I call the section ‘Money Stuff’ but as a column name that is rather taken. There has been lots to write about on this front that didn’t fall neatly into other categories. It clearly benefited a lot from being better organized into subsections, and the monthly roundups could benefit from being shorter, so this will probably become a regular thing.
Great piece as usual. One thing in particular that caught my attention was:
"I certainly have considered whether to leave New York for the same reason, and almost did so at one point. I ultimately decided to stay put, but I am paying a hell of a lot of money to be here."
As a New Yorker I've had similar thoughts over the years, but also have ended up staying. If you did leave, where would you go instead? Have you considered splitting your time to have residence somewhere else but just stay in New York for a few months a year?
I haven’t read the EMH iff P = NP paper in detail yet, just skimmed the first 10 pages, but my low confidence guess is that it makes no sense. Certainly the conclusion is implausible, as I can perfectly well encode a PSPACE-complete problem into a market. And also their definitions take ages to express and seem unlikely to hold up on a closer reading.
Excellent piece overall but I think you're overselling the advantages of overbooked flights (although I can't claim that you lack experience). The trouble with airline delays is that the airlines virtually never offer to just cut you a check. Instead, they offer a voucher with an expiry date that will predictably be a pain in the ass to redeem to and can only be used to buy services from the same airline that just fucked you by overbooking an (often predictably) high-demand flight.
The issue isn't that the airlines are paying people based on the elasticity of their schedules and marginal utility of money, it's that they're "paying" people with a combination of scrip and transaction costs with radically lower (if non-zero) value than face amount, instead of just giving out actual cash.
I think you’re wrong about Federation warships. Starfleet doesn’t optimize for defeating near peer competitors militarily. They live in a universe where liberalism works, so they try to reach diplomatic solutions with other liberals or near-liberals, and they can play for time and out-scale any non-liberals.
The fleet and its officers and rules are set up to make things easier on the diplomatic front and to not piss off any of the godlike entities that litter the galaxy, while still trying to follow their ideological commitments.
(Also, like so many things this breaks in DS9, but in TOS and TNG things work like in the Age of Sail, there are huge offensive and defensive advantages to just being the bigger ship.)
That first graph with layoffs does not contain enough information to tell us anything about the job market, and I would be very suspicious of anyone who presents that as otherwise, whether from mistake or intent.
Why? Because those are only layoffs, and we don't know what the state of those jobs are, or the total jobs. Did that giant spike in 2020 (~2x the previous yearly average) represent a lot of people laid off and then rehired at the same company or somewhere else, or did those jobs permanently go away, either as eliminated positions or companies that closed forever? That is a massively important point, as it if they represent workers laid off but reabsorbed later it might just be there was a build up of underutilized workers, things correct and we are back normal (although the 5 year average would still bit way above the previous averages). If those jobs went away for ever, then we are just short that many jobs, and getting back to regular levels of layoffs still implies we are at a lower level.
In other words, 2020 might represent a step change in employment that is not shown in a graph of absolute number of layoffs. A more informative graph would be layoffs per worker, layoffs per job. In fact it is a little surprising that isn't the case, because economists almost always normalize in some way.
It is times like these where I feel I must remind myself that the government is the one that typically gathers and distributes economic data, while at the same time being the group that is measured on how well the economy is doing. Perhaps not incentive compatible.
> However, once we have made that decision to mostly tax income rather than consumption, making an exception in particular for retirement accounts seems like a clear mistake to me given everything we now know, if we assume the revenue deficit is made up for by higher income taxes elsewhere.
It doesn't seem that way to me. You agree it's better to tax consumption than investment, and higher income taxes with retirement exempted will come more from consumption. Whether we've "made the decision" not to have a consumption tax is irrelevant. One could as well say that we've "made the decision" to exempt requirement accounts.
(2) If you were an aging country, with one massive very price inelastic buyer of healthcare . . . what would you expect to see? Would you have some concern that Uncle Sam's "buy-now-pay-later" knee replacements and eldercare would take a dominant share of GDP, and perhaps hide what is otherwise relative stagnation? I think you might, and that's what we're seeing. If you want to be even more pessimistic, consider how much of private construction spending (another big procyclical thing) is subsidized by the IRA? Private real estate construction is flat.
