Public Policy and Governance – Page 83

Supply And Demand

Understanding supply and demand is at the very basis of Economics 101, and thanks to the pandemic, we are seeing a “real world” example of what happens when demand surges, outstripping supply–or at least, outstripping the ability to satisfy demand promptly. For example, the supply-chain problems that have raised prices and fears of inflation have been exacerbated by the gusher of spending that is attributed to demand that was pent-up due to COVID restrictions.

Ezra Klein recently revisited the consequences of imbalances between supply and demand in a column for the New York Times. He focused on the dilemma posed by subsidies–not the pernicious subsidies of corporate farmers or fossil-fuel companies, but well-meaning efforts to help needy American families.

Many of progressivism’s great dreams linger on the demand side of the ledger. Universal health care promises insurance that people can use to buy health care. Food stamps give people money for food. Housing vouchers give them money for rent. Pell Grants give them money for college. Social Security gives them money for retirement. The child tax credit gives them money to care for their children. The minimum wage and the earned-income tax credit give workers more money. A universal basic income would give everyone more money.

Great. Or maybe not…

The problem is that if you subsidize the cost of something that there isn’t enough of, you’ll raise prices or force rationing. You can see the poisoned fruit of those mistakes in higher education and housing…

Klein quotes from a recent paper issued by the Niskanen Center–a think tank I have previously cited, and one that consistently turns out clear-eyed, impressive research.

We are in an era of spiraling costs for core social goods — health care, housing, education, child care — which has made proposals to socialize those costs enormously compelling for many on the progressive left,” Steven Teles, Samuel Hammond and Daniel Takash write.

There are sharp limits on supply in all of these sectors because regulators make it hard to increase supply (zoning laws make it difficult to build housing), training and hiring workers is expensive (adding classrooms means adding teachers and teacher aides, and expanding health insurance requires more doctors and nurses) or both. “This can result in a vicious cycle in which subsidies for supply-constrained goods or services merely push up prices, necessitating greater subsidies, which then push up prices, ad infinitum,” they write.

The Niskanen paper advises Republicans to stop focusing on “backward-looking deficit reduction strategies based on budgetary gimmicks or dead-on-arrival cuts to existing entitlements.” Instead, it urges conservatives to tackle costs, pointing out that, far too often, Republican proposals to cut government spending “are just shell games that shift costs onto individuals.”

The conservative enthusiasm for moving Medicare beneficiaries onto (often more expensive!) private plans “risks being little more than an accounting trick — a purely nominal change in ‘who pays’ that would do little to address the underlying sources of cost growth.

What is needed, according to Klein, the Niskanen authors and others quoted in the article, is a new focus on innovation, and public policies that encourage it.

Klein says progressives are finally figuring this out, most clearly when it comes to climate. Biden’s agenda would increase the supply of renewable energy and advanced batteries and build the supply of carbon-neutral transportation options. Environmentalists understand that markets alone cannot solve the climate crisis, and Democrats are coming to recognize that the same is true for much else on the progressive docket.

Klein shares a quote from a member of Biden’s Council of Economic Advisors.

The transportation, rail, public transit and port investments will reduce efficiency-killing frictions that keep people and goods from getting to markets as quickly as they should,” they wrote. “The child and elder care investments will boost the labor supply of caretakers. The educational investments in pre-K and community college will eventually show up as higher productivity as a result of a better-educated work force.”

As he concludes:

A list like this could go on. It’s not clear whether it’ll be in the reconciliation bill, for instance, but Biden has proposed an expansive plan to increase housing supply in part by pushing local governments to end exclusionary zoning laws. And in California, that’s exactly what’s happening, as I wrote a few weeks back. A decade ago, progressives talked often of making housing affordable, but they didn’t talk much about increasing housing supply. Now they do. That’s progress.

Yes. As Aaron Bastani, another author Klein quotes, puts it, “the world we should want requires more than redistribution. It requires inventions and advances that render old problems obsolete and new possibilities manifold.”

Getting to that world will require overcoming the fear of change that is roiling the world we currently inhabit.

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Speaking Of Florida…

Speaking of Florida…

Ron DeSantis–the delusional and dangerous governor of Florida–is evidently doubling down on his insistence that government has no business protecting the public health via vaccine mandates.

