Comments on economics, mystery fiction, drama, and art.

Monday, July 15, 2019

"Those who cannot remember the past are condemned to repeat it."

Beginning very early on in the history of the United States, immigrants have been regarded as somehow "other," and inferior, possibly not fully human. Look at the response to the Irish immigration (late 1840s/early 1850s), which was a consequence of the potato famine. (The "know-nothing" party was maybe the clearest manifestation of this:
Later, as immigration from eastern (Poland; Russia--many of these immigrants were also Jewish) Europe, southern Europe (Italy. Greece), and Asia (especially, but not only, China), anti-immigrant sentiments shifted. Chinese immigration was *legally prohibited* beginning in 1882 (
(Read the whole thing...)
And a discussions of the response to European immigration. (
Eastern and southern immigration:
"Between 1880 and 1910, almost fifteen million immigrants entered the United States, a number which dwarfed immigration figures for previous periods. Unlike earlier nineteenth century immigration, which consisted primarily of immigrants from Northern Europe, the bulk of the new arrivals hailed mainly from Southern and Eastern Europe. These included more than two and half million Italians and approximately two million Jews from Russia and Eastern Europe, as well as many Poles, Hungarians, Austrians, Greeks, and others.
"The new immigrants’ ethnic, cultural, and religious differences from both earlier immigrants and the native-born population led to widespread assertions that they were unfit for either labor or American citizenship. A growing chorus of voices sought legislative restrictions on immigration. Often the most vocal proponents of such restrictions were labor groups (many of whose members were descended from previous generations of Irish and German immigrants), who feared competition from so-called “pauper labor.” "
Note the opposition of earlier German immigrants to the immigration of Italians, Greeks, Poles, Russians (and especially Jews).
IQ tests were used (and, I think, developed) as a tool to restrict immigration in the early 1900s:
"Low test scores (given as an intelligence quotient, or IQ) were used by eugenicists to lobby in the US Congress for restricting immigration of those claimed to be genetically inferior in IQ."…/230435620_Intelligence_Tests…
And, as this articles in the Smithsonian puts it:
"This Jigsaw Puzzle Was Given to Ellis Island Immigrants to Test…/puzzle-given-ellis-island…/
Famously, Jews attempting to flee the Nazis were denied entry to the US in the 1930s; the Dominican Republic, unlike the US did admit them:
"In the end, only one country, the Dominican Republic, officially agreed to accept refugees from Europe. (Dictator Rafael Trujillo, influenced by the international eugenics movement, believed that Jews would improve the “racial qualities” of the Dominican population.)"…/america-and-holocaust
While the response to the "boat people" from Viet Nam was somewhat more restrained (in terms of official immigration policy--perhaps in part because so many were children of US military personnel), they were not warmly welcomed in a lot of US communities, especially along the Gulf coast.
(In my opinion, the response to the plight of Vietnamese refugees was particularly unfortunate, because the US was largely responsible for the conditions that led them to flee their homes.)
So what we are facing today is not anything new. In all--or almost all (we have not really escaped our reluctance to allow immigrants from Latin America)--the previous cases, attitudes changed; groups that were excluded or stigmatized (especially the Chinese) became desirable.
It's almost as if we don't want to remember our past, and, we refuse to remember it, and we keep making the same mistakes over and over again. Or, as George Santayana put it more eloquently:
"Fanaticism consists in redoubling your efforts when you have forgotten your aim... Those who cannot remember the past are condemned to repeat it."

Thursday, July 04, 2019

Labor Force Participation of Teenagers Over Time

Or more specifically, labor force participation rates of people ages 16-19.

Teens have the most volatile within-year labor force participation, with a substantially higher percentage of teens in the labor force in June, July, and August than the rest of the year.  This is not, of course, surprising, because most--or at least many--teens are in school either full-time and part-time.  And, over time, the general level of teen labor force participation has changed quite significantly, as the following chart shows.

What's most interesting to me right now are the "cohort" effects.  The Bureau of Labor Statistics data begin in 1948, so that initial group consists of those born between 1929 (19 in 1948) and those born in 1932 (16 in 1948).  The chart shows what has happened to succeeding cohorts.  From 1948 to 1960, the labor force participation of 16-19 year-olds, both during the school year (the blue dots) and during the summer (red), dclined a lot--down from around 50% during toe school year to around 40%, and from around 6o% during the summers to around 55%..  (By 1961, that's the group born between 1941 and 1944; it is one of the smaller birth cohorts in US history--for obvious reasons.)

