I Know Which "Times" I Prefer...

Dan Kennedy draws attention to the state of US cable news in the Guardian. UK television news is certainly much better than in the US, but when it comes to newspapers and magazines, in my view the best publications in the US are far better than their British counterparts.

These days UK newspapers - yes, even the "broadsheets" (for non-UK readers, these are the four "serious" newspapers, namely the Times, Telegraph, Guardian and Independent) - contain little more than re-worded press releases plugging some product or another ("10 best stir-fry pans" etc.), or paraphrased versions of the Reuters wire. There is nothing remotely equivalent to the serious journalism you see in the New York Times. By this I mean pieces where the journalist makes the effort (and has the background) to understand the issues for herself, and then puts the evidence together into a coherent story.

The opinion pages are even worse. In the UK papers, opinion pieces are droll enough, but very rarely have the depth of the best of the New York Times or Washington Post's op-ed pages. I really can't imagine a serious economist like Paul Krugman having a regular column in the Times of London. Instead we get the likes of Boris Johnson: a funny enough writer, but a literate generalist with absolutely no expert knowledge of anything.

Finally, where are Britain's magazines? America has the superb New Yorker, the New York Review of Books, and the more mainstream Newsweek and Time (light, but readable enough). Germany has Der Spiegel and Stern. Leaving aside the Economist, which is a much more specialist outlet than any of the above, we have nothing comparable.

Thank heaven for BBC news...

Youth unemployment

I've written previously on how difficult it is to compare rates of joblessness between countries. One of the trickiest areas is the youth labour market. Suppose countries A and B each have 1 million 16-20 year olds. Out of this population, each country also has the same number - let's say 50,000 - of youths who are neither at work nor in education. Now, country A is less generous with funding for education, so 450,000 of the the 950,000 kids at school there work part-time. Country B offers more support for education, so only 50,000 of the kids at school there work. Now, the unemployment rate is, by definition

number unemployed / (number unemployed + number employed)

Thus, the formal youth unemployment rate in country A is just 10% but in country B a whopping 50%. Both countries have exactly the same number of kids who are not usefully occupied, but A's situation looks better simply because it has more of its students at work. (You could even argue that B's position is better, since the long-term pay-off of good education is high, and it may well be the case that it's preferable if students don't have to work.)

There's a good argument to be made that the US currently resembles country A, and France country B. As economists John Schmitt and David Howell report:

At 22 percent, the nominal youth unemployment rate in France is double the U.S. rate of 11 percent, and even further above the U.K. rate of 9.9 percent...

Yet:

...for male youth the unemployment-to-population rate is 8.3 percent in the United States and 8.6 percent in France...

And there are of course differences in the rate at which young people work:

In the United States, 23.1 percent of 16- to 19-year-old students were also working, compared to only 1.8 percent of French teenagers. This disparity creates most of the higher statistical unemployment rate.

Be wary of unemployment rates: they really are the most heavily politicised of economic indicators...!

What's the rush?

I've posted previously about working hours, and at various times talked about the relationship between conventionally measured economic output (i.e. in terms of GDP) and well-being. This piece:

http://www.cepr.net/index.php?option=com_content&task=view&id=1039&Itemid=45

by David Rosnick from the Center for Economic and Policy Research does a really good job of bringing these strands together in one article. And given what a rush many of us are in - although thankfully not the Compulsive Theorist - it's nice and brief. Well worth a read.

The key point I would draw attention to is the fact that these issues are not ones we can decide upon in isolation. Choices of this kind pretty much have to be made collectively: this is an area where we really need politics and not just individual choice.

Starving the NIH

Very rarely do I find myself agreeing with anything in the Washington post, but this piece is spot-on:

http://www.washingtonpost.com/wp-dyn/content/article/2007/07/23/AR2007072301364.html

NIH-funded research, and associated spin-offs, have been for many years arguably the most potent source of biomedical innovation in the US, if not the world. Yet the Bush administration - which when it comes to tax cuts seems swayed by far more tenuous arguments about innovation and technology - sees fit to reduce its support. The effects are substantive. From my own small circle, I can think of several top young scientists - all very smart and enormously hard-working - who have, largely as a consequence of these changes, now reluctantly left the academic sector.

