• Recommendations for Further Reading
  • February 8, 2024

Sugar taxes, homelessness, and the Nobel Prize


Claudia Goldin has been awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2023, "for having advanced our understanding of women's labour market outcomes." The Nobel committee publishes useful background essays and videos at https://www.nobelprize.org/prizes/economic-sciences/2023/summary/. From the "Popular Science Background:"

"Goldin began by compiling statistics from a range of sources, producing the first long series on the pay gap between men and women. Using materials that covered two hundred years, she was able to demonstrate that many historically important structural changes in the labour market actually benefitted women, long before the issue of equality was a priority. The gender earnings gap lessened significantly during the industrial revolution (1820–1850) and when demand for administrative and clerical services increased (1890–1930). However, despite economic growth, increasing education levels among women and a doubling in the proportion of women working for pay, the earnings gap essentially stayed the same between 1930 and 1980. [T]he earnings gap between women and men in high-income countries is somewhere between ten and twenty per cent, even though many of these countries have equal pay legislation and women are often more educated than men. Why is this? Goldin attempts to answer precisely this question and, among other things, succeeds in identifying one key explanation: parenthood. Goldin showed that this motherhood effect can partly be explained by the nature of contemporary labour markets, where many sectors expect employees to be constantly available and flexible in the face of the employer’s demands. Because women often take greater responsibility than men for childcare, for example, this makes career progression and earnings increases more difficult."

The Annual Review of Financial Economics has published a four-paper symposium, with an introduction, on the subject of choosing an appropriate social discount rate (2023, https://www.annualreviews.org/toc/financial/15/1). From the abstract of the paper by W. Kip Viscusi, "The Social Discount Rate: Legal and Philosophical Underpinnings":

"Discounting of deferred impacts of government policies is a long-established practice that has been the target of substantial litigation and continued philosophical debate. Legal challenges to the social rate of discount have resulted in general acceptance of the principle of discounting at a nonzero rate for both monetary and nonmonetary impacts. Courts have displayed a general familiarity with discounting and often require transparent justification for the selection of the discount rate based on established scientific principles. The philosophical issues are more wide-ranging and include whether nonmonetary impacts should be discounted, the use of the opportunity cost of capital or the social rate of time preference, the time frame that is pertinent for setting the discount rate, and determination of whose preferences should have standing. Intergenerational issues are particularly challenging, raising questions regarding which generation’s preferences should be recognized, the potential for dynamic inconsistencies arising from preferential discount rates, and intertemporal inequities."

Lawrence H. Summers delivered the first annual lecture honoring Richard N. Cooper, at the Peterson Institute for International Economics, with the title "What should the 2023 Washington Consensus be?" (September 18, 2023, video and transcript available, https://www.piie.com/events/what-should-2023-washington-consensus-be). Summers organizes his discussion around "six major misconceptions." Here are two of them:

"First, it is supposed that the idea of economic policy is to maximize the creation of jobs rather than to maximize the availability of goods at low cost to consumers and firms. Both the officials responsible for competition policy and those responsible for international trade have explicitly rejected economic efficiency as a central guide for economic policy. This, I would suggest, is a costly and consequential error. Third, the world has fared very well. Relative to the time when I was chief economist of the World Bank at the beginning of the 1990s, child mortality rates are less than half of what they were then. Literacy rates are more than twice what they were then. Poverty rates, terms of extreme poverty are less than 40% of what they were then. And in some ways most fundamental and important, this month, we celebrate the 78th anniversary of a situation where there has been no direct war between major powers. You cannot find a period of 78 years since Christ was born when that was the case. So, the idea that we've been doing it all wrong is, I would suggest, a substantial misconception."

Mario Draghi delivered the 15th Annual Martin Feldstein Lecture on "The Next Flight of the Bumblebee: The Path to Common Fiscal Policy in the Eurozone" (NBER Reporter, October 2023, https://www.nber.org/ reporter/2023number3/next-flight-bumblebee-path-common-fiscal-policy-euro-zone).

"Whichever route we take [in the European Union], we cannot stand still or—like a bicycle—we will fall over. The strategies that had ensured our prosperity and security in the past—reliance on the USA for security, on China for exports, and on Russia for energy—are insufficient, uncertain, or unacceptable. The challenges of climate change and migration only add to the sense of urgency to enhance Europe's capacity to act. We will not be able to build that capacity without reviewing Europe's fiscal framework, and I have tried to outline the directions this change might take. But ultimately the war in Ukraine has redefined our Union more profoundly—not only in its membership, and not only in its shared goals, but also in the awareness it has created that our future is entirely in our hands, and in our unity."

