Rising inequality and stagnating growth have led to a resurgence of interest in questions about the distribution of income, saving, and wealth and a renewed appreciation of the benefits of integration of micro and macro data. At the same time, quality problems with survey data are growing. The session will investigate what we can learn from the existing distributional data, potential new approaches to collecting and using distributional data, and strategies for improving the availability and quality of distributional data.
Chair:
Speaker:
- Shaida Badiee, Managing Director and Co-founder, Open Data Watch
Discussants:
- Sabina Alkire, Director, Oxford Poverty and Human Development Initiative, and Professor of Economics, George Washington University
- Pali Lehohla, Director General of Statistics South Africa
- Conchita D’Ambrosio, Professor of Economics at University of Luxembourg
This isn’t a book about how to raise IQ: it’s a book about the benefits of raising IQ. And a higher IQ helps in ways you might not have realized: on average, people who do better on standardized tests are more patient, are more cooperative, and have better memories. But while dozens of studies by psychologists and economists have established these links, few researchers have connected the dots to ask what this means for entire nations. And since average test scores vary across nations—whether we’re talking about math tests, literacy tests, or IQ tests—an overall rise in national test scores likely means a rise in the number of more patient, more cooperative, and better-informed citizens. This in turn means that higher national test scores will probably matter in ways too big to ignore. And if education researchers and public health officials can find reliable ways to raise national test scores, productivity and prosperity will rise where poverty and disease now flourish.
Most economists are certain that human capital is as important to productivity growth as physical capital. And to some degree, that’s obviously true. Modern economies would not be possible without widespread literacy and numeracy: many emerging economies are held back by inadequate skills.
But one striking feature of the modern economy is how few skilled people are needed to drive crucial areas of economic activity. Facebook has a market value of $374 billion but only 14,500 employees. Microsoft, with a market value of $400 billion, employs just 114,000. GlaxoSmithKline, valued at over $100 billion, has a headcount of just 96,000.
The workforces of these three companies are but a drop in the ocean of the global labor market. And yet they deliver consumer services enjoyed by billions of people, create software that supports economy-wide productivity improvements, or develop drugs that can deliver enormous health benefits to hundreds of millions of people...
Projections by the US Bureau of Labor Statistics (BLS) for job creation over the next ten years illustrate the pattern. Of the top ten occupational categories that account for 29% of all forecast job creation, only two – registered nurses and operational managers – pay more, on average, than US median earnings, while most of the other eight pay far less.Employment is growing fastest in face-to-face services such as personal care. These jobs are more difficult to automate than manufacturing or information services; but, according to the BLS, they require only limited formal skills or on-the-job training. And job categories that require specialist ICT skills do not even make the top ten. The BLS foresees 458,000 more personal-care aides and 348,000 home health aides, but only 135,000 more software and application developers.But wouldn’t better skills enable people currently in rapidly growing but low-pay job categories to get higher paid jobs? In many cases, the answer may be no. However many people are able to code, only a very small number will ever be employed for their coding skills. And even if someone currently in a low-skill job is equipped to perform a high-skilled one at least adequately, that job may still go to an employee with yet higher skills, and the pay differential may still be great: in many jobs, relative skill ranking may matter more than absolute capability.So “better education and more skills for all” may be less important to productivity growth and a less powerful tool to offset inequality than conventional wisdom supposes. But that would not undermine in the least the personal and social value of education.
Over 40% of all absenteeism is due to mental illness (and most of this mental illness is unconnected with the atmosphere at work). If mentally ill people were no more absent than other workers, hours worked would rise by 1.2% in continental Europe and slightly more in Britain.“Even in the most boring of circumstances, these technologies could lead to fairer, more objective outcomes for people up and down the economic stack,” says Behlendorf.
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Hyperledger itself formed a working group last month that will propose projects in health care. Making it easier for patients to move their medical records between providers is one area of interest. The government has spent billions to advance the idea of portable electronic health records. But progress has been slow because organizations see keeping patient data siloed as a competitive advantage. Attempts by Google and Microsoft to build repositories for health data have fallen flat.
Companies, researchers, and even the U.S. government are now considering how blockchains could break the deadlock. Behlendorf argues that the technology could create infrastructure that gives patients primary control over their data. “This is an industry that is in need of additional ideas on how to share,” he says.
Over the next year, experimentation from Hyperledger and others will start to provide more concrete evidence of whether the technology can deliver disruptive ideas like that, says Chris Curran, chief technologist at PwC, which is working with companies in finance and other sectors interested in blockchains. “We’re coming to a moment when we’ll find out if this really can reinvent industries,” he says.
If you want to know what economic policy would look like in a Hillary Clinton administration, you can read her speeches or policy positions or look at the backgrounds of the advisers she surrounds herself with.
But it’s also worth examining a 21-page briefing paper issued on Oct. 25 by Obama White House economists about an important concept with a forbidding name: labor market monopsony. The paper is a prime example of the direction left-of-center economic policy is going, evident not just in the Obama administration’s second-term priorities but in a range of work at liberal think tanks and in Mrs. Clinton’s own economic proposals.Labor market monopsony is the idea that when there isn’t enough competition among businesses, it is bad news for workers. When an industry includes only a few big companies, they don’t have to compete with one another as hard to attract employees — and so end up paying their workers less than they would if there were true competition. It’s the flip side of how monopoly power lets companies charge higher prices to consumers.It’s an idea that has a long lineage in economic thought but has been barely discussed in mainstream policy-making circles until recently. Every year since 1947, White House economists have issued the “Economic Report of the President,” describing in great detail the United States’ strengths and challenges. The phrase “labor market monopsony” appears not once in tens of thousands of pages.The talk of monopsony is part of a shift in the policy tools that many left-of-center economic thinkers see as most promising for addressing the economic challenges of poor and middle-class Americans. Rather than focusing on policies that amount to redistribution — tax rates, the social welfare system — they are looking at how the rules of the economic game shape people’s outcomes.Some use a term for this set of policies coined by the Yale political scientist Jacob Hacker: predistribution policy. This is policy that shapes how the market works in the first place, as opposed to redistribution policy, which assumes a free market will generate growth and then uses taxes and spending to give a lift to the economy’s losers.To understand the dueling approaches, think of a professional sports league that finds that richer, big-market teams are consistently at an advantage, making games less entertaining. One approach would be to tack on a few extra points to the small-market team’s score when it plays a larger rival. That’s the equivalent of redistribution.