According to The Week,

Florida Gov. Ron DeSantis (R) on Thursday stepped up his fight against the White House over COVID-19 restrictions, calling for a special legislative session so the state’s Republican-dominated Legislature can block President Biden’s vaccine mandates. “We have an opportunity here to take additional action, and I think we have to do it,” said DeSantis, who also has vowed to challenge Biden’s mandates in court. “I think we have got to stand up for people’s jobs and their livelihoods.” Florida House Speaker Chris Sprowls said his office had not received details on the plan for a special session. Biden in September said his administration would impose vaccine mandates on federal workers and businesses with more than 100 employees, prompting criticism from Republicans who said getting vaccinated should be a personal choice.

I don’t have any special insight into whether DeSantis is really as stupid as he sounds, or whether he has decided that his political future rests with the delusional Trumpian base of the GOP, but this latest bit of theater is driving rational observers over the edge.

The hypocrisy is bad enough. This sudden libertarianism is jarring, coming as it does from Republicans who have waged culture war on behalf of government’s right to dictate everything from citizens’ right to smoke weed to who they can marry and and how they must reproduce.

What is especially infuriating, however, is the insistence that protecting others from serious illness and possible death should be a matter of “personal choice.”

As most readers of this blog are aware, I spent six years as the Executive Director of Indiana’s ACLU. I came to that position as a libertarian Republican (a category that no longer exists in the GOP, despite these sudden dishonest exhortations about “personal choice.”) I was–and am–a believer in what is called the libertarian premise, the Enlightenment construct that says citizens are entitled to pursue their own telos, their own life goals–in today’s jargon, entitled to “do their own thing” and make their own “personal choices”–so long as they do not thereby harm the person or property of a non-consenting other, and so long as they are willing to accord an equal liberty to others.

The legitimacy of government action rests on those caveats.

There can certainly be arguments about what constitutes sufficient harm to justify government rules and regulations. Those arguments have been especially relevant to so-called “victimless crimes.” We distinguish, for example, between the guy who gets drunk in the privacy of his own home and the guy who gets drunk and takes to the road in his car. People who smoke in their own homes and cars are free to do so, but we have regulated smoking in public places ever since medical science discovered that passive smoke endangers others. We argue whether the gambler who sustains losses poses a threat to others sufficient to legitimize laws against gambling, and whether the driver who doesn’t “buckle up” endangers anyone but himself.

The argument that vaccination is a “personal choice” doesn’t fall into that category.

Previous epidemics have not spawned similar, widespread debates about government’s right–actually, government’s duty–to protect public health. American courts, including the Supreme Court, have upheld both vaccination and quarantine mandates, because they are most definitely not matters of personal choice. A decision to forego vaccination for a non-medical reason is a declaration of disregard for ones fellow-citizens. Period.

If today’s insane Republicans want to risk their own lives in order to make a political statement, I’m fine with that. When they want to risk the lives of other people, not so much.

In Florida, a large percentage of the population is composed of elderly folks who are particularly vulnerable to the pandemic, That makes DeSantis’ opposition to vaccination especially heinous. He isn’t protecting “personal choice;” he’s signaling his willingness to add to the 59,000+ deaths the state has already suffered from COVID.

He has made a “personal choice” to elevate politics over morality.He’s despicable.

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A Different Kind Of Florida Man

“Florida man” has become a comedy label, a phrase recognizing the ubiquity of stories about someone from the Sunshine State doing something idiotic or bizarre (but definitely funny).

Business Insider, however, recently had a different sort of “Florida man” story, and it’s worth pondering.

As businesses across the country advertise for workers, as “we are hiring” signs proliferate and every day brings complaints from businesses that tell us they are struggling to find employees, a Florida man decided to test their claims. He submitted at least two applications every day in September, taking care, as he told the magazine, to apply only for positions for which he was qualified.

Joey Holz had watched as business after business complained that the availability of government stimulus money was keeping workers at home and out of the job market. The complaint–and the attribution of the scarcity to government largesse–“was so ubiquitous that he joined a ‘No one wants to work’ Facebook group.”

He said he found it hard to believe that government money was keeping people out of the labor force, especially when the end of expanded federal unemployment benefits did not seem to trigger a surge in employment. The expanded benefits ended in September, but 26 states ended them early in June and July.

“If this extra money that everyone’s supposedly living off of stopped in June and it’s now September, obviously, that’s not what’s stopping them,” he said. Workers have said companies struggling to hire aren’t offering competitive pay and benefits.

So Holz, a former food-service worker and charter-boat crewman, decided to run an experiment.

Holz spent a month applying for jobs, mostly at businesses whose employers had been vocal about a lack of workers . He kept track of those applications in a spreadsheet. After submitting 28 applications, he had received exactly nine email responses, one follow-up phone call, and one interview. That interview was with a construction company that had advertised a full-time job focused on site cleanup paying $10 an hour.

