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A Lack of Government Capability at the State and Local Level - Conversable Economist
In the US system of government, the federal government has shifted its empahasis toward becoming a pass-through device for money: it passes through funds to individual through Social Security and various safety net programs; it passes through money to the health care industry through Medicare and Medicaid; it passes through money in the form of
Thoughts on the Trump Tariffs - Conversable Economist
It will take some time for the effects of President Trump's "Liberation Day" announcement of higher US tariffs to become apparent. Here, I'll just offer some notes and quick reactions. 1) The announced tariffs represent a very large increase. Here's a figure showing historical US tariff rates. You will notice that the average rates have
The Ocean-Related Economy - Conversable Economist
A new OECD report on "The Ocean Economy to 2050" begins its "Executive Summary" in this way: The ocean covers 71% of Earth's surface, comprises 90% of the biosphere, provides food security for over three billion people, enables the transportation of over 80% of global goods, and hosts sea cables carrying 98% of international Internet
The AI Market Ecosystem - Conversable Economist
For users of AI tools, the discussion often focuses on the newest version of ChatGPT or Gemini or DeepResearch. But the point of contact of the AI industry with users is of course just one part of the AI industry as a whole. as a whole. Leonardo Gambacorta and Vatsala Shreeti lay it out in
A View from the IMF on Nuances of Industrial Policy - Conversable Economist
Industrial policy can be defined as government policies that seek to shift the sectoral structure of an economy: for example, toward a certain high-technology industry, or toward a manufacturing industry, or in a lower-income country away from a heavy production of raw materials and agricultural goods and toward a greater emphasis on processing those outputs.
The Benefits and Dangers of Decision-making by Algorithm - Conversable Economist
It's crystal-clear that decision-making by algorithm can be imperfect. It's also crystal-clear that decision-making by humans can be pretty imperfect, too. However, the imperfections across these two types of decisions are probably not the same. How and when should society make use of decision-making by algorthm? Cass R. Sunstein provides a thoughtful overview in "The
The Impracticality of Henry George’s Land Tax - Conversable Economist
For those not familiar with the work of Henry George (1839-1897), he is best-known today for the thesis of a book called Progress and Poverty, which after its original publication in 1879 became a best-seller in the late 1880s and into the 1890s. He argued for a land tax as a practical method of financing
The North American Trade Bloc at Risk - Conversable Economist
The "multipolar" world has been a reasonably popular framework for thinking about the global economy. The idea was that the world economy was sorting itself into three geographically defined regions: a North American group, a European group, and an East Asian group. Each group of countries had a combination of traits: a sufficient amount of
Interview with Paul Krugman: Trade and Industrial Policy - Conversable Economist
Chad Bown interviews Paul Krugman at the Trade Talks podcast on a range of subject related to trade and industrial policy (Trade Talks, March 16, 2025, "Paul Krugman talks trade, industrial policy, and Trump"). Here are a few comments that caught my eye: If you are worried about dependence of the US economy on foreign
Private Credit: Replacing Banks for Business Loans? - Conversable Economist
In discussions of how businesses borrow money, there used to be essentially two choice: firms could either issue bonds or borrow through banks. But during the financial crisis of 2008-09, as well as other episodes, it seemed that a number of banks were taking too much risk, which in bad times meant that their solvency
Snapshots about the Federal Workforce - Conversable Economist
I saw some mention that there has been a sharp rise in federal civilian employment in 2023 and 2024. When I tracked down the numbers at the FRED website run by the Federal Reserve Bank of St. Louis, it looked like this: Just to be clear, this is civilian employees only, and doesn't count the
Mistaken Identities: The International Trade Version - Conversable Economist
It is common in current US political discourse to hear it asserted, as an incontrovertible truth, that the US economy is smaller because of the US trade deficit--or equivalently, that tariffs to reduce imports will cause the US economy to grow. Such claims are generally not well-founded. But here, I want to point out one
Will the Next Generation Be Better Off? International Pessimism - Conversable Economist
In the US economy, since the modern pattern of economic growth started back in the early 19th century, average annual growth has been remarkably close to 2% per year on a per capita basis (as I have noted here and here). It would be an extraordinary reversal of fortune for this process to stop and
Three Questions on the US Safety Net - Conversable Economist
