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Wonkbook: The end of ‘if you like your plan, you can keep it’
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Here’s One Scenario For The End Of Obamacare
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Tyler Cowen’s Future Shock: No More Average People
This article originally appeared in The Washington Examiner “This book is far from all good news.” So writes Tyler Cowen at the beginning of his latest book, “Average is Over: Powering America Beyond the Age of The Great Stagnation.” Cowen is an economist at George Mason University who is generally classified as libertarian and whose interests range far afield. His most recent books include “The Great Stagnation” and “An Economist Gets Lunch” (his advice: skip fancy downtown places, eat at restaurants attached to Pakistani-owned motels). In “The Great Stagnation,” he argued that productivity has been lagging because of lack of technological innovation. Information technology, he wrote, has produced nothing like the gains obtained from the steam engine, electricity and hydrocarbon chemistry In “Average Is Over,” he looks farther ahead to “a very surprising time,” when new technologies will lead us out of stagnation. But it will lead some of us out very much farther than others. Cowen minces no words on this. Those of us accustomed to the emollient language of politicians promising a bright future will be startled by Cowen’s frankness. The big winners in the economy he foresees will be those who can work with and harness machine intelligence and those who can manage and market such people. Such “hyperproductive” people, about 15 percent of the population, will be wealthier than ever before. Also doing well will be those providing them personal services. For jobs lower down on the ladder, there will be a premium on conscientiousness. That’s good for women and bad for men, who are more likely to do things their own way. Middle-level jobs, Cowen says, are on the way out. He argues that many of those laid off after the financial crisis were “zero marginal product” workers. They weren’t producing anything of value and employers won’t replace them. Upward mobility will still be possible, he says, thanks to machine-aided education, which can spot talent in unlikely places. But I think he overestimates how likely that will be. Assortative mating (people marrying similar people) and the considerable hereditability of intelligence means that many or most of those with the talents to get to the top will start out there. A fair society, ironically, may have less social mobility. How will this society handle the pending fiscal shortfall? Cowen’s prediction: by raising taxes a bit (but it’s hard to get more out of rich, clever people),… Read more…
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NPR Asks President Obama about Tyler Cowen’s “Average Is Over”
This article originally appeared in NPR The economist Tyler Cowen was on our program the other day. He’d written a book about income inequality. And he argued, based on his analysis, that it’s really inevitable, it’s going to get worse, and the thing for public officials to do is to adapt to it rather than try to change it. Well, I don’t accept that. America is, always [has] been, at its best when everybody who’s willing to work hard has a chance to succeed. There is no doubt that these trends are powerful and they’re global. I mean, we’re seeing the same trends in Scandinavian countries that historically were — prided themselves on great equality. We’ve seen it magnified in less developed countries and emerging markets. So these are global trends that we’re going to have to fight against. But if we are educating a workforce that has the skills they need to compete, if we have a tax system that is fair and not rewarding those who can afford high-priced accountants and lawyers, if we are rebuilding our infrastructure in this country, not only to make us more competitive but because those create jobs that can’t be exported, if we are increasing a minimum wage so that it is reflective of the same purchasing power that existed many years ago, if we’re creating more ladders of opportunity for people who are locked in neighborhoods that have been abandoned and small towns where factories have closed — if we do those things, then we can lessen the impact of these broader market forces. But what is true is that globalization and technology are a mixed bag. On the one hand, they create a situation in which consumer goods are cheap and they create a situation in which we can have access to goods and services that we would never have had before. On the other hand, it does create a situation in which a lot of the jobs that are created are at the very top, high-skilled, you know, creative work that can’t be replicated, or at the bottom, low-skilled jobs. What we don’t have are those jobs in the middle that we have to really focus on building, because we can outcompete anybody when we have smart policies. Read Entire Transcript
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The American Dream, RIP?
