Sunday, May 16, 2021

Labor market monopsony and Peter Diamond

 These are some no-doubt under-informed thoughts on monopsony  and labor markets that I've had preparatory to teaching the principles course.  In Peter Diamond's first search article, I believe, he briefly discusses a model of  search-friction-induced monopoly that is simple but provocative.  The idea is (I am embellishing here, so this is loose) take a large number of sellers and we'll say an equal number of buyers. Give each buyer a downward-sloping demand and let marginal cost  be constant and identical for each seller.  In a competitive equilibrium, the good sells for marginal cost and each seller serves one buyer. Now add search costs for the buyers--it doesn't matter how big or small.  If we start from the competitive price, each seller now faces a demand which is downward-sloping in the neighborhood of the competitive quantity at prices between MC +search cost and MC-search cost. Each will then raise price to MC + search cost. But this is not an equilibrium, since with all charging MC+ search cost, each has an incentive to raise price to MC + 2*(search cost).  The only symmetric Nash equilibrium has each charging the monopoly price! And the interesting thing is that this is the unique equilibrium for any value of search cost, however small.  

Now when we teach monopsony, we start with a single buyer. The idea that labor markets are monopsonistic in this sense is obviously a non-starter, as your students, some of them anyway, will tell you!  There are many buyers. But then you might mention search costs on the seller side, and show how they give each buyer a "little bit" of monopsony power, if they are small, which they probably are.

But we can do the analogue to the Diamond idea on the buyer side as well -- or so it seems to me, and get an equilibrium, with positive search costs, however small, in which each firm pays the (low) monopsony wage. So even a little bit of search friction can conceivably produce, for each of many firms, a lot of monopsony power -- in fact, as much monopsony power as a single buyer would have!!

Does anyone know if something like this idea has been applied to labor market monopsony? 

The Public Reappearance Of The Israeli-Palestinian Conflict

 Sigh, so much that is so obvious, and so much that is not, but so much that is so sad, especially as there seems to be little real prospect of any serious improvement or settlement on the underlying issues.  Indeed, it is probably the case we did not see anything happen for a good 7 years because from the Palestinian side things looked so hopeless in the face of ongoing Israeli expansion of settlements in the Occupied West Bank and increasing suppression of their rights, with more and more political figures on various sides declaring that the Two-State Solution was dead, so fuggedaboudit. With Bibi Netanyahu managing to get full control of the GOP line on things Israeli, and getting most of what he wanted from this while Trump was president, including a US embassy move to Jerusalem and recognition of the Israeli annexation of the Golan Heights, not to mention the Abraham Accords diplomatic recognitions by UAE, Bahrain, Morocco, and Sudan, all this supposed to "change history," and without Israel giving up anything to the Palestinians for any of these items, the first two of which had long been bargaining chips held by the US government in order to bring about a sustainable and reasonable Two-State settlement.  But no, Bibi could even bring in screaming racists to his government, people the US government used to formally label as "terrorists."  But now, well, history was changed, and the Palestinians were just going to have take what they were given without any whining or complaining, much less any rock-throwing demonstrations or worse.

But it was not to last.  The long simmering efforts by Jewish settlers to have Palestinian families in East Jerusalem evicted from homes the UN put them in during the 1950s because previously Jews lived in, them, not ancestors of those bringing the lawsuits to claim their own personal ownership, but on behalf of "the [Jewish] Community," clearly aggressive rank nonsense. During the recently ended Muslim holy month of Ramadan these efforts brought about demonstrations in front of the Damascus Gate on the north side of the Old City, with Israeli police and other security increasingly violently putting down these rock-throwing demos, and also blocking Muslims from entering the gate to get to the Haram-al-Sharif, the "Sacred Enclosure,"  aka "The Temple Mount," the most hotly contested piece of real estate on the planet, which sits on top of the ruined base of the old Hebrew temple in the southeastern part of the Old City, and which has two sacred Muslim sited on it, the beautiful Dome of the Rock, which contains a rock that the Prophet Muhammed reportedly ascended to heaven for a consultation from, and nearby to it the al-Aqsa mosque, viewed by Muslims as the third most sacred site in their world after the rock in the Kaaba in Mecca and the Temple of the Prophet in Medina. 

