Many folks in the media seem to think it is part of their job to promote trade agreements like the Trans-Pacific Partnership (TPP), not only in opinion pages, but in the news section too. The NYT gave us yet another example of this effort in a piece on a hotly contested congressional race in Washington.
At one point the piece tells readers that the TPP: “…would have reinforced the nation’s embrace of free trade.” This is not true.
The TPP had relatively little to do with free trade in the sense of reducing tariffs and other traditional trade barriers. The United States already had trade agreements with six of the other eleven countries in the pact and trade barriers were already low with most of the other countries.
The main focus of the agreement was locking in commercial rules on items like Internet commerce. These rules would make it more difficult for countries to restrict privacy abuses like those recently committed by Facebook.
The TPP also would have imposed longer and stronger patent and copyright protections. These protections are forms of protectionism, as in the opposite of free trade.
They are also incredibly costly forms of protectionism, often raising the price of protected items (like prescription drugs) by factors of ten or even a hundred. This makes them equivalent to tariffs of 1000 percent or 10,000 percent. The cost in the case of prescription drugs alone is in the neighborhood of $380 billion a year, roughly 2.0 percent of GDP. The NYT may like longer and stronger patent and copyright protection, but it is dishonest to call them free trade.
The piece also reported, without comment, a grossly inaccurate number on the benefits of the tax cut claimed by Dino Rossi, the likely Republican nominee for the seat. Rossi is quoted as saying the typical household will get $3,357 from the tax cut. According to the Tax Policy Center, a family in the middle of the income distribution can expect to get $930 from the tax cut, less than one-third of Mr. Rossi’s figure.
Many folks in the media seem to think it is part of their job to promote trade agreements like the Trans-Pacific Partnership (TPP), not only in opinion pages, but in the news section too. The NYT gave us yet another example of this effort in a piece on a hotly contested congressional race in Washington.
At one point the piece tells readers that the TPP: “…would have reinforced the nation’s embrace of free trade.” This is not true.
The TPP had relatively little to do with free trade in the sense of reducing tariffs and other traditional trade barriers. The United States already had trade agreements with six of the other eleven countries in the pact and trade barriers were already low with most of the other countries.
The main focus of the agreement was locking in commercial rules on items like Internet commerce. These rules would make it more difficult for countries to restrict privacy abuses like those recently committed by Facebook.
The TPP also would have imposed longer and stronger patent and copyright protections. These protections are forms of protectionism, as in the opposite of free trade.
They are also incredibly costly forms of protectionism, often raising the price of protected items (like prescription drugs) by factors of ten or even a hundred. This makes them equivalent to tariffs of 1000 percent or 10,000 percent. The cost in the case of prescription drugs alone is in the neighborhood of $380 billion a year, roughly 2.0 percent of GDP. The NYT may like longer and stronger patent and copyright protection, but it is dishonest to call them free trade.
The piece also reported, without comment, a grossly inaccurate number on the benefits of the tax cut claimed by Dino Rossi, the likely Republican nominee for the seat. Rossi is quoted as saying the typical household will get $3,357 from the tax cut. According to the Tax Policy Center, a family in the middle of the income distribution can expect to get $930 from the tax cut, less than one-third of Mr. Rossi’s figure.
Read More Leer más Join the discussion Participa en la discusión
The NYT had an interesting piece on how many cities are bringing in foreign teachers, under J-1 visas, because US citizens are not willing to work for the pay being offered. This is yet another example of how political power shapes the market and thereby determines the pay in different occupations.
If it were simply an economic question, there would be far more money to be saved by bringing in foreign doctors than foreign teachers. The average pay for doctors in the United States is over $260,000 a year. This is more than twice the average for other wealthy countries. The gap between doctors’ pay in the United States and pay in developing countries like the Philippines (the focus of this piece) would be even larger.
If economists actually supported free trade and maximizing efficiency they would be spending a huge amount of time working out arrangements that would allow for foreign doctors to meet US standards and then practice medicine in the United States under the same terms as doctors who were trained here. Unfortunately, the economics profession is more committed to redistributing income upward than to free market principles. (Yes, I am promoting my [free] book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.)
The NYT had an interesting piece on how many cities are bringing in foreign teachers, under J-1 visas, because US citizens are not willing to work for the pay being offered. This is yet another example of how political power shapes the market and thereby determines the pay in different occupations.
