Benjamin Franklin's Strategy to Make the US a Superpower Worked Once, Why Not Try It Again?

Here is a link to my 28th column on Quartz “Benjamin Franklin’s strategy to make the US a superpower worked once, why not try it again?”

Update: Steve Sailer has an interesting post pointing out the importance of birth rates, as well as the immigration rates I emphasize in the column. In order to keep an open mind, before reading Steve Sailer’s post, I recommend reading my post “John Stuart Mill’s Argument Against Political Correctness.” In his post Steve also points out that Ben Franklin favored English immigration over German immigration. 

Ezra and Evan’s Flag. I was very pleased to see Ezra Klein and Evan Soltas flag the column, and intrigued by the way they boiled it down:

KIMBALL: The Ben Franklin strategy to a U.S. renaissance. “The reason China’s economic rise matters for US grand strategy is that China has a much larger population than the United States…An excellent answer is to do everything possible to foster long-run growth of per capita GDP in the US. At a minimum, this includes radical reform of our system of K-12 education, removing the barriers state governments put in the way of people getting jobs, and dramatically stepped-up support for scientific research…The key to maintaining America’s preeminence in the world is to return to Ben Franklin’s visionary grand strategy of making many more of the world’s people into Americans.” Miles Kimball in Quartz.

Miles on HuffPost Live: Barack Obama Talks about the Long Run, While We Wonder about His Pick for Fed Chief

Link to HuffPost Live segment “Back to the Economy”: Mark Gongloff, Edward G. Luce and Miles Kimball, hosted by Mike Sacks

It was a little odd having two fairly disparate topics in this HuffPost Live segment: long-run issues and who the new Fed Chief should be. Here is what I talked about:

Michael Huemer's Immigration Parable

Image Source

Image Source

At Bryan Caplan’s recommendation, I have been reading Michael Huemer’s book The Problem of Political Authority. Michael tells this parable on pages 142-143:

Marvin is in need of food, without which he will suffer from malnutrition or starvation. He plans to travel to a nearby marketplace, where he will be able to trade for food. But before he can reach the marketplace, he is accosted by Sam, who does not want Marvin to trade in the marketplace, for two reasons. First, Sam’s daughter is going to be shopping in the marketplace, and Sam fears that Marvin might bid up the price of food. Some vendors might even run out of bread if too many people come to the marketplace. Second, Marvin comes from a different culture from most people presently at the marketplace, and Sam fears that Marvin might influence other people and thus alter the culture of the marketplace. Sam decides to solve the problem by force. He points his gun at Marvin and orders Marvin to turn around. The starving Marvin is thus forced to return home empty-handed. 

Sam’s reasons for coercing Marvin in this story are clearly inadequate. Furthermore, Sam will be culpable for whatever harms Marvin suffers as a result of being unable to reach the marketplace; they will be harms that Sam inflicted upon Marvin. If Marvin starves to death, then Sam will have killed him. This is true even though Sam was not responsible for Marvin’s initial situation of being hungry and out of food; it is true because Sam actively prevented Marvin from obtaining more food. If a person is starving, and you refuse to give him food, then you allow him to starve. But if you take the extra step of coercively interfering with his obtaining food from someone else, then you do no merely allow him to starve; you starve him. The same point applies to lesser harms: If, for example, Marvin merely suffers malnutrition as a result of being unable to reach the marketplace, Sam will have inflicted this harm upon him. 

The behavior of Sam in the story is analogous to that of the government of any modern country that excludes poor immigrants. Potential immigrants from developing nations come to participate in the marketplaces of wealthier countries. The governments of the wealthier countries routinely forcibly exclude these potential immigrants. As a result, many suffer greatly diminished life prospects. The government does not merely allow harms to befall these would-be immigrants. If the government merely stood by passively and refused to give aid to potential immigrants, then it would be allowing harms to occur. But it does not stand by passively; the government of every wealthy country in the world deliberately hires armed guards to forcibly exclude or expel unwanted persons. This coercive intervention constitutes an active infliction of harm upon them, just as Sam inflicts harm on Marvin in the story above. 