There are two broad models for how to address the chronic homeless, which go under the headings of "treatment first" and "housing first." Joseph R. Downes makes the case for the second in "Housing First: A Review of the Evidence" (Evidence Matters: US Department of Housing and Urban Development, Spring/Summer 2023, pp. 11–19, https://www.huduser.gov/portal/periodicals/em/spring-summer-23/highlight2.html).

"Four major RCTs [randomized control trials] have been performed to compare the effectiveness of Housing First programs with treatment first programs. Three of these RCTs were conducted in the United States, and the other was conducted in Canada. In a review of these RCTs, Tsai notes that two RCTs conclusively found that Housing First led to quicker exits from homelessness and greater housing stability than did TAU [treatment as usual]. In the Canadian trial, an RCT in five of Canada's largest cities known as At Home/Chez Soi, analysis revealed that, in findings similar to those of the American RCTs, 'Housing First participants spent 73% of their time in stable housing compared with 32% of those who received treatment as usual.' Baxter et al. also performed a systematic literature review and metanalysis of these four RCTs, finding that Housing First resulted in significant improvements in housing stability. This study also found that no clear differences existed between Housing First and TAU for mental health, quality of life, and substance use outcomes . . ."

The World Trade Organization has published its World Trade Report 2023 on the theme "Reglobalization for a Secure, Inclusive, and Sustainable Future" (https://www.wto.org/english/res_e/publications_e/wtr23_e.htm). From the Executive Summary:

"Recent crises, such as the COVID-19 pandemic and the war in Ukraine, have fed into perceptions that globalization exposes economies to excessive risks. Consequently, a trade-sceptic narrative has gained traction, suggesting that international trade is an obstacle to building a more secure, inclusive, and sustainable world. Viewing interdependence as a vice rather than a virtue, policymakers are now placing greater emphasis on economic independence. The primary conclusion of the Report is that international trade, anchored in a strengthened multilateral trading system, plays an indispensable role in creating a more secure, inclusive, and sustainable world. Building upon these findings, the Report makes the case that a better alternative to fragmentation is 're-globalization'—understood as extending trade integration to more people, economies and issues."

Country Narratives

A research group at Harvard's Growth Lab has published "Growth Through Inclusion in South Africa" (November 15, 2023, https://growthlab.hks.harvard.edu/publications/growth-through-inclusion-south-africa). The authors are Ricardo Hausmann, Tim O'Brien, Andrés Fortunato, Alexia Lochmann, Kishan Shah, Lucila Venturi, Sheyla Enciso-Valdivia (LSE), Ekaterina Vashkinskaya (LSE), Ketan Ahuja, Bailey Klinger, Federico Sturzenegger, and Marcelo Tokman.

"It is unfortunately clear that South Africa's trajectory is not one of growth or inclusion, but rather stagnation and exclusion. South Africa's economy is stagnating and, in fact, losing capabilities, export diversity, and competitiveness. While the racial composition of wealth at the top has changed, wealth concentration in South Africa has not and remains very high. Moreover, the broader structures of the economy have not allowed for the inclusion of the labor and talents of South Africans—black, white, and otherwise. There appear to be major spatial impediments to labor market inclusion in cities and large spatial patterns of exclusion in former homelands. As the performance of network industries and public capabilities have deteriorated and growth has slowed, exclusion has only worsened. Empowerment of a few has de facto come at the expense of the many."

Johan Norberg discussed "The Mirage of Swedish Socialism: The Economic History of a Welfare State" (Fraser Institute, August 2023, https://www. fraserinstitute.org/studies/mirage-of-swedish-socialism-the-economic-history-of-a-welfare-state).

"Sweden has a tradition of sticking to the path it has chosen and ignoring problems until they become too big to deny and everybody changes their minds at the same time. Then Swedes move fast in the opposite direction. Far from following the famed 'middle way,' Sweden has often been a country of extremes. It liberalized the economy more than other countries did in the mid-1800s, socialized more than others in the mid-1900s, and then reversed course and liberalized again faster than others in the late 20th century."

Ending Stagnation: A New Economic Strategy for Britain has been published by the Resolution Foundation and the Centre for Economic Policy Research (December 2023, https://economy2030.resolutionfoundation.org/wp-content/uploads/2023/12/Ending-stagnation-final-report.pdf).

