Smorgasbord

Stijn Van Nieuwerburgh delivered the 2023 Presidential Address to the American Real Estate and Urban Economics Association on the topic "The remote work revolution: Impact on real estate values and the urban environment" (Real Estate Economics, January 2023, pp. 7–48, https://onlinelibrary.wiley.com/doi/10.1111/1540-6229.12422).

"Born out of necessity, remote work now appears to have taken hold as a permanent feature of modern labor markets. It is a benefit that employees enjoy and are willing to pay for. Their tolerance for commuting appears to be permanently reduced. Having experienced the flexibility that comes with working from home (WFH), the genie is out of the bottle. Firm managers too have come around to see its virtues, often in the form of higher productivity and profits, and have adjusted their own expectations about the number of days they expect employees to be in the office. Several firms have gone fully remote, while most others have moved to a hybrid work schedule of 2–3 days in the office. Various indicators of office demand appear to have stabilized at levels far below their prepandemic high-water marks. . . . In this article, I review what we know so far about these dramatic changes in residential and commercial real estate markets."

Alexander J. Field runs counter to conventional wisdom in "The decline of US manufacturing productivity between 1941 and 1948" (Economic History Review, published online January 16, 2023, https://onlinelibrary.wiley.com/doi/full/10.1111/ehr.13239). From the abstract:

"The view that war benefits potential output has been influential in treatments of US mobilization for the Second World War, where it has been largely premised on the benefits of learning by doing in producing military durables. If the thesis that war benefits aggregate supply is correct, it is indeed within manufacturing that we should most likely see its effects. Total factor productivity within the sector in fact fell at a rate of −1.4 percent per year between 1941 and 1948, −3.7 percent a year between 1941 and 1944, and −5.1 percent a year between 1941 and 1945. The emphasis on learning by doing has obscured the negative effects of the sudden, radical, and temporary changes in the product mix, the behavioural pathologies accompanying the transition to a shortage economy, and the resource shocks inflicted on the country by the Japanese and Germans. From a long-run perspective, the war can be seen, ironically, as the beginning of the end of US world economic dominance in manufacturing."

Brian R. Cheffins complexifies the narrative of how US antitrust enforcement has evolved in "Getting Antitrust and History in Tune" (Accounting, Economics, and Law: A Convivium, published online March 2, 2022, https://www.degruyter.com/document/doi/10.1515/ael-2021-0084/html). From the abstract:

"Antitrust is high on the reform agenda at present, associated with calls to 'break up big tech.' Proponents of reform have invoked history with regularity in making their case. They say reform is essential to reverse the baleful influence of the Chicago School of antitrust, which, in their telling, disastrously and abruptly ended in the 1980s a 'golden' era of beneficially lively antitrust enforcement. In fact, antitrust enforcement was, at best, uneven, from the early 20th century through to the end of the 1970s. As for the antitrust 'counter-revolution' of the late 20th century, this was fostered as much by fears of foreign competition and skepticism of government regulation as Chicago School theorizing. The pattern helped to ensure that the counter-revolution was largely sustained through the opening decades of the 21st century."

Paul Krugman delivered the "The Godley–Tobin Memorial Lecture: The Second Coming of Tobinomics " (Review of Keynesian Economics, Spring 2023, 11:1, 1–9,  https://www.elgaronline.com/view/journals/roke/11/1/article-p1.xml).

"James Tobin was, obviously, a Keynesian in the sense that he believed that workers can and do suffer from involuntary unemployment, and that government activism, both monetary and fiscal, is necessary to alleviate this evil. But he wasn't what people used to call a hydraulic Keynesian, someone who imagined that you could analyse the economy by positing mechanical relationships between variables like personal income and consumer spending, leading to fixed, predictable multipliers on policy variables like spending and taxes. . . . Instead, Tobin was also a neoclassical economist. That is, he believed that you get important insights into the economy by thinking of it as an arena in which self-interested individuals interact, and in which the results of those interactions can usefully be understood by comparing equilibria—situations in which no individual has an incentive to change behaviour given the behaviour of other individuals. Neoclassical analysis can be a powerful tool for cutting through the economy's complexity, for clarifying thought. But using it well, especially when you're doing macroeconomics, can be tricky. Why? It's like the old joke about spelling 'Mississippi': the problem is knowing when to stop. What I mean is that it's all too easy to slip into treating maximising behaviour on the part of individuals and equilibrium in the sense of clearing markets not as strategic simplifications but as true descriptions of how the world works . . . So part of the art of producing useful economic models is knowing when and where to place limits on your neoclassicism. And strategic placing of limits is a large part of what Tobinomics is about."

