Wrap Up for March 2021

Infrastructure costs are also affected by citizen voice.

The shift to electronic vehicles is likely to increase overall energy demand.

Part II of Scott Sumner's explanation of MMT.

Some changes in jail incarceration rates from 2005 to 2018.

"Inflation mongering is back."

Potential GDP is controversial, but important.

Adam Tooze doesn't care for Bitcoin, and explains why.

How much did the pandemic affect GDP in 2020?

John Cochrane provides some eye opening graphs: What happened to GDP per capita?

Europeans have gained some "rights to repair" in electrical goods.

Innovation is localized and temporary. And, South Korea leads in innovation rankings.

"Technological progress and TFP are not the same thing."

Perhaps the Trump era has been good for the Republican party.

"Market Power in Neoclassical Growth Models"

Frank Lloyd Wright helped his clientele build a "refuge in a troubled world".

Some long run trends in global connectedness.

One on one tutoring improves educational outcomes.

From the San Francisco Fed: "The Impact of COVID on Potential Output"

A proposal for a public-ownership rental option.

Less proactive police behavior also comes with fewer arrests and more homicides.

"government debt is not just a means of funding government. Treasuries are the rocket fuel of financial markets."

How could tensions between the Fed and the Treasury be addressed?

Might the pandemic lead to permanent changes in production systems?

"High minimum wages stimulate the accumulation of occupation-specific human capital at community colleges but discourage enrollment in academic programs offered by universities."

There's a link between social isolation and impaired cognitive function. On the other hand, some have benefited from the social distancing of at home work.

For John Stuart Mill, liberty was incompatible with systemic inequality.

New rental construction is high, but a growing percentage is intended for the high end of the market.

Noah Smith interviews Patrick Collison.

The media narrative for addiction to painkillers was overly simplistic, which in turn made it difficult to access painkillers for chronic pain.

The productivity of good deflation has at times been confused with the bad deflation of depression.

Is there a neglect of learning potential in early adolescence?

Emergency room visits are the main contributor to medical debt.

An interesting and thought provoking discussion between Ed Nelson and David Beckworth, re Milton Friedman's monetarist legacy.

Ryan Cooper makes "the case for trailer parks".

Kenneth Rogoff is concerned about "the dollar's fragile hegemony". 

Just the same, as David Beckworth notes, it's not easy for investors to walk away from U.S. debt.

It's time to address the bitter resentment of the heartland.

Might Macroeconomic Theory Be Incomplete?

Surprisingly, given the structural changes which have taken place in recent decades, macro theory still takes a back seat to other factors in our economic debates. Even if theoretical issues are highlighted, they generally lack the depth of theoretical discussion which took place during the Great Recession. 

While this is unfortunate, perhaps it also indicates that something more is needed in terms of stories and explanations. In particular, some believe that macro theory should further evolve in order in to remain fully useful. However, mainstream economists are reluctant to advance the horizons of economic theory, indeed some have also noted that economists are the only ones with "rights" to do so. Inexplicably, this approach means economists are becoming more inclined to follow the lead of policy makers. And since the latter have become quite polarized, economist are also less inclined to agree among themselves about theoretical constructs.

In particular, the lack of attention to general equilibrium dynamics in a time of non tradable sector dominance, makes it difficult for economists to productively respond to long term fiscal budgetary burdens. For instance, excess fiscal policy means more taxation later on. Scott Sumner recently mused on what this means:

I don't think the fiscal stimulus is a good idea, but not because I expect much inflation. The inflation rate will be determined by the Fed. Rather, it's a reckless policy because it will lead to higher tax rates in the future and won't do much to generate growth beyond Q3. (Deficits do cause higher interest rates, but only slightly higher in a country like the US.)

And continued: 

For 250 years of American history politicians have held the peacetime budget deficit in check because of fears of either inflation or higher interest rates (or perhaps a loss of confidence in the gold standard). What would happen if they began to sniff out that the actual risk is not inflation or much higher interest rates next year, rather the risk is higher taxes in 20 years, after they've safely retired. How would they respond to this information? I fear that we are about to find out.

Meanwhile, many policy makers are drifting towards an MMT rationale, despite its lack of theoretical validity. Noah Smith notes the lack of academic depth in current discussions, and suggests: 

it seems fairly clear to me that the reason is that everyone quietly stopped believing in the usefulness of academic theory.

Tyler Cowen in turn responds to Noah Smith:

His whole Substack post is very good, though I give the entire matter a different interpretation. I do not view contemporary macroeconomics as wonderfully predictive, but it does put constraints on what you can advocate for or for that matter on what you can predict. I saw the Republicans go down this path some time ago, and now the Democrats are following them - it ain't pretty. I think what we are seeing now is that (some, not all) Democrat economists want Democrats to be popular, and to win, and so they will rearrange macroeconomic thinking accordingly.

Some also appear to believe that revision of macroeconomic theory is needed, so that economists might feel better about their profession. But is that really enough? I suggest that a better understanding of macro theory could provide more insight, how 20th century general equilibrium dynamics allowed nations to introduce knowledge based endeavour for citizens. Alas, this was only an introduction! As it turns out, these methods are insufficient for more complete levels of economic integration in the 21st century. Will we, can we, meet the challenge?

