The Audacity of the Fight for Higher Wages

Robyn Beck/Agence France-Presse â€" Getty Images Picketing outside a Los Angeles restaurant on Thursday.

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities in Washington and a former chief economist to Vice President Joseph R. Biden Jr.

I was struck Thursday by the juxtaposition of two stories in the news (two and half, really).

First, the banks had another banner quarter in terms of profits, up $42 billion, or 23 percent from last year.  News reports emphasized lower loan losses, meaning the banks had to mark down or charge off fewer nonperforming loans.  That increases the share of their capital that they can put to work spinning off profits, something they are very good at.

A classic case of it takes money to make money.

At the other end of the economy were the striking fast-food workers, calling for an increase in their pay to $15 an hour (the average for these workers is around $9, up from $8.66 in 2009).

I also noted â€" this is the half-a-report I mentioned above â€" that in the upward revision to second-quarter gross domestic product that came out on Thursday, corporate profits were  again up near record highs as a share of national income while compensation fell again and is now at the lowest share it has been since the year I was born (1955 â€" ancient history, I know).

And yet, what I mostly heard about this was about the audacity and the economic illiteracy of the strikers.  Don’t they realize that it’s still a tough economy?  Don’t they get that their employers are not the big corporations but the franchisees who can’t afford to pay more?  Don’t they get that the increase will just have to be passed on in prices?

Don’t get me wrong. These are good questions. They have answers, and the commentators should know and offer them, as I will in a moment.  Neither do I begrudge any sector its profitability; that’s what capitalism is all about, right?

But let’s face it. Something’s broken here in an economy that serves up low wages to significant numbers of adults whose families depend on their earnings (the typical worker earning between the minimum wage and $10 an hour earns half of his or her family’s income; 88 percent are adults).  And something’s broken when the media and economic pundits seem to devote a lot more energy to explaining why companies can’t pay living wages than considering what to do about it.

About those questions:

■ Moderate increases in the minimum wage have had their intended consequences of lifting the earnings of affected workers.  Yes, the increase is absorbed by small price increases, some redistribution from profits, and other mechanisms, which can include some job or hour losses.  But the research is clear on this point: the benefits to low-wage workers far outweigh these costs. Those protesting workers are not economic illiterates at all. The research supports their actions.

■ Yes, it’s still a tough economy, but research on the 1990-91 minimum-wage increase, introduced in a downturn, found the same effects just noted.  Moreover, the runway to this debate is very long.  Start now and the increase could come when the economy is in better shape.

■ The franchisee point is a strong one. They do operate with narrow profit margins, and one should not conflate their profitability with that of their corporate parents. But minimum wages apply to all companies and industries (though there is an exception for waiters, as the great economist Sylvia Allegretto often notes), so no single company is at a competitive disadvantage. Also, another way part of the wage increase could be offset is through a reduction in the corporate parent’s royalty charge to the franchisee.

So, sure â€" this is all just capitalism, and I’m all for it. But market failure is also a hallmark of capitalism, and those purporting to hold forth on the economy have a responsibility to recognize such failures, particularly when they violate norms of equity and opportunity. If significant portions of some industries pay wages on which grown-ups cannot support a family, while other industries post historic profits, and, importantly, the gains to the latter fail to ever reach the former, then corrective policy is needed. Some of that should be done through wage subsidies and work support (for example, the earned-income tax credit, and health and housing support), and some should be through moderate increases in the minimum wage.

To me, that’s not radicalism. It’s plain common sense.

The Central Challenge in U.S. Health Policy

Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.

“Health Care Costs Climb Moderately, Survey Says” read the headline in The New York Times last week. It appears that health insurance premiums for job-based family coverage rose “only” 4 percent between 2012 and 2013, although still twice as fast as did wages.

The survey in question is the Kaiser Family Foundation’s annual survey of employment-based health insurance, widely viewed as a gold mine for anyone seeking information on that part of the American health system. The full report is easily accessible, or readers may prefer to read just the summary or browse through the fine group of charts the foundation provides. Here is a telling chart from that pack.

Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2013.

The premiums shown in this chart are in current dollars, meaning they are not adjusted for inflation. They do not reflect a common benefit package. Furthermore, they are only averages that differ substantially from the experiences of individual companies.

For example, as is shown in Figure 2 (which is a slightly different format of Exhibit 1.7 in Kaiser’s full report), 21 percent of the companies in the Kaiser survey paid premiums in excess of $19,387 for families and in excess of $7,062 for singles in 2013 â€" a hefty amount. At the other end, about a fifth of the companies in the sample paid less than $13,225 for family coverage and less than $4,708 for single coverage. The other bars in the chart can be similarly interpreted.

There is also apt to be considerable intercompany variance not only in the level of premiums but also in the year-to-year growth of premiums. That will be especially so among small companies that are experience-rated - which means their premiums are based on the average health status of only their few employees. Many of these companies experienced premium growth in the double digits last year, as has happened every year in the past.

At the moment, there is great uncertainty about the premium increase between 2013 and 2014 that these small companies may experience as a result of the onset of community rating, beginning in 2014.

The Kaiser surveys include detailed data on the contributions that employees make out of their paychecks toward the premiums for their coverage, but they do not include data on the out-of-pocket spending for health care by employees and their families through deductibles, co-insurance and exclusions of health care services from coverage.

The benefit consulting firm Milliman annually publishes its Milliman Medical Index on the average total cost of health care for a typical American family of four under age 65, covered by a preferred provider plan, or P.P.O. That index includes not only the employment-based health insurance premium paid by employer and employee but also an estimate of the family’s out-of-pocket spending. In other words, if estimates total annual health spending for the hypothetical family. A time series of the index is shown in Figure 3, below. These figures, too, are in current dollars, not adjusted for inflation.

The Milliman index is not directly comparable to the Kaiser data, because it is a composite actuarial estimate for a particular hypothetical family of four and a particular form of insurance policy and benefit package whose estimated average premium is higher than the Kaiser average. These actuarial estimates (again, in non-inflation-adjusted dollars) are based on the large database of coverage of the firm’s clients.

According to Milliman’s report, the total cost of $22,030 in 2013 is composed of a total premium for insurance coverage of $18,430, of which the employer is estimated to contribute $12,886 and the employee $5,544. The rest represents out-of-pocket spending of $3,600.

Although not directly comparable, taken together these two data series raise the question of how many American families could afford this kind of health spending strictly with their own financial resources, if one took the extreme position that health care is a private consumption good for which American households themselves should be financially responsible. I hasten to add that I do not know anyone who actually holds that extreme position; the argument is and always has been only over how extensive such support should be.

But the numbers are daunting just the same, if one contrasts them with data on the distribution of household money income (after taxes and transfers) by income group, as is done in Figure 4.

The data in Figure 4 comes from Table A-2 (Page 39) of the Census Bureau’s report “Income, Poverty, and Health Insurance Coverage in the United States: 2011.” It is seen that in 2011, 20 percent of American households had incomes below $20,262. Although the figure includes households of various sizes, including singles, it is nevertheless a small sum to absorb even Kaiser’s premium numbers for single coverage. Median household income in 2011 was $50,054, meaning that close to 50 percent of households had an income below that number.

