Recommendations for Further Reading

American Economic Association

Recommendations for Further ReadingAuthor(s): Timothy TaylorSource: The Journal of Economic Perspectives, Vol. 25, No. 2 (Spring 2011), pp. 217-224Published by: American Economic AssociationStable URL: http://www.jstor.org/stable/23049461 .

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Journal of Economic Perspectives—Volume 25, Number 2—Spring 2011—Pages 217-224

Recommendations for Further Reading

Timothy Taylor

This section will list readings that may be especially useful to teachers of under

graduate economics, as well as other articles that are of broader cultural interest. In

general, with occasional exceptions, the articles chosen will be expository or integra

tive and not focus on original research. If you write or read an appropriate article,

please send a copy of the article (and possibly a few sentences describing it) to Timothy

Taylor, preferably by e-mail at ([email protected]), or c/o Journal of Economic

Perspectives, Macalester College, 1600 Grand Ave., Saint Paul, Minnesota, 55105.

Unemployment and Jobs

The International Labour Organization presents its World of Work Report 2010:

From One Crisis to the Next? From the first chapter by Steven Tobin and Veronica

Escudero: "The current economic recovery is not creating enough jobs and there

are concerns about the quality of the jobs being created. Workers are becoming

discouraged and leaving the labour market altogether, which could have long

lasting and devastating effects, especially for young men and women . . ." "Over

the medium term, in advanced economies job growth is expected to remain stag

nant through 2010 and a return to pre-crisis levels is not foreseeable before 2015."

"For the 33 emerging and developing economies analysed, a V-shaped recovery is

expected—with employment having quickly returned to pre-crisis levels in the first

half of 2010. Yet, the challenge is to absorb labour surpluses from earlier years as well

as new entrants: in 2011 there is an employment deficit of approximately 7 million

■ Timothy Taylor is Managing Editor, Journal of Economic Perspectives, based at Macalester

College, Saint Paul, Minnesota. His e-mail address is ([email protected]).

doi=10.1257/jep.25.2.217



218 Journal of Economic Perspectives

jobs, which are needed to restore employment rates to their pre-crisis levels."

'Young men and women have been disproportionately affected since the onset of

the crisis. Earlier experiences have shown that it takes, on average, over 11 years

for youth unemployment to return to pre-recession levels." "[L]ooking ahead, it

is crucial to prioritize policies that prevent exit from the labour market (activation

programmes, well-designed social protection that facilitates participation, effective

minimum wage policies and employment-friendly taxation)." September 2010. At

(http://www.ilo.org/ wcmsp5/groups/public/@dgreports/@dcomm/documents

/publication/wcms_l 45078.pdf).

Jim Tankersley searches for "The Phantom 15 Million: Taming unemployment

starts with solving the mystery of the jobs that were supposed to have been created in

the past 10 years but weren't." "America'sjobs crisis began a decade ago. Long before

the housing bubble burst and Wall Street melted down, something in our national

job-creation machine went horribly wrong. . . . The Great Recession wiped out what

amounts to every U.S. job created in the 21st century. But even if the recession had

never happened, if the economy had simply treaded water, the United States would

have entered 2010 with 15 million fewer jobs than economists say it should have... .

Even now, no one really knows why." "The simple truth is that American firms are

either returning the spoils of globalization and technology to their shareholders,

spending them on new projects abroad, or both." "Perhaps, some economists theo

rize, the United States isn't creating innovative jobs because its workforce isn't up

to the challenge. For probably the first time in history, our young adults are no

better educated than their parents. Nearly all our international rivals, in developed

and developing economies alike, continue to make generational leaps in college

graduation." "Others say that the government should revamp its approach to unem

ployment benefits, linking payments to job retraining in an effort to shift workers from disappearing fields." National Journal, January 21, 2011. At (http://national

journal.com/magazine/what-happened-to-15-million-u-s-jobs- -20110121).

