The Biden Presidency

Raoul said:
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Hope he does it. Can't wait for Alberta (and especially Jason Kenney) to explode over this. :drool:

This might actually hurt the Canadian economy, but it might also put an end to the waffling about changing economic focus in Alberta and Saskatchewan and help the country get out of the neverending oil and pipelines discussions. Let's head for the future instead.
 
Grinner said:
So you've posted a quote which you don't even know whether it is accurate or not to make some vague point about possible things maybe said 40 years ago about different times and economic realities that maybe Biden doesn't think apply presently?

Or did I miss something?
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Yes, you did miss something! ... oh yes and the past is not 'another country, as Joe will no doubt find out

WI_Red said:
Why are you being so mean to @Maticmaker?
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Ooh Ouch!!..... do I come here often?

Conor said:
Someone might have changed their stance on a topic over the course of 40 years? That's wild, man.
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Correct, but there will always be something there to remind him... social media.... 'fake news' of course, it never happened folks!!!
 
Maticmaker said:
Yes, you did miss something! ... oh yes and the past is not 'another country, as Joe will no doubt find out



Ooh Ouch!!..... do I come here often?



Correct, but there will always be something there to remind him... social media.... 'fake news' of course, it never happened folks!!!
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Do you mean 'the past is a foreign country?'

You're a bit haphazard with your quotes.
 
Grinner said:
Do you mean 'the past is a foreign country?'

You're a bit haphazard with your quotes.
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No, I meant 'another' country.... could be 'foreign', (but that would not make sense in this context) or, that in the past the present country could have been seen as being a different/another country, in terms of outlook, economy, etc. as indeed you referred to ...make some vague point about possible things maybe said 40 years ago about different times and economic realities that maybe Biden doesn't think apply presently?

Arguing against yourself here I think?
 
Maticmaker said:
No, I meant 'another' country.... could be 'foreign', (but that would not make sense in this context) or, that in the past the present country could have been seen as being a different/another country, in terms of outlook, economy, etc. as indeed you referred to ...make some vague point about possible things maybe said 40 years ago about different times and economic realities that maybe Biden doesn't think apply presently?

Arguing against yourself here I think?
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I'm beginning to understand what I've been reading about you.
 
Maticmaker said:
No, I meant 'another' country.... could be 'foreign', (but that would not make sense in this context) or, that in the past the present country could have been seen as being a different/another country, in terms of outlook, economy, etc. as indeed you referred to ...make some vague point about possible things maybe said 40 years ago about different times and economic realities that maybe Biden doesn't think apply presently?

Arguing against yourself here I think?
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Have you had a fall and hit your head?
 
Cheimoon said:
Hope he does it. Can't wait for Alberta (and especially Jason Kenney) to explode over this. :drool:

This might actually hurt the Canadian economy, but it might also put an end to the waffling about changing economic focus in Alberta and Saskatchewan and help the country get out of the neverending oil and pipelines discussions. Let's head for the future instead.
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He’s already moaning even before Biden is President.

 
berbatrick said:
@MTF
One of the few things I internalised and accepted from my compulsory Econ 101 is min wage increases = bad job killer. 10 years since I took the course there are literally tons of carefully obtained data within the US showing next to no effect on jobs.



So my first point is that it seems the field is shifting a bit (perhaps, a funeral at a time, like all fields). And certainly I know there are economists who have weird views on national ebt and deficit spending, and the years since 2008 haven't been bad for their predictions.

Secondly, that the awfulness of minimum wages remains ever-present in the textbooks and among many economists, including this charmer; she was last in the news for telling EMTs that drug addicts should be left to die since saving them is a moral hazard generating more addicts. What I'm trying to say is that econ departments do need "pointless morality tests".