Eric Goldwyn, Alon Levy, Elif Ensari, and Marco Chitti have coauthored "Transit Costs Project: Understanding Transit Infrastructure Costs in American Cities" (New York University, Marron Institute of Urban Management, February 2023, https://transitcosts.com/Final-Report).

"Based on our detailed case studies and data collection, we identified three primary factors that comprise total project costs and explain why Phase 1 of New York's Second Avenue Subway is 8 to 12 times more expensive than our composite baseline case. Our baseline case draws on detailed cost data from our Italy, Istanbul, and Sweden cases, and is informed by data from medium-cost Paris and Berlin and low-cost Helsinki and Spain. The New York premium is based primarily on detailed cost data from our Second Avenue Subway case study, and is supported by data from our GLX [Green Line Extension in Boston] case and data from London and Toronto. . . . The good news is that high-cost countries can adopt the practices of low-cost countries and build subways at costs more in line with those of low-cost Scandinavia, Southern Europe, and Turkey. To do this, it requires rethinking design and construction techniques, labor utilization, procurement, agency processes, and the use of private real estate, consultants, and contingencies. If it implements the best practices we detail in the rest of the overview, the highest-cost city in our database, New York, can reduce its construction costs to match those of Italy and match or even do better than Scandinavia."

Symposia

The Oxford Review of Economic Policy has published a ten-paper symposium on the "Economics of Pandemic Vaccination." Here, I’ll focus on the overview essay, by Scott Duke Kominers and Alex Tabarrok, titled "Vaccines and the Covid-19 pandemic: lessons from failure and success" (Winter 2022, 38:4, pp. 719– 741, https://academic.oup.com/oxrep/issue/38/4).

"It is important to note that underinvestment was not simply a US problem—every country underinvested in vaccines. In fact, Operation Warp Speed was by far the largest vaccine investment programme globally, so whatever problems reduced the effectiveness and scale of the US response may have been far larger elsewhere. Global underinvestment in vaccination may in part have been a result of human psychology—voters tend to reward politicians for dealing with emergencies, but not for avoiding them, and in the case of Covid-19, the scales in question may have been especially hard to contemplate. Human psychology may also help to explain why it appears to have been harder to spend trillions on a war against a virus than on wars against other people."

John Baffes and Peter Nagle have edited a four-chapter book on Commodity Markets: Evolution, Challenges, and Policies (World Bank, 2022,  https://openknowledge.worldbank.org/handle/10986/37404). From the first chapter, "The Evolution of Commmodity Markets over the Past Century," by Baffes and Nagle, together with Wee Chian Koh:

"Economic expansion after World War II (WWII), and more recently the emergence of EMDEs [emerging markets and developing economies] as important players in the global economy, has increased commodity demand, especially for energy commodities and metals and minerals. Even though the world’s population rose from 2 billion in 1920 to 8 billion in 2020, the production of commodities to feed, clothe, and support the rising population has more than kept pace. Expanding production was possible because of technological innovations, the discovery of new reserves of commodities, and more intensive agricultural production. On the energy front, crude oil became the most important commodity, replacing coal. Known reserves of crude oil and natural gas have increased substantially even as production has risen. . . . Mineral resource development expanded because of advances in technology and new discoveries. Metal production has become more efficient as innovations and productivity improvements became widespread in mining, smelting, and refining. Improved fabrication and new alloys have allowed less metal to be used without loss of strength. Despite radical changes in supply and consumption, metals prices, in real terms, have seen cycles around a quite flat trend over the past century. . . . Food production has increased faster than population, and most of the world’s consumers have better access to adequate food supplies today than they did a century ago. This improvement is due to technological advances in the 1900s, especially the Green Revolution. In large part because of increasing productivity, prices of agricultural commodities have experienced a downward trend over the past 100 years."

Regional Development

The United Nations Development Programme has published "Arab Human Development Report 2022: Expanding Opportunities for an Inclusive and Resilient Recovery in the Post-Covid Era" (June 2022, https://arab-hdr.org/report/ahdr-2022/).

"Few Arab States have competitive private sectors, particularly for tradables, and the economies that are based on oil and gas are subject to highly volatile prices. The productivity of labour, much of it informal, is relatively low. The capacity of government institutions is generally weak. This persistent equilibrium of low growth–low productivity–low employment–low institutional capacity emerges from a social contract based on a deep-seated rentier state that favours the status quo and rejects truly transformative economic reforms. The region's well-known economic fragilities are not destiny, however. They can be corrected with a strong human development approach to tackle the region's long-term structural challenges. Five priorities stand at the top of the agenda. First is to diversify and transform the Arab States region’s economies to reduce exposure to commodity cycles and macroeconomic volatility. Second is to boost growth to generate decent jobs for poor people and informal workers and for new entrants to the labour force. Third is to improve the investment climate and level the playing field for businesses, large and small, and investors, domestic and foreign. Fourth is to increase access to finance for women and smaller enterprises. And fifth is to pursue regional economic integration to expand markets and deliver regional public goods."

