Editor’s Note

Published April 26, 2019


JG, our faithful correspondent from Passadumkeag, Maine, wants to know why we always begin the editor’s note with a joke.

Best as I recall, JG, I was inspired by an article by Andrew Yuengert in the Journal of Economics and Philosophy entitled, “Why did the economist cross the road?” The abstract notes that “Positive economics, when it satisfies Aristotle’s definition of technique, enjoys a certain autonomy from ethics, an autonomy limited by a technique’s dependence for guidance and justification on ethical reflection.”

But, dear reader, before we get any deeper into the existential weeds, let me draw your attention to splendid content of the Review that is before you.

Lee Branstetter, an economist at Carnegie Mellon University, explains why President Trump’s trade war with China diverts attention from the real issue: confiscation of technology as the price of doing business in the Middle Kingdom. “By attacking the issue with unilateral tariffs on a wide range of products,” Branstetter point out, “the administration is shooting itself in the foot. … It would be a sad irony if the dead-on-arrival tactics now being used to bludgeon China pushed a sophisticated, coordinated approach out of reach.”

Brian Asquith, an economist at the W.E. Upjohn Institute in Michigan, takes a hard look at why rent control, the regulation economists have always loved to hate, is back in vogue. “There’s little doubt that controls are here to stay,” Asquith concludes. “Indeed, we may well see controls spreading as rising rents threaten tenants in more cities that are enjoying the mixed blessings of rapid growth. Probably the best one can hope for are compromises that limit rent controls’ perverse impact on the supply and quality of rental housing and the mobility of labor.”

Arin Dube, an economist at the University of Massachusetts, explains why the minimum wage (the other regulation that economists have long viewed with distaste) is not only popular with the public but also with growing numbers of mainstream economists. “A minimum wage increase is not the only arrow in our quiver for raising the incomes of less-skilled workers,” he writes. And it “would be a tough call if it were likely to price marginally productive labor out of the market. But the rewards from assuring a fair day’s pay for a fair day’s work seem to be much greater than the risks.”

Dan Murphy, a senior associate at the Milken Institute Center for Financial Markets, outlines the threat to the banking establishment posed by big tech — and why the rest of us should be worried, too. “As policymakers assess the consequences of big tech’s banking ambitions, they need to be clear-eyed about both the opportunities and risks,” he explains. “Big tech may be a useful tool to increase financial inclusion, but shouldn’t be counted on until the tech platforms reckon with impending limits on the use of consumer data.”

Simon Haeder, a political scientist at West Virginia University, explains why work requirements in return for Medicaid benefits touches a chord in the American psyche — and why it is nonetheless a terrible idea. “The goal of pushing people out of dependence is laudable and popular,” he agrees. “But it doesn’t follow that taking away medical coverage from those who can’t afford to buy it would advance the goal. Indeed, imposing work requirements would be bound to deny insurance to many who could not possibly benefit from another dose of tough love.”

Senior colleagues at the Milken Institute’s FasterCures and Center for Financial Markets warn of the squeeze on R&D for new medical treatments that will never be financial blockbusters, and outline strategies for keeping them on the front burner. “Could there be a thriving market for good science in biopharmaceuticals that has lesser commercial prospects or is simply an ill-fit with corporate strategies? We see an emerging ecosystem of organizations pursuing new models and transaction structures that could narrow the gap between private and social returns on therapeutic compounds.”

Jonathan Woetzel, a director of the McKinsey Global Institute, contemplates the rapid rise of what used to be called the Third World and the dramatic, sometimes unexpected, differences it is making to the global economy. Among others: an acceleration of the superstar phenomenon, in which relatively few corporations increasingly dominate business profitability. “The world’s 58 largest value-creating firms already account for 6 percent of all economic profit,” he notes. “They have 20 times more sales, 4 times more profit (based on net income margin) and 5 times more R&D investment than the median for firms with annual sales above $1 billion.”

Jeffrey Hummel, a professor of economics at San Jose State University, argues that the circulation of huge sums of large-denomination euro and dollar currency does society more good than harm. “It seems only prudent to put the burden on advocates of currency restrictions,” he writes “to show that the benefits in terms of crime suppression and the extension of monetary policy in a deflationary environment are worth the costs in terms of the loss of seigniorage. And, of course, hovering in the background is the question of whether free societies can afford to extend the reach of government and financial services corporations any farther in an era in which privacy is threatened on numerous fronts.”

Last but far from least: don’t forget to check out the fascinating excerpt about Canada (yes, Canada!) from the new book, Empty Planet, by Darrell Bricker and John Ibbitson.

Happy perusing.

Peter Passell