Month: November 2024

If government is considering an industrial policy to subsidize a certain industry (for example, as the US is subsidizing domestic semiconductor manufacturing), what’s the best way to do it? I am not typically a fan of such subsidies, but it’s possible to make an economic case that for certain industries that provide social as well as private benefits (say, reducing carbon emissions or strengthening the domestic supply chain in produce important to national security), some form of government subsidy can be production. But what form?

I ran across an example of some issues that can arise in “The Political Economy of Industrial Policy,” by Réka Juhász and Nathan Lane (Journal of Economic Perspectives, Fall 2024, 38:4, 27–54). They describe a situation which the appropriate form of subsidy would not be for the firms that succeed in producing the desired product, instead for firms that fail. The mechanism would be a “repayable advance” from the government, where successful firms need to repay the advance, but firms that fail to compete in the market do not need to repay. They write:

Consider a green industrial policy, where a public agency subsidizes risky projects that, if successful, would generate both private and social benefits. How should the agency design conditional subsidies? Meunier and Ponssard (2024) show that when firms and public agencies have symmetric information about the probability of a project’s success, rewarding success is optimal. However, under asymmetric information, where only the firm knows its probability of success, failure should be rewarded (!)—as it mitigates the windfall profit that arises when an agency subsidizes projects that would have received financing absent the subsidy. This insight speaks directly to the experience of the French Agency for Ecological Transition (ADEME), a public agency monitoring innovative activities for the energy transition funded by the Investments for the Future Programme. At the outset, ADEME used flat subsidies, but evidence of windfall profits quickly emerged in some projects. Therefore, the agency introduced “repayable advances,” which are subsidies that need to be paid back in the case of success—that is, they are subsidies for failure.

The article that Juhász and Lane cite, by Guy Meunier and  Jean-Pierre Ponssard, is titled “Green industrial policy, information asymmetry, and repayable advance” (Journal of Public Economic Theory, February 2024, e12668). The article will be math-heavy for the uninitiated reader. But they are

One danger of government subsidies for successful firms is that they reward those that would have already been successful in producing the desired good: in fact, they may reward firms for projects that were already financed and underway. In effect, they reward firms that would have already been profitable with even higher profits. In contrast, a repayable advance is aimed at encouraging more firms to try to produce the desired product, because the repayable (and forgivable) advance means that losses from failure are reduced.

On the other side, a danger of repayable advances is that, well, they are paid to firms that don’t succeed. One can imagine a situation where a firm, knowing that it is somewhat protected against losing money, fails to make an optimal effort to succeed. In addition, politicians will find it easier to explain subsidizing success–which also offers photo opportunities!–than subsidizing failure.

In the specific setting of the Meunier-Ponsard model, it turns out that the key difference between subsidizing the winning firms or the losing firms relies on what information is available. For example, consider a situation in which there are a number of possible firms that might be ready to invest in trying to produce the desired product, but neither the government nor the firm’s themselves have any clear idea of who is likely to be most successful. In this setting, it might make sense to promise additional rewards for the winners. But now consider an alternative situation, where the government does not know what firms are likely to succeed, but the firms themselves have a pretty good idea. In that situation, the firms that are likely to succeed are also more likely to be going ahead without the subsidy–and the government is only rewarding what would have happened anyway.

At a broader level, the key point is that providing a broad overall justification for an industry subsidy is only a first step. The actual design of a specific policy can matter a great deal for the incentives that are created. Meunier and Ponsard write:

More generally our analysis justifies the importance of the empirical recommendations made by Rodrik (2014) for an agency in charge of monitoring a green policy. Let us review three of them briefly. Discipline: clarify ex ante objectives for the agency, build an evaluation protocol on what should or could be observed, making this an important aspect of the contracting process. Embeddedness: introduce reasonably simple conditional incentives along the life of the project but be aware of the risk of manipulation. Gaming: it plays an important role in our analysis, we formalize this issue and show how repayable advance may be used in some circumstances to mitigate its impact.

Of course, these guidelines for attempting to assure that industry subsidies are not wasteful or ineffective apply not just to green energy, but to any type of industrial subsidy. For those interested in learning more, Dani Rodrik’s (2014) paper is “Green industrial policy (Oxford Review of Economic Policy, 30(3), 469–491).

Thanksgiving is a day for a traditional menu, and part of my holiday is to reprint this annual column on the origins of the day.

The first presidential proclamation of Thanksgiving as a national holiday was issued by George Washington on October 3, 1789. But it was a one-time event. Individual states (especially those in New England) continued to issue Thanksgiving proclamations on various days in the decades to come. But it wasn’t until 1863 when a magazine editor named Sarah Josepha Hale, after 15 years of letter-writing, prompted Abraham Lincoln in 1863 to designate the last Thursday in November as a national holiday–a pattern which then continued into the future.

An original and thus hard-to-read version of George Washington’s Thanksgiving proclamation can be viewed through the Library of Congress website. The economist in me was intrigued to notice that some of the causes for giving of thanks included “the means we have of acquiring and diffusing useful knowledge … the encrease of science among them and us—and generally to grant unto all Mankind such a degree of temporal prosperity as he alone knows to be best.”

Also, the original Thankgiving proclamation was not without some controversy and dissent in the House of Representatives, as an example of unwanted and inappropriate federal government interventionism. As reported by the Papers of George Washington website at the University of Virginia.

The House was not unanimous in its determination to give thanks. Aedanus Burke of South Carolina objected that he “did not like this mimicking of European customs, where they made a mere mockery of thanksgivings.” Thomas Tudor Tucker “thought the House had no business to interfere in a matter which did not concern them. Why should the President direct the people to do what, perhaps, they have no mind to do? They may not be inclined to return thanks for a Constitution until they have experienced that it promotes their safety and happiness. We do not yet know but they may have reason to be dissatisfied with the effects it has already produced; but whether this be so or not, it is a business with which Congress have nothing to do; it is a religious matter, and, as such, is proscribed to us. If a day of thanksgiving must take place, let it be done by the authority of the several States.”

Here’s the transcript of George Washington’s Thanksgiving proclamation from the National Archives.

Thanksgiving Proclamation

By the President of the United States of America. a Proclamation.

Whereas it is the duty of all Nations to acknowledge the providence of Almighty God, to obey his will, to be grateful for his benefits, and humbly to implore his protection and favor—and whereas both Houses of Congress have by their joint Committee requested me “to recommend to the People of the United States a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many signal favors of Almighty God especially by affording them an opportunity peaceably to establish a form of government for their safety and happiness.”