Then the participation begins to rise.  And it seems to have risen both for the early "baby boom" kids and for those born slightly earlier.  By 1980 (those born between 1961 and 1964), labor force participation had risen to about 55% during the school year and around 70% during the summer.  And, it is worth noting, college attendance rates were rising as well.  Whether the rise in summertime labor force participation can be attributed to college students seeking work to help pay for college is a valid hypothesis, but I clearly have not proved that's what drove this.

Since 1980, teen labor force participation has consistently declined, and is now at lower levels than at any time for which we have reliable data--around 35% during the school year (up from even lower levels--around 32% between 2010 and 2015--during the school year) and between 40% and 45% during the summer.  And, the ga between school year and summer participation has narrowed--from around 15% t0 20% in the 1940s and 1950s, to around 10%.  The continuing decline in teen labor force participation has tended to reduce the overall unemployment rate (teen unemployment rates are higher than adult rates) slightly.  

What interests me most about all this is the decline in summer labor force participation.  (I will add here that, although I have not disaggregated by gender, labor force participation for teen women fell less in the 1950s, rose more in the 1960s and 1970s, and has declined less since 1980 that it did for males.)  What was a significant source of funds to support college attendance in the "baby boom" era has quite clearly eroded.  I suspect that part of this might be a consequence of year-round college attendance (although that should, it seems, be at least partially offset by the growth in part-time attendance).  But part of it is probably a result of changes in employment patterns in the overall economy.

In manufacturing, not only are there fewer jobs, those jobs are probably less seasonal, which means fewer opportunities for teens attending college.  The same seems likely to be true in retail, although seasonality in retail employment is likely to have increased, in anything.  And many local governments face significant funding constraints for summer programs, so seasonal employment is likely to have declined there as well.

I would also emphasize a point made above...summer employment is no longer as significant a source of income to support college attendance as it was 20 or 30 4 40 years ago.  Generally, resorting to anecdote is not necessarily a convincing rhetorical strategy, but I will anyway.  I worked every summer beginning a age 16 (1964), through the summer after my college graduation (1969, which was before I entered graduate achool)--six years of summer employment.  That contributed between 10% and 20% of the annual cost of my college attendance.  And almost everyone I knew had the same sort of summer employment.  I would guess that declining summer employment opportunities has caused some increased reliance on student borrowing; I also would giess that we would be better off as a society if we could somehow return to a world of more robust summer earning opportunities for teenagers.

Friday, March 29, 2019

"Closing the Border" itj Mexico--Another "Lose-Lose" Policy

I've stitched together (without cuts or corrections to any typos) Trump's tweets about "closing" the US-Mexico border.  I want to focus on one part of this (and I wish FB would let me highlight or bold  the text, but it doesn't, so I will pull that out):

“The DEMOCRATS have given us the weakest immigration laws anywhere in the World. Mexico has the strongest, & they make more than $100 Billion a year on the U.S. Therefore, CONGRESS MUST CHANGE OUR WEAK IMMIGRATION LAWS NOW, & Mexico must stop illegals from entering the U.S. through their country and our Southern Border. Mexico has for many years made a fortune off of the U.S., far greater than Border Costs. If Mexico doesn’t immediately stop ALL illegal immigration coming into the United States throug our Southern Border, I will be CLOSING the Border, or large sections of the Border, next week. This would be so easy for Mexico to do, but they just take our money and “talk.” Besides, we lose so much money with them, especially when you add in drug trafficking etc.), that the Border closing would be a good thing!”
(29 March 2019)
"Mexico has the strongest [immigration laws--DC], & they make more than $100 Billion a year on the U.S...Mexico has for many years made a fortune off of the U.S...Mexico has for many years made a fortune off of the U.S...Besides, we lose so much money with them...that the Border closing would be a good thing!"

The only possible meaning of this has to be that the US exports a smaller value of goods and services to Mexico than we import from Mexico.  We have a "bi-lateral" trade deficit with Mexico.  And Trump is asserting that this means Mexico is making a "fortune" by trading with the US.

Let's start with the size of the balance of trade with Mexico.  (negative numbers, like -$81 billion mean a deficit--we're importing more than we're exporting, while positive numbers, like $+xx billion mean we're exporting more than we're importing).  So, what has out trade balance been with Mexico?  Here it is, annually, beginning in 2001.  (In Billions of current dollars--unadjusted for inflation.)