(3) Point about aggregate consumer spending is a less-lagged proxy for employment and an alternate (perhaps better) proxy for growth. Think of it as aggregate revenue growth for consumer businesses. It's generally a good sign that it's up (and consumers are pretty smart about what gets the best bang for their buck), but it's historically a *lagging* indicator for a recession. People lose their jobs first, and then stop spending.
I don't think it makes sense to want people to spend or save or whatever. What you want is for people to move up and to the right, and how they express that, varies on their preferences. If people were saving a lot, you might see it as "having nothing better to do with their money" problem, but then the problem is "lack of good investment options" and not "aggregate savings is too high" (which is macro-tail-wagging-micro-dog). Savings rate are low now because people are spending what they make--"should" it be low or high is depends on what you're trying to learn. Japan "saved too much" (I suspect) because old people save. The problem is that Japan got old, not that the savings rate is too high.
(4) The point of services spend specifically is that aging--a secular shortage of working age people--is the inflationary force that keeps on giving. Fewer people turns into higher wages (especially for "blue collar" workers), which turns into higher prices, which leaves services more expensive, but not better, at least not yet. Where are the wage gains the highest recently? Healthcare. The result (I think, and it's borne out by the data) is a shift from service-spend to goods-spend--if services are worse, people tradedown where they can, but otherwise find more bang-for-the-buck elsewhere. Uncle Sam though doesn't trade down--just keeps putting it on the company card.
Eventually, though, supply-demand being what it is, there's some concern that if white collar wages don't start going up too, then demand for those expensive services will soften, and so too will demand for those service workers. But innovation and efficiency could also close that gap.
Regarding California's taxes, it is absolutely brutal looking at how expensive everything is. I'm making money by moving there, but not very much more. It's incredibly annoying that taxes are mandatory and don't even buy you anything good
Trek is a world where replicators provide a high level of UBI and people have been culturally attuned to a more altruistic use of their time and talents, but scarcity hasn't been completely eliminated. It seems to have a concept of "intellectual property" (though people often give it away for free) and big time energy use seems to have some kind of limitation (dilithium crystals, you can't replicate a starship, etc).
There also appears to be some kind of "money". Sometimes they call it federation credits. Which is clearly less fungible than latinum but still used for trade. My guess is that there still exists some price mechanism for the use of rival goods (space, non-replicable goods, intellectual property, peoples time) and that federation credits are a kind of money with limited convertibility or cultural norms about using it only in certain ways.
There is also probably some universal requirement to work, but perhaps its very limited in scope (say one day a week).
What's puzzling is that the federations rivals seem to engage in artificial scarcity? It's hard to understand exactly what is going on there. Unless replicators are very expensive to produce, you would think every society would adopt them. Do other societies have less access to dylithium crystals? Maybe the implication is that their governments keep them intentionally impoverished? Buy why? The Cardassianians backstory is that they needed to expand to get raw materials, but couldn't they replicated raw materials?
One potentially relevant fact about the Minneapolis cab industry (as it was), that the sources you cite don't mention explicitly, is that it's heavily dominated by Somali-Americans. (Yes, really, there's a thriving Somali immigrant community in frozen Minnesota of all places, tracing back to local church organizations historically doing a lot of refugee aid.) I'm not sure how much that implies for the current rideshare landscape but the political situation seems consistent with drivers having unusually high solidarity (compared to NYC, say) and operating as a de facto union that "bargains" with Uber and Lyft via legislation.
The bit on pay transparency seems overly partial. It is not in any obvious way an obnoxious privacy issue; Norway et al handle it quite fine. Now there is certainly evidence that horizontal price transparency has even palpable downward effects of worker wages, even up to 2.7%(!) in the Danish example cited. That Bennedtsen paper also seems to conclude that "the gender pay gap declines by 2 percentage points, or 13% relative to the prelegislation mean", which might in some society be seen as a trade-off worth pursuing. And let's not entirely omit the interesting conclusion of Cullen's article: "vertical and cross-firm pay transparency policies that ameliorate information frictions in the labor market more broadly have shown potential to improve motivation and talent allocation and sharpen competition, and, in so doing, raise wages, productivity, and equity."
Great piece as usual. One thing in particular that caught my attention was:
"I certainly have considered whether to leave New York for the same reason, and almost did so at one point. I ultimately decided to stay put, but I am paying a hell of a lot of money to be here."