"We [that is, the United Kingdom] were catching up with more-productive countries like France, Germany and the US during the 1990s and early 2000s. But that came to an end in the mid-2000s and our relative performance has been declining ever since, reflecting a productivity slowdown far surpassing those seen in similar economies. Labour productivity grew by just 0.4 per cent a year in the UK in the 12 years following the financial crisis, half the rate of the 25 richest OECD countries (0.9 per cent). The UK's productivity gap with France, Germany and the US has doubled since 2008 to 18 per cent . . . Weak productivity growth has fed directly into flatlining wages and sluggish income growth: real wages grew by an average of 33 percent a decade from 1970 to 2007, but this fell to below zero in the 2010s We might like to think of ourselves as a country on a par with the likes of France and Germany, but we need to recognise that, except for those at the top, this is simply no longer true when it comes to living standards."

Interviews with Economists

Mitchell List and Kurt Schuler present "An Interview with James D. Gwartney on His Life and Work in Economics" (Johns Hopkins Institute for Applied Economics, Global Health and the Study of Business Enterprise, SAE #238, August 2023, https:// www.dropbox.com/scl/fi/0emygx0l29345gnbw837w/Working-Paper-238.pdf). Gwartney talks about attending a one-room schoolhouse in Kansas, as did Vernon Smith. He also discusses the philosophy behind his popular introductory textbook:

"I wanted to integrate public choice analysis into a principles of economics text. Around 45 percent of [US] GDP was allocated through the political process in 2020 and through most of the history of the book it's been in the 30 to 35 percent range. . . . The political process is merely an alternative form of making decisions. We need to know something about how that process works as well as how markets work. This is the contribution of our text. Merely stating, 'Here's what the benevolent, omnipotent dictator (an expression my friend Randy Holcombe likes to use when talking about the political process) would do' is not very useful. Political decisionmakers may not be very benevolent, but even if they are benevolent, they’re not going to be omniscient, therefore there's no reason to expect that they're going to come up with ideal solutions. Even today, much of economics reflects this misleading view. Our book integrating public choice was really an attack on the idea that government is a corrective device that's lying around so that if something goes wrong, we'll just call on the corrective device and fix it. That seemed a very naive view of what the role of government in the economy should be. I believe this integration of public choice accounts for the staying power of our text."

Tim Besley serves as interlocutor in "Biodiversity: A Conversation with Sir Partha Dasgupta" (Annual Review of Economics, 2023, pp. 755–773, transcript and video available, https://www.annualreviews.org/doi/abs/10.1146/annurev-economics-042423-044154). Dasgupta says:

"Does the climate change literature assume, in effect, that it is the only sustainability problem? . . . [T]he established economics of climate change supposes that Nature provides us with only one maintenance and regulating service: carbon regulation. It permits analysts to imagine that with only modest investment in the transition to clean energy—say, 2% of global GDP until a net zero economy is attained—we can expect a future of indefi- nite GDP growth. We do not have that luxury in the economics of biodiversity. . . The economics of climate change then becomes a branch of the economics of biodiversity (or of Nature writ large). So, instead of continually finding ways to reduce carbon concentration, as is customary in the economics of climate change, we search for ways to better manage our portfolio of assets in the economics of biodiversity It is not an accident that the bulk of the world's biodiversity is in the tropics and that most of the world's poorest people live there. Principal exports from those regions are primary products, whose extraction (from mines, plantations, wetlands, coastal waters, and forests) inflicts adverse externalities on local inhabitants. The externalities are not reflected in export prices, meaning that local ecosystems are overexploited; but that amounts to a transfer of wealth from the exporting country to the importing country, from a poor to a rich country. . . .Ecological externalities within regions suggest that countries in sub-Saharan Africa should collectively impose export taxes on primary products. That would ease pressure on their local ecosystems such as rainforests and fisheries and would also be a source of income for them."

Follow-Up on Past JEP articles

Gizelle George-Joseph and Devesh Kodnani of Goldman Sachs describe "Historically Black, Historically Underfunded: Investing in HBCUs" (Goldman Sachs Research, June 13, 2023, https://www.goldmansachs.com/intelligence/pages/gs-research/the-case-for-investing-in-hbcus/report.pdf).

"[A]dmissions of Black students at HBCUs started to decline beginning in 1982, partly because historically white colleges had begun to admit Black students in greater numbers and Black colleges were unable to compete with the scholarships, facilities, or variety of academic programs offered by white colleges. The decrease in Black students was offset by the enrollment of non-Black students. According to the U.S. Department of Education Black students' enrollment at HBCUs increased by 14% between 1976 and 2021; however, as the overall college enrollment of Black students more than doubled during that period, the share of Black students enrolled at HBCUs decreased from 18 percent in 1976 to just over 9 percent in 2021 . . . 59% of students at HBCUs receive Pell Grants compared to 31% at non-HBCUs. Moreover, 61% of HBCU students leverage Federal loans versus 40% of students at non-HBCUs . . . When some of these factors are controlled for, HBCUs have a higher graduation rate for Black college students than non-HBCUs.” George-Joseph and Kodnani emphasize and complement the article by Gregory N. Price and Angelino C. G. Viceisza in the Summer 2023 issue "What Can Historically Black Colleges and Universities Teach about Improving Higher Education Outcomes for Black Students?"

