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Expanding the Child Tax Credit: Lessons From a Short-lived Pandemic Policy - Conversable Economist
A "child allowance," in the policy lingo, is a policy that provides a per-child payment to every family with children. The US has for some decades now has a "child tax credit," which has reduced taxes and paid refunds to low-income families with children. But during the pandemic, this program was expanded temporarily in a
More Police, Fewer Prisons, and Other Ways to Reduce Crime - Conversable Economist
What does the existing research evidence say about how to reduce crime? Jennifer Doleac offers and over overview in "Why Crime Matters, and What to Do About It." It appear as an essay in a book published by the Aspen Economic Strategy Group, Strengthening America's Economic Dynamism, edited by Melissa Kearney and Luke Pardue. You
Why Don’t EU Firms Innovate? The Hidden Costs of Failure - Conversable Economist
A simple-minded view of a business trying to innovate might go like this: You spend some money, hire some workers, give it a try--and if it fails to produce revenue, you take your losses, close the books, and shut it down. But what if the act of shutting something down imposes additional future costs? In
The Changing US Labor Market - Conversable Economist
There is a widespread belief that the US labor market has been undergoing a period of unprecedented chance in the last decade or two. On one hand, David Deming, Christopher Ong, and Lawrence H. Summers case doubt on this historical claim in their essay, " Technological Disruption in the US Labor Market"--that is, they argue
Argentina’s Economic Challenge in Context - Conversable Economist
When those outside Argentina discuss Javier Milei, who took office as President of Argentina in December 2023, I sometimes feel as if they are actually saying how they would feel if Milei was elected in their own country. For example, Milei has in a year cut Argentina's government spending by 30% in real terms. So
Some Patterns of Long-Run Asset Returns - Conversable Economist
In classes about personal finance, once of the best-known lessons is that investing in US stocks can have considerable short-term risk, but that over an extended period of time, a patient investor has been rewarded for that short-term risk with higher long-run returns. David Chambers, Elroy Dimson, Antti Ilmanen, and Paul Rintamäki discuss this pattern and others in
Will President Trump Have the Power to Impose Tariffs on Day One? - Conversable Economist
Most actions of the US government require a process. A law is passed through Congress and signed by the president. An administrative agency follows a process for a rule, which is then open for a period of public comment, before being finalized. So it seems reasonable to ask: Does President Trump have the legal authority
Designing an Industry Subsidy: Repayable Advances? - Conversable Economist
If government is considering an industrial policy to subsidize a certain industry (for example, as the US is subsidizing domestic semiconductor manufacturing), what's the best way to do it? I am not typically a fan of such subsidies, but it's possible to make an economic case that for certain industries that provide social as well
Thanksgiving Origins - Conversable Economist
Thanksgiving is a day for a traditional menu, and part of my holiday is to reprint this annual column on the origins of the day. The first presidential proclamation of Thanksgiving as a national holiday was issued by George Washington on October 3, 1789. But it was a one-time event. Individual states (especially those in
An Economist Chews Over Thanksgiving - Conversable Economist
As Thanksgiving preparations arrive, I naturally find my thoughts veering to the evolution of demand for turkey, technological change in turkey production, market concentration in the turkey industry, and price indexes for a classic Thanksgiving dinner. Not that there’s anything wrong with that. [This is an updated, amended, rearranged, and cobbled-together version of a post that
Robots Rising - Conversable Economist
The International Federation of Robotics publishes an annual report on the use of robots in manufacturing and services. The main report is expensive and restricted, but some highlights are free. The top panel shows robots per 10,000 workers in manufacturing industries for 2023. The panel below shows a similar figure with data for 2017. A
The Middle Income Trap - Conversable Economist
The middle income trap refers to the pattern in which certain economies grow rapidly enough to move into the global middle class, or even into the group of high-income countries, but at some point this catch-up growth seem to stall. The problem seems potentially widespread. For example, Japan and Korea both went through several decades
Russia’s Economy and Deathonomics - Conversable Economist
Back in 1939, Winston Churchill famously said in a radio broadcast: "I cannot forecast to you the action of Russia. It is a riddle wrapped in a mystery inside an enigma ..." One might say something similar today about the state of Russia's economy. Since Russia's renewed invasion of Ukraine in 2022, international economic sanctions have
An Economic Policy Tradeoff between Speed and Fraud During the Pandemic - Conversable Economist
The eruption of the COVID-19 pandemic in March 2020 is less than five years ago: still, it has become hard (for me, at least) to recapture in my own head the fears and uncertainties of those first few months. The unemployment rate spiked from 3.5% in February 2020 to 14.8% just two months later in
Interview with Laura Alfaro: Globalization and the Great Reallocation - Conversable Economist
David A. Price of the Richmond Fed serves as interlocutor in an interview with "Laura Alfaro: On global supply chains, sentiment about trade, and what to learn from Latin America" (Econ Focus, Fourth Quarter 2024, pp. 22-25). Here are a couple of comments from Alfaro that stuck with me: On lessons for the United States
Nordhaus Reflects on Technology and Climate Change - Conversable Economist
