Tag Archives: economic growth

automatic fiscal stabilizers

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This doesn’t sound like an exciting topic, but I have been thinking, if the federal government decided to match metro-scale infrastructure projects say, between 25 cents and 75 cents on the dollar, and vary that amount based on economic conditions, what kind of trigger would you use for the economic conditions. My initial thought is to base it on unemployment – maybe 25 cents on the dollar if unemployment is below 5%, 50 cents if it is 5-7%, and 75 cents if it goes over 7%. But I just made that up based on no data other than a vaguely remembered undergraduate economics class in the 1990s. Here is a serious idea called the Sahm indicator:

The “Sahm indicator” measures the difference between the three-month moving average of the unemployment rate and its minimum over the prior 12 months (see chart). The use of the unemployment rate avoids the long lags (and frequent large revisions) associated with other indicators (like GDP). Since 1970, whenever the Sahm indicator crossed the threshold of 0.5%, a recession was underway―there were essentially no false signals. Moreover, the trigger occurred early in these downturns (on average within 4 months of the start). Sahm also proposes using an unemployment rate test to turn the stabilizers off. To avoid a premature return to fiscal austerity, she suggests deactivating programs when the unemployment rate falls to a level that is less than 2 percentage points above the initial trigger.

The infrastructure projects have to be ready to go, and part of plans, not just projects. Maybe you could set aside some of the money in a maintenance trust fund, which gets released to local metropolitan area governments to give them some relief in tough times. Maybe federal or state workers could be trained to do basic maintenance tasks. This is really the issue we saw after the 2007-2008 recession – how do you get people hired and trained and contracts and construction plans all in place fast enough to make a difference economically. It’s hard to do that and still build smart, thoughtful, future-ready infrastructure. But catching up on unglamourous deferred maintenance – think fixing potholes, lining leaky pipes, etc. could make sense.

UAE and AI

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A couple interesting facts I learned in this article: (1) The United Arab Emirates has a “Minister of AI” and (2) 89% of workers in the country are foreign-born. The author makes a case that the citizens of the country value their leisure time more than westerners and are willing to embrace state ownership of the means of production with as much automation as possible.

my campaign platform

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I always fantasize in election years about what my campaign platform would be, in a fantasy world where I had political skills and was running. It’s not a useless fantasy, because it gives me a benchmark to measure candidates against when I’m thinking of who to vote for. So here goes:

  • Education – “free college” and trade school yes, but also universal preschool, lifelong education, and strong incentives for private sector skills training and retraining.
  • Infrastructure – I’ve talked a lot about this. Plan at the metropolitan area scale, take a broad view of infrastructure to include housing and green infrastructure. Include strong incentives for private sector capital investment.
  • Innovation – Flood universities with funding for basic research across the board. Make some bets on a few “moon shot” technologies like quantum computing, nanotechnology, fusion power, and advanced biotechnology. Include strong incentives for private sector R&D.
  • Corruption – also known as “campaign finance”, but that sounds boring. This is really about having voters rather than dollars decide elections, and having elected officials write laws that benefit a critical mass of citizens rather than a few large campaign donors. It’s really a prerequisite to achieving anything else in the long term. Hammer the fuckers relentlessly and voters might respond.
  • Nuclear Weapons – Sure I want world peace, but the public is incredibly cynical about that and this is a place to start. Remind people how horrifying and dangerous they are, and that we have way more than we could ever rationally need for any purpose. If we want others to give them up or stop pursuing them, we can easily lead by example. Just put them away as they wear out and don’t make new ones.

Maybe I’ll elaborate on these in future posts, if I get a chance.

Now, which politician do I think is the best match? I have a lot of research and paying attention to do. I think Bernie Sanders would be the strongest on campaign finance, and just making progress on that issue in an 8-year administration might be worth putting him in office. I also think he might be strong on peace. I think his instinct is to expand the welfare state without taking the first three steps to accelerate income growth over time. I’m not sure who I think would be strongest here. Possibly a rational, moderate Republican actually, if such an animal still exists. But I will never support any politician from that party as long as it continues to stand for bigotry, science denial, and war.

