Tim Taylor reviews Robert J. Gordon: Thoughts on Long-Run US Productivity Growth [feedly]

Robert J Gordon is a well known and influential analyst on the perplexing shifts in productivity [our most important value-creating measure for human work] since the onset of the computer age and the vast expansion in the production -- and consumption -- of intangibles.

Here he opens a different door:  new studies reveal a correspondence between poverty and productivity, and recommends big interventions in "education" at age 6 months, not just in K-12. Huge vocabulary gaps between upper and poor classes are a telling marker.

Of course, maybe the first "intervention" should just be ending poverty. That might lessen the cost of the "intervention" in the long run..

Robert J. Gordon: Thoughts on Long-Run US Productivity Growth
https://conversableeconomist.blogspot.com/2021/02/robert-j-gordon-thoughts-on-long-run-us.html

Leo Feler has a half-hour interview with Robert J. Gordon on "The Rise and Fall and Rise Again of American Growth"  (UCLA Anderson Forecast Direct, February 2021, audio and transcript available). The back-story here is that Gordon has been making the argument for some years now that modern economic interventions, like the rise of information technologies and the internet, have not had and will not have nearly the same size effect on productivity as some of the major technologies of the past like the spread of electricity or motor vehicles (for some background, see here and here). 

Here, Gordon makes a distinction worth considering between growth in productivity and growth in consumer welfare.

Let's divide the computer age into two parts. One is the part that developed during the 1970s and 80s and came to fruition in the 1990s, with the personal computer, with faster mainframe computers, with the invention of the internet, and the transition of every office and every business from typewriters and paper to flat screens and the internet, with everything stored in computer memory rather than filing cabinets. That first part of the computer revolution brought with it the revival of productivity growth from the slow pace of the 70s and 80s to a relatively rapid 2.5% to 3% per year during 1995 to 2005. But unlike the earlier industrial revolution where 3% productivity growth lasted for 50 years, this time it only lasted for ten years. Most businesses now are doing their day-to-day operations with flat screens and information stored in the cloud, not all that different from how they did things in 2005. In the last 15 years, we've had the invention of smartphones and social networks, and what they've done is bring enormous amounts of consumer surplus to everyday people of the world. This is not really counted in productivity, it hasn't changed the way businesses conduct their day-to-day affairs all that much, but what they have done is change the lives of citizens in a way that is not counted in GDP or productivity. It's possible the amount of consumer welfare we're getting relative to GDP may be growing at an unprecedented rate.

To understand the distinction here, say that you pay a certain amount for access to television and the internet. Now say that over time, the amount of content you can access in this way--including shows, games , shopping , communication with friends, education, health care advice, and so on--rises dramatically, while you continue to pay the same price for access. In a productivity sense, nothing has changed: you pay the same for access to television and internet as you did before. But from a consumer welfare perspective, the much greater array of more attractive and easier-to-navigate choices means that you are better off. 

The expression "timepass" is sometimes used here. One of the big gains of information technology is that, for many people, it seems like a better way of passing the time than the alternatives. 

Gordon also points out that the shift to working from home and via the internet could turn out to involve large productivity gains. But as he also points out, shifts in productivity--literally, producing the same or more output with fewer inputs--is an inherently disruptive process for the inputs that get reduced. 

This shift to remote working has got to improve productivity because we're getting the same amount of output without commuting, without office buildings, and without all the goods and services associated with that. We can produce output at home and transmit it to the rest of the economy electronically, whether it's an insurance claim or medical consultation. We're producing what people really care about with a lot less input of things like office buildings and transportation. In a profound sense, the movement to working from home is going to make everyone who is capable of working from home more productive. Of course, this leaves out a lot of the rest of the economy. It's going to create severe costs of adjustments in areas like commercial real estate and transportation.

When asked about how to improve long-run productivity, Gordon's first suggestion is very early interventions for at-risk children:  

I would start at the very beginning, with preschool education. We have an enormous vocabulary gap at age 5, between children whose parents both went to college and live in the home and children who grow up in poverty often with a single parent. I'm all for a massive program of preschool education. If money is scarce, rather than bring education to 3 and 4 year olds to everyone in the middle class, I would spend that money getting it down as low as age 6 months for the poverty population. That would make a tremendous difference. ... This isn't immediate. These children need to grow into adults. But if we look out at what our society will be like 20 years from now, this would be the place I would start.

For some of my own thoughts on very early interventions, well before a conventional pre-K program, see here, here and here. 

