Did you notice that social media had much less traffic and activity today? It seems like even less than on Christmas.

I was instantly sick about all of the emails that went out early in the COVID times from companies that said that “we’re in this together”. Frankly – no we weren’t. Lots of people dissented and still do today.

To a great degree, we share a great deal in common. If you didn’t work today, then you probably spent time with family and friends – it’s a relatively secular holiday. Even if you did work, you probably resented it a little.

But, we do share common experiences otherwise. Make sure that you get home safely tonight. Maybe check-in on your friends in the morning. Be sure to reflect on your life from the past year. Plan like you have many years in front of you and live like you have a single day in front of you.

Happy new year everyone from Economistwritingeveryday.com !

What does effective political advocacy look like? There is an entire school of thought dedicated to effective altruism. Givewell.org exists solely to evaluate and promote efficient, high-impact charities to help donors maximize the value their donations create. But what about political advocacy? It doesn’t fall neatly within the realm of altruism or charity – there is certainly nothing wrong with advocacy on behalf of yourself or a group you count yourself among, but it’s not altruistic in the classic sense. It also doesn’t conform to the neater forms of dollar efficiency or target outcome analysis that a charity might be evaluated along. Political outcomes don’t always lend themselves to intuitive metrics, or even agreement over whether an outcome should be counted a good or bad thing. There’s nothing especially convenient about political advocacy as a tool for welfare maximization, but that doesn’t free us from its necessity. Abandoning politics for it’s frequent ugliness concedes the power of of governance to the ugliest among us.

Political advocacy requires, nearly by definition, to interface with government institutions. In the case of a democracy, this means working within the limits and incentive structures of politics, and all of the complexity that entails. Leaving behind the relatively straightforward prices and incentives of the marketplace, as well as the fungibility of direct charitable donations, politics demands coping with indirect routes to measurable outcomes and, most importantly, the inevitable arrival of oppositional forces. It doesn’t take long in any meaningful advocacy engagement before the arrival of people and resources working explicitly, if not directly, counter to your efforts. This is not something you have to deal with in most charitable endeavors – efforts to shutdown city food banks and block textbooks from reaching African schoolchildren are thankfully rare.

So, again, what might an effective advocacy practice look like? I imagine it would bare scarce resemblance to your modal election campaign, where the emphasis is on manufacturing turnout in a zero-sum competition with your opponent. I also doubt it would look like most lobbying efforts, where the dollars at work represent the selection-effects of classic collective action problems. Rather than the efficient welfare maximization that a hypothetical EffectiveAdvocacy.org would aspire to, the lion share of lobbying simply represents the interests of firms and groups who have identified a bundle of policies whose benefits are sufficiently concentrated within them that it is worth organizing, while at the same time the broader social costs are sufficiently spread out that an opposing forces cannot similarly get over the organizational hump (Yes, I know this is a restatement of the standard Olsonian collective action model of lobbying. Bear with me.)

Effective advocacy would demand working with not just the limited resources of a group without a built-in constituency of concentrated benefits, but also a focused strategy of identifying welfare-maximizing policies unlikely to generate organizable opposition. That’s a tall order. I mean, if you’re going to convince me such a thing is feasible, an example would go a long way. Can you name one?

I’m glad I asked.

The good people at Marginal Revolution posting a link to a paper about the de facto banning of HIV home tests that has been in effect at the FDA for almost 40 years. Suffice it to say, the banning of home tests for a deadly communicable disease is a horrifying policy, one that has without question killed people by the thousands at best and the millions at worst. I imagine the origin story of this regulatory horror is not dissimilar from the opposition to the HPV vaccine – a macabre desire to raise the costs of an undesired behavior. Homosexuality was viewed by many in the not distant past as a choice, HIV/AIDS was killing homosexuals, and a home test would feasibly lower the risk to gay men, so advocates successfully blocked the development of tests. Why did opposition to HPV vaccines find less success? Because HPV is connected to cervical cancer in everyone, and being pro-cancer in the 2010’s enjoyed less popular support than being anti-gay in the 1980s.

This story is a tragic history, but it also represents an opportunity for effective advocacy. The policy, born of homophobia, would never enjoy such popular support today. It survives almost exclusively of regulatory inertia today. A minimum of lobbying resources could feasibly end the policy in large part because it’s originating constituency is diminished and would be unlikely to successfully organize.

