The Wall Street Journal ran a piece headlined, “as minimum wages rise, small firms get squeezed.” Most readers probably would expect a story of how small businesses are being hit by higher minimum wages. But the business that provides the framing for the story doesn’t seem to fit the bill at all:
“Hannah Joseph dreams of bringing gourmet grilled hot dogs to food lovers coast to coast. But she now rules out owning any new restaurants beyond the two she and her husband currently operate in Indianapolis.
“The reason: high staffing costs, and growing competition for low-wage workers.
“‘I don’t want to deal with more employees,’ said Ms. Joseph, co-owner of King David Dogs, whose 10 or so staffers start at $7.50 an hour, 25 cents above the federal minimum.”
As the piece notes, the minimum wage in Indiana is just the federal minimum of $7.25 an hour and has not been raised in six years. The restaurant apparently is not bound by the minimum, since it is already paying 25 cents an hour more than the minimum, presumably to attract and retain workers.
Insofar as Hannah Joseph is being forced to scale back her plans it seems likely that it is mostly the result of a poorly conceived business strategy. She apparently underestimated the cost of labor and presumably other expenses. That likely would have been the case even if no one was raising the minimum wage, unless the Fed threw the economy back into a recession with high interest rates.
The Wall Street Journal ran a piece headlined, “as minimum wages rise, small firms get squeezed.” Most readers probably would expect a story of how small businesses are being hit by higher minimum wages. But the business that provides the framing for the story doesn’t seem to fit the bill at all:
“Hannah Joseph dreams of bringing gourmet grilled hot dogs to food lovers coast to coast. But she now rules out owning any new restaurants beyond the two she and her husband currently operate in Indianapolis.
“The reason: high staffing costs, and growing competition for low-wage workers.
“‘I don’t want to deal with more employees,’ said Ms. Joseph, co-owner of King David Dogs, whose 10 or so staffers start at $7.50 an hour, 25 cents above the federal minimum.”
As the piece notes, the minimum wage in Indiana is just the federal minimum of $7.25 an hour and has not been raised in six years. The restaurant apparently is not bound by the minimum, since it is already paying 25 cents an hour more than the minimum, presumably to attract and retain workers.
Insofar as Hannah Joseph is being forced to scale back her plans it seems likely that it is mostly the result of a poorly conceived business strategy. She apparently underestimated the cost of labor and presumably other expenses. That likely would have been the case even if no one was raising the minimum wage, unless the Fed threw the economy back into a recession with high interest rates.
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There have been numerous articles and columns about how China is going to suffer because of its one child policy. The story is that there will be very few workers to support the growing population of retirees.
Well, just when you thought it couldn’t get any worse, it turns out that robots are coming to take the jobs of the few workers China still has. How are they ever going to be able to support their retirees now?
Yes, these are completely opposite stories. It’s too hot and too cold. It’s too wet and too dry.
Look, there can be some truth to either of these stories. The first story is one where there is a problem of too little supply. Everyone is retired and there are not enough workers left to care for the elderly.
The second story is one of too little demand. The robots are doing all the work so no one has a paycheck to pay for the things they need. In this story, the robots are caring for the retirees, we don’t need any workers to do it.
The fact that both of these stories can be told by people with claims to being serious speaks volumes about the state of economic debate in policy circles. Why do people put up with economists?
There have been numerous articles and columns about how China is going to suffer because of its one child policy. The story is that there will be very few workers to support the growing population of retirees.
Well, just when you thought it couldn’t get any worse, it turns out that robots are coming to take the jobs of the few workers China still has. How are they ever going to be able to support their retirees now?
Yes, these are completely opposite stories. It’s too hot and too cold. It’s too wet and too dry.
Look, there can be some truth to either of these stories. The first story is one where there is a problem of too little supply. Everyone is retired and there are not enough workers left to care for the elderly.
The second story is one of too little demand. The robots are doing all the work so no one has a paycheck to pay for the things they need. In this story, the robots are caring for the retirees, we don’t need any workers to do it.