The data in Figure 4 is for 2011 only (in current dollars, not adjusted for inflation). While the nominal median household income in the United States has increased substantially since 1975, in constant-dollar terms of 2011 it has been remarkably and disappointingly flat, as is shown by the line for “real income” in Figure 5 below. That chart is based on Table H-6 in the Census Bureau report “Historical Income Tables: Households.”

As Figure 5 indicates, after 2008 nominal median household income in the United States has been flat, while real income has fallen somewhat, by about 8 percent (see Figure 1 in this report). It is not clear when real median income will return again to its previous high. Most of the growth in real gross domestic product in the last several decades has actually accrued to households in the top quintile of the income distribution and, within that quintile, to the top 1 percent (see Table 1 in this paper and also this abstract of another paper).

The gist of the preceding array of data is that even under what we now call “moderate” growth in health care costs, stagnating incomes for millions of American households will put American health care as we have come to know it out of their financial reach, unless they receive substantial help from households in the upper third or so of the household income distribution.

This central political dilemma in American health policy â€" leave health care to those who can afford it or increase tax revenues to broaden coverage â€" will continue as far as the eye can see. A good part of the current shouting match over the Affordable Care Act expresses anger over this dilemma, and it will not subside even after the act has been fully put in place.

Chinese Students Bolster U.S. College Budgets

Washington Monthly’s annual college issue usually has some fascinating material, and this year is no exception. One example is an article by Paul Stephens on the sharp rise in foreign students on American campuses (to more than 764,000, an increase of roughly 200,000 in less than six years, he says, citing data from the Institute of International Education and the State Department). Many are from wealthy overseas families paying full tuition â€" and helping to bolster college budgets.

Where are the students coming from? By this reckoning, the bulk of the net increase â€" more than 160,000 of the 200,000 â€" has come from China.

Washington Monthly State Department statistics on F-1 student visas issued to applicants from four selected nations.

Mr. Stephens writes:

While administrators promote the diversity and global perspectives these new students bring to campus, it’s clear that such high-minded goals are not the only motivation for enrolling large numbers of foreign students. With state spending on higher education declining sharply over the last five years â€" it’s down an average of 28 percent nationwide â€" out-of-state and international students who pay full tuition (and sometimes even additional tuition) have kept these institutions in the black. As state assemblies have cut back, the people of China have picked up the tab.

Behind the Big Increase in Food Stamps

Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

The food-stamp program spending grew primarily because of new program rules, and going back to 2007 program rules would yield significant savings for taxpayers.

Something unusual has been happening with the food-stamp program, now known as SNAP, for Supplemental Nutrition Assistance Program. Between 2007 and 2012, spending on SNAP more than doubled, adjusting for inflation and population growth.

Paul Krugman and others attribute essentially all of the SNAP spending growth to the depressed economy. They have the general direction right - a more depressed economy will cause unemployment and antipoverty programs to spend more - but have missed the single largest factor increasing program budgets: program rules that are more generous now than they were in 2007.

Veterans benefits, Supplemental Security Income, Medicaid and Temporary Assistance for Needy Families all experienced a depressed economy, too, but they somehow managed through it without doubling their spending. Veterans benefits increased the most among these - 49 percent beyond inflation and population growth - compared with 110 percent for SNAP. (These data, which exclude administrative costs, can be found in the Bureau of Economic Analysis’ National Accounts Table 3.12.) Even state unemployment benefit spending, which is directly linked to layoffs in the economy, increased “only” 24 percent beyond inflation and population growth.

Peter Ganong and Jeffrey Liebman of Harvard have recently found (see Table 2 in their paper) that seven or eight changes in SNAP eligibility have spread across the states in recent years. They have examined county-level data on SNAP participation and other variables in order to estimate quantitative importance of some these rules. They find that between 2007 and 2011, new eligibility rules by themselves added 3.4 million people to SNAP enrollment and naturally tended to increase SNAP spending.

Perhaps 3.4 million seems small for a program that enrolled 26 million people before the recession. However, at the same time, SNAP began to pay more generous benefits to people who enrolled. Although changing benefit formulas is not part of Mr. Ganong’s and Professor Liebman’s paper, the new formulas would have increased SNAP spending more than 25 percent even without any new enrollment. Combined, the spending impact of enrollment and benefit rules is remarkable.

The chart below reports two estimates of the sources of SNAP spending growth: the one on the right, which builds on the Ganong-Liebman enrollment findings, and the one on the left, based on enrollment results I obtained earlier using somewhat different methods. (The Ganong-Liebman paper does not attempt to measure the combined effect of new benefit and eligibility rules between 2007 and 2011). The vertical axis measures the increase in SNAP program spending between 2007 and 2011, measured in 2007 dollars per American per year. All Americans are in the denominator - not just those who participate in SNAP - so that more participation in SNAP increases spending measured this way.

The total increase is $112 per person per year. Part, but not all, of the $112 can be attributed to more generous benefit formulas and more inclusive eligibility rules. That part is shown in red. My estimates say that, without a depressed economy, inflation-adjusted SNAP spending per capita would have increased $77 because SNAP rules changed. Using the enrollment estimates of Mr. Ganong and Professor Liebman together with the changes in benefit formulas suggests the increase would have been $53.

The remaining or unexplained spending increase is potentially attributable to the depressed economy, although it could be attributable to changes in the conduct of the SNAP that have not yet been quantified. For example, the Department of Agriculture has perennially attributed some of the increase in program participation to its outreach efforts - that is, advertising, promotional and other activities that encourage eligible people to join the SNAP program. Mr. Ganong and Professor Liebman note that enrollment itself may react to more generous benefits, as high benefits are likely to have encouraged more households to participate. These are effects that should be included in the red area in the chart but have been left as part of the blue “unexplained” area because of the lack of quantitative estimates.

The United States had a food stamp program before the recession that automatically included more households as circumstances put their incomes near or below the poverty line. The newest estimates suggest that going back to the 2007 SNAP program rules would annually save taxpayers at least $53 per American - that’s $212 for every family of four - and put SNAP spending back in line with spending on other antipoverty programs.

India’s Economic Crisis

Simon Johnson, former chief economist of the International Monetary Fund, is the Ronald A. Kurtz Professor of Entrepreneurship at the M.I.T. Sloan School of Management and co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”

In 2005-6 the consensus among leading international policy makers, including the finance ministers who make up the governing body of the International Monetary Fund, was that economic and financial crises were a thing of the past. The United States and Europe had evolved beyond the potential for serious instability, and middle-income emerging markets had learned hard lessons from their experience over the previous decades, so their policies would be much more careful going forward. Serious crises, if they occurred at all, would be limited to war-torn, low-income countries.

This view was completely wrong. We are now partway through a full cycle of crises, beginning with the United States (from 2007) and Europe (from 2008 in earnest). It is now the turn of emerging markets to face real problems, including India, a country that experienced great and long overdue success for 20 years.

