Scott Sumner Disputes Robert Shiller's Narrative Theory Of The 1920-21 Recession

See Heterodoxy at the AER. Excerpts:

"The depression of 1920-21 is probably the most well understood business cycle in world history. Until today, I couldn't even imagine anyone contesting the standard view, which is that it was caused by deflationary monetary policy. If we are wrong about this, we have no reason to have any confidence in anything we teach in the macro half of our EC101 textbooks.

If Shiller is right, then macroeconomics is back to square one. Not back to 1967, before the natural rate hypothesis. Not back to 1935, before the General Theory. More like 1751, before Hume's writing on money, velocity and business cycles. Is Shiller actually that much of a nihilist? I very much doubt it. More likely, Shiller's a relatively normal Keynesian, who thinks we do know certain things, such as that a highly contractionary monetary/fiscal policy can cause the unemployment rate to rise. (Please correct me if I am wrong.) Rather the problem seems to be his understanding of macroeconomic history.

Consider Shiller's description of the 1920-21 depression:

In looking for the narrative basis of economic recessions, which might be hard to see since narratives are not easy to measure, it would appear that we would have the most luck looking at really big ones: 1920-1921 was the sharpest US recession since modern statistics are available. The US Consumer Price Index switched suddenly from inflation to deflation: between June 1920 and June 1921, during the Depression, it fell 16 percent, the sharpest one-year deflation ever experienced in the United States. The Index of Wholesale Prices fell much more: 45 percent over the same time interval, its sharpest decline ever.

This sort of implies that there is a puzzle to be explained. Why would the price level have suddenly plunged by 16%, the largest decrease ever? Perhaps because the Fed reduced the supply of high-powered money by 15.2% between the fall of 1920 and the fall of 1921, by far the sharpest one-year decline ever experienced in the US? But Shiller doesn't even mention that fact. Instead he says the following:

Surprisingly, the online NBER Working Paper Series, almost a hundred years later, when searched, has virtually nothing to say about what caused this spectacular depression. Why, after all, did it happen? Milton Friedman and Anna J. Schwartz, in their Monetary History of the United States, have given the most influential account. According to them, the 1920-1921 contraction has a single identifiable cause: an error made by the fledgling Federal Reserve to raise the discount rate to trim out-of-bounds inflation in 1919 caused by their carelessly over-expansionary policy right after World War I, leading to a necessity to take strong measures against inflation in 1920. Benjamin Strong, the president of the New York Fed, was on a long cruise starting December 1919, and was unable to prevent Federal Reserve Banks (which did not coordinate their policies with each other so much back then) from raising the discount rate as much as a full percentage point in one shot in January 1920.

This is misleading in all sorts of ways. First, the 1920-21 depression has been studied by a number of researchers. Much less than the Great Depression, but that's partly because the cause of the 1920-21 recession is so obvious. It's a simple problem. Second, Friedman and Schwartz's views are mischaracterized in a way that makes them seem Keynesian. They certainly did not argue that higher interest rates caused the recession, in the ordinary Keynesian sense of causation. Rather they suggested that higher discount rates led to a massive decline in the money supply, and that this is what caused the sharp deflation and depression.

All of these events--World War, the influenza epidemic, the race riots, the Big Red Scare, the oil shock--were associated with hugely unsettling narratives that could have led to a sense of economic uncertainty that might have discouraged discretionary spending of households and slowed down hiring decisions of firms around the world. These certainly sound like more significant potential causes than New York Fed President Benjamin Strong's decision to take a cruise when he was needed.

This is a weak argument. Start with the fact that it mixes up two issues, F&S's incidental conjecture that Gov. Strong's cruise led to the Fed policy error, and the much more important question of whether the Fed's highly deflationary monetary policy could have caused a depression. Shiller makes it seem like someone rejecting the cruise ship conjecture must also reject the entire orthodox monetary explanation for the 1920-21 depression. That's just silly.

But it's even worse. Shiller offers a series of alternative explanations where no alternatives are needed. We know what happened in 1920-21, a deflationary monetary policy. You'd at least think he would have picked an example where the issue to be explained was a mysterious drop in velocity, not a drop in the money supply. I still wouldn't agree with him, but I could imagine someone arguing that mood shifts among the public might impact velocity. Instead he picks the one depression where velocity seems to add very little to the simple money supply contraction story.

