Year: 2021

I am now in my 35th year as Managing Editor of the Journal of Economic Perspectives. The JEP is published by the American Economic Association, which decided about a decade ago–to my delight–that the journal would be freely available on-line, from the current issue all the way back to the first issue. You can download individual articles or the entire issue, and it is available in various e-reader formats, too. Here, I\’ll start with the Table of Contents for the just-released Spring 2021 issue, which in the Taylor household is known as issue #136. Below that are abstracts and direct links for all of the papers. I will probably blog more specifically about some of the papers in the next week or two, as well.

Reducing carbon emissions will require a number of different intertwined steps, and  one  of them is commonly being referred to as \”electrification of everything.\” Basically, the more that society can rely for its energy needs on electricity generated from low-carbon or carbon-free methods, the more it can turn away from  burning fossil fuels. In turn, this policy agenda will require a vast expansion of high-voltage electricity transmission lines, especially if a substantial share of that electricity is generated from solar and wind. If there is more reliance on intermittent sources of electricity, there is also more need to ship electricity from place to place–more need for what is sometimes called a National Supergrid.  

However, the prospect of doubling the number of long-distance electricity transmission lines (or perhaps more than doubling) poses a classic problem of political economy. Under current law, decisions about allowing pathways for high-voltage lines are typically made at the state- or county-level. Local decision-makers don\’t have much incentive to take into account the broad social benefits of a widespread network of electricity lines that cross state and county boundaries. Thus, it\’s become politically very hard to expand the existing network. An obvious possible answer is to give more power to a federal-level authority to grant permissions. But where this has been done–say, in building and updating natural gas pipelines–the process has often proven to be highly controversial and has not always results in pipelines being built. 

Liza Reed provides an overview of these issues in \”Transmission Stalled: Siting Challenges for Interregional Transmission\” (Niskanen Center April 2021). She writes (footnotes omitted): 

The electricity sector is expected to change dramatically to meet decarbonization goals, with some pathways showing demand doubling or more as cars, households, and industry are increasingly electrified. This will require similar expansion in transmission capacity to serve increasing demand. …

Under the current system of planning and permitting, high-voltage interstate transmission lines take eight to ten years on average to complete, if they succeed at all. Four years or more of that timeline is absorbed by the regulatory hurdles, particularly siting the lines and acquiring the permits and land rights to build.

Transmission lines that traverse multiple states must satisfy the requirements of all states along a planned route. The timelines for each state are different, as are the standards each state uses for the evaluation of public convenience and necessity. Some states require a developer to be a recognized utility provider within the state, an arguably anachronistic requirement. In other states the siting process is handled at the county level, placing an even higher regulatory burden on transmission developers. High-voltage transmission lines often provide their highest overall value to the system as a whole, and may only provide modest benefits to a particular state. It can be difficult or impossible for developers of these lines to convince multiple states that the benefits are enough. Oftentimes developers choose not to pursue these projects at all. The national transmission system, which could be the backbone of our electricity system and decarbonization efforts, suffers as a result.

A 2016 review of transmission projects by the Lawrence Berkeley National Lab identified permitting as one of the top four factors affecting transmission projects.  Referring to multi-state siting and permitting, the report notes: “Regardless of which process concludes first, the process that concludes last determines when construction can be completed.”

Reed discusses multiple attempts to extend transmission lines so that electricity can be shipped across states (including wind energy) that have been blocked for years by state/local politics and court decisions. She also points out that incumbent energy firms may not favor expansions of long-distance transmission lines, either, because it raises the level of competition they face from electricity generated in other locations. Local regional planners may also want to support local sources of energy, and thus oppose closer ties to energy generated outside  their region. 

There have been some attempts to designate \”national interest electricity transmission corridors (NIETCs)\” where it would be faster and easier to get permission to build additional electricity transmission lines, but these have also been contested and blocked by local authorities and courts. 

I\’ve got no magic solution here. Local control tends to block the needed national expansion. Moving authority to the federal level, like the Federal Energy Regulatory Commission, would in some cases inevitably make decisions opposed to local desires–indeed, the reason for putting greater authority at the federal level would be to override local desires in some cases. Reed provides an honest discussion of some problems that have come up in the case of FERC having greater power to speed the permitting process for natural gas pipelines.