There are several types of emerging market crisis. One of the more common varieties starts in the following manner. There is a boom, based on natural resources or finding new niches for manufacturing exports or even implementing sensible liberalization measures. The private sector expands and more prominent companies find it increasingly easy to borrow overseas. Dollar (or other foreign currency-denominated) loans become attractive because they carry a lower interest rate than does borrowing in domestic currency.

International investment banks beguile the local elite - the economic and political people who make policy decisions - with stories of how their country and the world has changed, so it makes sense to borrow more. This is not a hard sell. Policy makers want to believe they have found the special elixir of economic growth and, in recent years, to believe they have “decoupled” from the prolonged recessions and slow growth in the United States and Western Europe.

And issuing debt - “increasing leverage,” in the jargon - feels like alchemy during good times. If you put less money down to buy an asset (i.e., less equity and more debt in your purchase) and the asset appreciates in value - then you have a made a great return on your equity. But you are almost certainly not thinking about risk-adjusted returns, i.e., what happens when asset prices fall. Less equity means the value of your debt will exceed the value of your asset that much sooner.

Put all this together, and you have a classic recipe for vulnerability. Capital inflows (borrowing overseas plus foreigners coming into the local stock market) tend to keep the exchange rate more appreciated than it would be otherwise. This encourages imports and discourages exports, so it is easy to develop a current account deficit (meaning that the country buys more goods and services from the rest of the world than it sells).

This is sustainable as long as the capital continues to flow in - particularly as long as companies can issue debt in dollars. But as John C. Bluedorn, Rupa Duttagupta, Jaime Guajardo and Petia Topalova of the I.M.F. point out in a new working paper, “Capital Flows Are Fickle: Anytime, Anywhere,” at least since 1980 “private capital flows are typically volatile for all countries, advanced or emerging, across all points in time.”

No one is immune from the fickle nature of credit in the world economy. International banks love countries until about five minutes before they start trashing them to clients - for example, because they feel (as now) that growth in China and other emerging markets is definitely slowing.

Shifts in sentiment are unavoidable. The question is: how leveraged are you when this happens and how much debt do you need to refinance while markets are feeling negative about your prospects?

While the generic description above is a helpful framework, the Indian situation has important special features, as Devesh Kapur of the University of Pennsylvania and Arvind Subramanian, my colleague at the Peterson Institute for International Economics, have stressed. In particular, policy makers have not made the mistake of trying to cling to a fixed exchange rate (i.e., there is no explicit commitment to peg the rupee to a precise rate relative to the dollar).

As a result, the rupee is able to depreciate without too much drama, and this by itself should, over time, help to reduce imports and increase exports. India’s foreign debts are mostly private, and the government’s fiscal position, while not strong, is also not as weak as seen in Latin America in the 1980s or some European countries more recently.

(To be precise: there is a large annual budget deficit - the headline number is around 9 percent of gross domestic product - but recent growth and a significant degree of inflation mean that debt relative to G.D.P. is projected to be around 66 percent by the end of 2013. This is gross debt, as reported in the I.M.F.’s latest Fiscal Monitor; the I.M.F. does not compile data on net government debt.)

Indian foreign exchange reserves remain at relatively strong levels, at least in comparison with past crisis experiences elsewhere.

This is not to play down the pressures. The effect of exchange rate depreciation is to push up domestic inflation, in part because much of India’s oil is imported (and world oil prices are in dollars, so depreciation immediately pushes up the domestic price in rupees).

Weakening confidence in the Indian economy has been compounded by some policy confusion in recent months, which has further encouraged domestic residents to move funds out of the country. But the central bank’s signaling of its intentions is likely to become clearer, with some tightening of policy, including modest interest rate increases, following the appointment of Raghuram Rajan as the new central bank governor. (I worked for Mr. Rajan in 2004-5, when he was chief economist at the I.M.F., and I was his successor in that position.)

Still, there is political pressure to keep the economy growing ahead of elections in early 2014, so we should not expect fiscal policy to tighten. And if the Federal Reserve does indeed tighten monetary policy in the United States - currently referred to as “tapering” its purchase of bonds - that will tend to push up interest rates and is likely to attract more capital out of emerging markets.

The Fed’s mandate is, by law and by convention, to worry about the United States economy, although officials in Washington are willing to provide outside assistance when things get sufficiently bad (e.g., the dollar funding provided to European banks, directly and indirectly, in the darkest days of 2008-9).

Terrence Checki of the Federal Reserve Bank of New York got it half right when he said recently, “Fundamentals are fundamental,” and “experience suggests that one cannot overstate the importance of sound economic management, strong fiscal positions, credible proactive monetary policy and rigorous financial-sector oversight.”

He was talking about the American perspective on what emerging markets need to do - and the trajectory that countries like India must convince foreign investors they are on.

Of course, Mr. Checki was not talking about the United States, where economic management is shaky, the fiscal position is weak (and another budget crisis looms in October), and monetary policy has struggled to keep up with dealing with the consequences of failed financial-sector oversight (an unfortunate development in recent decades, for which the New York Fed shares responsibility).

When the United States faces a serious crisis, as in fall 2008, the world becomes unstable and capital flows into the United States, because the dollar is the ultimate reserve currency.

When a country like India faces crisis, for domestic reasons but also perhaps because of what is happening in the United States, capital tends to flow out of that country and toward safe havens (like the United States).

You can wring your hands about this system as much as you like - and central bankers around the world have been complaining even more than usual in recent weeks. But this is the way the world works, and this is how it will work for the foreseeable future.

The message is borrower beware, always. As the United States heads toward its next crazy confrontation over the federal government’s debt ceiling, heavily indebted emerging markets face serious risks.

Janet Yellen’s Wealth

Gary Cameron/Reuters Janet Yellen, vice chairwoman of the Federal Reserve, at a conference in March.

Janet L. Yellen reported investments worth at least $4.8 million in 2012, making her one of the wealthiest members of the Federal Reserve’s board of governors, according to annual financial disclosures that the Fed released Tuesday.

All seven members of the board are millionaires, but the disclosures also show that the Fed’s chairman, Ben S. Bernanke, may well be the least affluent of the group.

Ms. Yellen, a candidate to succeed Mr. Bernanke, owned stock in a small number of companies including Conoco Phillips and Pfizer, but mostly invested in broad-based equity and bond funds. Much of the money is held in retirement accounts.

Her investments, mostly held in common with her husband, George Akerlof, also include a stamp collection worth at least $15,000. The couple’s investments were worth between $4.8 million and $13.2 million in 2012, according to the disclosure forms, which assign each asset to a range (such as $50,001 to $100,000) rather than providing a value.

The total does not include the pensions the couple earned at the University of California, Berkeley, where both worked as professors, nor Ms. Yellen’s pension from the Federal Reserve Bank of San Francisco, where she was president from 2004 to 2010, nor the home they own near campus.

Ms. Yellen earns a salary of $179,900 as a Fed governor. She does not earn anything extra for her position as vice chairwoman. On top of that, the couple reported income from investments of between $102,820 and $323,200. The disclosure forms do not include the salary earned by Mr. Akerlof as a senior resident scholar at the International Monetary Fund.

