Monday, September 25, 2017
Sunday, September 24, 2017
Germany Votes
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Germany Votes // The American Prospect
http://prospect.org/article/germany-votes
AP Photo/Michael Sohn
Supporters hold posters as German Chancellor Angela Merkel returns on the stage at the headquarters of the Christian Democratic Union CDU in Berlin.
This Sunday, September 24, Germans went to the polls to elect a new Bundestag. The preliminary results confirm predictions that Chancellor Angela Merkel's Christian Democratic Union (CDU; and its Bavarian partner Christian Social Union) would come in first, with about one-third of the vote, but this is down about 8 percentage points compared with four years ago.
The center-left Social Democratic Party (SPD), led by Martin Schulz, turned in its worst performance since World War II, with just over 20 percent of the vote. The SPD thus becomes the latest victim in the collapse of center-left establishment parties nearly everywhere. In the May presidential election in France, the French Socialists also turned in their worst performance since their founding and have been forced to put their party headquarters up for sale to pay the bills, and of course Democrats in the U.S. lost to Donald Trump.
Finishing in third place was the Alternative for Germany party (AfD), which rose to prominence on its virulent anti-immigrant, anti-EU rhetoric. In the long piece I wrote for the print edition of TAP, I predicted that AfD, as the party is known, had lost some of its steam and would finish with under 10 percent of the vote. I was wrong. Early results put AfD just over 13, which makes it the third strongest political force in Germany. Although discussion of the refugee crisis had taken a back seat in recent months to outrage over the conspiracy by German auto manufacturers to cover up their violation of Diesel exhaust emissions limits, AfD's candidates successfully exploited smoldering resentment of Merkel's open-door policy, especially in the states that used to be part of East Germany. While AfD's 13 percent is still well short of the Front National's 33 percent (in the second round of the French presidential elections), Germany will now have an openly racist party represented in the Bundestag for the first time since the end of the war.
Merkel has said that she will not include AfD in any coalition government. She has also excluded working with Die Linke, the far-left party, which garnered just under 9 percent. Her coalition options are therefore limited. She could try to renew the Grand Coalition with the SPD, with which she has ruled for the past four years. But SPD members are distinctly unenthusiastic about continuing to serve as Merkel's junior partners. Even before the election results were in, many in the party felt that their cooperation with the CDU over the 12 years of Merkel's rule has cost them dearly, not least because it made them party to the deepening "dualization" of the German labor market, which has been good for export businesses and for the skilled workers they employ but which has also resulted in a sharp increase in the Germany poverty rate.
If the SPD refuses to renew the Grand Coalition, or if Merkel herself decides that her best option is to jettison the weakened left, two possibilities remain. She can seek to form a so-called Jamaica coalition with the Free Democrats (FDP) and the Green Party—the name "Jamaica" refers to the colors of the three parties, black (CDU), yellow (FDP), and green (Greens), the same as the colors of the Jamaican flag. The FDP, which fell below the 5 percent threshold in the last election and was therefore excluded from the Bundestag, has come roaring back under leader Christian Lindner, more than doubling its score since 2013. The Greens have also improved their score compared with 2013 but still trail the FDP by about a percentage point.
The problem with a Jamaica coalition is that the staunchly free-market FDP and the passionately market-curbing Greens are deeply at odds on many issues. What's more, the FDP is deeply Euroskeptic, whereas Merkel remains committed to the European Union and has signaled to French President Emmanuel Macron that she is willing to entertain a number of his proposals for EU institutional reform.
If Jamaica proves too exotic a destination, Merkel could try for a Black-Yellow coalition with the FDP, but she would then also need to pick up some votes from members of other parties. It may be some time yet before we know the exact complexion of the new Bundestag membership. The German electoral system combines proportional and first-past-the-post tallies, so it will take some time before we even know precisely how many seats each party will hold.
