Brothers Judd Blog

If two New Hampshire men aren't a match for the Devil, we might as well give the country back to the Indians. -Stephen Vincent Benet (1898-1943)

One Economy to Rule Them All

One Economy to Rule Them All

ALL OF WHICH GOES DOUBLE FOR UBI:

The Conservative Case for Remote Work (Frank DeVito, 3/18/24, Public Discourse)

[T]he economy has been steadily moving out of homes and into centralized locations for the last two centuries or so. Yes, this has meant mass production of cheaper goods, including those essential to keeping people alive. But there has been a massive downside: it has become the norm for people to spend more of their waking hours at a workplace than at home. Critics of feminism (properly) lament that the cultural norm for new mothers is to leave their children in another’s care in order to work outside the home (and they face increasing pressure to do so in light of a poor economy). Conservatives also speak (correctly) about the disastrous effects of fatherlessness on children and family life. Might it not be worth asking, then, if there ought to be a conservative case against normalizing traffic-jammed commutes and long hours in an office when it isn’t strictly necessary?

Remote Work: A Return to Family-Centered Life

The massive move to remote work has opened many eyes. All of a sudden, fathers spent their lunch breaks with their wives and children rather than alone in a cubicle or with colleagues. Work breaks meant stepping outdoors with children or holding babies, rather than idly gossiping with co-workers. Working professionals realized that it was possible to fulfill their professional responsibilities, get their work done . . . and still live in the midst of their own families. For many workers, remote work is not primarily about cutting out commuting time or luxuriously working in sweatpants, but about a return to a family-centered economic life. This is about much more than an equation to properly achieve “work–life balance”; it is about an opportunity to rediscover a properly ordered life.

Of course, there are jobs where remote work is not possible. Policemen must be on the streets, pilots must be in the cockpits, and laborers must be in the factories where things are actually made. But for white-collar workers, the “laptop class,” there is no universal reason why they must leave their homes and families to do their laptop work in a central office rather than at home—at least not every day.

End of History One Economy to Rule Them All

hISTORY eNDS EVERYWHERE:

The most important immigration story of all: The West doesn’t share the same fate as Rome (Peter Heather, MARCH 12, 2024, UnHerd)

The process only accelerated under the newly independent governments of ex-imperial territories in the years after 1945. Many devoted considerable resources to basic education, attempting to create homegrown industrial bases to fend off expensive imports from their former masters. And this sucked people in massive numbers from continental interiors to congregate in coastal cities such as Shenzhen, São Paolo, Lagos, and Mumbai. Once there, better healthcare and a plentiful food supply added exponential population growth into the mix.

In economic terms, these import replacement strategies enjoyed only limited success, and largely failed after the oil price shocks of the Seventies. But what this astonishing flow of humanity did achieve was to put in place a ready-made labour force across different parts of the developing world for the Eighties, when Western countries lifted their long-standing capital controls. As the West deindustrialised, investment began flowing outwards to the developing world, where labour was so much cheaper, with the aim of returning Western corporations — and hence the West as a whole — to post-war levels of growth.

This worked, for a time. But over subsequent decades, Western investment has combined with the emergence of new classes of indigenous entrepreneurs to generate a global shift in the geographical location of manufactured wealth production. Since 1947, for instance, the population of Bangalore has increased from 700,000 to about 14 million, the vast majority supported by manufacturing jobs, while India’s national literacy rate has risen from about 20% to 75%. Over the same period, by contrast, London’s population has stayed more or less the same and it has ceased to be a major manufacturing centre. This second Völkerwanderung had created such a cost-effective labour force that it proved overwhelmingly logical, as globalisation gathered momentum, to relocate a huge percentage of global industrial production away from the West’s old manufacturing centres to the teeming new coastal metropoles of the developing world.

