In this excellent book Ragu Rajan and Rohit Lamba argue that India should and can grow faster than it has recently, envisioning a future in higher valIn this excellent book Ragu Rajan and Rohit Lamba argue that India should and can grow faster than it has recently, envisioning a future in higher value-added services for domestic consumption and export (including services bundled with manufacturing goods). Their prescription has many parts but the ones they emphasize most are political tolerance and openness (needed for creativity and ideas to fuel this type of economy), more political decentralization (so the state can be more responsive), and investments in people (especially education and health).
On the "what not to do" side is industrial policy which they are on the (quietly and politely) scathing side, offering the example of a $2b subsidy to offset 70% of the cost of a Micron that will support 5,000 jobs--at a cost of $400,000 per job. Moreover they point out it is still a foreign plant, India does not have big national security vulnerabilities around chips (and even it did getting part of the supply chain wouldn't help much), and this type of near-commodity manufacturing is at the lowest end of the value chain.
I would feel more confident about Rajan and Lamba's vision for the future of India if they could point to other examples. But there aren't any--thus the title Breaking the Mold. In addition, I'm worried that service sector productivity growth has generally been lower than manufacturing productivity growth around the world--another obstacle to the vision. Also India already has done a lot in services exports (from call centers to back-office legal work) but it has yet to be transformational in aggregate).
All that said, they do have a compelling set of reasons to be skeptical about industrialization as a future for India because there is too much low-wage competition globally, the type of manufacturing they would do is low value added (at the bottom of Richard Baldwin's "smile curve"), the existence of technological and other change that has led to premature deindustrialization (country's manufacturing employment share peaks at lower incomes), and the West is unlikely to tolerate another China-like shock. These arguments are compelling, thus the importance of offering another vision. And to be clear, I'm not saying I'm confident their vision is wrong, just nervous.
Fortunately, you don't need to be convinced by their vision to be convinced by their prescription for the future. They are NOT saying the service sector should be targeted and subsidized because they can confidently predict winners and losers--which basically is what much of the industrialization policy vision is based on. Instead they are talking about the types of preconditions for greater innovation, investment, entrepreneurship, participation in the workforce, etc., that would help advance just about any path--including industrialization if they end up having been too pessimistic about that.
And one more note: the book has a nice discussion of why China grew and India did not. Rajan and Lamba list a lot of causes but emphasize the following (some of which I've read elsewhere but worked nicely as a compare/contrast to their interpretation of India): (1) China had more primary education/literacy which was originally to train people to follow Communism but then when they liberalized enabled them to start small businesses and have higher productivity (this reminds me of some of the arguments that both Jews and Protestants have done well economically at various times because the reading they developed for another reason became useful economically when circumstances changes), (2) competition between localities in China made it more business friendly and growth oriented than India's highly nationalist system and (3) China could use wage suppression, financial suppression, devalued exchange rate and general lack of democracy to push through large scale infrastructure and industrialization in a way a democracy could not do....more
There are lots and lots of opinions on policy towards and governance of AI. A lot of those opinions are based on recycling the same sets of arguments There are lots and lots of opinions on policy towards and governance of AI. A lot of those opinions are based on recycling the same sets of arguments or facts. Some of those opinions are that others should not have opinions on these matters. Now enter Verity Harding, who has worked in government, industry, and at universities, with a book that is truly additive by bringing new ideas and insights to bear into what is already starting to feel like an old debate. It is also a really fun and stimulating read.
The bulk of Harding’s book is a history of the governance, mostly by government, of three postwar technologies: space exploration, IVF and human embryonic research, and the internet. Each of these are interesting in their own right, filled with lively characters, big stakes, and something that is much harder ex post—a sense of the many different, and worse, possibilities and paths that were not taken because of the choices that were made.
What emerges is a subtle interplay of contingency, individual government actions, the importance of ethics as a North Star and motivation, diplomacy (in some cases), and also the participation, and in some cases, centrality of businesses. The result was a treaty that space should be disarmed, a broad societal consensus in the UK on embryonic research, and the extraordinary rise of the internet as a global system that is not controlled by any one country or corporations (in part because of wise choices made in the United States).