And it's even worse. After telling us that the CPI fell by 16% and the WPI by 45% in one year, the most in US history, he speculates about possible psychological causes that have no plausible link to deflation. Take his oil shock example. We also had massive oil shocks in 1974 and 1979-80. Does anyone seriously believe those had a deflationary effect? We had very serious race riots in 1965, 1967 and 1968. Hmmm, those were the first years of the Great Inflation. Red scares? Did the 1979 Russian invasion of Afghanistan trigger a deflationary mood among the public? What happened to the WPI in 1979-80? How about the McCarthyism period? The Cuban Missile Crisis?

He also mentions the 1919 influenza epidemic, which may have killed more people than the Black Death. But the Black Death was inflationary, just as the AS/AD model predicts. Indeed all five shocks that he speculates might have cause a big deflation are actually known to have inflationary consequences.

Maybe Shiller's theory is "it depends". Sometimes oil shocks are inflationary, and sometimes they are deflationary. But if you are going to make your psychological theory of cycles that elastic, what use is it? I could invent 1000 narrative "theories" to fit any set of time series data."

Migrants and the Making of America: The Short- and Long-Run Effects of Immigration during the Age of Mass Migration

NBER Working Paper by Sandra Sequeira, Nathan Nunn, Nancy Qian.

Here is the abstract:

"We study the effects of European immigration to the United States during the Age of Mass Migration (1850-1920) on economic prosperity today. We exploit variation in the extent of immigration across counties arising from the interaction of fluctuations in aggregate immigrant flows and the gradual expansion of the railway network across the United States. We find that locations with more historical immigration today have higher incomes, less poverty, less unemployment, higher rates of urbanization, and greater educational attainment. The long-run effects appear to arise from the persistence of sizeable short-run benefits, including greater industrialization, increased agricultural productivity, and more innovation."

Some thoughts on Equal Pay Day, an annual event that spreads statistical misinformation about the gender pay gap

From Mark Perry.

"The American Association of University Women (AAUW) and the National Committee on Pay Equity (NCPE) are major participants in the feminist propaganda machine that mobilizes forces every April and engages in statistical misrepresentations to publicize the annual feminist holiday known as Equal Pay Day. According to the NCPE, Equal Pay Day will fall on Tuesday, April 4 this year, based on a 20% unadjusted difference in median annual earnings for women and men in 2015 when absolutely nothing relevant is controlled for that would explain income differences like hours worked, marital status, number of children, education, occupation, and the number of years of continuous uninterrupted job experience. Therefore, Equal Pay Day on April 4 this year misleadingly represents how far into 2017 a typical woman will allegedly have to continue working to earn the same income that her male counterpart earned last year for doing the exact same job.

This year, Facebook COO Sheryl Sandberg is joining in (“leaning in”) to the annual dissemination of statistical misinformation:

We have to understand that the pay gap is happening to women and men with similar jobs that require similar skills and similar educational levels — and that has a real impact. The number of working women living in poverty would be cut in half if women were just paid the same as men. So this is important for our businesses and this is important for our country.

That type of verifiably false statement about the allegedly widespread practice nationwide of employers illegally using dual-pay scales based on gender follows in a long tradition of feminist legerdemain this time of year. For example, in April of 2015 the AAUW’s then-executive director Linda D. Hallman sent a mass email that made this similar verifiably false statement (emphasis added):

Think about it: Women have to work almost four months longer than men do to earn the same amount of money for doing the same job. What’s more, we have to set aside a day each year just to call the nation’s attention to it.

Sandberg’s and Hallman’s statements are statistical fairy tales based on the false assumption that women get paid 20% less than men for doing exactly the same work in the exact same occupations and careers, working side-by-side with men on the same job for the same organization (at Facebook?), working the same number of hours per week, traveling the same amount of time for work obligations, with the same exact work experience and education, with exactly the same level of productivity, etc. In other words, the AAUW, NCPE, progressives, and gender activists like Sandberg falsely assume that employers all across America are using coupons like the one above to get a 20% wage discount for every woman they hire, and it’s that rampant, unjust and blatant gender discrimination that is the culprit behind the gender pay gap.