Now therefore I do recommend and assign Thursday the 26th day of November next to be devoted by the People of these States to the service of that great and glorious Being, who is the beneficent Author of all the good that was, that is, or that will be—That we may then all unite in rendering unto him our sincere and humble thanks—for his kind care and protection of the People of this Country previous to their becoming a Nation—for the signal and manifold mercies, and the favorable interpositions of his Providence which we experienced in the course and conclusion of the late war—for the great degree of tranquillity, union, and plenty, which we have since enjoyed—for the peaceable and rational manner, in which we have been enabled to establish constitutions of government for our safety and happiness, and particularly the national One now lately instituted—for the civil and religious liberty with which we are blessed; and the means we have of acquiring and diffusing useful knowledge; and in general for all the great and various favors which he hath been pleased to confer upon us.

and also that we may then unite in most humbly offering our prayers and supplications to the great Lord and Ruler of Nations and beseech him to pardon our national and other transgressions—to enable us all, whether in public or private stations, to perform our several and relative duties properly and punctually—to render our national government a blessing to all the people, by constantly being a Government of wise, just, and constitutional laws, discreetly and faithfully executed and obeyed—to protect and guide all Sovereigns and Nations (especially such as have shewn kindness unto us) and to bless them with good government, peace, and concord—To promote the knowledge and practice of true religion and virtue, and the encrease of science among them and us—and generally to grant unto all Mankind such a degree of temporal prosperity as he alone knows to be best.

Given under my hand at the City of New-York the third day of October in the year of our Lord 1789.

Go: Washington

Sarah Josepha Hale was editor of a magazine first called Ladies’ Magazine and later called Ladies’ Book from 1828 to 1877. It was among the most widely-known and influential magazines for women of its time. Hale wrote to Abraham Lincoln on September 28, 1863, suggesting that he set a national date for a Thankgiving holiday. From the Library of Congress, here’s a PDF file of the Hale’s actual letter to Lincoln, along with a typed transcript for 21st-century eyes. Here are a few sentences from Hale’s letter to Lincoln:

“You may have observed that, for some years past, there has been an increasing interest felt in our land to have the Thanksgiving held on the same day, in all the States; it now needs National recognition and authoritive fixation, only, to become permanently, an American custom and institution. … For the last fifteen years I have set forth this idea in the “Lady’s Book”, and placed the papers before the Governors of all the States and Territories — also I have sent these to our Ministers abroad, and our Missionaries to the heathen — and commanders in the Navy. From the recipients I have received, uniformly the most kind approval. … But I find there are obstacles not possible to be overcome without legislative aid — that each State should, by statute, make it obligatory on the Governor to appoint the last Thursday of November, annually, as Thanksgiving Day; — or, as this way would require years to be realized, it has ocurred to me that a proclamation from the President of the United States would be the best, surest and most fitting method of National appointment. I have written to my friend, Hon. Wm. H. Seward, and requested him to confer with President Lincoln on this subject …”

William Seward was Lincoln’s Secretary of State. In a remarkable example of rapid government decision-making, Lincoln responded to Hale’s September 28 letter by issuing a proclamation on October 3. It seems likely that Seward actually wrote the proclamation, and then Lincoln signed off. Here’s the text of Lincoln’s Thanksgiving proclamation, which characteristically mixed themes of thankfulness, mercy, and penitence:

Washington, D.C.
October 3, 1863
By the President of the United States of America.
A Proclamation.

The year that is drawing towards its close, has been filled with the blessings of fruitful fields and healthful skies. To these bounties, which are so constantly enjoyed that we are prone to forget the source from which they come, others have been added, which are of so extraordinary a nature, that they cannot fail to penetrate and soften even the heart which is habitually insensible to the ever watchful providence of Almighty God. In the midst of a civil war of unequaled magnitude and severity, which has sometimes seemed to foreign States to invite and to provoke their aggression, peace has been preserved with all nations, order has been maintained, the laws have been respected and obeyed, and harmony has prevailed everywhere except in the theatre of military conflict; while that theatre has been greatly contracted by the advancing armies and navies of the Union. Needful diversions of wealth and of strength from the fields of peaceful industry to the national defence, have not arrested the plough, the shuttle or the ship; the axe has enlarged the borders of our settlements, and the mines, as well of iron and coal as of the precious metals, have yielded even more abundantly than heretofore. Population has steadily increased, notwithstanding the waste that has been made in the camp, the siege and the battle-field; and the country, rejoicing in the consiousness of augmented strength and vigor, is permitted to expect continuance of years with large increase of freedom. No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy. It has seemed to me fit and proper that they should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People. I do therefore invite my fellow citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next, as a day of Thanksgiving and Praise to our beneficent Father who dwelleth in the Heavens. And I recommend to them that while offering up the ascriptions justly due to Him for such singular deliverances and blessings, they do also, with humble penitence for our national perverseness and disobedience, commend to His tender care all those who have become widows, orphans, mourners or sufferers in the lamentable civil strife in which we are unavoidably engaged, and fervently implore the interposition of the Almighty Hand to heal the wounds of the nation and to restore it as soon as may be consistent with the Divine purposes to the full enjoyment of peace, harmony, tranquillity and Union.

In testimony whereof, I have hereunto set my hand and caused the Seal of the United States to be affixed.

Done at the City of Washington, this Third day of October, in the year of our Lord one thousand eight hundred and sixty-three, and of the Independence of the United States the Eighty-eighth.

By the President: Abraham Lincoln
William H. Seward,
Secretary of State

As Thanksgiving preparations arrive, I naturally find my thoughts veering to the evolution of demand for turkey, technological change in turkey production, market concentration in the turkey industry, and price indexes for a classic Thanksgiving dinner. Not that there’s anything wrong with that. [This is an updated, amended, rearranged, and cobbled-together version of a post that was first published on Thanksgiving Day 2011.]

