Michael Strong and me; Samuel J. Abrams on The Talk; Is immigration over-estimated or under-estimated?; me on AI and other topics; Noah Smith on infrastructure and other topics
> a story of a few million migrants replacing those retirees
This sounds like a “gdp factory” theory. That a bunch of 60-somethings with 40 years of experience can be replaced in the job market by a bunch of 20-somethings with zero experience (and who probably speak very little English) simply because the aggregate number of people in the two groups kinda cancels.
The whole line of reasoning seems tortured, almost like it was designed to try and blame inflation on something that had nothing to do with it.
My property taxes, town sales taxes, water bill, etc have all skyrocketed the last few years. These mostly go to pay for services provided to immigrants, who live in subsidized apartments in town and send to their kids to local public schools (where the county spends $22k/year educating them, while their tax contribution doesn’t even come close). But they do work in the local restaurants and I guess my meals if I eat out are slightly cheaper. Still, I’d prefer the lower taxes, I think I would come out ahead.
This is a problem that runs through a lot of libertarian commentary trying to support policy claims based on economic analysis and "efficiency". There are policy reforms that might, in isolation, be positive sum or Pareto improving in an ideal Econ-101 world. But in the actual real world of the bad governments and worse parties we have - which are motivated to combine those moves with other policies which are net-negative and deviate from "net social welfare" in the direction of factional political advantage - the implementation of those policies as part of those corrupt packages would be harmful. The commentary supply would shrink to nothing if they were required to start with the caveat, "After first eliminating all welfare subsidies, then ... "
You did not provide a link to the Noah Smith post on the 'build-nothing country,' but I found the post on his Substack. The 'build-nothing country' is part 4 of a post on multiple topics. In part 2, he cheerleads once again for 'green energy,' arguing that green energy is going to win because 'manufactured technologies (solar and wind) enjoy cost learning curves' while fossil commodities don't, and then he underscores the distinction between 'stuff we dig up out of the ground' versus 'stuff we assemble in a factory,' while acknowledging that 'technologies use commodities.' As Mark P. Mills emphasizes in his articles, energy transition hardware (the manufacture of solar, wind and EV technologies to replace hydrocarbon machines) 'radically increases demand for minerals,' i.e. stuff we dig up out of the ground. Does the chart comparing historical costs of energy sources that Smith includes reflect the costs of digging minerals out of the ground and processing them for use in the manufacture of renewable technologies? I doubt it. Then there's the question of the energy sources used to manufacture these renewable technologies, especially if they are made in China using electricity generated from burning coal. How can anyone take this kind of analysis seriously?
In part 4 on the build-nothing country, after detailing a series of failures (such as California's high-speed rail boondoggle), Smith argues that progressives are better equipped to solve certain underlying problems because industrial policy to restore US manufacturing requires 'beefing up the civil service' and the Republicans would balk at that. Even if US universities were capable of producing the requisite human capital, the implication that a progressive Democratic administration would hire people with the requisite qualifications beggars belief.
In part 1, Smith critiques Niall Ferguson's article comparing the US to the late-stage USSR. One parallel between the US and USSR that Ferguson does not address is the role of an elite intellectual class in cheerleading for the regime. Let's call them 'regime toadies.' In the Soviet case, regime toadies were not completely uncritical of the existing political and economic system, but they didn't challenge the system and their reform proposals were modest and lacked credibility. I'll let others guess who I think fits this description here in the US.
"Does the chart comparing historical costs of energy sources that Smith includes reflect the costs of digging minerals out of the ground and processing them for use in the manufacture of renewable technologies? I doubt it."
In college I took an econ course on markets. One day we talked about oil and how Saudi Arabia would soetimes adjust production to meet demand. I forget the exact details but we ignored production and delivery costs. Were they zero? Absolutely not but they were small enough they were irrelevant to the discussion.