As a New Yorker I've had similar thoughts over the years, but also have ended up staying. If you did leave, where would you go instead? Have you considered splitting your time to have residence somewhere else but just stay in New York for a few months a year?
I haven’t read the EMH iff P = NP paper in detail yet, just skimmed the first 10 pages, but my low confidence guess is that it makes no sense. Certainly the conclusion is implausible, as I can perfectly well encode a PSPACE-complete problem into a market. And also their definitions take ages to express and seem unlikely to hold up on a closer reading.
Excellent piece overall but I think you're overselling the advantages of overbooked flights (although I can't claim that you lack experience). The trouble with airline delays is that the airlines virtually never offer to just cut you a check. Instead, they offer a voucher with an expiry date that will predictably be a pain in the ass to redeem to and can only be used to buy services from the same airline that just fucked you by overbooking an (often predictably) high-demand flight.
The issue isn't that the airlines are paying people based on the elasticity of their schedules and marginal utility of money, it's that they're "paying" people with a combination of scrip and transaction costs with radically lower (if non-zero) value than face amount, instead of just giving out actual cash.
I think you’re wrong about Federation warships. Starfleet doesn’t optimize for defeating near peer competitors militarily. They live in a universe where liberalism works, so they try to reach diplomatic solutions with other liberals or near-liberals, and they can play for time and out-scale any non-liberals.
The fleet and its officers and rules are set up to make things easier on the diplomatic front and to not piss off any of the godlike entities that litter the galaxy, while still trying to follow their ideological commitments.
(Also, like so many things this breaks in DS9, but in TOS and TNG things work like in the Age of Sail, there are huge offensive and defensive advantages to just being the bigger ship.)
That first graph with layoffs does not contain enough information to tell us anything about the job market, and I would be very suspicious of anyone who presents that as otherwise, whether from mistake or intent.
Why? Because those are only layoffs, and we don't know what the state of those jobs are, or the total jobs. Did that giant spike in 2020 (~2x the previous yearly average) represent a lot of people laid off and then rehired at the same company or somewhere else, or did those jobs permanently go away, either as eliminated positions or companies that closed forever? That is a massively important point, as it if they represent workers laid off but reabsorbed later it might just be there was a build up of underutilized workers, things correct and we are back normal (although the 5 year average would still bit way above the previous averages). If those jobs went away for ever, then we are just short that many jobs, and getting back to regular levels of layoffs still implies we are at a lower level.
In other words, 2020 might represent a step change in employment that is not shown in a graph of absolute number of layoffs. A more informative graph would be layoffs per worker, layoffs per job. In fact it is a little surprising that isn't the case, because economists almost always normalize in some way.
It is times like these where I feel I must remind myself that the government is the one that typically gathers and distributes economic data, while at the same time being the group that is measured on how well the economy is doing. Perhaps not incentive compatible.
> However, once we have made that decision to mostly tax income rather than consumption, making an exception in particular for retirement accounts seems like a clear mistake to me given everything we now know, if we assume the revenue deficit is made up for by higher income taxes elsewhere.
It doesn't seem that way to me. You agree it's better to tax consumption than investment, and higher income taxes with retirement exempted will come more from consumption. Whether we've "made the decision" not to have a consumption tax is irrelevant. One could as well say that we've "made the decision" to exempt requirement accounts.
Thanks for mentioning!
A few things:
(1) re. healthcare, it is the data--it's also what the BLS itself chooses to highlight (that growth is driven by healthcare consumption). It's not the only source of growth, but it's a large share. It's also a very large share of job growth (most recently, here https://www.therandomwalk.co/i/142756846/high-earners-we-hardly-knew-ye but also here https://www.therandomwalk.co/i/140486836/healthcare-makes-all-the-jobs)
(2) If you were an aging country, with one massive very price inelastic buyer of healthcare . . . what would you expect to see? Would you have some concern that Uncle Sam's "buy-now-pay-later" knee replacements and eldercare would take a dominant share of GDP, and perhaps hide what is otherwise relative stagnation? I think you might, and that's what we're seeing. If you want to be even more pessimistic, consider how much of private construction spending (another big procyclical thing) is subsidized by the IRA? Private real estate construction is flat.
(3) Point about aggregate consumer spending is a less-lagged proxy for employment and an alternate (perhaps better) proxy for growth. Think of it as aggregate revenue growth for consumer businesses. It's generally a good sign that it's up (and consumers are pretty smart about what gets the best bang for their buck), but it's historically a *lagging* indicator for a recession. People lose their jobs first, and then stop spending.
