Ants and the division of labor

Ants are one of the few of our fellow travelers* to engage in the division of labor, which is a key to economic development. Unlike humans, however, the ant’s division of labor is determined genetically: ants go through distinct life phases, certain ages during which they specialize in particular tasks. When you think about it, it is fairly remarkable that even with such basic elements of social structure so hard coded, ants are still remarkably adaptive and successful.

And maybe even more remarkably so, given that in many ant species, some workers seem to do nothing! I came across this article that finds that, at least for one species, some workers specialize in doing nothing. That is, when researchers observed inactive ants, they just sit around and do nothing all day; this isn’t an instance of workers resting between tasks, or that there is simply nothing to do.

Is this adaptive behavior that we just don’t understand? Is it evidence against a ruthlessly efficient interpretation of evolution? An illustration of the selfish gene hypothesis?

The answers to those questions could have bearing on how we decide to organize our own society.

* A term adapted from a quote that has stuck with me since I first encountered it, by Henry Beston: “We need another and a wiser and perhaps a more mystical concept of animals. Remote from universal nature and living by complicated artifice, man in civilization surveys the creature through the glass of his knowledge and sees thereby a feather magnified and the whole image in distortion. We patronize them for their incompleteness, for their tragic fate for having taken form so far below ourselves. And therein do we err. For the animal shall not be measured by man. In a world older and more complete than ours, they move finished and complete, gifted with the extension of the senses we have lost or never attained, living by voices we shall never hear. They are not brethren, they are not underlings: they are other nations, caught with ourselves in the net of life and time, fellow prisoners of the splendour and travail of the earth.”

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Paid Family Leave as Intertemporal Transfer

 

Mike Konczal makes a point on Twitter that I hadn’t considered before, but seems to me to be correct:

This is in reference to a recent George Will column offering the standard conservative critique of paid family leave as merely a bill that will come due in the next generation. Mr. Konczal is right to point out that, even if there is no value add at all to paid family leave, it could be the case that future adults would prefer to be able to lend their parents some money so they could have an easier time in those first months of life. Given that time only flows one direction, such a transfer doesn’t seem to be possible without outside intervention.

An angle Mr. Will does not consider is that paid family leave improves outcomes for children, making them more productive future workers. To my knowledge, there is no slam dunk evidence as yet that this is the case, though the earliest months of life do seem to be very formative. Paid family leave could then in fact be a net benefit for society!

Of course, the opportunity cost to the employer has to be figured in as well. Funding paid family leave through an employer tax would be a huge mistake; you should always keep in mind the separation principle, that where a tax goes has nothing to do with where it comes from. There is no sense in adding an undue burden on to firms just for doing what they normally do: hire people. Instead, tax revenue should come from whatever sector a tax does the least harm.  Additionally, people should be paid directly by the government; again, there is no sense in involving firms here. It’s possible that firms should also receive some benefit as well, since they will be out an employee for several weeks.

In sum, paid family leave is something politicos of all stripes can agree on, provided it is structured correctly.

Supply Shock in Transportation Costs?

The Wall Street Journal noted in an article recently that food makers are facing higher input costs (leading to higher consumer prices), and this is driven in part by an increase in freight costs. This is the kind of thing that’s easy to overlook when thinking about the economy: I suspect most of us don’t consider the price of transporting various components of a good as part of its value add, but it is. Cheap transportation allows supply chains to have a huge geographic scope, and hence take advantage of specialization and comparative advantage.

But what about the increase in these transportation costs is newsworthy? FRED has data on the Producer Price Index for freight transportation, and there’s a clear spike in recent months:

fredgraph (2)

What could be driving this? A good first guess would be fuel prices, which are shown below (note the different axes!):

fredgraph (3)

While historically the two series are very closely linked, this recent runup seems to be unrelated to fuel prices. But obviously there has been some sort of supply shock. Later on the article gives a hint: new federal regulations aimed at increasing transportation safety have essentially reduced the number of hours drivers can work. It takes time to hire and train people, and as the economy heats up the marginal truck driver is probably finding better employ elsewhere (long haul trucking is a famously difficult job).

Looking at total truck transportation jobs, it’s interesting to note how employment has been flat since 2015 or so:

fredgraph (4)

An uptick has just begun; perhaps the beginning of hiring to offset the reduced hours per worker?

One question this story leaves us with is why these changes weren’t anticipated; if transportation firms knew that regulations were coming, they would presumably have begun hiring ahead of the implementation to avoid this spike in prices.

This article here is a year old but presumably covers the regulations in question.

Trouble in Congo?

This week’s Economist has an excellent article on the situation in the Democratic Republic of Congo, where tensions seem to be rising again and the threat of large scale violence is increasing.

I suspect most Americans are unfamiliar with the wars in Congo, or have just the vague notion that such wars existed. Probably most know of the Rwandan genocide, but don’t know that it was the kicking off point for a series of conflicts often dubbed ‘Africa’s World War’.

The best book I have read on the topic is Dancing in the Glory of Monsters, and what I really appreciated about it beyond lucid prose was that the author took pains to look at the structural factors that led to such horrors. It’s far too easy to put blame on the character of individuals (‘those people are just uncivilized/animals/etc’) and miss the much larger forces at play.

For one, the actual state capacity of the Congolese state is very limited and basically exists only in the west around the capital Kinshasa. In the east, the closest thing to a state are a series of warlords that operate more or less with the blessing of President Kabila; he couldn’t do much to stop them even if he wanted to.

In fact what makes the book great is that it is in many ways a case study of what types of social structures can lead to genocide and sustained warfare; the lessons he draws are not specific to Africa. Check it out!

Sketchbook for 02/06/18

Immigration

Do Immigrants Import Their Economic Destiny?

Why Open Borders is a Dangerous Idea

Twitter thread from Lyman Stone on immigration

Regional Business Cycles

Regional vs Global Business Cycles

Measuring Business Cycles Intra-Synchronization in US

Industrial Organization

Spirit Airlines v. Northwest Airlines (pdf)

Two-Sided Markets – Markets where firms need buyers on both side, e.g. Nintendo needs to attract gamers to attract developers to make games for Nintendo to sell. (Note this actually isn’t the best example because Nintendo does a lot of first party development compared with other game companies.)

US Corporate Profits as Share of GDP

Recently a number of economists have become concerned with an increase in the market power of firms, or conversely, a lack of competition in markets. This is particularly evident in the record levels of corporate profits seen over the past several years. Recall that under perfect competition firms receive no profit, which is not to say they don’t make any money, only that they make no money above and beyond what it takes to run the business and pay salaries. Given that these profits are in fact occurring, it suggests some degree of monopoly power, and monopoly power means deadweight loss. But just how large is this deadweight loss?

In the field of industrial organization, a rule of thumb is that the deadweight loss in a market is roughly half of the monopolist profit (at the profit maximizing P and Q). So a quick and dirty way to gauge this is to look at corporate profits as a share of GDP, and divide by two. Using data from FRED, the latest numbers suggest that the size of deadweight loss in the US economy is around 6%. Is this a large number?

I think it helps to put this in historical context, so below is the time series of US corporate profits as share of GDP; simply mentally divide by 2 to get the rough deadweight loss.

fredgraph (1)

If this in fact a reliable method, there appear to be three regimes: from the post war era to about 1980, the average DWL is around 5%; from 1980 to 2000 around 3-4%; and post 2000 a significant run up to 6%, with a big dip from the Great Recession.

Follow up question: how does this compare to other economies?