 -- via my feedly newsfeed

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Chump change: The Romney–Cotton minimum wage proposal leaves 27 million workers without a pay increase [feedly]

Chump change: The Romney–Cotton minimum wage proposal leaves 27 million workers without a pay increase
https://www.epi.org/blog/romney-cotton-minimum-wage/

Those who had high hopes for a serious minimum wage proposal from the Republican Party will be disappointed: The recent proposal released by Sens. Mitt Romney (R-Utah) and Tom Cotton (R-Ark.) would not even increase the minimum wage to 1960s levels, after adjusting for inflation. It is a meager increase that fails to address the problem of low pay in the U.S. economy.

The Romney–Cotton proposal would slowly raise the federal minimum wage from its current level of $7.25 per hour to $10 per hour in 2025. In contrast, the Raise the Wage Act of 2021 would raise the minimum wage to $15 per hour by 2025.

• The Romney–Cotton proposal would leave 27.3 million workers without a pay increase, compared to the Raise the Wage Act.
• Only 4.9 million workers, or 3.2% of the workforce, would receive a pay increase in 2025 under the Romney–Cotton plan, for a total of $3.3 billion dollars in wage increases.
• In contrast, under the Raise the Wage Act, pay would rise for 32.2 million workers, or 21.2% of the workforce, with $108.4 billion in total wage increases.
• 11.2 million fewer Black and Hispanic workers would receive a raise under the Romney–Cotton plan, compared with the Raise the Wage Act.
• 16 million fewer women would see wage increases. Less than one in 20 women (4.1%) would have higher pay under the Romney–Cotton proposal, whereas the Raise the Wage Act would raise earnings for one in every four women (25.8%).
• The average affected worker who works year-round would see their annual pay rise by $700 under the Romney–Cotton plan; under the Raise the Wage Act, the average annual pay increase would be nearly five times that amount ($3,400).

Romney–Cotton's $10 target by 2025 is the equivalent of $9.19 per hour in today's dollars, about 13% less than what the minimum wage was at its high-water mark in 1968.

It is unconscionable that we should pay the lowest-wage workers today less than what they earned five decades ago, while the economy's productivity has more than doubled over the last 50 years. The Romney–Cotton proposal would continue that harmful trend; would maintain a separate lower wage for young workers and those with disabilities; and would—incredibly—fail to increase the separate minimum wage for tipped workers that has been stuck at $2.13 per hour for 30 years.

The Romney–Cotton plan would also couple this meager minimum wage increase with a nationwide mandate for employers to use E-Verify, the federal government's web-based electronic employment authorization system. This part of their proposal is a blatant attempt to scapegoat immigrants for the behavior of low-wage, low-road employers. E-Verify does not afford sufficient privacy and due process protections, giving employers an additional tool to discriminate and retaliate against workers when they speak up about workplace abuses, wage theft, and health and safety violations—or when they try to join with other workers in union-organizing efforts.

Without a broad immigration reform that legalizes the unauthorized immigrant population, a nationwide E-Verify mandate will push millions of working people into the informal economy, degrading wages and working conditions and undermining the freedom of association and ability of workers to join together to improve labor standards for all. It will also create additional incentives for employers to misclassify workers as independent contractors—already a disturbing trend in the U.S. economy—which will allow employers to distance themselves from responsibility for labor and employment violations.

In short, the Romney–Cotton plan would do little to improve the working conditions of the low-wage workforce.  It compares especially poorly with the Raise the Wage Act of 2021, which raises the federal minimum to $15 by 2025 and gradually eliminates all subminimum wages. A single adult working full time today, in 2021, needs at least $15 an hour to maintain a modest but adequate standard of living in virtually every area of the country, according to the Economic Policy Institute's Family Budget Calculator. The Romney–Cotton proposal comes nowhere close to that level: Future automatic increases after 2025 would keep the Romney–Cotton minimum wage stalled at $10 per hour in real, inflation-adjusted terms; in nominal terms, it would be roughly $11.54 in 2030.

The tables below provide a detailed comparison of the impact of the Romney–Cotton plan and the Wage the Raise Act of 2021 on the low-wage workforce.

Table 1

Table 2

 -- via my feedly newsfeed

Dean Baker: To Prevent the Resurgence of the Pandemic, Can We Talk About Open-Source Research? [feedly]

To Prevent the Resurgence of the Pandemic, Can We Talk About Open-Source Research?
http://feedproxy.google.com/~r/beat_the_press/~3/LRr-RLzAMF4/

As the vaccination campaign picks up steam, we have many public health experts warning us about a possible resurgence of the pandemic due to the spread of new vaccine resistant strains. The logic is that, as more people are protected against the predominant strain for which the vaccines were designed, it will allow room for mutations to spread, for which the current vaccines may not be effective. This can leave us in a whack-a-mole situation, where we have to constantly alter our vaccines and do new rounds of inoculations to limit the death and suffering from the pandemic.

