Derek Thompson reports,

For Flint, Detroit, Youngstown, Cleveland, and Milwaukee, the demise of manufacturing, steel production, and other off-shored blue-collar work have gutted these foundries of good middle-class jobs.

Pointer from Mark J. Perry, who provides two interesting tables and much interesting analysis, including

Not surprisingly, more than half (11) of the top 20 metro areas with the highest median incomes for Americans ages 18-34 in 1980 were in Midwest or Rust Belt states (Flint, Detroit, Chicago, Milwaukee, Youngstown, Cleveland, Minneapolis-St. Paul, Pittsburgh, Toledo, Grand Rapids and Cincinnati). By 2009-2013, only three of the top 20 metro areas by income for young Americans were in Midwest or Rust Belt states: Minneapolis-St. Paul, Chicago and Des Moines (and none of those cities have a strong manufacturing base), and almost all of the top 20 metros by income for young Americans were in East Coast or West Coast states (San Jose, San Francisco, Washington, DC, Boston, New York, Philadelphia, Baltimore, Seattle, etc.).

The force that this illustrates is the New Commanding Heights. As income rises, the demand for manufactured goods tapers off, and much more of the increased income is spent on education and health care.

Colleen Flaherty reports on a study of academic hiring.

The study, published this week in Science Advances, is based on hand-curated data about placements of 19,000 tenure-line faculty members in history, business and computer science at 461 North American institutions with doctoral programs. Using a computer-aided, network-style analysis, the authors determined that just 25 percent of those institutions produced 71 to 86 percent of tenure-line professors, depending on discipline.

My guess is that if you were to study the economics field, the concentration would be even higher.

You can think of this as a very natural equilibrium. A few graduate schools get good reputations. They then get a huge share of the best students. With the best students, they place students well. This reinforces their ability to attract the best students. etc.

The actual quality of teaching does not matter in this equilibrium. In fact, MIT, where I went, had a reputation of caring more about teaching than other top departments. In hindsight, the few classmates with whom I keep in touch think that the classroom instruction was really poor. Some of the courses in the required sequences were a complete waste of time (Ray Fair, I’m looking at you.) Tom Rothenberg, who visited for a semester from Berkeley (and then quickly fled the Boston weather), was by far the best teacher we had. In fact, the core was taught much more by visiting professors (Fair, Dixit, Begg, Rothenberg) than by permanent faculty, which tells you how much the permanent faculty really cared about teaching.

I don’t have a problem with an equilibrium in which the best students are attracted to a few departments. But when only a few dissertation advisers control entire sub-fields, you get a dreadful monoculture. I have said many times that I think that macro suffered from this. The field became completely dominated by students of Thomas Sargent at Minnesota and Stan Fischer and Rudi Dornbusch at MIT. Together, they produced nothing but a giant garbage factory.

Do you think I should submit this essay somewhere?

The central concept of the sociologists is privilege. Privilege is like status, except that it is based on membership in a group rather than in characteristics of the individual. One’s privilege is based on his her membership in a economic class, race, religious group, or sexual category. Rich people enjoy a lot of privilege, while poor people are underprivileged. In America, whites are privileged, while African-Americans and Hispanics are not. Similarly, Christians are privileged, and Muslims are not. Male heterosexuals are privileged, and people with other sexual orientations are not.

It goes on to claim that this is how the Obama Administration views terrorism. I actually don’t think I’m being uncharitable. I think I could pass an ideological Turing test as a sociologist or as a member of the Administration.

I have only glanced through it, but I like what I see. Previous reports under President Obama I found to be long on cheerleading for the his policies and much shorter on substance than what we used to see. This one appears to represent a return to substance. Greg Mankiw points out the way in which the report hints that the median household income has been hurt more by slow growth than by increased inequality.

I give the authors credit for putting a lot of focus on labor force participation trends. They write,

Overall, the most important factor affecting the aggregate participation rate in the recession and recovery has been the aging of the population. But there are a number of important trends and developments relevant for understanding the changes in participation of different subgroups of the population:
• Increased participation by older Americans, which may be attributable to an increase in skills among this population and also to changes in Social Security retirement benefits;
• Reduced participation by younger Americans as they stay in school longer;
• Continuation of an at least 65-year long trend of declining male labor force participation, which is especially stark for young minority men; and
• Tapering of the long-term trend of increasing female labor force participation, which dates back to before World War II.

Don’t get me wrong. I don’t think much of the policy recommendations in the report. I also think that if you are looking for clues to declining labor force participation, you should pay some attention to the high implicit marginal tax rates faced by people who are eligible for food stamps and other government benefits. As regular readers will remember, I favor replacing the hodge-podge of means-tested programs, including Medicaid, with a single cash grant that tapers off gradually as income rises (I would suggest that the implicit marginal tax rate be limited to something like 20 or 25 percent).

An editor of a publication asked if it would be ok to reprint this essay. Since it is 15 years old, I thought it would look pretty silly if it were reprinted now. There are a few lines in the essay that I still like.

All of these features are feasible with existing technology. The problem is that if you tried to combine them into a single device, you’d probably need to carry around a power pack the size of a cantaloupe.

Today, a teacher in a classroom or a speaker in a meeting has a presumptive ownership over the attention of the audience. My guess is that within five years or so this will have broken down completely. You simply will take it for granted that while you address an audience, people will be engaged in electronic communication with external parties, only intermittently tuning in to what you have to say.

But mostly, there are clunkers like this:

I do not see signs of mobile Internet devices crossing the chasm. Palm Pilots have been around for a few years now, and I am still waiting for a compelling reason to buy one. I’m sorry, but the way see it, if I need something to keep myself occupied when I’m traveling, I can pack a book.

