Monday, May 29, 2017

"A Contemptible Democratical Oligarchy of Glib Economists:" Samuel Coleridge

Samuel Taylor Coleridge (1772-1834) is of course most famous for writing poems like "The Rime of the Ancient Mariner" and "Kubla Kahn,"  as well as hanging around with William Wordsworth and being one of the founders of the Romantic Movement in England, which glorified the emotions of individuals acting in the face of nature or historical settings. Thus, it's not a surprise that Coleridge was no fan of the then-budding discipline of economics, nor of modern commerce.

Here are a couple of passionately aimed shots he took at the subject, as described in the Letters, conversations and recollections of S. T. Coleridge. edited by Thomas Allsop. The first edition of the book was published in 1836, two years after Coleridge's death; the quotations here are from the third edition, published in 1864 (p. 73) and magically available through the Hathi Trust website. The comments are circa 1820. Here's are a couple of comments from Coleridge in full flight: 
"It is this accursed practice of ever considering only what seems expedient for the occasion, disjoined from all principle or enlarged systems of action, of never listening to the true and unerring impulses of our better nature, which has led the colder-hearted men to the study of political economy, which has turned our Parliament into a real committee of public safety. In it is all power vested; and in a few years we shall either be governed by an aristocracy, or, what is still more likely, by a contemptible democratical oligarchy of glib economists, compared to which the worst form of aristocracy would be a blessing."

"Commerce has enriched thousands, it has been the cause of the spread of knowledge and of science, but has it added one particle of happiness or of moral improvement? Has it given us a truer insight into our duties, or tended to revive and sustain in us the better feelings_of_our nature? No! no! when  I consider what the consequences have been, when I consider that whole districts of men, who would otherwise have slumbered on in comparatively happy ignorance, are now little less than brutes in their lives, and something worse than brutes in their instincts, I could almost wish that the manufacturing districts were swallowed up as Sodom and Gomorrah."

"The Most Unfeeling Thing I Know of is the Law of Gravitation:" Mill on Selfishness

One of the concerns sometimes raised about studying economics is that it tends to make you a more selfish person (for some discussion, see here and here). The great economist John Stuart Mill offered a memorable response to this concern in his "Inaugural Address Delivered to the University of St. Andrews," delivered on February 1, 1867, when he was appointed as Rector of the University (and available various places on the web like here and here, with the address starting on p. 643). I've broken the quotation into two paragraphs here, with most of the wallop arriving in the second paragraph. 
"Those branches of politics, or of the laws of social life, in which there exists a collection of facts or thoughts sufficiently sifted and methodized to form the beginning of a science, should be taught ex professo [that is, by an expert]. Among the chief of these is Political Economy; the sources and conditions of wealth and material prosperity for aggregate bodies of human beings. This study approaches nearer to the rank of a science, in the sense in which we apply that name to the physical sciences, than anything else connected with politics yet does. I need not enlarge on the important lessons which it affords for the guidance of life, and for the estimation of laws and institutions, or on the necessity of knowing all that it can teach in order to have true views of the course of human affairs, or form plans for their improvement which will stand actual trial. 
"The same persons who cry down Logic will generally warn you against Political Economy. It is unfeeling, they will tell you. It recognises unpleasant facts. For my part, the most unfeeling thing I know of is the law of gravitation: it breaks the neck of the best and most amiable person without scruple, if he forgets for a single moment to give heed to it. The winds and waves too are very unfeeling. Would you advise those who go to sea to deny the winds and waves—or to make use of them, and find the means of guarding against their dangers? My advice to you is to study the great writers on Political Economy, and hold firmly by whatever in them you find true; and depend upon it that if you are not selfish or hard-hearted already, Political Economy will not make you so."
An airline pilot who pays attention to the wind isn't "unfeeling," and neither is a boat captain who pays attention to the water.As economists are quick to note, recognizing the existence of scarcity, budget constraints, and incentives, and thinking about either how best to work within the available constraints or how best to relax those constraints, is not a matter of hard-heartedness.  It's a matter of caring enough about the actual problem at hand to face it honestly.

