Zwick and Zidar argue that a substantial share of the decline in labor share can be accounted for by changing forms of pay, including pass-throughs and equtiy compensation. In particular, if an employee is paid in stock and that stock increases in value then the tax rules tend to count some of that as capital income (depending on when the capital gains occur) rather than as labor income. Zwick and Zidar point us to Human Capitalists for the details:

Human capitalists are corporate employees who receive significant equity-based compensation such as equity grants and stock options. These employees are partial owners of US firms, and in return for their human capital input, human capitalists accrue a share of firm profits through firm dividends and capital gains in addition to earning wages. We document the stylized facts describing the evolution of human capitalists’ income over time and across industries within the US manufacturing sector.¹ Human capitalists have become an increasingly important class of corporate income earners. Due to measurement challenges, prior work has underestimated the importance of equity pay below the C-suite. Correctly measuring the total income of human capitalists substantially alters conclusions about changes in factor shares and technological complementarity.

Equity-based compensation represents 36% of compensation to human capitalists from 2010 to 2019 and constitutes a 7% share of value added in the manufacturing sector in 2019. Correctly accounting for the total income earned by high-skilled workers has a substantial effect on measured changes in labor shares over the modern era. The addition of equity pay to cash wages reduces the decline implied by the wage-only income share of value added in manufacturing since the 1980s by 32%. Without including equity pay, high-skilled labor’s share decreased from 17% in the 1980s to 11% in the most recent decade. The inclusion of equity-based compensation almost eliminates this decline. The high-skilled share of total labor income increases from one-third at the beginning of the 1960s to two-thirds in the 2010s when equity-based compensation is included.

See also my previous post The Labor Share Fell. So What?

The post Capital Gains Can Be Labor Income appeared first on Marginal REVOLUTION.

1. Far from retarding the abolition of slavery, the Revolution actually accelerated it. Its triumph gave a big boost to Enlightenment liberalism, which inspired the First Emancipation in the US (the abolition of slavery in the North that became the first large-scale emancipation of slaves in modern history), and boosted antislavery movements in Europe, as well.

2. Had the Revolution been defeated, Enlightenment liberal ideology would have been dealt a setback in Britain and France, too. That would have set back antislavery movements there, as well. It is no accident that many antislavery leaders in Europe were also sympathizers with the American Revolution. The Marquis de Lafayette was just one of the most famous examples of European liberals who actively backed both.

3. The West Indian slaveowner lobby in Parliament was strong enough to block abolition of slavery until 1833. Had Britain also been saddled with the much larger proslavery lobby of the American South, it would have taken far longer. Especially when you combine the impact of the larger slavery lobby with the force of point 2 above.

Here is the full piece, with additional arguuments.

The post Ilya Somin defends the American Revolution appeared first on Marginal REVOLUTION.

Spider Noir (Prime): I’ve had enough of the Marvel multiverse so I was worried about Spider-Noir. The writers, however, have written an excellent noir in the style of Raymond Chandler with Nicholas Cage channeling Humphrey Bogart. The Spiderman stuff is all there but it is appropriately embedded. There are some excellent lines. Most notably an inversion of the Spiderman motto that I won’t give here but you will know it when you hear it. Also many sharp one-liners:

• Reilly: I don’t like surprises.
• Cat: I’ll remember that when your birthday rolls around.

Nicholas Cage does some Nicholas Cagey spidery things which I enjoyed. Watch it in black and white.

Project Hail Mary (Prime): I waited until this was streaming and I’m glad I did because it was disappointing.
The core problem is Ryan Gosling. He plays Ryland Grace, the genius scientist-hero but genius is something we are told, never shown. Indeed, the character with the best ideas in the film is Carl, Grace’s bodyguard/minder (played by Lionel Boyce)—they should have sent him to save the planet. Gosling has no intensity, and every choice he makes is to lighten and humorize. It’s a small thing, but it annoyed me to watch a scientist toss his instruments disdainfully. Andy Weir is a master at showing smart people grinding through hard problems—in the novel, Grace spends months learning to communicate with an alien. In the movie, Gosling dances.

This isn’t just miscasting. The whole adaptation is built to soften the book. The film cuts the desperation of the world, undercuts the ruthlessness of Stratt and instead adds a karaoke number and a trip to Home Depot (ha, ha, duct tape can solve everything!) Every change is away from high stakes intensity and toward charm and humor, a Disneyfied version of Weir. I have nothing against Gosling but we have lots of charming movies and I would like some competence porn.

The main virtue of PHM, in the end, is that it shows what a miracle The Martian was. Matt Damon knows how to play smart and intense, and he brought both to what I called the most Ayn Rand film in decades. There’s an old story—probably apocryphal—that Chuck Yeager was once asked what he’d do if his engine flamed out and he had sixty seconds before hitting the ground. He replied, “I’d spend the first fifty-nine seconds working on the engine.” Chuck Yeager had the right stuff. Matt Damon in The Martian has the right stuff. Ryan Gosling does not have the right stuff.

The Sheep Detectives (Prime): A delightful surprise! A flock of sheep solve a murder-mystery in a quaint English town; featuring Hugh Jackman and voices from Julia-Louis Dreyfus, Bryan Cranston, Patrick Stewart and others. Babe meets Knives Out. A family film but, as the best family films are, with some deep themes.

The post What to Watch and Not appeared first on Marginal REVOLUTION.

That is the theme of my latest Free Press piece, here is one excerpt from it:

Government-run systems often (not always) do a perfectly fine job setting a broken arm or administering a long-standing, well-known medication. They do much less well when it comes to developing, financing, and delivering a new immunological approach to fighting cancer, personalized to your individual genome at a cost of hundreds of thousands of dollars. In our rapidly arriving biomedical future, innovation capacity will matter above all else. And though they may not see it today, the people with the most life ahead of them will reap nearly all of the benefits of a dynamic system, or suffer the consequences of a paralytic one.