"Pathways to Prosperity: Meeting the Challenge of Preparing Young Americans

for the 21st Century" is a report from a project at the Harvard Graduate School of

Education. "Our current system places far too much emphasis on a single pathway

to success: attending and graduating from a four-year college after completing an

academic program of study in high school. Yet as we've seen, only 30 percent of

young adults successfully complete this preferred pathway ... It is long past time

that we broaden the range of high quality pathways that we offer to our young

people, beginning in high school. The lessons from other countries strongly suggest that this might be the single most promising strategy for greatly increasing the

percentage of young adults who earn a post-secondary degree or credential that

prepares them to embark on a meaningful career." "Any effort to construct a more

effective network of pathways to prosperity will require a sea change in the role

of business and other employers. . . . But the pathways system we envision would

require them to become deeply engaged in multiple ways at an earlier stage—in

helping to set standards and design programs of study; in advising young people; and most importantly, in providing greatly expanded opportunities for work-linked



Timothy Taylor 219

learning." "Several countries, including Great Britain, Australia, and the Nether

lands, have developed highly visible national youth policies that in effect create

a new social compact between adult society and young people. . . . These three

countries have all raised the school leaving age to 18 for students who have not

completed upper secondary and they require students to participate in education

or training until they have obtained a credential. Dropping out puts them or their

families at risk of losing social benefits." February 2011. At (http://www.gse.harvard . edu/news_even ts/features/2011 /Pathways_to_Prosperity_Feb2011. pdf).

Dane Stangler and Paul Kedrosky examine "Neutralism and Entrepreneur

ship: The Structural Dynamics of Startups, Young Firms, and Job Creation." "Why

do new and young firms create (or appear to create) nearly all net new jobs? After

digging into the data on firm formation, this paper comes to the conclusion that

there are distinct reasons for the patterns we see in terms of job creation and firm

age. As the American economy (or any economy) moves through time, the number

of firms populating it accumulates—that is, there is a progressively larger volume of

firms each year. With relatively steady levels of firm entry and exit (as the American

economy has experienced), in any given year new and young companies will consti

tute the largest bloc of firms in the economy. Partly as a result—and only pardy—this

bloc also contributes the largest number of net new jobs to the economy. In other

words, there is a structural context in which firm formation and job creation occur

that helps explain why new and young companies dominate net job creation. This in

no way diminishes the contribution of new and young companies or their economic

importance—after all, it remains true that they generate most net new jobs. But by

studying the economic structure, we can perhaps unearth the reasons behind that

importance." Kauffman Foundation. September 2010. At (http://www.kauffman

.org/uploadedFiles/firm-formation-neutralism.pdf). Bruce Yandle asks "Jobs, Jobs, Jobs: Where Do Jobs Come From?" "At the time,

I was engaged in a World Bank project . . . Bangladesh was one of the countries I

visited. In an interview with the manager of the government-owned Bangladesh

textile industry, I was told about a large new mill being built within sight of the

office I was visiting. The industry manager told me that he had purchased new 1950s

vintage textile machinery from China for the new plant. (This was in 1986.) Why would they install obsolete 1950s machinery? The manager quickly explained that

they wanted more jobs. They wanted low-paying jobs even though they recognized

that the goods produced could not compete in world markets. The operators of the

government-owned enterprise were motivated to achieve a short-run political goal.

Of course, avoiding revolutions can be seen as an understandable political objec

tive. The Bangladesh leaders had their own ideas about where jobs come from."

"Sometimes, we tend to think of the U.S. economy as a static system that can be

inspired by government policy to expand or contract. Politicians and others speak of taking action to create jobs, almost as if the economy will respond like a lawn that

receives fertilizer and rain. But... the economy is not static at all." George Mason

University, Mercatus Center Working Paper No. 11-02. January 2011. At (http://

mercatus.org/sites/default/files/publication/Jobs.WP_.Yandle. 1.27.10_l.pdf).




International Healthcare Finance

The symposium in this issue on the costs of healthcare has a primarily

American focus. As a complement, the Fiscal Affairs Department of the Interna

tional Monetary Fund has written Macro-Fiscal Implications of Health Care Reform in

Advanced and Emerging Economies. From the Executive Summary: "[S]ince 1970,

public health care spending has risen from 3 to 7 percent of GDP in the advanced

economies, by far the most important driver of total public spending increases."