Maybe the biggest news about Thanksgiving dinner this year is that the overall cost of a traditional meal is down 4.5% from last year–although still up 25% from 2019. For the economy as a whole, the starting point for measuring inflation is to define a relevant “basket” or group of goods, and then to track how the price of this basket of goods changes over time. When the Bureau of Labor Statistics measures the Consumer Price Index, the basket of goods is defined as what a typical US household buys. But one can also define a more specific basket of goods if desired, and since 1986, the American Farm Bureau Federation has been using more than 100 shoppers in states across the country to estimate the cost of purchasing a Thanksgiving dinner. The basket of goods for their Classic Thanksgiving Dinner Price Index looks like this:

The cost of buying the Classic Thanksgiving Dinner rose 20% from from 2021 to 2022, but then fell back 4.5% from 2022 to 2023, and the dropped another 3.09% from 2023 to 2024. As the table shows, the big change is a drop in turkey prices since last year. The top line of the graph that follows shows the nominal price of purchasing the basket of goods for the Classic Thanksgiving Dinner. The lower line on the graph shows the price of the Classic Thanksgiving Dinner adjusted for the overall inflation rate in the economy. The lower line is relatively flat, which means that inflation in the Classic Thanksgiving Dinner has actually been an OK measure of the overall inflation rate over long periods of time.

Of course, for economists the price is only the beginning of the discussion of the turkey industry supply chain. This is just one small illustration of the old wisdom that if you want to have free-flowing and cordial conversation at dinner party, never seat two economists beside each other. The last time the U.S. Department of Agriculture did a detailed “Overview of the U.S. Turkey Industry” appears to be back in 2007, although an update was published in April 2014  Some themes about the turkey market waddle out from those reports on both the demand and supply sides.

On the demand side, the quantity of turkey per person consumed rose dramatically from the mid-1960s up to the early 1990s: for example, from consumption of 6.5 pounds of turkey per person per year in 1960 to 17.8 pounds per person per year in 1991. But since the early 2000s, turkey consumption has declined somewhat, falling to 14.8 pounds per person in 2023 and projected to fall below 14 pounds per person this year and next.

On the supply side, turkey companies are what economists call “vertically integrated,” which means that they either carry out all the steps of production directly, or control these steps with contractual agreements. Over time, production of turkeys has shifted substantially, away from a model in which turkeys were hatched and raised all in one place, and toward a model in which the steps of turkey production have become separated and specialized–with some of these steps happening at much larger scale. The result has been an efficiency gain in the production of turkeys. Here is some commentary from the 2007 USDA report, with references to charts omitted for readability:

In 1975, there were 180 turkey hatcheries in the United States compared with 55 operations in 2007, or 31 percent of the 1975 hatcheries. Incubator capacity in 1975 was 41.9 million eggs, compared with 38.7 million eggs in 2007. Hatchery intensity increased from an average 33 thousand egg capacity per hatchery in 1975 to 704 thousand egg capacity per hatchery in 2007.

Some decades ago, turkeys were historically hatched and raised on the same operation and either slaughtered on or close to where they were raised. Historically, operations owned the parent stock of the turkeys they raised while supplying their own eggs. The increase in technology and mastery of turkey breeding has led to highly specialized operations. Each production process of the turkey industry is now mainly represented by various specialized operations.

Eggs are produced at laying facilities, some of which have had the same genetic turkey breed for more than a century. Eggs are immediately shipped to hatcheries and set in incubators. Once the poults are hatched, they are then typically shipped to a brooder barn. As poults mature, they are moved to growout facilities until they reach slaughter weight. Some operations use the same building for the entire growout process of turkeys. Once the turkeys reach slaughter weight, they are shipped to slaughter facilities and processed for meat products or sold as whole birds.”

U.S. agriculture is full of examples of remarkable increases in yields over periods of a few decades, but such examples always drop my jaw. I tend to think of a “turkey” as a product that doesn’t have a lot of opportunity for technological development, but clearly I’m wrong. Here’s a graph showing the rise in size of turkeys over time from the 2007 report.

A more recent update from a news article shows this trend has continued. Indeed, most commercial turkeys are now bred through artificial insemination, because the males are too heavy to do otherwise.

The production of turkey is not a very concentrated industry with three relatively large producers (Butterball, Jennie-O, and Cargill Turkey & Cooked Meats) and then more than a dozen mid-sized producers.    Given this reasonably competitive environment, it’s interesting to note that the price markups for turkey–that is, the margin between the wholesale and the retail price–have in the past tended to decline around Thanksgiving, which obviously helps to keep the price lower for consumers. However, this pattern may be weakening over time, as margins have been higher in the last couple of Thanksgivings  Kim Ha of the US Department of Agriculture spells this out in the “Livestock, Dairy, and Poultry Outlook” report of November 2018. The vertical lines in the figure show Thanksgiving. She writes: “In the past, Thanksgiving holiday season retail turkey prices were commonly near annual low points, while wholesale prices rose. … The data indicate that the past Thanksgiving season relationship between retail and wholesale turkey prices may be lessening.”

If this post whets your your appetite for additional discussion, here’s a post on the processed pumpkin industry and another on some economics of mushroom production. Good times! Anyway, Thanksgiving is my favorite holiday. Good food, good company, no presents–and all these good topics for conversation. What’s not to like?

The International Federation of Robotics publishes an annual report on the use of robots in manufacturing and services. The main report is expensive and restricted, but some highlights are free. The top panel shows robots per 10,000 workers in manufacturing industries for 2023. The panel below shows a similar figure with data for 2017. A few themes emerge:

1) Across the major manufacturing countries, the number of robots per 10,000 manufacturing workers roughly doubles, from 85 to 162.

2) The robots in China increase especially rapidly, from close to the national-level average in 2017 to almost triple the national average by 2023.

3) Robots in the US were more than double the national-level average in 2017, and less than double in 2023.

These figure are just a count, not an analysis of effects on jobs or wages. National economies focus on different kinds of manufacturing, and also are facing different demographic trends in the number of working-age adults, so one would not expect the patterns of robots to be uniform. That said, it’s perhaps worth noting that total US manufacturing jobs were 12.3 million in January 2017 and 12.9 million in December 2023, even as the number of robots per 10,000 US manufacturing workers went from 200 to 295. My own opinion is that more robots are part of the productivity-enhancing solution for a healthy US manufacturing sector.

The IFR also reports some statistics on “service robots,” which do not produce goods. At present, these are mainly in transportation/logistics (think robot vehicle scooting around warehouses and factories) and in hospitality (which refers to “food and drink preparation robots as well as social interaction robots providing mobile guidance in retail stores, museums, and other public spaces”).

