• Recommendations for Further Reading
  • November 3, 2023

Refugees, policymaking, and decarceration



The World Development Report 2023 discusses the issues and evidence about "Migrants, Refugees, and Societies" (World Bank, https://www.worldbank.org/en/publication/wdr2023).

"[T]here are globally about 184 million migrants (about 2.3 percent of the world's population)—37 million of them refugees . . . The share of migrants in the global population has remained relatively stable since 1960. However, this apparent stability is misleading because demographic growth has been uneven across the world. Global migration increased more than three times faster than population growth in high-income countries and only half as fast as population growth in low-income countries. . . . There is no "pre-migration" harmony to return to. In every society, tensions, competition, and cooperation have always existed across a variety of groups that are partly overlapping and constantly changing. Some of these tensions reflect socioeconomic divides: they are not about migration but about poverty and economic opportunity—and large numbers of migrants happen to be poor. Because many of those who moved or their descendants have been naturalized, some of the cultural issues attributed to migration are, in fact, about the inclusion of national minorities. Migration is also just one of many forces transforming societies in an age of rapid change, alongside modernization, secularization, technological progress, shifts in gender roles and family structures, and the emergence of new norms and values, among other trends."

Nick Chater and George Loewenstein discuss "The i-frame and the s-frame: How focusing on individual-level solutions has led behavioral public policy astray"
(Behavioral and Brain Sciences, published online September 5, 2022, https://www.cambridge.org/core/journals/behavioral-and-brain-sciences/article/iframe-and-the-sframe-how-focusing-on-individuallevel-solutions-has-led-behavioral-public-policy-astray/A799C9C57F388A712BE5A8D34D5229A1).

"An influential line of thinking in behavioral science, to which the two authors have long subscribed, is that many of society’s most pressing problems can be addressed cheaply and effectively at the level of the individual, without modifying the system in which the individual operates. We now believe this was a mistake, along with, we suspect, many colleagues in both the academic and policy communities. Results from such interventions have been disappointingly modest. But more importantly, they have guided many (though by no means all) behavioral scientists to frame policy problems in individual, not systemic, terms: To adopt what we call the 'i-frame,' rather than the 's-frame.' The difference may be more consequential than i-frame advocates have realized, by deflecting attention and support away from s-frame policies. Indeed, highlighting the i-frame is a long-established objective of corporate opponents of concerted systemic action such as regulation and taxation. We illustrate our argument briefly for six policy problems, and in depth with the examples of climate change, obesity, retirement savings, and pollution from plastic waste."

At this year's annual meeting conducted at Jackson Hole by the Federal Reserve Bank of Kansas City, with the theme of "Structural Shifts in the Global Economy," Charles I. Jones presented a paper on "The Outlook for Long-Term Economic Growth" (August 2023, for full proceedings of the three-day symposium, see https://www.kansascityfed.org/research/jackson-hole-economic-symposium/jackson-hole-economic-policy-symposium-structural-shifts-in-the-global-economy/). Jones writes:

"What are the prospects for economic growth in the United States and other advanced countries over the next several decades? U.S. growth for the past 150 years has been surprisingly stable at 2 percent per year. Growth theory reveals that in the long run, growth in living standards is determined by growth in the worldwide number of people searching for ideas. At the same time, a growth accounting exercise for the United States since the 1950s suggests that many other factors have temporarily contributed to growth, including rising educational attainment and a rising investment rate in ideas. But these forces are inherently temporary, implying that growth rates could slow in the future. This prediction is reinforced by declining population growth rates throughout the world. In contrast, other forces could potentially sustain or even increase growth rates. The emergence of countries such as China and India provides large numbers of people who could search for ideas. Improvements in the allocation of talent—for example, the rise of women inventors—and increased automation through artificial intelligence are other potential tailwinds."