The fact that both of these stories can be told by people with claims to being serious speaks volumes about the state of economic debate in policy circles. Why do people put up with economists?
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The NYT told readers that the budget deficit in the first nine months of the 2015 fiscal year was $365.2 billion and is projected to be $486 billion for the whole year. Feel informed?
Odds are that most readers don’t have much basis for determining whether this deficit is big or small (yes, it is lots of money). In times past the NYT had committed itself to putting numbers like this in some context that would make it understandable to readers. For fans of such context, the deficit is a bit less than 2.7 percent of GDP. It is somewhat smaller by this measure than last year’s deficit and is causing the debt to GDP ratio to edge downward.
That might have been useful information for readers. As it is, the NYT told readers that the deficit is a really big number.
The NYT told readers that the budget deficit in the first nine months of the 2015 fiscal year was $365.2 billion and is projected to be $486 billion for the whole year. Feel informed?
Odds are that most readers don’t have much basis for determining whether this deficit is big or small (yes, it is lots of money). In times past the NYT had committed itself to putting numbers like this in some context that would make it understandable to readers. For fans of such context, the deficit is a bit less than 2.7 percent of GDP. It is somewhat smaller by this measure than last year’s deficit and is causing the debt to GDP ratio to edge downward.
That might have been useful information for readers. As it is, the NYT told readers that the deficit is a really big number.
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The man who said he endorses any trade deal that has the words “free trade,” and said that the Germans would insist Greeks work shorter hours as a condition of a bailout is talking about economics again.
Citing a McKinsey study, Friedman tells readers:
“Millions of people can’t find work, ‘yet sectors from technology to health care cannot find people to fill open positions. Many who do work feel overqualified or underutilized.'”
The situation where workers can’t find work or take jobs for which they are overqualified is what would be expected in an economy that is suffering from a lack of demand. The best remedy for a lack of demand is to generate more demand (i.e. spend money). The government can do this by running larger budget deficits. We can also generate more demand by reducing the size of the trade deficit through a lower valued dollar. We can also create demand for more workers by creating incentives for reducing the average number of hours that each worker works in a year, as Germany has done. All of these are fairly simple stories that don’t require using big data or the new complex matching programs that Friedman is touting.
What about the sectors that cannot find people to fill positions? Well skepticism is in order here. Where do we see rapidly rising wages? The answer is pretty much nowhere. This suggests that sectors are not really having trouble filling positions. Higher pay is how employers ordinarily attract more workers, if employers aren’t raising wages then we can reasonably assume they don’t think they have trouble getting the workers they need. That doesn’t mean employers don’t complain. They are always looking for handouts from the government and complaining is the best way to get them.
Of course, it is possible that we have a serious skills gap, as Friedman tells us in the very next sentence in his piece. However it is among corporate managers who don’t understand how labor markets work. They apparently don’t understand that if they can’t get the workers they need then they have to offer higher pay. Maybe a two week training course for top managers could do the trick?
Note: This is slightly revised from a version earlier this morning.
The man who said he endorses any trade deal that has the words “free trade,” and said that the Germans would insist Greeks work shorter hours as a condition of a bailout is talking about economics again.
Citing a McKinsey study, Friedman tells readers:
“Millions of people can’t find work, ‘yet sectors from technology to health care cannot find people to fill open positions. Many who do work feel overqualified or underutilized.'”
The situation where workers can’t find work or take jobs for which they are overqualified is what would be expected in an economy that is suffering from a lack of demand. The best remedy for a lack of demand is to generate more demand (i.e. spend money). The government can do this by running larger budget deficits. We can also generate more demand by reducing the size of the trade deficit through a lower valued dollar. We can also create demand for more workers by creating incentives for reducing the average number of hours that each worker works in a year, as Germany has done. All of these are fairly simple stories that don’t require using big data or the new complex matching programs that Friedman is touting.