Harding links each of these histories to their relevance but also limitations for thinking about AI. The individual histories are bracketed by a discussion of the rise of digital platforms in the Bay Area, Harding’s thrill and disappointment with them, and then a discussion of what lessons we should take from all of it.
Harding’s commitment is not to a specific policy but instead to a process that respects the importance of government but also the essential role of business, the need for ethics on the part of both players, and a passionate belief that “you” have a role to play as well....more
The word “important” is overused in describing books. Part of why overusing it is a problem is that it diminishes the power it carries when it is trulThe word “important” is overused in describing books. Part of why overusing it is a problem is that it diminishes the power it carries when it is truly merited. And Melissa Kearney’s The Two-Parent Privilege truly deserves to be called important.
Economists' discussions of poverty have largely shied away from “cultural” issues like marriage because of the fear of falling into cultural judgments, the belief that they are entirely a consequence of economic outcomes not a cause of them, and a worry that we do not have any solutions to them. All three of these have some truth to them. Nevertheless I have always been a bit guilty that my own writing, reading, and policy work has been on conventional poverty issues like tax-and-transfer programs and ways to facilitate and encourage work while avoiding culture entirely.
Enter Kearney with a thoughtful, non-judgmental account of the undesirable consequences of the decline in children’t being raised by married couples—much of it based on her previous scholarly research as well as the research of others (including a number of sociologists, which is nice to see in a book by an economist). She documents this trend which is particularly pronounced for lower-income families, rebuts a number of ways of explaining it away (e.g., there is not much cohabitation without marriage and the little there is tends to be relatively unstable), establishes its importance for outcomes for children and the channels by which it is important, and discusses a number of the causes as well. For good measure there is also a discussion of declining birthrates. And woven throughout is a set of policy conclusions from specific programs (e.g., fatherhood programs and what they need to do to improve) to a broader plea that we should all be taking marriage more seriously.
The story is a complicated one because the decline in marriage is partly caused by economic developments (most notably the decline in earnings for men) but also causes them. Moreover her earlier research found that when men got more opportunities from fracking it did not lead to more marriage so the economic relationships may not work in reverse and there may be persistence in a new set of norms. Moreover the programs that deal with these issues are complicated too, with mixed success and nothing particularly huge. The result is not a magic bullet solution to the problem Kearney so ably documents so much as a plea for all of us to care more about it—a process that holds out the hope of developing more solutions in the future....more
Tyler Cowen’s writes what he calls a “love letter to an American anti-hero”. But it is more honest and balanced than most love letters. This is embodiTyler Cowen’s writes what he calls a “love letter to an American anti-hero”. But it is more honest and balanced than most love letters. This is embodied by his discussion of a book Bad Pharma: How Drug Companies Mislead Doctors and Harm Patients. Cowen says he agrees with just about everything the book documents about, for example, kickbacks to doctors, overprescribing, and keeping trial results secret. His cheeky objection, however, was that the book was titled Not Nearly as Good as It Could Be Pharma: How Corruption Is Diminishing One of Our Great Benefactors and did not include all the good that prescription drugs have done for us.
Similarly his chapter on competition has a lot in common with Thomas Philippon’s book The Great Reversal: How America Gave Up on Free Markets, which was an argument about the problems stemming from increased concentration in the US economy. He identifies much the same areas where competition is insufficient and consumers are hurt, including health care, cellular and cable. But he also spends much more space on the parts of the economy where competition has increased, especially retail, and the many ways in which we have more choices and better ability to compare than ever before.
Other topics get similar treatment: Cowen documents the evidence that larger corporations tend to be more honest because they have reputations at stake while also discussing cases of dishonesty as well as industries built on it and he describes the wonders of the tech industry while expressing substantial concerns about privacy (some of which go well beyond my own personal tastes for privacy0. He is much more unqualified in his defense of CEO pay (it is linked to firm size and the scarce pool of talent) and finance (critical not just for economic development but also global power).
Cowen’s most creative but perhaps least convincing chapter was his speculation that the reason people hate businesses is that they anthropomorphize them. This has the advantage of making them more relatable but the disadvantage that we judge them by the same standards we judge people, something they can never live up to because they are not in fact our cuddly friends.