The middle income trap refers to the pattern in which certain economies grow rapidly enough to move into the global middle class, or even into the group of high-income countries, but at some point this catch-up growth seem to stall. The problem seems potentially widespread. For example, Japan and Korea both went through several decades of rapid growth, but then slowed to a more common pace. China’s exceptionally rapid growth seems to be slowing. The World Bank offers an overview of “The Middle Income Trap,” and possible policy solutions, in the World Development Report 2024.

From the report:

Developing economies change in structure as they increase in size, which means that changes in the pace of growth stem from factors that are new to them. Although these imperatives can vary across countries, economic expansion, on average, begins to decelerate and often reaches a plateau in income per capita growth, typically at about 11 percent of US GDP per capita. Today, this figure would be about US$8,000, or around the level at which countries are firmly considered upper-middle- income. A systematic slowdown in growth then occurs. … However, the pace of progress in middle-income countries is slowing. Average annual income growth in these countries slipped by nearly one-third in the first two decades of this century—from 5 percent in the 2000s to 3.5 percent in the 2010s. A turnaround is not likely soon because middle-income countries are facing ever-stronger headwinds. They are contending with rising geopolitical tensions and protectionism that can slow the diffusion of knowledge to middle-income countries, difficulties in servicing debt obligations, and the additional economic and financial costs of climate change and climate action.

Here’s an illustrative figure. Classify the middle-income countries as they were in the late 1970s. The blue line shows how those countries have done relative to the US, when measured on per capita GDP. The overall catch-up is quite modest, and as the orange line shows, the catch-up that has occurred is mostly due to China. The graph also shows some prominent examples of middle-income countries from different regions. Yes, Poland and Chile have caught up a bit, but their per capita GDP still hovers at about 20-25% of US levels. South Korea is the shining example of a middle-income country that has kept growing, but even after decades of rapid growth, its per capita GDP is about half the US level–and it’s catch-up seems to have stalled over the last decade or so.

The report suggests that economic development involves multiple steps. The first step is for a country to increase its investments in physical capital and human capital. However, the report offers a striking fact on this point: Middle-income countries already, at present, have about 71% of the physical and human capital of the US on a per capita basis; however, output per worker is only about 21% of US levels. The capital investment in these countries is not translating into output.

A plausible reason for this gap is that the quality of physical and human capital investment in middle-income countries is not as high, or to put it another way, the technology is not as good. Thus, the report argues that after an increase in investment, additional steps is needed.

To achieve more sophisticated economies, middle-income countries need two successive transitions, not one. In the first, investment is complemented with infusion, so that countries (primarily lower-middle-income countries) focus on imitating and diffusing modern technologies. In the second, innovation is added to the investment and infusion mix, so that countries (primarily upper-middle-income countries) focus on building domestic capabilities to add value to global technologies, ultimately becoming innovators themselves. In general, middle-income countries need to recalibrate the mix of the three drivers of economic growth—investment, infusion, and innovation—as they move through middle-income status

Consider this sketch of the relationship. Notice that the original step of greater investment is needed, but it doesn’t do much for catch-up growth. That happens with the later steps of infusion and innovation.

These additional step of infusion and innovation are potentially quite hard, because changing the technology of an economy is not plug-and-play. The necessary changes don’t just happen inside companies, but also involve shifts in earlier economic, social and political understandings. Incumbents will push back against forces that require substantial change. As one example: “In many middle-income countries, power markets are still a monopoly: an SOE [state-owned enterprise] operating under a vertically integrated utility remains in charge of generation, transmission, distribution, and the retail supply.” Such incumbent firms are comfortably sheltered behind a barricade of powerful political and economic forces.

From this perspective, the key to growth isn’t exactly the technology itself, but rather the incentives and flexibility within a given country and economy that determine how and how fast the technology will be adopted. For firms, this flexibility is about entry of new firms and the extent to which existing firms evolve and change, and about giving successful firms space to grow and inefficient firms the chance to shut down or be absorbed. For people, it’s about opportunity and mobility. The report notes: “Economically and socially mobile societies are better at developing skills and utilizing talent, but social mobility in middle-income countries is about 40 percent lower than that in advanced economies.”

The report has much more to say: about how the finance industry can support these evolutions, or not; about how countries with an international diaspora of skilled emigrants might be able to draw on those connections; about striking a balance where success is encouraged without being allowed to become entrenched; and so on.

The emphasis of this report on a dynamic and evolving society struck me as having relevance not just to middle-income countries, but also to high-income countries including the United States. For example, the report notes: ]

Three kinds of preservation forces perpetuate social immobility in middle-income countries, shutting out talent from economic creation. The first force is norms—biases that foreclose or limit opportunity for women and other members of marginalized groups. Next are networks—above all, family connections. And the last force is neighborhoods—regional and local disparities in access to education and jobs. Although all three factors can have positive impacts on talent creation—filling voids left by missing markets and services—they become forces of preservation when they block the disadvantaged from accessing opportunity.

Thinking about how to limit the constraints that norms, networks, and neighborhoods can put on the flourishing of individuals seems like a US issue, too.

Back in 1939, Winston Churchill famously said in a radio broadcast: “I cannot forecast to you the action of Russia. It is a riddle wrapped in a mystery inside an enigma …” One might say something similar today about the state of Russia’s economy. Since Russia’s renewed invasion of Ukraine in 2022, international economic sanctions have increased. However, Russia’s economic growth appears robust, according to IMF figures, because of enormous wartime stimulus. Meanwhile, Russia’s central bank has hiked its policy interest rate above 20%, partly to choke off inflation and partly to avoid a depreciation of the ruble (which would make it more expensive for Russia to import goods from China, in particular). Add unreliable and unavailable Russian economic statistics to the mix, and it’s hard to see into the riddle, though the mystery, past the enigma. But some evidence does bubble to the surface now and then.

A report from the Wall Street Journal describes “The ‘Deathonomics’ Powering Russia’s War Machine; Payments for soldiers killed on the front lines are transforming local economies in some of Russia’s poorest regions” (by Georgi Kantchev and Matthew Luxmoore November 13, 2024).

Facing heavy losses in Ukraine, Russia is offering high salaries and bonuses to entice new recruits. In some of the country’s poorest regions, a military wage is as much as five times the average. The families of those who die on the front lines receive large compensation payments from the government.