How did you come to study those three topics?
I wanted to study issues that matter to development, i.e. inequality, infrastructure and fiscal capacity, using Brazil as a reference. I was also very curious to better understand the extent to which events in the past still influence development outcomes today. It motivated me and my co-author – Felipe Valencia, from the University of Bonn – to explore the effects of slavery on inequality, using colonial institutions to eliminate the problem of endogeneity between economic activities and location of slaves. The same curiosity led me to identify a historical telegraph line laid in the wilderness of the Amazon forest in the beginning of the twentieth century and to use it as an instrumental variable for the current road in order to evaluate its impact on development outcomes and deforestation. Finally, fiscal capacity is a topic that has attracted me from the outset of my professional career working in governments and international organisations.Tell us about your findings.In the first paper, “Tordesillas, Slavery and the Origins of Brazilian Inequality”, we find that the effect of slavery on income inequality, measured by the Gini coefficient, is 0.103, which corresponds to 20.7% of the average income inequality measure of our sample. The main channels of persistence identified are income racial imbalance, education racial imbalance and public institutions.
In the second paper, “From Telegraphs to Space: Transport Infrastructure, Development and Deforestation in the Amazon”, I find that for each kilometre’s distance from the highway, the income decreases on average by 0.10%. Transport infrastructure has also affected deforestation in the Amazon as it opens new frontiers for cattle farming and soybean agriculture. For each kilometre’s distance from the highway, the average percentage of trees per pixel increases from 2% to 9%. I also observe that in indigenous areas the forest coverage by pixel is 24% larger than in other areas.
In the third paper, “Ready to Tax: What Happens When Brazilian Municipalities Invest in Fiscal Capacity?”, I find that certain types of investments in fiscal capacity increase property tax revenues by USD 1.3 to USD 1.6 per capita annually, given that the average property tax revenue per capita of the full sample is USD 9.34. The results also show that the number of households in a municipality where waste is collected increases by 2,210 on average when the municipality invests in fiscal capacity in comparison to those that do not. In addition, I do not find evidence that investments in fiscal capacity affect re-election outcomes.
However, the achievement of high growth – even high levels of sustainable growth – must ultimately be judged in terms of the impact of that economic growth on the lives and freedoms of the people.
Redistribution, as distinct from growth, cannot be the answer to removing poverty. In countries such as India, China, and Brazil, the large numbers of the poor mean that redistribution will do little and that, too, will not be sustainable. A peasant may get no more than another chappati or burrito a day: we quote the great communist economist Kalecki of Poland, who told one of us in 1962 that the problem for India is that “there are too many exploited and too few exploiters.” The pie has to grow; growth is a necessity.Bhagwati, Jagdish; Panagariya, Arvind. Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries .
Inequality of outcome among today’s generation is the source of the unfair advantage received by the next generation. If we are concerned about equality of opportunity tomorrow, we need to be concerned about inequality of outcome today.
A common myth, promoted by the rich, is that wealth is produced individually before it is collectivized by the state, through taxation. In fact, wealth was always produced collectively and privatized by those with the power to do it: the propertied class. Farmland and seeds, pre-modern forms of capital, were collectively developed through generations of peasant endeavor that landlords appropriated by stealth. Today, every smartphone comprises components developed by some government grant, or through the commons of pooled ideas, for which no dividends have ever been paid to society.So how should society be compensated? Taxation is the wrong answer. Corporations pay taxes in exchange for services the state provides them, not for capital injections that must yield dividends. There is thus a strong case that the commons have a right to a share of the capital stock, and associated dividends, reflecting society’s investment in corporations’ capital. And, because it is impossible to calculate the size of state and social capital crystalized in any firm, we can decide how much of its capital stock the public should own only by means of a political mechanism.A simple policy would be to enact legislation requiring that a percentage of capital stock (shares) from every initial public offering (IPO) be channeled into a Commons Capital Depository, with the associated dividends funding a universal basic dividend (UBD). This UBD should, and can be, entirely independent of welfare payments, unemployment insurance, and so forth, thus ameliorating the concern that it would replace the welfare state, which embodies the concept of reciprocity between waged workers and the unemployed.
As a general rule wealth grows faster than economic output, he explains, a concept he captures in the expression r > g (where r is the rate of return to wealth and g is the economic growth rate). Other things being equal, faster economic growth will diminish the importance of wealth in a society, whereas slower growth will increase it (and demographic change that slows global growth will make capital more dominant). But there are no natural forces pushing against the steady concentration of wealth. Only a burst of rapid growth (from technological progress or rising population) or government intervention can be counted on to keep economies from returning to the “patrimonial capitalism” that worried Karl Marx. Piketty closes the book by recommending that governments step in now, by adopting a global tax on wealth, to prevent soaring inequality contributing to economic or political instability down the road.