If it were simply an economic question, there would be far more money to be saved by bringing in foreign doctors than foreign teachers. The average pay for doctors in the United States is over $260,000 a year. This is more than twice the average for other wealthy countries. The gap between doctors’ pay in the United States and pay in developing countries like the Philippines (the focus of this piece) would be even larger.
If economists actually supported free trade and maximizing efficiency they would be spending a huge amount of time working out arrangements that would allow for foreign doctors to meet US standards and then practice medicine in the United States under the same terms as doctors who were trained here. Unfortunately, the economics profession is more committed to redistributing income upward than to free market principles. (Yes, I am promoting my [free] book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.)
Read More Leer más Join the discussion Participa en la discusión
The NYT described the problems that fast-food restaurants are having in getting and keeping workers as a result of lower unemployment. It describes several ways in which restaurants have been able to maintain sales with fewer workers. It also suggests that many restaurants are likely to go out of business since they will not be profitable if they have to pay the wages necessary to keep workers.
This is how productivity increases in a market economy. Some restaurants will be able to find ways to make a profit even while paying higher wages. Other restaurants, which are less productive, will end up going out of business. The workers that had been employed at these restaurants will mostly end up at businesses that make better use of their labor.
The growth of fast-food restaurants described in this piece is a drag on the economy’s productivity. When a larger number of workers are employed in very low productivity jobs, it reduces average productivity in the economy. If higher wages ends up reversing this process, it will mean more rapid productivity growth.
This is essentially the story of the transition of the United States from being a primarily agricultural economy to an urban one. Manufacturing and other industries in urban areas offered higher pay than was available in rural areas. This forced farms to either become more efficient or go out of business. This is mostly a positive story of rising living standards, although there always will be some people hurt in the process (e.g. farmers or restaurant owners going out of business.)
The NYT described the problems that fast-food restaurants are having in getting and keeping workers as a result of lower unemployment. It describes several ways in which restaurants have been able to maintain sales with fewer workers. It also suggests that many restaurants are likely to go out of business since they will not be profitable if they have to pay the wages necessary to keep workers.
This is how productivity increases in a market economy. Some restaurants will be able to find ways to make a profit even while paying higher wages. Other restaurants, which are less productive, will end up going out of business. The workers that had been employed at these restaurants will mostly end up at businesses that make better use of their labor.
The growth of fast-food restaurants described in this piece is a drag on the economy’s productivity. When a larger number of workers are employed in very low productivity jobs, it reduces average productivity in the economy. If higher wages ends up reversing this process, it will mean more rapid productivity growth.
This is essentially the story of the transition of the United States from being a primarily agricultural economy to an urban one. Manufacturing and other industries in urban areas offered higher pay than was available in rural areas. This forced farms to either become more efficient or go out of business. This is mostly a positive story of rising living standards, although there always will be some people hurt in the process (e.g. farmers or restaurant owners going out of business.)
Read More Leer más Join the discussion Participa en la discusión
I can’t say I’ve been following all the details here, but it’s hard to see why a public university should have secret agreements with funders. If the Kochs don’t want the terms of their funding exposed to the public, then the conditions probably are not proper. Universities should not be in the business of selling legitimating arguments for political positions.
The same story applies to private universities that want to be taken seriously. In fact, it would be a good rule to have as a condition of receiving their taxpayer subsidy (tax-exempt status). Let Corrupt University take as much money as it wants from the Koch gang, but the rest of us should not have to subsidize their sleaze.
I can’t say I’ve been following all the details here, but it’s hard to see why a public university should have secret agreements with funders. If the Kochs don’t want the terms of their funding exposed to the public, then the conditions probably are not proper. Universities should not be in the business of selling legitimating arguments for political positions.
The same story applies to private universities that want to be taken seriously. In fact, it would be a good rule to have as a condition of receiving their taxpayer subsidy (tax-exempt status). Let Corrupt University take as much money as it wants from the Koch gang, but the rest of us should not have to subsidize their sleaze.
Read More Leer más Join the discussion Participa en la discusión
This is an important point to remember in coverage of the Federal Reserve Board’s plans on interest rates. Former Fed Chair Janet Yellen repeatedly reminded the public that the 2.0 percent target is intended to be an average.