At the root of some of the book is an alternative theory of the firm to the Coase-Williamson minimize transaction costs view, instead it is businesses as social capital bundling trust, relationships and culture. This leads him to criticize Milton Friedman’s view that corporations should just maximize profits and instead argue that they need to imbue their workers with a sense of mission and purpose that goes beyond profit maximization.
Overall I found myself largely in agreement with the book. It is a good reminder that the average contribution of corporations is enormously beneficial—they make the goods and services we rely on and love (including the Kindle I read the book on and the MacBook I’m typing this review on) and they also employ most of us (not me, I work for a nonprofit and previously worked for the government). The book does not shy away from the many negative marginal contributions corporations make, and in fact endorses holding them to account and making them better, it just does include them to the exclusion of everything else....more
I was very familiar with most of the ideas in Nudge from reading many of the underlying papers that Cass Sunstein and Dick Thaler draw on and that theI was very familiar with most of the ideas in Nudge from reading many of the underlying papers that Cass Sunstein and Dick Thaler draw on and that they themselves wrote plus from working in public policy and lots of conversations. But I had never read the actual book and thought I should finally get around to it.
I can see why it was such a hit. It is a true joy to read. The authors enthusiasm, humor, good intentions, and personalities show through, including the many anecdotes about both of them that are used to illustrate their points. It also does a delightful job of wearing its erudition lightly while breezily covering a wide range of behavioral economics, public policy and deeper dives into a few discrete public policy areas (including retirement savings, organ donations and climate change). Aficionados of this area will not learn a huge amount new but that is partly because of the success of the authors in conveying the ideas in so many ways.
As a matter of public policy or company behavior there is little downside to the Nudge approach. The authors are very clear that Nudges can and are used both for good and for bad, they’re not automatically good. Sure libertarians worry about a slippery slope to something more like a shove while liberals worry that it will turn into a substitute for times when shoving is truly necessary. But choice architecture is unavoidable, it should be done intentionally.
The bigger issue is how large the upside is. The authors are very enthusiastic about the upside and cite specific research and examples to back that up. I remain somewhat less convinced. The only truly large intervention in the economic space is automatic enrollment (and sometimes escalation and investment) in 401(k)s. Of the major economic policy developments in the last decades, including the Affordable Care Act, various fiscal plans, evolution in antitrust, etc. etc., Nudging takes a backseat to mandates, subsidies, and taxes. This is not a criticism of the approach, see the previous paragraph, just a sizing of its consequences.
Finally, I wished the book did more to explore some of the difficult cases and delineate where nudges are appropriate and where other remedies are needed. Some of this comes through, particularly in the very subtle, thoughtful and persuasive discussion of organ donation (they’re in favor of “prompted choice” that encourages and makes it easy for people to opt in rather than “presumed consent” that people can opt out of) and climate change. But it never systematically enunciates the principles that tell policymakers when to use what tool. And it only addresses issues where the behavioral mistake people are making is consistent with social goals (e.g., people eat more than they want to, nudging them can help save them money while helping society) but does not address the harder cases where they are not aligned (e.g., how to do automatic enrollment in health plans for young healthy people when they might want to select a plan that is good for them but society would rather they default into pooling with sicker people).
The book is labelled “Final Edition,” which the authors describe as a commitment device to avoid doing another edition. But whether or not they do they both have many, many more contribution in lots of other forms—so maybe we’ll even get more medium- and large-sized interventions. Until then it is well worth being intentional about getting even the smaller ones right....more
A spectacular book that synthesizes a range of research in economics, education, psychology, sociology, evolutionary biology and public policy in ordeA spectacular book that synthesizes a range of research in economics, education, psychology, sociology, evolutionary biology and public policy in order to document, explain and propose remedies to the problems facing boys and men in modern society.
Richard Reeves does not set out to gratuitously shock with a polemic He is at pains to say nothing in his book is about diminishing challenges facing women and girls. He works hard to bring both progressives and conservatives along with a sympathetic account of how their approaches could contribute—while also criticizing the errors they made. Nevertheless, the book is truly shocking.