June 2019 in Review

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Most frightening and/or depressing story:

  • The world economy appears to be slowing, even though U.S. GDP is growing as the result of the post-2007 recovery finally taking hold, juiced by a heavy dose of pro-cyclical government spending. The worry is that if and when there is eventually a shock to the system, there will be little room for either fiscal or monetary policy to respond. Personally, the partisan in me is thinking any time before November 2020 is as good a time for any for a recession to hit the U.S. I am a couple decades from retirement, and picturing that bumper sticker “Lord, Just Give Me One More Bubble”. Of course, this is selfish thinking when there are many people close to retirement and many families struggling to get by out there. And short-term GDP growth is not the only metric. The U.S. is falling behind its developed peers on a wide range of metrics that matter to people lives, including infrastructure, health care costs and outcomes, life expectancy, maternal and infant mortality, addiction, suicide, poverty, and hunger. And it’s not just that we are no longer in the lead on these metrics, we are below average and falling. Which is why I am leading the charge to Make America Average Again!

Most hopeful story:

  • There have been a number of serious proposals and plans for disarmament and world peace in the past, even since World War II. We have just forgotten about them or never heard of them.

Most interesting story, that was not particularly frightening or hopeful, or perhaps was a mixture of both:

  • In technology news, Elon Musk is planning to launch thousands of satellites. And I learned a new acronym, DARQ: “distributed ledger technology (DLT), artificial intelligence (AI), extended reality (XR) and quantum computing”. And in urban planning news, I am sick and tired of the Dutch just doing everything right.

 

is the U.S. becoming a developing country?

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This Bloomberg article has a list of areas where the U.S. is following behind its peer group of developing nations.

  • roads, highways, bridges
  • high construction costs for all types of infrastructure, particularly high speed rail causing planned projects to be canceled
  • health care costs and outcomes
  • life expectancy
  • maternal mortality
  • rents rising faster than inflation
  • opioid addiction
  • suicide
  • lead in drinking water
  • poverty and hunger

The article offers the cautionary tale of Italy, which has been sliding backward over a decade or so following many years of similarly flashing warning lights before that.

May 2019 in Review

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This wasn’t my most prolific writing (or reading) month ever. In fact, it my have been my worst. But here are a few highlights of what I did get around to.

Most frightening and/or depressing story:

  • Without improvements in battery design, the demand for materials needed to make the batteries might negate the environmental benefits of the batteries. I’m not really all that frightened or depressed about this because I assume designs will improve. Like I said, it was slim pickings this month.

Most hopeful story:

  • Planting native plants in your garden really can make a difference for biodiversity.

Most interesting story, that was not particularly frightening or hopeful, or perhaps was a mixture of both:

  • Joseph Stiglitz suggested an idea for a “free college” program where college is funded by a progressive tax on post-graduation earnings.

 

leisure-enhancing technologies and productivity

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This article claims that the rise of the entertainment industry explains slowing productivity growth, because not only does entertainment distract us from creative and productive pursuits, but our creative and productive people are pouring their energies into this sector because it is where the profits are. I don’t necessarily buy the former, because it is possible that we could be deciding as a society that we are productive enough and choosing to spend more time on pursuits that do not put ever more monetary wealth in our pockets. I think some people are doing that, perhaps not most. Perhaps in Scandinavia. But the second part does make sense to me, that the smartest and most creative people are not being drawn to the sectors where they could do the most good for society.

data-driven economics 101

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This article in Vox is about an entirely data-driven approach to introductory economics. The idea of asking students to discover their own theories is an interesting one, but in most fields I do think there is an established body of theory and standard practice that students should learn before they are qualified to go off reinventing their own wheels. If a new generation doesn’t know what they don’t know, they have to reinvent everything and society doesn’t make progress.

Joseph Stiglitz’s Economic Platform

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Joseph Stiglitz has a new book on what he thinks an evidence-based progressive economic platform should look like. I admit, I haven’t read the book, but I have read this Axios summary of the book. And here is my summary of that summary:

  • “the government should spend as much money as it takes to bring the economy to full employment.” Nicely put.
  • strong antitrust action, including against social media companies
  • a federal job guarantee, but no universal basic income or explicitly race-based reparations
  • the ability to opt in the Medicare
  • (optional) mortgages provided by the government (well, don’t we have something close to this already? I guess it’s just that private banks get their cut before they hand it over to an “implicitly” government-backed lender. I guess you could cut out the middleman.
  • Higher education funded by a progressive tax on post-graduation earnings: “Graduates earning more than $30,000 might pay 1% of their income toward repaying their student loans; those on seven-figure salaries might pay 4%. After 25 years, the loans are forgiven.” He doesn’t specify this has to be public schools only, although it seems to me this would blur the distinction. And if this federal program existed, is it possible states would reduce or end their funding for state schools and blur the distinction even more?

This all sounds good to me. Add some serious research spending and it just might work. The jobs guarantee might work, but would have to be coupled with a stronger disability, mental health and substance addiction safety net than we have now.