While maybe not quite as irrelevant, I'd argue you are missing the similarity here. Using fossil fuels for heat and power requires far more extraction from the earth than digging up minerals for renewable sources. The difference is big enough it simply isn't worth making the comparison.
Note: I am only referring solar/wind energy that is immediately used. Battery storage shifts the ratio a bit.
I don't want to get into the weeds on this issue, although the estimates provided by Mark Mills on the percentage increases in minerals (copper, lithium, nickel, graphite, rare earths) and other materials (steel, concrete and glass) required to replace hydrocarbons with wind/solar/batteries suggests that your argument by analogy is not correct. My point is that Smith is essentially arguing that renewables have a long-term cost advantage over fossil fuels because they don't rely on 'stuff we dig out of the ground' relative to fossil fuels, and that argument is disingenuous.
Read my comment again. I never said anything about what it takes to get enough materials to build an entirely renewable energy system. You are arguing against something I didn't say.
Moving on to what I did say, you got that right,
"because they don't rely on 'stuff we dig out of the ground' relative to fossil fuels,". The key word is relative. You've said nothing to dispute that point
If you want more specifics you could Google it but I'm pretty sure that's not why you ask so why don't you just get to whatever point you want to make?
Random walk is not alone but the increase in the relative price of anything, including labor (as if such a heterogeneous group of factor services made any sense anyway!). does not cause inflation. The Fed causes inflation, sometimes and to some extent for damn good reasons, but its the Fed.
Immigration raises real income when they get jobs (and that's what they come for). It would raise real income more if the same number were all H1b-type immigrants, but low-wage immigrants help. The is no reason to adduce a false reason for supporting immigration!
Love when you go on podcasts, I listen to every appearance you link. Keep it up! Congrats on the fox news segment! Wish you published a podcast feed of your own interviews that you do
Reading the labor supply and inflation links, one tends to want to go rooting around in the data and when one does so one tends to be left with more questions than when one began.
For example, is the notion of a post-Covid wage spike really born out in the data? Looking at FRED’s
charting of ECI, there seems to have been a slight increase in the rate of increase (Q2 2017: 129.7, Q2 2021: 144.7, Q1 2024: 164), but not a spike, and the increase is ongoing. See: https://fred.stlouisfed.org/series/ECIALLCIV
And why doesn’t ECI track CPI more closely over time? CPI does seem to have had a spike: 02/2017: 244.06, 02/2021: 263.58, 05/2024: 313,25. See: https://fred.stlouisfed.org/series/CPIAUCSL
One sees quite a bit about changes in the mixture of the labor force that is permanently employed in the full time jobs (apparently declining) and the percent in employed in one or more part-time jobs increasing but I have yet to find a clear explanation of the math on how that affects ECI figures.
And has the labor supply actually increased all that much? 02/2017: 159,859, pre-Covid peak 12/2019: 164,699, 02/2021: 160,133, 05/2024: 167,732. See: https://fred.stlouisfed.org/series/CLF16OV But apparently at some point in the past, individuals getting payment from Medicare/Medicaid to provide home health care services to their family members started getting counted in employment figures but I have yet to find anything that lays out all that information or provides any data on what the possible impact, if it did indeed happen, might be.
But actually, the labor supply figures don’t look too bad given their relation to the steady increase in the BEA population estimates: 02/2017: 326,050, 02/21: 331,983, 04/2024: 336,550. So from 2017 to 2024 the civilian labor force increased by about 18 million while the population only increased by about 10 million.? On the other hand, one wonders if there is any compelling reason to believe that anyone has any idea of what the actual US population is within plus or minus 10 million?