This, in a nutshell, is the opportunity for effective advocacy – the strategic search for welfare-harming policies whose originating constituencies have shrunken or disappeared. It’s not particularly exciting, the notion of combing through policies on the books, agency by agency, looking for harmful policies with little to no continuing political support, but it is in that lack of excitement within which the opportunity lies. Reform of headline- and chryon-inducing policies have built in opposition. Any political or politics-adjacent effort that garners significant media attention always promises similar attention for opposing forces. It is within the boring stuff, the bureaucratic protocols and categorical bans produced at the margins of historical political battles, where advocacy, particularly crowd-sourced efforts, motivated by the same sentiments behind effective altruism and efficient charity might make contributions to our government institutions in the best way possible: by making changes that nobody can get attention from opposing.

That’s just one opportunity for effective altruism: inattention. There are no doubt more, but I suspect many will share at least a sliver of unsexy monotony. A better world through boredom.

Organized shoplifting mobs! Retailers claiming increases in shoplifting! Journalists claiming its an overstated numbers grift! Other journalists saying we should ignore shoplifting because corporate theft! The conversation about shoplifting is often hysterical and occasionally stupid, but that doesn’t mean something isn’t actually happening. Some of the facts seem clear, others murkier, and the underlying causes, like everything during this pandemic, are no doubt complex and uncertain. Let’s see if we can organize our thoughts a bit.

What we know

Shoplifting has been on the rise across the United States, with increasing theft of both staples for survival and the goods most easily resold on the black market. More specifically, and perhaps even more certainly, a still wealthy San Francisco, where one would expect retailers to desperately want a presence, can only seem to watch as its retailers flee. CVS is out. Walgreens is out. One Target it out (but not the biggest one). And the reason they claim is not commercial real estate overhead costs or declining customer bases, but an overwhelming increase in shoplifting (or what the retail industry used to call “inventory shrink”). While obviously not the whole story, the effective decriminalization of theft under $950 in San Francisco seems a key component. It doesn’t take any clever or subtle theorizing to expect that if the cost of theft under a certain threshold is radically lowered, then all you have to do is disaggregate your theft events across time and people to yield a sufficiently lucrative use of time (especially for those who are struggling or already carry the far weightier burden of a felony record). You can’t lower the opportunity cost of labor (less jail time) in a field of endeavor (boosting consumer goods) and pretend to be shocked when supply increases (more theft).

What we think

I am sure there is no shortage of “greedy corporations are abandoning American cities” and other malice-based theories, but those aren’t particularly useful theories. Retailers want customers and cities have a lot lot of them. So the first possibility is that they are simply telling us, and their shareholders, the truth– theft has reduced the profitability of stores such that the optimal decision is to close the doors. It would be a pretty shocking development to look back one day and realize that shoplifting was what closed the book on brick and mortar retail. Not Amazon or delivery drones, but the favored hobby of bored delinquents and subsidy of struggling families.

To those ends, though, a meteoric rise in shoplifting nonetheless feels, if not convenient, then incomplete as an explanation. CVS isn’t just closing in San Francisco, it’s closing 900 stores and moving to a new “store format”. Perhaps the better way of framing these closures isn’t a “crime wave of shoplifting” but rather more evidence that the brick and mortar retail industry is incredibly fragile, where any unforeseen increase in costs immediately threatens profitability. In a composite of shoplifting, online competition, the unabated growth of Costco and other wholesale clubs, and the rise in reservation wages of labor all across the country, which story would you want to emphasize to your shareholders as you close shops in urban centers? That you can’t compete? That you can’t afford labor? Or that you are being forced out by the crumbling of civilization into Mad Max dens of wayward lawlessness? At least the last one holds out hope that your business model isn’t wholly obsolete.

Still, people definitely seem to be stealing a lot of stuff, and that just creates one more cost advantage for online competitors and venues that require membership for admission. Things are changing, perhaps at an accelerated rate thanks to the pandemic and it’s accompanying bundle of policy responses. When considering fundamental change, observation of chaos rarely offers evidence to the contrary.

What can or should we do?

There are lots of things we should decriminalize. Lots. But I am extremely confident that theft is not one of them. The consequences are obvious, and in the short run will be felt almost exclusively by the poorest, who depend on local retailers, particularly those on the public transportation routes they take to work. Further, this is a problem that can metastasize as people don’t just supplement their incomes with theft, but specialize in it. It will hollow out the largest retailers and the smallest bodegas. It will change the the entire structure of physical marketplaces. It will change how people interact with core components of our welfare system. It will poison another relationship, this time between seller and customer, where people are increasingly viewed as a threat.