(The leading candidate to succeed Mr. Bernanke, Lawrence H. Summers, the Harvard economist and former Treasury secretary, reported wealth between $7 million and $31 million in 2009, when he last entered public service. He likely has probably that number considerably since leaving the Obama administration in 2010.)

The format of the disclosures make it impossible to rank the Fed’s governors by wealth, but Mr. Bernanke’s reported holdings of $1.1 million to $2.3 million had the lowest minimum and the lowest maximum values of any governor.

The Young Developer’s Guide to Debugging JavaScript

We recently completed our internship program here at The Times, and it’s made me wonder what I would have liked to have known when I was a young developer. The answer: I wish I’d known more about debugging.

There is no shortage of resources on how to use the various browser dev tools, and new tools are added daily. They are amazing. As someone who learned JavaScript years ago, I envy new developers for these tools. To set a breakpoint in a browser, inspect all values in the environment and walk up the call stack has been transformative.

I would have loved to have had such magical toys while learning: breakpoints, CoffeeScript, source maps, network inspector, reliable ubiquitous console.

That said, your strongest debugging tool is the one between your ears. All the arcane debugging knowledge in the world is no substitute for understanding what you’re coding.

To Develop Is to Err

To write code is to make mistakes. The best developers you’ve ever met have been responsible for bugs. They have sat at their computers, scratched their heads and wondered, “Well why is it doing that?”

Developers often think of programming as problem solving, but writing code is more like cooking. As with cooking, code is never perfect, only better and worse. You can try different spices. You can use turkey instead of chicken. You can apply more or less heat. But there is no complete, only done enough. Dinner is done when you eat it.

To master debugging, you must expect to find bugs. If somebody reports a bug, you should accept it. The natural state of code is to have bugs.

Where Bugs Come From

If you are new to writing code, the most likely cause of a bug is your nascent understanding of the platform. If you don’t have a precise knowledge of how an array works, you are likely to misuse arrays, and that will cause bugs. Only experience can correct this.

This guide assumes you have reached a point of sufficient expertise that your bug is not because you don’t understand how a given feature works. Don’t worry: You will still create bugs.

You’re likely to encounter two kinds of tricky bugs:

1. Subtle Typos
2. Wrong Object Types

Whenever you say the phrase “I don’t understand why x”, stop yourself and try to remember that if x is doing something, it is because that thing makes absolute sense to x. X’s behavior seems puzzling to you.

From the perspective of the computer and the program, all behaviors are as expected, given the rotten input provided. If you don’t understand why your program is doing what it is doing, the problem is your lack of understanding.

The computer is always right. The computer is always right. The computer is always right. Take it from someone who has programmed for over ten years: not once has the computational mechanism of the machine malfunctioned.

Subtle Typos

Most typos are spectacular, resulting in names that don’t exist, which throws an undefined variable error. This will spew red pixels all over your toolset and is usually easy to catch. The pernicious bug results from typing a name or value that is defined, but is not what you intended. You can add a linter to your toolset, but you can’t rely on that to catch everything.

For instance, you might have a hash of values. In JavaScript, a variable inside a hash that has no value returns null. If the value is an object with methods, calling a nonexistent method should error out meaningfully. Helpful red pixels everywhere. But if you are merely accessing a value which happens to be null, you may get incorrect math values that aren’t as easy to track. My console informs me that null - 3 == -3.

Wrong Object Type

In this age of Gmail and Facebook, client applications can be thousands and thousands of lines of code, with complex object hierarchies. Template engines render data models delivered by transport objects controlled by framework controllers controlling view controllers.

Modern applications have many object types, and if you happen to use the wrong type â€" particularly if the types are similar, or perhaps parent or child classes of the one you intended â€" most things will work correctly, but some will not. It is important to check that the object producing bugs is always the type you expect and that all variables you use in that object are the type you expect.

As an example, suppose you have an important set of data in a hash. Note: The examples that follow are in CoffeeScript, but are illustrative. Think of them as pseudocode that happens to execute.

Animals =       “Fido”: DogObject(“Fido”)      “Samantha”: CatObject(“Samantha”)      ...  

Sometimes your code will expect the key and sometimes the actual object. A common trap is to expect one and get the other.

# Is this the object or the string Fido?  addAgeToAnimal: (animal, age) -> animal.setAge(age)   

Or suppose DogObject extends AnimalObject, and you are pulling from a database. You create AnimalObjects and automatically fill them in with data. When calling the method, sometimes the method will get an actual DogObject, and sometimes it will get an AnimalObject that you’ve filled with dog data. But then you change DogObject, and your manual AnimalObjects are missing a now-required piece of information. This can be tricky to figure out. (Consider an alternate approach, by the way. Try to minimize divergent code paths.)

# AnimalObject doesn’t have a buyBone method.  buyDogNewBone: (dog) -> dog.buyBone()  

Next Steps: Problem Areas

Once you determine what the problem area is, you must determine why the value is incorrect.

1. Async

Your brain probably does a poor job understanding asynchronous operations. It’s hard enough tracking vast application state trees even when you’re not adding time as a variable. Yet asynchronous operations are the rule in JavaScript applications. If an object is the wrong type or the wrong value, the odds are good that you have a race condition caused by an asynchronous operation (via an AJAX call, an asynchronous database or worker call). Or you could just be using Node.

# What does a equal? Depends when you ask.    @a = “Default”    jQuery.getJSON destinationUrl, (data) =>      @a = data.people[0].firstName    @a = “Bob”  

When a bug surfaces, you will need to use breakpoints in your debugger to pause execution and inspect application state at various times. If the problem does not emerge, you’ll probably need to check many iterations of a piece of code through time. The place to start is with any asynchronously delivered data.

2. Counting Problems and Off By One

This is so common it’s a programmer joke. When looping through an object, make sure the object is the type you expect, contains all the properties you expect and is consistent. If components are sharing state, as in the async scenario above, a loop could be compromised between loop runs. If you cached a count value and used it to run a loop without checking that it’s still valid, loop errors become more likely. If you are counting in one-based systems and zero-based arrays simultaneously, the odds of a bug rise even more quickly.

jQuery.getJSON remoteUrl, (data) =>      ###      # Data is of form: [      #    {      #       “id”: 1,      #       “first”: “Bob”,      #       “last”: “Smith”      # }...      #]      ###      names = []      data.forEach (item) => names[item.id] = item.first + ‘ ‘ + item.last  ###  # Uh oh. Depended on the id being zero based, but it’s one   # based, and arrays aren’t.  # for (var i=0, len=... will render unexpected results.  ###  

3. Scope

Scope is a problem in many environments, but the problem is particularly nasty in JavaScript. One of the easiest ways for a variable to have an unexpected value is for the scope to be different than expected. If you define a local variable without using var, the value leaks up to enclosing scopes. The JavaScript keyword this doesn’t always mean what you expect it to mean. When pausing on a breakpoint, make sure this is the object you expected. The easiest mistake is in an event handler or a setTimeout. By default, this in either scenario will be the global window object. (My solution is to use CoffeeScript and the fat arrow. There are other solutions. And ES6, the next version of JavaScript, will also have solutions.)