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That Econ 101 thing is (I'm sure you know this) with a simple supply and demand model with perfect competition: a minimum wage set above market wage puts the market out of equilibrium, resulting in deadweight loss. Employers will be strict losers, while some employees will gain and other lose (increased unemployment). Net effect will be negative, net effect for employees can be positive but unemployemt will increase outside of some crazy elastisities. It's a useful framework, but applying that to the job market specifically is ... optimistic, for several reasons.

I don't think it's useful necessarily to poll economists broadly when we're talking about specific empirical questions regarding labor economics (which is of course a specialized field on its own). Jerneck's tweet touches on this indirectly when he points out that labor economists are more likely to support minimum wage increases. You see this is most fields, if you poll philosophers on metaethics then professors working in that specific subfield will have very different views than the average professor (the ethicists are moral realists in much greater numbers, if I remember correctly). In modern academia things are so specialized, there's a limit to how up to date you can be on all the things.

Dube is usually the main go-to guy regarding American data, and his current view is that we have good data on minimum wage increases up to 50-60 % of median wage. Practically no evidence of job loss at this point. Median wage is very different in NYC and rural Mississippi, so how $15/h fits into that is complicated. But the 50-60 % point is just where the data stops (it might be even higher now, I'm too lazy to confirm), not when minimum wage increases suddenly turn bad. And increased unemployent is only one factor when evaluating a minimum wage anyway, not the whole thing.
 
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Raoul said:
He’s already moaning even before Biden is President.

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Like clockwork. They come out like that every time there is any mention of ending the Keystone XL project. Great bit of cherry-picking in that letter. (E.g., "First Nations who have signed partnership agreements" is a great way of implying that all FNs support the pipeline. That wouldn't be true, but don't actually say that either.)

NotThatSoph said:
That Econ 101 thing is (I'm sure you know this) with a simple supply and demand model with perfect competition: a minimum wage set above market wage puts the market out of equilibrium, resulting in deadweight loss. Employers will be strict losers, while some employees will gain and other lose (increased unemployment). Net effect will be negative, net effect for employees can be positive but unemployemt will increase outside of some crazy elastisities. It's a useful framework, but applying that to the job market specifically is ... optimistic, for several reasons.

I don't think it's useful necessarily to poll economists broadly when we're talking about specific empirical questions regarding labor economics (which is of course a specialized field on its own). Jerneck's tweet touches on this indirectly when he points out that labor economists are more likely to support minimum wage increases. You see this is most fields, if you poll philosophers on metaethics then professors working in that specific subfield will have very different views than the average professor (the ethicists are moral realists in much greater numbers, if I remember correctly). In modern academia things are so specialized, there's a limit to how up to date you can be on all the things.

Dube is usually the main go-to guy regarding American data, and his current view is that we have good data on minimum wage increases up to 50-60 % of median wage. Practically no evidence of job loss at this point. Median wage is very different in NYC and rural Mississippi, so how $15/h fits into that is complicated. But the 50-60 % point is just where the data stops (it might be even higher now, I'm too lazy to confirm), not when minimum wage increases suddenly turn bad. And increased unemployent is only one factor when evaluating a minimum wage anyway, not the whole thing.
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Out of curiosity: how does this Dube does his modelling? Do you have a link? I have read before about economists often doing their modelling/predictions based on the assumption of the 'perfect' free-market economy, which is of course flawed as that doesn't exist in practice and people also don't behave fully rationally as expected; but I'd be curious about more reality-based modelling.
 
Can Biden reverse Trump's pardons? I fully expect outgoing wotsit to pardon the idiots who stormed the capitol, would be ridiculous if they get away with it repercussion-free.
 
Cheimoon said:
Out of curiosity: how does this Dube does his modelling? Do you have a link? I have read before about economists often doing their modelling/predictions based on the assumption of the 'perfect' free-market economy, which is of course flawed as that doesn't exist in practice and people also don't behave fully rationally as expected; but I'd be curious about more reality-based modelling.
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Ok, so, this isn't a straight forward question. Models like the very general supply and demand model, or a Solowian growth model, or a Heckscher-Ohlin model trade model etc. etc. are big M models which aim to explain how/why something happens or maybe even will happen. The actual effect of minium wage policies is an empirical question, but empirics is difficult because you're trying to measure the real world which is influenced by a ton of different things, so you need empirical models to do this. You can't just observe that a minimum wage policy happened and then unemployment changed by X some time later and that's that.