In short, macroeconomic theory may not prove truly useful, until it creates potential for all communities, not just the economic prospects of governments and prosperous regions. Part of getting to a better place in this regard, is understanding how no level of fiscal policy is going to address the aggregate demand realities of regions which were left behind. No economic theory is going to be complete, if it does not take today's built in supply side limitations into account. All the more so, since many future attempts to pour fiscal policy into the bottomless buckets of supply side constraints, will be doomed to fail. It's time to bring supply side considerations to what have become the general equilibrium equations of the 21st century.

Time Based Product and the Profit/Productivity Conundrum

When it comes to service organizations, an investment approach such as private equity can sometimes lead to problems, if personal time is an important component of final product. All the more so in healthcare, should patients need individualized attention for successful outcomes. How might we respond, if and when profit gains result in less personal time with patients in particular? 

For example, a recent NBER working paper, "Does private equity investment in healthcare benefit patients?" highlights the issue of patient neglect. In the abstract, the researchers note how

Our estimates show that PE ownership increases the short-term mortality of Medicare patients by 10%, implying 20,150 lives lost due to PE ownership over our twelve-year sample period. This is accompanied by declines in other areas of patient well-being, such as lower mobility, while taxpayer spending per patient episode increases by 11%. 

An article from Vox further elaborates:

The researchers studied patients who stayed at a skilled nursing facility after an acute episode at a hospital, looking at deaths that fell within the 90-day period after they left the nursing home. They found that going to a private equity-owned nursing home increased mortality for patients by 10 percent against the overall average.

As it turns out, the result was more pronounced for patients who were relatively healthier, since sicker patients benefited from time based regiments deemed too necessary for targeted reductions. Whereas other services appeared more amenable to time adjustments. So private equity changes

include a reduction in staffing, which prior research has found is the most important factor in quality of care. Overall staffing shrinks by 1.4 percent, the study found, but more directly, private equity acquisitions lead to cuts in the number of hours that front-line nurses spend per day providing basic services to patients. Those services, such as bed turning or infection prevention aren't medically intrusive, but they can be critical to health outcomes.

The researchers noted an increase in the use of psychotics which could have substituted for personalized care as well. This study is certainly getting attention, for instance Matthew Yglesias referenced it as an example of meritocracy issues in a recent post. He stresses how smart people may be inclined to do "bad things":

Why do private equity takeovers kill so many people? It's not because the Wall Street boys are dimwitted. Their job is to look for companies that, for whatever reason, are not managed in a way that maximizes shareholder value...There's a lot more you could say about this story looking specifically at the lens of nursing home operations. But I'm interested in meritocracy. And the point here is that things can go awry not despite, but because smart people are in charge.

Indeed, it is easy to frame the unfortunate circumstance of nursing homes as a morality play, and there are countless other time relevant service examples which can be told in similar fashion. However, getting caught in these stories, instead of finding positive ways to respond, ultimately depresses us all. 

Why not try a more dispassionate view in the form of a total equilibrium perspective? Money cannot be expected to accomplish all things equally well, for everyone involved. More specifically, unsettling things will occur when money occasionally fails in its coordination tasks for time based services generation. Again, I can't stress enough that money is problematic when it is expected to remain the sole representation of economic value. For that matter, should we elect to create valid service markets for a full range of personal time potential, people would gain more opportunities to meet the needs of their loved ones, when existing organizational capacity does prove inadequate. And family members would not have to shoulder the entire load of caring for loved ones (outside the time limits of today's services institutions), once community members can freely participate in local platforms for services generation.

By no means would time arbitrage supplant existing meritocracies and their associative hierarchies. Rather, horizontally aligned communities would work alongside meritocratic organizations, meanwhile reinforcing the positives which merit based hierarchies do hold.

Could Time Arbitrage Stabilize Medium Term Growth?

Many have spoken of the need to build new growth and employment strategies, for even our medium term economic reality is somewhat uncertain. I remain convinced that time arbitrage could ultimately contribute to economic stability, in part due to its advantages as a continuum for local services generation.

Symmetric alignment for the time based coordination of local communities, could add to wealth in the here and now. What's more, locally generated time arbitrage would gradually reduce the need for the future fiscal obligations so many services now require. Since decentralized markets for time value would evolve as direct sources of wealth, they could create positive long term effects in terms of total factor productivity gains. 

In particular, time arbitrage may prove advantageous for medium term gains by stabilizing workplace participation for those who engage in person to person service offerings. As things currently stand, technology is beginning to replace the digital tasks which many came to rely on during the pandemic. And while pandemic circumstance initially led to losses in lower income employment (due to social distancing), continuing technology gains will ultimately result in losses of higher wage work, also. Recently, Bryan Walsh of Axios noted that software bots are "learning" to perform tasks previously assigned to office workers. He adds: 

Bots can make digital work more efficient by taking on onerous and repetitive white-collar tasks, but the better they get, the more competition they pose to skilled workers who might have thought themselves exempt from the job-disrupting effects of automation.

