The week links

I've decided to start a weekly overview of some of the decent articles on the web, not always having the time to comment on each of them in detail, but still would like to share some of their ideas to my readers. This will be in addition to the "graph of the week" column, with a slightly more interesting play of words. (I wanted to call it "the best of the rest" but someone else had already used it). After all, a lot of economics bloggers apply this practice, so I'm gonna do the same.

Here they are for this week:

1. David Brooks, "The Inequality Problem", New York Times:

"If you have a primitive zero-sum mentality then you assume growing affluence for the rich must somehow be causing the immobility of the poor, but, in reality, the two sets of problems are different, and it does no good to lump them together and call them “inequality.” 

...If you think the problem is “income inequality,” then the natural response is to increase incomes at the bottom, by raising the minimum wage.  

But raising the minimum wage may not be an effective way to help those least well-off ... That’s because raises in the minimum wage are not targeted at the right people. Only 11 percent of the workers affected by such an increase come from poor households. Nearly two-thirds of such workers are the second or third earners living in households at twice the poverty line or above.

The primary problem for the poor is not that they are getting paid too little for the hours they work. It is that they are not working full time or at all. Raising the minimum wage is popular politics; it is not effective policy. 

...Some on the left have always tried to introduce a more class-conscious style of politics. These efforts never pan out. America has always done better, liberals have always done better, when we are all focused on opportunity and mobility, not inequality, on individual and family aspiration, not class-consciousness.

If we’re going to mobilize a policy revolution, we should focus on the real concrete issues: bad schools, no jobs for young men, broken families, neighborhoods without mediating institutions. We should not be focusing on a secondary issue and a statistical byproduct."

 The entire article is very intuitive. I recommend it.

2. Chris Giles, "Productivity crisis haunts the global economy", Financial Times.

The Conference Board said: “This stalling appears to be the result of slowing demand in recent years, which caused a drop in productive use of resources that is possibly related to a combination of market rigidities and stagnating innovation”.

The failure of overall efficiency – known to economists as total factor productivity – to grow in 2013 results from slower economic growth in emerging economies alongside continued rapid increases in capital used and labour inputs. Labour productivity growth also slowed for the third consecutive year. 

Mr van Ark said Europe’s problem in achieving more efficiency from its labour force stemmed from structural rigidities. “We really see the need for more people to move quickly from one company to another and where [innovative] firms do not see huge risks in taking on these people”. 

3. Acemoglu & Robinson: "Democracy's pains", Why Nations Fail blog

"Democracy will function better, and has a better chance of approximating our ideal “inclusive political institutions,” when complemented by non-electoral constraints, which includes not just the media but also the willingness of ordinary people to get up and protest in the streets.

...

Though the conundrum of patronage-based elections under imperfect institutions has no simple solution, a good case can be made that the way to increase the inclusivity of political institutions is not to ignore the ballot box, but to utilize it, together with protests when necessary. But so long as elites and a vocal minority refuse to accept electoral results they don’t like, the path to a healthy democracy and truly inclusive institutions will be long, arduous and perhaps blocked for a long time."

4. Robert Shiller: "The Rationality Debate, Simmering in Stockholm", New York Times - he asks whether people are rational in economic decision making, referring to the Nobel Prize lectures given by Fama, Hansen and himself in December: 

"The question is not simply whether people are rational. It’s about how best to describe their complex behavior. A broader notion of irrationality may someday be reconciled with one of rationality, and account for actual human behavior."

5. "Technology and jobs: Coming to an office near you", The Economist (arch theme of last week's issue)

"Although innovation kills some jobs, it creates new and better ones, as a more productive society becomes richer and its wealthier inhabitants demand more goods and services. A hundred years ago one in three American workers was employed on a farm. Today less than 2% of them produce far more food. The millions freed from the land were not consigned to joblessness, but found better-paid work as the economy grew more sophisticated. Today the pool of secretaries has shrunk, but there are ever more computer programmers and web designers."

I wrote about the impact of technology on jobs quite a lot over the last year (see here, here, here and here), and it's nice to see the Economist agreeing with me and even using some of the same arguments I used.