Wrap Up for May 2018

The job guarantee controversy, revisited. Timothy Taylor notes that yes, the U.S. job market would benefit from a broad shake-up. People are losing their patience for good reasons. But why haven't similar programs already been implemented in Europe? And that's just the first tough question. Also a response from Ed Dolan.

April 30th, 2018, was a critical turning point for the FOMC. And,

By paying banks more to hoard reserves than they could make by lending them, the Fed could effectively sequester those reserves, preventing them from contributing to increasing lending, spending and prices.

Is healthy food an important factor in depopulation?

When we asked rural officials about the importance of grocery stores, they shrugged: Affordable housing, jobs, schools and hospitals topped the list.

In the past, deficits didn't really spook markets. That could be changing.

From McKinsey: "The economics of artificial intelligence"

The Federal Reserve Board is one of the few institutions which has received normal treatment from Donald Trump. Can that last?

"Overheating" is hardly a likelihood from the dominance of a single indicator such as oil. Spending growth in 2018 hasn't been sufficient to warrant inflation concerns.

"Although AI is already in use in thousands of companies around the world, most big opportunities have not yet been tapped." "The fallacy that a computer's narrow understanding implies broader understanding is perhaps the biggest source of confusion, and exaggerated claims about AI's progress. We are far from machines that exhibit general intelligence across diverse domains."

Diane Coyle describes some current problems re GDP measure.

Will the pressure on profit margins from higher resource costs prove temporary?

"One of the things that comes up in studying the role of markups is an apparent paradox. The presence of markups can mean the value of aggregate output is lower than it otherwise would be, as it leads to a misallocation of inputs. But at the same time, it is possible that raising the average markup in the economy will increase the value of aggregate output. It would appear as if markups can be both good and bad for output."

Some images of jobs that are disappearing

"Can people afford American infrastructure?"

Productivity growth (a follow up post): Can we sort out positive productivity effects from negative allocation effects? Allocation markup can be positive with quality output gains, but to what extent? I also wonder whether the collapsing markups may reflect a relatively diminished aggregate supply in some instances. Especially when substantial portions of supply are dependent on government revenue. Nevertheless, if markups generated a 40% equilibrium loss in 2014, any possible efficient equilibrium outcome, would center around utility preferences.

Markups in healthcare made the U.S. an attractive market for innovation. "Yet being an engine for innovation doesn't necessarily translate into better outcomes."

Path dependency is an infrastructure problem.

Is future productivity expected to "rebound, stay the same, or decline further"? The authors suggest that "Future structural change will not reduce productivity much further." However, if the status quo were to remain intact, I'd suggest this may be due to reduced aggregate production in time based product. In other words, less use of applied and experiential knowledge at an economic level.

Henry Kissinger discusses the instability of artificial intelligence.

Cities: The passage of time affects "spontaneous complexity and intricacy".

"The benefits that the Affordable Care Act was likely to achieve in terms of expanding health insurance coverage were often oversold."

Vitalik Buterin shares some of his concerns re the need for decentralization

Interest rates have been trending downward for a long time.

Does "doing the right thing" enhance the bottom line? Some interesting experiments with corporate social responsibility.

Elite communities are leaving everyone else behind. What happens next?

"...as college became the default path to professions in the 20th century, apprenticeships fell out of favor with America's upwardly mobile culture."

Too few are taking into account, how this could eventually wreak havoc with our present prosperity: "America's Exploding Budget Deficit" Also, a global perspective.

Deductive vs Inductive Reasoning

One perspective is - of course - NIMBYs wanted it this way. "Early decade big city growth continues to fall off, census shows"