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British journalist and think-tanker Gavin Kelly blogs about the various calls to “compensate the losers” from globalization (though he acknowledges automation as the more important macro trend). And Kelly finds the answers lacking any systemic approach and failing to provide an overarching policy regime. More of a unsatisfying jumble, with many ideas on the moldy side. Policies that promote geographic mobility, re-skilling, and a more robust safety net may have merit but hardly add up to a “big idea.”
And whatever their substantive merits, Kelly argues that you “can’t fight big lies like ‘mines will be re-opened’ or ‘manufacturing jobs re-shored’ with small pledges to retrain displaced workers.”
Financial Times about the infrastructure ideas of then-Chancellor of the Exchequer George Osborn:
For example, Mr Osborne is committed to strengthening the economy of the north of England. He made its transport infrastructure one of the first things for the commission to assess.
This is welcome, given the geographic imbalance of the UK economy. But conventional cost-benefit analysis makes returns on south-eastern and London projects look more attractive because that is where the economic growth is. Strategic choices require vision and courage.
Cost-benefit analysis is the main tool economists provide for assessing projects, but it is inadequate for long-term infrastructure projects. The Victorians did consider costs and benefits, but knew these could be dramatically different if a plan went ahead.
Modern cost-benefit analysis does not do this. It is a method for looking at incremental changes, not system-wide ones. It does not try to account for the significant changes in behaviour that new infrastructure causes. It does not take full account of social externalities, positive or negative, even when they are captured in private markets — for example, house prices near stations on the new London Crossrail line.
Now the idea of thinking harder about location very much fits with a recent proposal put forward by my AEI colleague Paul Kupiec who wants to move some federal agencies to hard-hit regions. Maybe move the FBI or Labor Department to Detroit, for instance. But I think Kelly is too hard on the sorts of policy proposals economists are currently offering. I think there is a big idea: work is important, and jobs are about more than just a paycheck. And supporting work will require a broad policy portfolio. Here is AEI’s Mike Strain:
Public policy can help reinvigorate these norms by supporting and encouraging work; and these norms can help make public policy more effective by better predisposing citizens to respond in a productive way to policy incentives. We should increase earnings subsidies. By subsidizing labor market earnings, policy can help a paycheck go further, and can pull people into participating in the workforce who otherwise would not in light of the wages they can command in today’s economy. Policy should help workers build skills that businesses actually demand and that the market will reward. Apprenticeships are a particularly promising option. Policy should get government out of the way by deregulating the labor market, creating more opportunity. And policies with significant unintended consequences that suppress workforce participation — like disability insurance — need to be reformed.
Oh, and thanks to McKinsey’s Susan Lund for a Twitter pointer to the blog post.Published in