Yes, I knew many of the main points: girls are increasingly successful in school and a growing majority in higher education. Male employment rates have been falling for decades (in fact, Reeves draws on some work we did at the Council of Economic Advisers on this topic). Men are increasingly lonely and often feeling without purpose. All of this is especially bad for Black men and poor men. Most randomized trials and natural experiments find that most public policies that help girls do not also help boys (e.g., preschool, mentoring, college scholarships, work subsidies, training, etc.) But I learned a number of new ones and reading them all together in such stark terms was still eye opening.
Reeves then goes on to explain these points, grounding his explanation in a combination of nature and nurture. He explains some of the evolutionary biology of masculinity and the way in which it co-developed with culture. The evidence is overwhelming that there is something different about men including risk taking (possibly the biological result of their lower rates of evolutionary success), violence, sexual drive, and more. Reeves notes that there is a lot of overlap between men and women on most of these but that men also have greater variance and thus more extremes.
This account allows Reeves to situate his analysis in a political context. He chides progressives for alienating men with their belief that all masculinity is toxic and their mistaken insistence on a “blank slate” that denies the role of biology. Conservatives have the opposite problem, over-emphasizing biology and treating feminism as itself toxic. Much of the conservative response styles itself as a response to the liberal one, in which discussions of male problems are de-emphasized so it becomes a forbidden discussion that quickly turns dark and ugly.
Finally, Reeves concludes with a set of very detailed and specific policy recommendations. The biggest one is to redshirt boys, setting the default of starting school a year later to make up for their slower biological development. This is a big idea and deserves serious thought—but I’m not sure the evidence is good enough yet that I would want to see the entire country adopt it. More modest is the suggestion of an effort to enlist more male teachers, something the evidence shows matters a lot for boys learning reading—and now only 11 percent of elementary school teachers are male. In addition he has ideas on attracting more men to HEAL professions, non-transferrable paid leave that could be used for children up to age 18, and much more.
Overall the problem Reeves is documenting is not exactly a secret, after all he cites and draws heavily on work by leading economists, sociologists, and other social scientists and biologists who have all done scholarship in the area. Then again, you wouldn’t read a book on inequality and dismiss it because it is not a newly discovered problem. Reeves puts it together nicely, tying together all of the different steps of the argument and aspects of the problem. He also shows how much it was neglected in public policy discussions (e.g., he highlights several examples of a focus on a problem for girls/men when the exact same problem, like suicide or COVID or whatever, is worse for boys/men). I don’t think he has all the solutions—no one person does—but I hope the book motivates more people to look for them....more
The world is lucky that David Wessel devoted so much time, attention and open mindedness to one particular provision in the tax code, Opportunity ZoneThe world is lucky that David Wessel devoted so much time, attention and open mindedness to one particular provision in the tax code, Opportunity Zones, documenting their origin and impact. He has a reporters eye for detail, an ability to tell the story in an exciting way, but also blends in rigorous policy analytics and a certain degree of sympathy and open mindedness--while being willing to make the calls when they are obvious.
Opportunity Zones were a provision in the 2017 that allowed people to take capital gains and instead of paying taxes on them invest them in funds that invested in designated lower-income (sort of) areas with the gains deferred and (they hoped) permanently eliminated it. The idea was the brainchild of Silicon Valley billionaire Sean Parker who established a "think tank" (the Economic Innovation Group), drummed up bipartisan support, and got the idea enacted in record time in the 2017 tax cut. The bad press quickly mounted as many gentrifying and even rich areas were designated Opportunity Zones, connected people started profiting, and funds appeared to be going into expensive hotels, storage facilities and college dorms.
As someone that has worked on economic policy, both reporting and from within Brookings, Wessel brings a lot of insight into how ideas are fleshed out and defended. In some ways he is appropriately cynical, but in other ways he shows the ways in which the idea was, at least in part, well intentioned by its developers, promoter and legislators (and Parker himself does not appear to have profited at all from it). He does make the think tank policy industry sound a little more cynical than it deserves, I would also love to read a book on how the idea of a child allowance went from pipe dream to reality rapidly in part through think tanks and research in a manner that has some similarities but many differences from Opportunity Zones.