On the other hand one wonders what to make of the very real spike in the money supply followed by some contraction. 02/2017: 5,470.4, 02/2021: 7,420.7, 04/2024: 6,663.4 https://fred.stlouisfed.org/series/M2REAL And the shifts in velocity, Q2/2017: 1.437, bottoming out at 1.128 in Q2/2020, Q2/2021: 1.145, Q1/2021: 1.36. https://fred.stlouisfed.org/series/M2V Normally one thinks of declining velocity has being deflationary, but here that seems reversed. One wonders what effect student loan debt forgiveness has on the money supply and inflation. So far it has only been around $200 billion or so in the Biden administration, but one wonders if that is enough to register in inflation figures as much as say government spending on immigrants might.
Looking at the BLS’s most recent ECI, one gets the idea that there is inflationary pressure from state and local government labor costs: “Compensation costs for state and local government workers increased 4.8 percent for the 12-month period ending in March 2024, and increased 4.9 percent in the period ending in March 2023. Wages and salaries increased 5.0 percent for the 12-month period ending in March 2024 and increased 4.7 percent a year ago. Benefit costs increased 4.5 percent for the 12-month period ending in March 2024. The prior year increase was 5.0 percent.” One tends to think these jobs are unaffected by competition from immigrants. To Biden’s credit, his 2025 budget only includes a 2% pay increase following a shameful 5.2% increase for 2024 (4.7% across-the-board base pay increase and an average 0.5% locality pay increase.) And these types of increases would seem to matter at the margin, because the 4,567 million increase in the civilian labor force noted above for 2021-2024 was tracked by a 1,542 million increase over the same years in total government employment: 02/2017: 22,326, pre-Covid peak in 02/2020: 22,867, post-Covid bottom: 21,395, 02,2021: 21,777, 05/2024: 23,319. (https://fred.stlouisfed.org/series/USGOVT ) And growth in the highly compensated federal employees category has contributed its share: 02/2017: 2,812, 08/2020 Covid (?) peak: 3,157. 02/2021: 2,875, 05/2024: 2,999.
So the increase in the share of employment held by government employees would seem to account for some of the inflationary upward movement in EC at least at the margin.
One tends to get the impression that there are multiple explanatory factors for inflation.
"Suppose that after Pearl Harbor demonstrations had broken out in major cities around the world and at campuses in the United States expressing solidarity with Japan. We would wonder where such feelings came from"
That seems an odd comparison. I'm not defending anything Hamas and Palestinians have done but US was not occupying Japan and Pearl Harbor is not part of the former Japanese homeland.
That seems reasonable though one could imagine if a Pearl Harbor type attack happened today. Maybe on a US base somewhere further east and by China instead of Japan. That still doesn't seem comparable to Israel-Palestine.
“Suppose that after Pearl Harbor demonstrations had broken out in major cities around the world and at campuses in the United States expressing solidarity with Japan. We would wonder where such feelings came from.”
It is surprising and shocking to see the demonstratIons, and their moral compasses are severely out of whack, but I think the prominence and the reach of anti-Israel sentiment are way overstated. Mostly it’s limited to kids in college who are doing it because they’re running with a crowd and they can hold those beliefs without much consequence. In a few years they’ll be forced to leave that bubble and the reality of day-to-day living will mollify their sentiments for most of them.
The far greater concern to me is how indifferent much of America has become to what is going on in Ukraine. That is a far greater tragedy by any measure.
>Mostly it’s limited to kids in college who are doing it because they’re running with a crowd and they can hold those beliefs without much consequence. In a few years they’ll be forced to leave that bubble and the reality of day-to-day living will mollify their sentiments for most of them. <
Kinda what we thought about all that 60s crazyness fifty years ago. Yep, we've come a long way, Baby.
Those college students are the most visible but there are plenty of older progressives who think anyone who supports Israel is defending murderers and should be canceled.
It's a good thing political considerations never cloud these national aggregate statistics. Then they might really be unreliable!
> a story of a few million migrants replacing those retirees
This sounds like a “gdp factory” theory. That a bunch of 60-somethings with 40 years of experience can be replaced in the job market by a bunch of 20-somethings with zero experience (and who probably speak very little English) simply because the aggregate number of people in the two groups kinda cancels.