Natural gas pipeline infrastructure does not face the same siting challenges. The Natural Gas Act grants siting authority to FERC for interstate natural gas pipelines. The average permitting time is 18 months, less than half of the average interstate transmission permitting time. This single, central authority, in which FERC sites and permits lines and coordinates environmental reviews, is why the United States was able to respond quickly to the shale gas boom. …

When considering reforms for transmission infrastructure, policy makers should consider how expansive FERC siting authority under the Natural Gas Act has disadvantaged private citizens and landowners. In practice, FERC provides limited notice of landowners’ rights, limited notice of applications for natural gas lines, and little meaningful access for impacted landowners. FERC delegates its statutory and constitutional obligations to provide notice to landowners to pipeline companies, and fails to confirm that such notice was actually provided. …  Indeed, FERC establishes ad hoc timelines rather than a fixed time for intervention, and there are examples of FERC providing landowners with at least three inconsistent and contradictory sets of instructions for intervening. This has resulted in landowners being given as little as 13 days to intervene in proceedings whose purpose is to take their property. Though the practice has been recently rejected by the U.S. Court of Appeals for the D.C. Circuit, FERC has a long history of indefinitely delaying landowner rehearings (and thereby delaying landowners’ access to judicial review) by what are colloquially known as “tolling orders,” which prevented landowners from challenging FERC’s decision.

FERC’s record reveals other problems, too. FERC can issue “conditioned certificates” allowing eminent domain, even though the pipeline in question has not, and may never, obtain other required permits. With a FERC certificate in hand, courts currently will grant pipelines so-called quick-take possession of property, whereby a company takes land prior to remuneration, removing an incentive for the company to reimburse landowners on a reasonable timeline. FERC also establishes conditions on how companies construct pipelines and protect the remainder of landowners’ property, but the agency consistently fails to respond to any landowner complaints regarding violations. These practices allow for takings and destruction of private land in absence of oversight and without a fully permitted project. What’s more, if the project never gets built, or a court finds that the certificate was invalid, the pipeline company gets to keep the easements obtained from landowners, including all perpetual land use restrictions, however irrelevant in the absence of a pipeline.

Again,  I have no magic solution to balance the competing interests here. But I will say that if you are a strong proponent of solar and wind power, basic consistency requires that you also need to favor a vast and well-coordinated expansion of long-distance electricity transmission lines, with the associated commitments of physical resources and land, as well as sometimes needing to override local interests.  As Reed writes: 

Recent studies from MIT, Princeton, and NREL [National Renewable Energy Laboratory] demonstrate that interstate lines and interregional coordination are critical to achieving a cost-effective grid. Clear and consistent rules and metrics, which can only come from a single governing agency, would allow transmission developers, utilities, and generators to unlock the clean energy resources available across the nation.

For some other recent posts about of the future of US electricity generation and transmission, see: 

• \”The Coming Evolution of Electric Power in the US\” (March 1, 2021)
• \”Electrify Everything: Some Limitations of Solar and Wind\” (April 9, 2021)

Jeff Bezos is stepping down from daily management tasks as chief executive officer of Amazon, the company he founded in 1994, although he will continue to be involved in the company as executive chairman of the board. Earlier this month, Bezos wrote his last annual letter to company shareholders. A main focus of the letter is on how Amazon creates \”value.\” 

I\’ve found that the word \”regulation\” is a sort of Rorschach test on which many people project their broader political beliefs. Some are deeply suspicious of any proposals that can be characterized as \”deregulation,\” and predisposed to favor \”regulation\” even before knowing the details of the proposal. These people tend to begin with a belief that private market actors are almost also pushing up to and beyond the edge of what is good for society, and thus comfortable with a presumption that government pushback in the form or regulation may help.  Indeed, for the first three-quarters of the 20th century, during the rise of US regulatory agencies from near-zero to high prominence, this group was preeminent in how most academics and policy-makers thought about regulation. 