In this (pdf file) relatively new working paper Dube et.al. use an empirical model to analyze the effect to 138 minimum wage changes over a 35 year period, where they use bunching (they look at changes in employment directly below and above the minimum wage treshold). This isn't really what most people have in mind when talking about models, though.

There are several different models looking at the labor market specifically, but the easiest is to just think of it in the same supply and demand framework I described above but where employers have some degree of market power. So instead of that graph with two lines you see when you google "supply and demand" you get something like this:

monopsony_wage_1.jpg


With perfect competition the market clears where supply intersect with demand, so at E1 employment at a wage of W1. If employers have market power then you get that third line (because employers can lower the market wage by restricting how many they employ, with full competition they can't), so market wage will be the lower W3 at the lower employment level E2. If a minimum wage is set at a level higher than W3 but not exceeding W1 then wages will rise and employment increase. Above W1 you'll start getting the same effects you see if you google "supply and demand price floor". This is basically what Dube et.al. talks about here (a monopsony is the same thing as a monopoly, but from the demand side instead of the supply side).

So this basically non-answer is that Dube is looking at the labor market using the classic supply and demand model/framework described in Econ 101, but where employers have some degree of market power. He's using a wide variety of empirical models to isolate the effect of the minimum wage policies on wages and employment, and he's then using those empirical findings to predict the effect of future minimum wage policies.
 
NotThatSoph said:
Ok, so, this isn't a straight forward question. Models like the very general supply and demand model, or a Solowian growth model, or a Heckscher-Ohlin model trade model etc. etc. are big M models which aim to explain how/why something happens or maybe even will happen. The actual effect of minium wage policies is an empirical question, but empirics is difficult because you're trying to measure the real world which is influenced by a ton of different things, so you need empirical models to do this. You can't just observe that a minimum wage policy happened and then unemployment changed by X some time later and that's that.

In this (pdf file) relatively new working paper Dube et.al. use an empirical model to analyze the effect to 138 minimum wage changes over a 35 year period, where they use bunching (they look at changes in employment directly below and above the minimum wage treshold). This isn't really what most people have in mind when talking about models, though.

There are several different models looking at the labor market specifically, but the easiest is to just think of it in the same supply and demand framework I described above but where employers have some degree of market power. So instead of that graph with two lines you see when you google "supply and demand" you get something like this:

monopsony_wage_1.jpg


With perfect competition the market clears where supply intersect with demand, so at E1 employment at a wage of W1. If employers have market power then you get that third line (because employers can lower the market wage by restricting how many they employ, with full competition they can't), so market wage will be the lower W3 at the lower employment level E2. If a minimum wage is set at a level higher than W3 but not exceeding W1 then wages will rise and employment increase. Above W1 you'll start getting the same effects you see if you google "supply and demand price floor". This is basically what Dube et.al. talks about here (a monopsony is the same thing as a monopoly, but from the demand side instead of the supply side).

So this basically non-answer is that Dube is looking at the labor market using the classic supply and demand model/framework described in Econ 101, but where employers have some degree of market power. He's using a wide variety of empirical models to isolate the effect of the minimum wage policies on wages and employment, and he's then using those empirical findings to predict the effect of future minimum wage policies.
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Very interesting! Thanks for taking the time to share all that.

I'm not an economist or a statistician, but I think I get most of it. In my understanding, it's predictive analysis rather than theoretical modelling - although I guess there is overlap there. In any case, it's great that they have been able to data mine recent history like that, and it's a pretty good sample size. (Even if not all 138 cases might be equally significant here.)