This article originally appeared in The Economist COULD America survive the end of the American Dream? The idea is unthinkable, say political leaders of right and left. Yet it is predicted in “Average is Over”, a bracing new book by Tyler Cowen, an economist. Mr Cowen is no stranger to controversy. In 2011 he galvanised Washington with “The Great Stagnation”, in which he argued that America has used up the low-hanging fruit of free land, abundant labour and new technologies. His new book suggests that the disruptive effects of automation and ever-cheaper computer power have only just begun to be felt. It describes a future largely stripped of middling jobs and broad prosperity. An elite 10-15% of Americans will have the brains and self-discipline to master tomorrow’s technology and extract profit from it, he speculates. They will enjoy great wealth and stimulating lives. Others will endure stagnant or even falling wages, as employers measure their output with “oppressive precision”. Some will thrive as service-providers to the rich. A few will claw their way into the elite (cheap online education will be a great leveller), bolstering the idea of a “hyper-meritocracy” at work: this “will make it easier to ignore those left behind”. Mr Cowen’s vision is neither warm nor fuzzy. In his future, mistakes and even mediocrity will be hard to hide: eg, an ever-expanding array of ratings will expose so-so doctors and also patients who do not take their medicines or otherwise spell trouble. Young men will struggle in a labour market that rewards conscientiousness over muscle. With incomes squeezed, many Americans will head to the sort of cheap, sun-baked sprawling exurbs that give the farmers’-market-and-bike-lanes set heartburn. Many will accept rotten public services in exchange for low taxes. This may sound a bit grim, but it reflects real-world trends: 60% of employers already check the credit ratings of job candidates; young male unemployment is high and migrants have been flooding to low-tax, low-service Texas for years. The left is sure that inequality is a recipe for riots. Mr Cowen doubts it. The have-nots will be too engrossed in video games to light real petrol bombs. An ageing population will be rather conservative, he thinks. There will be lots of Tea-Party sorts among the economically left-behind. Aid for the poor will be slashed but benefits for the old preserved. He does not fear protectionism, as most jobs that can… Read more…
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A Dearth of Investment in Young Workers
This article originally appeared in The New York Times ONE of the most troubling features of the slow economic recovery is that it has largely bypassed young people. This doesn’t bode well for the future of the American economy. For Americans aged 16 to 24 who aren’t enrolled in school, the employment picture is grim. Only 36 percent are working full time, down 10 percentage points from 2007. Longer term, the overall labor-force participation rate for that age group has dropped 20 percentage points for men and 14 points for women since 1989. This lack of jobs will damage the long-term careers of a big chunk of the next working generation. Not working after you finish school very often means missing out on developing the skills and habits that will serve you well later on. The current employment numbers are therefore like a telescope into the future labor market: a 23-year-old who is working part time as a dog walker, yoga instructor or retail clerk may be having fun, but perhaps will receive fewer promotions as a 47-year-old. One culprit in this situation may be the higher minimum wage enacted in 2009, but the root causes run much deeper. Employers appear to be more risk-averse, more concerned about overhead costs and less willing to invest in developing young workers’ skills. And that seems true across a wide variety of sectors. In the legal profession, for instance, there is less interest in hiring junior associates and grooming them for partner status. Colleges and universities are often more interested in hiring adjuncts than tenure-track young faculty members. And publishing houses, instead of providing a big advance upfront and investing in young authors over a series of books, now expect many writers to earn their share of a book’s revenue through royalties. If we consider how many jobs are being advertised, without asking whether they are being filled, the labor market seems to be booming. If we measure labor market progress in terms of actual hiring, however, it’s clear that the economy is recovering slowly. Employers appear to be looking around for workers but then holding out for the very best candidates, and, if need be, making do with few new hires or none at all. These are signs of a world where next year’s business income is less certain, and many employers take greater care to keep weaker workers off the corporate team. Some employers would… Read more…
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Who Will Prosper in the New World
This article originally appeared in The New York Times Self-driving vehicles threaten to send truck drivers to the unemployment office. Computer programs can now write journalistic accounts of sporting events and stock price movements. There are even computers that can grade essay exams with reasonable accuracy, which could revolutionize my own job, teaching. Increasingly, machines are providing not only the brawn but the brains, too, and that raises the question of where humans fit into this picture — who will prosper and who won’t in this new kind of machine economy? Who will do well? THE CONSCIENTIOUS Within five years we are likely to have the world’s best education, or close to it, online and free. But not everyone will sit down and go through the material without a professor pushing them to do the work. Those who are motivated to use online resources will do much, much better in the generations to come. It’s already the case that the best students from India are at the top in many Coursera classes, putting America’s arguably less motivated bright young people to shame. “Free” doesn’t really help you if you don’t make an effort. PEOPLE WHO LISTEN TO COMPUTERS