We really ought to think a bit about the future of work and the future of the economy. It’s obvious that in the future manufactured goods will increasingly be produced by machines. It’s also pretty clear that if you compare rich people in developed countries to middle class people in developed countries, the rich people don’t consume vastly larger quantities of manufactured goods than the middle class people do. Instead the rich people consume more and fancier services. The middle class kids go to day care. The rich kids have nannies. The really rich kids have nannies and nanny consultants. There’s a sort of infinitely elaborate hierarchy of personal services one could take advantage of in life were one to have limitless quantities of money.


Like it or not, a huge share of the jobs of the future are going to involve taking care of old people and taking care of kids. The best caretaking jobs are the ones that involve working for the richest, fanciest, fussiest people. Time to get depressed.


Will a casino expansion help upstate New York?

Cuomo’s plan calls for the immediate construction of four upstate casinos: two in the Catskills, one in the Capital Region and one in the Southern Tier along the Pennsylvania border. After seven years three more would be built, with New York City on the table as a possible locale. But despite the governor’s enthusiasm, some experts aren’t so optimistic.

“The days of ‘build it and they will come’ are over,” said Alan Woinski, who blogs about the gambling industry for Gaming USA Corp. “With how many casinos there are around the United States now … look at Ohio—they have four casinos and seven racetracks, and they’re all underperforming because they’re surrounded by states with other casinos.”

Woinski said that the competition from casinos in Pennsylvania, New Jersey and Connecticut could mean that only local gamblers would be interested in a casino in the Catskills. The success of the Resorts World Casino in Queens, which opened in 2011 with slot machines and electronic table games, has occurred simultaneously with plummeting revenues in Atlantic City. And New York is already home to five full-scale tribal casinos upstate.

“This is why I call it a zero-sum game overall,” Woinski said. “We’ve reached a point where you can’t open another casino and expect to grow the entire market, so you’re basically stealing from others. And if you destroy another casino, how successful are you, really?”

Chad Cotti, a professor of economics at the University of Wisconsin’s Oshkosh College of Business who has studied the effects of gambling on local economies around the country, said that his research shows casinos providing an immediate increase in jobs, but minimal spillover into other industries

“The casinos themselves are largely self-contained, so there tends not to be a meaningful effect that propels other industries or other jobs outside of the casino,” Cotti said. “In an urban area, the effect that a casino has on overall employment is negligible. But [where] you do see a boost is in rural counties.”

A concern omitted from this article is the potential for an increase in gambling addictions, which can cause financial ruin for middle and low income families and burden state governments with costly treatment programs. As The New York Daily News explains:

Notwithstanding benefits for education and employment, gambling’s proliferation will inherently spread the addiction—at rates some experts predict will devastate millions of Americans. “All this government backing makes gambling sound harmless,” says [Timothy Fong, professor of psychiatry at the University of California—Los Angeles and co-director of the school’s gambling addiction program], “but there is a dark side that many state governments are downplaying.”

When politicians champion gambling legalization, [Sam Skolnik, author of “High Stakes: The Rising Cost of America’s Gambling Addiction”] says citizens don’t typically hear about the programs that will need to be created to offer education and treatment for gambling addiction. “Some states are setting aside money for these programs. By laying out these programs, in essence, they’re conceding they’re creating new groups of addicts in their community,” Skolnik says.
I’m not sure if the broader question of whether casinos ultimately benefit or harm local economies is easily answered but it seems clear that casinos come with more than a few strings attached. Of all possible solutions for upstate New York’s economic woes, why has Cuomo prioritized building casinos? If he is willing to legalize a “vice” in the interest of creating jobs, why not legalize marijuana and revitalize some of the struggling small farms throughout the state? According to Time, California nets $14 billion in annual marijuana sales and the legalization of medical marijuana in other states has caused dispensaries to spring up “in hundreds of towns and cities.” New York, with its enormous urban population and multitude of upstate farms, seems an ideal place to start a profitable marijuana industry. So, get on it, Cuomo. 
We understand that the low-wage labor market has a lot of turnover and frictions. A minimum wage can reduce churning while not reducing employment. So those together point to the idea that a higher minimum wage not only increases wages but may also improve the functioning of the labor market.

Any attempt to correlate minimum wage increases with joblessness falls on its face. When Clinton raised the wage in the mid-90s, low income employment skyrocketed. Some catastrophe. And we can take this as far back as folks want. …The real value of the minimum wage (now at a historical low)…Its peak was 1968. The unemployment rate in 68? A brilliantly low 3.5 percent.