These are life-changing sums for those left behind. Russian economist Vladislav Inozemtsev calculates that the family of a 35-year-old man who fights for a year and is then killed on the battlefield would receive around 14.5 million rubles, equivalent to $150,000, from his soldier’s salary and death compensation. That is more than he would have earned cumulatively working as a civilian until the age of 60 in some regions. Families are eligible for other bonuses and insurance payouts, too. “Going to the front and being killed a year later is economically more profitable than a man’s further life,” Inozemtsev said, a phenomenon he calls “deathonomics.”

The subsidies are large enough to reduce poverty rates in some of Russia’s poorest areas, and also to balloon budget deficits:

The money flowing to military families can also carry economic risks. The payouts cost around 8% of state expenditures in the year to June 2024, expanding the budget deficit, according to an analysis by Re: Russia, a research group. The payouts have contributed to a high inflation rate plaguing Russia, leading the central bank to raise interest rates to near-record 21%. And more men going to the front is stoking a labor crunch, leaving employers short of welders, drivers and builders.

In Russia’s hinterland, though, the war payouts make a big difference. In Tuva, a remote region where the poverty rate is three times the national average, bank deposits have jumped by 151% since January 2022, the month before the invasion, central-bank data shows. That is the highest increase in Russia, a sign that people are able to squirrel away substantial amounts of money. The region is also in the midst of a record construction boom with new multistory residential complexes arising in the regional capital of Kyzyl. It is almost as if an entire generation has found work overseas and is now sending back remittances.

The Stockholm Institute of Transition Economics (SITE) at the Stockholm School of Economics has tried to see through the smoke in its report “The Russian Economy in the Fog of War” (September 2024). The report starts by putting the size of Russia’s economy in international perspective.

In a global context, Russia is sometimes labeled a “great power”. There are good historical reasons for this. It was one of two opposing poles in the cold war; it remains a major nuclear state; it is a permanent member of the UN security council with veto powers; between 1998 and 2014 it was part of the G7 which with the inclusion of Russia became the G8; and in terms of land size Russia is by far the largest country in the world. In terms of economic size, however, Russia is not a “great power” with a GDP of around 2000 billion US dollars. That is about 1/10th of the combined GDP of the EU-27 (about 20 000 billion US dollars), or approximately the same size as the Nordic countries combined. The size of the US economy is about 27 000 billion US dollars or more than 13 times the Russian economy. Compared to other BRIC countries, Russia is behind Brazil (2200 billion US dollars), distanced with some margin by India (3600 billion US dollars), and only around 10 percent of the Chinese economy (17 800 billion US dollars). … In other words, there is no reasonable scenario where Russia could afford to outspend the West on military equipment and personnel if the West decided to enter a full-blown arms race with Russia in the longer run, when short-run production constraints are not the deciding factor.

For Russia, oil and gas exports alone are about 14% of total GDP. Thus, Russia’s economy fluctuates with energy prices. The report cites one estimate that “between 60 and 95 percent of Russia’s GDP growth can be explained by changes in one exogeneous variable alone: the change in international oil prices.”

Another way of illustrating how natural resources dominate the Russian economy is to look at trade flows. A break-down of what Russia exports, and to whom, shows that more than half consists of sub-soil assets, and more than 40 percent of the total is oil and oil products. When instead looking at imports, it is clear that Russia depends on the rest of the world for machinery, electronics, vehicles, pharmaceuticals, and other goods that require innovation and competitive manufacturing. In short, the Russian economy in terms of trade relations can be described as exporting mainly natural resources, while importing manufactured items and being highly dependent on importing advanced products.

Since 2022, Russia has stopped and then re-started the publication of various economic series. The official GDP numbers are probably not trustworthy, and even to the extent that they can be trusted, they involve heavy production for a wartime rather than a civilian economy. The report uses the price of oil to estimate the size of Russia’s GDP, and then applies a range of possible estimates of inflation, withe the result that “all the alternative measures of growth are negative, ranging from around minus 2 to minus 11 percent.”

The unemployment rate in Russia appears to be quite low, at an official rate of 2.4%. But the grim reason is a combination of killed and wounded in the Ukraine war and people of military age fleeing the country. As the report notes:

Beyond the aggregate numbers, there are also important details when it comes to what happens with the composition of the workforce. The war requires soldiers in great numbers at the front lines, mostly young males, with many of them ending up killed or injured. The war has also triggered an outmigration of citizens due to sanctions and the threat of conscription. Notably, those emigrating are predominantly middle-class business owners and educated workers in conscription age. Furthermore, migrants also move their capital to their new home countries, as for instance shown by the significant financial flows being directed from Russia to the United Arab Emirates since the invasion began in February 2022 (Alexander and Malit, 2024). This suggests that the brain drain not only results in a reduction of skilled labor but also in a loss of capital and investment.

In snowy mountain regions, the situation is sometime ripe for an avalanche, but at the same time, exactly what might cause the avalanche to happen can be unclear. Russia’s economy is currently spending about 8% of GDP on defense and intelligence, while running large budget deficits, double-digit inflation, interest rates north of 20%, and suffering under international sanctions. I do not know if the result will be an economic avalanche, or just a stagnant and declining standard of life for civilians.

The eruption of the COVID-19 pandemic in March 2020 is less than five years ago: still, it has become hard (for me, at least) to recapture in my own head the fears and uncertainties of those first few months. The unemployment rate spiked from 3.5% in February 2020 to 14.8% just two months later in April 2020. It was not clear how many employers would function, or how many people would earn a living. In short, it was a time when a fast legislative reaction seemed essential. But although no one of prominence was making this point in March 2020, any high-speed plan to spend a few trillion dollars is also extraordinarily likely to end up with an oversized proportion of waste and abuse.

Cecilia Elena Rouse makes this point in her broader discussion of “Lessons for Economists From the Pandemic,” delivered as the annual Martin Feldstein Lecture at the National Bureau of Economic Research (NBER Reporter, 2024, No. 3). She describes the sheer size of federal spending in response to the pandemic:

In response, in 2020, Congress passed and then-President Trump signed two bills: the Families First Coronavirus Response Act on March 18, 2020 (providing $192 billion for COVID research, enhanced UI, and health funding), and the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) less than 10 days later (providing more than $2.2 trillion in economic stimulus). CARES alone was the largest stimulus package in American history. These were followed by the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, which was signed in December 2020, providing $900 billion in additional funding and stimulus. And then, in 2021, Congress passed and President Biden signed the American Rescue Plan, which added yet another $1.9 trillion in stimulus and recovery funding. In total, this was more than $4.5 trillion in stimulus, compared to just over $2 trillion throughout the 2008 global financial crisis (both in 2022 dollars).