Putting together a final coalition will then require extensive backroom dickering. One important unknown is the fate of Finance Minister Wolfgang Schäuble. Merkel and Schäuble have not always seen eye-to-eye, and she may avail herself of the opportunity to use his position as a bargaining chip to woo a potential coalition partner. Neither the SPD nor the FDP would be likely to join a coalition with Schäuble as finance minister.
In any case, Merkel will now begin her fourth term as chancellor, putting her in a position to rival Helmut Kohl's all-time longevity record. But the vote is hardly a ringing endorsement of her stewardship. One possible casualty of her lackluster triumph is the promise of cooperation with France on EU reform. The surge by both the FDP and AfD suggests that more than a few German voters think their government ought to put them first and foreigners second. EU reform is not high on their list of priorities.
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Enlighten Radio:The Poetry Show -- 9/25/17 -- Odes, Vietnam and John Asbery.
Blog: Enlighten Radio
Post: The Poetry Show -- 9/25/17 -- Odes, Vietnam and John Asbery.
Link: http://www.enlightenradio.org/2017/09/the-poetry-show-92517-odes-vietnam-and.html
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Experiencing the Holocaust [feedly]
http://understandingsociety.blogspot.com/2017/09/experiencing-holocaust.html
What do most American adults know about the Holocaust? Here are some core beliefs that most people could probably recite. It was a horrible crime. It was a deliberate program of extermination. Over six million Jewish men, women, and children were murdered. Other groups were also targeted, including Roma people, homosexuals, and Communists. It was the result of racist Nazi ideology. There were particular agents of this evil -- Hitler, Himmler, Göring, Hess, ... There were countless ordinary people across the face of Europe, in Germany and many other countries, who facilitated this evil -- the "banality of evil". There were some heroes who fought against the killing -- Wallenberg, Schindler, Bonhoeffer, Marc Bloch, the villagers of Le Chambron. There are noted tragic victims -- Anne Frank, Maximilian Kolbe. And the Allies could have done much more to disrupt the killing and to facilitate escape for the Jews of Europe.
But notice how thin this body of beliefs is. It is barely thick enough to constitute "knowledge of the Holocaust". It is encapsulated in just a few sentences. If it has emotional content it is a hazy version of the emotions of pity and sorrow. Is this knowledge adequate to the realities it represents? When we repeat the words, "Never again!", do we know what we are saying? And how can a more full and satisfactory level of knowledge of this horrifying and defining event in the twentieth century be achieved?
Here is one possible answer. There is a different way of gaining a more personal and nuanced understanding of the Holocaust -- an extended visit to Auschwitz and Birkenau (link). It is a museum, an historical site, a killing ground, a place where one and a half million people were systematically murdered. A visit to the concentration camps is a very different avenue of knowledge -- knowledge through personal, empathic understanding of the vastness and horror of the crimes committed here.
So, for example, one can see the photographs of individual prisoners, their life stories encapsulated by the date and place of their arrest and the date of their death in the gas chambers. One can read a very personal family tragedy in these photographs.
This drawing by a child depicts something the child must have seen -- the arrival of prisoners and their separation at the platform into those who would perform slave labor and those who would die immediately.
So an intensive visit to Auschwitz is very powerful at the level of emotion and empathy. It makes the horror of the Holocaust both personal and particular. The visitor is led to imaginatively place himself or his loved ones on the platform, in the barracks, in the changing room. The Holocaust is no longer just a set of numbers and facts, but am invitation to vicarious empathic understanding -- and then a mental multiplication of that experience by a factor of millions.
In other words, we may speculate that the more particular experience of the Holocaust afforded by a meaningful visit to Auschwitz contributes to creating a different kind of twenty-first century citizen, one who has a deeper visceral appreciation of what these crimes of the Nazi period involved in human terms, and a better and deeper understanding of the enormity of this experience. Equally important, it helps to create a much more specific emotional experience of pity and sorrow that honors the humanity of these millions of human beings who were murdered during this period.