The inflation rate, as measured by the consumer price expenditure deflator, has been under 2.0 percent for most of the last six years. This means the Fed should be prepared to allow the rate to rise modestly above 2.0 percent given its target. We will have a recession at some point in the future, which will lower the inflation rate. This means the Fed should be looking to have the inflation rise to perhaps 2.5 percent, or even slightly higher if 2.0 percent is the actual target.
It is also worth noting that inflation has not been following the normal pattern in past recoveries. The inflation we are seeing is hugely concentrated in housing. Pulling out rent, the core inflation rate is rising at roughly a 1.0 percent annual rate. In the past, rental inflation has not differed much from the rate of inflation in other goods and services.
Rents are driven by a shortage of housing, not wage-cost pressures. Also, higher interest rates are likely discouraging construction, making the housing shortage worse, so it’s not clear that higher interest rates are a good mechanism to combat the inflation we are now seeing.
CPI Minus Food, Energy, and Shelter: Percent Change Last 12 Months
Source: Bureau of Labor Statistics.
This is an important point to remember in coverage of the Federal Reserve Board’s plans on interest rates. Former Fed Chair Janet Yellen repeatedly reminded the public that the 2.0 percent target is intended to be an average.
The inflation rate, as measured by the consumer price expenditure deflator, has been under 2.0 percent for most of the last six years. This means the Fed should be prepared to allow the rate to rise modestly above 2.0 percent given its target. We will have a recession at some point in the future, which will lower the inflation rate. This means the Fed should be looking to have the inflation rise to perhaps 2.5 percent, or even slightly higher if 2.0 percent is the actual target.
It is also worth noting that inflation has not been following the normal pattern in past recoveries. The inflation we are seeing is hugely concentrated in housing. Pulling out rent, the core inflation rate is rising at roughly a 1.0 percent annual rate. In the past, rental inflation has not differed much from the rate of inflation in other goods and services.
Rents are driven by a shortage of housing, not wage-cost pressures. Also, higher interest rates are likely discouraging construction, making the housing shortage worse, so it’s not clear that higher interest rates are a good mechanism to combat the inflation we are now seeing.
CPI Minus Food, Energy, and Shelter: Percent Change Last 12 Months
Source: Bureau of Labor Statistics.
Read More Leer más Join the discussion Participa en la discusión
Not really. The Guardian has an article that begins by telling readers how Amazon produces a copy of a designer laptop stand and sells it for half the price as the designer stand. While the article correctly refers to the Amazon product a “knockoff,” in other contexts, such as when discussing Chinese copies of US products, these copies are often referred to as “counterfeits.”
This is not just a question of semantics. With a counterfeit, the buyer is being deceived. They pay a higher price because they actually believe that it is produced by the company in question. In the case of a knockoff, or unauthorized copy, the buyer knows that they are not getting the product produced the designer company, but are paying a considerably lower price.
In the case of the knockoff, the customer is benefiting, as is the seller. There could be an issue where the designer’s property rights are being violated, but both of the parties to the exchange are benefiting. By contrast, in the case of a counterfeit item, the buyer is being ripped off. They pay more for the item because it has been misrepresented.
Not really. The Guardian has an article that begins by telling readers how Amazon produces a copy of a designer laptop stand and sells it for half the price as the designer stand. While the article correctly refers to the Amazon product a “knockoff,” in other contexts, such as when discussing Chinese copies of US products, these copies are often referred to as “counterfeits.”
This is not just a question of semantics. With a counterfeit, the buyer is being deceived. They pay a higher price because they actually believe that it is produced by the company in question. In the case of a knockoff, or unauthorized copy, the buyer knows that they are not getting the product produced the designer company, but are paying a considerably lower price.
In the case of the knockoff, the customer is benefiting, as is the seller. There could be an issue where the designer’s property rights are being violated, but both of the parties to the exchange are benefiting. By contrast, in the case of a counterfeit item, the buyer is being ripped off. They pay more for the item because it has been misrepresented.
Read More Leer más Join the discussion Participa en la discusión
Just curious, since Marketplace radio told listeners about the shortage of workers in the residential construction industry for jobs that pay $17.61 an hour. Would we be hearing that there is a shortage of doctors (or lawyers or economists) if few were willing to work at $17.61 an hour?
