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In the long run: Post/Long-Covid als individuelles und gesellschaftliches Problem» mehr

Next year, Nottebohm will be turning 70. Only very recently, Weiler, on this blog, made the point that the argument of a genuine link – underpinning the case of the Commission against the Maltese golden passport scheme – is unconvincing and rests on a "tendentious reading of Nottebohm". Yet, in Commission v Malta, the CJEU may well reinvigorate a European debate about the genuine links that bind us. I, for once, would argue it is high time to make the point that nationality is not just anything a State makes of it.

From Rashad Ahmed today: Source: Rashad Ahmed.

Plus: Passover's race problem, Lenin revisionism, and more...

 Paul Krugman recently asked why people have negative views of the economy even though economic conditions are pretty good.  He suggested that one reason was partisanship--specifically, that Republicans have become more likely to rate the economy as bad just because a Democrat is in office.  I discussed this possibility back in July 2021 and said that there was a clear increase in the effect of partisanship on economic expectations, but that we couldn't be sure about whether there was a change in the effect on ratings of current conditions.  But that was early in Biden's presidency, so there's more information now (data are from the Michigan Surveys of Consumers, which are conducted every month).   The partisan gap (president's party minus opposition party) in ratings of current conditions* and expectation of future conditions:                            Current            Expected        ObservationsCarter                         5.5                  3.1                          1Reagan                      16.0               23.3                          5GW Bush                  16.6               18.4                        10Obama                        7.6               23.3                        25Trump                       21.7               52.0                        46Biden                        19.3               44.0                        30The partisan gap in expectations became larger under Trump and has remained large under Biden.  But the gap in ratings of current hasn't shown any trend--the only thing that stands out is that it was smaller under Obama.  So the issue isn't that Republicans are particularly negative:  it's that everyone is.  Currently, Democratic ratings of the economy are about what they were in the middle of 2010, when unemployment was over 9%.The Michigan surveys didn't regularly ask about party identification until recently, but the ratings of economic conditions go back to the early 1950s.  The horizontal line is the level in the latest survey (March 2023).  Although ratings have been improving since the middle of 2022, they are still very low by historical standards.  The measure of expectations:  Expectations are also low, but they don't stand out as much.  Another way to look at it is to consider the relationship between ratings of current conditions and expectations:The dotted line is the regression line--observations in Biden's presidency are in green.  They are all close to the line, with no tendency to be above or below.  I also indicated the early (Truman-Kennedy) presidencies in blue, because I noticed that expectations were consistently favorable relative to ratings of current conditions in those years.  I'm not sure why that would be the case, but it seems interesting.  The points below the line (expectations negative relative to ratings of current conditions) were mostly in the last years of the Carter administration, which seems reasonable to me given my memory of that time--there was a general sense that things were falling apart.  When you get puzzling results with survey data, a good place to begin is to look for other questions on the same topic, and see if they point in the same direction.  That's what I'll do in my next post.  *The Michigan index is composed of answers to two questions:  "Would you say that you (and your family living there) are better off or worse off financially than you were a year ago?"  and "About the big things people buy for their homes--such as furniture, a refrigerator, stove, television, and things like that. Generally speaking, do you think now is a good or bad time for people to buy major household items?" 

The weather hasn't been great, but the other day the sun came out for a bit so I could get the long lens out. These characters came out to feed. Long-tailed tits (Aegithalos caudatus):

Reader Bruce Hall wishes for any discussion of the impact of trade policies include displays of the manufacturing sector's progress, over the maximally long period. Here, without further ado, is what I could gather quickly. Figure 1: Manufacturing employment (blue), and manufacturing production (tan), both seasonally adjusted, in logs, 1972M01=0. NBER defined peak-to-trough recession dates […]

