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  All pre-covid. European GDP per capita fell in the decade following the financial crisis. US growth was nothing to write home about, but things could be worse. The we-should-be-more-like-Europe crowd has some explaining to do. (The Word Bank's software misplaced the UK label; it is the red line on the top of the European group.) From the World Bank , HT Marginal Revolution . The graph is in dollars, so part of the effect is that the dollar got more valuable relative to the euro. (Thanks to the commenters who noticed that I misread the graph caption. Blog post now fixed to reflect that.)  Update A correspondent sends along the following graph from IMF data. IMF data uses PPP adjustments, not straight conversion to dollars. So the exchange rate really is an issue in comparing US to EU growth.   Relative inflation has not been that different between the two countries.  At least by these measures, EU inflation has been only very slightly less than US inflation  ...

Greg Ip has a great column in the WSJ on Bidenomics.   It's not long, it's so well written that it's hard to condense the good parts, and you should really read it all.  There is an intellectual framework to Bidenomics, and with that a scarily more durable move on economic policy.  There used to be  "certain rules about how the world worked: governments should avoid deficits, liberalize trade and trust in markets. Taxes and social programs shouldn’t discourage work." By contrast President Biden's (really his team's) "embrace of bigger government" is founded on different economic ideas. To wit, abridged:  Growth Old view: Scarcity is the default condition of economies: the demand for goods, services, labor and capital is limitless, their supply is limited. ...faster growth requires raising potential by increasing incentives to work and invest. Macroeconomic tools—monetary and fiscal policy—are only occasionally needed to deal with recessions and i...

"San Francisco bans affordable housing," is the spot-on conclusion of a lovely post  by Vadim Graboys  (link to twitter).  The post is titled "54% of San Francisco homes are in buildings that would be illegal to build today" with an interactive graph of those homes.  Or, put another way, "To comply with today's [zoning] laws, 130,748 homes would have to be destroyed, evicting around 310,000 people." The latter statistic is fun, but actually severely understates the damage of San Francisco's (and Palo Alto's!) zoning laws. The only reason current homes are illegal is that they were built under slightly less restrictive zoning laws. So that measures how much zoning laws have gotten stricter over time. It does not measure the much larger number of homes and apartments that were never built. Now, how does San Francisco, ground zero of progressive governance, and a city whose politicians can't get out of bed in the morning, or sign permission to...

Conversation with Tyler podcast interview. Perhaps predictably, the most challenging interview / podcast I've ever done. Video here   and embed below  Update: My comments on efficient markets and active management provoked a lot of email.  I mentioned Jonathan Berk, and should have mentioned his coauthors Rick Green and Jules Van Binsbergen, on how active management can persist even though investors don't make any money on it. The basic idea is really clever:  A manager has 5% alpha skill on $10 milllion, i.e. he can earn $500k, but the skill does not scale. So he earns 5%, charges 1% fee, investors get 4%.  Investors see his great performance and rush in.  Now he has $50 million assets under management. He still earns $500k. He charges 1% fee, and investors get zero alpha. It’s equilibrium – if investors leave,  alpha to investors goes up again, and they return. Investors are earning the same zero alpha they get on the index so why not. And that’s ab...

I learned a lot. The book is very interesting. Direct link in case the following embeds don't work.    

    Source  Stephan Schubert Source: Chad Jones "straight out of the Penn World Tables, and I first learned about it from Lee Ohanian and Jesus Fernandez-Villaverde" In the top graph you get the impression that German and French workers are using up to date technology, including both machines, firm organization,  opportunities to trade in a wide market, etc. but that they simply choose to, are incented to, or forced to work fewer hours than US workers. Italy and UK are still plodding along 20% or so inside the frontier. The bottom graph points a bleaker picture. I'm not an expert, but if labor productivity is high and total productivity is low, that means that the productivity of other inputs must be atrocious.  Chad (amazing expert on all things growth) "It is stunning to me that Spain and Italy have had negative TFP growth for 20 years."  I remember when real business cycles came out, and many were incredulous at the idea of negative productivity shocks. ...

Here are two unsettling slides I made for a talk. Here is GDP per capita in US, UK, France and Italy and China (2020 dollars, source world bank)  To make the comparison easier, here is each country not including China, divided by the US:  Here are the 2019 numbers (in 2019 dollars, again World Bank) US: $65,297. UK $42,330. That's 35% less than the US. Or, the US is  54% better off than the UK.. France: $40,494. Italy: $33,228 That's 50% less than US. Or the US is 96% better off than Italy.  China: $20,261. And it's been getting steadily worse. France got almost to the US level in 1980. And then slowly slipped behind. The UK seems to be doing ok, but in fact has lost 5 percentage points since the early 2000s peak. And Italy... Once noticeably better off than the UK, and contending with France, Italy's GDP per capita is now lower than it was in 2000.  GDP per capita is income per capita. The average European is about a third or more worse off than the averag...