29 July, 2016

George Will - Is anemic growth the new normal?


Is anemic growth the new normal?




By George F. Will Opinion writer July 8

ST. LOUIS

America’s economy has now slouched into the eighth year of a recovery that demonstrates how much we have defined recovery down. The idea that essentially zero interest rates are, after 7½ years, stimulating the economy “strains credulity,” says James Bullard, president of the Federal Reserve Bank of St. Louis. But last month he and other members of the Federal Reserve Board understandably felt constrained to vote unanimously to continue today’s rates for an economy that created just 38,000 jobs in May, and grew just 0.8 percent in the first quarter, after just 1.4 percent in the previous quarter.

The grim news is not that the economy continues to resist returning to normal. Rather, it is that this “current equilibrium” (Bullard’s phrase) is the new normal. If 2 percent growth is, as he says, “the most likely scenario” for the foreseeable future, the nation faces a second consecutive lost decade — one without a year of 3 percent growth.

N. Gregory Mankiw, Harvard economist and chairman of George W. Bush’s Council of Economic Advisers, writes in the New York Times that in the past decade the growth rate of the real gross domestic product per person averaged 0.44 percent, down from the historical norm of 2 percent: At 2 percent, incomes double every 35 years; at 0.44 percent, about every 160 years.

With the recovery aging, Larry Summers, former treasury secretary, guesses that “the annual probability of recession is 25 to 30 percent.” When it arrives in a near-zero interest rate environment, the Fed’s monetary policy, normally its countercyclical weapon — it usually reduces rates at least four percentage points in a recession — will be unable to cushion the shock.

Bullard says “labor market data is giving us different” — he means more encouraging — “signals than the GDP data.” But surely the fact that the official unemployment rate is down to 4.7 percent is less important than this: The workforce participation rate has plunged, which has been only partly because of the population aging — baby boomers retiring. If labor participation were as high as when Barack Obama became president, the unemployment rate would be over 9 percent.

Besides, it is unclear how to distill the significance of traditional data for an untraditional economy. For example, 7-year old Uber, with just 6,700 employees (not counting drivers), has a public market valuation ($68 billion) $13.8 billion more than that of Ford Motor Co. (201,000 employees globally).

Certainly very low interest rates, by driving liquidity into equities and assets in search of higher yields, are exacerbating the inequality that is disturbing American politics with distributional conflicts. Homeowners, and the 10 percent of Americans who hold 81 percent of the directly and indirectly owned stocks (the stock market is 160 percent higher than its 2009 low), are prospering. Those whose wealth comes from wages — formerly, the Democratic Party’s base — are losing ground. No wonder Hillary Clinton vows to “expand” Social Security, never mind its rickety financial architecture.

The public’s perception, and perhaps the Fed’s conceit, is that the Fed “manages” the economy. “We are,” Bullard says, “our own worst enemy.” By taking credit when things go well, it acquires responsibility in the public’s mind “for everything that happens.”

Bullard says “the most disturbing number” about the economy is that for five years productivity has grown only half a percent a year. Still, he is not among those who are in a defensive crouch about immigration: “We have a great thing happening in that a lot of people want to come here and work.”

Neither does he subscribe to Robert Gordon’s hypothesis (developed in “The Rise and Fall of American Growth”) that we must abandon the unrealistic growth expectations we acquired as a result of an exceptional century (1870-1970) of transformative developments (e.g., electrification, the internal combustion engine, urban sanitation) that have no foreseeable analogues. Bullard imagines someone a millennium ago saying: Fire has been harnessed, the wheel and agriculture have been invented — we already have most of the possible growth from new technologies.

Besides, Bullard says, it takes a while for technologies to “diffuse through the economy.” And some of the diffusion — in leisure, in richer living experiences (social media; smartphones and their apps) — is not captured in GDP statistics. Perhaps that helps to explain why Obama’s job approval has reached 52 percent at a moment when she who seeks to replace him concedes that the economy is so anemic that her husband will be assigned to “revitalize” it.

15 July, 2016

Forced Diversity vs. Human Nature


A friend sent me this article, and I think it is as applicable today as it was when it was written in 2003.


People Like Us
David Brooks

Maybe it's time to admit the obvious. We don't really care about diversity all that much in America, even though we talk about it a great deal. Maybe somewhere in this country there is a truly diverse neighborhood in which a black Pentecostal minister lives next to a white anti-globalization activist, who lives next to an Asian short-order cook, who lives next to a professional golfer, who lives next to a postmodern-literature professor and a cardiovascular surgeon. But I have never been to or heard of that neighborhood. Instead, what I have seen all around the country is people making strenuous efforts to group themselves with people who are basically like themselves.