Saturday, May 27, 2017

Later School Starts for High School?

Would high school students learn more if school start-times were moved back? For example, the American Association of Pediatrics recommends that adolescents should have schedules that allow them to sleep until 8AM. Jennifer Heissel and Samuel Norris offer some actual evidence on the point in “Rise and Shine: The Effect of School Start Times on Academic Performance from Childhood through Puberty,” Journal of Human Resources, published online before print, April 19, 2017 (the abstract is here, but many readers will have access to the article through an institutional library subscription).

David Figlio has a nice overview at "Start high school later for better academic outcomes," a report posted at the Brookings Institution website (May 25, 2017). Rather than provide an inferior copy of his discussion (with includes mentions of some other evidence and a more in-depth discussion), I'll just offer some excerpts of his discussion of the Heissel and Norris paper.  Figlio writes:
"The authors focus their attention on the relationship between sunlight and sleep, and take advantage of the fact that the state of Florida, where they conduct their research, is divided into two time zones. The sun comes up an hour later, on the clock, in the Eastern Time Zone than a few miles west in the Central Time Zone, but schools only partially account for this difference when setting their start times, so, on average, students in the Central Time Zone in Florida have more than half an hour more sunlight before school starts than do their counterparts in the Eastern Time Zone, and some have an hour or more additional sunlight, depending on when school starts.
"One might be concerned that people living in different parts of Florida are somehow different in other ways as well, and Heissel and Norris are able to deal with this concern by concentrating on students who moved between time zones, while remaining in the northern part of Florida (typically called the Panhandle). Some students moved between the Eastern Time Zone and the Central Time Zone, thereby gaining extra sunlight in the morning before school, while others moved from the Central Time Zone to the Eastern Time Zone, thereby losing some sunlight before school starts. Their strategy, therefore, is to compare the same students’ test performance before versus after their cross-time zone moves. The authors found that people making these eastward and westward moves in the Florida Panhandle were similar across a large range of characteristics, and tended to follow similar over-time test score trends prior to their moves.
"What happens when children get an extra hour of sunlight before starting school? (The authors estimate the effect of each additional minute of pre-school sunlight, and I’m presenting the effects of a 60 minute difference for ease of explication.) If they are young, math scores are barely affected—the estimated score improvement is just one percent of a standard deviation—but reading scores increase by six percent of a standard deviation. But once they reach puberty (approximately at age 11 for girls and age 13 for boys) math scores improve by eight percent of a standard deviation and reading score improvements remain at six percent of a standard deviation. ...

"Heissel and Norris carried out a thought exercise in which, for every Florida panhandle school district, they assigned the school district’s earliest start times to elementary students, the middle start times to middle school students, and the latest start times to high school students. This calculation would move elementary school start times 22 minutes earlier, middle school start times 13 minutes earlier, and high school start times 44 minutes later, on average.
"Heissel and Norris estimate that making these scheduling switches would raise average math performance by six percent of a standard deviation and average reading performance by four percent of a standard deviation. While not earth-shattering performance changes, they are extremely impressive for a policy change that would cost school districts little to implement – and are approximately one-fourth the difference between an excellent-performing school and an average-performing school."
When I've heard discussions of later start times for high school, several issues usually come up. First, there is an aversion to having the youngest children start earlier. Frankly, this has always seemed a little odd to me. I've got no evidence on the point, but a lot of young children seem to wake up pretty early, and parents who are depending on school for child care have good reason to wish that their younger children were out the door a little sooner. Second, there's an argument that if the high school day starts later, it also needs to end later, which in turn means less time for high school sports and activities, or for after-school jobs. Third, there's an argument that lots of high school students are staying up until the middle of the night as it is, and if they can get up later, they will just stay up later.

"The American Academy of Pediatrics strongly supports the efforts of school districts to optimize sleep in students and urges high schools and middle schools to aim for start times that allow students the opportunity to achieve optimal levels of sleep (8.5–9.5 hours) ..."  But of course, getting a sufficient quantity of sleep is not just about school start times. It's about the outside-school load of homework, school activities, jobs, family life, social life--and about developing a habit where the regular bedtime is a hour or more before midnight, not after.