The whole line of reasoning seems tortured, almost like it was designed to try and blame inflation on something that had nothing to do with it.
The immigrate do not need to be _as productive_ as people who are retiring early in order to be net contributors to real incomes of non-immigrants.
My property taxes, town sales taxes, water bill, etc have all skyrocketed the last few years. These mostly go to pay for services provided to immigrants, who live in subsidized apartments in town and send to their kids to local public schools (where the county spends $22k/year educating them, while their tax contribution doesn’t even come close). But they do work in the local restaurants and I guess my meals if I eat out are slightly cheaper. Still, I’d prefer the lower taxes, I think I would come out ahead.
This is a problem that runs through a lot of libertarian commentary trying to support policy claims based on economic analysis and "efficiency". There are policy reforms that might, in isolation, be positive sum or Pareto improving in an ideal Econ-101 world. But in the actual real world of the bad governments and worse parties we have - which are motivated to combine those moves with other policies which are net-negative and deviate from "net social welfare" in the direction of factional political advantage - the implementation of those policies as part of those corrupt packages would be harmful. The commentary supply would shrink to nothing if they were required to start with the caveat, "After first eliminating all welfare subsidies, then ... "
I agree it doesn't sound as likely to be a primary contributor to inflation as some other things that were happening.
As for the immigrants, they don't have to be direct replacements. Underemployed can move up with immigrants filling jobs at the bottom.
You did not provide a link to the Noah Smith post on the 'build-nothing country,' but I found the post on his Substack. The 'build-nothing country' is part 4 of a post on multiple topics. In part 2, he cheerleads once again for 'green energy,' arguing that green energy is going to win because 'manufactured technologies (solar and wind) enjoy cost learning curves' while fossil commodities don't, and then he underscores the distinction between 'stuff we dig up out of the ground' versus 'stuff we assemble in a factory,' while acknowledging that 'technologies use commodities.' As Mark P. Mills emphasizes in his articles, energy transition hardware (the manufacture of solar, wind and EV technologies to replace hydrocarbon machines) 'radically increases demand for minerals,' i.e. stuff we dig up out of the ground. Does the chart comparing historical costs of energy sources that Smith includes reflect the costs of digging minerals out of the ground and processing them for use in the manufacture of renewable technologies? I doubt it. Then there's the question of the energy sources used to manufacture these renewable technologies, especially if they are made in China using electricity generated from burning coal. How can anyone take this kind of analysis seriously?
In part 4 on the build-nothing country, after detailing a series of failures (such as California's high-speed rail boondoggle), Smith argues that progressives are better equipped to solve certain underlying problems because industrial policy to restore US manufacturing requires 'beefing up the civil service' and the Republicans would balk at that. Even if US universities were capable of producing the requisite human capital, the implication that a progressive Democratic administration would hire people with the requisite qualifications beggars belief.
In part 1, Smith critiques Niall Ferguson's article comparing the US to the late-stage USSR. One parallel between the US and USSR that Ferguson does not address is the role of an elite intellectual class in cheerleading for the regime. Let's call them 'regime toadies.' In the Soviet case, regime toadies were not completely uncritical of the existing political and economic system, but they didn't challenge the system and their reform proposals were modest and lacked credibility. I'll let others guess who I think fits this description here in the US.
"Does the chart comparing historical costs of energy sources that Smith includes reflect the costs of digging minerals out of the ground and processing them for use in the manufacture of renewable technologies? I doubt it."
In college I took an econ course on markets. One day we talked about oil and how Saudi Arabia would soetimes adjust production to meet demand. I forget the exact details but we ignored production and delivery costs. Were they zero? Absolutely not but they were small enough they were irrelevant to the discussion.
While maybe not quite as irrelevant, I'd argue you are missing the similarity here. Using fossil fuels for heat and power requires far more extraction from the earth than digging up minerals for renewable sources. The difference is big enough it simply isn't worth making the comparison.