This situation would seem to make the urgency for open-sourcing our research on vaccines even greater than in the past. The point is that we would want evidence on new strains to be shared as quickly as possible. We also would want the evidence on the effectiveness of the current batch of vaccines against each new strain to be quickly shared.

The Problem of Patent Monopolies

That is not likely to happen as long as drug companies are trying to maximize the profits from their government-granted patent monopolies. They have little incentive to share evidence that their vaccines may not be effective against particular strains. Regulatory agencies may make this determination and publicly disclose their findings, but it is not in the interest of, for example Pfizer, to make this determination and widely disseminate its findings.

The issue of protecting intellectual property claims in the pandemic has gotten considerable attention in the rest of the world, if not in the United States, as a result of a resolution put forward at the World Trade Organization by India and South Africa. This resolution would suspend patent and other intellectual property claims on vaccines, treatments, and tests for the duration of the pandemic. While it enjoys overwhelming support in the developing world, the United States and other wealthy countries stand nearly united in opposition.

After the resolution was put forward a number of analysts argued that ending intellectual property protections would not speed the diffusion of vaccines. (They generally did not address the issue of treatments and tests.) Their argument was that producing the vaccines involved sophisticated manufacturing processes, which others producers could not replicate even if not blocked by patent monopolies. They also argued that there were intrinsic limits to how rapidly production could proceed and that these limits would not be affected by the removal of patent monopolies.

As far as the first point, there is no dispute. Pfizer, Moderna, and other vaccine manufacturers have specific knowledge of manufacturing processes that is not widely available. While producers elsewhere could probably in time replicate their processes, we would want these companies to directly share their manufacturing expertise.

This can be done in two ways. We can pay them for transferring their knowledge. This would mean having seminars and consultations with engineers at other manufacturers to allow them to get up to speed as quickly as possible. Ideally, we could negotiate terms with that would be acceptable to these companies.

But suppose Pfizer, Moderna, and the rest insist they are not selling, or at least not at a reasonable price. Then we go route two. We offer big bucks directly to the people who have this knowledge. Suppose we offer $5-$10 million to key engineers for a couple of months work with engineers around the world. Yeah, Pfizer and Moderna can sue them. We'll pick up the tab for their legal fees and any money they could lose in settlements. The sums involved are trivial relative to lives that could be saved and the damage prevented by more rapid diffusion of the vaccines.

If these companies actually pursued lawsuits it would also be a great teaching opportunity. It would show the world how single-mindedly these companies pursue profits and how incredibly corrupting the current system of patent monopoly financing is.

Okay, but let's say we can overcome the obstacles and get the knowledge from these companies freely dispensed around the world. We still have the claim that there are physical limits to how rapidly vaccines can be produced.

There are two points here. First, while there clearly are limits, we can still move more quickly in the relevant time frame. No one had vaccines in March of 2019, but the leading producers had capacity to produce tens of millions of doses a month by November, a period of less than eight months.

Unfortunately, the pandemic is still likely to be a serious problem in much of the world in October of this year. This means that if we replicated the facilities of Pfizer, Moderna, and the other leading manufacturers, we would be able to have additional supplies in a time frame where it would still be enormously helpful, and the October target assumes no learning that speeds up the process.

On this point, Pfizer recently announced that it had discovered changes in its production process that could nearly double its production rate. This is of course great news, but it means that the authoritative voices who assured us that there was no way to accelerate the production process, were not exactly right.

Pfizer's discovery of production efficiencies also raised the obvious question as to whether Pfizer's engineers are the only people in the world with the ability to uncover ways to speed the production of vaccines. In other words, if knowledge of Pfizzer's production process was freely shared with engineers throughout the world, do we really believe that no one else could come up with further improvements?

Fighting the Variants

This gets us back to the value of going full open-source to combat the spread of new vaccine resistant variants. At this point we have more than a half dozen vaccines that are being widely distributed in countries around the world. In addition to the U.S. and European vaccines, there are at least two from China (the country has apparently just approved a third), a vaccine from India, and a vaccine from Russia. These vaccines have varying effectiveness rates and undoubtedly will also have different rates against different strains.