The process is irreversible, and far from complete. Public attention focuses on China and the other Bric countries, but seven of the world’s 10 fastest-growing economies are now African. Kenya, for example, is still mostly famous for its tea and game reserves. But it currently enjoys an annual growth rate of over 7% and Nairobi has become a digital finance hub. And it is in examining the peripheries of the Western world’s old empires, that the comparison with Late Antiquity achieves a new resonance. Imperial systems first come into existence with the purpose of enriching the population at the imperial centre. But over the longer term, they unintentionally kickstart revolutionary processes of economic and hence socio-political change around their fringes, and eventually the emergence of new entities capable of challenging the Empire’s continued dominance.

Neoconomics

TAX WHAT YOU DON’T WANT, NOT WHAT YOU DO:

It’s Time the US Abolished the Income Tax: Bring on the consumption tax. (John H. Cochrane, February 12, 2024, CBR)

Here there is an awkward truth of taxation. Unexpected, “just this once and we’ll never do it again” wealth taxes are economically efficient. The problem of taxation is disincentives. If you announce a wealth tax in the future, people respond by not accumulating wealth. They go on round-the-world private jet tours instead of investing and building companies. But if you tax existing wealth, and nobody knew it was coming, there is no disincentive.

This is, however, one of the most misused propositions in economics. That “just this once and never again” promise isn’t credible: if the government did it once, why not again? And it feels horribly unfair, doesn’t it, grabbing wealth willy-nilly? Unpredictability is not something responsive, rule-of-law democracies can or should do.

In any case, as with corporate income, taxing investment income also makes no sense. You earn money, pay taxes on it, and invest it. If you choose to consume later rather than now, why pay additional tax on it? One of the main don’t-distort-the-economy propositions is that we should give people the full incentive to save by refraining from taxing investment income.

So why do we tax investment income? Again, because once you tax income, you have to start plugging holes. Many people can shift labor income to investment income. If you run a business, don’t take a salary but pay yourself a dividend. If you’re a consultant, incorporate yourself and call it all business income. In the 1980s, even cab drivers incorporated to get lower tax rates.

The income tax is the original sin. Taxing income made no sense on an economic basis. The government only did it because it was easy to measure and grab, at least before people started inventing a century’s worth of clever schemes to redefine “income.” It has led inescapably to more sins, such as the corporate tax and the tax on investment income. And now the repatriation tax on accumulated foreign earnings.

What’s the solution? Well, duh. Tax consumption, not income or wealth. Get the rich down at the Porsche dealer. Leave alone any money reinvested in a company that is employing people and producing products. Now we can do it. And we can then throw out the income tax, corporate tax, and estate tax.

One Economy to Rule Them All

NO ONE MISSES OFFICES:

‘Office culture’ as we know it is dead. Workers have other ideas (Lillian Stone, 3/03/24, BBC)


The world of work looks and feels entirely different than just a few years ago – yet many companies are still intent on recreating the office cultures workers left behind as they abandoned their desks in 2020. While these companies are making some gestures to adapt – for instance, redesigning spaces to accommodate new preferences and hybrid-work habits – many are still set on bringing back what lured in workers before the pandemic.


Yet swaths of employees simply aren’t interested in going backward. Instead of trust-falls and cold brew on tap, employees are demanding flexible work, equitable pay and a focus on humanity in the workplace that transcends the perks they sought years earlier.
Workers’ shifting priorities are a natural consequence of the Covid-19 pandemic, says Georgina Fraser, head of human capital for global commercial real-estate firm CBRE. “The pandemic gave us autonomy in a way that we haven’t had previously,” she says. “It gave us the opportunity to choose how we structured our working days.”

Deflation

…AND CHEAPER…:

We Are Still Measuring Inflation All Wrong (Alan Reynolds, 2/26/24, Cato)

Owners’ equivalent rent purports to measure monthly variations in a price nobody pays, and to average those estimates for every house in the entire country. Nearly every other country wisely excludes such impossibly arbitrary OER estimates from their measure of inflation. Yet that singular made‐​up number dominates the US CPI, and to a lesser extent the Personal Consumption Expenditures (PCE) inflation index too.