# In setTimeout, this will translate to window.removeFlag  unflag = -> @removeFlag()   setTimeout(unflag, 500)  

Talk to Somebody

Finally, and perhaps more importantly, you should talk to somebody about your bugs. I’ve heard it called many things, but for me, it will always be “duck debugging.” The premise is to put a rubber duck next to your computer, and whenever you encounter a bug, explain it to the duck. Better yet, talk to another developer.

You’ll often find that by verbally expressing the problem, your brain will solve it before the person listening even needs to speak.

Bugs are a fundamental aspect of programming. You will continue to make them for the rest of your career. Fixing them is the most important thing we do as developers. The quicker you can resolve bugs, the quicker you can return to features and fancy code designs.

Bugs are a signal that your understanding of a problem is incomplete or mistaken. Reality is the final arbiter. There will be moments, after staring at your screen all day. You want to throw your computer out the window. And then, somehow, through effort, duck debugging, or maybe just dumb luck (I strongly advise taking the occasional walk), you break through. This is the reward. Knowledge, hard won, will burst in your mind, and you will understand the world around you that much better. I can’t emphasize how wonderful that feeling is. You are one step closer to unattainable perfection.

Congratulations. You are now a debugger.

‘The Great Shift’: Americans Not Working

Looking at these two charts together is a quick way to become demoralized about the American economy:

Express Employment Professionals Source: Bureau of Labor Statistics

Express Employment Professionals Source: Bureau of Labor Statistics

Yes, the unemployment rate has fallen. But almost the entire reason it has fallen is the drop in the number of people in the labor force â€" either working or actively looking. As Binyamin Appelbaum has noted, the share of adult Americans with jobs is essentially unchanged over the last three years.

In a brief new report from Express Employment Professionals, a staffing firm, the company’s chief executive, Bob Funk, refers to the problem as “the great shift.” This shift long predates the recent financial crisis, too. The labor force participation rate peaked more than a decade ago.

Express Employment Professionals Source: Bureau of Labor Statistics

If the decline stemmed largely from an aging work force, it would be much less worrisome. But the initial wave of baby-boomer retirements plays only a small role in the drop; the labor force participation rate has fallen almost as sharply for people aged 25 to 54 as it has for the overall adult population.

As the report notes, economists are not entirely sure what has caused the shift. One factor seems to be the so-called skills gap â€" the slow growth in educational attainment in recent decades, even as the economy has become more technologically advanced.

A second factor is most likely the weak economic growth of the past 13 years: the 2000-1 dot-com bust, the mediocre expansion that followed, the financial crisis that began in 2007 and the disappointing recovery of the last few years.

Another cause may be the rise in the number of workers on disability. The report cites a study by the Federal Reserve Bank of San Francisco to argue that disability is helping cause the decline in work. That’s probably right, although it is worth remembering that the growth of the ranks of the disabled may be more of an effect of the jobs slump than a cause.

Either way, the decline in labor force participation almost certainly receives too little attention. Each month, small changes in the unemployment rate receive great scrutiny. We often overlook just how flawed a measure of the job market that rate has become over the last 13 years.

The Charitable Deduction, Continued

Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform - Why We Need It and What It Will Take.”

Last week, I discussed certain aspects of the federal tax deduction for charitable contributions. I return to this topic to review a few more points.

One issue is to what extent the charitable deduction actually motivates net additional contributions. As I noted previously, a large amount of aggregate contributions is made by people who cannot deduct them because their income is too low to have an income tax liability or they use the standard deduction. Obviously, the deduction has no effect on their contributions.

Moreover, to the extent that contributions are tax-motivated, the higher the tax rate, the more contributions there should be. Conversely, reductions in marginal tax rates should, all other things being equal, reduce charitable giving. With the top federal income tax rate close to half what it was in 1980, we should have seen a sharp drop in giving by the wealthy if tax considerations were paramount.

In fact, charitable giving by the wealthy has not fallen. This shows that the growth of income is the dominant factor in charitable giving; when people have more money to give, they give more. The general state of the economy is more important than the tax structure in determining aggregate giving.

Another important point about charitable giving is that it often isn’t as altruistic as it is made out to be. That is, givers often get something in return for their gifts. Sometimes it is simply the “warm glow” of helping an institution they have a special interest in. But it can also be more tangible - names on buildings at universities or wings at hospitals, gala dinners and awards for generous donors or the continuation of some service, like public broadcasting, from which one receives a specific benefit.

In some cases, contributions to tax-exempt organizations are abused. For example, one might donate a work of art to a museum at an inflated price and deduct that inflated value from one’s taxable income even though it is actually worth much less. Without an arm’s length market transaction, it is hard to say what the true value is. (The Internal Revenue Service requires a written appraisal by a qualified appraiser for any deduction taken on items valued at more than $5,000, and it has said that this system is reducing the use of overvaluations.)

Moreover, unlike those who donate cash, donors of assets never have to pay taxes on an asset sale. If someone had to sell a painting or stock first, they would have to pay the capital gains tax before receiving the cash from which to make a charitable contribution. Being able to deduct the gross monetary value of an asset without selling it in effect confers a double tax benefit.

It should also be noted that most charities get the bulk of their revenue from services provided. Universities receive tuition; tax-exempt hospitals charge for services. In the aggregate, charitable organizations receive three times as much revenue from program services as they do from gifts and contributions, according to the Internal Revenue Service.

These factors would be unchanged if the charitable tax deduction were reduced or abolished. Of course, there was a considerable amount of charitable giving in the United States long before there was an income tax, as noted by Alexis de Tocqueville in 1831.

There are also costs involved in allowing deductions to tax-exempt organizations in the form of restrictions on their operations and government oversight. This has led some scholars to suggest that many charitable functions would be better served by profit-making entities.

In a widely discussed article in the December 2007 issue of the Virginia Law Review, Profs. Anup Malani and Eric A. Posner of the University of Chicago assert that profit-making entities may be more efficient at fulfilling certain missions traditionally undertaken by charitable organizations than those that are tax-exempt.

Responding to Professors Malani and Posner, Prof. Benjamin Leff of American University pointed out in a Seton Hall Law Review article that nontax-exempt charitable institutions already exist alongside those that are tax-exempt. For example, Google’s charitable arm operates as a for-profit entity in order to permit it to invest in start-up businesses, lobby Congress and engage in other activities that are prohibited for tax-exempt entities.

Other philanthropic organizations are following Google’s lead. One might view the Web site Kickstarter as a similar type of entity, because it raises money from individuals to fund a variety of undertakings they view as worthwhile but that cannot be financed through traditional channels like investors or foundations. The funders do not receive any tax benefit or profit.

Of course, eliminating the tax-exempt status of churches and other tax-exempt organizations would free them to pursue direct political activity without government interference.

Eliminating the distinction between profit-making and tax-exempt institutions would also level the playing field in areas where both types of organizations operate. Many for-profit businesses complain about growing competition from nonprofit enterprises producing goods and services identical to theirs without incurring a tax liability.

And there are questions about why certain seemingly profit-making operations of tax-exempt institutions are treated as tax-exempt when they don’t appear related to their core function. A good example is the tax-exempt status of university endowments, which often appear to be independent from anything to do with teaching or education; they simply get bigger each year as an end in itself.

