Wednesday, April 12, 2017

Weird Economic Science

The New Yorker has what amounts to a review of two papers by married Princeton economists, Anne Case and Angus Deaton. The first appeared in the Proceedings of the National Academy of Science and the second in the Brookings Papers on Economic Activity.

The couple have done the widely reported work which found increasing mortality rates for whites with no college, what they called "deaths of despair" - suicide, overdose, cirrhosis, alcoholism.
They wondered if a decline in income might explain the phenomenon, but that idea turned out not to fit the data so well. They noticed that another long-running pattern fit more precisely—a decline in what economists call returns to experience.

The return to experience is a way to describe what you get in return for aging. It describes the increase in wages that workers normally see throughout their careers.

The chronology matched some general changes in the nature of working-class work, which grew less skilled over time and therefore provided lesser returns to experience.
Then, review author Ben Wallace-Wells ties this idea to the 2016 election result.
If returns to experience are in decline, if wisdom no longer pays off, then that might help suggest why a group of mostly older people who are not, as a group, disadvantaged might become convinced that the country has taken a turn for the worse. It suggests why their grievances should so idealize the past, and why all the talk about coal miners and factories, jobs in which unions have codified returns to experience into the salary structure, might become such a fixation.
Hence the resonance of Donald Trump's campaign, the claim we need to return to greatness. Perhaps for some "greatness" = "returns to experience," a payoff for hard-won wisdom.

Too many years ago, when I took economics, we talked of "early ceiling" and "late ceiling" occupations. "Ceiling" referred to when in a working life income peaked.

Blue and pink collar jobs were the former, professional jobs the latter, white collar jobs somewhere in the middle. Truck drivers and carpenters reached maximum earning early in life then, as now. Has the change been all that great?