The most common reasons given for immigration restrictions are twofold. First, that new immigrants compete with existing Americans in the labor market, thus driving down wages for unskilled labor and making it more difficult for American workers to find jobs. Second, that if too many immigrants enter the country, they will alter the country’s culture. The first concern is analogous to Sam’s concern about Marvin’s competing with Sam’s daughter in the marketplace. It is not permissible to use force against another person simply to prevent a third party from suffering economic disadvantage through normal marketplace competition. The second concern is analogous to Sam’s concern about the culture of the marketplace. It is not permissible to use force against another person simply to prevent that person from influencing the culture of one’s society in undesired ways.

The Ethics of Immigration Policy, Revisited

Link to a review of Crossing Borders by Sergio Troncoso

Link to a review of Crossing Borders by Sergio Troncoso

For practical policy debates, the most important ethical principle is that the pain and suffering—and the joy—of each human being is of equal importance, without regard to who that person is.  Treating some human beings and their concerns as being of lesser importance is the root of much evil in the world.

For those who cannot manage to approach the well-being of all human beings on an equal footing (and of course, this includes almost all of us in our personal dealings), let me recommend this:

At least for public policy purposes, 
on the way to treating the concerns of all human beings as of equal value,
let us treat the concerns of those human beings we treat as least important
as being at least one-hundredth as important
as the concerns of those we treat as most important.

All of that is an introduction for this link to a robust Twitter discussion on the ethics of immigration policy.

Update: I have added a Twitter discussion sparked by this post at the end of the storified tweets from earlier. In that discussion, I call the rule just above, treating foreigners as at least one-hundredth as important as citizens, the tin rule.

Quartz #14—>Off the Rails: How to Get the Recovery Back on Track

blog.supplysideliberal.com tumblr_inline_mlkedka0Pt1qz4rgp.png

Link to the Column on Quartz

Here is the full text of my 14th Quartz column, “Off the Rails: What the heck is happening to the US Economy? How to get the recovery back on track,” now brought home to supplysideliberal.com. It was first published on February 1, 2013. Links to all my other columns can be found here.

If you want to mirror the content of this post on another site, that is possible for a limited time if you read the legal notice at this link and include both a link to the original Quartz column and the following copyright notice:

© February 1, 2013: Miles Kimball, as first published on Quartz. Used by permission according to a temporary nonexclusive license expiring June 30, 2014. All rights reserved.

GDP fell in the last quarter of 2012. It was only a fraction of a percent, but it means the recovery is on hiatus. Why? Negative inventory adjustments tend to be short-lived, so let me leave that aside, although it definitely made last quarter’s statistics look worse. Of the longer-lived forces, on the positive side,

  • consumer spending rose,
  • home-building rose, and
  • business investment on buildings and equipment rose.

On the negative side,

  • exports fell more than imports, and
  • government purchases fell.

Net exports and government purchases are the big worries going forward as well.

How much the rest of the world buys from the US depends on how other economies are faring. And most of the rest of the world is hurting economically. The Japanese are so fed up with their economic situation that they are on their sixth prime minister in the six and a half years since Junichiro Koizumi left office in 2006.  The European debt crisis is in a lull right now, but could still resume full force at any time. In addition to all of its other problems, the United Kingdom is facing a mysterious decline in productivity, explained in Martin Wolf’s Financial Times article “Puzzle of Falling UK Labour Productivity” and the Bank of England analysis by Abigail Hughes and Jumana Saleheen.

The decline in US government spending comes from the struggle of state and local governments with their budgets and at the federal level from the ongoing struggle between the Democrats and Republicans about the long-run future of taxing and spending. Last quarter saw a remarkable decline in military spending that Josh Mitchell explains this way in today’s Wall Street Journal (paywall).

The biggest cuts came in military spending, which tumbled at a rate of 22.2%, the largest drop since 1972. …

Military analysts said the decline likely was a result of pressure on the Pentagon from a number of areas.