Jason Collins dares to write,

Those nations with high-IQ, educated populations tend to have higher levels of economic development. Although rich countries tend to have good political institutions and policies that are not completely crazy, the direction of causation is population to institutions. If you have the “right” people in a nation, decent political frameworks tend to follow.

You can read my cross-country study, which supports Jason’s view. The appendix is where I introduce an IQ variable, which is very powerful. If you don’t like my dependent variable, which is an index of economic freedom, you could redo the analysis using the United Nations human development index and get very similar results.

Chris Dillow writes,

there’s no conflict between leftism and a belief in the heritability of ability. In this respect at least, the left has nothing to fear from science.

Suppose that one believes that intelligence is heritable and that intelligence affects economic status. To the extent that you believe those two things, you have to maintain a somewhat lower belief in the importance of effort in determining economic status. Accordingly, in scoring a policy of pure income redistribution, as Dillow points out, you have to give it additional philosophical points because the well-off are the beneficiaries of lucky inheritance. In addition, such a policy loses fewer economic-efficiency points, because taxes that discourage effort will not diminish total wealth as much as they would if wealth were entirely determined by effort.

So Dillow would appear to be correct. And in fact Gregory Clark, who is well known for his findings supporting heritability of economic status, says that his findings support income redistribution.

Why, then, is heritability of intelligence a problem for the left? I believe that the three-axes model can help provide the answer.

In the three-axes model, progressives want to squeeze every issue into an oppressor-oppressed narrative. To suggest that ethnic groups differ in average income for reasons other than oppression would be to weaken that narrative. So even if from a policy perspective a belief in heritability is tolerable, from a narrative perspective a book like The Bell Curve represents a huge threat.

My sense is that this produces a great deal of cognitive dissonance on the left. I have many friends on the left, and I do not know a single one who would instinctively deny the heritability of intelligence. On the other hand, they have been instructed to regard Murray and Herrnstein as vile racists.

Evidence that runs counter to the oppressor-oppressed axis narrative is difficult for people on the left to process. I think that, notwithstanding Dillow’s reasoning, the left is going to continue to be uncomfortable with the science of heritability of intelligence.

Greece will achieve economic success when ____.

My inclination is to feel as unable to complete the sentence as I was the similar sentence about peace in the Middle East. Yet Simon Wren-Lewis writes,

To be able to say intelligent stuff about what is going on at the moment (which you would hope an economics education would enable you to do), you need to know quite a lot of economic theory. A lot of macro of course, but quite a bit of finance, and also at least some game theory. . .And if you want to get into all those ‘reforms’ imposed by the Troika, you need a lot of micro.

Pointer from Mark Thoma.

To be fair, Wren-Lewis is saying that knowledge of these topics is necessary in order to offer opinions on Greece. He is not claiming that it is sufficient to finish the sentence.

I just want to emphasize the extent of our ignorance here. Somebody with legitimate training in mainstream economics could easily argue that the best thing for Greece right now would be to get off the Euro. After all, many mainstream economists, perhaps a majority, would say that it was a mistake for Greece to go on the Euro in the first place. Still, there are many other mainstream economists who would argue that it would be better for Greece to remain in the Euro.

As for supply-side reforms, the economic analysis is the easy part. The hard part is dealing with the historical and cultural baggage of the country.

If you forced me to take my best shot at addressing the historical and cultural baggage, I would be inclined to fill in the sentence with “some time after the government runs out of other people’s money.” But there are many economists who would disagree.

In any case, my prediction is that this will not happen soon. Again, I think that the route by which German money gets to the Greek government will be opaque and circuitous for face-saving reasons, but I expect such an outcome. Note: I gather that Tyler Cowen assesses the situation differently. I think we agree that it is possible to claim a symbolic win and take a substantive loss, we just disagree as to which party is most likely to end up doing that.

Seth G. Benzell, Laurence J. Kotlikoff, Guillermo LaGarda, and Jeffrey D. Sachs write,

over time, as the stock of legacy code grows, the demand for new code and, thus for high-tech workers, falls.

The resulting tech bust reflects past humans obsolescing current humans. . .these robots contain the stuff of humans – accumulated brain and saving power. Take Junior – the reigning World Computer Chess Champion. Junior can beat every current and, possibly, every future human on the planet. Consequently, his old code has largely put new chess programmers out of business.

. . .tech busts can be tough on high-tech workers. In fact, high-tech workers can start out earning far more than low-tech workers, but end up earning far less.

Furthermore, robots, captured in the model by more code-intensive good production, can leave all future high-tech workers and, potentially, all future low-tech workers worse off. In other words, technological progress can be immiserating

They use an overlapping generations model, which would not be my first choice for this sort of analysis. In fact, it makes me highly skeptical of the value of this paper.

I am starting a new category, called Four Forces Watch, for my pointers to pieces on the four forces that I see shaping the economy over the longer term: New Commanding Heights (health care and education absorbing more resources); Marriage Stratification; Factor-price Equalization (aka globalization); Moore’s Law. The piece quoted above falls under Moore’s Law.

Concerning Gregory Clark’s findings of the absence of high multi-generational mobility, a commenter writes,

I still can’t believe things are quite as static as he makes them out to be, but I don’t know enough to dispute any of his specific findings. The model of human social behavior I carry around in my brain just doesn’t match the one he presents.

One thing we know is that there is high variance in outcomes across siblings. Back when people had many children, it may have been the case that if you were well off it was very likely that at least one of your grandchildren would be well off, but not so likely that every one of your grandchildren would be well off. With people having fewer children, either multigenerational mobility will go up or other forces (such as stronger assortative mating) will offset what otherwise would be an increase in random variation across generations.