"In the advanced economies, public health care spending is projected to rise by an

additional 3 percentage points of GDP over the next 20 years and by 6Vz percentage

points over the next 40 years. In net present value terms, these spending increases

would be close to 100 percent of GDP. In emerging economies, where fiscal pres

sures are less severe, public health outlays are projected to rise by 1 percentage

point of GDP, but are more sizable in certain regions . . ." "Past experience points

to the importance of four major policy options to contain spending in advanced

countries in an efficient and equitable manner. First, budget caps and central over

sight of budget allocations: among the countries with the lowest public spending

increases, Italy, Japan, and Sweden have a greater reliance on budget caps. Second,

reforms that strengthen the role of market mechanisms by introducing competi

tion and choice: Germany and Japan score relatively high in this regard and are

among the countries with the lowest spending growth in the past. Third, strong

incentives for the provision of cost-effective health care: this includes the intro

duction of case-based payment systems which have been used with relative success

in Germany and Italy. Fourth, greater reliance on private financing: Australia,

Canada, and France rely significantly on private insurance for services not covered

by the public package." December 28, 2010. At (http://www.imf.org/external/np / pp/eng/2010/122810.pdf).

For a focus on low- and middle-income countries, the World Health Organiza

tion has produced its World Health Report for 2010, subtided Health Systems Financing:

The Path to Universal Coverage: "On the service coverage side, the proportion of

births attended by a skilled health worker can be as low as 10% in some countries,

for example, while it is close to 100% for countries with the lowest rates of maternal

mortality. Within countries, similar variations exist. Rich women generally obtain

similar levels of coverage, wherever they live, but the poor miss out. Women in

the richest 20% of the population are up to 20 times more likely to have a birth

attended by a skilled health worker than a poor woman. Closing this coverage gap

between rich and poor in 49 low-income countries would save the lives of more

than 700 000 women between now and 2015. In the same vein, rich children live

longer than poor ones; closing the coverage gap for a range of services for children

under the age of five, particularly routine immunization, would save more than

16 million lives." "The path to universal coverage, then, is relatively simple—at least on paper. Countries must raise sufficient funds, reduce the reliance on direct

payments to finance services, and improve efficiency and equity. . . . Many low- and

middle-income countries have shown over the past decade that moving closer to



Recommendations for Further Reading 221

universal coverage is not the prerogative of high-income countries. For example,

Brazil, Chile, China, Mexico, Rwanda and Thailand have recently made great strides

in addressing all three problems described above. Gabon has introduced innovative

ways to raise funds for health, including a levy on mobile phone use; Cambodia

has introduced a health equity fund that covers the health costs of the poor and

Lebanon has improved the efficiency and quality of its primary care network."

November 2010. At (http://www.who.int/whr/2010/en/index.html).

Potpourri

Masaaki Shirakawa, the Governor of the Bank of Japan, discusses "Unique

ness or Similarity? Japan's Post-Bubble Experience in Monetary Policy Studies."

"At various international conferences I attended in the early 2000s, I explained

the Japanese situation many times, but never imagined that zero interest rates

and quantitative easing would be adopted by other central banks in the advanced

economies. I believe many of central bank officials thought the same way." "Japan

showed economic growth on a per worker basis comparable to the United States in

the 2000s, although significantly declined from the 1980s. At the same time, Japan delivered a weaker performance in real GDP growth. Obviously, the differences

between real GDP growth and real GDP growth per worker reflect the declines in

the workforce in Japan." "Japan has not experienced a deflationary spiral. More

precisely, Japan has not experienced the phenomenon after the burst of a bubble

that a decline in prices induces a decline in economic activity, thereby leading to

a further decline in prices. Instead, Japan has experienced the longest recovery,

just in duration without considering its strength, from 2002 under mild deflation."

"[V]arious unconventional measures taken by central banks in a crisis produced

significant effects on stabilizing the financial system, and thus contributed to

minimizing the economic downturn. In particular, such unconventional measures

were the most effective in the situation that the overall function of the financial

system, including credit markets, deteriorated due to the malfunction of interbank

money markets." Bank of Japan. September 16, 2010. At (http://www.boj.or.jp/en

/announcements/press/koen_2010/data/kol009c.pdf).