Here are three main often-asked questions about the US safety net: 1) If your goal is to expand the social safety net, are you more likely to be successful with a focus on universal programs (like Social Security) or means-tested programs (like food stamps or welfare)? 2) Back in 1996, President Bill Clinton signed what
Adam Smith on Those Who Wish to Dominate Others - Conversable Economist
One of my long-ago professors--not an economist, and not a political conservative-- sometimes said that Adam Smith was just flat out deeper and more interesting than many of his critics, who often try to reduce him to a cardboard cutout disciple of free-market fundamentalism. For example, I've heard (uninformed) criticisms of Smith that he assumes
Economic Uncertainty in the US Economy - Conversable Economist
It's intuitively obvious that "uncertainty" matters in economic decision-making. If the risks of making a choice--starting a company, making an investment, buying a house--look especially big in the present, then there is reason to postpone that decision. As a result, higher uncertainty can lead to a drop in economic activity. Thus, it's a concern that,
High and Low Stress in the Workplace: A World War II Example - Conversable Economist
Will workers in an inherently high-stress environment perform better if their bosses seek to defuse that stress? Or if their bosses play up and emphasize the stress? The answer probably depends on specific contexts of the workforce and the boss. But for some evidence and a speculative answer in one context, Oded Stark offers "Stress
Debt Risks Rising for Low- and Middle-income Countries - Conversable Economist
One of the puzzles of international macroeconomics is that if capital has diminishing returns, then it seems plausible that capital should flow from capital-rich high-income countries to capital-poor low-income countries. After all, the potential returns to capital investment should presumably be high in a capital-poor environment. However, for some decades now, net capital inflows have
The 2023 Merger Guidelines Will Remain: What Does That Mean? - Conversable Economist
Under current law, any US companies considering a merger or acquisition that is above $125 million in size must first report it to the government. The most recent data for 2023 says that 1,805 such transactions were reported in 2023, which was a relatively low number for recent years. In 2021 and 2022, for example,
Interview with Alan Auerbach: Federal Debt and Social Security - Conversable Economist
David A. Price of the Federal Reserve Bank of Richmond interviews Alan Auerbach "On the federal debt, the Social Security trust fund, and how Uncle Sam discourages seniors from working" (Econ Focus, First/Second Quarter 2025). Here are a few of the points that caught my eye. The US Has Lost its Debt-Restraint Religion It's the
Re-Interpreting US Law for Environmental Permitting - Conversable Economist
The National Environmental Policy Act, commonly known as NEPA, became law in 1970. The law itself remains intact, but the way in which the law is implemented is undergoing major changes. The back-story goes like this. In 1977, President Jimmy Carter signed an Executive Order that gave the Council on Environmental Quality (CEQ)--which is an
Europe’s Internal Trade Barriers: A Long Way From a Single Market - Conversable Economist
One remarkable advantage for the US economy is the large size of its internal market. US firms can make investments in new goods and services knowing that they can potentially sell, with only a few limitations rooted in state laws, to a large number of customers across a broad area. Indeed, the openness of the
Costs of Pennies and Nickels - Conversable Economist
The US Mint, in its 2024 Annual Report report, includes a table showing the cost of producing pennies and nickels. As the bottom row shows, total cost of making a penny is now 3.69 cents; total cost of making a nickel is 13.78 cents. It is apparently the 19th consecutive year that the cost of
Dangers of Rising Federal Debt - Conversable Economist
When talking about dangers of rising US government debt, I've found that at least some people who are concerned about the large debt want to hear a "sword of Damocles" story: that is, the federal debt is poised above our economy, held only by a thread, and even a small change could cause it to
Winter 2025 Journal of Economic Perspectives Freely Available 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
A Meditation: An Academic Journal Goes Paperless - Conversable Economist
The American Economic Association publishes a suite of 10 academic journals: one of them is the Journal of Economic Perspectives, where I have worked as Managing Editor for 39 years. Starting in February 2025, none of these journals is going to be printed on paper. For more than a decade now, the JEP has been
What Share of Federal Spending is Borrowed? - Conversable Economist
In a recent year, or a typical year, what share of federal spending is borrowed deficit spending? Here's a figure constructed from the ever-useful FRED website run by the Federal Reserve Bank of St. Louis. The numbers on the vertical axis can be read as percentages: that is, .2 is 20 percent, and so on.