Among them: reductions in spending on the war in Afghanistan as it winds down, a downturn in planned military spending, a constraint placed on the Pentagon budget because the federal government is operating on short-term resolutions that limit spending growth, as well as concern that further cuts may be in the pipeline.

The problem is that, absent a big increase in economic growth, balancing the federal budget in the long run requires big increases in taxes or big reductions in spending. But, although opinions differ on which option is worse, tax increases and spending cuts themselves are enemies of economic growth. So the traditional options for balancing the federal budget in the long run all have the potential to make things much worse.

Our problems are so big they need new solutions. In our current situation, the fact that a proposal is “untried” is a plus, since none of the economic approaches we have tried lately have worked very well. In the last few months I have focused my Quartz columns on explaining how the US and the world can get out of the economic mess we are in with new solutions. A recap:

  1. One of the new solutions is really an old one, that Congress and the President might be timidly tiptoeing toward too little of: dramatically more open immigration. Done right, this is guaranteed to add to long-run economic growth, as more workers make more goods, perform more services, and contribute to solving our long-run budget problems. And it isn’t just the US that would benefit from more open immigration. Ryan Avent has a must-read article in The Economist arguing that “Liberalising migration could deliver a huge boost to global output.”
  2. The long-run budget can be balanced in a way that achieves both the core Republican goals of holding down the size of government and the burden of taxation and the core Democratic goal of taking care of the poor, sick and elderly. Here is how: by using the tax system to back up a program of public contributions to expand the non-profit sector instead of taxes and spending to expand government, or brutal cuts with no compensating way to take care of those in need.
  3. For stimulating the economy, the one current approach that has been working at least halfway is “quantitative easing”: the Fed’s large purchases of long-term government bonds and mortgage-backed securities. But quantitative easing is hugely controversial and has an unfortunate side effect of making our long-run government debt problem worse than if we could stimulate the economy some other way. Establishing a US Sovereign Wealth Fund to do the purchasing of long-term and risky assets would give the Fed room to maneuver in monetary policy, and restrict its job to steering the economy rather than making controversial portfolio investment decisions. And a US Sovereign Wealth Fund could stand as a bulwark against wild swings in financial markets. (In addition to the column linked above, I spoke on CNBC’s Squawkbox about a US Sovereign Wealth Fund.)
  4. Although valuable, a US Sovereign Wealth Fund is a poor second best to electronic money. It is the fear of massive storage of paper currency that prevents the US Federal Reserve and other central banks from cutting short-term rates as far below zero as necessary to bring full recovery. (If electronic dollars, yen, euros and pounds are treated as “the real thing”—the yardsticks for prices and contracts—it is OK for people to continue using paper currency as they do now, as long as the value of paper money relative to electronic money goes down fast enough to keep people from storing large amounts of paper money as a way of circumventing negative interest rates on bank accounts.)  As I argued in “Could the UK be the first country to adopt electronic money,” the low interest rates that electronic money allows would stimulate not only business investment and home building, but exports as well—something that would lead to a virtuous domino effect as the adoption of an electronic money standard by one country led to its adoption by others to avoid trade deficits. If I were writing that column now, I would be asking if Japan could be the first country to adopt electronic money, since Japan’s new prime minister Shinzo Abe is calling for a new direction in monetary policy. For the Euro zone, I argue in “How the electronic deutsche mark can save Europe” that electronic money is not only the way to achieve full recovery, but the solution to its debt crisis as well.
  5. Finally, if electronic money is too radical, the government can stimulate the economy without adding too much to the national debt by giving consumers extra borrowing-power with a government-issued credit card and a $2,000 credit limit to every taxpayer. These Federal Lines of Credit would stimulate the economy at a fraction of the cost of tax rebates. This is a big advantage for countries deep in debt, which includes most major economies. And Lines of Credit are an affordable way to stimulate the economies of European countries such as Spain and Italy that lack an independent monetary policy because they share the euro with many other European countries.

Franklin Roosevelt famously said:

The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something.