The colorful, mostly libertarian history of Key West

Following a largely preordained election, Vladimir Putin was sworn in last week for another six-year term as president of Russia. Putin's victory has, of course, been met with accusations of fraud and political interference, factors that help explain his 87.3% vote share. If this continuation of Putin's 24-year-long hold on power makes one thing clear, it's that he and his regime will not be going anywhere for the foreseeable future. But, as his war in Ukraine continues with no clear end in sight, what is less clear is how Washington plans to deal with this reality.Experts say Washington needs to start projecting a long-term strategy toward Russia and its war in Ukraine, wielding its political leverage to apply pressure on Putin and push for more diplomacy aimed at ending the conflict. Only by looking beyond short-term solutions can Washington realistically move the needle in Ukraine.Since Russia's full-scale invasion, the U.S. has focused on getting aid to Ukraine to help it win back all of its pre-2014 territory, a goal complicated by Kyiv's systemic shortages of munitions and manpower. But that response neglects a more strategic approach to the war, according to Andrew Weiss of the Carnegie Endowment for International Peace, who spoke in a recent panel hosted by Carnegie. "There is a vortex of emergency planning that people have been, unfortunately, sucked into for the better part of two years since the intelligence first arrived in the fall of 2021," Weiss said. "And so the urgent crowds out the strategic." Historian Stephen Kotkin, for his part, says preserving Ukraine's sovereignty is critical. However, the apparent focus on regaining territory, pushed by the U.S., is misguided. "Wars are never about regaining territory. It's about the capacity to fight and the will to fight. And if Russia has the capacity to fight and Ukraine takes back territory, Russia won't stop fighting," Kotkin said in a podcast on the Wall Street Journal.And it appears Russia does have the capacity. The number of troops and weapons at Russia's disposal far exceeds Ukraine's, and Russian leaders spend twice as much on defense as their Ukrainian counterparts. Ukraine will need a continuous supply of aid from the West to continue to match up to Russia. And while aid to Ukraine is important, Kotkin says, so is a clear plan for determining the preferred outcome of the war.The U.S. may be better served by using the significant political leverage it has over Russia to shape a long-term outcome in its favor. George Beebe of the Quincy Institute, which publishes Responsible Statecraft, says that Russia's primary concerns and interests do not end with Ukraine. Moscow is fundamentally concerned about the NATO alliance and the threat it may pose to Russian internal stability. Negotiations and dialogue about the bounds and limits of NATO and Russia's powers, therefore, are critical to the broader conflict. This is a process that is not possible without the U.S. and Europe. "That means by definition, we have some leverage," Beebe says. To this point, Kotkin says the strength of the U.S. and its allies lies in their political influence — where they are much more powerful than Russia — rather than on the battlefield. Leveraging this influence will be a necessary tool in reaching an agreement that is favorable to the West's interests, "one that protects the United States, protects its allies in Europe, that preserves an independent Ukraine, but also respects Russia's core security interests there."In Kotkin's view, this would mean pushing for an armistice that ends the fighting on the ground and preserves Ukrainian sovereignty, meaning not legally acknowledging Russia's possession of the territory they have taken during the war. Then, negotiations can proceed. Beebe adds that a treaty on how conventional forces can be used in Europe will be important, one that establishes limits on where and how militaries can be deployed. "[Russia] need[s] some understanding with the West about what we're all going to agree to rule out in terms of interference in the other's domestic affairs," Beebe said. Critical to these objectives is dialogue with Putin, which Beebe says Washington has not done enough to facilitate. U.S. officials have stated publicly that they do not plan to meet with Putin. The U.S. rejected Putin's most recent statements of his willingness to negotiate, which he expressed in an interview with Tucker Carlson in February, citing skepticism that Putin has any genuine intentions of ending the war. "Despite Mr. Putin's words, we have seen no actions to indicate he is interested in ending this war. If he was, he would pull back his forces and stop his ceaseless attacks on Ukraine," a spokesperson for the White House's National Security Council said in response. But neither side has been open to serious communication. Biden and Putin haven't met to engage in meaningful talks about the war since it began, their last meeting taking place before the war began in the summer of 2021 in Geneva. Weiss says the U.S. should make it clear that those lines of communication are open. "Any strategy that involves diplomatic outreach also has to be sort of undergirded by serious resolve and a sense that we're not going anywhere," Weiss said.An end to the war will be critical to long-term global stability. Russia will remain a significant player on the world stage, Beebe explains, considering it is the world's largest nuclear power and a leading energy producer. It is therefore ultimately in the U.S. and Europe's interests to reach a relationship "that combines competitive and cooperative elements, and where we find a way to manage our differences and make sure that they don't spiral into very dangerous military confrontation," he says. As two major global superpowers, the U.S. and Russia need to find a way to share the world. Only genuine, long-term planning can ensure that Washington will be able to shape that future in its best interests.