OECD Survey of Adult Skills: Where the US Stands - Conversable Economist
The Survey of Adult Skills was carried out across 31 mainly high-income economies in 2003. It's a survey that's done by having actual interviewers meet people in their homes. For the US, the sample size was 3,765, which may not sound like much, but it's worth remembering that a typical Gallup poll is only about
Structure-Conduct-Performance: An Earlier Generation of Antitrust - Conversable Economist
The birth of US antitrust law dates back to the Sherman Anti-Trust Act of 1890. That law was so vague and poorly worded that it had only modest effects--although it did provide sufficient force to break up the Standard Oil Trust in 1911. The Clayton Antitrust Act of 1914, along with the creation of the
Warnings About Air Traffic Safety Two Months Before the Crash over the Potomac - Conversable Economist
On January 29, a commercial flight collided with an Army helicopter over the Potomac River in Washington, DC, killing 67 people. Less than two months earlier, on December 12, 2024, the US Senate Committee on Commerce, Science, and Transportation held a "Subcommittee Hearing on U.S. Air Traffic Control Systems, Personnel and Safety." The testimony offered
Why Does February (Usually) Have 28 Days? - Conversable Economist
I understand why the calendar adds an extra day to February every four years. The revolution of the earth around the sun is approximately 365 and one-quarter days. Every four years, that adds up to one additional day, plus some extra minutes. The modest rounding error in this calculation is offset by steps like dropping
Modern China, the Old USSR, and American Attitudes about Trade - Conversable Economist
The GATT, formally known as the General Agreement on Tariffs and Trade but informally known as the Gentleman's Agreement to Talk and Talk, was first signed by 23 countrie back in 1947. Over the decades, all that talking led to a substantial decrease in tariffs all around the world. By 1994, the GATT morphed into
The Child Penalty: An International View - Conversable Economist
It's well-known that when a couple has a child, the average woman experiences a "child penalty" in labor market outcomes, while outcomes for the man are largely unchanged. For a discussion of this pattern using US data, here's an article by Jane Waldfogel from back in 1998 in the Journal of Economic Perspectives. As that
Hayek on Decentralized Information in Markets - Conversable Economist
Friedrich von Hayek won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 1974. For the 50th anniversary of the prize, the IEA published a short collection of essays called Hayek’s Nobel: 50 Years On, edited by Kristian Niemietz. It Includes Hayek's speech upon acceptance of the Nobel Prize, "The Pretence
Levels of Industrial Policy - Conversable Economist
In arguments over industrial policy, there's often a moment where someone makes an assertion like: "Every nation has industrial policy. Even not having an industrial policy is a type of industrial policy. The only relevant question is what kind of industrial policy we should choose." In my experience, the people who make this argument then
Protectionism Fails to Achieve Its Stated Goals - Conversable Economist
President Trump set off a wave of protectionist trade policies about seven years ago, back in 2018, and those policies were mostly extended and followed during President Biden's term of office as well. But unsurprisingly to most economists, trade restrictions have done a poor job of producing the desired results. Michael Strain provides a trenchant
The Big Problem Paradox - Conversable Economist
Learning that a problem is widespread may, paradoxically, cause people to view the problem as less dangerous. Kasandra Brabaw offers a readable overview of this dynamic in "The ‘Big Problem Paradox'" (Chicago Booth Review, December 10, 2024). Brabaw writes: If you want to get people’s attention to address a problem, making it seem as big
China’s Industrial Policy for Shipbuilding: The US Pushes Back - Conversable Economist
The US Trade Representative has filed a "Report on China's Targeting of the Maritime, Logistics and Shipbuilding Sectors for Dominance" (January 16, 2025). In the lingo of US trade law, this is a "Section 301" report, which comes from a 1974 law delegating the authority to the USTR to investigate "unfair" trade practices by other
Will AI Bring an “Intention Economy”? - Conversable Economist
Back in the 1971, Herbert Simon (Nobel '78) published an essay on the "attention economy." It famously noted that "a wealth of information creates a poverty of attention." He offered insights about how economic organizations (and people) needed mechanisms to receive and process large amounts of information, and then pass only the relevant portion of
Interview with Myron Scholes: On Academic Finance and the Black-Scholes Option Pricing Formula - Conversable Economist
Jon Hartley interviews Myron Scholes (Nobel '97) on "Academic Finance, Black-Scholes Options Pricing, and Regulation"("Capitalism and Freedom in the 21st Century" podcast, January 5, 2025). The interview includes insights about what was happening in economic finance in the 1960s and 1970s after the "big bang" represented by the work of Harry Markowitz. Here are a