The Bank of International Settlements, in its Annual Economic Report 2021 report, devotes a chapter to “CBDCs: an opportunity for the monetary system."

Central bank digital currencies (CBDCs) offer in digital form the unique advantages of central bank money: settlement finality, liquidity and integrity. They are an advanced representation of money for the digital economy. . . . The ultimate benefits of adopting a new payment technology will depend on the competitive structure of the underlying payment system and data governance arrangements. The same technology that can encourage a virtuous circle of greater access, lower costs and better services might equally induce a vicious circle of data silos, market power and anti-competitive practices. CBDCs and open platforms are the most conducive to a virtuous circle. . . . CBDCs built on digital identification could improve cross-border payments.

The Bank of International Settlements (2021)

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The McKinsey Global Institute has published “The economic state of Black America: What is and what could be.”

Dismantling the barriers that have kept Black Americans from fully participating in the US economy could unleash a tremendous wave of growth, dynamism, and productivity . . . Today the median annual wage for Black workers is approximately 30 percent, or $10,000, lower than that of White workers . . . We estimate a $220 billion annual disparity between Black wages today and what they would be in a scenario of full parity, with Black representation matching the Black share of the population across occupations and the elimination of racial pay gaps within occupational categories. . . . The racial wage disparity is the product of both representational imbalances and pay gaps within occupational categories—and it is a surprisingly concentrated phenomenon. . . . The median Black household has only about one-eighth of the wealth held by the median White household. The actual dollar amounts are striking: while the median White household has amassed $188,000, the median Black family has about $24,000. . . . We estimate a $330 billion disparity between Black and White families in the annual flow of new wealth, some 60 percent of which comes from inheritances. . . . The gap in inheritances between Black and White recipients is some $200 billion annually.

The McKinsey Global Institute (2021)

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The Credit Suisse Research Institute discusses “The global food system: identifying sustainable solutions.” 

A sustainable global food system benefits human health as well as the global ecosystem. However, this is far from the reality at present as almost 700 million people are undernourished, while at the same time around 1.8 billion people globally are overweight or obese. The need to change appears obvious to us as the impact of malnutrition alone costs the global economy USD 13.6 trillion annually. . . . Malnutrition is not the only reason why the global food system needs to change. Food production and consumption already contribute well over 20% to global greenhouse gas emissions and account for more than 90% of the world’s freshwater consumption. . . . The likely growth in the world’s population to around ten billion people by 2050 coupled with a further shift in diets, especially across the growing emerging middle class, could increase emissions by a further 46%, while demand for agricultural land could increase by 49%.

The Credit Suisse Research Institute (2021)

Edited E-books

Ruud de Mooij, Alexander Klemm, and Victoria Perry have edited a collection of 16 interrelated essays concerning Corporate Income Taxes under Pressure: Why Reform Is Needed and How It Could Be Designed. Narine Nersesyan lays out some of the overall issues in “The Current International Tax Architecture: A Short Primer.”

When a business activity crosses national borders, the question arises as to where the profits resulting from that activity should be taxed. In principle, there are at least three possibilities for assigning a taxing right:

• Source: the countries where production takes place
• Residence: the countries where a company is deemed to reside
• Destination: the countries where sales take place.

The generally applied tax architecture for determining where profits are taxed is now nearly 100 years old—designed for a world in which most trade was in physical goods, trade made a less significant contribution to world GDP, and global value chains were not particularly complex. . . . The current international tax framework is based on the so-called ‘1920’s compromise’ . . . [in which] the primary right to tax active business income is assigned where the activity takes place—in the ‘source’ country—while the right to tax passive income, such as dividends, royalties and interest, is given up to the ‘residence’ country—where the entity or person that receives and ultimately owns the profit resides. The system has, however, evolved in ways that considerably deviate from this historic ‘compromise,’ and international tax arrangements currently rest on a fragile and contentious balance of taxing rights between residence and source countries.

IMF (2021)

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Ana Margarida Fernandes, Nadia Rocha, and Michele Ruta have edited an e-book of 16 essays titled The Economics of Deep Trade Agreements. From their Introduction:

Pascal Lamy, former Director General of the World Trade Organization (WTO), recently wrote: ‘More than tariffs, trade agreements today are about regulatory measures and other so called ‘non-tariff measures’, that were once the exclusive domain of domestic policy-making. For these reasons, ‘deep’ trade agreements, as trade experts refer to this new class of agreements, are fundamentally different than the previous generation of trade agreements.’ . . . Starting in the early 1990s, the number of PTAs [preferential trade agreements] has increased from 50 to more than 300 within three decades. While WTO rules still form the basis of most trade agreements, PTAs have in some sense run away with the trade agenda. . . . While the average PTA in the 1950s covered 8 policy areas, in recent years they have averaged 17 . . . At the same time, the number of commitments that governments have taken in trade agreements has largely increased, along with provisions requiring stronger transparency.