It was specifically to the al-Aqsa mosque that worshippers sought to go for evening Ramadan services and were blocked, which led to demos at the mosque as well. A few days before the end of Ramadan, without any really specific provocation (although I am sure various Israeli commentators would say otherwise), Israeli police and security forces entered the mosque, shooting people with rubber bullets and other forms of force, reportedly injuring 330, although not killing anybody. But this assault on the third holiest site in all of Islam set off massive demonstrations around the world and among the Palestinians, not only in Jerusalem and the West Bank, but in Israeli cities themselves, the first time ever for this, and, of course, Hamas in Gaza began firing rockets into Israel, over 100 so far.  Few of these unaimed missiles went further than 3 miles and 90% were taken out by Isrtael's Rocket Dome defense system. But a few longer range ones hit both Jerusalem and Tel Aviv, killing 9 Israelis.  The Israelis have since hit back with massive bombing of Gaza, with the latest reported number dead at 140, 40 of those children.  They have also taken down large buildings, although warning ahead of time so people could get out.  This could be a lot worse, but it is ongoing, with no clear end in sight, although probably Hamas in Gaza will run out of rockets to fire pretty soon.

A question arises as to why Bibi let the police do something so outrageous and stupid as to invade the al-Aqsa mosque late in Ramadan and shoot a bunch of people, and, although perhaps more understandable, why did Hamas in Gaza think it reasonable after this to start firing rockets into Israel, knowing full well from past experience that the Israelis would bomb them severely, killing many innocent Palestinian civilians.

In the case of Bib, this looks like a last-gasp desperate move to hold onto his position as Prime Minister of Israel.  Israeli President Reuvan had shortly before this attack on the mosque invited the main opposition leader, Yair Lapid, to form a new government, after long gridlock and repeated stalemated elections, as well as Netanyahu himself having just failed yet again to form a government at Reuven's invitation.  It turns out that finally after all these decades, the contending possible PMs have begun looking at and negotiating with members of Arab parties in the Israeli Knesset (Yes, this is one difference between apartheid in Israel and South Africa, at least the Arab citizens of Israel can vote). Apparently Bibi tried, but failed to come to an agreement, and other far right wing partied have become disgusted with him (Lapid is only slightly more moderate than Netanyahu). In any case, Lapid had received his invitation, and many thought the moment had arrived for Bibi finally to be out.  But, aha! with this massive blowup within Israel itself between the Arab and Jewish populations, it certainly looks like any coalition government by any Jewish leader with any of the Arab parties is out of the question.  So this imminent threat that Lapid could form a government and remove him looks to be out for now, although who knows what will come down the road. There has been surprisingly little commentary on this precise matter in the media, aside from vague notes that this was in "Netanyahu's political interest," but this is why specifically.

As for Hamas, it is also seen to be in their interest, if not quite so immediately so as it is for Ben-Yamin Netanyahu. Hamas has been in a long conflict with the al-Fatah-led Palestinian Authority in the West Bank, led by the 85-year old Mahmoud Abbas, who has put off another election (which he and his group were expected to lose to Hamas).  Abbas, clearly a spent political force, has long led the PA government that arose from the now-all-but-dead Oslo Accords of 1993.  Unlike Islamist Hamas, secular al-Fatah was willing to recognize and work with Israel on many matters, and still does.  The Israeli government will be sad to see it go, and this is likely to be another fallout of Bibi's attack on the al-Aqsa mosque.

So, the only hope, really, is the Two-State solution.  But it looks to be deader than evet and beyond hope.  The increasing obviousness of this, along with the increasingly outrageous actions by the slef-confident Israeli government, propped up in that by Trump's policies, have triggered this uprising by Palestinians, including the deadly rocket attacks by Hamas, although Hamas looks to gain in the longer run from this by helping to bring down Abbas and al-Fattah and to become the undisputed leader of the Palestinian people with their refusal to recognize Israel and their ongoing demand that it cease to exist.

I note that so far the US seems to have done little useful in all this. Supposedly an unnamed "ambassador" has arrived in Jerusalem to negotiate a cease-fire, but nothing has come of it.  As for public statements, these have sounded almost Trumpish in their one-sided concern for Israelis facing the pathetic rocket attacks coming out of Gaza, without a word about all those being killed in Gaza.  Oh, there was a mild but brief criticism of the attack on the crowd al-Aqsa mosque, but pretty low key, even as many Dems have called for much more support and sympathy for the Palestinians in this.  At a minimum, Bernie Sanders has been completely right to call for ending the annual $4 billion in mostly military aid the US gives Israel.  Surely they do not need it, much less at this point deserve it.

Two odd personal notes on this.

