@DiegoBeghin @MisuseCase @Alon @kentwillard Income has not converged with the West in Eastern Europe. I spend a lot of time in Romania. Romanians earn substantially less than Western Europeans, which is why a very substantial fraction of the younger population has migrated West. Much of Romania's economic support is remittences from that migrant population. Even with those remittences and the relative scarcity of workers, there is no where near convergence of salary levels. 1/

@DiegoBeghin @MisuseCase @Alon @kentwillard (There is instead, ironically, importation of South Asian labor that lacks the right to work elsewhere in the EU or family that does. Capital does not simply accommodate labor growing scarce and expensive.) /fin

@DiegoBeghin @MisuseCase @Alon @kentwillard Like a lot of plans, you have an end state in mind where everything's hunkydory. If everyone's a migrant, there's no left-behind to trouble us. But how does the transition to that exalted stat work, when for now at least 30-40% will not for the foreseeable join the program? 1/

@DiegoBeghin @MisuseCase @Alon @kentwillard You can tell a just-so story about migrants making life better for those who remain. The marginal product of workers decreases in quantity, so those who remain will have better, more productive jobs, so everyone will be better off! 2/

@DiegoBeghin @MisuseCase @Alon @kentwillard At the same time, the migration destinations aren't underpopulated places, but huge cities. Here the just-so story is agglomeration effects mean that in fact the marginal product increases in the number of humans! 3/

@DiegoBeghin @MisuseCase @Alon @kentwillard Empirically, just-so story 2 seems pretty definitively to win, under our current economic arrangements. Places that depopulate do poorly in aggregate, and the people who live there do poorly on average and at median. Place that populate, and the people who live there do well at least on income grounds, though high costs blunt the benefit. 4/

@DiegoBeghin @MisuseCase @Alon @kentwillard That's not to say these things wouldn't work out differently with different economic and social arrangements. Place-based policy could make both just-so stories true in their respective places. Which is why I support it. /fin

@Alon @kentwillard "divisions…way worse" is very subjective. I agree that unemployment divides the policy into people suffering horribly and people who ignore them and get on with their lives, and that's worse morally. But politically, it is just the case that a recession that cleaves workers into unemployment is less destructive of incumbent votes than an inflation than harms the median voter. 1/

@Alon @kentwillard Places that are long-term depressed, high-unemploymnt, low-growth, low-inflation are full of discontent and division for sure. Failure and poverty breed fascism. https://drafts.interfluidity.com/2023/08/14/fascism-as-triage/

But that's a very different question than the question that faces political actors, whether a near-term downturn is better met with austerity to stimulus over the next electoral window. A hopefully transient unemployment is more survivable than an inflation.

/fin

@Alon @kentwillard My friend, I think you are doing a great deal of wishcasting of your own preferences. I wish inflation were less popular than unemployment. From a welfarist perspective, inflation is less harmful. But at least as popularity is refracted through democratic politics, inflation is much, much less popular. Unemployment harms a small fraction of the public grievously, and holds the bulk relatively harmless. Inflation harms all the way through past the median voter.

@Alon @kentwillard Farmer riots and truck parades are certainly not broadly popular. Neither are labor strikes. All these things inconvenience normies and piss them off. But they are narrow actions that seek to advance the interests of large groups, groups which may not be majorities but which correctly enjoy political power in democracies, mechanically because coalitions require them, morally because they are big enough their welfare is an important component of the polity's.

@Alon @kentwillard The relationship between urbanization and inequality is complex, like the relationship between growth and inequality is complex. It is not defensible to say that urbanization creates equality. It is also not defensible to say urbanization always creates inequality, although that is usually its very short-term effect. 1/

@Alon @kentwillard But trying to impose a preference for urbanism and geographic dynamism on the coat tails of egalitarian values is definitely not defensible. There have been more equal and less equal agrarian and urban societies. We don't know what the shape of the future is. Perhaps you have a very particular urbanistic, dynamic, egalitarian development path in mind, but mere "urbanization" is not necessarily, not remotely necessarily, egalitarian. /fin

@Alon @kentwillard If we are concerned abt welfare, we are concerned abt the welfare of all the humans, not just those willing or able to move to opportunity under current circumstance, even if that wld increase their productivity. If we are concerned abt democratic politics, we are concerned about the humans in proportion to their numbers, and if the fraction willing or able to move to opportunity is modest, don't blame "populism" for the bankruptcy of a politics that slights the place-bound.

@Alon @kentwillard None of this prejudices the solution space. One way to address the disconnect is to make it easier for people to live the dynamism imagined of homo economicus. Another way is to reshape productivity, so that, for example, geographical dynamism is less necessary because remote work. Lots of possibilities!

@Alon @kentwillard But if most of the working class still live within 15 miles of their parents, any "populism" — any functional democracy — will put a great deal of weight on those people as "representatives of the real working class".

@Alon @kentwillard (note: i edited "profitability" to "productivity" in one of the above posts; that's the word i'd intended to write.)

@jjoelson You’ve anticipated my response! Yes, sometimes large firms deploy market power on behalf of their own interests AND consumer welfare when they overlap, and it may be tempting to celebrate that. But it often works out badly. Firms with market power are simply not who we want acting quasigovernmentally on behalf of the public. As imperfect as our democracy is, their ability to weigh conflicting interests, and the bias imposed by the profit incentive, render the approach dangerous. 1/

@jjoelson The quintessential example is WalMart. In the 1990s, many of us (me too!) celebrated how WalMart was openly deploying its monopsony power (the power that comes from being a near-“monopoly” buyer, rather than seller) to squeeze suppliers for lower prices, even offering free consulting services to help them reorganize more “efficiently”. 2/

@jjoelson The net result seemed great at first — every day low prices! — but WalMart’s efforts destroyed many US companies by making them little Boeings, in the way we now understand Boeing to have destroyed itself. Plus, WalMart contributed hugely to the offshoring of American manufacturing to places where “low cost” (meaning often sweatshop or near enslaved) labor could be employed to cut costs. 3/

@jjoelson This was regrettable self-interestedly (offshoring US manufacturing so thoroughly has been a catastrophe for the US), and ethically (though that’s a more complicated case, you can argue that sweatshop near-slaver to multinationals is the first rung on a ladder to China style development, so is it “worth it”?). WalMart in any case continued relentlessly, because all the offshoring and price restraint contributed to its profitability. 4/

@jjoelson WalMart exercised its market power very openly and flagrantly against its suppliers, but under the then prevailing consumer-welfare standard, it was immunized from antitrust attention, since its exercise of market power seemed (under the narrow terms of antitrust analysis of the time) to be in consumers’ interest. 5/

@jjoelson You are right, I think, that sometimes Apple has used its market power where its interests and consumers have been aligned. Steve Jobs’ hard bargains with cell carriers may have been good for consumers as well as Apple. (With ebooks, there’s some irony, Apple was breaking Amazon’s WalMart-like use of monopsony prices to restrain ebook prices to $9.99! Was that “good”, because breaking the monopsony, or bad because raising consumer prices?) 6/

@jjoelson Given the world as it was, maybe Apple taking on these roles was at least provisionable laudable. But the world as it was, where the government had abandoned its role in regulating and structuring market competition, is exactly what DoJ now is trying to revise. Apple is just one of many firms that — very much rightly, in my view — will have to revise how it does business in light of a new and ultimately better reality. /fin