The first part of the book filled in a few holes in my knowledge (including some great stories, like Tim Scott in the Oval Office after Charlottesville using the opportunity to push President Trump on Opportunity Zones). But it got more interesting the second part where Wessel goes through the quirks of the process by which Treasury rapidly wrote rules on Opportunity Zones and the States implemented them with mixed results along with the many weirdnesses, quirks, accidents and malevolence that went into the process. Then he goes off to Portland, Baltimore and other places to examine project, finding that most of them would have happened anyway, did not appear to serve any particularly worthwhile goal, but in a few cases may have been consistent with the intention.
These anecdotes would be a wonderful complement to rigorous causal research, unfortunately there is none and given the paucity of data there may never be. But he cites evidence that Opportunity Zones have not raised housing prices, most did not get anything like the initial hype or even get anything at all, and most of the money went to gentrifying ones. All in all, the combination of anecdotes and evidence leaves one wondering whether a small fraction of the cost went to good or none of the cost went to good.
At the end of the day my own deep policy conviction is to be extremely skeptical of place-based policies and extremely skeptical of indirect policies that gives financial incentives to businesses or high-income people to do good things for others. The problem with place-based policies is they often do not benefit those in most need but property owners and in practice can be implemented in a highly politicized manner because nothing is more powerful for politicians than places. And then there is a parade of policies that are about indirectly giving incentives through corporations or high-income households to achieve goals (like the repatriation holiday), almost all of which beg the question of why not use the federal resources directly for whatever the purpose was.
A big advantage of giving money to people rather than places or high-income households is that it is hard to go badly wrong. If the government had spent the money on housing vouchers, for example, we might debate the finer points of whether they were optimally designed (e.g., whether and how to encourage mobility to high opportunity areas) but there would not be any doubt that the resources went to their intended purposes. Instead we are left with a triple bank shot of a policy that may have delivered a little to people who needed it while letting the most affluent take a huge cut.
Overall, a great case study in how Washington works, how tax policy works, and some of the challenges around promoting economic development through the tax code--highly recommended....more
Most polemics don’t persuade anyone of anything, they just provide comfort and occasionally a new argument for those who already believe. Matthew YgleMost polemics don’t persuade anyone of anything, they just provide comfort and occasionally a new argument for those who already believe. Matthew Yglesias’s brilliant book could be an exception that genuinely change some minds. I don’t mean persuade anyone that the United States should have more immigration or invest more in children, my guess is most of his readers already thought that. Instead, Yglesias might persuade his readers of the greatness of the American project, the importance of the United States continuing to be the leading country in the world, and the fact that it is currently under threat from a growing China. The book’s strong opening chapters eloquently make the case for America’s role in the world, why it is better than the alternatives, how we won World War II, and why that spirit matters in the future, a sentiment that is sometimes missing from the publication he founded which has been known to publish July 4th pieces regretting the very existence of an independent United States.
If a Council of Foreign Relations type read the book (and I hope they do but fear they won’t), they would get a new argument for high levels of immigration: “What the various diplomats and admirals and trade negotiators and Asia hands who think about the China question don’t want to admit is that all the diplomacy and aircraft carriers and shrewd trade tactics in the world aren’t going to make a whit of difference if China is just a much bigger and more important country than we are. The original Thirteen Colonies, by the same token, could have made for a nice, quiet, prosperous agricultural nation—like a giant New Zealand. But no number of smart generals could have helped a country like that intervene decisively in World War II.”
If a nativist politician read the book (and I know they won’t) they would have to either change their mind, dismiss it without cause (the most likely), or retreat to an argument that they supported a smaller, weaker, poor United States because they did not want to see further changes in its racial/ethnic composition which they value enough to outweigh these other concerns.
Personally, I was a convert on both of the causes above but I got a lot of new arguments, an organizing principle for those arguments, and some nifty data. The nationalistic argument may be more persuasive than the more moral and narrowly economic appeal that Bryan Caplan made in the also excellent Open Borders: The Science and Ethics of Immigration. (Caplan’s case resonates a bit more with me, but I suspect Yglesias nationalistic arguments and rejection of open borders is the wiser approach politically.)
If you had asked me before this book I would have said 1 billion Americans was a lot. But Yglesias marshals a lot of data about how it would still leave us much less dense than most of Europe and resource abundant relative to population as compared to many countries. He never seriously (or even at all) addresses adjustment costs, but given that it is more about an ambitious goal than the likelihood that we will get there anytime soon that is an understandable omission.