Your smartphone will record data on your life and, when asked, will tell you what to do, drawing on data from your home or from your spouse and friends if need be. “You’ve thrown out that bread the last three times you’ve bought it, give it a pass” will be a text message of the future. How about “Now is not the time to start another argument with your wife”? The GPS is just the beginning of computer-guided instruction. Take your smartphone on a date, and it might vibrate in your pocket to indicate “Kiss her now.” If you hesitate for fear of being seen as pushy, it may write: “Who cares if you look bad? You are sampling optimally in the quest for a lifetime companion.”Those who won’t listen, or who rebel out of spite, will be missing out on glittering prizes. Those of us who listen, while often envied, may feel more like puppets with deflated pride. PEOPLE WITH A MARKETING TOUCH There will be a lot more wealth in this brave new world, but it won’t be very evenly distributed because a lot of human labor won’t seem like a special or scarce resource. Capturing the attention of customers… Read more…
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Thought for Food
This article originally appeared in The Economist The dismal science has been getting a makeover. Long associated with the abstruse art of mathematical modeling, economics has become the discipline of choice to explain all sorts of phenomena, from human decision-making to the mysteries of the housing market. Economists such as Steven Levitt have been making their fortunes by grappling with real-world problems in books such as “Freakonomics”. Tyler Cowen, a professor at George Mason University with a widely read economics blog called “Marginal Revolution”, joins the crowd with a book on food, now out in paperback. “An Economist Gets Lunch” is really about finding the best places to eat—the economics is little more than a side salad. An adventurous gourmand and keen cook, Mr. Cowen doles out generous portions of advice, some of it counterintuitive. He offers tips for finding good food on the cheap, like the “chili ecstasy” in Albuquerque diners or the fish’n’chips of New Zealand. And he suggests the best way to order at fine restaurants: “If it sounds bad, it probably tastes especially good.” He devotes a whole chapter to the produce at his local Chinese supermarket (there are evidently six varieties of pak choi), and another to the various methods of barbecue cooking, “the greatest slow food of all”. Non-foodies may marvel at Mr. Cowen’s appreciation for detail. The author’s heart, or rather stomach, is in the right place. He has a winning enthusiasm for sampling exotic cuisines and he is critical of the way that Americans, by deferring to their children, have enabled the blandness of much mass-market foods. Eating with kids involves a lot of burgers, fries and doughnuts. He corrects some misconceptions about what it means to eat “green”, arguing that it is far better to cut back on red meat than to dine entirely on locally sourced food—not least because local farmers often drive long distances to bring small amounts of inefficiently raised produce to market. And he urges tourists to seek out the places where locals eat. Street stalls can provide delicious food, especially in places like Singapore. “Food is a product of supply and demand,” he writes, “so try to figure out where the supplies are fresh, the suppliers are creative and the demanders are informed.” Few would argue with Mr. Cowen’s view that while Paris still has some of the finest dining in the world, its cheap food… Read more…
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Wealth Taxes: A Future Battleground
This article originally appeared in The New York Times If you’d like to know where American political debates are headed, the data suggest a simple answer. The next major struggle — in economic terms at least — will be over whether taxes on personal wealth should rise — and by how much. The mathematical reality is that wealth is becoming more important, relative to income. In a new paper,“Capital Is Back: Wealth-Income Ratios in Rich Countries 1700-2010,”Professors Thomas Piketty and Gabriel Zucman of the Paris School of Economics have performed the heroic task of measuring wealth for eight leading economies: the United States, Canada, Britain, France, Italy, Germany, Japan and Australia. Their estimates reveal some striking trends. For instance, wealth accumulation in these eight countries has risen relative to yearly production. Wealth-to-income ratios in these nations climbed from a range of 200 to 300 percent in 1970 to a range of 400 to 600 percent in 2010. Behind the changing ratios is some bad news, namely that slow productivity growth and slow population growth have depressed income growth, but also some good news — that relative peace and capital gains have preserved wealth. Focusing on the wealth of economies lets us reframe our recent debates about government debt in useful ways. A look at the ratio of debt to gross national product, for example, can be scary, but the ratio of debt to wealth is far less forbidding. If, say, a nation’s debt-to-G.D.P. ratio is 100 percent — often considered a dangerous level — and national wealth is 10 times yearly national income, the debt-to-wealth ratio is thus 10 percent, which is comparable to owing $100,000 on a $1 million home. Not so scary. Using the wealth numbers provided by Professors Piketty and Zucman, we can understand how Japan, despite a debt-to-G.D.P. ratio of more than 200 percent, can maintain low interest rates; Japan has a wealth-to-income ratio of about 600 percent. In essence, creditors think the Japanese political system will be able to drum up enough support for the requisite taxes, pulled out of national wealth if necessary, when the time comes. But don’t relax too quickly, because fiscal problems remain very real for many countries. While virtually every government could pay off its debts by taxing wealth, such taxes are often politically unacceptable. In other words, fiscal problems are best regarded as problems of dysfunctional governance. In the…
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The Cookbook Theory of Economics