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Trump’s Comments on N.F.L. and Stephen Curry Draw Intense Reaction [feedly]
https://www.nytimes.com/2017/09/23/sports/trump-nfl-nba.html
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The productivity slowdown is even more puzzling than you think
David Byrne, Dan Sichel 22 August 2017
The growth in labour productivity – real output per hour worked – in the US slowed markedly around 2004. During the previous ten years, labour productivity in the business sector had risen at an annual average pace of more than 3%. Productivity received a boost from innovations in the production of digital information and communications technologies (ICT) and the spreading use of ICT across all sectors of the economy. Despite the apparent continuation of the digital revolution, productivity growth slowed to about 2% a year during 2004-2010 and then dropped to a paltry pace near just 0.5% during 2010-2016. Outside the US, labour productivity growth also declined in other advanced market economies.
If sustained, this sluggish pace would have dire consequences for future gains in living standards. Over long spans of time, increases in labour productivity are the fuel that boosts living standards and the main reason that material well-being is significantly higher today than 50 or 100 years ago. At a 2% pace, labour productivity would double every 35 years, while at a 0.5% pace, that doubling would take almost 140 years.
Economists have debated the reasons for the slowdown, though no consensus has emerged. Explanations generally fall into three categories. It is attributed to either supply-side accounts pointing to factors limiting the growth rate of potential output;1 demand-side stories highlighting inadequate demand or interactions between weak demand and sluggish growth of potential output;2 or, finally, measurement explanations arguing that the tools of economic measurement have not kept up with the digital revolution and that the slowdown is a figment of poor measurement.3
We suspect that this debate will not be resolved anytime soon. That being said, we want to refocus the discussion about measurement of the digital economy. While we agree that available evidence on mismeasurement does not provide an explanation of the productivity slowdown, we also believe that biases in measures of ICT are significant and that this mismeasurement has important implications for economic growth in the future. In particular, we argue that innovation is much more rapid than would be inferred from official measures and that these on-going gains in the digital economy make the productivity slowdown even more puzzling. At the same time, we believe that this continued technical advance could provide the basis for a future pickup in productivity growth.
Are we mismeasuring the digital economy?
The short answer is yes. A key challenge to measuring changes in real GDP over time is correctly deflating nominal GDP to account for changes in prices. Getting price changes right for ICT production and investment is particularly difficult. And, as highlighted in Byrne et al. (2017), official measures of prices point to very slow rates of decline in the prices of high-tech products. But, a growing literature indicates that prices of ICT are actually falling much faster. For example, Byrne et al. (forthcoming) developed a new price index for microprocessors used in desktop computers. Their index fell at an average annual rate of 42% during 2009-13, while the most comparable official price index – the Producer Price Index – reports an average decline of 6% during the same period. Other research points to mismeasurement for other ICT products as well. Byrne and Corrado (2016) provide the best available measures of the amount of bias in official price indexes for high-tech products. Table 1 reports rates of change in official price indexes and the alternative research series for computers, communications equipment, software, and semiconductors reported by Byrne and Corrado (2016).4 As shown in the last column of the table, measurement gaps – which equal the difference between the percent changes of the official price index and the alternative research index – are sizeable for all of the high-tech products shown. Moreover, prices of many ICT products are still almost completely unstudied, including devices used in the medical, aerospace, and defence sectors and the industrial robots that have been the subject of much recent media attention.
Table 1 Official and alternative research price indexes for high-tech products, average percent change, 2004-2015
Note: Measurement gaps calculated as "official" less "alternative."
Source: Byrne et al. (2017). Official indexes for computing equipment, communications equipment, and software are from the Bureau of Economic Analysis; the official index for semiconductors is from the Bureau of Labor Statistics. Alternative research indexes are from Byrne and Corrado (2016), including some details provided by the authors that are not reported in their paper.
In addition to ICT production, the digital economy encompasses an increasingly wide range of economic activity. The list is long and includes the myriad applications delivered by internet service providers, the energy exploration that relies on world class supercomputers to process seismic data, the surging e-commerce sector cannibalising shopping malls, the Hollywood movies produced with computer-generated imagery, the high resolution MRI, CT, and sonogram images that underpin advances in medical diagnosis, and many others. Developing price indexes that capture quality change for these industries is challenging. Moreover, the deep investment in ICT in all of the industries mentioned suggests that the official prices for their output, which in most cases show little change, may be missing something important.
