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August 8, 2015

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Posted: 08 Aug 2015 12:06 AM PDT

Paul Krugman: From Trump on Down, the Republicans Can’t Be Serious

Posted: 07 Aug 2015 09:08 AM PDT

They're all nuts:

From Trump on Down, the Republicans Can't Be Serious, by Paul Krugman, Commentary, NY Times: This was, according to many commentators, going to be the election cycle Republicans got to show off their "deep bench." The race for the nomination would include experienced governors like Jeb Bush and Scott Walker, fresh thinkers like Rand Paul, and attractive new players like Marco Rubio. Instead, however, Donald Trump leads the field by a wide margin. What happened?
The answer, according to many of those who didn't see it coming, is gullibility: People can't tell the difference between someone who sounds as if he knows what he's talking about and someone who is actually serious about the issues. And for sure there's a lot of gullibility out there. But if you ask me, the pundits have been at least as gullible as the public, and still are.
For while it's true that Mr. Trump is, fundamentally, an absurd figure, so are his rivals. If you pay attention to what any one of them is actually saying, as opposed to how he says it, you discover incoherence and extremism every bit as bad as anything Mr. Trump has to offer. And that's not an accident: Talking nonsense is what you have to do to get anywhere in today's Republican Party. ...
The point is that while media puff pieces have portrayed Mr. Trump's rivals as serious men — Jeb the moderate, Rand the original thinker, Marco the face of a new generation — their supposed seriousness is all surface. Judge them by positions as opposed to image, and what you have is a lineup of cranks. And as I said, this is no accident.
It has long been obvious that the conventions of political reporting and political commentary make it almost impossible to say the obvious — namely, that one of our two major parties has gone off the deep end. ...
Until now, however, leading Republicans have generally tried to preserve a facade of respectability, helping the news media to maintain the pretense that it was dealing with a normal political party. What distinguishes Mr. Trump is not so much his positions as it is his lack of interest in maintaining appearances. And it turns out that the party's base, which demands extremist positions, also prefers those positions delivered straight. Why is anyone surprised?
Remember how Mr. Trump was supposed to implode after his attack on John McCain? Mr. McCain epitomizes the strategy of sounding moderate while taking extreme positions, and is much loved by the press corps, which puts him on TV all the time. But Republican voters, it turns out, couldn't care less about him.
Can Mr. Trump actually win the nomination? I have no idea. But even if he is eventually pushed aside, pay no attention to all the analyses you will read declaring a return to normal politics. That's not going to happen; normal politics left the G.O.P. a long time ago. At most, we'll see a return to normal hypocrisy, the kind that cloaks radical policies and contempt for evidence in conventional-sounding rhetoric. And that won't be an improvement.

'Job Growth Remains Strong in July'

Posted: 07 Aug 2015 08:56 AM PDT

Dean Baker on the employment report:

Job Growth Remains Strong in July: Weak wage growth and low EPOPs indicate persisting slack in labor market.
The Labor Department reported the economy added 215,000 jobs in July, while the overall unemployment rate was unchanged at 5.3 percent. The unemployment rate for African Americans fell from 9.5 percent to 9.1 percent, the lowest level since February of 2008. The employment-to-population ratio (EPOP) remained unchanged at 59.3 percent for the population as a whole and 55.8 percent for African Americans.
While the unemployment rate has been falling sharply in the last four years, the EPOP has moved much less, having risen by just 1.1 percentage points from its low point in 2011. Only a small portion of this decline can be explained by demographics as the EPOP for prime-age men (ages 25-54) is still down by almost three percentage points from its pre-recession level. This is almost certainly an indication of ongoing weakness in the labor market.