On Wednesday, Erik Hurst presented a lovely paper, "The Distributional Impact of the Minimum Wage in the Short and Long Run," written with Elena Pastorino, Patrick Kehoe, and Thomas Winberry, at the Hoover Economic Policy Working Group seminar. Video (a great presentation) and slides here. This is a beautiful and detailed model, which won't try to summarize here. I write to pass on one central graph and insight. Suppose there is some "monopsony power," at the individual firm level. Don't argue about that yet. Erik and coauthors  put it in, so that there is a hope that minimum wages can do some good, and it is the central argument made by minimum wage proponents. In the paper it comes because people are uniquely suited to a particular job for personal reasons. Professors don't like to move, they've figured out the ropes at their current university, so the dean can get away with paying less than they could get elsewhere. Why this applies to MacDonalds relative to the Taco Bell next door is a good question, but again, the point is to analyze it not to argue about it. "Labor demand" here is the marginal product of labor. (\(f'(N)\) It's what labor demand would be in a competitive market. The monopsnists' demand is lower). Monopsony means that the "marginal cost of labor" rises with the number of employees. There is a core of people that really love the job that you can hire at low cost. As you expand, though, you have to hire people who aren't that attached to this particular job, so you have to pay more. And you have to pay everyone else more too, (by reasonable assumption -- no individually negotiated wages), so the average cost of labor rises. Thus, the monopsonies firm chooses to hire fewer people \(N_m\),  produce less, and pay them a wage \(W_n\) below their marginal product.  ("Average cost of labor" is really the labor supply curve, call it \(w=L(N)\). Then \(\max (f(N)-wN\) s.t. \(w=L(N)\) yields \(f'(N)=w+NL'(N)\). The "marginal cost of labor" in the graph is this latter quantity: the wage you pay the last worker, plus all workers times the extra wage you must pay them all. Disclaimer: the equations are me reverse-engineering the graph.) Now, add a minimum wage. As the minimum wage rises above \(W_m\), we initially see a rise in the number of workers, and their incomes. The firm moves along the arrow as shown. (\(\max f(N)-wN\) s.t. \( w \ge L(N)\), \( w \ge w^\ast\) gives \(w^\ast = L(N)\) .) Keep raising the minimum wage, though. Once we get past the point that labor supply ("average cost of labor") requires a wage greater than the marginal product of labor, the firm turns around and hires fewer people: (Really, the problem all along was \(\max_{w,N} f(N)-wN\) s.t. \( w \ge L(N)\), \( w \ge w^\ast\). Once the minimum wage rises enough, the solution \(w^\ast=L(N) \) has \(f'(N)<w^\ast\). The firm does better by hiring fewer people than are willing to work at that wage. With the second constraint slack, \(f'(N)=w^\ast\) is the optimum.) So, in this best case, minimum wages do first raise employment, and income. But if you keep going, they eventually turn around and lower employment and raise unemployment (people between the equilibrium and the "average cost of labor" curve want jobs but can't get them.)  We join the local "monopsony" view with the latter "neoclassical" view. The actual model is way more realistic, with multiple kinds of workers, firms that can substitute between workers, dynamics that include capital investment in worker-specific technologies, a search model for unemployment and more. Each seems to me just complicated enough to capture an important effect. Multiple kinds of workers is really important: a big part of the "labor demand" is not just a fixed marginal product of a given kind of worker, but the firm's ability to substitute other kinds of workers and machines for a given task. It's nicely calibrated to match the US economy. A bottom line: Start raising the minimum wage from $7.50.  At first, this raises employment of low-skilled workers, but the above mechanism. It does nothing to medium and high skill workers, since they are already being paid more than the minimum wage. (I'm not sure why we don't see substitution toward higher skills here.) As the minimum wage rises toward $10, however, we hit the neoclassical part of the low-skill curve, and it starts hurting low-skill employment. In their calibration, "monopsony" lowers wages by about 25%, so once the minimum wage has cured that, i.e. about $10 an hour, workers are being paid their marginal products, so requiring even more just quickly lowers their employment. Bit by bit the minimum wage starts to help each group as it hits the point between what they are actually paid and their marginal product. People whose marginal products are less than $7.50 an hour are missing from the picture. They were already driven out of the market by the current minimum wage.  (The conclusions about the optimum minimum wage are potentially flawed by this omission. It could be even less!) This is a lovely story. An obvious implication: Don't quickly generalize too far from local estimates or small interventions.  Big minimum wage changes can have the opposite effects as small ones! The big question of minimum wages is always which workers are helped vs hurt, not overall labor. Much of the other work on minimum wages (Jeff Clemens, for example) emphasizes that it helps a few, who can work the hours employers want, are already skilled, speak English, etc., at the cost of many others, who tend to be less well off to start. The dynamic part of the paper is great too. Minimum wages are like rent controls: the damage takes time to show up. In the model, dynamics show up as firms have structured their capital to the current employment mix. It takes time to put in, say, video screens to substitute away from order-takers. The shaded part is the duration of typical studies. Studies that examine the short run reactions to small minimum wage changes completely miss the long-run effect of large changes. Finally, once again, the minimum wage like so many other policies, is an answer in search of a question. If the issue is "how does policy address labor market monopsony," the minimum wage is a very ineffective answer to that question.  