This is the title to a paper in Historical Methods that I believe should convince you of two things. The first, and this applies to scholars in economic history, is that the journal Historical Methods is a highly interesting one. It tends to publish new and original work by economists, historians, sociologists and anthropologists who are well-versed in statistical analysis and data construction. The articles that get published there often offer a chance to discover solutions to longstanding problems through both interactions of different fields and the creation of new data.

The second is that it is becoming increasingly harder to hold the view that the industrial revolution was “a wash”. I described elsewhere this view of the industrial revolution as a wash as believing one or more of the following claims: “living standards did not increase for the poor; only the rich got richer; the cities were dirty and the poor suffered from ill-health; the artisans were crowded out; the infernal machines of the Revolution dumbed down workers”. Since the 1960s, many articles and books have confirmed that the industrial revolution was marked by rising wages and incomes as well as long-run improvements in terms of nutrition, mortality and education. The debates that persist focus on the pace of these improvements and the timing of the sustained rise that is commonly observed (i.e. when did it start)

The new paper in Historical Methods that I am mentioning here suggests that these many articles and books are correct. The author, Pierre Lack, takes all the 19th century pamphlets published in Britain and available online to analyze the vocabulary contained within them. Lack’s idea is to use the fact that books became immensely cheap (books were becoming more affordable through both falling prices and rising incomes — see table above) to evaluate emotional well-being by the words contained in them. What Lack finds is that there were no improvements in emotional well-being as proxied by the types of words in those pamphlets.

But how could this be positively tied to the industrial revolution as not being a wash? This is because, if you believe that there is such a thing as a hedonic treadmill (i.e. more income only allows us to actualize upward our preferences so that the income has no impact on happiness), you cannot hold many of the beliefs associated with the industrial revolution being a wash. For example, if you think that living standards for the poor did not rise while other dimensions of their well-being (e.g., health, environment of the city, working conditions) fell, then there the graph produced by Lack should have exhibited a downward trend!

This is not the only belief associated with the “industrial revolution was a wash” view that cannot withstand Lack’s new paper. One frequently advanced factor that purportedly affects emotional wellbeing is inequality. Because we care about our relative position (e.g., I am happier if my neighbor have a worse car than me), rising inequality should be associated with falling emotional well-being (that was for example the case that the Spirit Level of Wilkinson and Pickett tried to advance). However, if you believe that Britain enjoyed rising inequality (it did at first and it then fell according to Jeffrey Williamson who shows that inequality rose to 1860 and fell to 1913), then Lack’s data should show falling emotional well-being. It does not which means that it is quite hard to hold the view that the revolution was a wash.

This is probably my favorite paper at Historical Methods and I hope you will like it too. I also hope that you will add it to your list of articles to inform your own research.

There’s a concept sometimes floated in academia of being “overqualified”. The story usually starts with a PhD in something either extremely narrow in focus or difficult to imagine having an application in the private sector, and ends with the subject either excluding the PhD from their resume or driving a taxi. The idea is simple – this advanced degree that took years of intense study and effort to acquire has negative signal value in the broader marketplace. It’s the most brutal anecdote highlighting the failure of the Labor Theory of Value I know of.

I think something similar happens with reality television stars. They acquire a level of public awareness and notariety a rung below classic celebrities, but still multiple orders of magnitude more than the average citizen. If they become sufficiently famous they can earn rents off this notariety, at least in the short run. In the long run, however, the source of their fame is external to them (i.e. the show they were featured in), but have no immediate means to keep generating the exposure and public interest. The real problem, however, arrives if they try to re-enter the traditional labor force. They have a huge gap in their resume that requires explanation and haven’t been building human capital in any classic trade (and I very much include acting as a classic trade). Fame makes for fleeting human capital. Fame as capital decays rapidly, while the associated notariety serves as a tax that persists long after that fame has dissipated. This tax most often takes the form of casual harassment, but also includes threats to their privacy and safety. They may find themselves presented with opportunities to appear at bars, concerts, or county fairs for small fees, but these financial stop gap solutions only serve to further maintain what is now costly notariety while still failing to invest in any human capital with long run value.