On the other side, another group is deeply suspicious of regulations, because they mistrust the ability of government both to diagnose problems with a market economy or to design solutions. Instead, they fear that government regulations often end up either supporting or offering loopholes for politically powerful interest groups. The patron saint of this second group is George J. Stigler, who 50 years ago published published \”The Theory of Economic Regulation\” in the Bell Journal of Economics and Management Science (Spring 1971, 2:1, pp. 3-21, available via JSTOR and other places on the web). Stigler later won the 1982 Nobel prize \”for his seminal studies of industrial structures, functioning of markets and causes and effects of public regulation.\”

In the 1971 essay, Stigler made the case for what is now called \”regulatory capture.\” Imagine that the government is thinking about passing a certain set of regulations, and about an ongoing agency to enforce and interpret these regulation. Then ask yourself: Who has the most incentive to spend large amounts of money, time and attention focused on every twist and turn, every subclause and comma, of these regulations? And to sustain this focus day after day, year after year? Stigler pointed out that politics and behind-the-scenes lobbying will play a big role in this process. Over time, the industries directly affected by regulation will have a strong incentive to play a prominent role in shaping regulations. Stigler writes: \”A central thesis of this paper is that, as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.\”

For those who would like a thorough review of the arguments for and against this theory, the Stigler Center for the Study of the Economy and the State at the University of Chicago held a webinar on the occasion of the 50th anniversary of Stigler\’s essay this last week, and four hours of video of the discussions are available.  Several of the participants have also published short essays available at the link. Here, I\’ll offer a brief sketch of the state of the argument. 

1) Stigler had a point. 

Stigler\’s 1971 essay offers lots of examples in which it seems plausible that regulation was being used by incumbents to stifle competition and thus to improve their own profits. As he points out, the Civil Aeronautics Board which at the time set prices for all airline flights and decided which flights would be allowed did had \”not allowed a single new trunk line to be launched since it was created in 1938.\” He cited studies that the Federal Deposit Insurance Corporation had \”reduce[d] the rate of entry into commercial banking by 60 percent.\” Federal regulation of trucking led to a situation in which the number of licensed carriers was declining over time, despite thousands of annual applications for certificates to license additional truckers. Stigler wrote: \”We propose the general hypothesis: every industry or occupation that has enough political power to utilize the state will seek to control entry.\”

The deregulation wave of the late 1970s and 1980s affected airlines, trucking and banking. But other examples mentioned by Stigler live on. Government regulations, typically at the state level, require licenses for about one-fourth of all US jobs. A well-developed body of evidence (often looking at what is regulated or unregulated across states) suggests that in many cases, these regulations are less about protecting the public than about limiting competition. It seems likely that the building trade unions have used building codes to hinder new cost-saving technologies, including factory-built homes.  Government regulations in education give large advantages to established colleges and universities, and to the public K-12 schools, while limiting entry of new competition. Rules to limit certain imports of goods from abroad are typically driven by domestic industries concerned about foreign competition.

Indeed, every time a supporter of government regulation bewails how a special interest has invaded the process and caused a desired regulation to be blocked or diluted, they are in effect channeling their inner Stigler-style skepticism about the practical reality of the regulatory process.  Are supporters of added government regulation at all surprised that big health insurance companies lobbied for the Patient Protection and Affordable Care Act of 2010 and benefited after its passage? Or that in the aftermath of new regulations to reduce the risk of government bank bailouts, big banks gained market share at the expense of smaller institutions? 

Whatever the actual shortcomings of the private sector, and whatever the theoretical case for corrective government regulation, Stigler-style skepticism offers a useful corrective about what regulations are actually enacted. As Filippo Maria Lancieri and Luigi Zingales write in their short essay accompanying the Stigler Center symposium: 

The 1887 Interstate Commerce Commission was the first government agency to regulate an important sector of the US economy. By the 1900’s, there were 10 federal agencies, employing 15,000 workers. By 2019, the number of agencies rose to 117, employing 1.4 million workers. The 20th century could easily be labeled the century of regulation. …  Most likely, the 20th century would have also ended as the century of regulation if it were not for George Stigler.

2) Stigler probably overemphasized the role of pure regulator capture, as opposed to regulatory problems created by poor information or ideological bias. 