The best man in my first wedding in 1968 is a guy Peter Dorman may have known whom I shall not name, although he is about to have very serious heart surgery and may die.  Back then he was to my political left, and showed up at the rehearsal dinner from the Dem convention Chicago riots with half his hair shaved off and a lot of stitches where a police billy club cracked his skull open. Later he would go through a lot of changes, including a period of being a Sufi, but evrntually went home to Brooklyn, where he became Orthodox Jewish, although, not Chasid/Chared.  He went to Israel where he married an Israeli-Yemeni woman and had 8 children, half now in Brooklyn, half in Israel.  In 1980 we debated the Israeli-Palestinian issue and he declared that the solution was for the Palestinians "in Judea and Samaria" to be expelled.  I did not speak to him at all for a long time after that.  We later reinitiated our friendship, but have largely avoided politics other than to make jokes about each other's highly different views.  I visited him in Jerusalem four years ago this month, and among other things he took me on a tour of King David City.  I could say much more about him. but I shall for now simply hope he gets through is surgery.  His wife is in Israel, but unable to fly to Brooklyn to be with him for the surgery due to the current situation.  He has expressed worry about his family there, and I have said I hope they are not hurt.

Also in my distant past I spent serious time in an Arab nation.  My Arabic was so good back then that I passed for being an Arab.  Some people though I was Syrian (I have also often passed for being Jewish without trying to do so, although I am very WASPy). I back then heard several people say all those terrible things that Israelis claim Arabs think of them: that they should all be killed, that Israel should be pushed into the sea. It is all true. Both sides have been victims; both sides have been guilty guilty guilty.  The obvious solution was and remains the Two-State one, but the assassination of its Israeli organizer, the late Yitzhak Rabin, began the long slide to today where all the supposedly smart people declare the Two-State solution to be dead.  Well, it had better not be dead, because the only alternative is awful endless bloody war.

Barkley Rosser

Saturday, May 15, 2021

Dilke, Chapman, and Dahlberg Pop-ups

Credits: Reuben Walker, animation and music. Tom Walker, concept and design. Charles Wentworth Dilke, Sydney John Chapman, and Arthur Olaus Dahlberg, analysis and inspiration.

Disposable People Reinstated

Today I learned that my EconoSpeak post, "Disposable People" (which has over 2500 views) has been reinstated by Blogger. I never knew it had been removed. If I was a GOP whiner, this would be a prime example of cancel culture in operation. But of course, it's only an artefact of moderation that has to rely on algorithms to identify potential community guidelines violations.


Thursday, May 13, 2021

"Ambivalence" has dropped!


Two things I am especially pleased about that were sort of incidental at the time: 1. The prominence in the title of "ambivalence" -- the future is ambivalent -- and 2. the ending quote by Benjamin of a quote about stereoscopic vision. 

Friday, May 7, 2021

The Death of Dick Day

I learned a few days ago that Richard (Dick) Hollis Day died about a month ago.  There is no obit yet, so I do not have exact dates of birth or death, but communicating with an old mutual friend who knows his oldest son, apparently he succumbed to dementia and related problems that had him declining over the last several years at his home in Cambria, California.  He was born in 1933, but not sure of exact date, so he was either 87 or 88.  

Dick was somebody I think underappreciated by the economics profession who in my view played an important role on several fronts, both intellectually and in other ways. I shall note a prominent one of the latter being that he was he founding editor in 1981 of the Journal of Economic Behavior and Organization (JEBO), with me replacing him in that position in 2001 (lasting until end of 2010).  This "heterodox but respected" journal was very much his creation, and he published many papers that have since become highly respected although unpublishable in top journals back then.  The first in the first issue was one on new institutional economics by Nobelist Oliver Williamson and the second was the paper on mental accounting that was cited by the Nobel Committee when Richard Thaler received the prize.  It is the case that many ideas he championed back then have now become much more respectable, such as new institutional economics and behavioral and experimental economics, especially after the Nobel awards in 2001 and 2002 respectively for George Akerlof and Vernon Smith.

It was also a major outlet for papers on chaos theory, a matter he himself was an early student of in economics, as well as broader complexity economics and other topics still not fully accepted, such as more heterodox approaches to evolutionary economics and econophysics.  Papers on both Marxist economics as well as Austrian economics appeared in the journal.  Dick had a broad perspective and open mind.