Both those on the left, such as Robert Reich, labor secretary in the Clinton administration, and those on the right, such as James Piereson and Naomi Schaefer Riley, have questioned the tax exemption for the vast profits realized annually by college endowments, as well as other revenue received by universities, like patent royalties, that private businesses pay taxes on.

According to the National Association of College and University Business Officers, in 2011 76 universities had endowments of more than $1 billion, led by Harvard with $32 billion. Senator Charles Grassley, Republican of Iowa, and others have proposed taxing endowments’ income or subjecting them to the same mandatory payout rules that now apply to foundations.

In short, a number of issues related to charitable giving and charitable organizations ought to be examined if Congress pursues fundamental tax reform. There is much more to be considered than the simple question of whether the charitable deduction should be kept as is or reduced in some way to raise revenue to pay for rate reductions.

Wage Stagnation and Market Outcomes

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities in Washington and a former chief economist to Vice President Joseph R. Biden Jr.

A new paper from the Economic Policy Institute provides both diagnosis and prescription of what is arguably the fundamental problem of the United States economy in recent years: wage stagnation.  I’ll briefly describe the findings, but given that these trends have persisted for a long time, it’s more important to think about solutions, particularly ones that go beyond conventional wisdom.

From the report:

Between 2002 and 2012, wages were stagnant or declined for the entire bottom 70 percent of the wage distribution. In other words, the vast majority of wage earners have already experienced a lost decade, one where real wages were either flat or in decline.

This lost decade for wages comes on the heels of decades of inadequate wage growth. For virtually the entire period since 1979 (with the one exception being the strong wage growth of the late 1990s), wage growth for most workers has been weak. The median worker saw an increase of just 5 percent between 1979 and 2012, despite productivity growth of 74.5 percent â€" while the 20th percentile worker saw wage erosion of 0.4 percent and the 80th percentile worker saw wage growth of just 17.5 percent.

As the chart below shows, it’s not only real wages that have lagged far behind productivity (or barely outpaced inflation), it’s average compensation (wages plus benefits) as well. The chart shows indexes of two related compensation measures plotted against productivity growth. After growing a bit in the early 2000s, they’re both about where they were 10 years ago.

Economic Policy Institute Sources: Authors’ analysis of the Bureau of Labor Statistics’ unpublished Total Econoy Productivity data, and Employment Cost Index and Employer Costs for Employee Compensation public data series. Note: Productivity series reflects the total economy, while the other two reflect the compensation of all private workers. Employer Costs for Employee Compensation data are linearly interpolated between the first quarters of 2000 and 2001, and between the first quarters of 2001 and 2002 (no formal data exists for the second, third and fourth quarters in 2000 or 2001). Only the Employment Cost Index had data available for the second quarter of 2013.

The arithmetic of national income accounting is such that when average compensation lags behind productivity growth, as has been the norm in recent years, income is redistributed from paychecks to profits. That’s a characteristic of growing inequality and flows quite simply from the observation that the economy’s growth has to be going somewhere. If it’s not flowing much to wages and benefits, it must be flowing to profits (this is the point of another new report from the institute).

Why is this happening?

Economists typically cite globalization and technological change, both of which increase the earnings prospects of skilled workers relative to the less skilled. But that’s far from the whole story. The E.P.I. report shows that the real wages of college-educated workers have been flat over the last decade as well, though workers with advanced degrees have done better.

Also, the college wage premium â€" the wage advantage held by college-educated workers over the less educated â€" grew much more slowly over the last decade compared to the prior 20 years, posing a challenge to the notion that skills can either explain or solve wage stagnation. To be clear, there is little question that more educated workers are likelier to capture some of the economy’s growth than those with lesser skills or training.  But the wage data show that upgrading skills alone is an incomplete solution.

In fact, we need to think about solutions to this problem is a new way. To explain, let me introduce some terminology. The primary distribution is the income, wage and wealth status of households generated by market outcomes, before taxes and all kinds of other policies kick in to help those on the short end of those outcomes (i.e., transfer policies, like food stamps or unemployment insurance).  The secondary distribution is the income distribution after taxes and transfers.

Of course, policy plays a role in market outcomes. The primary distribution is not some pristine, meritocratic outcome devoid of political or policy influence. Trade policy, for example, creates winners and losers; the tax system itself, by favoring investment income over wage income, tilts market outcomes.

Still, the distinction is important. Consider this: when it comes to economic policy, the difference in recent years between Democrats and Republicans, or most liberals versus conservatives, is that the former are willing to alter the secondary distribution through more progressive taxes and transfers. The latter are content to leave market outcomes alone.

But neither wants to alter the primary distribution.

This poses a serious problem.  To accept market outcomes as given, and then try to offset the structural imbalances embedded therein through tax and transfer policy alone, is a fundamentally limited strategy.  As those outcomes become increasingly unequal, as has been the case over the last three decades, such a strategy implies yearly increases in redistribution through the tax code and transfer system, something our political system will not support even once we return to functional politics. The uniquely influential role of money in American politics limits this strategy even further.

To punt on the primary distribution as a target of economic policy is to give up the match, to cede the field to those in the top few percent for whom the current structure of economic incentives and rewards is working just fine, thank you.

Conversely, to take aim at the primary distribution right now would start from the premise that left to its own devices, the market will most likely create jobs of quantity and quality inadequate to lift the living standards of many middle- and lower-income families. And I’m not just thinking of the unemployed and underemployed here.  A key factor behind the E.P.I. wage findings is the absence of full employment: the benefits of growth flow away from those with the least bargaining power.  Slack labor markets rob working families of a reliable source of more equitable distribution (this observation is particularly germane in our largely deunionized workplaces).

Which policies would promote full employment?  In the near term, there would be more fiscal stimulus (instead of the fiscal drag we’re getting), and the Federal Reserve would not be planning to unwind its monetary stimulus too soon.  But in terms of aiming at the primary distribution, we need to be willing to think of the government as the employer of last resort, ready to step up direct hiring or subsidized employment programs in slack times.

Much the way the Fed becomes the lender of last resort when credit markets freeze, there is a role for the government to become the employer of last resort when the market persistently fails to create enough jobs.

I’ll have a lot more to say about this and similarly bold interventions in weeks to come, but the broader point is this: it is, of course, essential to preserve and protect the safety net and other measures that help offset the inequities of the primary distribution, but it is not enough.  In fact, if, in times of rising inequality, we abandon the primary distribution as a target of economic policy, we place far too much stress on our safety net programs.

Progressive economic policy must aim to improve the primary distribution, and the pursuit of full employment labor markets is a great place to start.

Full Time, Part Time, Good Jobs, Bad

Nancy Folbre is professor emerita of economics at the University of Massachusetts, Amherst.

The term “part-time jobs” is beginning to make Americans anxious. Many workers currently in such jobs would strongly prefer â€" and in many cases desperately need â€" more hours of employment to pay their bills. Policy makers worried about implementation of the Affordable Care Act point to features that could make part-time employment more attractive for both employers and workers.