Does this mismeasurement explain the productivity slowdown?
No. To explain the slowdown in labour productivity, either the amount of mismeasurement of productivity growth must have increased or the share of the mismeasured sectors must have risen. And recent research by Byrne et al. (2016) and Syverson (2017) has cast doubt on mismeasurement as an explanation of the productivity slowdown. While the amount of mismeasurement has increased in some areas, there was a lot of mismeasurement of high-tech before 2004 as well. And the production of many ICT products has shifted outside the US, reducing the GDP share of these products.
This answer was confirmed by Byrne et al. (2017). They use a detailed, multi-sector growth model to decompose growth in labour productivity into contributions from capital deepening (increases in the amount of capital available to each worker) and multifactor productivity (the amount by which output changes after accounting for changes in all inputs). Figure 1 shows this decomposition using both official price indexes (upper panel) and the alternative research price indexes described above (lower panel). As can be seen, switching from official price measures to the alternative research series has relatively little effect on the pattern of labour productivity growth over time, as well as the contributions from capital deepening and multifactor productivity (MFP). Byrne et al. (2017) focused on components of GDP that have been the subject of recent research attention. It is, of course, possible that mismeasurement elsewhere (either related or not related to the tech sector) could be biasing the pattern of labour and multifactor productivity in official measures.
Figure 1 Decomposition of labour productivity growth with official and alternative research prices, 1974-2015
Source: Byrne et al. (2017).
Does this mismeasurement matter?
Again, the answer is yes. Even though the mismeasurement of high-tech prices has little effect on the pattern of labour productivity growth across time, that mismeasurement has a dramatic effect on the allocation of MFP growth across sectors. As noted, MFP growth indicates the amount by which firms get better at transforming inputs into output. Along these lines, macroeconomists often use MFP growth as a rough proxy for the pace of innovation. MFP growth can be measured by comparing the growth rate of output to a weighted average of the growth rate of inputs. It also can be measured by comparing the price of output to a weighted average of changes in the prices of inputs (the so-called 'dual' approach). Borrowing the explanation from Sichel (2017), the logic of this approach can be seen in industries that experienced rapid technological progress. With fast MFP growth, an industry will be able, over time, to produce more output from a given set of inputs. If the cost of inputs is relatively stable, then those products should see their prices fall over time. For example, telecom has seen rapid price declines in recent decades. In 1952, a ten-minute daytime phone call from New York to Los Angeles cost about $48 in 2016 dollars.5 Today, phone companies do not even bother to separately price that call, and the call can be made from almost anywhere on a mobile phone rather than from a landline phone. These rapid price declines suggest that telecom experienced substantial growth in MFP.
Byrne et al. (2017) use this dual approach to measure MFP growth in high-tech industries (which include the production of computers, communications equipment, software, and semiconductors). Figure 2 compares the estimates of MFP growth generated using official price measures (the blue cross-hatched bars) and the alternative research price indexes (the red bars). As shown, MFP growth in the high-tech sector is considerably more rapid using the alternative research prices. This pattern indicates that the innovation has been much faster in the high-tech sector than indicated by official measures and accords more consistently with casual impressions that the digital economy continues to be powered by ongoing advances.
Figure 2. Total tech sector MFP growth rates with official and alternative research prices, 1974-2015 (%)
Note: High-tech sector includes the production of computers, communications equipment, software, and semiconductors.
Source: Byrne et al. (2017).
Byrne et al. (2017) also use the dual approach to calculate the growth rate of MFP outside of the high-tech sector. As shown in Figure 3, these growth rates are much slower when the alternative research prices are used than when official measures are used. Thus, correcting the mismeasurement of high-tech prices leads to a reallocation of MFP growth across sectors toward high tech and away from the rest of the economy. This reallocation of MFP growth implies much faster innovation in the digital economy than implied by official measures.