Viral V. Acharya, Mathew P. Richardson, Kermit L. Schoenholtz, and Bruce Tuckman have edited a collection of ten short and readable essays on SVB and Beyond: The Banking Stress of 2023 (CEPR Press, August 2023, https://cepr.org/publications/books-and-reports/svb-and-beyond-banking-stress-2023). As one example, Bruce Tuckman contributes "Silicon Valley Bank: Failures in 'Detective' and 'Punitive' Supervision Far Outweighed The 2019 Tailoring of Preventive Supervision." Tuckman writes:

"Supervision clearly failed to avert the failure of Silicon Valley Bank (SVB). 'Supervision' includes a broad range of regulatory actions. . . . [I]t is useful to divide supervision into 'preventive,' 'detective,' and 'punitive.' 'Preventive' supervision refers to imposing specific rules across all banks or across particular subcategories of banks, e.g., capital and liquidity ratios, supervisory stress tests, and standards of governance, controls, and risk management. Preventive supervision aims to remove from managerial discretion swaths of behaviour that are deemed inconsistent with the safety and soundness of individual banks and with the safety of the financial system. 'Detective' supervision refers to scrutinising individual banks not only for compliance with the rules of preventive supervision, but also for behavior that—while not explicitly violating preventive rules—is inconsistent with safety and soundness or with systemic stability. . . . [D]etective supervision is a crucial part of the supervisory toolkit because fixed, preventive rules cannot foresee and anticipate all sources of risk and bank business plans. In fact, systemic risks have often arisen precisely from business plans that have migrated toward high-return and high-risk activities that are not adequately addressed by preventive supervision. Finally, 'punitive' supervision refers to compelling banks to alter behavior in response to the findings of detective supervision . . . e.g., forcing a bank to arrange for contingent credit lines, forcing a bank to sell assets, etc. . . . All in all, then, in explaining the failure of supervision in the case of SVB, failures of detective and punitive supervision are far more significant than changes to preventive supervision . . ."

Peter J. Boettke and Rosolino A. Candela offer some thoughts :On the feasibility of technosocialism" (Journal of Economic Behavior and Organization, 2023 (205), pp. 44-54, https://www.sciencedirect.com/science/article/abs/pii/S0167268122004048). To launch the discussion, they quote Jack Ma, founder of Alibaba:

"Over the past 100 years, we have come to believe that the market economy is the best system, but in my opinion, there will be a significant change in the next three decades, and the planned economy will become increasingly big. Why? Because with access to all kinds of data, we may be able to find the invisible hand of the market. The planned economy I am talking about is not the same as the one used by the Soviet Union or at the beginning of the founding of the People’s Republic of China. The biggest difference between the market economy and planned economy is that the former has the invisible hand of market forces. In the era of big data, the abilities of human beings in obtaining and processing data are greater than you can imagine. With the help of artificial intelligence or multiple intelligence, our perception of the world will be elevated to a new level. As such, big data will make the market smarter and make it possible to plan and predict market forces so as to allow us to finally achieve a planned economy."

Boettke and Candela respond:

"However, we argue that the proposal provided by technosocialism is analogous to putting old wine into an irrelevant new bottle. What seems to be a novel proposal to deliver the age-old aspiration of socialism is not fundamentally different from the market-socialist model which had been proposed by Oskar Lange and Abba Lerner in the 1930s in response to Ludwig von Mises and F.A. Hayek, both of whom had argued that economic calculation under socialism was impossible."

Jason P. Robey, Michael Massoglia, and Michael T. Light describe "A Generational Shift: Race and the Declining Lifetime Risk of Imprisonment” (Demography, 2023, 60:4, 977–1003, https://read.dukeupress.edu/demography/article/60/4/977/380376/A-Generational-Shift-Race-and-the-Declining). From their abstract:

"This study makes three primary contributions to a fuller understanding of the contemporary landscape of incarceration in the United States. First, we assess the scope of decarceration. Between 1999 and 2019, the Black male incarceration rate dropped by 44 percent, and notable declines in Black male imprisonment were evident in all 50 states. Second, our life table analysis demonstrates marked declines in the lifetime risks of incarceration. For Black men, the lifetime risk of incarceration declined by nearly half from 1999 to 2019. We estimate that less than 1 in 5 Black men born in 2001 will be imprisoned, compared with 1 in 3 for the 1981 birth cohort. Third, decarceration has shifted the institutional experiences of young adulthood. In 2009, young Black men were much more likely to experience imprisonment than college graduation. Ten years later, this trend had reversed, with Black men more likely to graduate college than go to prison."