As it stands, there are serious complaints about lack of transparency on results from the non-U.S.-European manufacturers, however even the U.S. and European manufacturers have not been fully open with their trial results. It would be ideal if all these companies fully disclosed their clinical trial results, so that researchers throughout the world could see which groups of people each vaccine was most effective with, and how it fared in protecting against the various strains.

Getting full disclosure is something that would have to be negotiated, but this is why god created governments. In principle, this should be a doable lift. After all, it is to everyone's benefit to have the pandemic controlled as quickly as possible. And the specific task involved does not require a great effort. The manufacturers of the vaccines have the data, we just need to have them post it on the web.

If we had full information on the effectiveness of each vaccine and we freely allowed manufacturers everywhere to produce any vaccine, without regard to intellectual property claims, we would be best situated to contain the pandemic and quickly respond to the development of new strains. Of course, this will raise questions about whether our current system of patent monopoly financing is the best way to support the development of new drugs and vaccines, but that seems a risk worth taking.           

The post To Prevent the Resurgence of the Pandemic, Can We Talk About Open-Source Research? appeared first on Center for Economic and Policy Research.

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Fwd: [WEBINAR] Register now: Achieving Economic and Racial Justice for Black Workers: Policy Priorities for 2021 and Beyond

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From: Economic Policy Institute <newsletter@epi.org>
Date: Mon, Feb 22, 2021 at 10:22 AM
Subject: [WEBINAR] Register now: Achieving Economic and Racial Justice for Black Workers: Policy Priorities for 2021 and Beyond
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Join EPI for a discussion on policies for recovering from the COVID-19 pandemic and overcoming longstanding racial disparities in the labor market.

View this email in your browser Friend, As the nation recovers from the COVID-19 pandemic, we must define what economic justice and racial justice look like for Black workers in the 21st century. Join EPI's Program on Race, Ethnicity, and the Economy (PREE) on Wednesday, February 24, for a discussion that identifies essential policies for achieving recovery, as well as necessary structural and systemic changes that are key to remedying longstanding racial disparities in the labor market. Register for "Achieving Economic and Racial Justice for Black Workers: Policy Priorities for 2021 and Beyond." For updates and to share this event on social media, use #PolicyPriorities2021. Wednesday, Feb. 24 4 p.m.–5:30 p.m. ET / 1 p.m.–2:30 p.m. PT Economic Policy Institute Zoom   Featured speakers: Marc Bayard, Director, Institute for Policy Studies Black Worker Initiative Rebecca Dixon, Executive Director, National Employment Law Project Kyle Moore, PREE Economist, Economic Policy Institute Moderator: Valerie Wilson, PREE Director, Economic Policy Institute   Please donate to EPI, so we can continue to host great events. Register Today Want to change how you receive these emails? You can update your preferences or unsubscribe from this list.

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Janet Yellen on Jobs, Debt, Taxes, Climate and Cryptocurrency [feedly]

Yellen speaks to the NY Times. Commentary?

text-only below

Janet Yellen on Jobs, Debt, Taxes, Climate and Cryptocurrency
https://www.nytimes.com/2021/02/23/business/dealbook/janet-yellen-dealbook.html

Janet L. Yellen, the Treasury secretary, has given only a handful of interviews since taking up her post about a month ago. Business leaders and investors hang on her every word, trying to divine how she and the Biden administration will steer policy and how this will impact the economy and the markets. Ms. Yellen, previously the chair of the Federal Reserve, is skilled at staying on message, but in an interview with me for the DealBook DC Policy Project, she hinted at some policy priorities in her typically understated way.

Here are the highlights of what she said about some of the biggest issues — and my interpretation about what it means.

On jobs

When I asked Ms. Yellen what metric she would use to measure success in her new role, she made it clear that one issue rose above all others: "A simple one would be how long is it going to take us to get unemployment down to the levels we enjoyed prior to the crisis," she said.

But don't just look at the headline unemployment rate as the gauge. She is using an even tougher measure, which means she is likely to push for stimulus and other policies to goose the economy beyond what may be expected. "Remember, the unemployment rate was at a 50-year low of 3.5 percent," she said of the situation before the pandemic, contrasting it with the current rate of 6.3 percent. "Really, though, if you count in addition to the almost 10 million who are registered as unemployed, if you add in the four million who have dropped out of the labor force — for health reasons, because they have child care responsibilities — and two million people who have reduced hours or pay, we're looking at an unemployment rate that really is close to 10 percent."