Stated differently, these groups and activists must actually believe that companies and organizations across the country hire and pay employees according to an explicit dual-pay scale by gender: If organizations hire men at $100,000 per year, they will only pay equally-qualified women $80,000 per year. In other words, the AAUW, NCPE and Sandberg are claiming that thousands of organizations across America are illegally and flagrantly violating the Equal Pay Act of 1963, and those illegal actions are going undetected? Only in some ideological fantasy world could anybody possibly believe that! And if those blatant illegal violations are so supposedly widespread, the NCPE and gender activists should be encouraging female victims to report that employer misconduct to the US Equal Employment Opportunity Commission. Filing a charge of gender discrimination is easy, here’s the website to start the process.

Related: See my related CD post “Evidence of employers paying women 20% less than men for the exact same work is as elusive as Bigfoot sightings.”

The reality is that you can only find a 20% gender pay gap by comparing raw, aggregate, unadjusted full-time median salaries, i.e. when you control for NOTHING that would help explain gender differences in salaries like:

1. Hours Worked: The average man working full-time worked nearly two more hours per week in 2015 compared to the average woman, see my analysis here.
2. Type of Work: As I reported on CD last December, men represented 92.4% of workplace fatalities in 2015 (and the male share of job-related deaths has been consistently that high in every previous year) because men far outnumber women in the most dangerous, but higher-paying occupations like logging, mining and roofing that have the greatest probability of job-related injury or death. In contrast, women, more than men, show a demonstrated preference for lower risk occupations with greater workplace safety and comfort, and they are frequently willing to accept lower wages for the greater safety and reduced probability of work-related injury or death.
3. Marriage and Motherhood: a) single women who have never married earned nearly 94% of male earnings in 2014 (but that does not control for anything else like hours worked, age, experience, education, occupation, children, etc.); b) more women than men leave the labor force temporarily for child birth, child care and elder care, and c) women, especially working mothers, tend to value “family friendly” workplace policies more than men, according this Department of Labor study.

Most economic studies that control for all of those variables conclude that gender discrimination accounts for only a very small fraction of gender pay differences, and may not even be a statistically significant factor at all. For example, as Andrew Biggs and I pointed out in a 2014 WSJ op-ed:
In a comprehensive study that controlled for most of the relevant labor market variables simultaneously—such as that from economists June and Dave O’Neill for the American Enterprise Institute in 2012—nearly all of the 23% raw gender pay gap cited by the UUAW can be attributed to factors other than discrimination. The O’Neills conclude that, “labor market discrimination is unlikely to account for more than 5% but may not be present at all.”

On Equal Pay Day, when groups like the AAUW and NCPE point to a 20% unadjusted gender pay gap and demand that the pay gap be completely closed, what they are really saying is that they want women to:

• Work longer hours on average like men do;
• Work in riskier, less safe occupations like logging and commercial fishing like men do where the chances of getting injured or killed are much greater;
• Work in more physically demanding occupations like farming, construction, roofing, logging and working on oil rigs, where they’d be working alongside men outside in 100 degree weather in the summer and below zero weather in the winter;
• Accept fewer jobs in family-friendly workplace environments like teaching elementary school that coincide with their children’s schedules (with summers off, etc.), and accept more jobs in family-unfriendly workplace environments like being an over-the-road truck driver or being an oil field worker.
• Take less time off, or no time off, for child birth and child care to minimize their time away from the labor force that might affect their earnings.

Bottom Line: Those who publicize Equal Pay Day and demand that the unadjusted 20% pay gap be reduced to zero are unknowingly really advocating that men and women play completely interchangeable roles in the labor market and identical roles in their family responsibilities; and that’s an outcome I don’t think most women (or men) really want. As the Department of Labor concluded in 2009, “The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.” They also concluded that “the raw wage gap should not be used as the basis to justify corrective action.”

Therefore, once we adjust for all of the factors that contribute to the raw difference in pay by gender, Equal Pay Day actually probably fell close to December 31 of last year. Or maybe the first week of January…. but NOT the first week of April. Women should be embarrassed by the economic myth that is annually perpetuated on their behalf by Equal Pay Day, which suggests that gender discrimination in the labor market burdens them with more than 13 additional weeks of work to earn the same income as their male counterparts working for the same organization earned the previous year – when that’s not even remotely true."