Which brings me, of course, to JD Vance.

https://twitter.com/EggerDC/status/1495391630668578819?s=20&t=MG7JgWlcefO-kxOBr4-gHw

Cards on the table, I suspect Mr. Vance is not particularly brilliant, but I also doubt he is a complete fool. What I do think is that he has trapped himself in a career path not dissimilar to a reality TV star. Much in a way that a lot of bachelors and bachelorettes think they can build a Kardashian-esque career, Vance thought he could be another Trump. He wrote a successful book and that was made into a film. He dabbled in venture capital and, much like Trump, probably failed (though I can’t really say). What he saw, like Trump, was a path from fame to a career being compensated for that fame. There’s a real chance that it’s not going to work, and forwards inducting from a failed political bid that has included consistently foolish proclamations in an effort to pantomime populist-Trumpism, he doesn’t like what he forsees. Being fame-trapped into a red state fairground fear-mongering stooge might be a way to make a living, but it’s not a living he is particularly excited about.

Fame is a zero-sum tournament, and like a lot of such tournaments the top prize is extremely lucrative. Unlike the basketball or golf, however, the losing here isn’t just costly, its potentially scarring. In this way, it’s a bit more like selling cocaine. You can live a very good life for a while, but if you lose you’re going to have a tough time succeeding at anything else down the line. JD is a shooting his shot, but I don’t think he’s making these sort of aggressive attacks on public figures because he’s excited about being a Senator so much as he’s scared of trying set up a quiet law practice in Ohio and spending the rest of his life explaining to folks he knew in high school what went wrong.

Headlines have moved on from the The Great Resignation to the The Return of Inflation, which is completely normal as far as news trends go. But I think it’s worth reflecting on how the two can be related.

I was privy to a conversation with a local food+retail business owner yesterday where she revealed she was no longer comfortable hiring teenagers for summer and after-school jobs. Not because they were inadequate to the task, but because they had to endure too much abuse from customers eager to take advantage of young people in a service position. She was confronted with a decision: either operate understaffed, increase prices to cover the cost of older employees, or completely reorganize her business model.

Behind the wave of Great Resignation articles and opinion pieces, there has been a subcurrent of related articles about increasing customer predilection for abusing employees. Whether the rate has increased or simply its observation is hard to say, but the phenomenon itself appears to be real and non-trivial. Working in retail and food service jobs has in many ways deteriorated in job quality. The first line of investigaton and blame is always management, but it looks like customers are on the hook this time as well. Karen-wants-to-speak-to-the-manager memes didn’t emerge from nothing, folks.

No shortage of ink has been spilled about stagnating wages, particularly for workers without college degrees. Such discussions, however, always exist within a framework that holds the work, and what it entails, constant. If the quality of life on the job declines without an increase in compensating wage differentials, then the true (net) wage compensation has actually decreased even when nominal or real wages remain ostensibly constant. Combined with a pandemic that made service industry work more dangerous, the precipitous increase in wages necessary to maintain a labor supply sufficient to production demands makes all the more sense. Did we really think we could live in a world where McDonald’s is offering $20/hr to start but prices would stay the same?

Now, let’s be clear, I’m not suggesting that current inflation is being driven by crappy customers eager to abuse anyone they can in a fit of narcisstic rage. But I am suggesting that it, and factors similar to it, is a non-trivial part of the recipe. The market is very good about pricing-in everything associated with the supply of a good, but that doesn’t mean there aren’t frictions and associated lags along the way. Employees and their lives are sticky, and sometimes it takes an exogenous shock to dislodge them from one equilibrium to the next. If we were so eager to accept the hypothesis that the stimulus checks and health concerns were sufficient to get people to quit, we should be no more surprised that they are returning with higher reservation wages than previously, and that these new reservation wages are getting priced into the market. Combined with an utterly flummoxed set of global supply chains and growing geo-political uncertainty, all on top of nearly $2 trillion in stimulus spending, growing prices seem a fairly natural outcome.

Returning to the original thesis: compensating wage differentials are as unavoidable as every other economic phenomenon borne of people making rational decisions given the information at hand. A generation of employees have discovered that bosses may be dour, insensitive, and obsessed with bottom lines at the expense of their employees well-being, but at least they need you. They have to see you at work tomorrow and reap the relationship they’ve sowed. There is an equilibrium of mutual respect and shared objectives to be reached there that is best for everyone, even if a lot of bosses can’t seem to get out of their way when building it.

Customer are a different beast altogether. It’s hard for us coordinate and there’s little we can individually do to punish those who opt to abuse the people serving us. We’ve got a common pool resource problem – a subset get all their gross benefit of being jerks while the cost is spread across everyone. Whether it’s refusing to wear masks, threatening violence, or verbally abusing young people, each and every one of those incidents gets steadily priced in, until one day we’re all just staring in shock at $6 hamburgers and asking what happened. I tell you what happened: the Karen Tax, and we’re all paying it.

