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Radically Rethinking Economic Policy

Paper Session

Sunday, Jan. 7, 2018 10:15 AM - 12:15 PM

Marriott Philadelphia Downtown, Grand Ballroom Salon G
Hosted By: American Economic Association
  • Chair: John Roemer, Yale University

Rising Inequality, Household Debt, And The Slow Recovery After Great Recession

Atif Mian
,
Princeton University

Abstract

Is there a link between the rise in inequality, increase in household debt, and the slow recovery in consumption growth in the aftermath of the great recession? Using tax record and credit bureau data, we show that the rise in inequality since 1980's is accompanied by a rise in household debt with debt-to-income rising faster for the bottom 90% of the population – a process that accelerates during the 2000’s. Consumption growth prior to the Great Recession is closely tied to house price growth, but the relationship is driven by borrowing against home equity rather than a pure “wealth effect”. Consumption to disposable income reached a post-war high in 2008 followed by a continued decline that put a drag on consumption growth despite recovering house price growth.

A Welfarist Role for Nonwelfarist Rules: An Example With Envy

Matthew Weinzierl
,
Harvard University

Abstract

I propose and formalize an argument for why economists working in the welfarist normative tradition should include nonwelfarist principles in how they judge economic policy. The key idea behind this argument is that the world is too complex, and our ability to model it too limited, for us to fully trace a policy’s effects on welfare. Nonwelfarist principles can be valuable to a welfarist facing this limitation if they act as informational proxies, carrying accumulated knowledge about the effects of policy that otherwise cannot be considered. This argument can be seen both as extending a familiar logic for rule utilitarianism beyond the realm of individual ethics and as a specific version of a broader argument made for centuries by theorists from Hume to Hayek.
I also provide evidence of an example in which real-world policy judgments are consistent with this theoretical argument. Results from a novel U.S. opinion survey show that approximately half of respondents reject redistribution driven by envy even though it generates direct utilitarian gains. That share rises as the role of envy is made more salient, consistent with respondents using nonwelfarist principles to encode concerns about the unobservable consequences of policy.

Quadratic Voting: How Mechanism Design Can Radicalize Democracy

Steven P. Lalley
,
University of Chicago
E. Glen Weyl
,
Yale University

Abstract

Can mechanism design save democracy? We propose a simple design that offers a chance: individuals pay for as many votes as they wish using a number of "voice credits" quadratic in the votes they buy. Only quadratic cost induces marginal costs linear in votes purchased and thus welfare optimality if individuals' valuation of votes is proportional to their value of changing the outcome. A variety of analysis and evidence suggests that this still-nascent mechanism has significant promise to robustly correct the failure of existing democracies to incorporate intensity of preference and knowledge.

Should We Treat Data as Labor? Moving Beyond "Free"

Imanol Arrieta Ibarra
,
Stanford University
Diego Jiménez Hernández
,
Stanford University
Leonard Goff
,
Columbia University
Jaron Lanier
,
Microsoft Corporation
E. Glen Weyl
,
Microsoft Research, Yale University

Abstract

In the digital economy, user data is typically treated as capital created by corporations observing willing individuals. This neglects users' role in creating data, reducing incentives for users, distributing the gains from the data economy unequally and stoking fears of automation. Instead treating data (at least partially) as labor could help resolve these issues and restore a functioning market for user contributions, but may run against the near-term interests of dominant data monopsonists who have benefited from data being treated as "free". Countervailing power, in the form of competition, a data labor movement and/or thoughtful regulation could help restore balance.
Discussant(s)
Robert Shiller
,
Yale University
John Roemer
,
Yale University
Kenneth Rogoff
,
Harvard University
David Autor
,
Massachusetts Institute of Technology
JEL Classifications
  • H1 - Structure and Scope of Government
  • P5 - Comparative Economic Systems