Human beings are capable of drawing amazingly subtle social distinctions and then shaping their lives around them. In the Washington, D.C., area Democratic lawyers tend to live in suburban Maryland, and Republican lawyers tend to live in suburban Virginia. If you asked a Democratic lawyer to move from her $750,000 house in Bethesda, Maryland, to a $750,000 house in Great Falls, Virginia, she'd look at you as if you had just asked her to buy a pickup truck with a gun rack and to shove chewing tobacco in her kid's mouth. In Manhattan the owner of a $3 million SoHo loft would feel out of place moving into a $3 million Fifth Avenue apartment. A West Hollywood interior decorator would feel dislocated if you asked him to move to Orange County. In Georgia a barista from Athens would probably not fit in serving coffee in Americus.

It is a common complaint that every place is starting to look the same. But in the information age, the late writer James Chapin once told me, every place becomes more like itself. People are less often tied down to factories and mills, and they can search for places to live on the basis of cultural affinity. Once they find a town in which people share their values, they flock there, and reinforce whatever was distinctive about the town in the first place. Once Boulder, Colorado, became known as congenial to politically progressive mountain bikers, half the politically progressive mountain bikers in the country (it seems) moved there; they made the place so culturally pure that it has become practically a parody of itself.

But people love it. Make no mistake—we are increasing our happiness by segmenting off so rigorously. We are finding places where we are comfortable and where we feel we can flourish. But the choices we make toward that end lead to the very opposite of diversity. The United States might be a diverse nation when considered as a whole, but block by block and institution by institution it is a relatively homogeneous nation.

When we use the word "diversity" today we usually mean racial integration. But even here our good intentions seem to have run into the brick wall of human nature. Over the past generation reformers have tried heroically, and in many cases successfully, to end housing discrimination. But recent patterns aren't encouraging: according to an analysis of the 2000 census data, the 1990s saw only a slight increase in the racial integration of neighborhoods in the United States. The number of middle-class and upper-middle-class African-American families is rising, but for whatever reasons—racism, psychological comfort—these families tend to congregate in predominantly black neighborhoods.

In fact, evidence suggests that some neighborhoods become more segregated over time. New suburbs in Arizona and Nevada, for example, start out reasonably well integrated. These neighborhoods don't yet have reputations, so people choose their houses for other, mostly economic reasons. But as neighborhoods age, they develop personalities (that's where the Asians live, and that's where the Hispanics live), and segmentation occurs. It could be that in a few years the new suburbs in the Southwest will be nearly as segregated as the established ones in the Northeast and the Midwest.

Even though race and ethnicity run deep in American society, we should in theory be able to find areas that are at least culturally diverse. But here, too, people show few signs of being truly interested in building diverse communities. If you run a retail company and you're thinking of opening new stores, you can choose among dozens of consulting firms that are quite effective at locating your potential customers. They can do this because people with similar tastes and preferences tend to congregate by ZIP code.

The most famous of these precision marketing firms is Claritas, which breaks down the U.S. population into sixty-two psycho-demographic clusters, based on such factors as how much money people make, what they like to read and watch, and what products they have bought in the past. For example, the "suburban sprawl" cluster is composed of young families making about $41,000 a year and living in fast-growing places such as Burnsville, Minnesota, and Bensalem, Pennsylvania. These people are almost twice as likely as other Americans to have three-way calling. They are two and a half times as likely to buy Light n' Lively Kid Yogurt. Members of the "towns & gowns" cluster are recent college graduates in places such as Berkeley, California, and Gainesville, Florida. They are big consumers of DoveBars and Saturday Night Live. They tend to drive small foreign cars and to read Rolling Stone and Scientific American.

Looking through the market research, one can sometimes be amazed by how efficiently people cluster—and by how predictable we all are. If you wanted to sell imported wine, obviously you would have to find places where rich people live. But did you know that the sixteen counties with the greatest proportion of imported-wine drinkers are all in the same three metropolitan areas (New York, San Francisco, and Washington, D.C.)? If you tried to open a motor-home dealership in Montgomery County, Pennsylvania, you'd probably go broke, because people in this ring of the Philadelphia suburbs think RVs are kind of uncool. But if you traveled just a short way north, to Monroe County, Pennsylvania, you would find yourself in the fifth motor-home-friendliest county in America.