The Phony Internet Privacy Panic

WSJ editorial. Excerpt:

"The House voted this week to rescind an Obama Administration regulation requiring that cable customers “opt in” to allow data mining of their preferences, which allows companies to feature targeted ads or improve service. The rule passed in a partisan FCC vote last year but never took effect. This belies the idea that Comcast and other invented villains will have some “new freedom” to auction off your data. President Trump is expected to sign the bill, which already passed the Senate. The result will be . . . the status quo.

The FCC didn’t roll out these rules in response to gross privacy invasions. The agency lacked jurisdiction until 2015 when it snatched authority from the Federal Trade Commission by reclassifying the internet as a public utility. The FTC had punished bad actors in privacy and data security for years, with more than 150 enforcement actions.

One best privacy practice is offering customers the choice to “opt out”—most consumers are willing to exchange their viewing habits for more personalized experiences, and the Rand Pauls of the world can elude collection. Cable customers have this option now. For sensitive information like Social Security numbers, consumers have to opt in. This framework protected privacy while allowing innovation.
The FCC ditched this approach and promulgated a rule that, curiously, did not apply to companies like Google or Amazon, whose business model includes monetizing massive data collection—what panda videos you watch or which gardening tools you buy. The rule was designed to give an edge to Twitter and friends in online advertising, a field already dominated by Silicon Valley.

The crew pushing the rule say cable companies deserve scrutiny because it is easy to change websites but hard to change internet-service providers. The reality is the reverse: The average internet user connects through six devices, according to a paper last year from Georgia Tech, and moves across locations and networks. But which search engine do you use, whether on your home laptop or iPhone at work? Probably Google. Plus: Encryption and other technology will soon shield some 70% of the internet from service providers."

Repealing the Obama climate rules would only effect temperatures 1/100th of a degree Celsius

See The Climate Yawns: Donald Trump is no more a planet wrecker than Barack Obama (as measured to the third decimal) by Holman W. Jenkins Jr. Excerpts:

"So potent and large are these global forces that repealing the Obama rules, costly as they are, not only won’t affect coal jobs, it won’t affect climate. 

Gina McCarthy, Mr. Obama’s EPA administrator, admitted as much when confronted, during a 2015 House hearing, with the fact that, by the agency’s own climate models, the effect would be only 1/100th of a degree Celsius. Instead, she said success should be measured in terms of “positioning the U.S. for leadership in an international discussion.”

Even so, many climate activists felt the need to walk back Ms. McCarthy’s concession by insisting Obama policies would have a measurable effect—on the amount of CO ₂ released. Yes, the relative decrease would be tiny but measurable, though the climate effect would be zip. This is akin to medical researchers claiming a drug a success because it’s detectable in the bloodstream, not because it improves health."

"Pile up all the government policies enacted or seriously on the table, and their net effect is zilch. A new McKinsey study, that would be hilarious if it weren’t so sad, points out that Germany’s switch to renewables has been a success by almost every metric except CO ₂ output—which is up instead of down.

Rising energy prices to support this energy transition have had one measurable effect—more than 330,000 German households have had their electricity shut off in the past year from nonpayment of bills almost three times as high as those paid by U.S. households."

Trump cuts show Paris treaty is a paper tiger: Bjorn Lomborg

By Bjorn Lomborg.

"Climate approach rehashes a failed policy that wasted decades.

President Trump’s executive order eliminating President Obama’s standards for power plants guts the main U.S. measure to reduce harmful carbon emissions, and in doing so reveals the emptiness of the Paris climate treaty.

The science is clear-cut: Climate change is real and mostly caused by humanity. Obama committed America to major carbon cuts.

According to the International Energy Agency, the U.S. promised to cut more energy-related CO2 emissions than any country in the world from 2013 to 2025, under the Paris climate treaty.

The problem is that this promise never had much ground in reality.

The primary measure America offered to achieve the promised cuts was the Clean Power Plan, which required the U.S. power sector to reduce CO2 emissions.

Yet this plan, even if fully enacted, would have achieved just a third of the U.S. promises under the Paris Agreement. If it had remained in effect for the entire century, my peer-reviewed research using United Nations climate change models found that it would have reduced temperature rises by an absolutely trivial 0.023 Fahrenheit at the end of this century.

Without the Clean Power Plan, U.S. emissions will likely increase slightly.

Yet, despite eliminating the actual policy that it relied on to achieve its promises, America will remain party to the Paris treaty, which has been sold to the world as the ultimate deal to fix climate change.