Keeping our heads above water

A couple of observations about the UK floods:

- First, in my view, the UK response so far has been superb. The emergency services have been combing through flooded areas looking for kids and old people who may have been left behind, airlifting people when necessary and generally making sure that serious losses (as in deaths and serious injuries) are prevented. There's been a real community spirit and so far no reports of looting or anything of that kind that I can think of. The news media have been shrill, but they have been holding the government to very high standards. Last night the BBC news led with a piece on how drinking water dispensers in Gloucester haven't been filled often enough. The piece highlighted this failing and the reporter put the criticism directly to the Prime Minister Gordon Brown, who really had to say it would be fixed. Here's the thing: if he doesn't get it right, tonight's news will be scathing. I couldn't help contrasting what's happened with Katrina: the looting, the sign outside someone's house (“I have a big gun and an ugly wife”), FEMA's complete mismanagement of the crisis and Bush's now-infamous response (“Brownie – you're doing a heckuva job”).

- Second, I doubt you can put these floods down to global warming, but what they do highlight is the kind of economic devastation climatic changes will wreak in the years ahead. The so-called “economic” case against action (“it'll cost too much”) is totally bogus. As the Stern report has argued at length, even very conservative estimates regarding the frequency of events like this make a compelling economic case for action.

Why should we care about sustainability, if China and the US don't?

I live in the UK, and a question some people here ask is this: why should we bother about emissions in our small country when any small change on our part will be as nothing next to the impact of China and the US? In my view, this argument is wrong-headed because it ignores the manner in which preferences shift over time.

Consider slavery. At some point, in some "liberal" enclave, some people would have started thinking that slavery was morally wrong. At that point, a nay-sayer could reasonably have pointed out that all the total amount of slave-owning in the room was tiny compared with the vast mass of slave-owning in the Deep South, say. Yet it should be clear in retrospect that the efforts of an initial minority to argue a morally correct case can pay off, as more and more people start to listen and see their own values change. (It seems to me that such changes can be seen as propagating through a network, and can be highly non-linear, such that after a slow start things can really gather pace.)

Moving back to the present, when we in Britain see some European countries recycling and controlling their output of rubbish more effectively than we do, and when we see Germany's sustainable energy use at 12% and rising, it affects our political debate. Equally, when policy experts elsewhere look at our rapid adoption of leading standards for sustainable fishery (MSC) and forestry (FSC), they can see that it is possible to make these issues important to consumers.

These effects are certainly going to be subtle at first, but nonetheless very real. It's just much more powerful to be able to point to a policy choice that is already in place elsewhere, rather than an abstract idea which has not been tried. In addition, technologies or standards which are already working elsewhere are relatively easy to import. We hear this argument all the time in the context of the diffusion of technology, but I think it's just as applicable to ideas.

It therefore makes sense for a small country (or individual) to "go green" on three counts. First, the reduction in impacts, however small, is a good in and of itself. Second, there is a political and moral “ripple effect” which can be a potent source of change, both within and between countries. Third, the push to develop new technologies, standards, accounting practices in one place give late movers elsewhere working tools which can then be rapidly adopted.

Tax and Spend

I'm back again after (another) long-ish absence. Here's a comment from one Robert Waldmann on the excellent Economist's View which caught my eye:

George Bush said

"No nation has ever taxed and spent its way to prosperity."

He is, of course, totally wrong. No country which is not sitting on oil or made of guano has ever achieved prosperity without taxing and spending the money on public education. It's not like the pure private sector approach to schooling has never been tried -- it was tried and failed for millennia. So far in history the rule is no tax and spend no industrialization.

Tax and spend is so under-rated...

The solution to unemployment

It's now virtually an article of faith that the the US economic system is a marvellous engine of job creation, especially when compared with Europe, and that the source of this vitality is its flexible labour market and relative lack of social welfare. As I've mentioned previously, what is less well known is just how huge the US prison population is (around 2.2 million, or many times higher per unit population than any other wealthy country), and how this affects our view of unemployment.

Bruce Western at Princeton has tried to account for the effect of the prison population on unemployment numbers, and among other things, has found that the Black male unemployment rate during the 90s boom was a whopping 39%. Put this alongside France's much publicised 20% rate for its minorities, and you have the seeds of an interesting debate about which country is actually doing worse for it's “underclass”. Along with Katherine Beckett, Western has also shown that if you account for prison numbers, US unemployment was consistently higher than Europe's in the 90s. This is a remarkable turnaround of the conventional wisdom. Writing in the mid-90s, when the prison population was a mere 1.6 million, Western predicted that to keep official unemployment low, the prison population would have to rise further. Indeed, in the decade since, it's gone up a whopping 37% to around 2.2 million.

