This week in political economy.


Photo by Alpha Stock Images [CC BY-SA 3.0]
  • As cities across America continue to compete for Amazon’s second headquarters, Federal Reserve Bank of Minneapolis President Neel Kashkari says that winning isn’t all it’s cracked up to be: the cities competing, he told Bloomberg, may end up paying out more in subsidies than they receive in benefits.


  • The impact that Amazon’s rapid growth has on labor, particularly its own employees, has been the focus of much media scrutiny in recent months. In The Atlantic, Alana Semuels writes about the impact of Amazon’s growth on poor cities. At Whole Foods, recently taken over by Amazon, employees say the company uses “scorecards” to punish them if they fail to comply with its new inventory-management system: “Seeing someone cry at work is becoming normal.” Gizmodo reports on Amazon’s recent patenting of a wristband that tracks the movements of warehouse employees.


  • The International Business Times, meanwhile, reports on Amazon’s attempts to kill a shareholder resolution that would require Amazon to inform its shareholders of “risks related to Amazon’s role in providing physical and digital infrastructure, use of and control over data about customers and competitors, increasing reliance on automation and influence on the quality and diversity of content.”



  • The past two years have seen a widespread backlash against the tech industry, as economists, antitrust officials, privacy advocates, politicians, and even venture capitalists are increasingly concerned by the overreaching power of tech platforms. The only place where such concerns seem to be entirely absent, writes David Dayen, is “within the one agency that might be able to do something about it: the Federal Trade Commission.”


  • Three of most powerful companies in the US—Amazon, Berkshire Hathaway and JPMorgan Chase—announced this week that they’re starting a new health care company. In China, write Sui-Lee Wee and Paul Mozurj in The New York Times, tech giants are already trying to upend the country’s health care system.


  • In The Intercept, Susan Antilla and Gary Rivlin dive into Donald Trump’s SEC. Under current chair Jay Clayton—who spent his career as a lawyer representing large Wall Street firms—secrecy on Wall Street has increased as enforcement has shrunk, they find.


  • Brenda Fitzgerald, director of the Centers for Disease Control and Prevention and the country’s top health official, resigned this week following reports that she purchased shares in a tobacco company one month into her job as the head of the federal agency charged with reducing tobacco use.


  • In a blow to the administration, a US appeals court this week upheld the independence of the Consumer Financial Protection Bureau (CFPB), ruling that the agency’s structure is constitutional and that its director can be fired by the president for cause only.


  • New York’s Jonathan Chait on four new corruption stories related to the Trump administration. 


  • Also from IBT: Koch Industries’ corporate political action committee gave $300,000 to GOP lawmakers just before the final vote on the GOP tax bill. At a private resort near Palm Springs, California, House Speaker Paul Ryan thanked the Koch brothers for their help in passing the tax bill from which they could end up getting up to $1.4 billion each year, according to some estimates. The Koch-led network, according to Bloomberg, plans to spend close to $400 million on policy and politics on the 2018 election cycle—roughly a 60 percent increase over 2015-16.


Chatter from the Ivory Tower


  • The short-run output losses from austerity are small, say Alesina, Favero, and Giavazzi in a new discussion paper. Policymakers might still regard austerity with caution, though, given other recent findings that austerity in Germany in the interwar period was associated with more votes for Nazis.


  • Why is it so hard for democracies to undertake needed reforms? Costs of change, of course, says a new paper—and those costs are higher when reforms are larger. What’s more, during times of political polarization, politicians who are poor at carrying out reforms are more likely to be elected. This “Reform Dilemma” can lead to low-reform-ability politicians getting elected over and over again.


  • How does common ownership affect managers’ incentives? It flattens them, according to a paper by Antón, Giné, and Schmalz.


  • A new study by Seema Jayachandran of Northwestern reviewed the results of a payments-for-ecosystem-services (PES) program in Uganda aimed at reducing deforestation. Residents of 60 villages received payments of about $28 per hectare per year for conserving their forests. The program cut down the rate of deforestation by around half in participating villages. This suggests, says Jayachandran, that “a smart addition to [rich countries’] climate change strategies would be to fund projects in low-income countries that reward people for conserving forests.”


Stigler Center Goings-on


In the latest episode of Capitalisn’t, “Capital Isn’t in the 21st Century,” Luigi Zingales and Kate Waldock revisit Thomas Piketty’s surprise bestseller to see how it holds up in the current political and economic climate.


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