In Andrei Shleifer\’s keynote address for the Stigler Center symposium, he makes the point that there can be lots of reasons why regulations have mixed or negative effects. It\’s not all about regulatory capture by the industry affected. As a recent example, Shleifer points to the waves of rules and regulations that have become prominent in COVID-19 pandemic. For example, there have been rules about masks, social distancing, and lockdowns. There were regulations about what kinds of COVID-19 tests could be sold or used. There were rules about what constituted adequate testing of vaccines. There were questions over whether to shut down the use of the Johnson & Johnson vaccine over the possibility of a heightened risk of blood clots. 

Shleifer\’s point is not to argue for or against specific rules, but just to point out that, in general, the differences of opinion on these rules were shaped by available knowledge (and ignorance), and by beliefs about what risks were acceptable (or not), and what messages the public was ready to hear (or not). In these regulations and probably in many others as well, the key dividing lines are more about issues of knowledge and ideology that about a Stigler-style regulatory capture scenario. Of course, this doesn\’t make Stigler\’s insights irrelevant, but it does suggest that his \”theory of regulation\” was focused only one one slice of the issues involved. 

3) Stigler\’s \”theory of regulation\” may overemphasize the potential for bad outcomes, to the extent that his 1971 article essentially fails to acknowledge potentially beneficial outcomes of regulation. 

Cass Sunstein makes this argument in his keynote address for the second day of the Stigler Center symposium, and also in a short article written to accompany the event.  He points to a number of specific regulations: for example, rules requiring accessibility to public areas for those with disabilities; or rules specifying the rights that airline passengers have when a flight is overbooked; or the rules that now require rear-view cameras in all motor vehicles; or rules that require the Post Office to collect data on certain packages arriving from overseas as part of the effort to reduce imports of opioids. With these and many other examples in mind, Sunstein writes: 

Stigler offered, but did not adequately defend, the proposition that “as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.” That proposition is false. As a rule, regulation is not acquired by the industry, and it is not designed and operated for its benefit (primarily or otherwise). … Surely there are such examples, but they are not “the general rule.” I conclude that the success and influence of Stigler’s argument owed a great deal, not to its accuracy, but to its iconoclasm, its sense of knowingness, its smarter-than-thou, cooler-than-thou cynicism (appealing to many), its mischieviousness, and its partial (!) truth.

Paul Romer (Nobel \’18) offered a pithy aphorism  a few years ago: \”Everyone wants progress. Nobody wants change.\” But of course, the process of economic progress is inevitably lumpy. It doesn\’t smoothly affect everyone in the same way. International trade is one part of the process of economic progress, but nobody wants change. Adam S. Posen pushed back against the resulting dynamic in \”The Price of Nostalgia: America’s Self-Defeating Economic Retreat\” (Foreign Affairs, May/June 2021). He writes: 

There is a popular notion that the United States has been sacrificing justice in the name of economic efficiency, and so it is time to correct the imbalance by stepping back from globalization. This is a largely false narrative. The United States has been withdrawing from the world economy for 20 years, and for most of that time, U.S. economic dynamism has been falling, and inequality in the country has risen more than it has in economies that were opening up. Workers are less mobile. Fewer businesses have been started. Corporate power has grown more concentrated. Innovation has slowed. Although many factors have contributed to this decline, it has likely been reinforced by the United States’ retreat from global economic exposure. 

There\’s a lot to reflect on in the article, and there are parts of it I would agree with more than others. Here, I want to emphasize two of the points that Posen makes. 

One is that there are a wide variety of reasons for economic disruption and job loss: new technology, domestic competition, lousy management, shifts in consumer preferences for goods and services, and many more. For a huge and well-diversified economy like the United States, with its enormous internal market, the disruptions related to international trade are a relatively small part of the picture. Posen writes: 

After much debate, economists have agreed on an upper-bound estimate of the number of U.S. manufacturing jobs that were lost as a result of Chinese competition after 1999: two million, at most, out of a workforce of 150 million. In other words, from 2000 to 2015, the China shock was responsible for displacing roughly 130,000 workers a year. That amounts to a sliver of the average churn in the U.S. labor market, where about 60 million job separations typically take place each year. Although approximately a third of those total job separations are voluntary in an average year, and others are due to individual circumstances, at least 20 million a year are due to business closures, restructurings, or employers moving locations. Think of the flight of jobs from inner cities or the displacement of secretarial and office workers due to technology—losses that, for the workers affected, are no different in terms of local impact and finality than the manufacturing job losses resulting from foreign competition. In other words, for each manufacturing job lost to Chinese competition, there were roughly 150 jobs lost to similar-feeling shocks in other industries. But these displaced workers got less than a hundredth of the public mourning.