His own life and career followed a non--orrthodox path, although he received some serious recognitions over the years.  Born in Iowa in 1933 he got a BS in General Science in 1955 from Iowa State and with an interest in agricultural economics and development economics probably his earlier (he was on the ed board of the Journal of Development Economics for many decades). He attended Harvard from 1955-58, receiving his PhD from there in 1961 on "Recursive Programming Models for Explaining Investment and Technological Change in Agricultural and Industrial Sectors." This was the base for his first of 4 books in 1963, published by North-Holland.

He served in the US Air Force 1958-62, and then was a special consultant for Richard Reuter iduring 1962, who was leading JFK's Food for Peace program.  In many ways his political and world view reflected his identification with a JFK view of the world, Keynesian in macroeconomics, but with a tendency to a pro-military and hawkish view of US foreign policy.  He was also a deep student of existentialism and always enjoyed standing out in most groups as not fully agreeing with anybody and holding to his positions.  This certainly helped him as he forged into uncharted territory in later years.

He was at the University of Wisconsin-Madison, 1963-76, where I first got to know him.  He co-founded the Social Systems Research Institute there with Guy Orcutt, grandfather of recent JB Clark award winner, Emi Nakamura. In 1976 he moved to the University of Southern California, where he remained for the rest of his career, chairing the department for periods of time and also founding and leading for many years its Modeling Research Group.  There he met his second wife, Barbara, who would later be his Managing Editor at JEBO after he got it going.

In terms of ideas, besides recursive programming and simulation analysis, he was interested in disequilibrium models of economic growth.  This led him to publish early papers on chaos theory in economics and other complexity approaches to economics.  It was this interest that drew us together in the 1990s as I published on such matters, and he brought me on board to do various things at JEBO.  He also from an early time disagreed with fully rational models, admiring the bounded rationality/behavioral economics approach of Herbert Simon, who was on board at JEBO at its founding.

Besides that first book, and 9 edited volumes and 180 articles, I shall mention just three others.  One was an edited volume he produced in 1975 out of a conference he organized at the (Army) Mathematics Research Center, which had been bombed in 1970 when my late father directed it, coedited with Ted Groves. This volume, Adaptive Economic Models, Academic Press, contained papers by various economists who would later publish in the area of behavioral models of firm behavior as well as on complexity economics. The others are a two volume series he published in 1994 and 2000 at MIT Press, on Complex Economic Dynamics. These two, especially the first one, remain central to defining modern complexity dynamics, especially its dynamic type.  

I shall close with a curious anecdote.  He visited at many other places over the years, including MIT, Harvard, U. of Paris, Gottingen, U. of Siena, Athens, and the Institute for Advanced Study in Princeton during 1979. It happens that during that year a large conference was held to honor the centennial of the birth of Albert Einstein.  Somehow I learned about it, and while driving from Harrisonburg to New York I stopped by there and just walked into it uninvited, arriving in time for the main event, a debate between Eugene Wigner and John Wheeler about the cosmological implications of black holes.  I saw Dick, the only person there I personally knew, and so stood with him to watch this heavy duty debate, as they had sharply contrasting views.  In any case, that he was there and for that shows the breadth of his interests. I am proud to have worked with him and shall miss him.

Barkley Rosser

Sunday, May 2, 2021

A Recent Correlation Regarding Political "Leadership" And The Coronavirus

 The recent correlation I have noticed, with others commenting on it also, is that some of the most prominent nations with the most rapidly rising rates of coronavirus infections are led by somewhat authoritarian leaders who have recently dismissed the threat of it and engaged in policies that may have encouraged its spread.  The most dramatic examples are India, Brazil, and the Philippines.  

Last year India did not do too badly. It had only one wave, which was pretty well controlled by vigorous lockdown policies that sent many migrant workers from cities to villages. Increasingly authoritarian Indian prime minister, Narendra Modi, he who is imposing Hindutva on the nation and suppressing various dissident voices. This apparent success led to a lot of complacency, with this marked by Modi holding mass rallies prior to upcoming elections, especially a sensitive one in West Bengal where Modi's BJP is trying to take control of the state government.  But now there has been a dramatic outbreak of the coronavirus, setting records for the most infections in a day of any nation, topping 400,000. Reports have it that hospitals are overwhelmed, and Modi is facing serious criticism.

That said, it must be noted that despite the recent surge in India, it remains 88th in the world in accumulated per capita deaths from the coronavirus.  The situation in India could get a lot worse.  At just over 200,000 total deaths it appears to be about to move into third place ahead of Mexico, whose semi-authoritarian and Trump-loving president who appears not to have pursued vigorous policies against the pandemic and which is 17th currently in the world in per capita deaths overall from the coronavirus, although new cases apparently peaked in January and are now declining there.