Note: I am only referring solar/wind energy that is immediately used. Battery storage shifts the ratio a bit.
I don't want to get into the weeds on this issue, although the estimates provided by Mark Mills on the percentage increases in minerals (copper, lithium, nickel, graphite, rare earths) and other materials (steel, concrete and glass) required to replace hydrocarbons with wind/solar/batteries suggests that your argument by analogy is not correct. My point is that Smith is essentially arguing that renewables have a long-term cost advantage over fossil fuels because they don't rely on 'stuff we dig out of the ground' relative to fossil fuels, and that argument is disingenuous.
Read my comment again. I never said anything about what it takes to get enough materials to build an entirely renewable energy system. You are arguing against something I didn't say.
Moving on to what I did say, you got that right,
"because they don't rely on 'stuff we dig out of the ground' relative to fossil fuels,". The key word is relative. You've said nothing to dispute that point
What are batteries made out of? What are solar panels made out of? What are wind power turbines made out of?
Answer: Metals requiring lots of ore.
If you want more specifics you could Google it but I'm pretty sure that's not why you ask so why don't you just get to whatever point you want to make?
Random walk is not alone but the increase in the relative price of anything, including labor (as if such a heterogeneous group of factor services made any sense anyway!). does not cause inflation. The Fed causes inflation, sometimes and to some extent for damn good reasons, but its the Fed.
Immigration raises real income when they get jobs (and that's what they come for). It would raise real income more if the same number were all H1b-type immigrants, but low-wage immigrants help. The is no reason to adduce a false reason for supporting immigration!
Love when you go on podcasts, I listen to every appearance you link. Keep it up! Congrats on the fox news segment! Wish you published a podcast feed of your own interviews that you do
"and once again becoming a nation of abundance"
Noah Smith seems pretty sharp and his writing is type cally pretty good but it's hard to take someone seriously when they say something this absurd.
Reading the labor supply and inflation links, one tends to want to go rooting around in the data and when one does so one tends to be left with more questions than when one began.
For example, is the notion of a post-Covid wage spike really born out in the data? Looking at FRED’s
charting of ECI, there seems to have been a slight increase in the rate of increase (Q2 2017: 129.7, Q2 2021: 144.7, Q1 2024: 164), but not a spike, and the increase is ongoing. See: https://fred.stlouisfed.org/series/ECIALLCIV
And why doesn’t ECI track CPI more closely over time? CPI does seem to have had a spike: 02/2017: 244.06, 02/2021: 263.58, 05/2024: 313,25. See: https://fred.stlouisfed.org/series/CPIAUCSL
One sees quite a bit about changes in the mixture of the labor force that is permanently employed in the full time jobs (apparently declining) and the percent in employed in one or more part-time jobs increasing but I have yet to find a clear explanation of the math on how that affects ECI figures.
And has the labor supply actually increased all that much? 02/2017: 159,859, pre-Covid peak 12/2019: 164,699, 02/2021: 160,133, 05/2024: 167,732. See: https://fred.stlouisfed.org/series/CLF16OV But apparently at some point in the past, individuals getting payment from Medicare/Medicaid to provide home health care services to their family members started getting counted in employment figures but I have yet to find anything that lays out all that information or provides any data on what the possible impact, if it did indeed happen, might be.
But actually, the labor supply figures don’t look too bad given their relation to the steady increase in the BEA population estimates: 02/2017: 326,050, 02/21: 331,983, 04/2024: 336,550. So from 2017 to 2024 the civilian labor force increased by about 18 million while the population only increased by about 10 million.? On the other hand, one wonders if there is any compelling reason to believe that anyone has any idea of what the actual US population is within plus or minus 10 million?
