Hannes Malmberg
@hmalmberg.bsky.social
Assistant Professor in Economics, University of Minnesota. Development economics, macroeconomics, and a weekly rabbit hole.
Yes, it's an interesting question for social science why European unions are less anti-productivity than American unions. One hypothesis is that since European unions are larger, they internalize negative social effects more than American unions.
June 5, 2025 at 4:36 AM
Yes, it's an interesting question for social science why European unions are less anti-productivity than American unions. One hypothesis is that since European unions are larger, they internalize negative social effects more than American unions.
The economic intuition and the model were developed in our earlier work on long-run comparative statics, which provides a general framework for analyzing how capital accumulation shapes the responses of permanent economic shocks.
www.econ.ucla.edu/baqaee/main_...
www.econ.ucla.edu/baqaee/main_...
www.econ.ucla.edu
April 10, 2025 at 7:45 PM
The economic intuition and the model were developed in our earlier work on long-run comparative statics, which provides a general framework for analyzing how capital accumulation shapes the responses of permanent economic shocks.
www.econ.ucla.edu/baqaee/main_...
www.econ.ucla.edu/baqaee/main_...
Bottom line: Capital adjustment is critical when analyzing trade wars. Ignoring it risks understating long-run harm. For the full analysis and details, see the attached short note.
www.dropbox.com/scl/fi/jbkrm...
www.dropbox.com/scl/fi/jbkrm...
www.dropbox.com
April 10, 2025 at 7:45 PM
Bottom line: Capital adjustment is critical when analyzing trade wars. Ignoring it risks understating long-run harm. For the full analysis and details, see the attached short note.
www.dropbox.com/scl/fi/jbkrm...
www.dropbox.com/scl/fi/jbkrm...
Our findings run against the intuition that long-run impacts of negative shocks are milder than short-run impacts due to adjustment opportunities. For long-run wages and consumption, the possibility to adjust capital magnifies—rather than dampens—tariff-induced losses.
April 10, 2025 at 7:45 PM
Our findings run against the intuition that long-run impacts of negative shocks are milder than short-run impacts due to adjustment opportunities. For long-run wages and consumption, the possibility to adjust capital magnifies—rather than dampens—tariff-induced losses.
Similarly, real wages suffer since a smaller capital stock lowers labor’s marginal product. With capital fixed, capital owners are hit by lower profitability, but as they respond by pulling back investment, the burden shifts towards workers.
April 10, 2025 at 7:44 PM
Similarly, real wages suffer since a smaller capital stock lowers labor’s marginal product. With capital fixed, capital owners are hit by lower profitability, but as they respond by pulling back investment, the burden shifts towards workers.
Using a quantitative trade model to analyze proposed U.S. tariffs (with symmetric retaliation), we show that this effect is the dominant one. When capital is free to adjust, US consumption drops 2.6% in the long-run, compared to only 0.6% when capital is held fixed.
April 10, 2025 at 7:44 PM
Using a quantitative trade model to analyze proposed U.S. tariffs (with symmetric retaliation), we show that this effect is the dominant one. When capital is free to adjust, US consumption drops 2.6% in the long-run, compared to only 0.6% when capital is held fixed.
Why capital matters: tariffs increase the prices of investment goods (since they rely on imported inputs) relative to labor. Higher investment costs reduce firms’ demand for capital, depressing the overall capital stock. That, in turn, pulls down real wages and consumption.
April 10, 2025 at 7:43 PM
Why capital matters: tariffs increase the prices of investment goods (since they rely on imported inputs) relative to labor. Higher investment costs reduce firms’ demand for capital, depressing the overall capital stock. That, in turn, pulls down real wages and consumption.
Traditional trade theory highlights two effects of tariffs: (1) they manipulate terms-of-trade, which can benefit nations charging them, and (2) they distort production decisions, making everyone worse off. In the long run, both are dwarfed by a 3rd one: a fall in the capital stock.
April 10, 2025 at 7:43 PM
Traditional trade theory highlights two effects of tariffs: (1) they manipulate terms-of-trade, which can benefit nations charging them, and (2) they distort production decisions, making everyone worse off. In the long run, both are dwarfed by a 3rd one: a fall in the capital stock.
Experts don’t have time to patiently explain all ins and outs to everyone, and chatbots can help fill that void. Andy nudging in the right direction was enough for me to understand his point.
March 5, 2025 at 8:24 PM
Experts don’t have time to patiently explain all ins and outs to everyone, and chatbots can help fill that void. Andy nudging in the right direction was enough for me to understand his point.