James J. Heckman looks at "The American Family in Black & White: A Post-Racial

Strategy for Improving Skills to Promote Equality." "I first summarize a substantial

body of evidence that shows that discrimination in the labor market is no longer a

first-order cause of racial disparity. Second, I discuss the skill gap: which skills matter

and how the family plays an important role in producing them. Third, I consider the

consequences of adverse trends in American families that retard skill formation and

increase inequality. Finally, I propose effective policies to supplement the resources of

disadvantaged families. The true measure of child poverty is parenting, and an effective

skills-oriented policy bolsters the parenting resources of the disadvantaged." Daedalus,

Spring 2011. Also available as a February 2011 IZA Discussion Paper, no. 5495, from

the Institute for the Study of Labor, at (http://ftp.iza.org/dp5495.pdf).




Stefan Ambec, Mark A. Cohen, Stewart Elgie, and Paul Lanoie consider "The

Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation

and Competitiveness?" "Twenty years ago, by declaring that well-designed regula

tion could actually enhance competitiveness, Michael Porter certainly generated

enormous interest among scholars, policymakers, businesses, and pressure groups.

Indeed, much has been written about what has since become known simply as the

Porter Hypothesis (PH). This paper has provided an overview of the key theoretical

and empirical insights on the PH to date. First, on the theoretical side, it turns out

that the theoretical arguments that could justify the PH are now more solid than they

appeared at first in the heated debate that took place in 1995 in the Journal of Economic

Perspectives. On the empirical side, on one hand, the evidence about the 'weak' version

of the hypothesis (stricter regulation leads to more innovation) is also fairly well

established. On the other hand, the empirical evidence on the strong version (stricter

regulation enhances business performance) is mixed, with more recent studies

providing more supportive results." The two-paper JEPsymposium "Might Environ

mental Regulation Promote Growth?" appeared in the Fall 1995 issue. Resources

for the Future Discussion paper 11-01. January 2011. At (http://www.rff.org/rff / documents/rff-dp-11-01 .pdf).

Clayton M. Christensen, Michael B. Horn, Louis Soares, and Louis Caldera

write: "Disrupting College: How Disruptive Innovation Can Deliver Quality and

Affordability to Postsecondary Education." "There is a rising chorus of doubts about

how much the institutions of higher education that have been such a part of the

country's past successes can be a part of the answer. Graduation rates have stag

nated . . . None of America's higher education institutions have ever served a large

percentage of our citizens—many from low-income, African-American, and Hispanic

families. The institutions are now increasingly beset by financial difficulties, and the

recent financial meltdown is but a shadow of what is to come." "Furthermore, what

we see when we examine the existing institutions of higher education through this

lens is that for decades now they have offered multiple value propositions around

knowledge creation (research), knowledge proliferation and learning (teaching),

and preparation for life and careers. They have as a result become conflations of

the three generic types of business models—solution shops, value-adding process

businesses, and facilitated user networks. This has resulted in extraordinarily

complex—some might say confused—institutions where there are significant

coordinative overhead costs that take resources away from research and teaching.

A typical state university today is the equivalent of having merged consulting firm

McKinsey with Whirlpool's manufacturing operations and Northwestern Mutual

Life Insurance Company: three fundamentally different and incompatible business

models all housed within the same organization." Center for American Progress and Innosight Institute. February 2011. At (http://www.americanprogress.org

/ issues/2011 /02/disrupting_college.html). B. Kelly Eakin, A. Thomas Bozzo, Mark E. Meitzen, and Philip E. Schoech assess

"Railroad Performance under the Staggers Act." "Class I railroads have performed well in the post-Staggers Act era. Productivity has greatly increased, inflation-adjusted



Timothy Taylor 223

rates to shippers have declined by a substantial amount, and the financial stability of

the railroads has dramatically improved." "[AJnnual total factor productivity growth

for the railroad industry averaged 3.7 percent between 1980 and 2008, which was

about three-and-a-half times the productivity growth of the overall private business

sector during the same period." "Adjusted for inflation, rates for railroad freight

services have decreased by about 40 percent since 1980." "Our reading of the

evidence is that it was not volume growth per se, but rather increased traffic density,

resulting from a combination of volume growth and network contraction, that

underlies the railroad productivity story. The Staggers Act provided the industry

the flexibility and latitude to make the most of the good times." Regulation, Winter

