Good Tim Hartford article on the implications of technology and labor markets. These paragraphs in particular seemed interesting:
What is sobering is that we have already seen convincing evidence of the impact of technology on the job market. Alan Manning of the London School of Economics coined the term “job polarisation” a decade ago, when he discovered that employment in the UK had been rising for people at the top and the bottom of the income scale. There was more demand for lawyers and burger flippers. It was middle-skill jobs that were disappearing. The same trend is true in the US, and is having the predictable effect on wages: strong gains at the top, some gains at the bottom, stagnation in the middle.
The leading explanation is that technological change has favoured certain skills and displaced others. Typists, clerks, travel agents and bank tellers find their skills less valued. Mechanisation now dominates agriculture, large-scale construction and manufacturing. We tend to imagine that manufacturing jobs have disappeared to China; in fact, manufacturing employment in China has been falling. Even the Chinese must fear the robots.
This is the same general topic of the book Average is Over by Tyler Cowen. The more I read about this thesis, the stronger I think the argument of job polarization is.
The implications are particularly interesting. Cowen argues that regions will be reorganized by skills, with the highest skills concentrating in knowledge hubs and high quality of life places (think San Francisco, New York, and West LA). The less skilled will gradually relocate to strong back office / service cities like Phoenix or Dallas, as seen by the recent trend of strong growth in low paying jobs. Nationally and super regionally there will be more inequality. But on a metropolitan, basis there will be much more equality.
Mexico’s congress approved the energy reform opening the oil sector to private investment (both foreign and domestic).
I think this quote says it well
Oil production has stagnated partly because energy didn’t get the competitive impulse from Nafta that other industries did, said Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington.
“What this reform does is it now exposes the Mexican energy sector to national and international competition,” said Wood. “It marks a fundamental paradigm shift in the mentality of the energy sector. Now we get beyond 1938.”
It’s a very important trend to eliminate state monopolies and reduce state control of the Mexican economy in general. Not only is it inefficient and competition reducing, but it also breeds corruption. I still do not understand those who view this as a step in the wrong direction and their impulsive hostility towards foreigners. If Mexico is going to take the next step, it needs to embrace competition and capital, foreign and domestic.
From Marginal Revolution
One of the problems with commodity based currencies (hard or virtual) is that it diverts activity from productive activities. It used to happen with gold, where firms would focus on mining due to gold’s currency value and not on real supply and demand dynamics that mostly resembles today’s mining environment. And now it’s happening with Bitcoin, where instead of focusing on productive things like software, some engineers are focused on Bitcoin mining.
In reality, this isn’t the biggest problem. A major problem is the arbitrary inflation and deflation that comes through changes in supply (or lack thereof) and the market value of these commodities. We would have already experienced aggressive bouts of inflation and deflation with Bitcoin (as historically happened with gold). Not to mention that it helps make a financial crisis a full scale depression (here and here)
As Milton Friedman stated, commodity standards are justifiable for those favoring limited government but in practice have quite a bit of negative consequences that gives fiat currencies the advantage.
Mankiw’s response to Krugman on minimum wage
Even if it has no adverse effect on low wage employment it selectively penalizes those with low wage employees.