Piketty on inequality: views of the IGM economic experts
16 Oct 2014 Leave a comment
in applied price theory, applied welfare economics, comparative institutional analysis, constitutional political economy, discrimination, economic growth, entrepreneurship, gender, human capital, income redistribution, industrial organisation, labour economics, Marxist economics, Rawls and Nozick Tags: Daron Acemoglu, James Robinson, Piketty, poverty and inequality, The Great Enrichment
Question: The most powerful force pushing towards greater wealth inequality in the US since the 1970s is the gap between the after-tax return on capital and the economic growth rate?
Daron Acemoglu and James Robinson have a simple explanation for why Piketty is wrong:
But like Marx, Piketty goes wrong for a very simple reason. The quest for general laws of capitalism or any economic system is misguided because it is a-institutional.
It ignores that it is the institutions and the political equilibrium of a society that determine how technology evolves, how markets function, and how the gains from various different economic arrangements are distributed.
Despite his erudition, ambition, and creativity, Marx was ultimately led astray because of his disregard of institutions and politics. The same is true of Piketty.
The impact of street capital on the labour market prospects of inner-city youth
15 Oct 2014 Leave a comment
in human capital, labour economics, labour supply Tags: code of the street, human capital, labour economics, sociology
Dionissi Aliprantis wrote a superb paper on how the social skills developed to survive in the inner cities of America are not the skills that help you graduate from high school and get a job.
In the NLSY97, 26% of black inner-city youth report seeing someone shot by age 12, and 43% of black inner-city youth report the same by age 18.
The code of the street, the street smarted skills that inner-city black youth learn as teenagers to stay alive, do not pay off in regular society:
growing up in the ’hood means learning to some degree the code of the streets, the prescriptions and proscriptions of public behaviour. He must be able to handle himself in public, and his parents, no matter how decent they are, may strongly encourage him to learn the rules
The behaviours that do not help you survive in the street of the poor inner cities of America include include doing well in school, being civil to others, and speaking Standard English.
These skills that are the antithesis of the code of the street are exactly the skills valued by employers, especially employers of low paid workers. Employers of the low paid essentially want to recruit people who are friendly and reliable.
Dionissi Aliprantis found that exposure to street violence during childhood explains 20-35% of the high school dropout rate of inner-city youth.
The reverse gender gap in part-time employment
04 Oct 2014 Leave a comment
in discrimination, gender, human capital, labour economics, occupational choice Tags: compensating differentials, gender wage gap, part-time work, reversing gender gap
HT: economix
Robots will take my job alert: when musicians campaigned against the introduction of canned music into cinemas
28 Sep 2014 Leave a comment
in economics of media and culture, human capital, industrial organisation, labour economics, labour supply, survivor principle, technological progress Tags: automation, creative destruction, mechanisation, technological unemployment, The Great Enrichment
Much-needed gender analysis of median earnings growth since 1947
06 Sep 2014 Leave a comment
in discrimination, gender, human capital, labour economics Tags: gender analysis, median earnings growth by gender, myths and reality
Source: Council of Economic Advisors.
Are men just getting their comeuppance for decades of discrimination against women?
Much is made of the stagnation of median earnings over the last few decades. There is no such stagnation for women
The role of job sorting and job matching in constitutional political economy
25 Aug 2014 Leave a comment
Great British Class Survey finds seven social classes in UK | Society | The Guardian
20 Aug 2014 Leave a comment
in human capital, labour economics, liberalism, political change, politics Tags: new class
Sitcom guide to the new classes
Elite: General Melchett from Blackadder Goes Fourth. Braying, bellowing, incompetent and utterly contemptuous of the lower orders, Melchett would naturally expect to find himself at the top of the pecking order.
Established middle class: Margot and Jerry Leadbetter from The Good Life. As the establishment pillars of comfortable and conservative 1970s suburban society, the couple existed in pointed contrast to their more free-thinking neighbours Tom and Barbara Good.
Technical middle class: David Brent from The Office. Despite his supposedly rock’n’roll past, Ricky Gervais’s fist-gnawingly embarrassing general manager was resolutely middle class.
New affluent workers: Miranda from Miranda. Miranda Hart herself may be established middle class, but the heroine of her eponymous sitcom sits comfortably in a slightly lower category.
Traditional working class: Jim Royle from The Royle Family. Could Ricky Tomlinson’s armchair-bound, TV-addicted patriarch be anything other than proudly working class? My arse!
Emergent service workers: Maurice Moss from the IT Crowd. Young, nerdish and living at home with his mum, Moss could fit the emergent service worker class but probably needs a little work to increase his social and cultural capital levels.
Precariat: Rab C Nesbitt. Gregor Fisher’s much-loved and enduring sitcom creation has assumed the status of folk hero despite his resolutely unglamorous life.
The Full class topology is:
- Elite – the most privileged group in the UK, distinct from the other six classes through its wealth. This group has the highest levels of all three capitals
- Established middle class – the second wealthiest, scoring highly on all three capitals. The largest and most gregarious group, scoring second highest for cultural capital
- Technical middle class – a small, distinctive new class group which is prosperous but scores low for social and cultural capital. Distinguished by its social isolation and cultural apathy
- New affluent workers – a young class group which is socially and culturally active, with middling levels of economic capital
- Traditional working class – scores low on all forms of capital, but is not completely deprived. Its members have reasonably high house values, explained by this group having the oldest average age at 66
- Emergent service workers – a new, young, urban group which is relatively poor but has high social and cultural capital
- Precariat, or precarious proletariat – the poorest, most deprived class, scoring low for social and cultural capital
via Great British Class Survey finds seven social classes in UK | Society | The Guardian.
The importance of Baumol’s cost disease in school cost trends
16 Aug 2014 Leave a comment
in applied price theory, economics of education, human capital, labour economics, labour supply, occupational choice Tags: Baumol's disease
Baumol’s cost disease is a phenomenon described by William J. Baumol in the 1960s. It involves a rise of wages in jobs that have experienced no increase of labour productivity in response to rising wages in other jobs which did experience such labour productivity growth.
The rise of wages in jobs without productivity gains is required to compete for employees with jobs that did experience gains and can naturally pay higher wages.
The original study was conducted for the performing arts. Baumol pointed out that the same number of musicians is needed to play a Beethoven string quartet today as was needed in the 19th century: the productivity of classical music performance has not increased, but real wages of musicians (as well as in all other professions) have increased greatly since the 19th century.
In labour-intensive sectors that rely heavily on human interaction such as nursing, education, or the performing arts, there is little or no growth in productivity over time. These sectors must pay more to stay competitive in the labour market. These jobs will survive as long as consumers are willing to pay these wage increases. Entrepreneurs react to Baumol’s disease in several ways:
- Decrease quantity/supply
- Decrease quality
- Increase price
- Increase total factor productivity
Baumol’s cost disease in the education sector would be reinforced by reductions in class sizes, more specialised teaching, and the increase in the higher education premium throughout the economy.
All of these effects would require the schooling sector to pay because would be teachers have many more options than in the past. In days gone by, outside of the professions, teaching was one of the few jobs available to a university graduate. Indeed, in days gone by, many teachers were either teachers college graduates such is the case with the sister or they learnt on-the-job as my mother was going to do.
Utopia, you are standing in it! 
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