UNCTAD has published its "Economic Development in Africa 2022" report, "Rethinking the Foundations of Export Diversification in Africa: The Catalytic Role of Business and Financial Services" (July 2022, https://unctad.org/edar2022).

"[T]he most relevant variable to promote intra-African bilateral diversification with regard to exporters is a larger share of services value added. By providing business services and market knowledge, information and communications technology (ICT) services facilitate tapping into new markets with new or existing products. Further, transport and distribution services are important across value chains to store and sell products. Access to financial services and research and development are essential to innovation of new products and the continuous improvement of products to survive in markets. Business services can be employed to overcome structural constraints through marketing and consulting to position products on the market. . . . While the world has in recent decades experienced a boom in technology, the use of advanced technologies in the economy remains a challenge for many African countries. Many localities in Africa do not have access to stable Internet connections, in addition to multiple power shortages. Instability in Internet connections slows down services and makes technologies in trade in services less efficient. While digitalization is driving trade in high knowledge-intensive services, Africa remains the least digitalized continent on the planet."

Era Dabla-Norris, Tidiane Kinda, Kaustubh Chahande, Hua Chai, Yadian Chen, Alessia de Stefani, Yosuke Kido, Fan Qi, and Alexandre Sollaci have written "Accelerating Innovation and Digitalization in Asia to Boost Productivity "(International Monetary Fund, January 2023, https://www.imf.org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2023/01/08/Accelerating-Innovation-and-Digitalization-in-Asia-to-Boost-Productivity-523807). From their abstract:

"For many Asian countries, the COVID-19 crisis opened deep economic scars, which has led to intensifying pre-pandemic weaknesses—most notably, declining productivity growth. While no panacea will reverse productivity losses, digitalization and innovation can provide a way out. Digitalization can mitigate scarring during downturns—for example, by facilitating virtual education, remote work, and contactless sales—while improving productivity and innovation during expansions. . . . Despite these successes, Asia still faces important divides that prevent it from fully reaping the benefits of innovation-led growth. . . . Within countries, diffusion of innovation from high-performing firms to other firms is limited, including due to constraints in access to finance, management capabilities, and skill gaps in information and communications technologies. Digital gaps and unequal access to digital technologies prevent a sizeable share of firms and workers from reaping the full rewards of participating in the new economy and reaching their full potential."

The Economic Commission for Latin America and the Caribbean has published "A digital path for sustainable development in Latin America and the Caribbean" (November 2022, https://conferenciaelac.cepal.org/8/en/documents/digital-path-sustainable-development-latin-america-and-caribbean).

"Today, more than ever before, improvements in inclusion, equality and productivity are associated with the accumulation of new capacities in the area of digital technologies. . . . [I]n a world in which technological progress has accelerated sharply, there is less room for competition based solely on static comparative advantages, such as abundant natural resources or low-skilled labour. To boost economic development, resources need to be reallocated toward innovation- and knowledge-intensive activities; and economies need to diversify into sectors in which both domestic and external demand are growing rapidly. It is undeniable that the digital transformation entails major disruptions that could promote greater inclusion and equality and also foster diversification of the production structure and sustainable productivity growth. Digitalization is affecting all sectors of the economy and society, adding value along the production chain; but the magnitude of the change will depend, largely, on enabling factors such as skills and infrastructure. These technologies have expanded possibilities for advancing towards progressive and inclusive structural change. However, it is also true that the corresponding opportunities are not open to all countries or sectors alike. In fact, rapid digital transformation can become an additional source of social and productive segregation, both within and between countries, if the infrastructure and basic capacities needed to use the technologies appropriately and effectively are not in place. Moreover, success in harnessing the digital revolution depends increasingly on how economies, production sectors, institutions and societies position themselves to absorb and adapt to these changes."

Interviews

Jeff Horwich serves as interlocutor in "Jón Steinsson interview: Forward guidance, the state of macro, and how the economy is like a rumbling volcano" (Federal Reserve Bank of Minneapolis, December 19, 2022, https://www.minneapolisfed.org/article/2022/jon-steinsson-interview-forward-guidance-the-state-of-macro-and-how-the-economy-is-like-a-rumbling-volcano).