But why should we account for incarceration when we are interested in unemployment? I think the answer to this lies in thinking for a second about why it is we care about unemployment in the first place. We care about unemployment because it is unpleasant to be unemployed. That's it. It's the well-being of the jobless that is the issue. If the unemployed, were, for some reason, perfectly happy to be without work, and if the rest of the labour market was functioning just fine without them, the issue would cease to be of consequence.

Yet being incarcerated is surely at least as bad as being unemployed (and taking into account endemic features of violence, sexual assault and psychlogically devastating things like solitary confinement probably much worse). At the time the standard measures of economic well-being were formulated the prison population was so small - as it still is in most of the world - that it was unnecessary to account for it in national measures of economic health. But the population affected by the criminal justice system in the US is now so large that neglecting to account for it means missing out a huge part of the labour market in that country, and, in my view, leads to a much too rosy view of unemployment there.

These prisoners are not only not gainfully employed, but deprived of basic liberties, and in many cases lose many rights for life. Furthermore, their sorry outcome, unlike that of the unemployed in Europe, is simply erased from the economic accounts (well, actually all the guarding and prison building actually adds to GDP, but that's another story). Personally, I find the way in which the outcomes of these millions of people are effectively erased from US measures of well-being really disturbing, because mass incarceration not only reduces well-being, but perversely gives the impression of increasing it.

Viewed in this way, perhaps Europe's greatest "failing" is actually trying to count all its citizens in economic measures. How much better would European unemployment look if we simply imprisoned a large chunk of the poor and unskilled, and hired some of the remainder to guard them?

Urban America

In just over a year living in the USA, perhaps nothing has surprised me more than the contrast between the much-vaunted wealth and dynamism of this country and the often mediocre quality of life in its urban areas. This post from urban planning writer Josh Stephens makes this point far more eloquently and passionately than I can:

http://www.planetizen.com/node/23517

A nice, and in my view very accurate, observation from the piece:

Many Americans rightfully take pride in so-called gems like San Francisco, New York, Portland, and even Los Angeles on a clear day. But Mercer's analysis indicates that we're fooling ourselves: we're so far from the top that, in true Platonic fashion, we can't even imagine what the top looks like.

You could say that Stephens is being a little tough on the US here. Perhaps US life is fundamentally centred around the car, and that it is this fact that changes everything in terms of how cities are designed. To be fair, I know Americans who dislike European cities because they have pedestrian zones and public spaces and because you have to walk between shops: so perhaps it's just a case of to each his own.

Unemployment in Germany and the US

A standard piece of conventional economic wisdom says that Germany's labour-friendly regulations and high level of social benefits result in a high level of unemployment. It's not unusual to see unemployment figures as high as 12% quoted in the press, usually in juxtaposition to a US rate of 5% or thereabouts.

But is the difference really as great as that? The German government's numbers are calculated in a very different way from the US. As far as I'm aware, in Germany if you work upto 15 hrs a week but register a desire to work longer, you count as unemployed. In the US, if you work just 1 hour a week, you're employed. The OECD tries to correct for these sorts of accounting difference in its "Standardised Unemployment Rates". The current rates for Germany and the US are 7.7% and 4.6% respectively:

http://www.oecd.org/document/50/0,2340,en_2825_495670_38234290_1_1_1_1,00.html

However, Germany's social benefits in themselves surely increase the chance that an unemployed person is formally recorded as unemployed: he or she has much to lose by being "off the books". This "pull" factor is very likely much weaker in the US, so I'd expect a greater chunk of the unemployed in the US to be unrecorded than in Germany. Admittedly, this is hard to correct for. Also, the US figures don't include that country's enormous prison population of well over 2 million. It seems reasonable to assume that a good chunk of these people would be unemployed if they were not incarcerated. Accounting for these differences would surely add at least 1% to the US figure bumping it up to around 5.6%.

Finally, while you can never control for all the many relevant factors, there's one event in recent German history that simply cannot be ignored. This is, of course, reunification. If unemployment is three times higher in the East than West, a back of the envelope calculation suggests that unemployment in West Germany is probably around 6%.

This leaves us with a very minor difference in unemployment rates between the US and West Germany. Put this together with the fact that West Germany had really low unemployment for decades previously, and this must surely put a question mark over the claim that social welfare must lead to joblessness.

