Archive for June 2021


Vermont and Wyoming

Vermont has the nation’s highest vaccination rate — 72.4%

Wyoming has a rate that is well below average — 38.2%

Why such a big difference? These states rank number 49 and 50 in population. Both states are lacking in big urban areas. Both states are overwhelmingly white, with relatively few minorities. At the same time, there are obviously huge cultural differences between the two states.

It’s also worth noting that Vermont has the lowest Covid fatality rate among the lower 48 states. Wyoming’s fatality rate isn’t that bad, but is 2 1/2 times worse than Vermont, and also far worse than states like Utah, Washington and Oregon.

I’d be surprised if Vermont’s high rate of vaccination was unrelated to its low Covid fatality rate. Perhaps both facts are related to Vermont’s culture. Perhaps Vermonters are risk averse people who “trust the science”. Here are two counterarguments for my claim:

1. Vaccination rates are high throughout the Northeast, and yet many northeastern states have high Covid fatality rates.

2. Perhaps culture doesn’t explain the low vaccination rates, rather in places with higher infection rates there is less vaccination because many people already have have natural immunity from previous exposure. They don’t believe they need to be vaccinated.

Of course, the second point in is tension with the first. Lots of people in Massachusetts have been exposed to Covid (far more than in Wyoming), so why such a high vaccination rate in Massachusetts?

In the Northeast, the worst Covid wave was during the spring of 2020, before many people realized the severity of the pandemic. In addition, those areas are densely populated. (Even indoors. I find that shopping in Mission Viejo is much less crowded than back in Boston.)

My best guess is that cultural differences explain the Vermont/Wyoming discrepancy in vaccination rates. This FT story has “nudge” suggestions for encouraging vaccination from behavioral research.

PS. Biden got 66.1% of the vote in Vermont, highest of any state in the country. In 1936, Alf Landon got 56.4% of the vote in Vermont, highest of any state in the country.

Vermont is weird.

PPS. Here’s a Yahoo story on Wyoming:

Some public health officials have resigned themselves to the reality that many in their community will not budge on shots.

In Wyoming’s Sweetwater County, population 44,000, authorities are at a loss for what else they can do to achieve herd immunity.

Sweetwater carries the unfortunate distinction of being the county with the steepest increase in infections in the state with the most new infections per capita in the country. Only a quarter of its residents are fully vaccinated, and public health officials don’t see the number budging much higher.

Jean Stachon, Sweetwater County’s health officer, said officials held mass clinics, brought vaccine doses to employers and churches and accept walk-ins at the public health office. They have sacrificed extra doses in a vial to vaccinate at least one person. But demand is minimal, even as the virus still looms in the community. Two people died of covid-19 in the last week. Eight emergency room patients were diagnosed with coronavirus in one night.

Are the jobs gone forever?

In my previous post, I linked to a Tyler Cowen post that quoted Betsey Stevenson:

The problem is that old jobs are long gone for the vast majority of those who remain unemployed.

In a narrow technical sense that may be true. But according to Yahoo, this is also true:

More signs of labor shortages emerged, with employers scrambling to find qualified workers to fill positions and meet surging demand during the post-pandemic recovery. The Bureau of Labor Statistics reported that job openings soared to a record more than 9 million in April. And a separate new sentiment survey showed a record 48% of small businesses reported that they had unfilled job openings last month.

Meanwhile, the BLS says workers are suddenly quitting their jobs at record rates.

And yet unemployment is still 5.8%, far higher than in 2019. This is a really weird labor market.

PS. I wonder if the quit rate is linked to recent reports of some companies offering considerably higher wages? Workers may be shifting from one job to another. If so, the wage increases may spread.

PPS. Today, I’m even more skeptical of UBI than I was last year.

PPPS. I recently spoke with a college student who within the past 5 weeks received $3800 in stimulus checks. Summer job? Not this year.

The unvaccinated and the unemployed

Roughly 49% of the US population has not received at least the first dose of a Covid vaccine. Total employment is down 7.6 million from early 2020. Should we conclude:

1. The 160 million unvaccinated Americans have searched and searched and just can’t find any location willing to offer them a vaccine. (Or that perhaps it’s too expensive for them to afford.)

2. The unemployed have searched and searched and just can’t seem to find any employers who are looking for workers. (But not teens, they are having no problem finding jobs.)

Speaking for myself, I’m inclined to doubt both hypotheses. I suspect that there are other factors that explain the surprisingly large number of unvaccinated and unemployed.

Perhaps some people don’t want to be vaccinated. Perhaps some people don’t want to be employed.

PS. Tyler Cowen quotes Betsey Stevenson making this claim:

The problem is that old jobs are long gone for the vast majority of those who remain unemployed.

Perhaps the old jobs are permanently gone. Or maybe it’s the old workers that are temporarily gone.

Not the USA

Here’s The Economist, discussing the woes of the Labour Party:

In their recent book “Brexit Land” two academics at the University of Manchester, Maria Sobolewska and Robert Ford, argue that today’s political divide is cultural rather than economic. The university-educated classes define themselves by their cosmopolitan values—their enthusiasm for immigration and fierce hostility to racial and gender-based prejudice. Voters from the old working-class define themselves by their fealty to “traditional values” of flag, family and fireside. And a large new Labour block—immigrants and the children of immigrants—usually sides with the first group despite being more culturally conservative. Originating in long-term changes such as the expansion of the universities and the rise of a multicultural society, the division has been supercharged by Brexit.