We are at such a moment again. The usual remedies have failed. It is time to try something new. Any one of these proposals could make a major difference. In combination, they would transform the world.

Adam Ozimek's Regional Visa Proposal

Adam Ozimek

Adam Ozimek

The immigration reform debate should turn in earnest to Adam Ozimek’s proposal for regional visas, which you can see at this link.

Here is a slightly tidied up version of what I had to say about his proposal when I appeared on Huffpost Live:

The United States is like a college that has everyone wanting to get in. We ought to be able to do something with that. Let me give you just one idea. I love Adam Ozimek’s idea of region-based visas. If you let states and cities and towns apply for visas for people, then you require people to buy a house and get a job in that area, then we can let the different areas decide how many immigrants to bring in. Some places don’t think they can handle immigrants, and some places think they can. I’ll tell you what will happen: those places that let in lots of immigrants will have the dynamic local economies, and pretty soon people will see just how much immigrants bring to the economy. But you don’t have to believe me. Just allow these region-based visas, and then the states and localities that are willing to try it will show the way, and show how much immigrants add to our economy.

Postscript: See my earlier post about that appearance on HuffPost Live, “Miles on Huffpost Live: The Wrong Debate and How to Change It” for the rest of what I said. In particular, I was able to make a pitch for electronic money. Here is the video itself, including also commentary by Robert Kuttner, Dan Gross, Zach Carter and Stephanie Kelton.

Isaac Sorkin: Don't Be Too Reassured by Small Short-Run Effects of the Minimum Wage

Isaac Sorkin

Isaac Sorkin

(Note: on this topic, see also “Jonathan Meer and Jeremy West: Effects of the Minimum Wage on Employment Dynamics.”)

In light of the current debate about raising the minimum wage, I wanted to bring to your attention University of Michigan graduate student Isaac Sorkin’s work on the minimum wage. He begins his paper “Minimum Wages and the Dynamics of Labor Demand” by raising the issue of long-run versus short-run: 

Typical analyses of the employment effects of minimum wages find effects too small to easily reconcile with the short-run elasticities implied by the textbook approach. However, if many firms do not fully adjust their labor demand in the short run, then the short-run employment responses would be much smaller in magnitude than the textbook approach implies, and in line with empirical work.

Later in the introduction, Isaac explains:

The main contribution of this paper is that it revives, formalizes and quantifies an old argument about the employment response to minimum wage increases that has been curiously neglected in the modern literature. In the famous Lester (1946), Machlup (1946), and Stigler (1946) debate about minimum wages, … Lester’s argument is that in response to temporary changes in wages, employers are unlikely to make the fundamental changes in how they do business necessary to reduce labor demand simply because it is not worth it to them to pay the adjustment cost. Thus, this paper follows in that tradition by arguing that the presence of adjustment costs on labor demand provides a cohesive explanation for the small short and long-run employment effects found in the minimum wage literature. 

The relevant quotation from Lester is this:

Most industrial plants are designed and equipped for a certain output, requiring a certain work force. Often effective operation of the plant involves a work force of a given size…Under such circumstances, management does not and cannot think in terms of adding or subtracting increments of labor except perhaps when it is a question of expanding the plant and equipment, changing the equipment, or redesigning the plant…

From much of the literature the reader receives the impression that methods of manufacture readily adjust to changes in the relative cost of productive factors. But the decision to shift a manufacturing plant to a method of production requiring less or more labor per unit of output because of a variation in wages is not one that the management would make frequently or lightly.

Richard A. Lester (1946, pg. 72-73). 

If the long-run effect of minimum wages is substantial, why then don’t we see this effect? Isaac argues it is because there have been very few long-run changes in the minimum wage in the United States, so evidence on their effects is scant. The minimum wages is set in nominal terms, so it declines with inflation, is raised, declines with inflation, is raised, etc.  This yields a sawtooth pattern of the real (inflation-adjusted) minimum wage in which almost all changes in the real minimum wage are temporary. And Isaac argues that temporary changes in the minimum wage have muted effects. In Isaac’s words:

… if adjustment is slow (because it is costly), then labor demand today is a forward-looking decision and depends critically both on the realized path, and the expectations, of minimum wages. In the US, minimum wages are mostly set in nominal terms and so a given increase is not very persistent. As a result, labor demand would never fully adjust to a given minimum wage increase and the long-run consequences of a given minimum wage increase for employment might be quite small.