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On debt

How much is too much? That's the key question economists are debating as government debt soars, with some arguing that the old fiscal rules no longer apply. Ms. Yellen, who was known for her dovish tendencies at the helm of the Fed, doesn't go that far. However, she made an argument that "traditional metrics" like the debt-to-G.D.P. ratio are the wrong things to look at to judge whether the country can afford more debt. "I remember back in 2007, the debt-to-G.D.P. ratio before the financial crisis was 35 percent. And now it's around 100," she said.

Refer someone to The Times.

They'll enjoy our special rate of $1 a week.

A more important measure, for her, is the cost of debt. "Just look, for example, at interest payments on the debt as a share of G.D.P. Currently that's under 2 percent," she said. "And it's no higher than it was in 2007. So, I think we have more fiscal space than we used to because of the interest rate environment. And I think we should be using it now to address an emergency."

On taxes

Ms. Yellen said that she wasn't planning a wealth tax à la Senator Elizabeth Warren — "it's something that has very difficult implementation problems" — but in her most direct comments yet on the topic, the Treasury secretary said that she was prepared to look at ending tax treatment that could have a similarly profound effect. She plans to explore stopping a rule that allows assets to be passed on after death at their current — or "stepped up" — value, without paying taxes on the gains accrued over time. The Center on Budget and Policy Priorities crunched the numbers and estimated that unrealized capital gains account for as much as 55 percent of assets in estates worth more than $100 million.

Private-equity executives should also take note: She hinted that she wanted to look at "carried interest," which allows some financiers to pay taxes on their income at capital gains rates as if they had invested the money themselves.

Ms. Yellen seemed less convinced about a financial transactions tax, which some have suggested could raise $80 billion a year by imposing a small charge on every trade, which would hit Wall Street most of all. "It could deter speculation but it might also have negative impacts," she said.

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What Frances McDormand Would (and Wouldn't) Give to 'Nomadland'

The Lockdown Showed How the Economy Exploits Women. She Already Knew.

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On cryptocurrency

Ms. Yellen doubled down on a "buyer beware" message to investors in Bitcoin. "I don't think that Bitcoin — I've said this before — is widely used as a transaction mechanism. To the extent it's used, I fear it's often for illicit finance," she said. "It's an extremely inefficient way of conducting transactions. And the amount of energy that's consumed in processing those transactions is staggering. But it is a highly speculative asset, and I think people should beware. It can be extremely volatile, and I do worry about potential losses that investors in it could suffer."

Ms. Yellen is more interested in the prospect that the Federal Reserve could develop a so-called digital dollar, the first time she appears to have made public comments about that prospect. Crypto supporters may interpret this as an endorsement of the idea — Ms. Yellen's predecessor, Steven Mnuchin, seemed less interested in it — which shares some of the technologies that underpin Bitcoin and other cryptocurrencies. "It makes sense for central banks to be looking at it," she said. "We do have a problem with financial inclusion. Too many Americans really don't have access to easy payment systems and to banking accounts, and I think this is something that a digital dollar — a central bank digital currency — could help with. I think it could result in faster, safer and cheaper payments."

There are a number of "issues" to be resolved before central banks get into digital currencies, she said. "What would be the impact on the banking system? Would it cause a huge movement of deposits out of banks and into the Fed? Would the Fed deal with retail customers or try to do this at a wholesale level? Are there financial stability concerns? How would we manage money laundering and illicit finance issues? There's a lot to consider here, but it's absolutely worth looking at."

On the climate

Ms. Yellen has said that dealing with climate change is part of a broader mandate for the Treasury, as it is for other departments under President Biden. One of the most fascinating comments she made had to do with the role of financial institutions, and the risk they face by investing or lending to companies that are exposed to climate change. "There's a new movement now toward stress testing of financial institutions," she said, which acknowledges that finance firms face risks from the changing climate, in terms of "physical risks and also risks due to price changes, stranded assets and the like."

It is "encouraging" that the Fed is looking into this, she said, "and I think that's something that at Treasury we may be able to discuss and facilitate." She added, "It's not envisioned that these tests would have the same status in terms of limiting payouts and capital requirements, but I think they would be revealing to both regulators and to the firms themselves."


 -- via my feedly newsfeed

Mission impossible [feedly]

Mission impossible
https://thenextrecession.wordpress.com/2021/02/20/mission-impossible/

A very good intro and review of Mariana Mazzucato, who has become a global celebrity of sort while remaining a serious intellectual force in government economic policy. Despite his unnecessarily snarky conclusion, I think 'Brother Roberts' has some affection and infatuation with Prof. Mazzucato.

