Friday, April 8, 2016

Manufacturing Employment

I saw this earlier today, but I can't find it now, to give credit. Hat tip: KPC

But, I saw this graph of manufacturing employment as a percentage of total employment.

This looks similar to age adjusted labor force participation over long periods.  The trends on these measures are surprisingly linear.

What's interesting about measures like this is that they are clearly signals of progress.  Move back a century and you'd have the same trend in agricultural employment.  Yet, progress causes dislocation, so as we experience progress, we treat it as failure.  And, over 70 years or so, along the way, the supposed causes of the faux failure are debated.  Those faux causes are mostly a window into our prejudices.  Some of us would like to blame this failure (that is to say, this progress) on creeping regulations, on foreigners, on unionization, on the decline of unionization, on taxes and spending, on a lack of taxes and spending, on greedy multi-national corporations.

How much of the public conversation around finance is based on arguments about things that aren't real that we can all hang our prejudices on.  It seems unavoidable to me that this will be the case.  Complex topics lend themselves to this problem.  I don't see how any of us can avoid it.

The line between using models and heuristics to approximate the world and imposing your prejudices on complex topics is too thin to parse.


  1. Here are some strange facts.

    1. Obama has spent double in real terms what Reagan spent on the military.

    2. Obama prosecuted a war in Afghanistan for his entire eight years in office.

    3. After 241 Marines were blown to bits in Beirut, Reagan pulled out of the Middle East and never went back.

    4. The inflation rate under Obama has been half or less that it was under Reagan.

    5. The minimum wage in California in 2020 will be the same that it was as in 1970 after adjustment for inflation. In other words 50 years of sideways motion.

    5. But in the last 50 years in California, property zoning has become so stipulative that housing development has nearly come to a halt.

    But remember, Obama is the big liberal and the topic is always the minimum wage!

    1. This from should be right up your alley, Kevin;

      'Place matters for productivity and for jobs that involve the creation or exchange of ideas – cities are the place to be. Great cities attract great minds that benefit from being nearby. Glaeser (2011) documents how such agglomeration benefits, in conjunction with the benefits that urban density offers to consumers, have fuelled a stunning urban revival. However, regulation prevents some of the most successful cities from growing, thus limiting the number of people that share in their riches. The economic cost may be steep. Hsieh and Moretti (2015) estimate that lowering regulatory constraints in high productivity cities like New York, San Francisco and San Jose to the level of the median city would increase US production by 9.5%.'

      The costs in England being especially high;

      'Figure 1 summarises our empirical findings. It illustrates the impact on house prices of removing, one by one, each of the three supply constraints in an average English local planning authority (LPA). What the figure shows is that house prices would have risen by about 100% less, in real terms, from 1974 to 2008 (from £79,000 to £147,000 instead of to £226,000) if, hypothetically, all regulatory constraints were removed. Put differently, house prices would have been about 35% lower (£147,000 instead of £226,000) in 2008 absent of regulatory constraints. The effect of constraints due to local scarcity of developable land is largely confined to highly urbanised areas such as the Greater London area. The local impact of uneven topography is quantitatively less relevant. Hypothetically removing scarcity related and topographical supply constraints would have jointly reduced house prices in 2008 by 15%. We should note here that Figure 1 understates the impact of the various local supply constraints to the extent that they were already binding in 1974, so if anything, the estimated effect of local regulatory constraints on house prices is a lower bound estimate of the impact of the British planning system.'

    2. Yeah. I saw that. I haven't had time to look closely, but it definitely looks supportive of some of my thesis.