As Brad DeLong would say: Raise the minimum wage. Raise it now.


Economic research supports raising the minimum wage

The old Economics 101 textbook theory…that a higher minimum wage will necessarily reduce employment – was not supported by empirical research. As a 1995 paper in the Journal of Economics Literature put it, “There is a long history of empirical studies attempting to pin down the effects of minimum wages, with limited success.” No one found significant employment losses when President Truman raised the minimum wage by 87% in 1950. When Congress raised the minimum wage by 28% in two steps in 1967, businesses predicted large employment losses and price increases. As the Wall Street Journal reported six months later, “Employment and prices show little effect from $1.40-an-hour guarantee.”  Empirical studies even before Card and Krueger’s landmark New Jersey study found no increase in the unemployment rate for teens and young adults from a 10% rise in the minimum wage, while it was clear that higher wages were bringing housewives into the workforce.

Manhattan condo developers, in a construction revival after the credit crisis, are raising prices on their unbuilt units as often as twice a month as buyers return from the housing slump to find there’s little on the market. The borough’s inventory of homes for sale fell to the lowest in at least 12 years in the fourth quarter, according to appraisal firm Miller Samuel Inc. Sales, meanwhile, were the second-highest in a decade in 2012.

Hey so you might not feel like your own personal economic conditions have turned the corner quite yet - but don’t worry, someone out there is definitely doing really well right now. Developers can’t even keep up with the booming demand for Manhattan condos. Offerings include three-bedroom apartments from $9.25 million and 564 square foot studios from $750k, so act now while supplies last! (via jakke)

I’m reminded of this recent NYT article, which states that “the higher the price, the higher the concentration is likely to be of owners who spend only a few months, a few weeks or even just a few days each year in their apartments. This very costly form of desolation means that some of the city’s most expensive residential buildings stand mostly dark, lonesome and empty on the inside.”

I don’t claim expertise in economics but residential towers that are largely empty can’t be good for Manhattan neighborhoods.

(via jakke)


I have estimated statistically that the prohibition of drugs produces, on the average, ten thousand homicides a year. It’s a moral problem that the government is going around killing ten thousand people. It’s a moral problem that the government is making into criminals people, who may be doing something you and I don’t approve of, but who are doing something that hurts nobody else. Most of the arrests for drugs are for possession by casual users.

Now here’s somebody who wants to smoke a marijuana cigarette. If he’s caught, he goes to jail. Now is that moral? Is that proper? I think it’s absolutely disgraceful that our government, supposed to be our government, should be in the position of converting people who are not harming others into criminals, of destroying their lives, putting them in jail. That’s the issue to me.

- Milton Friedman, advocating the end of drug prohibition in a brilliant interview for America’s Drug Forum in 1991. 

Fed Leaning Closer to New Stimulus if No Growth Is Seen

There is considerable evidence that the Fed’s purchases of Treasuries and mortgage-backed securities have reduced interest rates and encouraged investors to buy riskier assets like equities. Stock markets rally whenever the central bank hints at another round of purchases. The Fed has made two large rounds of asset purchases, first in 2008 and again in 2010. But the broader benefits of lower rates have been tamped down because many consumers and businesses are unable to qualify for loans.

Several Fed officials have expressed public support for buying mortgage-backed securities because studies show that such purchases have a larger effect on mortgage rates, allowing the Fed to take aim at the troubled housing market.

The reason there’s violence in underground markets is because they’re underground. People can’t resolve disputes in underground markets with lawyers, with advertising, with courts….They need some other mechanism to resolve their disputes and the natural thing is violence.
- Jeffrey Miron, Marijuana: A Chronic History
We have what I would describe as the world’s worst tax code. It is the longest, the most complicated, riddled with loopholes, exceptions and deductions - all of which are fundamentally institutionalized corruption. They are a way that Congress is able to reward powerful constituents by giving them what seem to be small giveaways in the tax code but which are, of course, government grants often amounting to hundreds and millions and billions of dollars in perpetuity…
As the two parties sketch out their general-election campaign platforms, both should commit to a reasonable and responsible goal—closing the deficit in 10 years. Even given Washington’s current dysfunction, this can be achieved through a simple two-step process: The president can declare that he will allow the Bush tax cuts to expire for all income levels, and Congress can take an up-or-down vote on the Simpson-Bowles deficit-reduction plan, as a bipartisan group of House centrists will propose this week. That plan calls for $4 trillion in savings by capping discretionary spending, slowing the growth of entitlement costs including Social Security, and raising revenue through tax reform.