Rouse focuses on some of the main aspects of the CARES legislation passed in March 2020. As she points out, while the law “may have been `good enough,’ it was sloppy.” She points out:

This lesson is based on the fact that federal data, computer, and human resource infrastructures were — and still are — not up to the task of delivering surgical and speedy support for the economy. Components of the CARES Act highlight this reality well. For example, the Paycheck Protection Program (PPP) provided uncollateralized and forgivable loans to small businesses (generally, those with fewer than 500 employees). These loans could officially be used only to retain workers (with several safe harbor provisions), meet payroll and health insurance costs, or make mortgage, lease, and utility payments. If these conditions were met and firms met their employment targets, the loans would be entirely forgiven after the pandemic. The Economic Injury Disaster Loan (EIDL) program provided low-interest-rate loans of up to $2 million, payable over up to 30 years. Loans also included the option to defer all payments during the first two years while businesses and nonprofits got back on their feet after the pandemic. And finally, the coverage and generosity of UI were expanded dramatically. Benefits were increased by $600 per week, and those not typically covered, such as gig workers and contractors, were made temporarily eligible.

While it may have been “good enough,” it was sloppy. On the one hand, nearly 1 million firms received PPP loans (worth $150,000 to $10 million), and 3.9 million received EIDL loans. On the other hand, this assistance was rather inefficiently delivered. Waste and poor targeting were a problem. David Autor and his coauthors estimate that PPP loans cost between $169,000 and $258,000 per job-year saved, which is more than twice the average salary of these workers. They also estimate that more than two-thirds of the total outlays on the program accrued to business owners and shareholders rather than employees.

Outright fraud was also a major issue. The Government Accountability Office (GAO) estimates that PPP fraud totaled about $64 billion out of a total of nearly $800 billion in loans— that is, about 8 percent of all PPP loans may have been fraudulent. Under EIDL, some borrowers claimed loans using falsified names or business details and often simply ran off with the cash. In the end, the GAO and the Small Business Administration estimate that EIDL fraud was even more pervasive than PPP fraud, in dollar terms — more than $136 billion. UI fraud also skyrocketed during the pandemic; the GAO estimates that fraud may have cost anywhere from $55 to $135 billion.

Add it up, and the $2.2 trillion of economic stimulation in the CARES legislation may have involved more than $300 billion of outright fraud–as well as extremely high costs per job saved. Of course, adding the fraud and waste components from the rest of the pandemic-response legislation would add to the total fraud and waste.

Was this tradeoff between speed of response and the nearly inevitable fraud and waste that followed worth it? Rouse points out that compared to other high-income countries, the recovery of US GDP by the end of 2021 was much stronger. She also notes that this boost of federal support also played a role in triggering the resurgence of inflation. She argues that the pandemic response was clearly not perfect, but given the stresses of the time, could at least be categorized as “good.”

I’m willing to give Congress and President Trump something of a pass for the pandemic support passed in the craziness of March 2020. It seems to me that the additional $2 trillion or so in stimulus passed into law under President Trump in December 2020 and under President Biden in March 2021 probably deserved more scrutiny than they got.

The obvious follow-up question is whether it’s possible, when (not if) a similar crisis occurs, to reduce this tradeoff between a speedy response on one hand and waste and fraud on the other hand–a tradeoff that occurred across other high-income countries as well. Rouse points out that minimizing fraud and waste means investing up-front in information systems and technology that make it possible for the administrators of these programs perform their role as front-line fraud and waste detectors. But the US has lagged behind in such investment. Rouse focuses on the example of information technology in unemployment insurance programs, which are run at the state level, although her point can be more broadly applied to many government information systems. She notes:

As of 2020, less than half of the states had modernized their UI [unemployment insurance] systems. Some state systems still run on COBOL; it is almost impossible to submit an application on a mobile device in most states, and workers in some states must still be physically mailed a password to log in to their UI account. In part because of these challenges, by the end of May 2020, only about 57 percent of unemployment claims had been paid nationwide. This created a double crisis, where overworked employees didn’t have the resources they needed to rigorously verify claims, leading to more fraud, while genuinely eligible workers had to wait weeks or months to get their benefits.

Moreover, if the goal in a pandemic-type situation is to get income to those suffering immediate disruption, unemployment insurance as it exists is an imperfect tool. The program doesn’t cover many people in “alternative” work arrangements like contract worker, the self-employed, gig workers, or students who hold jobs while taking classes at the same time.

We are already seeing some high-profile prosecutions for fraud during the pandemic. But while trying to identify the wrongdoers several years later is necessary, it’s also a costly and inefficient way to limit wrong-doing. What we aren’t seeing is serious thought (and investment) to reduce risks of fraud and waste in these programs both now, and in a future crisis.

David A. Price of the Richmond Fed serves as interlocutor in an interview with “Laura Alfaro: On global supply chains, sentiment about trade, and what to learn from Latin America” (Econ Focus, Fourth Quarter 2024, pp. 22-25). Here are a couple of comments from Alfaro that stuck with me:

On lessons for the United States from Latin America, Alfaro comments:

On the negative side, I don’t see the United States paying attention to unsustainable fiscal debt. Politicians have been just offering to spend money and this at some point comes back to roost. One does start to worry. It is true that the United States has advantages. It’s the biggest economy in the world; it has its own currency, which is the reserve currency. So we tend to assume that it can go on forever — that when the end of the world comes, U.S. sovereign debt will be around along with the cockroaches. But it is not endless. 

For Americans, anti-trade attitudes seem inextricably intertwined with negative attitudes regarding trade with China. The “Great Reallocation” refers to the pattern that, as the US has raised tariffs on imports from China since 2017, products are instead being partially produced in China, finished in third countries, and then imported to the US from these third countries. Alfaro describes the pattern of US public opinion in this way:

There seems to be a backlash against globalization, but it’s in rich countries. People think it’s global, but it’s not. It’s Brexit; it’s the United States. I did this work with Davin Chor and Maggie Chen. … We were thinking that what’s going on is people have not been explained the benefits of globalization. … And so in an arrogant way, we thought we would teach them. That was the objective of the paper: Let’s give people facts about trade to see if we convince them that trade is good.