An American who loses his job to Chinese competition is no more or less deserving of support than one who loses his job to automation or the relocation of a plant to another state. Many jobs are unsteady. The disproportionate outcry about the effect of Chinese trade ignores the experiences of the many more lower-wage workers who experience ongoing churn, and it forgets the way that previous generations of workers were able to adapt when they lost their jobs to foreign competition.

 The other point is that the rest of the world is going ahead with globalization.  Around the rest of the  world, export/GDP ratios have generally bounced back after the decline during the Great Recession, but not in the US.  Meanwhile, countries within the European Union are extremely open to trade with each other, and becoming more so.  The European Union has expanded by 13 countries since 2000, and is signing trade agreements with the rest of the world. China is maintaining high involvement with the rest of the global economy, too. 

W. Brian Arthur re-opens some old questions about the discipline of economics and the role of mathematics with fresh language iu \”Economics in Nouns and Verbs\” (April 5, 2021, preprint at arXiv). Here\’s a flavor of his argument:

I will argue that economics, as expressed via algebraic mathematics, deals only in nouns—quantifiable nouns—and does not deal with verbs (actions), and that this has deep consequences for what we see in the economy and how we theorize about it. …

Let me begin by pointing out that economics deals with prices, quantities produced, consumption, rates of interest, rates of exchange, rates of inflation, unemployment levels, trade surpluses, GDP, financial assets, Gini coefficients. These are all nouns. In fact, they are all quantifiable nouns—amounts of things, levels of things, rates of things. Economics as it is formally expressed is about amounts and levels and rates, and little else. This  statement seems simple, trite almost, but it is only obvious when you pause to notice it. Nouns are the water economics swims in.

Of course in the real economy there are actions. Investors, producers, banks, and consumers act and interact incessantly. They trade, explore, forecast, buy, sell, ponder, adapt, invent, bring new products into being, start companies. And these of course are actions—verbs. Parts of economics—economic history, or business reporting—do deal with actions. But in formal discourse about the economy, in the theory we learn and the models we create and the statistics we report, we deal not with verbs but with nouns. If companies are indeed started, economic models reflect this as the number of companies started. If people invest, models reflect this as the amount of investment. If central banks intervene, they reflect this by the quantity of intervention. Formal economics is about nouns and reduces all activities to nouns.

You could say that is its mode of understanding, its vocabulary of expression. Perhaps this is just a curiosity and doesn’t matter. And maybe it’s necessary that to be a science economics needs to deal with quantifiable objects—nouns. But other sciences heavily use verbs and actions. In biology DNA replicates itself, corrects copying errors in its strands, splits apart, and transfers information to RNA to express genes. These are verbs, all. Biology—modern molecular biology, genomics, and proteomics—is based squarely on actions. Indeed biology would be hard to imagine without actions—events triggering events, events inhibiting events. … 

Any economist will have some immediate reactions here, several of which are anticipated by Arthur. 

The reader may object that mathematics in economics does use verbs: agents maximize; they learn and adapt; rank preferences; decide among alternatives; adjust supply to meet demand. But the verbs here are an illusion; algebraic mathematics doesn’t allow them, so they are quickly finessed into noun quantities. We don’t actually see agents maximizing in the theory; we see the necessary conditions of their maximizing expressed as noun-equations. We don’t see them learning; we see some parameter changing in value as they update their beliefs. We don’t see producers deciding levels of production; we see quantities determined via some optimizing rule. We don’t see producers responding to demand via manufacturing actions, we see quantities adjusting. It might appear that dynamics in the economy are an exception—surely they must contain verbs. But expressed in differential equations, they too are just changes in noun quantities. Verbs in equation-based theory require workarounds.