Brazil is clearly a serious case, with a leader who went even further than his role model Trump in dismissing the pandemic and sneering at scientific solutions.  With 352,000 deaths it is second behind the US in aggregate and 12th in the world in per capita deaths, with a rate of new infections surging at a rate rising as fast as India's. While Brazil remains a democratic nation, Jair Bolsoanaro has mumbled praise of previous military dictatorships, with his sons chiming in on this, and reports that the actual military is split between those who like such talk and might support a coup versus those who wish to support the democratic constitution. Bolsonaro is quite the poster boy for this current correlation.

Another nation with a rapid rise of cases is the Philippines, led by another authoritarian strongman, Duterte, notorious for simply having large numbers of his citizens murdered on accusations involving drug use.  I am less well informed on policies there, but he also seems to fit the bill.

Now it may be that this curious current correlation is simply an ephemerum, a mere coincidence.  Looking at the longer term data it could be argued in fact that there is a positive correlation between democracy and coronavirus deaths.  All of the top 11 nations in the world on this ranking are in Europe, with Brazil at the top of the non-European ones, and the US at 15th place, with its 570,000 total dead.  What has received little media attention is that the top 7 nations in per capita numbers are all former communist-ruled nations in Eastern Europe, although all currently are nominally democratic. But at the top, with 2800/million deaths is increasingly authoritarian Hungary.  It is followed in second place by the Czech Republic and in third place by Bosnia-Herzegovinia.  The top non-former communist state is Belgium in 8th place, with Italy in 10th, and the UK in 11th.   India in 88th place is at 149/million deaths, although that is clearly rising.

So this current curious correlation certainly does not seem to tell the full story, although in a world where many are now getting vaccinated, and quite a few nations that suffered preciously seem to be beginning to get the pandemic under control, it is indeed curious that the nations leading to the world setting new records for new cases seem to be led by people who have dismissed the danger and been careless in their policies, along with exhibiting egomaniacal hunger for power.

Barkley Rosser

Saturday, May 1, 2021

So Much For May Day

 Today is May Day. An ancient point of the Gaelic calendar marking spring, it was long marked by pagan fertility celebrations and rites, dancing around May poles and the like, with many variations on this in different countries. The day became associated with the worker's movement in 1886 when in Chicago a movement for the 8-hour work day involved many demonstrations and strikes and ultimately a riot in Haymarket Square in Chicago that culminated in a bombing and a massacre (with both police and workers killed), followed by trials and executions of various anarchists and activists. The actual date if the massacre was on May 4, but May1 became associated with the event, and it spread to become the leading International Worker's Day, despite competition from rivals such as Labor Day in September in the US.  Ironically both of them were started by socialists and in the US, but somehow in the US Labor Day came to be favored by more conservative interests and was made the legal holiday, with May Day the day celebrated by socialists in other parts of the world.

In the former Soviet Union May Day was one of the major holidays of the year, one of three on which there were major parades and activities in Red Square in Moscow during the period of rule by the Communist Party, the others being November 7 to celebrate the Great October Socialist Revolution (it was October 25 in the old Julian calendar, still followed by the Russian Orthodox Church), and May 9, Victory Day in memory of the victory of Germany in World War II.  Of course, Victory Day, following over a week of vacations following May 1, featured parading displays of military people and equipment, which also would show up, along with lots of party officials on November 7. However, perhaps recalling its old pagan celebratory past, the May Day celebrations in Red Square features athletes and youth groups.  It was an uplifting celebration, more of a party.

Well, since the end of the Soviet Union things have changed. Victory Day continues to be celebrated, with indeed Vladimir Putin playing it up in recent years, making a bigger and bigger deal of it in his appeal to a militaristic nationalism, with ever larger military parades.  As for November 7, in 2005 it was removed as a holiday, but November 4 was recognized as Unity Day, which has sort of replaced November 7, although without Red Square celebrations. It was in fact a pre-Soviet holiday that celebrated a victory of the Poles and Lithuanians in 1612.

But May Day was also dropped as a holiday, although people still basically take off work from it until the still hugely celebrated May 9 Victory Day.  This year, Sunday May 2 happens to be the Russian Orthodox Easter, given by the still followed Julian calendar.  And also this year Putin has been making a big deal about it, getting lots of publicity for going to church and hanging around with its leaders, presumably to distract people from the uprisings and opposition to his rule that have been happening.  But the old May Day is gone in Russia, only quietly noticed by the remnant Communist Party..

Barkley Rosser