Friday, May 26, 2017

Algorithmic Pricing and Competition: The Small-Town Gas Station Example

An enormous number of pricing decisions in the modern economy, not only in financial markets but in many on-line markets in general, are facilitated by computer algorithms. Indeed, a market may include the interaction of several different computer algorithms from buyers, sellers, and market-makers. Maureen K. Ohlhausen, who is Acting Chairman of the U.S. Federal Trade Commission, asks "Should We Fear The Things That Go Beep In the Night?Some Initial Thoughts on the Intersectionof Antitrust Law and Algorithmic Pricing," in a speech given at the Concurrences Antitrust in the Financial Sector Conference on May 23, 2017. As as setting for her discussion of issue raised by algorithmic pricing, she offers a hypothetical example of small-town gas stations, which goes like this:
"I want you to imagine a small, rural town somewhere in the desert southwest. This little town is modest and utterly unremarkable in every way. But in the center of town, clustered around the only stoplight, are three gas stations. These three stations have the only gas for sale within 150 miles in every direction. The date is 1970, so this is a time with no internet, no personal computers, no cell phones, and certainly no algorithmic pricing. All three gas stations currently charge exactly the same price for a gallon of gas. Prices may go up and down as the wholesale price of gasoline moves, but all three stations generally charge identical prices, and have been charging essentially identical prices for years. 
"All of that is about to change. At 6:00AM one bright clear Monday morning, the owner of the first gas station gets out his ladder and leans it against the big price sign out front. He then climbs up the ladder and changes the price, making it five cents a gallon more expensive. Then he takes his ladder down, walks over to a lawn chair in the shade and sits down to have a cup of coffee. At 10:00AM, he gets the ladder back out and lowers his price back down five cents so his price is now the same as everybody else’s price. He repeats that same pattern of behavior every Monday morning. He never directly talks to his competitors about the prices he is charging or why he is doing what he did. 
"Has he violated the antitrust laws just by changing his price for four hours? If that is all he has done, the answer is no. Generally, firms are free to set whatever prices they choose, as long as they act independently. Nor would it be unlawful for one of the other gas stations to decide, on his own, to follow the lead of our analog-era friend with the ladder and start raising his own prices on Monday mornings. Even if all the stations in the town ultimately decide to follow the lead of the first station and raise prices five cents, then keep those high prices in place, the antitrust laws do not condemn this behavior. 
"So why don’t we enforcers take action in this situation to prevent conscious parallelism? The simple reason is that there is no sensible remedy here. In a free market, individual actors are free to set their prices on the basis of all the information legally available to them. It is axiomatic that we cannot tell firms to ignore the public behavior of their rivals when they set prices without deleting the “free” in free market. Enjoining this kind of behavior would inevitably lead to price regulation, which is completely inimical to the underlying purposes of the antitrust laws. Because we cannot police this sort of behavior directly, instead we try to make sure, primarily through our merger enforcement program, that the conditions that allow this kind of behavior to take place generally don’t arise in the first place. We also prohibit explicit agreements to set prices collusively and exchanges of competitively sensitive, non-public information between competitors. 
"Fortunately for all of us, there are many, many reasons why this kind of informal pricing interdependency frequently fails or breaks down in the real world. For example, when the products are highly differentiated, or the market participants have different cost structures, or transactions are relatively infrequent, it is very difficult to maintain stable, interdependent pricing just by watching the behavior of your rivals. So the specific facts of my gas station example are very important. 
"Everybody is selling the exact same commodity product. Transactions happen frequently, with each individual transaction relatively small and unimportant, so there is little risk of major losses associated with price leadership. Also, there are few participants in the market, making it easier to get to a point of tacit consensus. Finally, and most critically, there is complete price transparency because everybody can see the prices everyone else charges just by looking at those big signs. If we take away any one of those facts, the whole thing will generally fall apart on its own. For example, if firms could somehow secretly discount and steal market share from their rivals, they have a significant incentive to do that and so on. ...
"So while our friend with the ladder may eventually, informally lead everyone’s prices higher, things look a lot different from a legal perspective if he walks over to one of his competitors and starts talking to him about prices. Suddenly we now have conduct that has nothing to do with independently setting prices and reacting to market conditions. The policy considerations that tolerate unilateral but interdependent pricing no longer apply. Once competitors reach an agreement setting price or output, they are engaged in behavior with no social utility and an enforcement response by the government is warranted. So there is a critical legal difference between concerted behavior among competitors aimed at influencing prices and unilateral decision-making in light of observed market conditions. Setting prices together is illegal, while observing the market and making independent decisions is not." 