Italian-American economist, Mariana Mazzucato, who works and resides in London, has become a big name in what we might call 'centre-left' or even in mainstream economic and political circles.  She has a new book out, Mission Economy: a moonshot guide to changing capitalism.

Mazzucato was briefly an economic adviser to the UK Labour Party under Corbyn and McDonnell; she apparently "has the ear" of radical Congress representative Alexandria Ocasio-Cortez; she advised Democratic presidential hopeful, Senator Elizabeth Warren and also Scottish Nationalist leader Nicola Sturgeon.  She was even accorded the title of "the world's scariest economist" because her ideas were apparently really shaking up things among the great and good.  According to the London Times newspaper, "admired by Bill Gates, consulted by governments, Mariana Mazzucato is the expert others argue with at their peril".

However, whereas she appeared to start out as adviser to the left of the political spectrum, more recently she has become available to all.  She quickly dropped her role as adviser to Corbyn.  According to one reviewer of her new book, "Mazzucato quickly recognised that there was no real role as a Corbyn adviser and resigned after two months."  She said: "The actual people pulling the strings were Seumas Milne and others. I felt like well, if you want to do your own thing, do it. But don't do it in my name,' she told the Daily Mail. The Mail commented: "After this brief flirtation with the wrong sort of politician, she is keen to point out that she has worked closely with the Tories, advising Greg Clark, among others, on his industrial strategy when he occupied the constantly changing role of Business Secretary.".

Mazzucato now advises governments and institutions internationally (Policy Papers : Mariana Mazzucato) and appears on various headline forums and seminars. The World Health Organization appointed her chief of its Council on the Economics of Health for All in 2020. Indeed, she recently praised the appointment of (unelected) former ECB chief and central banker, Mario Draghi, as Italy's prime minister, presumably because he is going to save Italy's economy.  Not so scary after all, then.

I have reviewed Mazzucato's previous (much weightier) books, The Entrepreneurial State and the Value of Everything in other posts. In this latest book, she continues her main argument that she made in those other books that the public sector should lead the way in modern economies. "Instead of acting as investors of first resort, far too many governments have become passive lenders of last resort, addressing problems only after they arise. But as we should have learned during the post-2008 Great Recession, it costs far more to bail out national economies during a crisis than it does to maintain a proactive approach to public investment."  Rightly, she points out that "the more we subscribe to the myth of private-sector superiority, the worse off we will be in the face of future crises." The role of public funded innovation and publicly owned research and development has been deliberately downplayed by the mainstream. And yet it has been publicly funded research that has led to the speedy rollout of vaccines for the COVID pandemic and it's been the publicly owned and run health services that have provided the best response in reducing deaths from the pandemic.

Mazzucato rightly wants to restore and proclaim the "narrative of government as a source of value creation." (although as I argue in my review of her last book, government does not create value (as profit for capital), but use values (for society) – a distinction that Mazzucato does not recognise, but capitalists do). She notes, for example, that an Obama administration loan was crucial to the success of Tesla, and that a 1980s BBC computer literacy program led to the founding of a leading software development firm and the creation of a low-cost computer used in classrooms around the world.

But above all, in this book, she aims to promote the model of the Apollo space mission to the moon as the way forward to develop innovations and diffuse them across the economy; what she calls a 'mission-oriented' approach.

As she puts it: "The Apollo program demonstrated how a clearly defined outcome can drive organizational change at all levels, through multi-sector public-private collaboration, mission-oriented procurement contracts, and state-driven innovation and risk taking. Moreover, such ventures tend to create spillovers – software, camera phones, baby formula – that have far-reaching benefits."  And what this model shows, she claims, is that "landing a man on the moon required both an extremely capable public sector and a purpose-driven partnership with the private sector."

So what modern capitalism needs is a 'purpose-driven' partnership between the public and private sectors: "moonshots must be understood not as siloed big endeavours, perhaps the pet project of a minister, but rather as bold societal goals which can be achieved by collaboration on a large scale between public and private entities."  Apparently, we need "a bold portfolio approach, a redesigning of tools like procurement and a proper economic theory to confront the directionality of growth head on" – whatever "confronting the directionality of growth" means.

Mazzucato recognises that so-called public-private partnerships in the past have often not turned out in the public interest. We must "not repeat the failures associated with today's digital economy, which emerged in its current form after the state provided the technological foundation and then neglected to regulate what was built on it. As a result, a few dominant Big Tech firms have ushered in a new age of algorithmic value extraction, benefiting the few at the expense of the many."  Instead, we must "capture a common vision across civil society, business, and public institutions."