I know these professions require much more training (although construction workers seem to do much better at their jobs than economists), but if the wage on offer for jobs in these professions was ridiculously low, most likely reporters would be calling attention to the low pay rather than the lack of willing workers.
Just curious, since Marketplace radio told listeners about the shortage of workers in the residential construction industry for jobs that pay $17.61 an hour. Would we be hearing that there is a shortage of doctors (or lawyers or economists) if few were willing to work at $17.61 an hour?
I know these professions require much more training (although construction workers seem to do much better at their jobs than economists), but if the wage on offer for jobs in these professions was ridiculously low, most likely reporters would be calling attention to the low pay rather than the lack of willing workers.
Read More Leer más Join the discussion Participa en la discusión
The Washington Post noted the 6.0 percent rise in business investment in the first quarter and said that it seems to contradict the drop of 0.1 percent in capital goods orders (excluding aircraft) in March. There actually is no contradiction.
Capital goods orders are forward-looking, indicating businesses’ intentions for how much they want to invest over the next year or two, sometimes longer. Their investment in the first quarter is mostly the outcome of investment made in prior quarters.
If we are looking for the impact of the tax cut on investment, we should be focused on orders. The growth figures touted by the Republicans imply growth of roughly 25 percentage points over baseline growth. The 6.0 percent figure is consistent with the recent trend; if the tax cut leads to anything like the growth promised by the Republicans, we should be seeing growth well into the double digits.
The Washington Post noted the 6.0 percent rise in business investment in the first quarter and said that it seems to contradict the drop of 0.1 percent in capital goods orders (excluding aircraft) in March. There actually is no contradiction.
Capital goods orders are forward-looking, indicating businesses’ intentions for how much they want to invest over the next year or two, sometimes longer. Their investment in the first quarter is mostly the outcome of investment made in prior quarters.
If we are looking for the impact of the tax cut on investment, we should be focused on orders. The growth figures touted by the Republicans imply growth of roughly 25 percentage points over baseline growth. The 6.0 percent figure is consistent with the recent trend; if the tax cut leads to anything like the growth promised by the Republicans, we should be seeing growth well into the double digits.
Read More Leer más Join the discussion Participa en la discusión
Yes, it’s the old looming demographic crisis again. It seems China is not going to have enough workers just as robots are taking all the jobs. Now that’s a bleak future.
Yes, it’s the old looming demographic crisis again. It seems China is not going to have enough workers just as robots are taking all the jobs. Now that’s a bleak future.
Read More Leer más Join the discussion Participa en la discusión
We all know how upset some folks get at the idea that people get food stamps from the government. So let’s get some of the righteous outrage directed at Robert R. Redfield, Trump’s pick to be the new head of the Center for Disease Control and Prevention (CDC).
According to an NYT article, Dr. Redfield will earn $375,000 a year in this post. According to the article, Redfield is able to get this high pay through a loophole that allows the government to pay more money to people who are uniquely qualified for their position. Redfield’s predecessor earned $197,300. It seems difficult to argue that Redfield is uniquely qualified for this position since he has no experience running a large bureaucracy and limited background in public health.
If people would like some context for this overpayment, the average annual benefit for a food stamp beneficiary is $1,512. This means that the overpayment to Redfield (compared to his predecessor’s pay) is equivalent to 110 years of a typical beneficiary’s food stamps.
Note: An earlier version had incorrectly identified the director of CDC as “Dr. Redford.”
We all know how upset some folks get at the idea that people get food stamps from the government. So let’s get some of the righteous outrage directed at Robert R. Redfield, Trump’s pick to be the new head of the Center for Disease Control and Prevention (CDC).
According to an NYT article, Dr. Redfield will earn $375,000 a year in this post. According to the article, Redfield is able to get this high pay through a loophole that allows the government to pay more money to people who are uniquely qualified for their position. Redfield’s predecessor earned $197,300. It seems difficult to argue that Redfield is uniquely qualified for this position since he has no experience running a large bureaucracy and limited background in public health.
If people would like some context for this overpayment, the average annual benefit for a food stamp beneficiary is $1,512. This means that the overpayment to Redfield (compared to his predecessor’s pay) is equivalent to 110 years of a typical beneficiary’s food stamps.
Note: An earlier version had incorrectly identified the director of CDC as “Dr. Redford.”
Read More Leer más Join the discussion Participa en la discusión