Another article in the same issue points out that Labour’s problems are compounded by the fact that the “electoral geography” favors the Tories:

Culture matters too. Mr Johnson has offended the sensibilities of the liberal professionals whom Mr Cameron wooed. A hard Brexit, tougher migration rules that restrict the supply of European au pairs and restaurant staff, and cuts to foreign aid all run against the grain of these areas.

But gains in these areas alone would not provide Labour with a viable path to power. The party needs to gain 128 seats at the next election to get a majority. The graduate vote is concentrated in urban areas, giving it big margins in cities but not elsewhere. Analysis by Onward, a think-tank close to the Conservatives, suggests that changes in electoral geography mean the Tories could gain another 50 seats at the next election, while simultaneously losing 37 mostly in their southern heartlands. 

And the Tories aren’t satisfied with their advantage in electoral geography, they also want to make it harder to vote:

American-style voter ID laws are coming to Britain

They will have almost no effect on fraud, because there is hardly any

Seven local authorities asked voters for various forms of identification in May 2019, after warning that they would be doing so. On average, 0.4% of would-be voters who were asked for id failed to show it, were turned away, and did not return to the polling station.

But many more might conclude that voting has become too much of a hassle, and not bother. “Not everyone gets as excited about elections as we do,” says Jess Garland of the Electoral Reform Society, which opposes the change. Any effect is likely to be uneven. A poll for the government found that 10% of non-white people would be less likely to vote in person if they were required to show photo id, compared with 5% of whites.

Remember, this is not the USA.

Another issue of The Economist looks at Mexico’s new president, a man of “the left” (as if these terms still have any meaning):

Mr López Obrador has attracted far less global attention than other populist leaders. But look closer and he appears astonishingly similar to them (see table). In his eyes, Mexicans fall into two groups: the people, whose authentic will he represents, and the elite, who are to blame for all Mexico’s ills. He sees himself as on a historic mission to sweep away the rotten habits of the past and establish a republic of virtue.

Inside the same issue, The Economist shows that in 1970, right-of-center parties received support from people with higher levels of education and higher incomes:

Today, right wing parties receive support from people with lower levels of education and higher incomes:

Show me a non-college educated business owner and I’ll show you a Republican. Show me a PhD making under $50k and I’ll show you a Democrat.

There are two types of people who accuse me of TDS. Those who say that Obrador, Bolsonaro, Modi, and Orban are obviously evil, but Trump’s not like that. And those who claim that Trump is similar to the other populists, but they are not in fact evil. I see both types in my comment section. Both are wrong.

Edward Nelson on Milton Friedman

While I’m only 275 pages into Ed Nelson’s big 2 volume set entitled “Milton Friedman & Economic Debate in the United States”, I can already say that it’s one of my favorite books on macroeconomics.

One issue that has frequently puzzled me is how to interpret causality in the Phillips Curve relationship. I have always interpreted Friedman’s natural rate model as one where causality went from inflation to output. More specifically, if inflation is higher than expected, then unemployment will be lower than the natural rate, and vice versa (perhaps due to sticky nominal wages.)

Keynesians usually seem to interpret causality in the opposite direction, low unemployment causes high inflation, and vice versa. And today, that seems to be the most widely accepted interpretation. Nelson (p. 273) quotes Friedman offering an interpretation that is consistent with my view:

There was, however, a crucial difference between Fisher’s analysis and Phillips’s, between the truth of 1926 and the error of 1958, which had to do with the direction of causation. Fisher took the rate of change of prices to be the independent variable that set the process going.

But Nelson also cites other statements by Friedman that are consistent with the Keynesian interpretation. He then suggests:

Friedman was also clear that both inflation and unemployment were endogenous variables. That being the case, neither a story based on causation from unemployment to inflation nor a story based on causation from inflation to unemployment can be accepted as a comprehensive description of the Phillips Curve relationship.

You probably know what I’m going to say. What’s really going on is that both inflation and unemployment are affected by NGDP shocks. When NGDP rises faster than expected, it increases inflation and reduces unemployment. When NGDP rises slower than expected, inflation tends to fall and unemployment rises. But what does Nelson say? How does he reconcile various statements by Friedman that seem inconsistent?

The answer offered here is that Friedman’s perspective was that, although inflation and output were jointly determined, the former variable could in large measure be usefully regarded as the driver of the relationship because inflation is a nominal variable and hence ultimately policy determined. Fluctuations in output (in relation to potential) would not occur if the private sector’s expectations of nominal variables corresponded continuously to the actual paths.

I really like this explanation. In Chapter 1 of my book coming out in July, I discuss the tricky issue of causality in macroeconomics. In the end, I conclude that statements about causal relationships should be judged on their usefulness. Thus it’s useful to say that monetary policy caused the Great Recession if another plausible setting of monetary policy instruments would have prevented the Great Recession, but not otherwise.

While Friedman is my favorite macroeconomist, I don’t believe that he got everything right. Like most people of his generation, he focused a lot of attention on inflation. And yet in many cases, his analysis makes more sense if you substitute NGDP growth for inflation. Thus his claim that a slowdown in inflation almost always results in higher unemployment would be more accurate if applied to a slowdown in NGDP growth. After all, inflation can slow due to a positive supply shock.

I’ve recently discovered another Ed Nelson paper on whether it makes sense to think in terms of “nominal shocks”, and will have more to say on this issue in a future post.

PS. Friedman’s quote is referring to a 1926 paper by Fisher that first developed the so-called “Phillips Curve”. It was rediscovered by Phillips in 1958, who gave it a Keynesian interpretation. Both Friedman and I prefer Fisher’s interpretation.