On the other hand one wonders what to make of the very real spike in the money supply followed by some contraction. 02/2017: 5,470.4, 02/2021: 7,420.7, 04/2024: 6,663.4 https://fred.stlouisfed.org/series/M2REAL And the shifts in velocity, Q2/2017: 1.437, bottoming out at 1.128 in Q2/2020, Q2/2021: 1.145, Q1/2021: 1.36. https://fred.stlouisfed.org/series/M2V Normally one thinks of declining velocity has being deflationary, but here that seems reversed. One wonders what effect student loan debt forgiveness has on the money supply and inflation. So far it has only been around $200 billion or so in the Biden administration, but one wonders if that is enough to register in inflation figures as much as say government spending on immigrants might.
Looking at the BLS’s most recent ECI, one gets the idea that there is inflationary pressure from state and local government labor costs: “Compensation costs for state and local government workers increased 4.8 percent for the 12-month period ending in March 2024, and increased 4.9 percent in the period ending in March 2023. Wages and salaries increased 5.0 percent for the 12-month period ending in March 2024 and increased 4.7 percent a year ago. Benefit costs increased 4.5 percent for the 12-month period ending in March 2024. The prior year increase was 5.0 percent.” One tends to think these jobs are unaffected by competition from immigrants. To Biden’s credit, his 2025 budget only includes a 2% pay increase following a shameful 5.2% increase for 2024 (4.7% across-the-board base pay increase and an average 0.5% locality pay increase.) And these types of increases would seem to matter at the margin, because the 4,567 million increase in the civilian labor force noted above for 2021-2024 was tracked by a 1,542 million increase over the same years in total government employment: 02/2017: 22,326, pre-Covid peak in 02/2020: 22,867, post-Covid bottom: 21,395, 02,2021: 21,777, 05/2024: 23,319. (https://fred.stlouisfed.org/series/USGOVT ) And growth in the highly compensated federal employees category has contributed its share: 02/2017: 2,812, 08/2020 Covid (?) peak: 3,157. 02/2021: 2,875, 05/2024: 2,999.
So the increase in the share of employment held by government employees would seem to account for some of the inflationary upward movement in EC at least at the margin.
One tends to get the impression that there are multiple explanatory factors for inflation.
"Suppose that after Pearl Harbor demonstrations had broken out in major cities around the world and at campuses in the United States expressing solidarity with Japan. We would wonder where such feelings came from"
That seems an odd comparison. I'm not defending anything Hamas and Palestinians have done but US was not occupying Japan and Pearl Harbor is not part of the former Japanese homeland.
It didn’t work for me because I imagine the bulk of the current protesters are Americans in a *much* looser sense than would then have been the case.
This is not a value judgment, but we need to retain the ability to note differences in order to make sense of the world.
That seems reasonable though one could imagine if a Pearl Harbor type attack happened today. Maybe on a US base somewhere further east and by China instead of Japan. That still doesn't seem comparable to Israel-Palestine.
“Suppose that after Pearl Harbor demonstrations had broken out in major cities around the world and at campuses in the United States expressing solidarity with Japan. We would wonder where such feelings came from.”
It is surprising and shocking to see the demonstratIons, and their moral compasses are severely out of whack, but I think the prominence and the reach of anti-Israel sentiment are way overstated. Mostly it’s limited to kids in college who are doing it because they’re running with a crowd and they can hold those beliefs without much consequence. In a few years they’ll be forced to leave that bubble and the reality of day-to-day living will mollify their sentiments for most of them.
The far greater concern to me is how indifferent much of America has become to what is going on in Ukraine. That is a far greater tragedy by any measure.
>Mostly it’s limited to kids in college who are doing it because they’re running with a crowd and they can hold those beliefs without much consequence. In a few years they’ll be forced to leave that bubble and the reality of day-to-day living will mollify their sentiments for most of them. <
Kinda what we thought about all that 60s crazyness fifty years ago. Yep, we've come a long way, Baby.
Those college students are the most visible but there are plenty of older progressives who think anyone who supports Israel is defending murderers and should be canceled.