Leaders in Pharmaceutical Business Intelligence (LPBI) Group

Friends and Colleagues,

We spent Thursday and Friday of last week sitting at Brookings, discussing six new papers with dozens of the world’s top economists and readying the findings to be published in our economics journal, the Brookings Papers on Economic Activity (BPEA).

One of the great things about this twice-yearly conference is that, in the spirit of true academic discussion, it often raises as many questions as it answers.

Here are six things we wanted to share from inside our discussion room:

1. “If this is our technological future, economists aren’t sure it adds up to much.” The Washington Post’s Wonkblog has a great summary of important new research on why we can’t blame the ongoing productivity decline on our inability to measure the benefits of the Internet and other technological innovations.

2. A group of Fed economists challenged what renowned economists Piketty, Saez and others say about the richest 1%. The blue line in the chart below represents the new BPEA estimates. The blue line is still rising—but a lot more slowly. The authors ultimately conclude that wealth and income concentration is rising by about half as much as previously thought.

3. We debated whether federal lending programs served as a “shadow stimulus.” (h/t Wall Street Journal on the apt phrasing.) These programs, especially housing and student loans, grew dramatically during the Great Recession. There was a lively discussion around a finding that the government’s housing and education credit programs were nearly as large as the 2009 stimulus act (ARRA) and on average three times more effective per dollar of cost at stimulating the economy.

4. Boys whose mothers did not complete high school are even more likely to drop out of high school themselves—if they live in areas with high income inequality. Typical explanations, like school quality, don’t account for this finding. The boys’ academic attainment explains part of it, though, reinforcing the view that interventions to get kids on track early may break the link between inequality and low mobility. This interactive map illustrates the point well.

5. American workers are moving around the labor market less and less, and it’s not because of disruptive technologies. This decline is pervasive across losing a job, finding a job, dropping out of the labor force, and moving from one job to another. The “fluidity rate” has been declining for at least three decades, but a closer look at the rate in different U.S. states shows that the decline in fluidity was smaller in states with more workers in routine jobs displaced by technological advancements. See the chart here.

6. If you’ve ever lived through hyperinflation, you know that very poor people are by necessity very sophisticated about inflation and exchange rates. That’s an observation from a conference participant, but it helps explain a finding that the average Argentinian wasn’t fooled by the government’s notorious manipulation of inflation data from 2007- 2013. David Wessel has moreon this “interesting question…[of] how much public perceptions matter.” As the Fed worries about inflation expectations going forward, the lesson from Argentina is that the general public can be very sophisticated when the stakes get high.

If you want to know more about BPEA or the new research submitted to this edition of the journal,visit BPEA on the Brookings website. We’ll be back in the fall with more new findings from leading economists.

Sincerely,
Janice Eberly and James Stock
Co-editors, Brookings Papers on Economic Activity
Nonresident Senior Fellows, Economic Studies at Brookings