The reason algorithms handle processes well is because each individual instruction, each step, can signal an action or process. Also, and here is where process enters par excellence, they allow if-then conditions. If process R has been executed 100 times, then execute process L; if not, then execute process H. Algorithms can contain processes that call or trigger other processes, inhibit other processes, are nested within processes, indeed create other processes. And so they provide a natural language for processes, much as algebra provides a natural language for noun-quantities. Frequently algorithms include equations, and so sometimes we can think of algorithmic systems as equation-based ones with if-then conditions. As such, algorithmic systems generalize equation-based ones, and they give us a new mode, a new language of expression in economics, although one that may look different from what we’re used to. …

The world revealed here is not one of rational perfection, nor is it mechanistic. If anything it looks distinctly biological. Its agents are constantly acting and reacting within a situation—an “ecology” if you like—brought about by other agents acting and reacting. Algorithmic expression allows novel, unthought of behaviors, novel formations, structural change from within—it allows creation. It gives us a world alive, constantly creating and re-creating itself.

Arthur and others who work in \”complexity economics\” have been creating and working with these kinds of models for decades. As Arthur writes in this paper, such models can be viewed as simulations\” or \”laboratory experiments\”–that is, given certain starting points and behavioral rules, if you allow the algorithm to evolve many times, what kinds of outcomes are more or less likely to evolve? 

All this is fair enough. My own sense is that algorithmic methods can be especially useful in showing how seemingly mild and plausible rules can sometimes lead to unexpected and even disastrous outcomes, and how small changes in initial conditions or in underlying assumptions about behavior can lead to dramatic differences in how outcomes evolve. 

Back in 2011,  US-owned assets abroad (blue line) were about $2.5 trillion less than the US liabilities owned by foreign investors (orange line). At the end of 2020, the gap had risen to $14 trillion. This is the US \”net international investment position.\”

The figure shows that the common pattern for the US economy during the last quarter-century is that foreign investors hold much more in US-issued debt than US investors hold in foreign debt. One main reason for that is that US-dollar debt–especially the debt issued by the US government, is viewed around the world as a safe asset. The US dollar has been the world\’s dominant currency for a long time.

Since 2010, … the net international investment position has plunged by some 50 percent of GDP. This time the valuation effects have worked in reverse: the U.S. dollar has strengthened notably since 2010, and U.S. equity prices have risen much more than foreign equity prices. In other words, the value of foreigners’ investments in the U.S. has risen a lot relative to the value of Americans’ investments abroad.

Thus, one way to look at the fall in US net international investment position is that it\’s the result of good news–a rising US stock market. 

The other important pattern here is that, in general, if you have $100 in debt it will pay a lower return than $100 in equity, basically because the debt is safer than the equity. The US investment in foreign equity is often in the form of \”foreign direct investment,\” where a US firm owns a large enough share of a foreign firm that the US firm has a say in managing the foreign firm (although the US firm may not have complete control over the foreign firm). This means that US investments abroad systematically earn more than foreign investments in the US. Here\’s a figure from Milesi-Ferretti:

Indeed, even though the rest of the world owns $14 trillion more in US assets than US investors own in foreign assets, it has been and continues to be true that the actual total returns paid on assets held in other countries is higher for US investors holding foreign assets than it is for foreign investors  holding US assets. 

I sometimes say that when it comes to international investment, the US economy is like a company that borrows money at a low interest rate and then invests that money in corporate stock and receives a higher rate of return. There are of course risks to this approach, but it\’s been this way for the US economy for a long time and there are clearly benefits, too. 

The people who made applying to college an elaborate performance, a nervous and years-long exercise in self-construction have now decided that the end result of this elaborate performance must be “the real you.” The tacit directive in all this — “Be authentic for us or we won’t admit you” — puts kids in a tough position. It’s bad that kids have to suffer this torment. It’s also bad that admissions departments actually think that the anxiously curated renderings that appear in applications can in any way be called “authentic.” It’s like watching Meryl Streep portray Margaret Thatcher and thinking: Now that is the real Meryl Streep. … 

What distinguishes an applicant here is not authenticity, but access to the best advice on how to create the right authenticity effect — cultured parents, costly admissions coaches, able and informed college counselors. … This points to another dark aspect of all this personalizing, with its imposed subtleties of performance and discernment — the barely hidden class bias. Admissions personnel are generally eager to add their voices to the chorus bewailing the socioeconomic and racial bias in standardized testing, but they’re largely incurious about the class bias in their own softer measures. In practice, that is, what ends up resembling “authenticity” to admissions officers is an uncannily WASPy mix of dispensations better understood as discretion, or, perhaps, good taste. After all, what admissions readers really dislike are the braggarts, and isn’t bragging a vice of the classless, the parvenus and arrivistes? …

Admissions bureaucrats faced with thousands more applicants than they can accept soon reach a level of arbitrariness. At that point, they launch an inquisition of their applicants’ souls. This makes little sense academically but allows them to stage a powerful, utterly undeserved disciplinary claim on the inner lives of teenagers — that is the abiding scandal of college admissions. ….