My immediate reaction, though, is that the analysis ignores further societal factors - such as an increased minimum wage leading to increased spending, setting in motion the chain of increased customer demand > need for increased supply > need for more employees. But you can only account for so much in any analysis - plus maybe that it is captured implicitly by looking how things changed in actual historical situations? (Sorry if this is actually obvious.)
 
Cheimoon said:
Very interesting! Thanks for taking the time to share all that.

I'm not an economist or a statistician, but I think I get most of it. In my understanding, it's predictive analysis rather than theoretical modelling - although I guess there is overlap there. In any case, it's great that they have been able to data mine recent history like that, and it's a pretty good sample size. (Even if not all 138 cases might be equally significant here.)

My immediate reaction, though, is that the analysis ignores further societal factors - such as an increased minimum wage leading to increased spending, setting in motion the chain of increased customer demand > need for increased supply > need for more employees. But you can only account for so much in any analysis - plus maybe that it is captured implicitly by looking how things changed in actual historical situations? (Sorry if this is actually obvious.)
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As with all things it's difficult, but generally you wouldn't expect a significant impact on spending when you don't see large employment effects, rather we're talking about redistribution from employers to employees. So employers spend less while employees spend more. It would certainly impact what people spend on, and that will have some effects, but probably not on total output. That sort of general equilibrium approach you mentioned is used to explain how you can have an increase in labor supply due to immigration without depressing wages (the Mariel boatlift is a famous example of this), but it's probably not very relevant here.

E.g. if you look at an AD-AS model (aggregate demand/aggregate supply) the long run AS curve is vertical, and therefore the constraint on output (GDP/Y). That's because you can't hire more workers than there are. Increased long term growth from a minimum wage increase would then have to shift the AS curve to the right. That's extremely optimistic, I think, but if it were to happen from the top of my head I could think of the following: a) It increases labor productivity. This would have to be via a mechanism like increased motivation, or maybe positive effects on health etc. b) It lowers structural and/or frictional unemployment, and by that increases the amount of available workers when the economy is at full employment (which is not 0 % unemployment).
 
NotThatSoph said:
As with all things it's difficult, but generally you wouldn't expect a significant impact on spending when you don't see large employment effects, rather we're talking about redistribution from employers to employees. So employers spend less while employees spend more. It would certainly impact what people spend on, and that will have some effects, but probably not on total output. That sort of general equilibrium approach you mentioned is used to explain how you can have an increase in labor supply due to immigration without depressing wages (the Mariel boatlift is a famous example of this), but it's probably not very relevant here.

E.g. if you look at an AD-AS model (aggregate demand/aggregate supply) the long run AS curve is vertical, and therefore the constraint on output (GDP/Y). That's because you can't hire more workers than there are. Increased long term growth from a minimum wage increase would then have to shift the AS curve to the right. That's extremely optimistic, I think, but if it were to happen from the top of my head I could think of the following: a) It increases labor productivity. This would have to be via a mechanism like increased motivation, or maybe positive effects on health etc. b) It lowers structural and/or frictional unemployment, and by that increases the amount of available workers when the economy is at full employment (which is not 0 % unemployment).
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Thanks! Right, yes, that's the other thing I had thought of earlier but forgot to mention in my post: employee productivity and retention rising due to the wage increase. Although I suppose that's not as pronounced as in the classic Costco vs. Wal-mart dichotomy (insofar as that's real; it is what I have read about anyway), as employee motivation is not just a function of wage but also various secondary conditions and the company culture more generally.

About the redistribution thing: but don't you also just have a growing economy? Employees get more money, spend it on more, employers have to produce more, hire more people, etc.? Depending on the strength of that feedback loop, additional lay-offs because of the wage increase might be cancelled by the effort to supply for the increased demand, resulting in a new situation where the same number of people are employed for higher wages. Although: I suppose that also assumes that that same number of employees now produces more (otherwise the increased demand is not being met), and I suppose I am getting myself into messy logic now (if not simply wrong).
 
