Joe Dator/The New Yorker Collection/The Cartoon Bank

Published April 27, 2018.


JG, our tireless correspondent from Passadumkeag, Maine, asks why she never sees the word “impactful” in the Review. Well, JG, you’ve raised a sore subject.

A few years ago I would have replied that it doesn’t grace our pages because it isn’t a real word. But English cares little about the sensibilities of fogies — even young ones like me. Impactful is now blessed by dictionaries, one and all. Actually, the word police get a twofer (also a legit word): not only is impactful a respectable adjective, “impact” has morphed into a verb from the familiar noun.

Just how my enlightenment will impact my editing as we grow the Review is not yet clear. But it's bound to be relatable to how quickly the language sherpas decide that common usage makes a word kosher.

Enough with the angst. Time to eyeball some really smart economics.

Mordecai Kurz, an economist at Stanford, challenges the basis for America’s love affair with information technology. “Explanations for the twin problems of slower growth and rising inequality run the gamut from globalization to inadequate investment in infrastructure,” Kurz writes. “But my own recent research points to the rise of IT.”

“Technological change is almost always seen as part of the solution, not part of the problem. But when you drill down to examine how markets and legal institutions divide the bounty created by advances in IT, and how successful IT companies limit technological change by outsiders, it’s clear that the conventional wisdom is misleading.”

Kim Clausing, an economist at Reed College in Oregon, laments the opportunities missed in the tax law approved in December. “The Tax Cuts and Jobs Act increases deficits, widens income inequality and makes the tax system far more complex,” she writes. “In an era in which government spending must increase in response to demographic factors, any tax reform should be revenue-neutral.”

Leonard Shabman, a senior fellow at Resources for the Future, explains why flood insurance costs so much that few homeowners in jeopardy buy it — and how to change that. “No matter how you slice and dice the problem,” he laments, “flooding remains a difficult hazard to insure at premiums property owners are willing and able to pay. Insurance industry interest in expanding its offerings would increase if Congress formally accepted the role of backstopping catastrophic losses of any and all sellers of private flood insurance.”

“This, by the way,” he adds, “is how the Terrorism Risk Insurance Act, passed in the wake of 9/11, allocates the risk of terrorist attacks between the public and private sectors.”

Karen Dynan, former chief economist for the U.S. Treasury, takes stock of current trends in household indebtedness, which fueled the boom in housing in the run-up to the Great Recession and retarded the recovery. “Thanks to massive deleveraging, most households are not overextended today and lenders are better prepared to deal with defaults,” she writes.

“But all is not roses. Managing credit risk simply by toughening credit requirements seems like the wrong direction to go, given the role of household debt in increasing economic mobility and smoothing consumption. Rather, we should be considering kinder, gentler ways to make sure that households are using and managing debt effectively.”

Martin Guzman, an economist at the Columbia University Business School, offers a (lack of) progress report on Puerto Rico’s recovery from catastrophes, man-made and natural. “Digging Puerto Rico out of its jam will require much more than just imposing a plan that cuts the debt down to size and provides sufficient aid to rebuild infrastructure,” he explains. “While the damage of unsustainable debt, compounded by the destructive might of a 100-year hurricane, was the proximate cause of the crisis, it took decades of dysfunction to fritter away the island’s capacity to pay its bills.”

Dallas Burtraw and Amelia Keyes, at Resources for the Future (this seems to be RFF’s issue of the Review), outline what some states are doing to combat climate change in the face of Washington’s indifference. “Of course, climate change is a global problem, and the likely emissions reductions in California and the states comprising the RGGI won’t be adequate to meet the U.S. pledge in Paris,” they write. “However, state actions could catalyze broader actions down the road. The states are providing a laboratory in which to experiment with a range of climate-related policies, both regulation- and market-based.”

Claude Lopez, director of macroeconomics research at the Milken Institute, reports on efforts to tame financial derivatives, which helped destabilize the economy in 2007. Much of the effort focused on driving derivative transactions into “central counterparty clearinghouses” where they are standardized, transparent and subject to stress tests, she explains. But “while strengthening CCPs is a necessary condition for bulletproofing the broader financial system, it’s worth remembering that it isn’t sufficient,” she points out.

“Stress tests evaluate the individual CCP’s resilience in isolation, without considering potential spillovers or feedbacks that new derivative- trading rules may have on the rest of the financial system. Indeed, many of the channels of risk transmission between CCPs and the financial system — direct and indirect — remain to be identified.”

William Galston and Clara Hendrickson of the Brookings Institution lament the government’s failure to modernize antitrust law to reflect current realities. “Where the evidence of increasing business concentration is persuasive, prospective mergers and acquisitions should bear a higher burden of proof than they currently do,” they conclude. “Firms should be required to demonstrate how their proposed agglomeration would serve the interests of consumers, broadly understood — and not just tomorrow, but for the reasonably foreseeable future.”

Happy perusing.

Peter Passell