Jonathan Guryan and Jens Ludwig discuss "Overcoming Pandemic-Induced Learning Loss" (in Building a More Resilient US Economy, edited by Melissa S. Kearney, Justin Schardin, and Luke Pardue, Aspen Economic Strategy Institute, November 2023, pp. 150–170, https://www.economicstrategygroup.org/publication/building-a-more-resilient-us-economy/).

"Because education is intrinsically cumulative, there is the real possibility that pandemic-induced school disruptions may set a whole generation of students off track for the rest of their lives . . . Students who can't read at grade level by third grade are four times less likely to graduate high school. Ninth graders who have not yet passed their required entry-level math class (Algebra I) are five times less likely to graduate. Overall, the learning gains from HDT [high-dosage tutoring] are much closer to offsetting the average learning loss experienced during the pandemic than other potential policy measures are. HDT is plausibly the intervention most up to the task of meeting the scale of our current learning-loss challenge. As one education expert put it, tutoring sessions are 'the best learning conditions we can devise'." This essay complements "COVID-19, School Closures, and Outcomes," by Rebecca Jack and Emily Oster, in the Fall 2023 issue.

Kristin Kiesel, Hairu Lang, and Richard J. Sexton discuss "A New Wave of Sugar-Sweetened Beverage Taxes: Are They Meeting Policy Goals and Can We Do Better?" (Annual Review of Resource Economics, 2023, pp. 407–432, https://www.annualreviews.org/doi/abs/10.1146/annurev-resource-111522-111325).

"Indeed, it will take the knowledge and expertise of public health officials and scholars, economists, psychologists, and those most affected by health inequities and SSB [sugar-sweetened beverage] taxes to carefully design multifaceted policies that alter our food environments and nudge both producers and consumers toward improved behavioral responses, health outcomes, and greater social welfare. Carefully designed taxes on added sugars and unhealthy foods implemented countrywide could be part of combined policies aimed at reducing the obesity epidemic and related health harms. Given their regressivity, limited impact on consumption of SSBs, and failure to incentivize product reformulations, we find little basis to support further implementation of local SSB taxes." This article updates the evidence and offers a differently nuanced conclusion than Hunt Allcott, Benjamin B. Lockwood, and Dmitry Taubinsky, "Should We Tax Sugar-Sweetened Beverages? An Overview of Theory and Evidence," in the Summer 2019 issue of this journal.

Discussion Starters

Thomas Peacock and Wendy S. Barclay argue that "Mink farming poses risks for future viral pandemics" (PNAS, July 19, 2023, https://www.pnas.org/doi/10.1073/pnas.2303408120).

"Mink are highly susceptible to infection with several viruses that also infect humans. In late 2020, government agencies and academics in Europe and North America repeatedly documented that farmed mink had become infected with SARS-CoV-2, the causative agent of COVID-19. Evidence of mink-adapted viruses spilling back into local communities further demonstrated the poor biosecurity guidelines and practices in the industry. With this in mind, some countries—for example, the Netherlands—shut down mink production altogether. Fortunately, the mink-adapted variants of 2020 were not fitter than viruses circulating at the time in humans and, hence, did not spread widely [W]e argue that mink, moreso than any other farmed species, pose a risk for the emergence of future disease outbreaks and the evolution of future pandemics."

Nicholas Eberstadt and Ashton Verdery describe "China's Revolution in Family Structure: A Huge Demographic Blind Spot with Surprises Ahead" (American Enterprise Institute, February 2023, https://www.aei.org/research-products/report/chinas-revolution-in-family-structure-a-huge-demographic-blind-spot-with-surprises-ahead/).

"Our simulations show that the Chinese family is about to undergo a radical and historically unprecedented transition, as extended kinship networks atrophy across the nation and close blood relatives disappear altogether for many. This fraying of the extended family and atomization of the nuclear family come at an almost exquisitely inopportune moment in China: Social needs are soaring alongside the rising tally of elderly dependents and the shrinking ranks of those on whom the elderly can rely—two social indicators poised for inescapable collision in the years immediately ahead. Indeed, the withering of the Chinese family as we now know it will make for new and unfamiliar challenges at every stage in the life cycle, for both Chinese people and the Chinese state."