So what should we do? Desperate people stealing rice and other staples is one more argument for an unconditional universal basic income. People opting for black market income is one more argument for wage subsidies to increase relative attractiveness of wages in the legal market. And people stealing because the price of getting caught approaches zero? That’s an argument for raising the price of theft. Not to new and cruel heights, but to the levels they were at before i.e. high enough that theft is nothing but a last resort. A very last one.

For the past few weeks, economist Patrick Newman has been doing the rounds for his new book (i.e. in the title of this blog post) on American economic history from 1607 to 1849. Well, its not only about American economic history. Its a bit more about the institutional history of the United States before 1850 and how it relates to economic history. It is an amazing book. Unfortunately, I expect many economic historians to ignore or fail to notice it. I hope that this blog post will at least reduce the likelihood of this happening because Newman’s book holds strong explanatory power if one is interested in the link between growth and institutions.

Newman’s argument is actually quite simple. First, there are two broadly-defined camps: the forces of liberty and the forces of power. Already, some may balk at this dichotomy but I would advise them not to. There are many reasons to keep going. The first is that It invokes an older tradition in historical studies that starts with Lord Acton and has been continued by numerous historians on the left and right. The other reasons become evident as one moves along in the book.

The forces of liberty are those that seek to constrain the state and the exercise of power. The forces of power, for their part, are those that seek to be empowered by a strong, capable and relatively unconstrained state. The forces of power, however, invite cronyism because the empowerment also permits personal aggrandizement (e.g. legally protected monopolies such as charters, tariffs, subsidies, grants, patronage).

The founding of the United States was, according to Newman, a battle between both forces with the British being the forces of power. After the Revolution, the forces of power continued inside the Federalist Forces — who basically dominated the constitutional convention of 1787 and the first Congress. Acting a de facto (because that is the title I give him) heir to Murray Rothbard, Newman adopts the position that the foundation of the US was in fact a rent-seeking bargain thanks to the federalists forces (Newman notably edited the lost volume of Rothbard’s Conceived in Liberty on the early republic).

After that, antifederalists and republicans coalesced into a working coalition that reinterpreted the constitution in a way that backfired against the Federalists and led to the Jeffersonian revolution of 1800. Important reforms, which Newman credits as being beneficial to living standards, were adopted. However, the Jeffersonians rapidly became corrupted by power. And here is the second reason to not balk at Newman’s dichotomy of the forces of power/liberty: people can move between camps. In other words, ideological commitment is not inelastic. Some in one camp or the other can switch when the rewards to do so change. However, the key point that Newman makes is that commitment to the forces of liberty is far more elastic than the commitment to the forces of power (which is more inelastic). The Jeffersonians’ commitment to liberty waned and they eventually enacted relatively similar policies to those of the federalists. They too engaged in cronyism. The same ebb and flow reoccurred later with the Jacksonians.

And here comes the third reason not to balk at Newman’s dichotomy: it actually hold pretty decent explanatory power. One common argument among financial and economic historians is that the United States may have sounded like a Jeffersonian project but the policies of the Early Republic and Antebellum were distinctly Hamiltonian (i.e. Federalist). To be sure, there is some evidence to that effect — which is what someone could retort to Newman. However, the old adage that “one in a glass house should not throw bricks” applies here. Revisions to the historical estimates of living standards have gradually swung in favor of the predictions associated with Newman’s model of the forces of power/liberty.

Consider this new article in Historical Methods by Frank Garmon (of Christopher Newport University). Garmon took issue with data from 1798 used by many scholars. In 1798, Congress introduced the a direct property tax to prepare for the possibility of a war with France. As Garmon succintly summarizes: “The law creating the tax consisted of three elements: a flat tax on slaves per head, a progressive tax on houses with rates escalating based on value, and a proportional tax on land based on value to make up the difference in each state’s obligation”. Other scholars, such as my co-author Peter Lindert and Jeffrey Williamson, argued that these features invited corruption during the assessing of tax liabilities. This was particularly true in the south because of the flat tax per slave. Thus, if one tries to use the tax data to estimate economic activity circa 1800, one has to augment it to some degree to reflect the geographically varying levels of corruption. Garmon finds that corruption was not an issue. The disparities pointed out by others (which made sense at first glance) could be largely explained by normal economic factors such as population density (which would affect land valuations etc.). Thus, Garmon argues that there is no need to deflate. As a result, he finds that incomes were roughly 5% lower in the southern states in 1800 (a proportion that would have been smaller in northern states).

