Understanding Income & Growth Stats & How Bad Incentives Can Disadvantage the Poor w/ Josh Crotts, Obsidian Productions - Bonus episode

Economics Explored

The podcast’s audio engineer Josh Crotts joins host Gene Tunny to discuss the recent episode with Professor John Cochrane of the Hoover Institution. Josh shares his queries and comments on the episode, particularly regarding Professor Cochrane's average income and economic growth statistics. He also questions Cochrane’s statement that “The other problem we have is that low-income Americans basically don't work.”.

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What’s covered in the Bonus episode

• [00:02:03] Delving into economic growth statistics.
• [00:05:26] Women's impact on GDP.
• [00:09:41] Earnings distribution skew.
• [00:13:36] Average income in China.
• [00:16:41] Slowing productivity growth.
• [00:19:19] Low income and food stamps.
• [00:24:27] Xerox and the mouse.

Takeaways

• The importance of accurately interpreting economic data: The episode highlights the need to delve into economic data and understand the different measures and calculations used.
• The impact of government policies on low-income individuals: The discussion raises the issue of high effective marginal tax rates (due to the withdrawal of government benefits) and how they can create disincentives for low-income individuals to take a higher-paying job or work additional hours. The example demonstrates the challenges those who rely on social programs face.
• The need for nuanced discussions on poverty and work: The episode emphasizes the importance of avoiding generalizations and stereotypes about poverty and work. Many low-income individuals are hardworking and face significant barriers and challenges. Discussions on poverty and work should consider the complexities of individual circumstances and the impact of government policies on incentives and opportunities.

Links relevant to the conversation

Economic growth data sources

• US Real gross domestic product per capita: https://fred.stlouisfed.org/series/A939RX0Q048SBEA
• US Gross domestic product per capita (i.e. nominal not real/inflation-adjusted): https://fred.stlouisfed.org/series/A939RC0Q052SBEA
• US Census Bureau publication Income in the United States: 2022: https://www.census.gov/library/publications/2023/demo/p60-279.html
• IMF estimates of GDP per capita, current prices, Purchasing power parity; international dollars per capita: https://www.imf.org/external/datamapper/PPPPC@WEO/OEMDC/ADVEC/WEOWORLD
• World Bank estimates of GDP per capita, PPP (current international $) - China: https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locations=CN
• World Bank estimates of GDP per person employed (constant 2017 PPP $) - China: https://data.worldbank.org/indicator/SL.GDP.PCAP.EM.KD?locations=CN

ABS article on the difference between mean and median earnings in Australia:

https://www.abs.gov.au/statistics/understanding-statistics/guide-labour-statistics/earnings-guide/average-earnings-guide

Articles Josh consulted on the working poor:

Poor People Work: A Majority of Poor People Who Can Work Do | Economic Policy Institute

One in four Americans think poor people don’t work hard enough - The Washington Post

Sources Gene found on the disincentives to work that some government programs create for the poor:

• Effective Marginal Tax Rates for Low- and Moderate-Income Workers in 2016 | Congressional Budget Office (which reports a small fraction of taxpayers do face effective marginal tax rates >50%) ; and
• https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53452-lfpr.pdf
  • “...some provisions of the Affordable Care Act probably discouraged some people from participating in the labor force in the past few years by raising their effective tax rates. The resulting reduction in take-home pay probably had the largest effect on lower-earning workers.” (from p. 18 of CBO report linked to above)

On the history of the computer mouse:

https://www.computerhope.com/issues/ch001083.htm

Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au.

Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.