What about the sectors that cannot find people to fill positions? Well skepticism is in order here. Where do we see rapidly rising wages? The answer is pretty much nowhere. This suggests that sectors are not really having trouble filling positions. Higher pay is how employers ordinarily attract more workers, if employers aren’t raising wages then we can reasonably assume they don’t think they have trouble getting the workers they need. That doesn’t mean employers don’t complain. They are always looking for handouts from the government and complaining is the best way to get them.
Of course, it is possible that we have a serious skills gap, as Friedman tells us in the very next sentence in his piece. However it is among corporate managers who don’t understand how labor markets work. They apparently don’t understand that if they can’t get the workers they need then they have to offer higher pay. Maybe a two week training course for top managers could do the trick?
Note: This is slightly revised from a version earlier this morning.
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Yes folks, it’s desperation time for the supporters of the Trans-Pacific Partnership (TPP). To get this sucker through they will say anything, because hey, making stuff up for the cause always sells in official Washington.
In his Washington Post column, George Will argued for the TPP because we need it to increase growth. He pointed to the 0.7 percent drop in GDP in the first quarter as illustrating the problem. (This decline was of course mostly due to the weather, but whatever.) If we view this reported drop in GDP as the problem, and the TPP as the solution, then according to the most optimistic estimates available, we will have eliminated roughly half the problem more than a decade from now when the effects of the TPP are fully felt. According to projections from the Peterson Institute for International Economics, the TPP will eventually increase GDP by 0.38 percentage points.
This study shows gains that are more than twice as large as an earlier version. An analysis by the United States Department of Agriculture showed minimal gains.
These analyses are all likely to overstate the gains from the TPP since none of them factor in the higher costs for drugs and other products as a result of the stronger and longer patent and copyright protections in the TPP. These protections are equivalent to massive tariffs barriers. In the case of prescription drugs, patents can raise the price a hundredfold, the equivalent of a tariff of 10,000 percent. And, as econ textbook fans everywhere know, tariff barriers lead to distortions and corruption.
It is quite likely that if these higher prices were factored into the analysis, the TPP would be shown to reduce growth. (We spend over $400 billion a year on pharmaceuticals alone, or 2.2 percent of GDP.) But no one would want the evidence to undermine a trade deal that will give more money to rich people.
Yes folks, it’s desperation time for the supporters of the Trans-Pacific Partnership (TPP). To get this sucker through they will say anything, because hey, making stuff up for the cause always sells in official Washington.
In his Washington Post column, George Will argued for the TPP because we need it to increase growth. He pointed to the 0.7 percent drop in GDP in the first quarter as illustrating the problem. (This decline was of course mostly due to the weather, but whatever.) If we view this reported drop in GDP as the problem, and the TPP as the solution, then according to the most optimistic estimates available, we will have eliminated roughly half the problem more than a decade from now when the effects of the TPP are fully felt. According to projections from the Peterson Institute for International Economics, the TPP will eventually increase GDP by 0.38 percentage points.
This study shows gains that are more than twice as large as an earlier version. An analysis by the United States Department of Agriculture showed minimal gains.
These analyses are all likely to overstate the gains from the TPP since none of them factor in the higher costs for drugs and other products as a result of the stronger and longer patent and copyright protections in the TPP. These protections are equivalent to massive tariffs barriers. In the case of prescription drugs, patents can raise the price a hundredfold, the equivalent of a tariff of 10,000 percent. And, as econ textbook fans everywhere know, tariff barriers lead to distortions and corruption.
It is quite likely that if these higher prices were factored into the analysis, the TPP would be shown to reduce growth. (We spend over $400 billion a year on pharmaceuticals alone, or 2.2 percent of GDP.) But no one would want the evidence to undermine a trade deal that will give more money to rich people.
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Economic reporting is far too focused on short-term fluctuations that often have little relationship to the underlying trend growth in the economy. Last fall this focus led to many celebrations of a turn around in the economy with many pronouncements that the United States was back on top in terms of growth.