CEPR Press (2021)

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Alain Samson has edited the The Behavioral Economics Guide 2021 . It includes 15 short chapters by authors summarizing their recent work, along with a 30+ page glossary with short essays (and citations) on behavioral science concepts, starting with “action bias” and ending with the “zero price effect.” John A. List contributes an introductory essay on “The Voltage Effect in Behavioral Economics:”

Indeed, most of us think that scalable ideas have some ‘silver bullet’ feature, i.e., some quality that bestows a ‘can’t miss’ appeal. That kind of thinking is fundamentally wrong. There is no single quality that distinguishes ideas that have the potential to succeed at scale with those that do not do so. In this manner, moving from an initial research study to one that will have an attractive benefit cost profile at scale is much more complex than most imagine. And, in most cases, scaling produces a voltage drop—the original BE [behavioral economics] insights lose considerable voltage when scaled. The problem, ex ante, is determining whether (and why) that voltage drop will occur. . . . What this lesson inherently means is that scaling, in the end, is a weakest link problem: the endeavor is only as strong as the weakest link in the chain.

Behavioral Science Solutions (2021)

Interviews

David A. Price has interviewed “Aysegül Sahin: On wage growth, labor’s share of income, and the gender unemployment gap."

What was striking about the Great Recession was its persistence. Everybody kept saying at the time that inflation is around the corner, the labor market is getting tighter, but it took a very long time for the labor market to heal. We are not seeing that this time. This was a very different shock. It was sharp, but it was transitory compared to the Great Recession. So the effect was great, but the recovery has been faster as well. I think that’s the main difference. Another big difference is that the Great Recession was a big shock to the construction sector, and we are seeing the opposite now. We’ve been spending more time at our houses and people want to improve their houses and they want bigger houses. . . . But the biggest difference is the persistence. After the Great Recession, it took quits rates five or six years to recover. Today, the quits rate is already back to where it started from before the pandemic hit. . . . During the Great Recession, this aversion to quitting lasted for a long time. As a result, people were stuck in jobs that they were not necessarily happy about or they were not very productive at. But in this recession, quits rates bounced back quickly. One reason is because there are a lot of job openings; the second is that people want to go back and find jobs that they are better matched at.

Price (2021)

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Luis Garicano serves as interlocutor in Capitalism after COVID: Conversations with 21 Economists. As one example, here’s Jesús Fernández-Villaverde in an interview called “Economists and the pandemic:”

One thing that I find disappointing for societies is that either you work eight hours a day or you work zero. Some societies, especially in the north of Europe, have made progress in terms of solutions, but it’s something we should push very hard. . . . So, imagine we are in a society where we have more flexible forms of work. Thanks to Zoom, I can go from being expected to work eight hours a day, to being expected to work six hours and half hours, to say a random number. Then, it’s much easier to reconcile work with family. . . . A lot of what we do is about coordination. I want to be in the office at 9:00 because someone else is going to be at there at that time. You just need to have a focal point, and governments can help to coordinate us in good focal points. I can imagine many people who are aged 65 or 66 and are reluctant to work eight hours a day, but at the same time they are not very happy working zero hours a day. If we could get to a society where you can flexibly work four or five hours a day, maybe we could extend the working life of many people, contributing to GDP and helping us a lot to transition. . . . Thanks to telecommuting and Zoom, we may be able to do that much better than in the past.

CEPR Press (2021)

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The Centre for Development and Enterprise has published “Lant Pritchett in Conversation with Ann Bernstein.” 

Development is a process that happens at the level of countries. The four transformations a country should make are: (1) to a productive economy, (2) to a capable state, so that it is able to do what it sets out to do, (3) to a government responsive to the needs and wishes of citizens, and (4) to a society where equal treatment of all before the law and of each other is a bedrock principle. I think those four characterise the transformation that takes a country from chaos and poverty to the levels of prosperity and well-being that we see in developed countries.

You often hear the phrase ‘this or that isn’t a panacea.’ My argument is: national development is a panacea. If your country manages to undergo the four transformations of national development, then all problems get solved because that is a machinery for nominating and solving problems. Yet the current focus in development is on what I call ‘kinky development,’ which involves tinkering on the margins to help the poorest of the poor. That is the wrong focus. If you achieve national development, you will solve poverty and provide prosperity for the general population, whereas focusing on poverty alone often is at odds with getting you to desirable levels of prosperity. . . . No country has high levels of human wellbeing without having achieved national development; and every country that has high national development achieves very high levels of human well-being. So, the only path to high human well-being is through national development.

The Centre for Development and Enterprise (2021)

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Michael Chui and Anna Bernasek of the McKinsey Global Institute discuss “Forward Thinking on technology and political economy with Daron Acemoglu.”

[I]f you look at the way that economists think about technology, it’s this latent variable that makes you just more productive. But very few technologies actually do that. Electricity didn’t make workers more productive. It made some functions in factories more feasible, and some few items more productive. . . . The example of spinning and weaving machinery that I gave, or the factory system, or, more recently, databases, software, robots, numerically controlled machines, they are mostly about replacing workers in certain tasks that they used to perform. . . . [I]n fact, one of the striking but very robust features of the last 40 years of economic development in the United States and the United Kingdom has been that many groups, especially low-education or middle-education men, have actually seen their earnings fall, some groups by as much as 25 percent, in real terms, since 1980.