Once you spell out the nature of the actual problem, all sorts of other policies are more effective. If you fix the monopsony, wage subsidies are better. But starting with figuring out why there is monopsony in the first place and what policies are inadvertently supporting it is better still.  ****Update: "Minimum Wages, Efficiency and Welfare" by David Berger, Kyle Herkenhoff and Simon Mongey is a similar paper along these lines -- careful modeling of minimum wages with heterogeneity of workers and firms.  This paper adds different kinds of firms: From Simon:"when you start accounting for firms also being heterogeneous... a similar logic carries over. A small minimum wage lifts employment at the small firm with a slither of monopsony power before tanking them, while it's tanking them it starts raising employment at the slightly bigger firm, then tanks that. By the time you get up to the wages paid by any firm that might have considerable market power you've blown up employment at a whole load of firms. A perturbation argument essentially leads you to never increase the minimum wage."Put another way, a minimum wage increase from $7.50 to $9.00 might actually increase employment at McDonalds... because it puts all the taco stands out of business. Then at $12.00, McDonalds goes out of business but Applebees expands, and so forth. (Or, "corner store" and "supermarket" in Simon's beautiful slides with lots of great supply and demand graphs.) They find that the efficiency maximizing minimum wage is close to where we are now. "Efficiency" means "offsetting monopsony." As in Hurst et al, only a small sliver of people are actually hurt by monopsony and helped by the minimum wage. Everyone whose productivity is below $7.50 an hour is already out of the labor force, and everyone whose productivity is higher than the proposed minimum wage is largely unaffected:  Again, "raise the minimum wage to offset labor monopsony" is an answer in search of a question. (They go on to evaluate redistribution, which I didn't look at. But I will ask the same question. "raise the minimum wage to redistribute income" sounds to me like an answer in search of a question; if the question is "redistribute income with minimum economic disincentive" I bet there are better answers.) ****Update 2. Now, let's think a bit about this "monopsony" business. Both papers include monopsony really for good rhetorical reasons: Let's give the model some reason for minimum wages. Both cite long literatures. Hurst et al summarize that wages are about 25% less than marginal products. Really? At McDonalds? Without getting in to the weeds, think for a minute just how hard this is. What is the marginal product of workers at your job? The marginal product of an extra professor in your department? That's awfully hard to measure! Kudos to those who try. It's easier to measure average products: how much the company makes, divided by number of employees. But wages should be below average products. Someone has to pay for the other inputs and a competitive return to capital. Did we really tease out average vs. marginal products? Well, build a model, add lots of assumptions, and here we go. That's the best we can do, but recognize how hard it is. Pervasive monopsony means two things, both suspicious. First, it means that each company would have to pay more to hire more people, to do the exact same job as current people, and then it has to pay everyone more. The labor supply curve to the company is upward sloping. That's key in the graph above. Really? Do a restaurant really have to pay everyone more in order to get one more employee? Second, it means there are substantial "rents." Where does the extra 25% go? Not just to an ordinary return to capital, but to extraordinary profits. Together with the view that price markups over marginal costs are large, it's just hard to see large monopoly and oligopoly rents spewing out of businesses. I think this illustrates two problems in our general economic discourse. First, econ 101 tends to be a week of how a hypothetical free market works, and then a 9 week litany of market failures, each remediable by an omniscient "planner" -- monopoly, monopsony, externality, asymmetric information, and so on. Our students, like two year olds with hammers, go out and see those nails. But are they really there, and are the available instruments actually able to fix them? Second, there is a pervasive tendency for answers to search for questions. Clearly the minimum wage came first, a centuries old idea, long before monopsony. Monopsony is only the latest item in the shopping cart of reasons for a pre-exiting policy idea. As above, if the question is monopsony, however, the answer is not a minimum wage. This problem abounds. (If the question is how to raise GDP 5% in 100 years, there are 99 answers better than force everyone to buy electric cars today, for example.) Let's be honest. The idea behind minimum wages is to try to transfer income from businesses -- and thus from their customers, investors, and high-wage workers -- to low-wage employees. Mongey et al. explicitly consider "redistribution" as an objective, and this is the objective. The many unintended consequences -- more unemployment, lower employment, favoring the better off at the expense  of the most precarious of low-wage employees, etc. -- bear on that issue. Here to, though,  if the question is "how should we redistribute income to low-wage workers" or even "how should we improve the lot of low-skill workers," there are 100 better answers. The EITC looks better in Hurst et al, though it too has many problems including a very high marginal tax rate as it phases out. Economic discourse would be a lot more productive if instead of focusing on answers that have been around a long time -- let's find a new reason for minimum wages -- we focused on the question and the mechanisms. 