Yglesias focuses on immigration and having children. On immigration he has the heterodox-for-a-progressive view that we should care about what types of immigrants we get, if it is more politically possible to expand for some groups we should, and that a differential tax rate for immigrants to reflect the benefits America creates for them would be tolerable. On having children Yglesias makes a heterodox pro-natalist argument for a relatively conventional but worthy progressive list of child allowances, preschool and the like—with an emphasis on genuine universality and the addition of marriage penalties to the list of public policy problems, something often omitted from progressive lists.
He also focuses on what would need to be done to make it work with an outstanding capsule discussion of trends in American economic geography and advocacy of reducing land use restrictions, a cause he has been a leading advocate of.
Overall, the book is intelligent, insightful, often heterodox, and persuaded me of the case for focusing on and making arguments for issues that are first order important and expanding the Overton window rather than just staying within the current and more limited paradigms....more
An outstanding, short, insightful capsule history of antitrust and antitrust through from the establishment of the Clayton Act in 1890 through the latAn outstanding, short, insightful capsule history of antitrust and antitrust through from the establishment of the Clayton Act in 1890 through the latest issues with the tech giants. All of it written very much for a general reader with little or no law or economics. In many places I would have liked to see much more, but you can find more in Wu’s papers—this book was for a different purpose. Underlying Wu’s version of history is an argument in favor of Louis Brandeis’ approach to antitrust, which focused as much on the political as the economic—specifically the risks of both concentrated economic power and concentrated political power.
Wu discusses the establishment of antitrust, its first major use with Standard Oil, and its growth through the Microsoft breakup pushed by Joel Klein during the Clinton administration. As antitrust actions are growing, the Chicago School was growing in importance as well with its emphasis on a much narrower concept of consumer welfare as determined by economic experts primarily with regard to whether a given merger will raise or lower prices. Ultimately Wu credits (or discredits) the “Harvard School” with taking the rough edges of the Chicago School and making it possible for the legal system to use it.
Wu faults the Chicago school’s narrow focus on economics while also faulting their economics. On the later, he is sympathetic to their limiting predatory pricing claims but thinks they way overshot the mark with their lack of concern about virtual all vertical mergers, many monopolies, and abuses of dominance.
At the same time Wu documents the benefits of antitrust enforcement, arguing the breakup of AT&T and the cases against Microsoft and IBM unlocked vast new economic terrains and were part of why the United States has outpaced countries like Japan which kept their monopoly telecoms in place. Some of this is widely accepted but Wu make a particularly compelling reinterpretation of the IBM case—often used as an argument against antitrust enforcement because it dragged on for over a decade—as central the separation of hardware and software and the rise of the PC.
Overall the book did not fully persuade me of the overarching “ne0-Brandesian” theory that Wu is seeking to revive for three reasons. First, I’m not sure how much link there is between corporate concentration and political power. It is the case that the wealthy have much more political power, but antitrust won’t do anything about hedge funds and private equity and I’m not sure that political power is much stronger with four airlines than six airlines. Second, much of Brandeis’s “big is bad” celebration of small businesses seems to be stronger on nostalgia than evidence. While too much corporate concentration can tilt bargaining power in a problematic way, it is not like small businesses are ideal places to work and in fact tend to have less workplace protection, benefits, training and room for advancement.
Finally, and most importantly, Wu shows that you don’t need to buy his broader political arguments to believe that antitrust needs to be more vigorous and specifically more vigorous in many of the ways he recommends (e.g., greater merger control, more reliance on structural remedies like breakups instead of conduct remedies about how companies are supposed to behave). Ultimately, Wu’s own arguments convincingly show that just appealing to economics—but expanding the focus to include innovation, quality, choice and other issues that are increasingly being considered in antitrust enforcement—is sufficient to get policy most or all of the way to where he would (rightfully in many cases) want it to go....more
A thoughtful, provocative, carefully argued book that made me change my mind on some issues that I thought I’d thought about quite a lot, which is aboA thoughtful, provocative, carefully argued book that made me change my mind on some issues that I thought I’d thought about quite a lot, which is about the best a book can do. Cass agrees with many progressives on the problem (the lack of work for less-skilled workers), proposes some solutions that are not just the standard trickle-down, laissez faire ideas like wage subsidies, but also finds new arguments for a number of old conservative ideas like less environmental regulation. Overall a refreshing take on center right economic policy.