William Nordhaus (Nobel '18) reflects on his pathway into and through economics in "Looking Backward, Looking Forward" (Annual Review of Resource Economics, 2024, 16: 1–20). He writes: "I first saw light in Albuquerque, New Mexico, at the dawn of World War II, in the lush Rio Grande River floodplain, with an irrigated alfalfa field outside
Are Theme Park Rides a Giffen Good? - Conversable Economist
It is canonical among economists that as the price of a good rises, the quantity demanded of that good falls (other factors held equal). The underlying logic is that a higher price for a certain good has two effects. The "substitution effect" is that a higher price for a certain good causes potential buyers to
Housing: Supply Chasing Demand - Conversable Economist
To explain the high and rising price of housing, the standard economic intuition is that growth in supply isn't keeping up with growth in demand. One piece of evidence supporting this intuition is the "vacancy rate"--that is, what share of owner-occupied housing or rental housing is empty? Here are a couple of figures from the
Fall 2024 Journal of Economic Perspectives Free Online - Conversable Economist
I have been the Managing Editor of the Journal of Economic Perspectives since the first issue in Summer 1987. The JEP is published by the American Economic Association, which decided back in 2011–to my delight–that the journal would be freely available online, from the current issue all the way back to the first issue. You can download individual
How Much Money from a Confiscatory Tax on the Uber-Wealthy? - Conversable Economist
Every now and then, I hear proposals to fund some program by taxing the wealthy--or even just confiscating wealth above a certain level. For the purposes of this post, I'm not interested in the question of whether this tax would be a good idea. (Shocking disclosure: I don't think it's a good idea.) I just
A Benefits Cliff in Washington, DC - Conversable Economist
Government attempts to assist household with low incomes face an inevitable practical problem. As income for a household rises, it will be necessary to phase out the government assistance. But what happens if--at least over a certain range of incomes--a previously low-income household that increases its earnings discovers that its government benefits are being decreased
The Fourth Industrial Revolution and the Future of Work - Conversable Economist
I occasionally pause for a moment to remember that just a few years ago, before we were concerned that AI would take all the jobs, we were worried that new robotics technologies would take all the jobs. And before that, we were worried that automation would take all the jobs. Can we learn something from
A Federal Guarantee of Paid Vacation? - Conversable Economist
The rules governing the US labor market are just different from other high-income countries in some way. One difference involves paid time off. Here's a figure from Betsey Stevenson, "A federal guarantee for earned paid time off" (Hamilton Project at the Brookings Institution, October 2024). You will notice that in this comparison across various high-income
The National Childcare Program During World War II - Conversable Economist
The United States has has a nationwide childcare program at one time in its history: a temporary program during World War II. Tim Sablik of the Federal Reserve Bank of Richmond tells the story and summarizes some economic research on the topic in "When Uncle Sam Watched Rosie's Kids: To support women working on the
Larry Summers on the Economics of AI - Conversable Economist
Joe Walker serves as interlocutor in "Larry Summers — AGI and the Next Industrial Revolution" (The Joe Walker Podcast, October 22, 2024). Here are a couple of points that caught my eye, but there is much more in the interview itself. Here's Summers on the long-term increase in economic output over time and the interrelationship
A Prescription for Fixing the US Healthcare System - Conversable Economist
Among the major issues not being discussed in the US presidential campaign are those facing the US healthcare system. The two main concerns are well-known. One is high cost. The US economy spends about $12,500 per person on health care in 2022, according to the OECD. The second- and third-highest countries, Switzerland and Germany, spend
Employment Levels for Low-Income Women and Men Since the 1990s - Conversable Economist
There is a widespread sense, not just in the United States but in European countries like Denmark, that government assistance for low-income households should be linked to participation in the labor force. So what do employment patterns look like for low-income American--that is, those who are also eligible for various means-tested government assistance programs? Lisa
The Puzzle of Japan’s Economy: When Productivity Gains Are Outside National Borders - Conversable Economist
In total size, Japan's economy is fourth-largest in the world, just behind Germany for third-largest. In per capita GDP, Japan is ahead of Spain and South Korea, although well behind Italy and France. With a life expectancy at birth of 84 years, ,Japan has one of the highest levels in the world. Clearly, Japan has
A Surge in US R&D Spending - Conversable Economist
From a conceptual point of view, the economics of research and development is the opposite of pollution. When a private party carries out an economic activity that leads to pollution, the private party gets the economic benefit, but the broader society bears the costs (in the jargon, a "negative externality"). However, when a private party
A Nobel for Acemoglu, Johnson, and Robinson: Institutions and Prosperity - Conversable Economist
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2024 has been awarded to Daron Acemoglu, Simon Johnson and James Robinson “for studies of how institutions are formed and affect prosperity.” Each year, the Nobel Committee helpfully publishes both a "Popular information" overview of of the award and a "Scientific Background" essay that goes into greater depth.