She argues that public–private partnerships have focused on de-risking investment through guarantees, subsidies and assistance. Instead, they should emphasize sharing both risks and rewards. So governments and capitalist companies are to share the risks and then share out the rewards.  That idea shows the difficulty inherent in the mission approach.  The mission for overcoming the COVID pandemic has already shown which sector has taken the risks and which will gain the rewards- as did the Apollo mission.

Mazzucato reckons that a fundamental reappraisal of the role of the public sector is required that goes beyond the traditional 'market failure' framework derived from neoclassical welfare economics to a 'market co-creating' and 'market-shaping' role. "It is not about fixing markets but creating markets".

But should the mission of government be to 'create markets' or 'shape markets'? Is it really possible that the public sector will be allowed to take the lead in investment for social purpose over investment for profit under capitalism?  Is it really possible that a 'common vision' can be 'captured' between big business in its drive for profits for its shareholders and governments which may have different objectives?  Can climate change and global warming be reversed while the fossil fuel industry remains untouched by governments?  Can rising inequality be reversed through some public-private 'common vision'?  Can technological unemployment be avoided when the big tech companies apply robots and AI to replace human labour?  Can a mission 'moonshot' approach based on partnership with big business and 'creating markets' really succeed, given the social structure of modern capitalism?  When you pose these questions, I think the answer becomes clear.

Indeed, some of the mission-approach schemes that Mazzucato cites in her book have been just as unsuccessful as previous 'public-private 'partnerships.  She advised Germany's Energiewende (energy transition to renewables), which has failed to deliver any better than others in reducing carbon emissions. She advised the Scottish Nationalists on launching its Scottish National Investment Bank.  Within two months, the SNP government cut its funding from £241m to £205m, a pathetic amount to start with.  When Labour under Corbyn first proposed such a SNIB, it was to be capitalised with £20bn!  And as for UK PM Johnson's 'Operation Moonshot' for mass test and tracing, say no more.

And how are these missions to be democratically controlled to achieve 'a common vision'?  Mazzucato says it will need "involving citizens in solving societal challenges and creating wide civic excitement about the power of collective innovation".  Wading through this jargon, she seems to be saying that policy makers, researchers (like herself) and businesses will get together and listen to 'citizens' somehow and out of this will come a widely approved set of 'missions' for innovation.

Mazzucato sums it up: "Mission Economy offers a path to rejuvenate the state and thereby mend capitalism, rather than end it."  In my view, that is a mission impossible.

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The Dependence of US Higher Education on International Students [feedly]

The Dependence of US Higher Education on International Students
https://conversableeconomist.blogspot.com/2021/02/the-dependence-of-us-higher-education.html

US higher education in recent decades had beeome ever-more dependent on rising inflows of international students--a pattern that was already in likely to slow down and now is being dramatically interrupted by the pandemic. John Bound, Breno Braga, Gaurav Khanna, and Sarah Turner describe these shifts in "The Globalization of Postsecondary Education: The Role of International Students in the US Higher Education System" (Journal of Economic Perspectives, Winter 2021, 35:1, 163-84). They write: 

For the United States, which has a large number of colleges and universities and a disproportionate share of the most highly ranked colleges and universities in the world, total enrollment of foreign students more than tripled between 1980 and 2017, from 305,000 to over one million students in 2017 (National Center for Enrollment Statistics 2018). This rising population of students from abroad has made higher education a major export sector of the US economy, generating $44 billion in export revenue in 2019, with educational exports being about as big as the total exports of soybeans, corn, and textile supplies combined (Bureau of Economic Analysis 2020).

Here's a figure showing the rise in international students from 2000-2017. Notice in particular the sharp rise in international students in master's degree students. 

Bound and co-authors write: 

[F]oreign students studying at the undergraduate level are most numerous at research-intensive public universities (about 32 percent of all bachelor's degrees), though they also enroll in substantial numbers at non-doctorate and less selective private and public institutions. ...  The concentration of international students  in master's programs in the fields of science, technology, engineering, and mathematics is even more remarkable: for example, in 2017 foreign students received about 62 percent of all master's degrees in computer science and 55 percent in engineering. ... Many large research institutions now draw as much as 20 percent of their tuition revenue from foreign students (Larmer 2019)."

This table shows destinations of international students from China, India, and South Korea, three of the major nations for sending students to the US. 