I strongly agree with Cass on the definition of the problem. Cass rejects the Panglossian views of some the people who like to deny the increased economic dysfunctions we are facing. Cass goes through a familiar recitation of the standard data on the slowdown of median income growth, the reduction in absolute mobility, and rising mortality rates. (Cass never uses the word “inequality” but in talking about the gap between mean and median incomes he is talking about the same topic.) The novelty was hearing this from the Manhattan Institute which I associated with the Scott Winship perspective that all these data were flawed and everything was much better than it appeared.
Cass goes one step further, rejecting the emphasis on growth and instead establishing a “working hypothesis” that “a labor market in which workers can support strong families and communities is the central determinant of long-term prosperity and should be the central focus of public policy.” I am sympathetic, in many ways being excluded from the workforce is much worse than income inequality, creating a downward spiral of exclusion for people and communities. But I also think Cass goes too far given the strong correlation between growth and median/bottom income and broader positive effects, many of them documented in, among other places, Ben Friedman’s Moral Consequences of Economic Growth.
This orientation sets him apart from both the “welfarism” that dominates economics by focusing on incomes and income distribution not the jobs and broader meaning Cass focuses on. It also separates him from supply siders and their relentless focus on economic growth over everything else. Some of this makes sense but, again, I think Cass understates the degree to which more money—especially for families with children—improves long-run outcomes in areas like health, education, crime and the labor market.
The second part of Cass’s book focuses on policy issues and in almost every case he evaluates them based on their impact of the employment prospects of less-skilled men. This leads him to be more supportive of manufacturing and less supportive of free trade and immigration than your typical center right conservative or, for that matter, myself.
In other places, it leads him to familiar arguments—like the need for less environmental regulation, a shift from cost-benefit analysis to a regulatory budget, and a lexicographic focus on less-skilled employment over environmental protection. Some of his arguments on the misapplication of cost-benefit analysis ring true but in my view the solution is better cost-benefit analysis not less of it. And he does not acknowledge the ambiguous relationship between environmental protection and employment (e.g., does requiring scrubbers create jobs retrofitting power plants or cost them?)
Cass’s discussion of unions is a mostly one-sided case against them but is followed by a thoughtful set of ideas on alternative work relationships that have much in common with Richard Freeman and what many on the left are thinking about, only in Cass’s case these would be in lieu of standard work protections.
The leading “big idea” in the book is Phelps-style wage subsidies for low wage work, an idea that I think deserves serious consideration although I would pilot it first since it is relatively untested and lends itself to fraud (people and employers can agree to report higher hours worked and thus record lower wages and collect a bigger subsidy).
Finally, the third part of Cass’s book is in many ways the most interesting, covering cultural and community issues that many progressives shy away from, including what Cass perceives as the increased denigration of more blue collar jobs and what this means for images and support for this work.
In the end, I disagree with many of Cass’s recommendations but I’m glad he is in what is mostly the right debate to be having about our economic future....more
Buy this book, then read the beginning of Chapter 4 which provides a hilarious send-up of how ineffective the government's food pyramid was (it is funBuy this book, then read the beginning of Chapter 4 which provides a hilarious send-up of how ineffective the government's food pyramid was (it is funnier when you can actually see the figure): "Now ask yourself what you should be eating if you care about nutrition. Maybe the shoeless person climbing (away from the food? toward the top?) holds a clue. But wait. What is so good about the top? What is that white apex supposed to represent? Is it heaven? Is it thinness? At the bottom, why are so many foods crowded into each other? Are you supposed to eat all of those things? At once? What’s that large stripe between “fruits” and “meat and beans”? And what is that brown thing at the lower right? Is it a shoe? Did it belong to that climbing person? Are you supposed to eat it?"
Then go back to the beginning of the book from beginning to end. And then start thinking about how you can apply the many lessons that Cass Sunstein imparts with brilliance, wit, insight, compassion, and endless energy and initiative--tying together a large amount of material into a coherent, consistent intellectual framework that is focused but also flexible....more
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