"We economists often get criticized for our inability to predict how things are going to turn out. I think people don't fully appreciate the fact that we're trying to predict something that is not only pretty complicated, but we've only seen very few instances of this thing we're trying to predict. In the United States in the post-war period, we've seen maybe a dozen recessions. We’ve seen inflation really rise three or four times. This is a little bit like a weather forecaster who's trying to predict the weather but has only ever seen 12 storms. . . . And recessions are heterogeneous: The COVID recession is very different from the Great Recession, which is very different from the Volcker recession. There's a similar thing going on in Iceland at the moment, because there's this volcano that is rumbling and actually has erupted twice in the last two years. But this volcano hadn’t erupted for 800 years. The volcanologists are on TV every day being asked to predict when the next eruption is going to happen, how long is the eruption going to last, is it going to get bigger, is it going to get smaller. I felt like it was very similar to us economists who are being asked the same questions about events that only happen every decade or so. I think the public is more understanding of the volcanologist than they are of the economist in this respect!"

David A. Price has an interview with "Steven Davis: On remote work, changes in recruiting, and business startups after the pandemic" (Econ Focus: Federal Reserve Bank of Richmond, Fourth Quarter 2022, pp. 22–26, https://www.richmondfed.org/publications/research/econ_focus/2022/q4_interview).

"Millions of people left the labor force in spring 2020 when the pandemic struck. . . . It would seem like a simple thing to know exactly how many, but it turns out not to be so easy . . . [T]he data sources that actually track large numbers of people over time in a way that makes it possible to get a precise answer to this question don't become available for two or three years after the fact. And even then, they're hard to access. . . . There are a few things going on, but let me mention two that I think are important. One is that there is increasingly good evidence that out of the tens of millions of people who had COVID-19, a small fraction of them have symptoms that endure for months and months. . . . But let’s say you have a hundred million people who had COVID-19—I'm just going to use round numbers here—and 15 percent of them have symptoms that last a long time. The numbers are in that ballpark. Of that 15 percent, let's say a third of them, just to make the arithmetic easy, have pretty serious debilitating conditions like shortness of breath or brain fog, that kind of thing. Now we're talking about 5 million people. Well, you take 5 million people out of the labor force, that's a reduction on the order of 3 percent. That's the long COVID impact on labor force participation, which others have worked on. And then there's long social distancing . . . [S]ome people who used to be in the labor force are now staying out of the labor force because they worry about infection risks associated in the workplace or on the commute to and from work. I think both long COVID and long social distancing are part of the story as to why labor force participation rates haven't recovered fully."

Conversation Starters

Lucian A. Bebchuk and Roberto Tallarita discuss "The Perils and Questionable Promise of ESG-Based Compensation" (Journal of Corporation Law, Fall 2022, 37–75, https://jcl.law.uiowa.edu/articles/2023/01/perils-and-questionable-promise-esg-based-compensation). They focus on the 97 US companies in the S&P 100—which together represent over half the total value of the US stock market.

"We found that slightly more than half (52.6 percent) of these companies included some ESG [environmental, social, or governance] metrics in their 2020 CEO compensation packages. These metrics focus chiefly on employee composition and employee treatment, as well as customers and the environment, but also, to a much smaller extent, communities and suppliers. ESG metrics are mostly used as performance goals for determining annual cash bonuses. However, most companies do not disclose the weight of ESG goals for overall CEO pay, and those that do disclose it (27.4 percent of the companies with ESG metrics) assign a very modest weight to ESG factors (between less than 1 percent to 12.5 percent, with most companies assigning a weight between 1.5 percent and 3 percent)."

Rachel Silverman Bonnifield and Rory Todd discuss "Opportunities for the G7 to Address the Global Crisis of Lead Poisoning in the 21st Century: A Rapid Stocktaking Report" (Center for Global Development, 2023, https://www.cgdev.org/publication/opportunities-g7-address-global-crisis-lead-poisoning-21st-century-rapid-stocktaking).

"Lead poisoning is responsible for an estimated 900,000 deaths per year, more than from malaria (620,000) and nearly as many as from HIV/AIDS (954,000). It affects almost every system of the body, including the gastrointestinal tract, the kidneys, and the reproductive organs, but has particularly adverse effects on cardiovascular health. According to the World Health Organization (WHO), it is responsible for nearly half of all global deaths from known chemical exposures. Despite this massive burden, the greater part of the harm caused by lead may come not through its effects on physical health, but its effect on neurological development in young children. . . . An estimated 800 million children—nearly one in three globally, an estimated 99 percent of whom live in low- and middle-income countries (LMICs)—have blood lead levels (BLL) above 5 micrograms per deciliter (μg/dL), which the WHO uses as a threshold for recommending clinical intervention to mitigate neurotoxic effects." They discuss common vectors of exposure to lead including recycling of lead-acid batteries, along with lead used in spices, paint, cookware, toys, and others.