The National Academy of Sciences has published Toward a 21st Century National Data Infrastructure: Mobilizing Information for the Common Good (2023, https://nap.nationalacademies.org/catalog/26688/toward-a-21st-century-nationaldata-infrastructure-mobilizing-information-for-the-common-good) and Toward a 21st Century National Data Infrastructure: Enhancing Survey Programs by Using Multiple Data Sources (2023, https://nap.nationalacademies.org/catalog/26804/toward-a-21st-century-national-data-infrastructure-enhancing-survey-programsby-using-multiple-data-sources). From the second report:

"Much of the statistical information produced by federal statistical agencies since the 1950s—information about economic, social, and physical well-being that is essential for the functioning of modern society—has come from sample surveys. . . . At the time they were established, many sample surveys represented the only way to obtain reliable, accurate, and regularly updated information about the population and businesses of the United States. But surveys have faced a number of challenges in recent years, including decreasing response rates, increasing costs, and user demand for more timely and more granular data and statistics. At the same time, there has been a proliferation of data from other sources, including data collected by government agencies while administering programs (administrative records), satellite and sensor data, private-sector data such as electronic health records and credit card transaction data, and massive amounts of data available on the internet. How can these new data sources be used to supplement or replace some of the information currently collected on surveys, and to provide new frontiers for producing information and statistics to benefit American society?"

More on After-Effects of the Pandemic

This issue includes an article by Rebecca Jack and Emily Oster on "COVID-19, Schools Closures, and Outcomes." Santiago Pinto provides a complementary discussion in "The Pandemic's Effects on Children's Education" (Economic Brief: Federal Reserve Bank of Richmond, August 2023, #23–29, https://www.richmondfed.org/publications/research/economic_brief/2023/eb_23-29).

"School closures and switches to hybrid/virtual learning due to the pandemic adversely affected student achievement through several channels, including a decline in skill accumulation and a disruption of peer effects and peer-group formation. Preliminary evidence suggests that losses took place early in the pandemic and that there has not been an apparent recovery. Also, the impact on students has been far from uniform, as economic losses tend to fall more deeply on younger students and students from disadvantaged backgrounds. Simply returning schools and instructional practices to where they were prior to 2019 will not avoid such losses. A wide range of remediation policies has been suggested, and evidence suggests that instruction practices—such as tutoring and individualized/small group instruction—appear to be effective."

In this issue, José María Barrero, Nicholas Bloom, and Steven J. Davis discuss "The Evolution of Work from Home." Tom Doolittle and Arthur Fliegelman of the Office of Financial Research discuss some implications in "Work-from-Home and the Future Consolidation of the U.S. Commercial Real Estate Office Sector: The Decline of Regional Malls May Provide Insight" (OFR Brief Series 23-03, August 2023, https://www.financialresearch.gov/briefs/2023/08/24/work-from-home-and-commercial-real-estate/).