I’m not delusional. I know we can’t boycott our family, co-workers, and acquaintences who abuse service workers. But maybe we can all agree to give them just a little more sideeye. Invite them to fewer lunches. Leave them out of the will. Because that’s the price that really needs to increase.

It’s time they paid the Karen Tax.

Canadians are blocking a bridge. For Americans who like to engage in stereotypes about Canadians, this is inexplicable (even though the practice of blocking things in Canada is not new by any means). However, for me as an economist, it is entirely explicable.

Consider what vaccine mandates/passports (which is what initiated the current mayhem) do in pure economics terms: they raise costs for the unvaccinated. They do not alter the benefit of being vaccinated. All they do is raise costs. People could be more or less inelastic to this cost, but the fact that many are willing to spend time and resources (fuel, wear and tear of trucks etc.) to prevent such policies from continuing suggest that their behavior is not perfectly inelastic.

How elastic is it then? Well, we can see that by looking at what happens when we alter the benefit of being vaccinated. This is the case with vaccine lotteries. The “extra” benefits associated with a lottery is that the unvaccinated obtains the value of the vaccine plus the expected value (i.e. the probability) of winning a particular prize. One recent paper in Economics Letters finds that for $55, you can convince an extra person to be vaccinated. That is basically the cost of administering a lottery plus the prizes themselves. That is a relatively cheap way to increase the benefit for the unvaccinated in order to have them change their mind. Another paper, in the American Journal of Health Economics, finds a similar results by concentrating on the Ohio vaccine lottery. The difference is that the amount is $75 instead of $55. Still, pretty cheap for an extra vaccinated person and the generally high social benefit of a vaccine in terms of avoided costs of infections/hospitalizations/deaths.

Thus, we can say that behavior is quite elastic. But this is where the rub comes. When you raise the benefits in this case, the story is over. There is nothing else that happens after that. When you raise the costs, people might resist and adopt other measures to avoid the costs. This includes blocking bridges on the US-Canada border. And what is the social cost of that attempt at avoiding the cost of the coercive private-cost-increasing policy? Pretty high. Probably higher than the cost of a lottery system or other voluntary programs that play with the marginal private benefit of being vaccinated.

The point I am trying to get across to you is quite simple: persuasion works because it essentially increases the perception of benefits from doing X or Y activity. Coercion is impose a private cost of not doing X or Y with the potential downside that people respond in ways that create socially detrimental outcomes. Yup, coercion isn’t cheap.

This tweet first reads as snarky, then insightful, but give it a few seconds and you’ll realize it’s pointing out a real problem.

There are many reasons why an industry can become concentrated within a narrow geographic region. Externally generated increasing returns to scale i.e. a firm becomes more productive simply by being near other firms producing the same thing, is an observation that goes all the way back to Alfred Marshall. That’s the story of Hollywood and Silicon Valley, not to mention a million other micro-industries. The story of journalism, however, is different, because it is not the capital or labor market opportunities, but specifically the labor itself that is concentrated in a narrow location. The “Writer living in Brooklyn” Twitter/LinkedIn/Muckrack bio is a cliche at this point for a reason. But why are they all in Brooklyn? And why do I get the sense that I can summarize at least half of them as White children of the upper-middle class who paid full-freight for an English-adjacent degree from an expensive liberal arts college?

Wages in journalism have gone to hell while, at the same time, there has emerged an extreme upper tail whose public standing achieved escape velocity, allowing them to go independent via Substack and earn vastly higher incomes. These diverging trends have their origin in the same phenomenon: the skyrocketing potential of any one journalist to reach the masses. The power law scale of social networks means every article, post, or tweet has a chance of going viral, and with it the chance to reach tens of millions of eyeballs. Put another way, its gotten easier to reach people, but harder to get paid to reach people.

There is a status that comes with strangers knowing who you are, what you wrote, what your core ideas are. It is also a status that disproportionately recognizes itself. When prominent writers hang out with each other, recognizing the ideas that each carries and communicates to large numbers of people, they reinforce the status that comes with that reach. I’m getting out over my psychological skis a bit here, but I’m willing to wager it feels good, in a way not dissimilar to my research being recognized by my academic peers. With less risk to going beyond my own expertise, I’m willing to argue that the reach, imprint, pageviews, and followers; the eyeballs that your work generates, is the prinicipal source of status within the modern journalist community.