And what are these facts? The U.S. has never seen the level of employment it has seen during globalization. If you look at the number of employed people in the U.S. in the last 20 years, U.S. unemployment is low, and the U.S. keeps employing people. So we gave these facts. We also showed the fact that the price of goods has come down. To keep it simple, we showed them the price of computers, the nominal price. We didn’t even go into real and nominal. The nominal price of computers has gone down. And of clothes. We also showed them that with tariffs, prices went up.

Unsurprisingly, if you tell them there was a loss of manufacturing jobs, people go against trade. But even if you tell them everything positive — it created more jobs, it lowered prices, tariffs increase prices — the process still made them more against trade. And these were randomized experiments. So we did this for five years, because we were thinking no, we did something wrong the first time. But the outcomes were very stable.

And so we went and asked people: I just told you trade was good, why are you still against trade? What we found is that people cannot differentiate trade from a link with China and jobs. It doesn’t matter what you tell them, it instantly triggers an association with China. So we walked away a little bit more humble because our models are not models that deal with national security. And that’s a concern that they mentioned. We economists should probably try to think more about how to incorporate national security concerns.

Our conclusion is that if we do want people to support trade — and as I said, I do think trade has benefits, and we do need to do things to improve redistribution, retooling, reskilling — if we want people to be open to it, we need to address the concerns about the particular bilateral interaction with China. Perhaps that reallocation is one way to deal with it. Let’s try to trade a little bit more with Vietnam and some other countries.

However, in our own work what we have found is that even as the U.S. has directly imported less from China, the main trade partners of the U.S. are importing more from China. Mexico is importing more. Europe is importing more. And Vietnam is importing more. So even though directly the U.S. is diminishing the exposure, indirectly the exposure might still be there. Therefore, one still needs to worry because people eventually may also note that the relation is indirect, given the concerns of the bilateral relationship with China.

William Nordhaus (Nobel ’18) reflects on his pathway into and through economics in “Looking Backward, Looking Forward” (Annual Review of Resource Economics, 2024, 16: 1–20). He writes: “I first saw light in Albuquerque, New Mexico, at the dawn of World War II, in the lush Rio Grande River floodplain, with an irrigated alfalfa field outside my window. Compared to the busy early lives of my children and grandchildren, there was not much to do but play marbles and pick up little prickers from the paths so that we could run barefoot. How did I get from an alfalfa field in New Mexico to Connecticut in 1959, join the Yale faculty in 1967, and land in Stockholm in 2018? This essay recounts the history of my journey. … Looking backward, I find that my interests have focused almost entirely on public goods, particularly global public goods, from technology and knowledge to climate change …”

The essay has many wonderful bits and pieces, as when Nordhaus spent his junior year of college abroad in Paris, being taught economics by a professor who “had not yet made it to Marxian economics and was entranced with Ricardian economics from around the 1820s.” Here, I’ll just mention a few points and examples that caught my eye.

On the problem that inventors can appropriate only a small share of the benefits of their innovations:

[T]he major roadblock to invention is the inappropriability of returns. This means that inventors cannot appropriate for themselves the full gains from new knowledge—they cannot collect the full value of the use of the knowledge. As a result of inappropriability, the private returns to innovation are usually well below the social returns, and less innovation takes place than is optimal for society as a whole.

Some examples of the inappropriability are inventors who died with little to show for their inventions. Nikola Tesla was a brilliant inventor who made many important contributions to the fields of electricity, magnetism, and wireless communication. However, he got little cash from his inventions and managed it poorly. When he died, he was bankrupt and living alone with pigeons in a New York hotel apartment.

Other stories have a happier ending. One of the major innovations of modern times was an effective vaccine for COVID-19. … [A] crash program by governments, universities, and corporate scientists produced an effective vaccine in less than a year. The benefits of securing an effective vaccine one year earlier are literally in the tens of trillions of dollars according to studies by public health specialists and economists. How much of this is earned by the developers of successful vaccines? If we look at one of the major firms, Moderna, its market value rose from $20 billion prevaccine to around $120 billion in 2022–2023. Say all the vaccine makers gained $300 billion. This reward is surely not a pittance, but it would be only circa 1% of the one-year social value of the vaccines (Watson et al. 2022). Notwithstanding this success story, the gap between social and private returns is a major impediment to effective innovation, and poor incentives appear to have slowed the development of later-generation COVID-19 vaccines.

On the issues of growth and limits to growth:

One of the joys of academic economics is model building. I built models of railroad profits, the US macroeconomy, the patent system, inflation, productivity, and induced technological change. I then turned to energy models. As mentioned above, the 1970s were the high-water mark of modern Malthusianism, predicting stagnation, the decline of living standards, and spreading famines. One of the doomsday books was by MIT’s Jay Forrester, called World Dynamics, published in 1971 (Forrester 1971). He was a computer genius, but I was appalled by the lack of economic analysis. I built and published (Nordhaus 1973) a model of the Forrester model to show that the results were highly sensitive to many assumptions and that any of several alternative assumptions would completely change the outcomes. History was not kind to the predictions of any of these studies, and Malthusian thinking proved as inappropriate to the late twentieth century as it had been in the early nineteenth century. However, while I didn’t much like the analyses in The Limits to Growth literature, I took the issues seriously. Clearly, there are limited resources of oil, gas, copper, and clean air. Just as clearly, technological change is finding substitute processes that replace scarce resources with superabundant resources. Perhaps the best example is fiber optics (light plus silicon) as a substitute for copper wire. The quadrillion-dollar question is whether technology will outpace depletion.

On progress made in analyzing climate change issues:

Because we know so much today, it is hard to remember how little we knew in 1970. Specialists thought the globe was cooling and that rising levels of particulates would further exacerbate cooling. The first study of the economics of climate change examined the impact of cooling, not warming. The only alternative to fossil fuels was thought to be nuclear power, which was viewed by many scientists with suspicion. All climate worries were based on modeling at that time, and only in the last two decades has the science been validated by observations. …

Over the next two decades, I moved from model to model like a pilgrim trying to find the holy grail. The main goal was to fix the two major flaws in the IIASA [International Institute for Applied Systems Analysis] model: to develop a general-equilibrium framework and to develop the modules of the climate externality, especially developing monetized damage estimates. Accomplishing these two goals took nearly two decades, and what finally emerged was the DICE model (Dynamic Integrated model of Climate and the Economy). The first major study was rejected by economic journals but accepted and published in Science (Nordhaus 1992). I have always loved the name of the DICE model. It is easy to remember and visualize. DICE also conveys a shiver of risk and danger. It alludes to the Faustian bargain that we make as we continue down the path of unchecked climate change, on the Walpurgis Night of reveling in a world enflamed by fossil-fuel passions and ignoring how the devil of damages will drag us into a hellish future. … My friend Martin Weitzman once teased me that updating the DICE model will provide lifetime employment until we solve the climate problem, which means lifetime employment. That certainty has proved an accurate forecast.