2010-2011, pp. 32-38. At (http://www.cato.org/pubs/regulation/regv33n4/regv

33n4-6.pdf). In the same issue, Douglas W. Caves, Laurits R. Christensen, andjoseph A. Swanson offer "The Staggers Act, 30 Years Later," in which "The authors of a 1981

article on railroad deregulation review their observations." Pages 28-31. At (http://

www.cato.org/pubs/regulation/regv33n4/ regv33n4-5.pdf). The Federal Reserve Bank of Philadelphia has published "The Second Bank

of the United States: A Chapter in the History of Central Banking," which offers

a readable overview of its history: its origins in the federal government's need to

borrow funds to fight the War of 1812 against Britain; its enactment after the war

had ended to rebuild trade and the economy; its role in providing credit to help

finance western expansion and to conduct a rudimentary monetary policy; how it

mismanaged the economy into financial panic in 1819; and the events leading up

to Andrew Jackson blocking a renewal of the bank's charter, leading to the bank's

end in 1834. December 2010. At (http://www.philadelphiafed.org/publications

/economic-education/second-bank.pdf). This follows a similarly useful overview

essay: "The First Bank of the United States: A Chapter in the History of Central

Banking," published in June 2009, and available at (http://www.philadelphiafed

.org/ publications/economic-education/first-bank.pdf).

John Parker authors another of the excellent survey articles that appear in the

middle of The Economist: "The 9 billion people question: A Special Report on Feeding the World." "The forecast rise in world's population, from just under 7 billion at the

start of 2011 to just over 9 billion in 2050, is the equivalent of two extra Indias. If you

include the 1 billion people who are now going hungry, the additional mouths to

feed over the next 40 years add up to three extra Indias.. . . Moreover, an increasing

proportion of the population is living in cities, and dollar for dollar city-dwellers eat

more food and especially more processed foods than their country cousins. They

also tend to be richer and able to afford pricier food, such as meat. ... Overall,

the FAO [Food and Agriculture Organization] reckons, total demand for food

will rise about 70% in the 44 years from 2006 to 2050, more than twice as much as

demand for cereals. ... Increasing food supplies by 70% in the next 40 years may

prove harder than it was to raise them by 150% in the previous 40. The main reason:

problems with yields. Yield—tonnes per hectare, bushels per acre or whatever—is

the traditional gauge of agriculture's performance. And the growth in yields has

been slowing down, from about 3% a year for staple crops in the 1960s to around 1 %




now." February 26, 2011. This article is a useful follow-up to the article, by Vernon

Ruttan, "Productivity Growth in World Agriculture: Sources and Constraints," which

appeared in the Fall 2002 issue of thisjournal.

About Economists

Albert E. Kahn, one of the preeminent scholars of regulation and deregulation,

died on December 27, 2010. Kahn was Chairman of the Civil Aeronautics Board at

the time that the agency deregulated itself out of existence. The website of National

Economic Research Associates, Inc., has a biography with links to obituaries. It also

has a copy of an underground classic—a short memo that Kahn wrote to the CAB

staff in 1977 on the importance of clear writing. Kahn began: "One of my pecu

liarities, which I must beg you to indulge if I am to retain my sanity (possibly at

the expense of yours!) is an abhorrence of the artificial and hyper-legal language

that is sometimes known as bureaucratese or gobbledygook. The disease is almost

universal, and the fight against it endless. But it is a fight worth making, and I ask

your help in this struggle." Also available is the text of a longer 1998 speech he

gave at Ithica on "My War against Bureaucratese." Available at (http://www.nera

.com/7132, htm). In "On Editing HOPE," Craufurd Goodwin reflects on editing the History of

Political Economy from the origin of the journal in 1969 through 2010. He concludes:

"This is not a job through which you will make many friends and admirers. It is a

cliche that every author who is accepted and published thinks it was entirely his own

exclusive accomplishment. There is no need for gratitude. Those who are rejected,

on the other hand (more than 80% in our case), invariably think the decision was

wrong and a result of the malfeasance or bad judgment of others. Since the referees

are anonymous the editor becomes the surrogate 'other' and target for the anger

that comes forth, and sometimes real fury. But sooner rather than later you become

inured to the slings and arrows. The comment I received from a disgruntled author

that I treasure most after forty-two years with HOPE, was 'I have observed that since

you became editor the quality of thejournal has steadily declined.'" February 2010. At

(http://econ.duke.edu/HOPE/HOPE%2040/Source%20Materials/Editing%20 HOPE-l.pdf).

■ Thanks to Larry Willmore for a steady stream of suggestions.



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