But Holz said the construction company instead tried to offer Florida’s minimum wage of $8.65 to start, even though the wage was scheduled to increase to $10 an hour on September 30. He added that it wanted full-time availability, while scheduling only part time until Holz gained seniority.

None of the companies that bothered to respond were paying over $12 an hour.

On September 29, after submitting 58 applications, Holz posted to Twitter about his saga, saying, ” y’all aren’t desperate for workers, you just miss your slaves.” The post went viral.

Holz acknowledged that his results may not be representative of the larger labor challenges in the country, since his search was local and targeted the most vocal critics of stimulus spending.

Holz is actually employed, and he noted that–despite the media focus on businesses that say they are struggling to hire–his own boss had experienced no staffing issues during the pandemic.

“Nobody leaves those positions because he takes care of his people,” Holz said, referring to his boss.

There is a larger lesson to be learned from the experiment run by this particular “Florida man,” if employers are willing to learn it. Research by the Economic Policy Institute confirms that lesson.

The author of the linked article concedes that, in a large and complex labor market like that of the U.S., there will periodically be pockets of bona fide labor shortages. But the article goes on to confirm “Florida man’s” conclusion: a far more common reason for such shortages is the reluctance of employers to pay enough to attract workers. “Employers post their too-low wages, can’t find workers to fill jobs at that pay level, and claim they’re facing a labor shortage.” A more precise formulation would be “I can’t find the workers I need at the wages I want to pay.”

The EPI analysis also points out that

when restaurant owners can’t find workers to fill openings at wages that aren’t meaningfully higher than they were before the pandemic—even though the jobs are inherently more stressful and potentially dangerous because workers now have to deal with anti-maskers and ongoing health concerns—that’s not a labor shortage, that’s the market functioning. The wages for a harder, riskier job should be higher.

“Florida man” proved the point…

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It Isn’t Just Gannett

The consolidation of the country’s newspapers has been a preoccupation of Americans who recognize the extreme importance of “the press”-who appreciate the outsized role that journalism plays in community and self-government. Large-scale, rapacious companies like Gannett (see yesterday’s post) have been the target of withering criticism for years.

But there’s a difference between corporations like Gannett and hedge funds like Alden Global Capital.

Gannett and its ilk were convinced that they could operate newspapers more efficiently–that they could do more–or at least as much– with less, and thereby continue to enjoy the high profit margins that the industry used to provide. Quality journalism was secondary–it was just the widget/product that happened to generate the all-important profits. (The fact that the company greatly overpaid for many of the papers it purchased made that optimism unrealistic.) Their first loyalty was–and is– to the bottom line, but they at least give lip service to the importance of journalism.

Hedge funds like Alden never bothered; they’ve simply “strip mined” the newspapers they’ve purchased–intentionally destroying them. As the linked article puts it, these funds are composed of

investors who have figured out how to get rich by strip-mining local-news outfits. The model is simple: Gut the staff, sell the real estate, jack up subscription prices, and wring as much cash as possible out of the enterprise until eventually enough readers cancel their subscriptions that the paper folds, or is reduced to a desiccated husk of its former self

The men who devised this model are Randall Smith and Heath Freeman, the co-founders of Alden Global Capital. Since they bought their first newspapers a decade ago, no one has been more mercenary or less interested in pretending to care about their publications’ long-term health. Researchers at the University of North Carolina found that Alden-owned newspapers have cut their staff at twice the rate of their competitors; not coincidentally, circulation has fallen faster too, according to Ken Doctor, a news-industry analyst who reviewed data from some of the papers. That might sound like a losing formula, but these papers don’t have to become sustainable businesses for Smith and Freeman to make money.

Alden’s aggressive cost-cutting makes Gannett look generous. The hedge fund has found a financially-rewarding formula: it continues to operate the newspapers it acquires at a profit for a few years, but during those years, it turns out a steadily worsening product and alienates subscribers.

This investment strategy does not come without social consequences. When a local newspaper vanishes, research shows, it tends to correspond with lower voter turnout, increased polarization, and a general erosion of civic engagement. Misinformation proliferates. City budgets balloon, along with corruption and dysfunction. The consequences can influence national politics as well; an analysis by Politico found that Donald Trump performed best during the 2016 election in places with limited access to local news.

With its acquisition of Tribune Publishing earlier this year, Alden now controls more than 200 newspapers, including some of the country’s most famous and influential: the Chicago Tribune, The Baltimore Sun, the New York Daily News. It is the nation’s second-largest newspaper owner by circulation. Some in the industry say they wouldn’t be surprised if Smith and Freeman end up becoming the biggest newspaper moguls in U.S. history.