Cheimoon said:
About the redistribution thing: but don't you also just have a growing economy? Employees get more money, spend it on more, employers have to produce more, hire more people, etc.? Depending on the strength of that feedback loop, additional lay-offs because of the wage increase might be cancelled by the effort to supply for the increased demand, resulting in a new situation where the same number of people are employed for higher wages. Although: I suppose that also assumes that that same number of employees now produces more (otherwise the increased demand is not being met), and I suppose I am getting myself into messy logic now (if not simply wrong).
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It's a growing economy if it increases productivity or employment, not by redistribution. That's just a reallocation of existing resources, so every extra dollar in the hands of an emplyee is a dollar less in the hands of employers. Employee spending will go up, employer spending will go down (employers are people too, even though they don't always act that way perhaps). There are no easy answers here, though, at least I don't know them. Consumption will probably go up because people at or around the minimum wage tend to consume a higher share of their income, so that'll change some things, but of course that means saving will go down and that'll change things too. Traditionally investment has been seen as the big driver of growth, though things have become a bit more murky lately. It's also made even more unclear by the fact that savings and investments are so decoupled in the US specifically, I'm not sure how that plays in (without international trade saving = investment).

There's also the factor that a higher minimum wage hopefully will reduce economic inequality, or at least slow the increase, and there's been emerging work the last years on whether or not inequality is bad for growth in and of itself. I don't know much about the research here.
 
NotThatSoph said:
It's a growing economy if it increases productivity or employment, not by redistribution. That's just a reallocation of existing resources, so every extra dollar in the hands of an emplyee is a dollar less in the hands of employers. Employee spending will go up, employer spending will go down (employers are people too, even though they don't always act that way perhaps). There are no easy answers here, though, at least I don't know them. Consumption will probably go up because people at or around the minimum wage tend to consume a higher share of their income, so that'll change some things, but of course that means saving will go down and that'll change things too. Traditionally investment has been seen as the big driver of growth, though things have become a bit more murky lately. It's also made even more unclear by the fact that savings and investments are so decoupled in the US specifically, I'm not sure how that plays in (without international trade saving = investment).

There's also the factor that a higher minimum wage hopefully will reduce economic inequality, or at least slow the increase, and there's been emerging work the last years on whether or not inequality is bad for growth in and of itself. I don't know much about the research here.
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And thanks again. :) I know income/wealth inequity mostly from its health and social effects, such as on very aspects of well-being, education, criminality, and so on. From what I read, countries with higher inequity tend to do worse across all income levels (including the highest incomes) on all of those. I.e., even rich people do worse on various quality-of-life indicators in high-inequity countries than rich people in low-inequity countries. There should thus be significant economic advantage to reducing the inequity, as it should lower crime rates, mental health issues, increasing education levels (which can also improve personal-life decision-making), and so on. Not sure how much a minimum wage increase does there though, and I suppose in any case that the exact impact on all relevant indicators would be hard to quantify.

InfiniteBoredom said:
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Another aspect, which I tend to forget about. :)
 
It wasn’t even the first time it happened in their history. Lincoln made a $400m loan within two months of taking office to equip the federal army, and mostly contracted private contractors since he couldn’t trust his own agencies due to Southern infiltration. That was the equivalent of a full year of federal revenue, if not more, and it only escalated from there. Spoiler alert: they didn’t go broke after the war. So you can give everybody 2000/month retroactively to the start of the pandemic, do the Green New Deal, abolish student debt and do M4A, and the total cost would still only amount to what the US gov loaned out in the first 2 months of the war.
 
What time (GMT) does the inauguration kick off tomorrow?
 
Raoul said:
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These are really good, but I am really interested to see what he is gonna do for the climate (in addition to the symbolism of Paris agreement). Put a trillion or two in green energy and we'll be friends forever.
 
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