Shelter accounts for 36.1 percent of the CPI and 42 percent of Core CPI. Shelter also accounts for 60 percent of measured inflation in non‐​energy services. This turns out to matter quite a lot, because estimated inflation for shelter has long been extremely high, while inflation for everything else has been extremely low.

The Graph shows that from July 2022 to January 2024, the average CPI inflation rate for shelter was 7 percent, yet the average inflation rate for everything else was only 1.2 percent. This January alone, the reported annual inflation rate for shelter was 6.9 percent, but inflation for everything else was 1.6 percent.

Latin America One Economy to Rule Them All

THANKS, GUS!:

Doug Irwin on the History and Political Economy of Trade Policy: Shruti chats with Doug Irwin about trade economists, trade in India, and globalization (Shruti Rajagopalan, 2/22/24, Mercatus Center)

SHRUTI RAJAGOPALAN: Welcome to Ideas of India, where we examine the academic ideas that can propel India forward. My name is Shruti Rajagopalan, and I am a senior research fellow at the Mercatus Center at George Mason University. […]

Today my guest is Douglas Irwin, who is the John French Professor of Economics at Dartmouth College. He is the author of dozens of books and papers, most recently, Clashing over Commerce, which is a magisterial history of US trade policy. We spoke about India’s liberalization moment in 1991, the five phases of globalization, British repeal of Corn laws, premature deindustrialization, the relevance of the WTO, absolute versus comparative advantage, the future Argentina, and much more.

RAJAGOPALAN: I think of this group of trade economists, especially the four of them, their ideas first percolated into the East and Southeast Asian countries. They had some impact on India for sure though not as much as one would like. And after 1990s, African countries started unilaterally liberalizing very much based on the Asian experience, but one group, which somehow never quite took their lessons and ran with it is the Latin American countries. Was it just a different set of problems or something was lost in translation? Because there was another group of economists who were the Chicago Monetarists who did have some penetration or impact in the Latin American countries. What’s going on there?

IRWIN: There’s a great deal of diversity across Latin America. Chile is an example where the reform stuck. Now, albeit they were introduced in the Pinochet dictatorship, but they survived the transition to democracy. The center-left governments that took over once Pinochet left, they had some appreciation for the economic model that they inherited. Chile had done pretty well with it towards the tail end of the Pinochet regime. Obviously, some big crises early on.

If you talk to Alejandro Foxley, who’s the first finance minister under democracy, he wanted to run fiscal surpluses to show markets that they were committed to not the excesses of the past. They reduced tariffs. They want to double down commit themselves to keeping the open economy model. Then the question is, why haven’t other countries in Latin America seen the benefits? Some have and some haven’t. Argentina, just to pick another big country has had cycles, and there’s a whole political dysfunction in Argentina

There’s been this pendulum swinging back and forth with Argentina. They were liberalizing in the ‘90s, then they closed up a little bit in the 2000s, and now maybe they’re moving in a different direction again. Peru’s an interesting case. Because once again, they opened up in around 1991.

RAJAGOPALAN: Had shock therapy.

IRWIN: Had shock therapy. That has stuck as well. Even though there’s continued political dysfunction in Peru, the economy’s done pretty well and the open economy model is pretty much entrenched. Colombia also a country that was never quite as closed as some of the others but opened up also in 1991. When I say opened up, getting realistic exchange rates, getting rid of quantitative restrictions on trade, getting rid of import licensing. Even if the tariffs are relatively high, getting rid of those other things really goes a long way to open up the economy. Columbia’s kept the open economy model. Then we can go to Brazil, another big country, which supposedly opened up in the early ‘90s, but there’s still a lot of non-tariff barriers and what have you.

RAJAGOPALAN: They’re like India.

IRWIN: A little bit.