Interview with Paul Krugman: Economic Geography and Mysteries of Productivity - Conversable Economist
Cardiff Garcia of the Economic Innovation Group interviews Paul Krugman at The New Bazaar website (October 9, 2024). The interview has a number of points of interest. Here are two themes that caught my eye. The study of "economic geography" focuses on why economics activity may tend to cluster, or to spread out, or to
Politically Homeless in the Land of Economics - Conversable Economist
There are of course a variety of reasons unrelated to economic policy to choose between Kamala Harris, Donald Trump, and other candidates running for President of the United States. But as an economist ... It would be nice to vote for someone who acknowledges that the US budgets and the accumulating US debt are a
Interview with Samuel Bowles: Inequality over the Millennia - Conversable Economist
Orley Ashenfelter interviews Samuel Bowles "on his deep interest in the causes of inequality & his work to transform economics" ("The Work Goes On" podcast, posted October 7, 2024). The entire interview is worthwhile: for example, I did not know that Bowles attended school in a tent in India when he was 11 years old
Globalization: Coming to Grips with the Record - Conversable Economist
Back in high school, the first book I read making the arguments against global corporations and globalization was Global Reach, which had been published a few years earlier back in 1974. Since then, anti-globalization arguments have been a consistent drumbeat in the background. I remember controversies over the "Tokyo round" of world trade talks in
Brookings Papers on Economic Activity: Fall 2024 - Conversable Economist
Each fall and spring, the Brookings Institutions holds a conference with a set of papers from prominent economists on leading policy topics, with comments and discussion. The Fall 2024 conference happened last Thursday and Friday. You can go to the website and spend hours watching the whole thing, or you can pick and choose through
The Physicality of Technology: The High Frequency Trading Example - Conversable Economist
Economists commonly think about technology as an idea, but in one way or another, the technology interacts with physical forms--and these physical forms affect how the technology is applied and its social effects. In his da Vinci Medal Address, Donald MacKenzie considers some implications of this idea in "Material Political Economy" (Technology and Culture, July
US Drug Prices: Higher for Brand Names, Lower for Generics - Conversable Economist
Brand-name drugs in the United States cost more than in other countries. The primary reason is that the US has a sort-of-constrained but pretty free market in setting drug prices, while in other countries it is common for the government or national health service to give pharmaceutical companies what amounts to a take-it-or-leave-it offer: charge
The Arrival of Field Experiments in Economics - Conversable Economist
When most people think of "experiments," they think of test tubes and telescopes, of Petri dishes and Bunsen burners. But the physical apparatus is not central to what an "experiment" means. Instead, what matters is the ability to specify different conditions--and then to observe how the differences in the underlying conditions alter the outcomes. When
How Can One Tell if Openness to Trade Helps Economic Growth? - Conversable Economist
The nature of globalization is clearly shifting, but it's not clear to me that the overall level is diminishing. It does seem true the level of goods moving across international borders is rising much more slowly--or even not at all. However, the level of services being performed across international borders is rising substantially, and movements
Student Loans: Not Just About Attending College - Conversable Economist
Student loan debt took off around the year 2000. Adam Looney and Constantine Yanellis tell the story in "What Went Wrong with Federal Student Loans?" (Journal of Economic Perspectives, Summer 2024, pp. 209-236). They point out: "Between 2000 and 2020, the total number of Americans owing federal student loans more than doubled from 21 million