Isaac backs up his story about how machinery adapted to be used by a given number of workers can influence labor demand by discussing detailed micro-data of the reaction to an important set of minimum wage increases in 1938 and 1939 (pp. 4-6).  

The implementation of the Fair Labor Standards Act of 1938 in the case of the seamless hosiery industry provides a nice example of this mechanism since the Bureau of Labor Statistics collected data on both employment and the kind of capital in January of 1938 and August of 1940, which is tabulated in US Department of Labor (1941)….

The minimum wage was implemented in two stages: it was set to 25 cents an hour in October 1938 and then raised to 32.5 cents in September 1939. The minimum wage was binding in the seamless hosiery industry….

The fundamental technological choice facing the seamless hosiery industry was whether to use machines where the top of the stocking was knit on a different machine than the stocking itself, or machines where the top was knit on the same machine as the stocking. The most labor-intensive process used the hand-transfer machine, where the top of the stocking was knit on a separate machine and then carried by hand to the knitting machine. A converted hand-transfer machine included an attachment to the hand-transfer machine that “in effect converts transfer machines into automatic machines” (US Department of Labor (1941, pg. 75)), while an automatic machine performed both steps in an integrated fashion. The hand-transfer machines were roughly four times more labor-intensive than the automatic machines (Hinrichs (1940, pg. 25, n. 15))….

… five points. First, as Seltzer (1997) emphasizes, the earnings and employment numbers are consistent with the minimum wage decreasing employment. Average hourly earnings rose three times faster in the low-wage plants than the high-wage plants. And employment fell in the low- wage plants and not in the high-wage plants.

Second, the plants paying higher wages in 1938 had a significantly different mix of machines than plants paying lower wages. In particular, half of the machines in the low-wage plants were the most labor-intensive, while only a quarter of the machines in the high-wage plants were the most labor-intensive. This is consistent with long-run differences in wages leading to differences in technology choice.

Third, in the two and a half year window around the implementation of minimum wages, bothhigh and low-wage plants shifted toward more capital-intensive machines, with much stronger shifts at the lower wage plants.

Fourth, the sharp increases in usage of more capital-intensive machines implies that the quantity of capital in use adjusts at least somewhat in the short run.

Finally, the speed of substitution toward more capital-intensive machines was slow.Two years after the change in relative labor costs, the use of the most labor-intensive machines declined by less than a quarter. Even among the plants paying on average below the minimum wage before its implementation, the use of the most labor-intensive machines declined by less than a third.

This evidence is consistent with a model in which conditional on installation of a machine the capital-labor ratio is fixed. Because the capital cost is sunk, the machines that continue to function remain in use, even if they do not have the optimal capital-labor ratio. To allow for the fact that there was a reduction in use of these labor-intensive machines even two year after the wage increase, some machines have to stop working at any given point in time. To capture the rapid increase in the use of capital-intensive machines, the model has to feature free entry into operating machines. The next section develops such a model and analyzes its implications for labor demand.

Miles on HuffPost Live: The Wrong Debate and How to Change It

“The Wrong Debate”

“The Wrong Debate”

Yesterday I was on HuffPost Live for the first time. I had a chance to make the case for electronic money and for Adam Ozimek’s idea of region-based visas. Here is the link again: “The Wrong Debate." 