The anxiety is somewhat misdirected. While full-time jobs generally pay better, offer more benefits, and promise more room for advancement than part-time jobs, the quality of a job is not necessarily determined by the average weekly hours put into it.

Nor is it clear that the United States economy as a whole would suffer from an increase in the percentage of part-time jobs â€" as long as those who wanted more full-time employment were able to find it.

Today, as in the past, women are more likely than men to be employed for fewer than 35 hours a week â€" not because they prefer leisure to labor, but because they take considerably more responsibility than men for family care and household work.
As more women have entered the paid labor force, they have reduced their hours of unpaid work, and men have taken on a larger share. But it remains difficult for many two-earner families responsible for young children or other dependents to put in a combined 80 or more hours of paid employment a week and sustain a meaningful family life.

Many women choose to work fewer than 40 hours a week not because they prefer leisure to labor, but because they make family care a priority over earned income. Some men now reduce their hours of paid employment or drop out of the labor force for the same reason.

Last month, about 8.3 million workers were in part-time jobs for “economic reasons” (primarily not being able to find full-time work)  while 19.1 million offered “non-economic reasons” as an explanation (not a very accurate label, since it includes factors like a lack of affordable child care or of a partner willing to share care responsibility).

Both sets of workers might prefer different circumstances, and many women experience lower lifetime income as a result of their choices. But part-time employment itself is not the problem.

To drive this point home, consider the following question. What’s the difference between an economy in which men all work about 40 hours a week for pay, relying on women to stay home and tend to family needs, and an economy in which most men and women work about 30 hours a week for pay, sharing responsibilities for family care?

The second economy enjoys more gender equality, more time for joint participation in family life, and more total hours of paid employment. Why should we view it as less desirable or less efficient than the first?

As Janet Gornick and Marcia Meyers explain their book “Families That Work,” several European countries have implemented policies designed to improve part-time employment â€" and general flexibility in employment hours â€" as part of a larger policy effort to support family commitments.

The policy tools include requirements that part-time jobs be paid at the same hourly rate as comparable full-time jobs in the same establishment, with benefits pro-rated accordingly.

Many countries, including Germany, Britain and the Netherlands, also give full-time workers the right to request part-time work without changing jobs, occupations or employers. Such policies tend to reduce the pay penalty for part-time work.

In the United States, by contrast, the large supply of married women and single mothers seeking part-time employment has made it easy for employers to designate such jobs as low-pay, no-benefit positions.

Drawing sharp lines between primary workers who are employed full time and secondary workers who are employed part-time makes it easier to treat some workers as cheap disposables without undermining the morale of others.

In some sectors of the economy, like retail trade, employers favor part-time contracts because scheduling flexibility allows them to accommodate peak shopping times and keep sales workers “fresher” on the job. Variability and unpredictability in hours â€" which often goes along with short shifts â€" can neutralize any “family-friendly” advantage.

Yes, some part-time jobs are really bad jobs. But that description fits a growing share of full-time jobs as well. The National Employment Law Project points out that job losses in the Great Recession were concentrated in the mid-wage occupations, while most of the jobs added in its aftermath are in low-wage occupations.

The Affordable Care Act will make it possible for more low-wage workers to get the health insurance they and their families need. Under current rules, however, employers will not be required to cover workers employed less than 30 hours a week, who will be eligible for public subsidies.

The extent to which employers will respond to this incentive remains to be seen. But there’s a simple way to address the problem. The United Food and Commercial Workers union is pushing for a Part-Time Worker Bill of Rights that would require employers to pro-rate health insurance benefits for workers employed less than 30 hours a week, and also extend other benefits like eligibility for unpaid family leave. Representative Jan Schakowsky, Democrat of Illinois, has introduced legislation to this effect in Congress.

The bill could improve the quality of part-time jobs. It could also increase the likelihood that people work part time by choice, rather than by necessity.

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Central Bankers Say Emerging Economies Will Be Ready for Fed Exit

JACKSON HOLE, Wyo. â€" The stimulus campaigns of the Federal Reserve and the central banks of Europe and Japan, by depressing domestic interest rates, have helped to push trillions of dollars into developing markets in recent years.

Now that the Fed has declared its intent to start easing up on the accelerator by the end of the year, some of that money is starting to slosh back to the United States.

Outflows from emerging markets have exceeded inflows since the Fed’s June announcement; Bloomberg calculates that emerging-market stocks have lost more than $1 trillion in value; emerging-market currencies are depreciating rapidly.

The question of what central banks are supposed to do about it dominated the formal agenda here at the Kansas City Fed’s annual monetary policy conference.

The answers were surprisingly mellow. The rest of the world would like the Fed to explain its plans clearly, and then to travel slowly. Bankers from developing nations said they might need to impose some restrictions on the outflow of capital, but expressed little concern over the potential for serious economic disruptions.

The Fed’s exit “is a net positive for emerging markets,” said Luiz Awazu Pereira da Silva, the Central Bank of Brazil’s deputy governor. “We prepared ourselves in Brazil. And I think we are now sort of capable of mitigating the risks for the unwinding of these measures.”

Christine Lagarde, the managing director of the International Monetary Fund, struck the same sanguine tone in a Friday speech, declaring that “Central banks handled entry well, and we see no reason why they should not handle exit equally well.”

She added that the fund - and by extension, the major economies - accepted that some developing countries might need to impose some financial controls. “In some circumstances, capital flow management measures have been useful,” she said.

This is not the way that policymakers used to talk. The big countries and the I.M.F. spent the last few decades pushing for the liberalization of financial markets. They argued that developing nations were creating their own problems by failing to take the painful steps necessary to moderate capital inflows, notably by allowing their currencies to appreciate. And they showed no tolerance for capital controls.

Developing nations, for their part, defended capital controls, arguing that that they should not be expected to bear the cost of other countries’ domestic missteps.

Both of these arguments were certainly revisited at Jackson Hole.

Terrence J. Checki of the Federal Reserve Bank of New York warned that capital controls don’t work and “often can lead to counterproductive results.”

Stanley Fischer, former governor of Israel’s central bank, noted that the alternative, allowing currencies to appreciate, meant that smaller countries were essentially agreeing to curtail their own growth by making their exports more expensive.

“If something happens in one country, then the rest of the world should share in the adjustment by allowing the exchange rate to adjust?” Mr. Fischer asked.

The 2008 financial crisis helped policymakers find a larger patch of common ground. Developing nations conceded the need for economic revival in the United States, Europe and Japan - not least because exports need buyers - while developed nations conceded it was reasonable to mitigate the resulting disruptions.

But it has been easy to agree in theory during these long years of waiting for the Fed and other central banks to actually being the process of pulling back.

Now comes the hard part. Mr. Pereira, of Brazil’s central bank, was only here to provide his upbeat assessment because the head of Brazil’s central bank, Alexandre Tombini, pulled out at the last minute. And on Friday, Brazil announced a $60 billion commitment to buttress the value of its currency over the remainder of the year. India, Indonesia and Turkey also have moved to shore up their currencies in recent weeks.

All of that, of course, before the Fed has actually started to taper.