Figure 3. Other output MFP growth rates with official and alternative research prices, 1974-2015 (%)
Source: Byrne et al. (2017).
A deeper puzzle, but hope for the future
This pattern of MFP growth makes the productivity slowdown even more puzzling. If the tech sector continues to innovate so rapidly, why has overall productivity growth been exceptionally sluggish? While it is possible that the challenges inherent in measuring output outside the ICT sector have suddenly worsened, we suspect that the answer depends importantly on the long lags necessary for innovations to diffuse through the economy and move the needle on overall productivity. This pattern of slow diffusion has been seen in the past both with electrification in the late 19th and early 20th centuries, as well as for semiconductors in the second half of the 20th century. We believe that the faster rates of innovation in high tech that are evident, once measurement biases have been corrected, could be the fuel for a future pickup in productivity growth.6
Authors' note: The views expressed in this article are those of the authors alone and not institutions with which they are affiliated. Sichel thanks the Bureau of Economic Analysis and National Telecommunications & Information Administration for financial support for related research on price measurement.
References
Branstetter, L, and D Sichel (2017), "The Case for an American Productivity Revival," Peterson Institute for International Economics Policy Brief 17-26, June.
Byrne, D M, and C Corrado (2016), "ICT Prices and ICT Services: What Do They Tell Us about Productivity and Technology?" presented at CRIW/NBER Summer Institute.
Byrne, D M, J G Fernald, and M B Reinsdorf (2016), "Does the United States have a productivity slowdown or a measurement problem?" Brookings Papers on Economic Activity 2016(1): 109-182.
Byrne, D M, S D Oliner, and D E Sichel (forthcoming), "How Fast Are Semiconductor Prices Falling?" Review of Income and Wealth, also available as FEDS working paper 2017-005, January 2017.
Byrne, D M, S D Oliner, and D E Sichel (2017), "Prices of High-Tech Products, Mismeasurement, and the Pace of Innovation", Business Economics 52(2(: 103-113.
Federal Communications Commission, Reference Book of Rates, Price Indices, and Household Expenditures for Telephone Service, March 1997.
Gordon, R J (2016), The Rise and Fall of American Economic Growth, Princeton University Press.
Mason, J W (2017), "What Recovery? The Case for Continued Expansionary Policy at the Fed," Roosevelt Institute, July 25.
Reifschneider, D, W Wascher, and D Wilcox (2013), "Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy," FEDS working paper no. 2013-77, November.
Sichel, D E (2017), "The Productivity Slowdown is Even More Puzzling than You Think," Econofact, May 17.
Summers, L H (2014), "U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound," Business Economics 49(2): 65-73.
Syverson, C (2016), "Challenges to Mismeasurement Explanations for the U.S. Productivity Slowdown," NBER working paper 21974.
Endnotes
[1] See Gordon (2016) for one prominent version.
[2] Summers (2014) has written extensively about "secular stagnation" as an explanation. Mason (2017) and Reifschneider, Wascher, and Wilcox (2013) have argued that weak demand has restrained advances in potential output.
[3] For example, Goldman Sachs (2015 and 2016), argue that we are missing growth in key components of GDP, and Byrnjolfsson and Oh (2013) make the case that economic welfare is growing faster than real GDP.
[4] Note that the semiconductor index shown in the table incorporates the microprocessor index described above but also includes other semiconductors.
[5] For the cost in 1952, see Federal Communications Commission (1997: 62). The adjustment to today's dollars was done with the price deflator for personal consumption expenditures.
[6] For a more complete explication of the case for a revival in US productivity, see Branstetter and Sichel (2017).
Harpers Ferry, WV
Saturday, September 23, 2017
Enlighten Radio Podcasts:Podcast Resistance Radio: Stewart Acuff's Call to Action on Graham Cassidy
Blog: Enlighten Radio Podcasts
Post: Podcast Resistance Radio: Stewart Acuff's Call to Action on Graham Cassidy
Link: http://podcasts.enlightenradio.org/2017/09/podcast-resistance-radio-stewart-acuffs.html
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