The problem isn’t that writing generates status, but rather that this status is grossly out of proportion to the wages they are earning in the market. Amongst other problems, this selects for people who value status over wages (often because they are independently financially secure). In this light it’s not surprising the community has become so geographically concentrated – there are enormous rewards to living with the people that most recognize and grant this status. This is not unto itself a problem until that concentration is part of greater demand for what is already some of the most expensive real estate in the world. I’d wager there are more than a few writers with non-trivial followings out there whose Brooklyn lifestyle is a net monetary loss every month. Thats bad, but honestly I think its even worse than it sounds.

1. Status skews even less equally than income

I’m tempted to say that status is a zero-sum game, but that’s not really true. A field or industry can grow in status as a whole, making all its members better off. The distribution of status, however, will tend to be even more skewed than the famously unequal distribution of income, an attribute likely to be all the more acutely observed in a field where attention begets attention – see Exhibit A, the power law distribution of retweets. If you think wage inequality puts people in a frothy rage of perceived unfairness, wait until a group of Brooklynites three drinks deep find out the friend they always hated got retweeted by Drake.

2. Status can’t pay the rent

Unlike wages, status is extremely difficult to directly exchange for goods and services. You need an intermediary, such as a person desperate to market their latest brand of protein powder or neo-fascist authoritarianism, who will pay you for access to your status.

3. Twenty-two year-olds will often accept status in lieu of wages

Makowsky’s law of career planning: never bet your entire future on doing something other people will happily do for free. If you’re curious why unionization has taken the journalism world by storm the last few years, you don’t have to look to politics or in-group signaling for an explanation, basic economics will get you all the way there. If you have an industry where amateurs can provide you the inputs you need at 60% of the quality level as professionals, but for 10% of the costs, the incumbent professionals in your labor force are going to have it rough. If those incumbents can close the shop via unionization and raise the mininmum wages within the profession, the balance will tip back to skilled professionals. You reduce quantity of labor supplied and end up with higher equilibrium wages for those who manage to get their foot in the door. Of course, this will only heighten the favoring of those who can get their foot in the $3200/mo Brooklyn rent door while dressing fashionably and using “semiotics” correctly in a sentence, but that’s neither here nor there.

4. Status rewards lead to homogeneity

Status rewards incentivize geographic concentration, which will in turn intensify herding behavior. If the bulk of your compensation is in-group status, you’re going to want to spend as much time with that group as possible. Your social life will become more important than ever. That also means, however, that anything that might risk disdain or ostracism within the group is to be avoided whenever possible. Opinions, particularly on subjects that don’t directly impact your life, will tend to become more and more homogeneous over time. It also means hypotheses born of motivated reasoning i.e. the next mayor will be super progressive or want to “defund the police” can acquire a life of their own and quickly evolve from idea spoken aloud in a Brooklyn cocktail bar to universally accepted truth within an insular community. This classic herding phenomenon is relevant to the broader world because this particular community spends its working hours delivering the news to us.

5. Homogeneity creates rewards to heresy

Even if you can survive off status and a monthly check from your parents at twenty-two, the same can rarely be said at forty-two. The mortgage needs to be paid, the kid needs braces, and you need to start putting away some money every month so you can die somewhere warm. The only thing you know how to do at a professional level is write, but you can’t find a way to get people to pay you well for what you’ve been writing.

Solution: write something that people will pay you for.

You need to find something that is undersupplied relative to demand. The answer lies in the very same homogeneity being created in your old neighborhood. You want to get paid: move to cheap suburb of a medium sized city and start writing heresy, the more inflammatory the better. Accusations of politicians and celebrities. Cheap pablum for frothing basement trolls and listicles of reasons never to let your kids leave the house. Election conspiracy theories and a new expose on why red wine and chocolate will cure Covid. Corporate public relations expressing the deepest committment of the NFL to protect everyone and only good from here on out. Anything that someone is willing to pay you to write because nobody else will write it for free.

So yeah, a bunch of writers live in Brooklyn and they are currently a hilariously homogeneous monolith of progressive cosplay, often producing little in the way of insight or information, surviving emotionally off the status returns of living in a bubble of mutual-affirmation and shared anxiety. It’d all be pretty innocuous if I didn’t worry that today’s progressive writer’s commune is also a breeding ground for tomorrows purveyors of reactionary fearmongering and misinformation.