2001……..-$30 billion
2018……….-$81 billion

Yep, deficits every year.  $100 billion or more in any year?  Nope.  Unless he doesn't mean *balance of trade*--he means IMPORTS.  (Which would really be crazy.)

Are persistent bilateral trade deficits a *bad* thing?  Nope.  Mexico produces things that we want, but that they can produce at a lower cost than we can.  So if we decided to import *nothing* from Mexico, we'd have to produce that for ourselves, and it would mean diverting resources from what we produce at a lower cost to producing things that would cost us more.  And that would make us worse off.  And make no mistake about it--we've been at or near full-ish employment for most of this period, so we haven't had a lot of idle workers or capital equipment sitting around.

We actually run persistent trade *surpluses* with come countries--Australia is one.

The point is that voluntary trade between people, between businesses, between countries is, generally, a good thing.  (That doesn't mean everyone always "plays fair.)  So, in general, if we stopped trading with Mexico, we'd be worth off.  If we stopped trading with Australia, we'd be worse off. 

But Trump does not see trade as a potential (and usually actual) benefit for both parties (countries, businesses...).  He sees things as zero-sum interactions--for me to "win"--for me to become better off--you have to "lose"--become worse off.  What economists think (and it's always possible we're wrong, but I doubt it) is that most trades have to be wins for both parties. 

We--the US--wins by trading with Mexico.  Australis wins by trading with us.  What Trump wants to do when he talks about closing the border--which really means closing ports of entry--has little or nothing to do with immigration.  It has to do with trade.  What Trump will do if he closes the border is shoot the US our collective foot *and* shoot Mexico in its collective foot.   Keeping the ports of entry open is not we lose, Mexico wins.  Closing the border is not we win, Mexico loses.

Closing the border is a lose-lose thing to do.  But Trump seems to be good at that.

Monday, March 11, 2019

The Current Budget and Its assumptions

The current 10-year budget plan put forward by the administration assumes that real Gross Domestic Product in the US will rise at an average annual rate of 3%.

Since 1950 (that is, excluding data covering the Great Depression, recovery from it, the WW2 and immediate post-WW2 years), the average growth rate of GDP over 4-year periods has been trending DOWN, The last 4-year period in which average annual growth in real GDP has exceeded 3% per year is the LATE 1990s.
I would suggest that the likelihood that the next 4 years--let alone the next 10 years--will achieve an average annual growth rate of 3% (or higher) is, well, slight.

Why is that?

First, population growth is slowing. In the early 1950s, population growth was abut 1.6% to 1.8% per year. It's now about 0.7% per year--and falling. It's harder for the economy to grow rapidly if the number of people available to preform the economy's work is growing slowly.

Second, productivity (measured as real GDP divided by the number of workers) has not been rising. Productivity growth has hardly been stable, but is has declined from about the beginning of the recession that began in 2007--and the growth in productivity has not rebounded. Since about 2014, it has been around 0.5% per year.
Getting 3% per year growth in real GDP with a more slowly growing population (and that seems unlikely to change anytime soon) and with productivity growth as anemic as it has been for several years...don't count on it.

This completely leaves out of the discussion the specifics of spending priorities in the budget.

Thursday, March 07, 2019

The decline of public/mass transit in Indianapolis

I wrote this as a part of a discussion with a professional colleague about public and private transportation in urban areas.

Having grown up in Indianapolis (in the 1950s/1960s) and as I am living there again (since 2012) in my retirement, I have a perspective on the changes that have affected one bus system,

In the 1950s and early 1960s, the bus routes were fairly simple:  most traffic was from "periphery" locations and to the city center.  Employment was concentrated "downtown"; this was pre-suburban-mall days (at least for Indy), so major retail shopping was also centralized.  So the bus routes were essentially designed to channel traffic to the city center.  Indy's remarkably regular grid street system meant some of that involved transferring from one bus route (the north-south routes, typically) to another (east-west).  The population was also concentrated.  Marion County is basically square, and it's divided into 9 townships, remarkably like a tic-tac-toe grid.  By 1960, the county had about 670,000 residents--and about  50% of them lived in Center Twp.  So a bus system that concentrated on the closer-in parts of the city, and getting people to-and-from the CBD was pretty efficient.  (Also, about 20% of the households were still car-less in the late 1950s.)