This absurd situation shows that the treaty is nothing but a paper tiger: Its only legal underpinning is that all nations submitted promises — but those promises do not need to be kept.

In truth, Trump’s action just exposes what we have known for a while: The Paris Agreement is not the way to solve global warming.

Even if every nation fulfilled everything promised — including Obama’s undertakings — it would get us nowhere near achieving the treaty’s much-hyped, unrealistic promise to keep temperature rises under 1.5 degrees Celsius.

The U.N. itself has estimated that even if every country lived up to every single promised carbon cut between 2016 and 2030, emissions would be cut by just one-hundredth of what is needed to keep temperature rises below 2 C.

My analysis, similar to findings by scientists at MIT, shows that even if these promises were extended for 70 more years, then they'd only reduce temperature rises about 0.3 degrees F by 2100.

Moreover, many poor nations signed up to the treaty largely because of a promise of $100 billion a year of "climate aid" from rich nations, starting from 2020. Over the past five years, rich countries have managed to come up with only a 10th of one year’s promise.

It is only a matter of time before taxpayers from wealthy nations balk at the bill waiting for them. That will make many developing countries back out of the whole process.

This climate approach rehashes a failed policy that wasted decades: From 1998, the Kyoto Protocol was sold as the solution to climate change, although every honest analysis already showed that its impact would be trivial. Yet it kept governments, non-profit organizations and pressure groups focused on living up to the protocol rather than finding effective solutions to climate change.

Unless we change tack, the preoccupation with a similarly toothless Paris treaty will waste decades more.

The underlying problem with the treaty is that today’s green solar and wind technology is still very inefficient, requiring hundreds of billions in annual subsidies for trivial carbon cuts. Therefore, trying to cut emissions significantly requires not just buying off poor nations, but also very high costs.

Calculations using the best peer-reviewed economic models show the global price tag of all the Paris promises — through slower gross domestic product growth from higher energy costs — would reach $1 trillion to $2 trillion every year from 2030.

And if America had managed to pass carbon-cutting policies to live up to its big promises, analysis shows that it would have reduced U.S. GDP by more than $150 billion each and every year throughout the century.

We need to focus instead on innovating the price of green energy down below fossil fuels. This would be a much more effective response to climate change, and speed up temperature cuts.

A panel of Nobel laureates for the project Copenhagen Consensus on Climate found that the best long-term policy should focus on dramatic increases in global energy research and development. Fortunately, a group led by Bill Gates has already stepped up to promise a doubling to $30 billion. Yet, our researchers showed that we should be even more ambitious and increase this sixfold, to reach at least $100 billion a year.

Trump campaigned on massive increases in infrastructure spending. Especially given he has proposed budget cuts to clean energy agencies, it is to be hoped that more money is allocated to energy

Climate science cannot be ignored: Global warming is a challenge that deserves a response. Even so, chasing a treaty of empty promises is no response at all.

Bjorn Lomborg is director of the Copenhagen Consensus Center, author of The Skeptical Environmentalist, Cool It, and The Nobel Laureates’ Guide to the Smartest Targets for the World 2016-2030, and a visiting professor at Copenhagen Business School."

Thanks to technology, our circumstances are much more equal today than conventional income measures would suggest

From Mark Perry.

"In an important National Affairs article in 2013 (the year before Thomas Piketty’s best-selling book “Capital in the Twenty First Century” was released) “Innovation and Inequality” Northwestern University law professor John O. McGinnis presents some very interesting ideas about income inequality, innovation and technological advances. Here’s the opening of Professor McGinnis’s article (emphasis added):