Why is Garmon’s result relevant to Newman’s claim? Because any lowering of the 1800-level of income is going to increase the rate of growth from there to 1840 when the commonly-used estimates (produced by R.A. Easterlin) become available. Any increasing in that rate of growth goes in favor of Newman’s model because his prediction because the era from 1800 to 1840 is predominantly occupied with pro-liberty forces (even though there are ebbs and flows).

I am not in full agreement with Newman’s book and his Rothbardian narrative (I am much less fond of Rothbard than he is notably because of the tendency for villains and heroes to exist in his narrative). However, the reality is that Newman’s description (and the Rothbardian narrative he imports and adapts) holds strong explanatory powers.

In our eternal quest to never let go of any effective rhetorical device that can double as a headline, the last 12-18 months have been dubbed The Great Resignation. Within voluntary job separations, a sizable chunk of which appear to be early retirements, many are young people transitioning from low-paying jobs to those that have seen fit to adapt to the labor shortage faster, offering some combination of higher wages, better benefits, or a higher quality of life, often through the channel of relaxed educational or experience prerequisites.

Some, generally from the political left, are framing this as a shift in power from management to labor, particularly for those who hope this can be the moment that pushes unionization back to the forefront. Others, mostly from the political right, are framing this as a catastrophic undercutting of the incentive to work induced by the expanded welfare state. I tend to see these positions as frantic over-optimism or pessimism from those desperate for a sexy political narrative to sell.

I think the closer parallel, in terms of mechanism (not scale), isn’t the Great Depression or the New Deal era that followed, but rather the World War II draft-accelerated entry of women into the workforce. I think what we’re seeing is a massive reorganization of the US labor market. If this half-baked generalization were true, what would it look like?

1. Education, Training, and Experience reconsidered

My guess is that managers in a range of fields have long had a itch in the back of their minds that they weren’t always hiring the right people. Specifically, they were eliminating large swaths of applicants from the pool of consideration because they lacked the minimum formal education or years of narrowly defined experience. A lot of these requirements, I suspect, existed not as tried and true markers of the subset of optimal candidates, but because they could be routinized through online job applications and human resources triage, largely in an effort to conserve on managerial and administrative time. Combined CYA incentives and other sources of herding behavior both within and across firms (i.e. no one gets fired for only hiring college graduates), these are exactly that kind of sub-optimal practices that can widely embed themselves when an economy is growing, but the labor market is relatively loose, so any suboptimality is lost in the wash.

A negative labor shock, be it a military draft or global pandemic, is exactly the kind of thing that rewards firms that begin hiring from whole strata of previously unconsidered job candidates. Not for nothing, that’s how you end learning all kinds of new things: the relative value of various degrees and training, the cross-applicability of job experience previously treated as irrelevant to an open position, and the marginal products of a firms employment portfolio.

2. Compensation bundles rebalanced

There’s plenty of fuss (rightly so) over the shift towards working from home. Yes, it saves on fixed costs, particularly in cities with sky-high commercial real estate costs, but I suspect the greater impact in the long run will be on the composition of wages+benefits+flexibility in employee compensation bundles, where flexibility is largely a catch-all for the quality of life component associated with any job. Maybe we already knew that health insurance and paid leave were valuable, but I think a lot of employees have discovered they were previously undervaluing the costs of commuting, schedule uncertainty, and existing “on call” for co-workers and superiors. Whether its working from home or as an independent contractor, many people are discovering that recapturing 10 hours a week of the rest of your life is worth a lot more than the wages being foregone. We already know that women are the future, but we also know that women value flexibility in work schedules more than men. A shift towards quality of life in compensation bundles was likely already in the cards, the pandemic just accelerated it.

For firms that have spent the last 20 years burning out the handful of key employees, rewarding their exceptional productivity by turning them into productivity bottlenecks, they are either going to have to find a way to spread the work thinner or recapture those key employees by finding other means of maintaining the quality of their employee lives.

3. The service industry is dead. Long live the service industry?

We’ve been eating on borrowed time. Through the combination of over-priced and over-valued higher education, a gratuitous over-stigmatization of non-violent criminal records, and the employment trap of limited human capital building, but lots of cash in hand, the service industry has been feeding us all on the cheap for a very long time now.