Milk into babies

In a recent article in Nature, Holmes and O'Connell discuss the depressing state of affairs for women in academia. One of the issues they raise concerns child-friendly policies at Universities:

More universities should provide paid family leave for graduate students and faculty members. Only one-third of PhD-granting institutions provide any sort of daycare for graduate students and most have no childbirth policy.

We're richer than we've ever been. We now have hourly productivity levels which would allow us to work less, at least for those critical years, the technology to facilitate flexible working, and the resources to build the infrastructure we need to make raising children really compatible with work. Yet basic things like good, onsite daycare remain a rare perk rather than the standard provision they could be. What is missing is the political and social climate to make it happen. Perhaps the very fact that we use phrases likes "child-friendly" says it all - when was the last time you heard of a "life-friendly" organization?

Part of the problem is that policies of this kind tend to be seen as leftist and uneconomic. But even if you discount all the non-monetary gains that would flow from a "family-friendly" re-thinking of how we work, the economic benefits are undeniable. Accounting for costs and benefits over a lifetime, there's surely no greater economic good than a well-raised child. Or, as Churchill famously put it: "There is no finer investment for any community than putting milk into babies."

All under one roof

Parents of young children typically have a hell of a time looking after the kids, while balancing mid-career workloads. So they end up spending lots of money on day care, nannies, etc. Yet, in many cases, their own parents would gladly take over, at least for short periods. This seems like a double payoff: the work gets done and the person doing it enjoys it.

One way to make this happen more would be to think up a new kind of old-fashioned family home. Have grandma in her own mini "in-law" unit, so you can meet every day,or at least very often. But, crucially, make sure that physically and psychologically there's just enough distance to stop it feeling like a re-run of the kids teenage years.

Would this be so hard to achieve? I don't think so. We just need some creativity to re-imagine this most ancient of set-ups in a new way. Any ideas?

Robots can't cut hair

Year-on-year, advancing technology automates processes that once required human effort. This puts people out of work in one sense, but in another sense it frees up that same human effort for other things, which are often - though certainly not always - more pleasant or creative. Thus, while a generation or two ago I would almost certainly have been plugging away as a clerk in a monstrous Kafkaesque insurance firm, today I get to do fun research. Wait, I hear you say, there were scientists two generations ago, surely? Yes, but very few, and as a consequence, the only full-time ones were probably vastly more talented than I am, and probably luckier too.

In general, it's the things machines are bad at that become the work of tomorrow. Who would have thought, in 1950, say, that there'd be as many hairdressers as there are today? Hairdressing requires the kinds of motor skills and creativity that is hard to automate, and lots of people enjoy getting what were once movie-star-only treatments. Hence the trend.

But not all creative professions grow. Ones in which the product can be replicated by technological means can actually shrink. A classic example is musicians: once upon a time you had to hire one in order to even hear a tune, now you can put on a CD and listen to Herbie Hancock or Itzhak Perlman or whoever, which has increasingly put medicore players out of business.

So the formula is this: jobs which are both hard to automate and can't be easily replicated tend to be the ones that grow. With that in mind, what occupations might swell their ranks in the years ahead? Research (of course!), and I think especially applied and translational work, which there could be so, so much more of. But also less obvious things like personal services - cooking, surgery, hairdressing etc. Maybe personal shoppers: technology is making shopping for clothes harder, inasmuch as there more choice, so I think there might be a growing demand for experts who do it all for you. Professional childcare should rise: surely everyone wants a Super Nanny on call? Teaching should keep growing, at least until classroom sizes grow small enough that no one cares about further reductions, and demographic changes mean there aren't actually many kids to teach.

So close your eyes and wonder: what would you like to have done for you, if it were really cheap? Whatever it is, odds on your grandchildren will be doing it, having it done for them, or, if you're a really demanding dreamer, still be wishing for the same thing.

You're my superstar

A number of years ago, Sherwin Rosen wrote about a “superstar” effect in economics*, whereby a single individual can, using modern technology to disseminate a product, reach a huge market, and thereby enjoy potentially enormous gains, perhaps at the expense of others in the same field. According to this view, the neighbourhood pianist of yesteryear is out of a job because virtuoso performances can now reach millions of people through CDs, high-quality radio broadcasts etc.

A heartening contrast, at least for those of us who are not superstars, is the emphatically one-to-one nature of human relationships. It takes so much time and effort to build a good relationship, that almost by definition superstar effects are excluded – you can only genuinely provide love to a small number of people. This puts an interesting twist on some of the phrases we use: “Daddy’s princess”, “you’re my superstar” etc.