See thread with Andy for an example of a reasoned discussion. Chatbots should not be used as final answers, but are very useful for outsiders to understand enough context to even know what to ask. Correctly used, they save experts a lot of time fleshing out implicit assumptions.
March 5, 2025 at 8:20 PM
See thread with Andy for an example of a reasoned discussion. Chatbots should not be used as final answers, but are very useful for outsiders to understand enough context to even know what to ask. Correctly used, they save experts a lot of time fleshing out implicit assumptions.
As an aside, this is also terrible for government efficiency....as a buyer you *want* the courts to ban contract breaking, otherwise you're not a credible counterparty!
March 5, 2025 at 8:12 PM
As an aside, this is also terrible for government efficiency....as a buyer you *want* the courts to ban contract breaking, otherwise you're not a credible counterparty!
I guess another a fig leaf for legal vs equity is that there is weak precedence on the government refusing to pay just-because. I suspect that historically, non-payment has always been backed by some dispute about the claim, not a general "funding freeze".
March 5, 2025 at 8:10 PM
I guess another a fig leaf for legal vs equity is that there is weak precedence on the government refusing to pay just-because. I suspect that historically, non-payment has always been backed by some dispute about the claim, not a general "funding freeze".
I see. And if compelling the government to do something they are legally obliged to do is a "compensatory damage" to the receiver, we replace judicial oversight of the executive with litigation, which would be quite radical.
March 5, 2025 at 8:01 PM
I see. And if compelling the government to do something they are legally obliged to do is a "compensatory damage" to the receiver, we replace judicial oversight of the executive with litigation, which would be quite radical.
And Tucker thing is a fig leaf, because that's more for contractual disputes, not about remedying blatant disregard of administrative duties.
March 5, 2025 at 7:48 PM
And Tucker thing is a fig leaf, because that's more for contractual disputes, not about remedying blatant disregard of administrative duties.
Thanks for response. Do I understand the problem roughly correctly that if you construe payments of past-due, obviously legally incurred, debts, as "damages" whose payments cannot be ordered by judges under the APA, then the ability of judges to enforce compliance is very weak.
March 5, 2025 at 7:38 PM
Thanks for response. Do I understand the problem roughly correctly that if you construe payments of past-due, obviously legally incurred, debts, as "damages" whose payments cannot be ordered by judges under the APA, then the ability of judges to enforce compliance is very weak.
I interrogated o1 to help me understand the dissent. Pushing it a bit, it granted that the government's behavior is extreme, but asking about this post of yours, I got the following. Is that incorrect?
March 5, 2025 at 6:51 PM
I interrogated o1 to help me understand the dissent. Pushing it a bit, it granted that the government's behavior is extreme, but asking about this post of yours, I got the following. Is that incorrect?
Given Elon's recent adventures, I'm willing to entertain he's been a fraud all along. But it just doesn't add up. The rockets fly, the cars run, Starlink works. It's not enough to say the engineers did it. How did he pick them? How did he motivate them? All that requires something.
February 24, 2025 at 4:17 PM
Given Elon's recent adventures, I'm willing to entertain he's been a fraud all along. But it just doesn't add up. The rockets fly, the cars run, Starlink works. It's not enough to say the engineers did it. How did he pick them? How did he motivate them? All that requires something.
And I guess the Platonists looked down on the number crunchers, but of course modern mathematicians would like the purists to be the heros
December 17, 2024 at 4:00 PM
And I guess the Platonists looked down on the number crunchers, but of course modern mathematicians would like the purists to be the heros
Lol...tbh one heretical view I have is that the whole shtick about math as the abode of certain knowledge might be a sidetrack. Purely axiomatic reasoning is non-robust. Tiny mistakes lead to big errors. Successful math was not about proof, but computation, where cross-checks etc were possible.
December 17, 2024 at 3:58 PM
Lol...tbh one heretical view I have is that the whole shtick about math as the abode of certain knowledge might be a sidetrack. Purely axiomatic reasoning is non-robust. Tiny mistakes lead to big errors. Successful math was not about proof, but computation, where cross-checks etc were possible.
Maybe a milquetoast compromise, but weren't both important? Aristotle good for empiricism, Plato good for making people revere math. Would Galileo's comment about the book of nature being written in mathematics happened without Platonism making a big return in Western Europe in the 15th century?
December 17, 2024 at 3:30 PM
Maybe a milquetoast compromise, but weren't both important? Aristotle good for empiricism, Plato good for making people revere math. Would Galileo's comment about the book of nature being written in mathematics happened without Platonism making a big return in Western Europe in the 15th century?