RAJAGOPALAN: They opened up, but they still have lots of restrictions. We don’t quite get captured in the trade liberalization obvious model or laundry list.

IRWIN: That’s a great way of putting it because what you don’t see when they liberalize is you don’t see imports as a share of GDP going up a lot, whereas you do see that in some of the other countries. I’d say there was a Latin American reform moment early 1990s. Once again, not uniform, very imperfect, but they did try to move in a different direction and shed the Raúl Prebisch dependency theory import substitution policies that had really doubled down on in the 1950s and ‘60s and into the ‘70s.

Malthusianism

NO ONE HAS IT HARDER THAN THEIR FATHER DID:


Thomas Piketty’s Motte and Bailey: Don’t expect new research to convince the egalitarians’ leading ido (Vincent Geloso, Jan 18 2024, City Journal)


To understand the contemporary debate about income inequality, it helps to be familiar with the deceptive rhetorical technique known as the motte-and-bailey. The motte-and-bailey involves a party making a tenuous, radical claim, then redirecting the argument toward a more agreed-upon, defensible claim when challenged on the radical one, only later to return to the tenuous claim. The technique is named for a style of medieval defensive settlements, in which a defensible stone keep (the motte) is situated on a raised earthwork. A courtyard and ditch (the bailey) surround the motte. The motte is the stronger position, while the bailey is the weaker. Defenders retreat to the motte when attacked, then, once the threat has subsided, return to the bailey.

Economist Thomas Piketty and his collaborators Emmanuel Saez and Gabriel Zucman are skilled motte-and-bailey technicians, extending indefensible claims about rising inequality, retreating to agreed-upon facts of social and economic change, and then reclaiming their radical baileys once attacks fade. […]

This radical bailey position is made untenable in three ways. First, my work with Phil Magness, John Moore, and Phil Schlosser (published in Economic Journal and Economic Inquiry) suggests that Piketty was careless in his usage of historical source materials and made numerous important errors in estimating inequality pre-1960. One involved his application of a rough estimation of income, though original sources contained data that could have enabled a more precise calculation. My coauthors and I tried to refine these pre-1960 estimates. Further, Piketty’s work contained significant historical inaccuracies (such as overlooking the exemption of state and local government employees from federal taxes before 1938) and misrepresented several steps in his methodology. We addressed these errors, too. Overall, we discovered that Piketty overstated inequality levels before the 1960s by about 20 percent.

Second, our work in Economic Inquiry showed that most of the levelling in the 1930s occurred as a result of the wiping out of capital gains. Roughly four-fifths of the “golden age” of equality (between 1950 and 1980) owed to the Great Depression, not tax policy. This finding is hard to celebrate because it means that greater equality was achieved while everyone was getting poorer. It also eliminates most of the purported influence of higher tax rates in generating the “golden age” of equality.

Third, the work of Gerald Auten and David Splinter shows that the golden age was not so golden. Once they corrected for how tax policy often encouraged changes in how taxpayers organized their income sources according to corporate or personal identities, they found that inequality started from a higher floor in the 1960s than Piketty and his colleagues presume. They also find a milder increase in inequality since the 1980s.

One Economy to Rule Them All

LIKE THE FROG IN THE POT…:

Unseen Innovation (Donald J. Boudreaux, February 1, 2024, AIER)

[E]ven when the market’s achievements are within plain sight — literally visible to the naked eye — they are often overlooked. Some innovations, such as the microwave oven in the 1970s and the smartphone in the first decade of this century, are so novel when they arrive on the scene that they’re oohhhed and aahhhed at first. But because the market soon makes these goodies affordable to almost everyone, they quickly become commonplace and expected.

And if, as is almost always the case, continued innovation and market competition drive the prices of these marvelous and amazing goods ever-further downward, they soon come to be regarded as cheap and frivolous trinkets — evidence, it is said, of the market elevating the shallow, the material, and the atomized individual over the profound, the spiritual, and the soul-sustaining community. Only sociopathic homo economicus and his silly defenders resist efforts to protect workers and communities from the vicious and soulless global competition that greedily spews out the baubles and gee-gaws available at Walmart and Target.