Today...the county population is about 950,000.  And only 142,000 people live in Center Township.  Retail locations are now spread, and, in terms of things like "big-box" and malls, most likely to be located on the periphery, as is "office" employment. The relevant structure for a bus system is hugely more complicated, involving periphery-to-center much less and periphery-to-periphery much more.   Auto ownership is almost universal (but not so nearly universal for lower income households).   And bus patronage has declined--quite dramatically:  from 64 million passenger trips in 1950 to 25 million in 1960 to about 7 million in 2017.  Suburbanization and hollowing out of the urban core, the construction of interstate highways nearly to, and encircling, the city center, and the now almost universal access to cars--and the bus system has come close to collapse, and I see no way to salvage it.

And the principal discussion for transit is to use abandoned rail lines from the two largest ex-urban citied as the platform for light rail.  There is no bus service from those two cities--now both over 100,000 in population (and outside the central county).

Wednesday, March 06, 2019

The Disdain For Small, Fuel-Efficient Cars: A Characteristic of US Auto Producers

American automakers have always hated small cars. They were barely even American. The idea of a small car seemed impossible…So when Japanese cars began to enter the market, the American makers were nonplussed. How would they respond? One way was to turn the Youngstown plant into a factory for the GM version of the small car, the Vega. But it was a low priority for the company, who never wanted to make a car like this in the first place.”[1]
I think this is largely—but only largely—true.  The Vega was not GM’s first attempt at building a small car.  That would, I think, be the Corvair,[2] [3] which debuted in 1960 and died in 1969.  As Ralph Nader famously pointed out, this was not, even for an American car of the time, a well-made, or safe, car; it was, in fact unsafe at any speed.  There were precursors, of course.  The Nash Rambler,[4] for example.  AMC (the successor to Nash) tried again with the Gremlin, which lasted from 1978 to 1978.[5]  And Ford, infamously, gave us the exploding Pinto (1970-1980).[6]
But all of these were designed and built, not because American car companies believed in them, or wanted to build them, but because the initial boom is US imports of cars were subcompacts, beginning with the WV Beetle [7] and followed by the various Japanese cars from Datsun/Nissan, Toyota, Honda, and Mazda.  Chrysler got into the game by contracting with Mitsubishi to build a subcompact—the Dodge Colt [8].  One way to judge Dodge’s commitment to the subcompact segment of the market is that it did not even design its own product (and, until at least 1976, did not require Dodge dealers to service the Colt).
It remains true to this day that Ford, GM, and the remnants of Chrysler still regard small, well-designed, fuel-efficient cars as an afterthought.
[2] My first car was a 1964 Corvair—bright red. 4-on-the-floor—maybe the car I’ve owned that I liked best.
[3] Most of the discussion of the Corvair is based on the wikipedia article about it.
[4] It was produced from 1950 to 1955. My parents bought one—used—in 1956 or 1957.  It was small, slow, uncomfortable, and (in keeping with almost all American cars of the time) not particularly fuel efficient or designed for passenger safety.
[6]  It was also produced as the Mercury Bobcat.
[7] I bought a (1964) Beetle in 1969 and another small VW product, a 1963 Karmann Ghia in 1970 (the Beetle caught on fire).
[8]  It was on the market from 1971 to 1994.  I bought one—my first new car—in 1974.  It was followed by 2 Mazda GLCs; I finally bought something other than a subcompact in 1987, when I bought my first Honda Accord.

Friday, January 04, 2019

An Economist Watches "Mary Poppins Returns"

This is why economists are no fun at childrens’ movies.

Near the end of “Mary Poppins Returns,” Mr. Dawes Jr. tells Michael Banks that the tuppence he invested with the bank 20 years ago has grown so that it’s now sufficient to pay off his loan to the bank.  And while we are not told exactly how much Michael owes the bank, we do know that it’s at least £100.  And so I’m sitting in the theater thinking to myself…Is that possible?  And when I got home, I worked it out.  (Of course, I did have to deal with the unlikelihood that Michael had three kids, a couple of whom appeared to be about 10 years old, and George would presumably be about 25…)

£100 is 24,000 pence (100x240).  So what rate of interest would the bank have to be paying on savings deposits in order for tuppence to grow to 24,000 pence in 20 years (and here I will assume a single annual interest payment)?  And the answer is:  160% per year.  Right. 

How long would it take for tuppence to grow to £100 if the bank pays 6% interest?
About 295 years.  (After 20 years, he’d have about six pence ha’penny.)

Either way Mikey Banks is still screwed.

Unless, of course, Mr. Dawes Jr. is just lying to Michael, and kicking in £100 so we can have a happy ending…