It is canonical among economists that as the price of a good rises, the quantity demanded of that good falls (other factors held equal). The underlying logic is that a higher price for a certain good has two effects. The “substitution effect” is that a higher price for a certain good causes potential buyers to shift at least some of their buying to substitutes. The “income effect” is that the if the price of a certain good rises, the overall buying power of one’s income is reduced, which tends to lead to a reduction in consumption of all “normal goods” that a person buys. Indeed, the economic definition of a “normal good” is a good where more is consumed as income rises: this is in contrast to an “inferior good,” where less is consumed as income rises. A standard example is that steak may be a “normal good,” while hamburger is an “inferior good:” as income rises, a typical household consumes more steak and less hamburger.

But there is a well-recognized theoretical exception to this rule, known as a “Giffen good.” Imagine a very “inferior” good. When the price of that good rises, the substitution effect provides an incentive to shift to other substitute goods. However, for an inferior good, when the higher price leads to reduced buying power, people with effectively lower incomes buy more of the good. If there aren’t many (or any) possible substitutes for the good, and the inferior good effect is strong, a higher price can lead to people buying more of the good.

As a real-world example, consider the situation of a low-income household where a single food item plays a large role in their near-subsistence diet: the example I grew up hearing in classrooms was the role of potatoes in the diet of of poor people in Ireland in the 19th century. Say the price of potatoes rises, because of some external factor like a bad harvest, but that even after this price increase, potatoes remain the cheapest source of calories in a basic diet. In this situation, the poor do not have a cheaper food product to which they can substitute. Moreover, a price increase for a staple food product that is a big part of overall household spending means that the buying power of family income is diminished, and potatoes are an “inferior good.” Thus, poor people in this situation react to a higher price of potatoes by purchasing a greater quantity.

This situation of a Giffen good–a food staple that does not have easy substitutes, but is an “inferior good” making up a large share of purchases of low-income households– is obviously rare. Francis Ysidro Edgeworth described Giffen goods in this way in 1914: `Only a very clever man would discover that exceptional case; only a very foolish man would take it as the basis of a rule for general practice.`” Indeed, I’m not aware of clear empirical evidence that the Giffen good argument applied to low-income Irish households eating potatoes in the 19th century. But there is some modern evidence that for low-income households in a particular location in China, rice was a Giffen good.

Garth Heutel offers the possibility of a completely different example in “Theme park rides are Giffen goods” (Southern Economic Journal, published online September 17, 2024). His argument requires a shift of perspectives fancy footwork. He focuses on a particular context, in which people pay an admission fee to enter an amusement park, but then do not pay an additional fee for the rides. In this context, given that you have already paid for admission, the “price” of a ride is the time that you wait in line. In addition, you go into the park knowing that there will be lines, especially at the most popular rides. Thus, Heutel argues, a “higher price” in this context is a situation in which, after entering the park, you find that the lines for a given ride are longer than you expected.

Here’s a simplified example from Heutel to provide some intuition:

Consider a theme park with just two rides: a high-demand ride with a long wait, like a roller coaster, and a low-demand ride with a short wait, like a carousel. A guest has made a touring plan based on the expected wait times for the rides – 15 min for the carousel and 120 min for the roller coaster – and on the total time spent in the park of 7 h. Given that budget constraint, the guest chooses three rides on the roller coaster (6 h) and four rides on the carousel (1 h). …

When the guest arrives in the park, she finds an unexpected increase in the wait time for the carousel, increased from 15 to 30 min. How does she change her behavior? One option … would be to maintain her three rides on the roller coaster, leaving her just enough time (1 h) for two rides on the carousel instead of four. This would reduce the total number of rides from seven to five. An alternate option … is to ride one fewer ride on the roller coaster (two instead of three), leaving her an extra 2 h to ride the carousel, which would allow her six rides instead of the original four on the carousel. This would increase the total number of rides from seven to eight. This option amounts to Giffen behavior in her demand for the carousel; the price (wait time) increased, and her quantity demanded increased. The Giffen option is more likely to be chosen if the guest has some minimum total number of rides that she would like to achieve, similar to subsistence demand.

Heutel offers data and theory to argue that this simplified example is as plausible representation of reality. I can’t do justice to the complexities of the analysis here, but here’s an overview:

I use a unique proprietary data set, which contains observations from several hundred guests of several major theme parks in California and Florida. Each guest has at least one “touring plan,” which is an itinerary of planned rides that the guest would like to do in the park. For each ride in the plan, I observe the ex-ante expected wait time, the actual wait time once the guest arrives at the ride, and the decision over whether the guest rode it. The key empirical test is the effect that the actual wait time, or the deviation between the actual and expected wait times, has on the probability of riding the ride. … The law of demand says that a higher wait time should cause a decrease in the probability of riding; Giffen behavior suggests the opposite. …

I find statistically significant evidence of Giffen behavior among theme park guests. On average, a 10-min increase in the difference between the actual wait time of a ride and its ex-ante expected wait time increases the probability of riding it by about three to five percentage points. This relationship holds under a variety of specifications and different controls, including controlling for weather, for overall park wait times, and for a set of user, ride, date, and time-of-day fixed effects. While true on average across all rides, I find that the effect predominantly arises from the rides that are the least desirable, that is, not the headliner rides like roller
coasters. These rides are more likely to be inferior goods and thus more likely to exhibit Giffen behavior. I show that the Giffen effect is larger in theme parks with a smaller number of substitute rides, consistent with the theory.

For me, it requires some mental exertion to think about the “subsistence” problem of those attending theme parks, in terms of the limited time they have in their day, as compared to the “subsistence” problem of impoverished Chinese people with a diet heavily dependent on rice. But of course, the very different context is what makes the example worth passing along.