"The work-from-home phenomenon is setting conditions for the consolidation of the U.S. commercial real estate (CRE) office sector. . . . In addition, indications that actual office occupancy by workers remains at or below 50 percent signal that employers lease significantly more office space than they currently need. Should firms reduce their office space requirements to reflect the reality of employees' work-from-home preference, the CRE office sector could suffer a contraction, posing a risk to (1) financial institutions with exposure to the sector and (2) municipalities reliant on CRE tax revenue. In fact, a diminished CRE office sector, recently valued at $3.2 trillion, could suffer a significant devaluation over time. That would generate significant financial instability through loan defaults, foreclosures, and equity value depletion. To assess the likelihood and potential extent of a CRE office sector consolidation, this brief examines another CRE sector that has suffered decline and restructuring due to changes in user preferences: regional malls. Once a ubiquitous fixture of American life, regional malls in the U.S. have declined in number by one-quarter, and no new regional malls have been built in nine years. Additionally, this brief analyzes the timing and recognition of financial losses in the office sector that would likely occur should work-from-home become permanent and marginal office properties become structurally vacant and require repurposing."

The US Government Accountability Office has published "Federal Real Property: Preliminary Results Show Federal Buildings Remain Underutilized Due to Longstanding Challenges and Increased Telework" (July 13, 2023, https://www.gao.gov/products/gao-23-106200).

"Our review of three selected weeks during January, February, and March 2023 found that 17 of the 24 federal agencies used on average an estimated 25 percent or less of the capacity of their headquarters buildings. On the higher range, agencies used an estimated 39 to 49 percent of the capacity of their headquarters on average. . . . All 24 agencies said that their in-office workforce has not returned to pre-pandemic levels due to increased use of telework and remote work."

Interviews with Economists

Steven Levitt interviews Robert Solow in in "Ninety-Eight Years of Economic Wisdom" (Freakonomics website, June 23, 2023, audio and transcript, https://freakonomics.com/podcast/ninety-eight-years-of-economic-wisdom/).

"[T]here are, however, a lot of people, in the profession and outside the profession, who think that a modern, industrial, capitalist economy cannot exist without growing. . . . So, I want to imagine an economy like ours and think about what it would be like if it were stationary, if it were not growing and not shrinking, but just fixed at whatever size we’re talking about. The first thing that would have to be true is that the population is constant. Now, I want to make another assumption, imagine that there's no innovation going on. There are no new products, no new industries, nothing like that. The economy is just stationary. It just repeats itself. . . . I think the important thing to realize is that there is no law of economics, no principles of economics, that say that such an economy could not exist and be healthy. It's not written anywhere that for a capitalist economy, it's grow or die. That's just not true. . . .Now I come to the rub that I don’t think most people think about: this non-growing economy has, as I said, no new industries, no new products, nothing like that. That can't be good for social mobility. What I'm afraid of is that in such an economy, the same good jobs and high status occupations would repeat themselves year after year. And the people who have those jobs would groom their children to follow in their footsteps. And that kind of society would tend to be a hereditary oligarchy. And that's not good. So if I were trying to bring about—for the sake of warding off climate change, for the sake of preserving the environment—a non-growth economy, what I would be thinking about is how you provide for social mobility, how you provide for the children of relatively poor parents to become relatively better off while some of the children of relatively well-off parents fall in the income distribution. That's the hard part. There's nothing in my background to make me a specialist in how to do that, but I can see that it would be a really serious problem."

William Kearney interviews Ben Bernanke in "Real Policymaking Involves a Lot of Other Things Besides Pure Technical Analysis" (Issues in Science and Technology, Summer 2023, https://issues.org/ben-bernanke-interview/).

"[T]he really big steps that are needed to avert climate change—such as developing new energy technologies and retrofitting old buildings and creating new infrastructure for electric vehicles—all those things are the province of the private sector or more likely the government. And by government, I mean broadly, like Congress. I think the Fed properly should focus most of its attention on its mandate, on the objectives given to it by Congress, which are full employment and price stability. I think inequality is a similar issue in its complexity. The Fed is paying more attention to inequality and is monitoring unemployment rates across different groups. . . . But again, the Fed really only has one instrument—namely, financial conditions being tighter or easier and then promoting or slowing economic growth—and it can't use that one instrument to achieve many different objectives at the same time. It can’t ease policy for one group and tighten policy for another group. It has to have the same policy for everyone in the country. This is not to deny that inequality and climate change are first-order, very important issues politically and socially, but the Federal Reserve is just one agency, and it should focus primarily on the goals that Congress sets forth for it and the tools it has to achieve those goals."