The linked article describes what happens after an acquisition by Alden, telling the stories of specific newspapers, the people who worked at them, and the cities and towns they no longer serve. It also profiles the men who run Alden–men who proudly identify themselves as “vulture capitalists” and who are identified by others as the “grim reapers” of journalism.( At least one of them–unsurprisingly–is a major supporter of Donald Trump, whose constant attacks on the news alarmed people who understood the importance of journalism to democratic governance.)

I cannot do justice to the Atlantic’s thorough and meticulous reporting in a brief blog post. Everyone reading this should click through and read the well-researched and eye-opening article in its entirety.

The crisis in local journalism has been the subject of concern and debate for well over a decade. We are now at a point where–in the absence of viable replacements for what has been lost–repairing the damage to governance and community will be difficult to impossible to achieve.

I never imagined quoting Donald Rumsfeld, of all people, but without a robust and vigorous press, we won’t know what we don’t know.

If American democracy collapses, Mitch McConnell and the sniveling invertebrates in the GOP will share responsibility with vulture capitalists like Alden Global Capital.

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A Prize For Evidence

There are all kinds of ways to divide/categorize the American public: there’s the urban/rural divide, the differences between Republicans and Democrats, people who are college educated versus those who are not…One distinction that is rarely highlighted but incredibly important doesn’t even have a descriptive term–it’s the difference between people who recognize and respect evidence and those who don’t.

Think of it as the difference between people who accept the Enlightenment emphasis on empirical reality and those who are “faith-based.” Being faith-based, at least as I am using the term, doesn’t necessarily mean “religious.” It means preferring an ideological commitment–something taken on faith– to demonstrable reality, and a number of people–many of them highly educated–fall into that category.

The judges who award the Nobel Prize just delivered a message to those faith-based folks, and that message was that real-world evidence matters more than ideological or theological preferences, no matter how sincerely or deeply held.

The Nobel Prize in Economics went to three American scholars. One of those was David Card of the University of California at Berkeley, who will receive half the prize.

NPR has the story.

Card was recognized in part for his groundbreaking work in the early 1990s with the late Princeton economist Alan Krueger, which challenged conventional wisdom about minimum wages.

Economists had long assumed that there was a tradeoff between higher wages and jobs. If the minimum wage went up, it was thought, some workers would get higher pay but others would be laid off.

But when Card and Krueger looked at the actual effect of higher wages on fast food workers, they found no significant drop in employment.

In other words, Card and Krueger explored what actually happened when adjacent jurisdictions imposed different minimum wage laws. They compared fast food restaurants in New Jersey, which raised its minimum wage, to restaurants in neighboring Pennsylvania, which did not.

As CNN reported,

Three economists were awarded the Nobel Prize on Monday for showing that precise — and surprising — answers to some of society’s most pressing questions can be gleaned from experiments rooted in real life.

David Card was recognized by the Royal Swedish Academy of Sciences for groundbreaking work on minimum wages, immigration and education. He showed, using a natural experiment — where researchers study situations as they unfold in the real world — that increasing the minimum wage does not necessarily lead to fewer jobs.

The announcement of the award made special mention of the importance of “experiments rooted in real life.” Until very recently, much research–including economic research–has been heavily theoretical and mathematical: this equation or formula predicts that taking such-and-such action will bring about thus-and-so result.

Card said his work was mostly about “trying to get more scientific tie-in and evidence-based analysis in economics.”

“Most old fashioned economists are very theoretical, but these days, a large fraction of economics is really very nuts-and-bolts, looking at subjects like education or health, or at the effects of immigration or the effects of wage policies,” he said.

The Nobel committee noted the importance of that emphasis on real-world evidence.

“Card’s studies of core questions for society and Angrist and Imbens’ methodological contributions have shown that natural experiments are a rich source of knowledge. Their research has substantially improved our ability to answer key causal questions, which has been of great benefit to society,” Peter Fredriksson, chair of the Economic Sciences Prize Committee, said in a statement.

I’ve previously admitted that–much like those “conventional” economists– I had accepted the belief that a higher minimum wage would lead to job losses. It seemed so logical. I later realized that the “logic” required a seldom-noted caveat: all other things being equal. And in the real world, all other things are rarely equal.

What led to that realization was real-world evidence that became available after studies done by Card and others persuaded some jurisdictions to raise their minimum wages and report the results.

There’s nothing wrong with theory, but it’s a framework for empirical exploration, not a substitute. In the end, real world evidence is what matters.

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