What's at stake in this development are continued efficiency gains, and why they are often deemed not just desirable but necessary. Granted, the efficiencies of earlier automation tended to be more closely associated with tradable sector activity. Over the decades - as these processes unfolded - the wealth gains of automation meant that "excess" tradable sector workers could subsequently find work in areas of non tradable sector activity. All the more so, due to additional wealth in circulation via exponential levels of tradable sector output.  

Nevertheless, eventually there would be no escape from the sectoral wealth shifts which eventually transpired. As the overall balance of GDP representation shifted from tradable sectors to non tradable sectors, it gradually became more difficult for tradable sector redistribution to support non tradable activity, given the compensatory claims the latter tended to require - especially when its organizational patterns were hierarchical in nature. 

Even so, much of today's non tradable sector endeavour is just as important for productive economic complexity, as what occurs in tradable sector activity. Unfortunately, many nations no longer have the full range of monetary flexibility they once had, for preserving the applied knowledge which modern economies need. Consequently, the challenge is to recreate more of this vital work on direct and reciprocal terms which are less hierarchical or costly to sustain. Time arbitrage is one way in which we might eventually make this possible. 

Increased efficiencies will always be a necessary component of getting things effectively done. And there is much efficiency to be gained through symmetric alignment which balances human capital inputs and outputs for time based service product. With symmetric time alignment, societies will eventually face fewer financial burdens which stem from the excess input requirements of human capital, in relation to time based services output. Time will always be our most scarce and precious resource. We can all realize productivity gains, by aligning our time with others in ways which make it simpler to meet markets for supply and demand in time based services generation.

Various Musings on (Hopes of) Vaccine Access

Due to the recent dustup over the Johnson and Johnson vaccine, when I began this post, the main thing on my mind was the extent to which healthcare access can be undermined by status games. Plus, for obvious reasons we're also being told the best strategy is simply accepting whatever vaccine comes our way. But is this really good advice? After all, many healthcare products and methods are subjectively experienced. In this instance, COVID-19 vaccines are also associated with knowledge and information which continues to evolve. Consequently, some "expert" pronouncements are based on professional opinions rather than obvious facts. Hence some advice I've taken with a grain of salt in my own decision making processes.

When it comes to subjective experiences, not only are our metabolisms unique, but out personal circumstance are quite different as well. For example, I don't recall having issues with vaccines or booster shots when I was young. But the last time I received a vaccine prior to some community college courses, I was already in my fifties. By then, I'd been managing fairly frequent migraines for some time. Perhaps not surprisingly, that last booster shot came with three or four days of strong migraine, afterward. 

Also important, is that strong migraines occasionally include side effects reminiscent of the chills, fever and body aches associated with COVID-19. For these reasons - now to mention the fact I've never liked shots - I suspected my body would better tolerate the once and done dose of Johnson and Johnson.

Alas, policy makers and also healthcare providers have their own preferences what "should" be available for local populations - indeed, if at all in certain rural areas. Compounding the issue: J & J vaccine has been unfairly contrast with both the Pfizer and Moderna vaccines. As a recent NPR article noted:

Public health messaging around the J & J is especially tricky because the efficacy numbers can obscure nuances about how it was studied. The trials were conducted in different countries during different times of the pandemic than the other two vaccines. And, of increasing importance, the J & J vaccine was tested in places where new, more dangerous variants of the virus were already circulated.

Until now, I'd not been overly upset with the particulars of the vaccine rollout - that is, until I became unexpectedly angry about the waiting list problem. After several attempts and frustrating phone calls, once I finally located the waiting list requirements online, I discovered the only people who could sign up locally were healthcare providers or people 65 years of age with at least one chronic condition. Even if - at 66 - I considered my twenty plus years of migraines as chronic, there's a good chance that since I've not relied on physicians for management, that could disqualify me from vaccine access.

However, a news report from a few days earlier had given me hope that local pharmacies might be among the groups administering J & J vaccines in southeast Texas. Unfortunately that turned out not to be the case in my area. Instead, only the local hospital is tending to vaccines for Pfizer and Moderna vaccines. Yet I only realized local doses were available, because a family member (from out of town) had received a Facebook notification from the hospital. Facebook! My age is showing because I really wish I didn't need to join social media to keep up with what is happening where I live. 

So I don't like how online waiting list processes feel. And when people explained to me that phone call appointments weren't allowed, something in their demeanor made me feel foolish for even asking. In fact, the common refrain from a couple of nearby pharmacists and a local doctor, was basically "why are you contacting me"? It comes across loud and clear from these individuals and their affiliated organizations, how they don't want to personally deal with people such as myself. With a little luck, I suppose, online registration prevents them from having to do so. At any rate, I was caught off guard in my poor reaction to this new reality of crossed finger waiting games and online registrations. It's nothing like the world of person to person interactions I once took for granted - a world of once gentler and kinder humanity which I still dream about. We've seemingly lost that world, at least for now.