*Here’s a short version of one of his essays:
http://www.geocities.com/valencia_aaup/The_Economics_of_Superstars.html

Escaping the pin factory

Adam Smith’s much quoted story of the pin factory (see e.g. http://divisionoflabour.com/archives/000006.php) emphasises the importance of specialisation in raising productivity and living standards. But some of the time, we all actively choose to expend our effort in ways that are clearly inefficient. Here’s one example from a few Sundays ago. I spent an hour cooking dinner, and my wife roughly the same amount of time baking a cake.

Why is this inefficient? Well, cooking is something I’m not really very good at, and in comparison with a professional set-up my kitchen is not really ideally equipped. This makes my productivity at cooking laughably low. In contrast, my productivity at work is much, much higher. The same is true for my wife’s baking versus her professional work. Why then, did we not spend Sunday afternoon at work, and then spend some part of the extra money on eating out, or buying a cake, in effect trading our specialised professional output with that of the chef or baker?

The answer of course is because of the joy of novelty. It’s actually fun to do something different, even if it is, in a narrow sense, inefficient. The reductio ad absurdum of specialisation would be horrible: imagine always doing your specialist work, stopping only to consume. No DIY, no cooking, probably not even much childcare, just monotonous, efficient, formal work. Count me out!

Who needs working-hours regulations?

Perhaps the bits of Euro-legislation most derided by experts in the English speaking world are those concerning working-hours restrictions. The standard argument against such legislation is based on liberal economic principles and really does sound pretty good. It goes like this: why not let individuals decide for themselves how much they want to work, and stop interfering in their free choice? According to this view, the best course of action is to minimize regulations, and simply let market mechanisms deal with the whole issue of working hours.

This sounds very convincing, but a serious problem arises from the nature of choice in employment. Let’s digress very briefly to look at choice in a more canonical market. Suppose I choose to buy 100 grams of coffee beans at a supermarket. The fact of my purchase is a reasonable indicator that I wanted 100gms, and not 90, or 110, provided the vendor sells beans by the gram. (Even if she doesn’t, if she has a large number of competitors, in the absence of any kind of collusion, someone in the same town should offer the choice I want.) Now, if we assume that I myself am the best person to judge what makes me happy, we can treat my buying behaviour as information that reveals the amount of beans I really want.

Unfortunately, choosing the number of hours you work is nothing like choosing the number of grams of coffee beans you want to buy. There are at least two major differences. The first is that except for a few professions, you can’t just decide on your own how much you want to work. Work is mostly a team effort, so everyone needs to be there at the same time for the organization to function effectively. As a consequence, you can’t just unilaterally decide to work fewer hours (or more) and necessarily be able to do it.

The second and maybe more important difference is that there are typically only a very small number of organizations in a given area that can effectively use a given worker’s skills. There is, in any practical sense, limited competition for labour, and a limited choice of employment options available to most workers. This departure from the continuum of choice we face when buying coffee beans can lead to strange market outcomes. Here’s one example. Suppose all the workers at a car factory really want to work 40 hours rather than 45, such that in every sense their well-being is better served by working fewer hours. Suppose also that there is no union, and that management present the option of a 45 hr week or no job to each worker individually. If there is no other car factory in the area, or at least none offering a 40hr week, the choices facing workers look like this: a) Accept 45hrs, b) Quit (and move your entire family in search of another job with exactly the right number of hours... bearing in mind that this ideal job, if at all it exists, may be 1000 miles away from all your friends and your elderly mom!). So rationally enough he chooses a). But this free choice has delivered a weird result: labour has chosen an outcome that is suboptimal for all of them! The outcome is the best of the very limited options available, but the 40hr week outcome which everyone would have preferred is just not on the table.

Employees simply do not get a realistic continuum of working hours at a given job they’re trained to do, in the exact same location. If they did (some workers probably do, work-from-home translators maybe?) we could treat the number of hours actually worked as a meaningful "revealed preference". But in real life employment choices are very, very limited. The real choice would be more like: work x hours a week at something you're trained to do, or <x hours on something totally different, or be unemployed. Given these choices, even someone who wants <x, usually just puts up with it.

We could reasonably view this problem as a sort of market failure in the provision of leisure time. It then becomes easier to see why some sort of intervention may be necessary to ensure outcomes that are closer to optimal. Such interventions may be through trade unions, regulation, or some other means. I’m not sure if the Euro approach is the right one, but the question of working hours does seem to be one that cannot be solved simply by leaving things to the magic of the market.