In the traditional economics approach . . . it is something that doesn’t really fit into this technology as augmenting framework. But when technology, at least in part, is about automation, replacing, displacing workers from their tasks, then this happens quite often. You can have productivity improvements—capital benefits, firms benefit, but workers, especially some types of workers, all workers overall can lose out in real terms. . . . [O]nce you go to this micro level, then the direction of technology, the future of technology looked at through the perspective of what type of technologies we’re going to build on, that becomes much richer and much more interesting. . . . [W]e have to come back to a world in which we put as much effort in increasing human productivity, both in the tasks that they already produce, but also creating new tasks in entertainment, in healthcare. . . . There are many, many things ranging from judgment, social skills, flexibility, creativity, that humans are so much better at than machines. But we’re not empowering them right now.

McKinsey Global Institute (2021)

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Bill Kerr interviews Erica Groshen in “Infrastructure: Upgrading the US labor statistics system."

[S]tate unemployment insurance agencies that, as part of running the program, collect worker wage records every quarter from every employer that lists the wages of workers for every month during that quarter. They also collect claims records from people who apply for claims. And these data are generally not available to BLS [Bureau of Labor Statistics] to augment or replace its current data collections. And that’s basically a shame, because it would be quite useful for statistical purposes. And employers, of course, have to report the same or slightly different data to a number of different government agencies. Our economics statistics are also not as good as they could be as a consequence of this. UI [unemployment insurance] wage records include who the person’s employer is and their earnings—that’s what’s in there. They should have job title, because that is closely associated with the person’s occupation.

And this would enable us to track workforce supply and demand much more closely, make better projections about the future of work. You also would want the number of hours worked for the wages that are being reported so that you know if someone is full time or part time, so you can get hourly rates, and really follow that dimension on which wages vary. Another thing you want is the actual work location of the people. . . . And then, the last thing, particularly in these times of understanding demographic inequities—racial inequities, in particular, but also gender inequities, things like that—you want to have demographics so that you can track social justice issues and advances and understand how the world of work is affecting demographic outcomes. These data should also, of course, be curated—by which I mean, they have to clean them up so that you can really analyze them and made accessible to the statistical agencies, for particular with the BLS, so that they can create better statistics. You could get better, cheaper, and more-frequent program-policy evaluations so that policy makers could make better decisions.

Harvard Business School (2021)

Discussion Starters

Ellis P. Monk Jr., Michael H. Esposito, and Hedwig Lee discuss “Beholding Inequality: Race, Gender, and Returns to Physical Attractiveness in the United States.”

While a one-standard-deviation increase in ability is associated with 3%–6% higher wages, attractive or very attractive individuals earn 5%–10% more than average-looking individuals. Another study even finds that returns to perceived attractiveness unfold over the life course and are robust to a wide array of potentially relevant controls, such as educational attainment, parental background, personality traits, IQ, and so on. . . . [P]erceived physical attractiveness is a major factor of inequality and stratification regardless of one’s race or gender. In fact, our analyses suggest that the magnitude of the earnings gap among White men along the perceived attractiveness continuum rivals that of the canonical Black-White wage gap and the attractiveness earnings gap among White women actually exceeds, in real dollars, the Black-White wage gap. . . . We find that while the returns to perceived physical attractiveness are similar for most race-by-gender combinations, the slope of the returns to perceived physical attractiveness is steepest among Black women and Black men. . . . Among Black women and Black men, the wage penalties associated with perceived physical attractiveness are also so substantial that, taken together, the earnings disparity between the least and most physically attractive exceeds in magnitude both the Black-White wage gap and the gender gap.

American Journal of Sociology (2021)

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Mary Brooks and Paul Rosenzweig describe a modest resurgence in prediction markets in “Let’s Bet on the Next Big Policy Crisis—No, Really”

Metaculus offers a platform for a quasi-prediction market, in which the currency of exchange is prestige points, and anyone can submit a question for inclusion in the market. . . . [T]here is significant demand for internal corporate prediction markets and crowd-forecasting. Google, Ford, Yahoo, Hewlett-Packard, Eli Lilly and a number of other prominent corporations have operated or continue to operate a corporate market. . . . From 2011 to 2015, the Intelligence Advanced Research Projects Activity (IARPA)—the intelligence-minded sister of DARPA—ran the Aggregative Contingent Estimation (ACE). ACE was a project designed to ‘dramatically enhance the accuracy, precision, and timeliness of intelligence forecasts . . . [by means of] techniques that elicit, weight, and combine the judgments of many intelligence analysts.’ Today, IARPA still runs the Hybrid Forecasting Competition, which “develop[s] and test[s] hybrid geopolitical forecasting systems.” . . . Kalshi—a San Francisco-based startup currently operating in beta—is the first fully regulated (CFTC-approved) prediction market. Because Kalshi is regulated, more significant amounts of money can be wagered than in many other markets, enabling them to build out a new asset class of events futures. The implications for this are obvious: An asset class like this could serve as an alternative or a supplement to more traditional insurance, allowing companies and individuals to hedge against crop failures, cyberattacks or floods.

Lawfare blog (2021)