Thirty years ago, it was often debated whether the Canadian or British healthcare systems were better than what we have in the U.S. After all, they offered a kind of guaranteed access to health services. The details could differ, but often the healthcare had no upfront price or only a low user fee. In America, in contrast, healthcare was more expensive, there were many millions of uninsured people, and dealing with sometimes rapacious insurers and hospitals could involve significant emotional trauma.

But over time the British and Canadian systems look worse and worse. The queues and rationing have increased, as giving healthcare away for free makes it hard to satisfy demands in a timely manner. In Canada, for instance, the median wait time has risen from 9.3 weeks in the early 1990s to 28.6 weeks today. In the British National Health Service, only 65.3 percent of patients start treatment within 18 weeks.

Worse yet, both of those systems are undercapitalized. In Britain, healthcare is badly understaffed and underfunded. Yet the country already has high taxes, high debt, and slow economic growth, so it is not clear where the new money will come from to recapitalize the system.

And this sentence:

This entire dynamic will be intensified as the pace of medical innovation picks up.

Your life may depend on it.

The post Single-payer health care systems are looking worse all the time appeared first on Marginal REVOLUTION.

“Buy land,” they said, “they aren’t making any more.” But in fact, we used to make a lot of land. Half the land area of Boston, a quarter of Manhattan, and 15% of San Francisco were raised from the sea before 1970. Tyler has already pointed to Zigmund Forrest and Max Tabarrok’s piece on land reclamation in Works in Progress. Check it out, it’s an excellent piece.

But also don’t miss Connor Tabarrok’s historical overview of land reclamation featuring the ancient Iraqi city of Ur, Alexander the Great’s siege of Tyre, and the amazing flood tanks built under the city of Tokyo! Connor, a civil engineer by trade, points out that most land reclamation isn’t done to build cities with land fill but rather to create farmland through drainage:

In the lower 48 states, the US Fish and Wildlife Service estimates that wetlands covered 221 million acres in the 1780s and 104 million by the 1980s. That is roughly 117 million acres drained in two centuries, a loss rate the report puts at 60 acres an hour, sustained for 200 years. For comparison, the total urban footprint of the United States is around 70 million acres. America has drained substantially more wetland than it has built city, and nearly all of that drained land became farmland.

… The Dutch invented the modern polder and have spent eight centuries pushing back the North Sea, and the result is one of the densest, richest countries in Europe. Yet around two-thirds of the country’s dry land is farmland. Flevoland, the newest province, is 1,410 square kilometers reclaimed from the Zuiderzee in the 1950s and 60s, and it was laid out as an agricultural basin, not a city. The country with the most reclaimed land per person uses it to grow potatoes, graze dairy cattle, and ranks as the world’s second-largest agricultural exporter.

The other reason that we drained land historically was to get rid of mosquito-driven malaria and to improve sewage.

In the mid-1800s the land south and west of the Washington Monument was the Potomac Flats, a tidal marsh that collected the city’s sewage and exposed it to the sun twice a day. The stench reached the White House. In 1882 Congress appropriated $400,000 and the Army Corps of Engineers, under Major Peter Hains, began dredging the river’s shipping channels and pumping the mud onto the flats. The work created more than 600 acres of new ground and a Tidal Basin engineered to flush the Washington Channel with each tide. The Lincoln and Jefferson Memorials stand on that fill. So do the cherry trees, planted in 1912 on land that had been open water within living memory.

Much more of interest at the whole thing.

The post Land Reclamation! appeared first on Marginal REVOLUTION.

In The Nationalization of American Science I warned that the Trump administration’s rewriting of the seemingly mundane Regulation for Federal Financial Assistance was a tremendous threat to America’s historically successful decentralized system of science funding. Many others are now sounding the alarm.

It’s not surprising that organizations like the AAAS oppose the rule, albeit with unusually strongly worded dissents:

This latest move is a brazen power grab by the Director of the Office of Management and Budget to buck the will of Congress and the American people and will make future discoveries less likely. If this rule becomes final, Americans’ hopes for future cures, national security and economic strength will rely on the scientific sensibilities of the nation’s chief bureaucrat. Alzheimer’s disease will not be cured by a budget analyst from either political party.

But we are now seeing strong pushback from independent thinkers such as:

Grayson Logue writing at The Dispatch:

Dan Drezner:

if I was trying to ruin American leadership in scientific research this is pretty much the kind of rule I would write…One of the genuine difficulties with observing the second Trump term is that the assault on state capacity and impartiality has been so multipronged that it is difficult to keep track of everything going on. But these proposed rule changes are monumental and catastrophic.

and Noah Smith:

MAGA’s attack on science is even worse than it looks…despite science’s overwhelming popularity and public trust, Trump and his administration are launching an unprecedented and devastating attack on American science — cutting funding, and forcing science projects to undergo ideological review by government commissars.

It may be that the Trump administration has pushed too far, but my real worry is that we are losing an equilibrium. Science was never completely independent of politics, of course, but even at the worst of times, funding was decentralized and the culture-war material that dominated the headlines was never more than a tiny fraction of the whole. Like an independent judiciary, independent science has been an American virtue. COVID policy, gender policy, and now the Trump administration’s weaponization of these mistakes may have destroyed that equilibrium.

As I wrote in my original post, we are adopting the loser policies of authoritarian nations but those policies are the norm elsewhere for a reason. Centralized control of science is the default because it serves the people in power of whatever party. Decentralization is the fragile exception—a historically unusual achievement that is easier to destroy than rebuild.

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