There were a couple of things I wanted to make sure to get in, so I wrote a couple of notes beforehand. Here are those two notes:

  • We actually have two problems: the economic slump and the long-run debt problem. We need solutions to each problem that don’t make the other one worse. For that, we need new tools in the economic toolbox. The old tools won’t cut it. In my Quart column "What the heck is happening to the US Economy?” I propose some new tools. Just to tick off the names, to get to full economic recovery without making our debt problem worse, I propose in that column electronic money, Federal Lines of Credit, and US Sovereign Wealth Fund. To Solve our long-run debt problem in a way that achieves both the core Democratic and core Republican goals [and I should have added, does not throw the economy back into recession], I propose a Public Contribution Program. These are new ideas.
  • With two big exceptions, the Federal Reserve has actually steered the economy very well for the last few decades. Greenspan ignored the warnings of my colleague Ned Gramlich about the housing bubble and [the Fed as a whole] kept underestimating the problems [the housing bubble and its collapse] would cause. But that’s water under the bridge. The big problem now is that the Fed is afraid to lower short-term interest rates for fear of causing massive storage of paper currency. The Fed should be going to Congress today to ask for the authority it needs to deter massive storage of paper currency so it can cut short-term rates and bring the economy roaring back.  Because that involves making paper money subordinate to money in bank accounts, and making money in bank accounts “the real thing,” this is called “electronic money” in the blogosphere. But for most of the people, most of the time, it wouldn’t look any different from the way things are now.

Of course, these lines mutated when I was actually on the spot, but I did get a chance to say them in my first two at-bats.

I knew the question about immigration policy (my third bit) was coming, so I didn’t need to mention it in the first instance. And I was confident I could say what I wanted to about that more extemporaneously, since I was just coming off of Immigration Tweet Day.

Immigration Tweet Day, February 4, 2013: Archive →

Here are the tweets I was able to storify for Immigration Tweet Day. I tried to storify just the original tweet, rather than all the retweets, but I suspect that in various ways there is some duplication.

Immigration Tweet Day was everything I could hope for. I was especially pleased to see the strong moral dimension to many of the arguments. Like Abraham Lincoln, who was very careful in how he handled the Emancipation Proclamation, I hope we will have a clear moral compass about immigration, working to change hearts and minds, but also be smart about political strategy.

I appreciate the contribution the minority who were against open immigration made to the discussion. It really sharpened the arguments.

A Bare Bones Model of Immigration

Think of a Neoclassical model with inelastic labor supply (including inelastic retirement timing). I am going to focus on the effects that occur in the period of time before capital has had much chance to adjust. To keep the numbers simple, let’s imagine there are 100 million workers in the economy. Production is Cobb-Douglas (see my post “The Shape of Production: Charles Cobb’s and Paul Douglas’s Boon to Economics”), with the following shares:

  • 25% share for capital;
  • 50% share for skilled going to half the population
  • 25% share for unskilled labor going to half the working population.

What are the economic effects of allowing 1 million new workers: enough additional immigration to increase the population by 1%?

Case 1: All of the New Immigration is Unskilled. If all of the new immigration is unskilled, the amount of unskilled labor increases by 2% (from 50 million to 51 million). This increases output by .25 * 2% = .5 %. Unskilled labor gets ¼ of this bigger pie. With a .5% bigger pie and 2% more people to share it among, unskilled workers get a 1.5% reduction in their wage.  The skilled workers get the same share of a bigger pie, with no dilution, so they each get a .5 % increase in their wage. Capital also gets .5% more. This helps people in saving for retirement.

Case 2: All of the New Immigration is Skilled. Now the pie is .5 * 2% = 1% bigger (from 50 million to 51 million). With a 1% bigger pie and 2% more people to share it among, each skilled worker now gets 1% less. Unskilled workers get the same share of a bigger pie, with no dilution, so they each get a 1% increase in their wage. Capital also gets 1% more, which helps people in saving for retirement.

Case 3: 60% of the New Immigration is Skilled, 40% Unskilled. In this case, the amount of skilled labor increases by 1.2% (from 50,000,000 to 50,600,000), while the amount of unskilled labor increases by .8% (from 50,000,000 to 50,400,000). This increases output by (.5 * 1.2%) + (.25 * .8%) = .6% + .2% = .8%. Capital gets .8% more, which helps people in saving for retirement. Since there are .8% more unskilled workers to divide their share of the pie among, the unskilled wage is unaffected. The effect on the skilled wage is .8% - 1.2% = -.4% in this simple model.