The inequality debate has long been a prominent feature of our politics, and many other social and cultural forces are now interpreted in light of it. We have certainly come to understand the progress of technology in that light: Many analysts have argued in recent years that technological advances tend to intensify economic differences, because technology disproportionately increases the incomes of those most able to take advantage of it. Thus, they say, technological innovation is a driver of inequality.
But this analysis is incomplete and misguided. The most important effect of technology on the American economy is not the minting of more millionaires, but the creation of a continual stream of new ideas and products that are quickly enjoyed by everyone. When we surf the web or use mobile computing devices, we are enjoying the value of many hundreds of ideas and innovations. These ideas — not the scarce material resources required to make a tablet casing or to carry packets of information from place to place — constitute most of the value added to our lives by the gadgets in our hands.
Economic value is thus increasingly created not by material things but by the information that arranges the material. And information can be shared equally in ways that material goods simply cannot. In the information age, we enjoy ever-greater access to a common pool of ideas that generates more value and consumption for all, substantially tempering the effect of technology’s differential boost to incomes.
This shift has important implications for our understanding of inequality. Material resources are zero-sum: Five different people cannot all own the same barrel of crude oil or the same hectare of land. The deployment of these resources is similarly limited. One barrel of crude cannot simultaneously heat thousands of homes and power millions of cars on different continents. Ideas and information, however, are radically different. An infinite number of people can access the same information and then use it in untold numbers of different applications all at the same time. And the accelerating pace of technological change drives down the costs of these information-based products — so far down indeed that some products (like many computer applications and a growing portion of online-education offerings) quickly become essentially free.
The fact that ideas can be shared equally in a way that material goods cannot, and the fact that technology increasingly makes ideas the drivers of our society and economy, means that our circumstances are more equal than the conventional income measures would suggest. And to the extent that inequality should be addressed through public policy, acknowledging these facts will help us craft more promising solutions — policies designed to increase innovation and improve education, rather than to simply transfer resources from one group to another. We would thus be better off thinking not of technology in light of inequality, but of inequality in light of technology.

And here are Professor McGinnis’s concluding thoughts:

Differences in income tell us less than they once did about differences in people’s real standards of living. And the immense potential of technology to reshape the lives of the rich and the poor simultaneously has yet to be fully understood and accounted for.
Even when we set out to examine technology and inequality together, we too often get things backwards, considering the effects of technology in terms of who has the money to access it. In reality, the most significant technologies of the past half-century have tended to make money less rather than more important, and have been available more widely, more quickly, than such valuable commodities have ever been before.
In our time, ideas increasingly matter more than things, and information is often more valuable than tangible property. Under such conditions, Americans from different walks of life and in different economic classes have an ever-stronger common interest in promoting innovation. A society with advancing technology is a society in which everyone may rapidly reap the bounty produced by the most talented and entrepreneurial among us. More than ever before, our economy can be a positive-sum game in which gains for some rapidly redound to the benefit of all.

Bottom Line: Professor McGinnis makes a very important contribution to the income inequality debate, summarized below in my words:

In today’s 21st century global information age, innovation, entrepreneurial capitalism, and advances in technology create more wealth for society’s most visionary and talented risk-taking entrepreneurs than ever before. The creation of enormous amounts of new entrepreneurial wealth is disproportionately today concentrated on the innovative genius class (Bill Gates, Mark Zuckerberg, Ted Bezos, Steve Jobs, etc.), which exacerbates inequality when measured by income or financial wealth. But the “continual stream of new ideas and products” that flows from innovation (Facebook, Amazon, Apple, Microsoft) are now “quickly enjoyed by everyone,” often because those new innovative goods and services “quickly become essentially free.”

Stated differently, at no other time in history have differences in monetary income told us less about differences in people’s real standards of living than in today’s information, digital age. Alternatively, at no other time in history has income inequality been more meaningless than in today’s innovation-filled world of advanced technologies and free or nearly free goods and services. Despite rising income or wealth inequality (if that’s true), consumption equality has probably never been greater than today. For example, there are almost no technologies that are available today to a billionaire like Warren Buffett or Tim Cook (computers, Internet, GPS, wireless, Facebook, Spotify, smartphones, Amazon Prime, Netflix, Google, etc.) that aren’t also available to the average person in America, often at a cost that is essentially free.

Thanks to Professor McGinnis for his excellent contribution to the debate on income inequality and its relationship to innovation and technology. According to Piketty, the concentration and unequal distribution of wealth leads to social and economic instability. Solution? Progressive wealth taxes to reduce inequality and prevent the vast majority of wealth coming under the control of a tiny minority. Understanding that the concentration of wealth or income can happen at the same time that consumption equality significantly increases, would suggest that progressive wealth taxes might be unnecessary. And when you consider that rising inequality from technological advances might actually be the driving force behind the equalization of consumption, imposing punitive taxes on the entrepreneurial forces driving innovation could actually backfire, and lead to an increase in consumption inequality."