Turns out, though, that the relative frugality of diners has squeezed margins in restaurants razor thin, and has largely come at the expense of servers and kitchen staff. Came at the expense, I should say. I think we’re all going to have find a new normal where outsourcing meal preparation is, at the margin, slightly less of a staple and slightly more of a luxury. I still see Help Needed signs in lots of restaurants, and owners complaining in news stories that “No one wants to work“, but I’m also seeing new employees bring home higher salaries at McDonald’s after 90 days than fine dining cooks in their 3rd year working sauté. Eventually the new equilibrium will be reached, and I predict it’s going to involve higher salaries and better benefits for line cooks, but it’s also going to mean customers are going to have to get over there perceived $28 ceiling on entrees. Also, don’t expect your favorite restaurants to be open on Monday’s and Tuesdays, because it turns out everyone wants to have weekend.

4. The same, but different
What will the labor market look like in 5 years? Forecasting is a fool’s errand, but I never promised anyone I wasn’t a fool. Here’s my best guess:

I don’t expect a revival of unionization, but I do expect that employment will start taking on a lot of the attributes that pro-union people are currently agitating for. There will be more people with 3 and 4-day work weeks, though I suspect those people will be working 10 and 12 hour shifts. I think there will be a lot of flexible office-home work schedules, where firms coordinate their employees around days when everyone is in the office, the rest floating between the office and home as the work dictates. I expect there will be more independent contractors, but unlike previously self-employed people who bounced from contract to contract, they will instead be people who balance a portfolio of employment, with what amounts a small number of long term contracts. Rather than work for one person at a time 40 hours a week, they’ll work for 2 or 3, 8-10 hours each, building up enough firm-specific capital that contracts will last years, even decades, at a time.

I expect kitchens will remain hot, crowded, and loud. I expect chef’s will remain angry and owner’s tight-fisted with every penny. I expect that servers will still finish every shift with sore feet and stories of annoying customers. Maybe even more annoying than before, because those customer’s will be paying 15% more than the prices they already manage to complain about. But it’ll be okay, because everyone in that restaurant is going to be earning a much better living. They’ll have to, because otherwise they’re not coming back.

These two tweets came through my feed today through secondhand channels

I am not suggesting that these two tweets are equivalent. The first is grotesque cosplay, the second a bit of hyperbole (possibly inspired by the first). Rather, I think they are both part of the same democratic mechanism – the belief that there are more votes to be gained from incentivizing turnout of the base rather than persuading those at the margin. The voters in your base have already decided you and your party are a better option than the rival option, so the only obstacle between you and their vote is the opportunity cost of their time relative to their chances of being decisive in the next election. None of this is new – this uncanny astuteness is how 24 of the last 3 failures of the Median Voter Theorem were predicted. If you want the base to show up, you don’t need to persuade them – you need to scare them.

You need people to vote, so you give them big stakes. Of course, mathematically no stakes short of global extinction are big enough to warrant voting in a national election. The thing about stakes, though, is that even short of extinction-level threats, they still increase the value of a vote that absolves your guilt if the other side wins. You can move on with your life because at least you tried.

When you’re trying to bring out the base, stakes are everything. Problem is, people start to catch on when every election somehow manages to be the most important one ever. You need to recruit someone to convince your base that this election is the most important one ever. Someone credible. And that’s what politicians and activists have figured out. The most credible source for the potential terror that only our candidate can hold at bay is the opposition. Not their candidates or campaigns, mind you. Their base.

The most credible way to increase the stakes for your base is the rile up the rage and vitriol of the the opposition’s. If you want to truly convince your voters that the stakes are high, all you have to do is chum the water and let the craziest avatars of your political opposition do the work for you. They’ll wave their guns, call each other “comrade”, insult their religious faith, call them stupid, make veiled threats, make unveiled threats, all of which will make perfectly clear that if we don’t win this next election, these people will win. They will win and have power. They must be stopped.

This is the principal reason there has been such a meteoric rise of professional trolls and hyperbolic “reply-guys”. The trolls, your Tucker Carlson’s and Chapo Trap Houses chum the waters, and then an entire ecosystem of reply-guys respond, quote tweet, and record 30 second CNN/Fox News video commentaries. Politicians have discovered that truly horrific people, and the shrieking dystopia fetishists that swarm them, are amazing at bringing out political support, not through persuasion or direct signaling of group identity, but through the specter of the lunacy of the opposition, and the subtle implication that if you don’t signal your affinity for our group, you are by implication associated with the toxicity of our opposition.

Which is why when these sort of messages show up on social media or television sound bites, you can quickly see that they aren’t propaganda or even fan service. They’re bait.

And just so you don’t get the wrong impression, I fall for this too. I try not to, but these people are professionals for a reason.

Just because I’m an economist, and one who studies political economy at that, that doesn’t mean I not still a sucker.