Geography is not the only way we find ourselves divided from people unlike us. Some of us watch Fox News, while others listen to NPR. Some like David Letterman, and others—typically in less urban neighborhoods—like Jay Leno. Some go to charismatic churches; some go to mainstream churches. Americans tend more and more often to marry people with education levels similar to their own, and to befriend people with backgrounds similar to their own.

My favorite illustration of this latter pattern comes from the first, noncontroversial chapter of The Bell Curve. Think of your twelve closest friends, Richard J. Herrnstein and Charles Murray write. If you had chosen them randomly from the American population, the odds that half of your twelve closest friends would be college graduates would be six in a thousand. The odds that half of the twelve would have advanced degrees would be less than one in a million. Have any of your twelve closest friends graduated from Harvard, Stanford, Yale, Princeton, Caltech, MIT, Duke, Dartmouth, Cornell, Columbia, Chicago, or Brown? If you chose your friends randomly from the American population, the odds against your having four or more friends from those schools would be more than a billion to one.

Many of us live in absurdly unlikely groupings, because we have organized our lives that way.

It's striking that the institutions that talk the most about diversity often practice it the least. For example, no group of people sings the diversity anthem more frequently and fervently than administrators at just such elite universities. But elite universities are amazingly undiverse in their values, politics, and mores. Professors in particular are drawn from a rather narrow segment of the population. If faculties reflected the general population, 32 percent of professors would be registered Democrats and 31 percent would be registered Republicans. Forty percent would be evangelical Christians. But a recent study of several universities by the conservative Center for the Study of Popular Culture and the American Enterprise Institute found that roughly 90 percent of those professors in the arts and sciences who had registered with a political party had registered Democratic. Fifty-seven professors at Brown were found on the voter-registration rolls. Of those, fifty-four were Democrats. Of the forty-two professors in the English, history, sociology, and political-science departments, all were Democrats. The results at Harvard, Penn State, Maryland, and the University of California at Santa Barbara were similar to the results at Brown.

What we are looking at here is human nature. People want to be around others who are roughly like themselves. That's called community. It probably would be psychologically difficult for most Brown professors to share an office with someone who was pro-life, a member of the National Rifle Association, or an evangelical Christian. It's likely that hiring committees would subtly—even unconsciously—screen out any such people they encountered. Republicans and evangelical Christians have sensed that they are not welcome at places like Brown, so they don't even consider working there. In fact, any registered Republican who contemplates a career in academia these days is both a hero and a fool. So, in a semi-self-selective pattern, brainy people with generally liberal social mores flow to academia, and brainy people with generally conservative mores flow elsewhere.

The dream of diversity is like the dream of equality. Both are based on ideals we celebrate even as we undermine them daily. (How many times have you seen someone renounce a high-paying job or pull his child from an elite college on the grounds that these things are bad for equality?) On the one hand, the situation is appalling. It is appalling that Americans know so little about one another. It is appalling that many of us are so narrow-minded that we can't tolerate a few people with ideas significantly different from our own. It's appalling that evangelical Christians are practically absent from entire professions, such as academia, the media, and filmmaking. It's appalling that people should be content to cut themselves off from everyone unlike themselves.

The segmentation of society means that often we don't even have arguments across the political divide. Within their little validating communities, liberals and conservatives circulate half-truths about the supposed awfulness of the other side. These distortions are believed because it feels good to believe them.

On the other hand, there are limits to how diverse any community can or should be. I've come to think that it is not useful to try to hammer diversity into every neighborhood and institution in the United States. Sure, Augusta National should probably admit women, and university sociology departments should probably hire a conservative or two. It would be nice if all neighborhoods had a good mixture of ethnicities. But human nature being what it is, most places and institutions are going to remain culturally homogeneous.

It's probably better to think about diverse lives, not diverse institutions. Human beings, if they are to live well, will have to move through a series of institutions and environments, which may be individually homogeneous but, taken together, will offer diverse experiences. It might also be a good idea to make national service a rite of passage for young people in this country: it would take them out of their narrow neighborhood segment and thrust them in with people unlike themselves. Finally, it's probably important for adults to get out of their own familiar circles. If you live in a coastal, socially liberal neighborhood, maybe you should take out a subscription to The Door, the evangelical humor magazine; or maybe you should visit Branson, Missouri. Maybe you should stop in at a megachurch. Sure, it would be superficial familiarity, but it beats the iron curtains that now separate the nation's various cultural zones.

Look around at your daily life. Are you really in touch with the broad diversity of American life? Do you care?