In his latest book, Technofeudalism, the maverick academic-turned unlikely Minister of Finance-turned enfant terrible of European politics Yanis Varoufakis argues that capitalism has ended. It has not, however, been destroyed by the workers of the world – it has been killed by capital itself. The idea, in a nutshell, is the following. As a response […]

Contrary to polling forecasts, neither side obtained the largest percentage of the vote in Sunday's mandatory presidential primaries. Instead, the overall winner—with 30 percent of the vote— was Javier Milei, a free‐​market economist who was first elected as a Congressman for a newly created party—Liberty Advances— in November of 2021.

There's been a lot thrown at Republican voters over the past few weeks. The field of primary candidates has doubled; the leading contender in the primary was federally indicted on 37 counts related to his handling of classified documents and alleged obstruction of justice; and a contest that had remained largely deferential to Trump ha […]

My last post said that the low ratings of current economic conditions weren't the result of increased partisanship--it's not just Republicans who rate them as poor, but people of all parties.  Of course, "economic conditions" can cover a lot of things, so let's look at some of the alternative measures.  Gallup has a question going back to 2001:  "Thinking about the job situation in America today, would you say that it is now a good time or a bad time to find a quality job?"  The last time it was asked (January 2023), 64% said it was a good time and 33% said it was a bad time.  That's good by historical standards--higher than it ever was before August 2017.  So people are quite positive about one important aspect of the economy.  Gallup also has this question:  "Next, we are interested in how people's financial situation may have changed. Would you say that you are financially better off now than you were a year ago, or are you financially worse off now?"  As of January 2023, 35% say better off and 50% say worse off.  That's about where it was in the recessions of 1992-3 and the early 2000s, and somewhat better than the worst years of the "Great Recession" (the graph is here).  The second Gallup question is just about the same as one of the two items in the Michigan index--the other one is about whether it's a good time to buy major household items.  Opinions on these two questions follow different patterns--for the financial situation, the Michigan question is similar to the Gallup one--the current value is low, but not exceptionally low.  For the "good time to buy" it is exceptionally low--lower than it ever was in the "Great Recession" or the recessions of the 1970s and early 1980s (graphs can be found in the "data booklets" here).  This question isn't purely about current or recent conditions--to some extent it's looking ahead.  That is, someone who thinks that economic conditions will get worse will hesitate to make a large purchase.  This is probably a factor now--the economic situation seems uncertain.  As far as the "better off than a year ago" results, the government spent unprecedented amounts to protect people from the Covid recession.  As a result, ratings of how your situation compared to a year ago were not that bad in 2020 and early 2021, even though unemployment passed 10%.  But the other side of that is that as the aid was cut back and the recovery was slower than expected, people became more negative.  Also, although I'm not sure, my impression is that businesses (especially large businesses) absorbed more of the blow in 2020-21--they didn't lay off as many people as they could have and didn't make much effort to cut wages--but when conditions improved, they have made up for that by holding the line against wage increases.  So people's standard of living didn't fall as much as the unemployment numbers would suggest in 2020-21, but hasn't risen as much as they'd suggest in 2022-3.  [Some data from the Roper Center for Public Opinion Research]

It's our first "actual" installment of Whiskey & IR Theory in Space! We discuss Star Trek: Th...