EPOP, Prime-Age Men, 1996-2015

 Most of the other data in the household survey showed little change. The median duration of unemployment spells remained constant, while the average duration and share of long-term unemployment both increased slightly, but were still below May levels. The share of unemployment due to voluntary quits increased to 10.2 percent, the same as the March level.
There has been an interesting shift in the age distribution of employment growth in the last year. Earlier in the recovery, workers over age 55 had accounted for the bulk of growth in employment. This group accounted for 68.1 percent of employment growth from July of 2010 to July of 2013; however, they account for just 42.7 percent of employment growth over the last two years.
This is primarily a story of lower employment growth among women over age 55. Employment growth for women over age 55 had averaged 679,000 in the two years from July 2011 to July 2013; it has averaged just 374,000 in the last two years. This likely reflects the impact of the Affordable Care Act, as many pre-Medicare age women no longer need to rely on their jobs to get insurance for themselves or family members. Younger workers, between the ages of 25-34, may have been the beneficiaries of this decision as there has been a notable uptick in employment growth among this group.
In addition to the healthy job growth in July, the increases for May and June in the establishment data were also revised up slightly to bring the 3-month average to 235,000. However, there is still no evidence of this job growth leading to wage pressures. The average hourly wage rose 5 cents in July, but this followed a drop of 1 cent in June. This brings the annual growth rate for the last three months compared to the prior three months to just 1.9 percent, compared with a 2.1 percent increase over the last year.
The mix of jobs was a bit peculiar with the non-durable manufacturing sector adding 23,000 jobs. This is the biggest gain in the sector since a gain of 26,000 in August of 1991. This was driven by gains of 9,100 in food processing and 5,800 in plastics and rubber products. By contrast, health care had slower growth, adding 27,900 jobs after adding an average of 45,900 jobs the prior three months. Insurance carriers were again a big job gainer, adding 9,600 jobs. Retail added 35,900 jobs and restaurants added 29,300, both roughly in line with their averages over the last year.
The management services sector added 13,700 jobs. This sector has grown especially rapidly in the recovery adding 356,000 jobs in the last five years, an increase of 19 percent. The temporary employment sector lost 8,900 jobs. The government sector had a gain of 5,000 jobs driven by a gain of 8,000 at the local level.
The overall story in this report is moderately positive, but still indicates the labor market has a long way to go to recover from the downturn. It is important to recognize that these are healthy job growth numbers, but not what we would expect after a steep downturn. At its peak growth, the economy was adding more than 400 thousand jobs a month following the 1981–82 recession. This would be equivalent to 600 thousand a month in today's labor market.

See also Calculated Risk (here too).

'Inventing Prizes: A Historical Perspective on Innovation Awards and Technology Policy'

Posted: 07 Aug 2015 08:54 AM PDT

Kevin Bryan:

"Inventing Prizes: A Historical Perspective on Innovation Awards and Technology Policy," B. Z. Khan (2015): B. Zorina Khan is an excellent and underrated historian of innovation policy. In her new working paper, she questions the shift toward prizes as an innovation inducement mechanism. The basic problem ... is that patents are costly in terms of litigation, largely due to their uncertainty, that patents impose deadweight loss by granting inventors market power... (as noted at least as far back as Nordhaus 1969), and that patent rights can lead to an anticommons which in some cases harms follow-on innovation (see Scotchmer and Green and Bessen and Maskin for the theory, and papers like Heidi Williams' genome paper for empirics).
There are three main alternatives to patents, as I see them. First, you can give prizes, determined ex-ante or ex-post. Second, you can fund R&D directly with government, as the NIH does for huge portions of medical research. Third, you can rely on inventors accruing rents to cover the R&D without any government action, such as by keeping their invention secret, relying on first mover advantage, or having market power in complementary goods. We have quite a bit of evidence that the second, in biotech, and the third, in almost every other field, is the primary driver of innovative activity.
Prizes, however, are becoming more and more common. ... What Khan notes is that prizes have been used frequently in the history of innovation, and were frankly common in the late 18th and 19th century. How useful were they?
Unfortunately, prizes seem to have suffered many problems. ..., prize designers don't know enough about the relative import of various ideas to set price amounts optimally, prizes in practice are often too small to have much effect, and prizes lead to more lobbying and biased rewards than patents. We shouldn't go too far here; prizes still may be an important part of the innovation policy toolkit. But the history Khan lays out certainly makes me more sanguine that they are a panacea. ...
[July 2015 NBER Working Paper (RePEc IDEAS). I'm afraid the paper is gated if you don't have an NBER subscription, and I was unable to find an ungated copy.]

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