Admissions officers have come to see the process they oversee in therapeutic terms. They present the college application as a set of therapeutic prompts, gentle invitations for the applicant to free herself from repression and self-deceit and move toward authentic self-expression and self-knowledge. …

Setting up a years-long, quasi-therapeutic process in which admissions goads young people into laying bare their vulnerable selves — a process that conceals a high-value transaction in which colleges use their massive leverage to mold those selves to their liking — is reprehensible. It is terrible thing to do. It renders the discovery of true underlying selves absurd. Sometimes, as we’ve seen, admissions people will admit they have this formative leverage over young people. But they fail to show the humility that should attend this admission, the clinician’s awareness that to use this power is to abuse it. Instead, they want even more power. They want to intrude even more deeply into the souls of their applicants. …

Douglas Clement provides an \”Esther Duflo interview: Deciding how to share\” (For All: Federal Reserve Bank of Minneapolis, Spring 2021).  

On the existence of a tradeoff between growth and inequality:

I think the whole notion of a trade-off is likely a fallacy, for various reasons. First of all, there is no clear link either on theoretical grounds or empirically between higher inequality and more growth. There is no reason why inequality is necessary for growth. And there is no law of economics that says that growth increases inequality either. So I think there is no causality necessarily going in either direction; therefore, there is not necessarily a trade-off. Just as a matter of accounting, growth is equality-enhancing if most of the benefits of growth are going toward the poor. And growth is inequality-enhancing if most of the advantages are going toward the rich. Both are possible. I don’t think there is a systematic pattern either way. … 

In fact, we don’t seem to have much of a handle on what causes growth anyway, although we might have interesting theoretical narratives on growth. If there is a consensus among macroeconomists, it’s on what should be avoided at all costs, like hyperinflation. But there is not a set of recipes that guarantees growth, and it’s not that these recipes therefore lead to a trade-off. So, I think there is actually no trade-off.

My husband, Abhijit Banerjee, also a Nobel Prize laureate, was asked to be the chairman of the coronavirus response team in West Bengal. … We knew from previous work … that stars and celebrities are very influential in conveying these messages, so we were looking for stars to pass along very basic social distancing advice to households in India at a time when it was completely confusing. It finally dawned on us that the best star we had was right on our team! Abhijit Banerjee has been a bit of a household name in West Bengal—where he’s from—since he won the Nobel Prize. …

Abhijit recorded messages that were sent in two rounds to subscribers with Airtel, a bigger subscriber network. One message was about asking people to be kind to coronavirus patients and not to shun them out of the village, and the other was about how travel during Durga Puja, where people normally come in droves to town and make pilgrimages to makeshift temples. So, potentially, a scene of millions of people crowded together, coming from everywhere and going back. It could have been a coronavirus disaster.

Abhijit worked with others in putting together something that was feasible. You cannot say, “Cancel the holiday.” That’s not really an option. So something that was feasible, but would improve things. And we sent one more round of messages urging people to stay home if they’re older, and if they do go out, visit just one location, and wear a mask.

And quickly after that, Durga Puja happened, and we saw that the attendance was down a significant amount from previous years. So it was much, much, much lower attendance. And we can now see whether there was an uptick of coronavirus and we don’t see that.

So, of course, it was not just his messages. There was also the chief minister went on television to relay the message. But this entire effort to convince people with clear messages about what to do seems to have been very effective. I’m convinced that that saved thousands and thousands of lives ultimately. You don’t get to do that every day.

For an earlier post on the award of the 2019 Nobel Prize in economics to Duflo, Banerjee, and Michael Kremer, see \”A Nobel for the Experimental Approach to Global Poverty for Banerjee, Duflo, and Kremer\” (October 18, 2019).