Chad Bown interviews Lee Branstetter about recent research on the topic "Is China’s industrial policy working?" (Trade Talks podcast, April 23, 2023, audio and transcript available, https://tradetalkspodcast.com/podcast/182-is-chinas-industrial-policy-working/).

"We find that the Chinese government is not giving subsidies to initially more productive firms. If anything, the statistical association is actually negative. The Chinese government is, on average, giving more subsidies to less productive firms. . . . Chinese firm's annual reports do often include language that describes what particular subsidies were for. But if we focus on that subset of subsidies that are meant to promote research and development, or the subset of subsidies that are meant to support upgrading of equipment, even for these specific subsidies, we find no relationship with productivity. It’s not the case that firms that are more productive are more likely to receive these subsidies in the first instance. And it's not the case that firms that receive these subsidies become more productive later. . . . As we dug into this data, it became increasingly clear to us that the subsidies provided to Chinese firms had lots of objectives, many of which were not connected to productivity. We see significant quantities of subsidies going into declining industries like mining. We see significant subsidies that appear to be designed to support employment in large firms . . ."

Discussion Starters

Donald Shoup explores the idea of "Parking Benefit Districts" (Journal of Planning Education and Research, published online March 2023, https://journals.sagepub.com/doi/pdf/10.1177/0739456X221141317). 

"Transportation planners have neglected curb parking because nothing is moving, and land-use planners have neglected it because it is in the roadway. No one seems to know how to solve the curb parking problem, except for followers of Nobel laureate William Vickrey who proposed that cities should set the prices for curb spaces to "keep the amount of parking down sufficiently so there will almost always be space available for those willing to pay the fee" (Vickrey 1954). Prices can vary by place and time of day to leave one or two open curb spaces on every block. Where all but one or two curb spaces on a block are occupied, the parking is both well used and readily available. . . .[S]treets are a city's blood vessels, and overcrowded free curb parking is like plaque on the vessel walls, leading to a stroke. Market prices for curb parking prevent this urban plaque. . . . The goal is not to persuade drivers they should pay for curb parking. The goal is to convince stakeholders they should charge for curb parking. Anyone who does not store a car on the street may begin to see free curb parking the way landlords see rent control. Free curb parking is rent control, for cars. If people want better public services more than they want free curb parking, the curb lane can benefit everyone, not just drivers who store their cars on the street. . . . Because New York does not charge drivers for parking in 97 percent of its three million curb spaces, it offers a titanic subsidy for cars. If the city charged only $5.50 per curb space per day, it would earn $6 billion a year, about the same as the $6.1 billion farebox revenue from all New York City public transit in 2019. . ."

Scott Lincicome, Gabriella Beaumontā€Smith, and Alfredo Carrillo Obregon discuss "Formula for a Crisis: Protectionism and Supply Chain Resiliency—the Infant Formula Case Study" (Cato Briefing Paper No. 146, January 11, 2023, https://www.cato.org/briefing-paper/formula-crisis).

"Given the pandemic's intense, unpredictable, and heterogenous effects on supply and demand patterns in the U.S. and abroad, supply chain problems (delays, shortages, gluts, etc.) inevitably arose for numerous products. However, baby formula was unique in both its magnitude and duration, as well as its being isolated to the United States and avoided in the rest of the developed world and neighboring countries (save a brief period in Canada when Americans traveled there for emergency supplies). . . . The barriers to competition in the U.S. infant formula market, including tariff and nontariff barriers hindering foreign producers' access, the WIC program's structure, and obscure domestic policies such as FDA regulations, altogether make it harder for new entrants to compete. The crisis illustrates how these policies encourage concentration among a handful of large producers, prevent rapid adjustment to economic shocks, and require fundamental reform."