Law School Applicants Decline, Especially Among Grads of Elite Colleges

We’ve written before about the declining interest in law school, as evidenced by the number of people taking the Law School Admission Test and the number applying to law schools. Over at the Associate’s Mind blog, Keith Lee notes that the number of applicants is down across the board, but the drop-off is particularly sharp among people who went to elite schools for their bachelor’s degrees.

He looked at graduates of the Ivies and three other schools (Stanford, Duke, the University of Chicago); I’ve done a similar analysis, but included the top 20 national universities as ranked by U.S. News that send a substantial number of alumni to law school each year. (Note that M.I.T. and Caltech, which are top-ranked national universities by U.S. News, are not included in this analysis because they are not among the top 240 biggest feeders to law schools for which the Law School Admission Council releases data.)

Across the board, the number of people applying to matriculate in fall 2012 was 67,700, down about 17 percent from the number who applied to matriculate in fall 2008 (82,000).

The average decline in applicants who graduated from the “elite” schools was 28 percent.

U.S. News National Universities Ranking	Feeder School	Applicants to Law School for Fall 2008	Applicants to Law School for Fall 2012	Decline (%)
1	Harvard	357	251	30%
1	Princeton	209	172	18%
3	Yale	320	234	27%
4	Columbia	231	190	18%
4	University of Chicago	212	175	17%
6	Stanford	262	179	32%
8	University of Pennsylvania	416	324	22%
8	Duke	304	233	23%
10	Dartmouth	195	171	12%
12	Northwestern	330	230	30%
13	Johns Hopkins	156	105	33%
14	Washington University in St. Louis	248	167	33%
15	Brown	249	177	29%
15	Cornell	534	314	41%
17	Rice University	135	67	50%
17	University of Notre Dame	348	232	33%
17	Vanderbilt	281	232	17%
20	Emory	325	211	35%

Among all 240 feeder schools that the Law School Admission Council releases data for, Rice had the biggest decline; 135 of its alumni applied to matriculate in fall 2008, but only about half that number applied for the fall 2012 semester.

I’m not sure why graduates with bachelor’s degrees from these higher-ranked universities have shown larger declines in interest in law school. Maybe they have access to better career services offices, which informed them that opportunities for newly minted lawyers have declined. Or maybe the range of jobs available to them in nonlegal fields has recovered faster than that for most college graduates, so the Ivy Leaguers feel less pressure to wait out the terrible job market by enrolling in law school. Or maybe it’s just coincidence.

I should note, by the way, that among the 240 feeder schools the Law School Admission Council tracks, there were 55 feeder schools that saw their alumni law school applicants increase; 22 schools had percentage increases in the double-digits.

Among the schools with the biggest increases in percentage terms were Florida Gulf Coast University, Liberty University,  Sam Houston State University, Utah Valley University and the University of New Mexico. Rutgers University School of Arts and Sciences and Kaplan University had the biggest increases in the number of their alumni who applied to law school, but both of those universities were founded relatively recently.

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Study Suggests Shift in Fed Bond-Buying

JACKSON HOLE, Wyo. â€" A new study finds that the Federal Reserve should keep buying mortgage-backed securities even as it stops buying Treasury securities, and even as it sells off its existing holding of Treasuries and mortgage bonds.

The study supports the Fed’s basic argument that buying bonds can help the economy, but it argues that the Fed made crucial mistakes in creating its bond-buying program, and that the Fed is at risk of compounding those errors.

Buying mortgage bonds has a larger economic effect than buying Treasuries, according to the study by Arvind Krishnamurthy, an economist at Northwestern University, and Annette Vissing-Jorgensen, an economist at the University of California, Berkeley.

But they found little economic benefit in holding mortgage bonds or Treasuries, a basic element of the Fed’s stimulus campaign.

And they argued that the Fed was undermining itself by failing to articulate a clear plan for the purchases. The paper was presented Friday morning at the annual monetary policy conference here in Jackson Hole, Wyo., convened by the Federal Reserve Bank of Kansas City.

There is broad agreement among economists that asset purchases have helped to hold down long-term interest rates indirectly, by signaling to investors that the Fed is serious about its plans to hold down short-term interest rates.

There have been persistent questions, however, about the direct benefits of the purchases.

Professors Krishnamurthy and Vissing-Jorgensen argue that the Fed’s purchases of more than $2 trillion in Treasuries since the financial crisis have had “limited economic benefits.” The purchases have cut the government’s borrowing costs, but they found little evidence for the Fed’s assertion that that has reduced borrowing costs for businesses and consumers.

It follows that “cessation of Treasury purchases or a sale of Treasury bonds will have small negative macroeconomic effects.”

They argue that the Fed should focus instead on buying mortgage bonds. The two professors found in an influential 2011 paper that the Fed’s purchases of mortgage bonds in 2008 and 2009 did reduce the cost of mortgages.

In the new paper, they write that the Fed’s current round of purchases has also worked, but for a different reason.

The first round of Fed buying helped because the financial crisis had constrained the resources of traditional bond buyers, in effect creating a shortage of demand for mortgage bonds, forcing sellers to offer higher interest rates.

The second round, by contrast, has worked because the Fed is reducing the supply of bonds available for purchase.

In both cases, the authors write, the benefit of the purchases is mostly limited to the housing market.

“It does not, as the Fed proposes, work through broad channels such as affecting the term premium on all long-term bonds.”

Interestingly, it also follows from this logic that selling the Fed’s existing holdings of mortgage bonds won’t have much impact on borrowing costs, because that would not affect the supply of the current crop of mortgage bonds.

Referring to mortgage-backed securities, the study says: “We conclude that an exit should proceed in the following sequence: The Fed should first cease its purchases of Treasury bonds and then sell down its Treasury portfolio. Second, the Fed should sell its higher-coupon M.B.S. as this will have small effects on primary market mortgage rates. The last step in this sequence is that the Fed should cease its purchases of current-coupon M.B.S. as this tool is currently the most beneficial source of economic stimulus.”

Professors Krishnamurthy and Vissing-Jorgensen argue that the Fed should be as clear as possible about its plans for this exit.

One of the most important developments in monetary policy over the last generation is the conclusion that central banks can increase the power of their actions by talking about their goals, thereby shaping the expectations of investors.

The Fed has embraced this approach in its core business of adjusting short-term interest rates, declaring that it intends to keep rates near zero at least as long as the unemployment rate remains above 6.5 percent and inflation remains under control. But it has not offered similar clarity about its bond-buying plans.

Fed officials have said that they want to remain flexible because they are still learning about the costs and benefits of asset purchases. The new paper argues that this is a mistake; it says that clarity about quantitative easing is even more important because of the large role of expectations in determining long-term rates.

“It is imperative that central banks outline a framework for the use of LSAP,” the paper says, using the acronym for asset purchases favored by cognoscenti. “Without such a framework, investors do not know the conditions under which LSAPs will occur or will be unwound, which undercut the efficacy of policy targeted at long-term asset values.”

In English: If the Fed doesn’t explain what it’s doing, investors will assume the worst, and borrowing costs will rise as if the Fed is doing nothing.