I don't think it makes sense to want people to spend or save or whatever. What you want is for people to move up and to the right, and how they express that, varies on their preferences. If people were saving a lot, you might see it as "having nothing better to do with their money" problem, but then the problem is "lack of good investment options" and not "aggregate savings is too high" (which is macro-tail-wagging-micro-dog). Savings rate are low now because people are spending what they make--"should" it be low or high is depends on what you're trying to learn. Japan "saved too much" (I suspect) because old people save. The problem is that Japan got old, not that the savings rate is too high.
(4) The point of services spend specifically is that aging--a secular shortage of working age people--is the inflationary force that keeps on giving. Fewer people turns into higher wages (especially for "blue collar" workers), which turns into higher prices, which leaves services more expensive, but not better, at least not yet. Where are the wage gains the highest recently? Healthcare. The result (I think, and it's borne out by the data) is a shift from service-spend to goods-spend--if services are worse, people tradedown where they can, but otherwise find more bang-for-the-buck elsewhere. Uncle Sam though doesn't trade down--just keeps putting it on the company card.
Eventually, though, supply-demand being what it is, there's some concern that if white collar wages don't start going up too, then demand for those expensive services will soften, and so too will demand for those service workers. But innovation and efficiency could also close that gap.
Regarding California's taxes, it is absolutely brutal looking at how expensive everything is. I'm making money by moving there, but not very much more. It's incredibly annoying that taxes are mandatory and don't even buy you anything good
Trek is a world where replicators provide a high level of UBI and people have been culturally attuned to a more altruistic use of their time and talents, but scarcity hasn't been completely eliminated. It seems to have a concept of "intellectual property" (though people often give it away for free) and big time energy use seems to have some kind of limitation (dilithium crystals, you can't replicate a starship, etc).
There also appears to be some kind of "money". Sometimes they call it federation credits. Which is clearly less fungible than latinum but still used for trade. My guess is that there still exists some price mechanism for the use of rival goods (space, non-replicable goods, intellectual property, peoples time) and that federation credits are a kind of money with limited convertibility or cultural norms about using it only in certain ways.
There is also probably some universal requirement to work, but perhaps its very limited in scope (say one day a week).
What's puzzling is that the federations rivals seem to engage in artificial scarcity? It's hard to understand exactly what is going on there. Unless replicators are very expensive to produce, you would think every society would adopt them. Do other societies have less access to dylithium crystals? Maybe the implication is that their governments keep them intentionally impoverished? Buy why? The Cardassianians backstory is that they needed to expand to get raw materials, but couldn't they replicated raw materials?
One potentially relevant fact about the Minneapolis cab industry (as it was), that the sources you cite don't mention explicitly, is that it's heavily dominated by Somali-Americans. (Yes, really, there's a thriving Somali immigrant community in frozen Minnesota of all places, tracing back to local church organizations historically doing a lot of refugee aid.) I'm not sure how much that implies for the current rideshare landscape but the political situation seems consistent with drivers having unusually high solidarity (compared to NYC, say) and operating as a de facto union that "bargains" with Uber and Lyft via legislation.
The bit on pay transparency seems overly partial. It is not in any obvious way an obnoxious privacy issue; Norway et al handle it quite fine. Now there is certainly evidence that horizontal price transparency has even palpable downward effects of worker wages, even up to 2.7%(!) in the Danish example cited. That Bennedtsen paper also seems to conclude that "the gender pay gap declines by 2 percentage points, or 13% relative to the prelegislation mean", which might in some society be seen as a trade-off worth pursuing. And let's not entirely omit the interesting conclusion of Cullen's article: "vertical and cross-firm pay transparency policies that ameliorate information frictions in the labor market more broadly have shown potential to improve motivation and talent allocation and sharpen competition, and, in so doing, raise wages, productivity, and equity."
"standard caveat that of course much of healthcare is highly valuable, as was driven home to me this past two weeks"
The cancer that's killing me is being held at bay only by healthcare that seems, at least from my vantage point, to be high value: https://jakeseliger.com/2023/12/07/tentative-fluttering-optimism-the-surprising-hot-r-d-ferment-in-head-and-neck-cancer-treatment/