Everything left out of this bare bones model suggests that in a richer model, output will ultimately grow more. If the skilled workers are willing to bet that the combination of higher returns to capital and the effects of capital accumulation, extra technological progress, the benefits of increasing returns to scale and diversity, and the share of the national debt and of unfunded government liabilities that immigrants will shoulder would make up for the -.4% reduction in wages they see in the bare bones model, the unskilled workers have no reason to object (except perhaps for cultural reasons), since even in the bare bones model, their wage is unaffected, and all other factors then push in the direction of doing better economically.

I suspect that something like the bare bones model of immigration lurks in the back of many brains, and is encoded as saying that immigration is good for capitalists, but not for workers. Therefore, to successfully argue their case, advocates of immigration must confront this bare bones model head on, explain what is missing, and convincingly argue what the quantitative effects of those missing pieces are.

Proclamation of Immigration Tweet Day: Monday, February 4, 2013

Tweets here and below: 

  • .@ModeledBehavior @Noahpinion and I hereby declare#ImmigrationTweetDay this Monday, February 4, 2013. Details in the next few tweets.
  • On #ImmigrationTweetDay this Monday, all bloggers with posts on immigration policy are invited to tweet links to all their immigration posts
  • Freedom of thought is a watchword of #ImmigrationTweetDay so all are encouraged to participate regardless of their views on immigration.
  • On #ImmigrationTweetDay this Monday, everyone is encouraged to tweet links to posts on immigration not yet tweeted by their authors.
  • On #ImmigrationTweetDay everyone is encouraged to make the best arguments for herhis position on immigration possible in 140 characters.
  • On #ImmigrationTweetDay everyone participating is asked to make an effort to retweet all genuinely relevant tweets they see.
  • I plan to storify the #ImmigrationTweetDay tweets, and link to that collection of tweets on my blog soon after#ImmigrationTweetDay is done.
  • Between now and Monday, please spread the word about#ImmigrationTweetDay
  • Look for #ImmigrationTweetDay this Monday, February 4, 2013

Off the Rails: How to Get the Recovery Back on Track

Here is a link to my 14th column on Quartz: “Off the Rails: What the heck is happening to the US economy? How to get the recovery back on track." 

This column gives a better overall picture of my economic policy stance than any other single post so far. From the conclusion:

Franklin Roosevelt famously said:

The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something.

We at such a moment again. The usual remedies have failed. It is time to try something new. Any one of these proposals could make a major difference. In combination, they would transform the world.

The Overton Window

The Open Window

The Open Window

A while back, I was intrigued by Chris Dillow’s mention of the “Overton window” in his post “Fiscal Policy and the Overton Window.”

Wikipedia defines the Overton window as follows:

The Overton window is a political theory that describes as a narrow “window” the range of ideas that the public will find acceptable, and that states that the political viability of an idea is defined primarily by this rather than by politicians’ individual preferences.[1]It is named for its originator, Joseph P. Overton,[2] a former vice president of the Mackinac Center for Public Policy.[3] At any given moment, the “window” includes a range of policies considered politically acceptable in the current climate of public opinion, which a politician can recommend without being considered too extreme to gain or keep public office.

The set of ideas politicians feel they can talk about in turn limits the range of ideas that are considered relevant policies for typical political debates. As a result, a great deal of political discussion is about a very narrow range of policies. One of the most important ways that the blogosphere can contribute to the political debate is by talking about attractive policies that politicians are not talking about. That makes those policies more familia–and so safer for politicians to talk about–thereby expanding the Overton window.