The celebrations quickly turned to despair as bad winter weather led to a drop in GDP in the first quarter. There was much hand-wringing over why consumers were not spending their dividend from lower gas prices. (Somehow the hand-wringers never bothered to notice that consumption was at a near record high as a share of the GDP.)
This hand-wringing hit its peak earlier this month with this “letter to stingy American consumers” in the Wall Street Journal. In the letter the WSJ begged consumers to start spending again. Apparently they got the message retroactively. The Commerce Department reported today that retail sales jumped 1.2 percent in May, with April’s data revised up from no change to an increase of 0.2 percent.
So it looks like consumers are again spending their cheap-gas dividend and the economy is safely back on its slow growth track. Needless to say, we will probably have another round of celebrations as people look at the strong growth in May and tout a new boom, forgetting that the cause is a bounceback from the winter weakness. At least it gives economists and economics reporters something to do.
Economic reporting is far too focused on short-term fluctuations that often have little relationship to the underlying trend growth in the economy. Last fall this focus led to many celebrations of a turn around in the economy with many pronouncements that the United States was back on top in terms of growth.
The celebrations quickly turned to despair as bad winter weather led to a drop in GDP in the first quarter. There was much hand-wringing over why consumers were not spending their dividend from lower gas prices. (Somehow the hand-wringers never bothered to notice that consumption was at a near record high as a share of the GDP.)
This hand-wringing hit its peak earlier this month with this “letter to stingy American consumers” in the Wall Street Journal. In the letter the WSJ begged consumers to start spending again. Apparently they got the message retroactively. The Commerce Department reported today that retail sales jumped 1.2 percent in May, with April’s data revised up from no change to an increase of 0.2 percent.
So it looks like consumers are again spending their cheap-gas dividend and the economy is safely back on its slow growth track. Needless to say, we will probably have another round of celebrations as people look at the strong growth in May and tout a new boom, forgetting that the cause is a bounceback from the winter weakness. At least it gives economists and economics reporters something to do.
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Several news articles have reported on the potential costs of the Obama administration’s plans to forgive some of the student debt associated with Corinthian Colleges. Corinthian is a for-profit college that recently went bankrupt. It has been accused of using fraudulent tactics to get students to take out large loans to pay for its tuition.
In projecting the costs to the government, these pieces neglect to take account of the positive effect on incentives that eliminating this debt would have. As it stands, heavily indebted students could expect to have a large portion of any money they earn taken away from them to repay their debts. This acts as a strong disincentive to work (or possibly an incentive to work off the books) in the same way that a high tax rate would provide a disincentive to work.
It is reasonable to believe that these former students will work more and pay more taxes if their debt is forgiven. This would offset some of the money that the government would lose by forgiving the debt. While this offset is not likely to be close to the face value of the debt, it is very plausible that in many cases the additional tax revenue would be comparable to what the government would eventually collect on the debt if it were not forgiven. (Much of the debt will never be repaid regardless of whether the government forgives it.) In other words, forgiving the debt of former Corinthian students may be much less than indicated in these pieces.
Several news articles have reported on the potential costs of the Obama administration’s plans to forgive some of the student debt associated with Corinthian Colleges. Corinthian is a for-profit college that recently went bankrupt. It has been accused of using fraudulent tactics to get students to take out large loans to pay for its tuition.
In projecting the costs to the government, these pieces neglect to take account of the positive effect on incentives that eliminating this debt would have. As it stands, heavily indebted students could expect to have a large portion of any money they earn taken away from them to repay their debts. This acts as a strong disincentive to work (or possibly an incentive to work off the books) in the same way that a high tax rate would provide a disincentive to work.
It is reasonable to believe that these former students will work more and pay more taxes if their debt is forgiven. This would offset some of the money that the government would lose by forgiving the debt. While this offset is not likely to be close to the face value of the debt, it is very plausible that in many cases the additional tax revenue would be comparable to what the government would eventually collect on the debt if it were not forgiven. (Much of the debt will never be repaid regardless of whether the government forgives it.) In other words, forgiving the debt of former Corinthian students may be much less than indicated in these pieces.
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