Workers and communities, apparently, would be far better off if the market were sclerotic and kept the likes of microwave ovens, smartphones, fresh blueberries in winter, and 1,200 thread count Egyptian cotton sheets so scarce as to be affordable only by hedge-fund managers and Hollywood starlets. Hoi polloi, noticing these luxuries being consumed by the superrich, might suffer a bit of envy, but this displeasure would be, we are told, swamped by the benefits that ordinary people would enjoy from the stability of their jobs and communities. One cannot put a price on the satisfaction experienced by welder Jones knowing that, like his father and grandfather before him, his sons and grandsons after him will also work as welders.

…we are so immersed in affluence we don’t notice it.

One Economy to Rule Them All

IT’S JUST WORK:

AGAINST HUMAN RESOURCES (HELEN ANDREWS, 2/02/24, The Lamp)

Only when corporations became so large that an owner could no longer learn the names of all of his employees did anyone start to talk about “human resources” in the abstract.

And even then it was hardly inevitable that the systematic science of selecting and managing workers would end up looking like the schoolmarmish, therapeutic, risk-averse paper-pushing that characterizes H.R. departments today. One textbook defines H.R. as “a largely behavioral science approach to the study of nonunion work situations, with particular emphasis on the practice and organization of management.” This is a pithy way of saying that H.R. sees bosses as economic actors and workers as psychological ones. From the beginning, H.R. has been the discipline addressed not so much to workers’ welfare as to their feelings.

As soon as the field of human resources was isolated from the rest of management, extravagant claims started to be made on its behalf. Henry Ford II said in 1946 that “solving the problem of human relations in production” could be as big a revolution as the assembly line. “Our task is nothing less than to rehumanize industry,” one psychologist declared in 1919. More recently, Silicon Valley C.E.O.s have mixed human resources with California-style spiritualism. Tony Hsieh of Zappos called his management system, Holacracy, “the next stage in the evolution of human consciousness.” His book, Delivering Happiness: A Path to Profits, Passion, and Purpose, spent twenty-seven weeks on the New York Times best seller list.

Zappos employees were not quite as enthusiastic about Holacracy. When the company offered buyouts to anyone who would not commit to the system, nearly twenty percent of employees took the money and quit. In November 2020, Hsieh barricaded himself inside a pool shed in New London, Connecticut, got high on nitrous oxide and marijuana, and burned himself and the shed to the ground. He was forty-six.

Just let us do our jobs.

One Economy to Rule Them All

CAIN WINS:

The U.S. economy is booming. So why are tech companies laying off workers? (Gerrit De Vynck, Danielle Abril and Caroline O’Donovan, February 3, 2024, Washington Post)

The continued cuts come as companies are under pressure from investors to improve their bottom lines. Wall Street’s sell-off of tech stocks in 2022 pushed companies to win back investors by focusing on increasing profits, and firing some of the tens of thousands of workers hired to meet the pandemic boom in consumer tech spending. With many tech companies laying off workers, cutting employees no longer signaled weakness. Now, executives are looking for more places where they can squeeze more work out of fewer people.

“We’re going to continue to be careful on what we invest in, and we’re going to continue to invest in new things and new areas and things that resonate with customers. And where we can find efficiencies and do more with less, we’re going to do that as well,” Amazon Chief Financial Officer Brian Olsavsky said in response to a reporter’s question during a Thursday media earnings call.

“That is the way the American capitalist system works,” said Mark Zandi, chief economist at Moody’s Analytics. “It’s ruthless when it gets down to striving for profitability and creating wealth. It redirects resources very rapidly from one place to another.”

The liberation of wealth creation from labor is Man’s greatest achievement.

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One Economy to Rule Them All

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