I have proposed a many policies that are currently not a big part of the political discussion in our country. It is my hope that additional discussion of these ideas in the blogosphere can expand the Overton window to encompass them as genuine political possibilities. Here are a few, with links:

  1. Electronic Money as a Way to Eliminate the Zero Lower Bound on Monetary Policy
  2. A Public Contribution System as an Alternative to Tax Increases
  3. Federal Lines of Credit as an Alternative to Tax Rebates
  4. A US Sovereign Wealth Fund to Give the Fed Running Room
  5. A Constitutional Amendment to Limit Government Spending to Less than Half of GDP
  6. A Dramatic Increase in Legal Immigration
  7. Year-Round Schooling

For proposals that are more nearly within the bounds of current political debate, see my post “Within the Overton Window,”

Note: This post, plus “Within the Overton Window” constituted a list of "save-the-world posts.“ My most current list of "save-the-world posts” is “Making a Difference: Save-the-World Posts as of December 3, 2013." 

An earlier list of "save-the-world” posts can be found in

My Platform, as of September 24, 2012,

and still earlier in  

Miles’s Best 7 “Save the World Posts,” as of July 7, 2012.

Yes, There is an Alternative to Austerity Versus Spending: Reinvigorate America's Nonprofits

Twitter Round Table on Consumption Taxation →

In the storified tweets of this  “Twitter Round Table on Consumption Taxation,” don’t miss the idea of ensuring that most consumption taxes can actually be collected even in a world of tax havens by having some level of earnings taxation that goes into escrow to pay consumption taxes that are documented by a smart card. In principle, the funds could come out of escrow at the point of sale, but I think it would encourage more saving and investment if people instead received a large tax rebate at the end of the year from their escrow account. One good aspect of this is that it gives people less incentive to evade the tax on spending.  

Charitable donations should also result in a rebate, since they are not consumption. And the funds in the tax escrow account should be transferable and bequeathable. The point is to put a floor under the amount of revenue the government gets up front.  

By the way, to read this Twitter conversation, you need to understand a little about a value added tax (VAT), which is a form of consumption tax common in many countries. The big administrative advantage of a value added tax is that it is collected all along the way during the production of goods, instead of having one big point of taxation that would be a big temptation to tax evasion. Here is a link to the Wikipedia article on value added taxes.

Steven Pinker on How the Free Market Makes Us Uneasy

Fiske’s taxonomy also accomodates a fourth relationship type [in addition to Communal Sharing, Authority Ranking, and Exchange], which he calls Market Pricing. It embraces the entire apparatus of modern market economies: currency, prices, salaries, benefits, rents, interest, credit, options, derivatives, and so on. The medium of communication is symbolic numerals, mathematical operations, digital accounting and transfers, and the language of formal contracts. Unlike the other three relationship types, Market Pricing is nowhere near as universal. A culture with no written language and with a number system that peters out at “3” cannot handle even the rudiments of Market Pricing. And the logic of the market remains cognitively unnatural as well. People all over the world think that every object has an intrinsic fair price (as opposed to being worth whatever people are willing to pay for it at the time), that middlemen are parasites (despite the service they render in gathering goods from distant places and making them conveniently available to buyers), and that charging interest is immoral (despite the fact that money is more valuable to people at some times than at others).[See Thomas Sowell: Knowledge and Decisions.] These fallacies come naturally to an Exchange mindset in which distributions are fair only when equivalent quantities of stuff change hands. The mental model of face-to-face, tit-for-tat exchanges is ill equipped to handle the abstruse apparatus of a market economy, which makes diverse goods and services fungible among a vast number of people over great distances of time and space. 

As far as I can see, this takes Market Pricing out of the realm of human nature, and there seem to be no naturally developing thoughts or emotions tailored to it.

Neil Irwin: American Manufacturing is Coming Back. Manufacturing Jobs Aren't

Sometimes a sector of the economy has so much technological progress that over many decades, output in the sector increases while inputs into the sector–particularly the amount of labor used–decreases. Agriculture went through this transformation first. In more recent decades, manufacturing employment has been shrinking while manufacturing output has been growing. Just as we need only a few farmers to feed everyone, we are moving toward a world where we only need a few people to manufacture things, while almost everyone is employed in the service sector.

Neil Irwin describes this transformation in his post “American manufacturing is coming back. Manufacturing jobs aren’t.”