However, Bound and co-authors note that the US lead as a higher education destination has been diminishing: "Although the United States remains the largest destination country for students from these countries, the US higher education system is no longer as dominant as it was 20 years ago. As an illustration, student flows from China to the United States were more than 10 times larger than the flows to Australia and Canada in 2000; by 2017, those ratios fell to 2.5 to 1 and 3.3 to 1, respectively."

This pattern of rising international enrolments in US higher ed was not likely to continue on its pre-pandemic trajectory. Other countries have been building up their higher education options. In addition, if you were a young entrepreneur or professional from China or India, the possibilities for building your career in your home country look a lot better now than they did, say, back in about 1990. But the pandemic has taken what would have been a slower-motion squeeze on international students coming to US higher education and turned it into an immediate bite. Bound and co-authors write: 

Visas for the academic year are usually granted between March (when admissions decisions are made) and September (when semesters begin). Between 2017 and 2019, about 290,000 visas were granted each year over these seven months (United States Department of State 2020). Between March and September 2020, only 37,680 visas were granted—an extraordinary drop of 87 percent. Visas for students from China dropped from about 90,000 down to only 943 visas between March and September 2020. A fall 2020 survey of 700 higher education institutions found that one in five international students were studying online from abroad in response to the COVID-19 pandemic. Overall, new international enrollment (including those online) decreased by 43 percent, with at least 40,000 students deferring enrollment (Baer and Martel 2020).

Overall, it seems to me an excellent thing for the US higher education system and the US economy to attract talent from all over the world. But even if you are uncertain about those benefits, it is an arithmetic fact that the sharp declines in international students are going to be a severe blow to the finances of US higher education. 

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The Green New Deal Threatens Republicans’ Bread and Butter, it’s Not Just Competition in the Battle of Ideas [feedly]

The Green New Deal Threatens Republicans' Bread and Butter, it's Not Just Competition in the Battle of Ideas
http://feedproxy.google.com/~r/beat_the_press/~3/Q2R6u8P9KHk/

Naomi Klein has an interesting piece in the New York Times on the implications of the Texas disaster. I would disagree with some parts, which attack the Texas approach to energy as "free market." To my view, this is far too generous.

Even Texas' deregulated energy market is still highly regulated. It is possible to have hugely different outcomes and incentives by structuring the market in slightly different ways. For example, since the supply of electricity to individual homes in inherently a monopoly relationship (no one will have two electrical hookups), the burden can be placed on the provider to ensure electricity in a specified price range, rather than structuring the market so the risk lies entirely with consumers.

The latter makes little sense for free market types, since consumers both have no ability to assess the risk that their providers are taking, nor the ability to take steps to reduce the risk. If contracts were written so that the risks fell to the providers, this would provide the sort of market incentives that fans of the "free market" claim they value.

But beyond this issue, Klein correctly notes that Texas Republicans and Republicans more generally see the Green New Deal as a huge threat, which she argues is because it is a challenger in the battle of ideas:

"Because for the first time in a long time, Republicans face the very thing that they claim to revere but never actually wanted: competition — in the battle of ideas."

I see the challenge as being even stronger. The Green New Deal is a huge challenge to major financial backers of the Republican Party. The fossil fuel industry has long been a major backer of the Republican Party and right-wing causes. Many major right-wing funders, most notoriously the Koch brothers, got a substantial portion of their fortunes from fossil fuels. If this industry is whacked by policies to limit global warming, it will be serious hit to these funders.

Looking at politics this way mirrors the strategy that Republicans have used successfully for decades to undermine the basis for progressive politics. They weren't just arguing in the battle place of ideas, they did things like appoint judges and National Labor Relations Board officials who would do everything they could to weaken unions and undermine the ability of workers to organize. And, they (along with leading Democrats) pushed trade and regulation policies that seriously weakened unions in sectors like manufacturing, transportation, and communications. After weakening unions in the private sector, they then designed a strategy for undermining them in the public sector as well.

They also looked to undermine other bases of support for progressive policies. For example, Reagan gutted federal support for legal services, which was a secure base from which many progressive lawyers pursued suits to benefit the working-class and the poor. They also radically cut back support for programs like the National Endowments for the Arts and Humanities, and the Corporation for Public Broadcasting.

Basically, the Republicans were more interested in destroying the financial bases for support for progressives than winning battles of ideas. It would be great if progressives could turn the table and destroy a major source of right-wing funding, while creating good-paying jobs and saving the environment.  

The post The Green New Deal Threatens Republicans' Bread and Butter, it's Not Just Competition in the Battle of Ideas appeared first on Center for Economic and Policy Research.

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