Ohlhausen uses the small-town gas station example to argue that the issues raised by algorithmic pricing are reasonably familiar, that similar issues have come up in well-known cases in the past, and so the antitrust authorities will have power to act if needed.

For example, one concern about algorithmic pricing is that the players in the market may use it as a way of colluding with each other behind the scenes, in a way that isn't easily visible in market prices. Ohlhausen points out that more than 20 years ago, back in 1993, airlines were using the information on-line reservation systems as a way of limiting competition, but the antitrust authorities and the courts had no trouble understanding the problem and addressing it. She writes: "This is because the type of technology used to communicate with competitors is wholly irrelevant to the legal analysis. Whether it is phone calls, text messages, algorithms or Morse code, the underlying legal rule is the same – agreements to set prices among competitors are always unlawful."

Ohlhausen proposes the "guy named Bob" rule: " "Everywhere the word `algorithm' appears, please just insert the words `a guy named Bob'. ... If it isn’t ok for a guy named Bob to do it, then it probably isn’t ok for an algorithm to do it either."

My sense is that Ohlhausen is surely correct about the underlying law here: that is, doing something with an algorithm does not offer any protection or immunity against antitrust rules. I also like the small-town gas station metaphor and the "guy named Bob" rule, as nice concrete ways of illustrating these issues. But I do worry that while algorithmic pricing doesn't alter the rules of antitrust, it may make collusion easier.

As one example, a few years back there was a scandal about the LIBOR benchmark interest rate (that is, London Interbank Offered Rate). The rate was set by having a number of big banks send in the interest rates they were being charged for borrowing. But it turned out that the individual actually submitting the rates were not sending actual numbers, but instead shading them up or down. As a result, the LIBOR would be a little higher or lower than it should have been. The effect was only a small amount for a short time, but LIBOR is linked to something like $300 trillion of financial instruments around the world, so a trader who knew that the rate was artificially high or low could find a way to cash in. This manipulation went on for years, and led to prosecutions at 15 major global financial institutions.

Yes, this particular case was eventually detected and prosecuted. But having algorithms ready to pounce on small and short-term movements in LIBOR clearly helped to facilitate the entire scheme. One wonders about the possibility of other cases, perhaps using market benchmarks or interest rates that are less prominent than LIBOR and involving far fewer participants, which are not detected. The problem here is not specifically algorithms, but rather that the internet offers lots of possibilities for those who wish to collude, and algorithms can make it easier to cash in on such collusion.

There are other cases where the algorithms themselves may become problematic. Algorithms are starting to offer the possibility of "personalized pricing," which refers to presenting online shoppers with a carefully designed series of options and prices and "if-you-buy-now" sales that--in combination with their past buying patterns and well-known behavioral biases--push that person toward a certain choice.

In other cases, as we move deeper into the world of big data and artificial intelligence, algorithms for buying and selling and setting prices are increasingly moving beyond basic rules, like buying only when a price falls below a certain level. Algorithms are now analyzing past patterns of players in the market, including how those player have reacted in the past, and then planning and implementing a potentially multi-step strategy. My guess is that some point there will be an antitrust case featuring the "algorithm defense," which basically says: "Hey, I just set up the smart learning algorithm and let it run. How could I know that it would interact with other smart learning algorithms in a way that led to collusion?" And the antitrust authorities (or other law enforcement) will need to argue that when a guy named Bob sets up and signs off on an algorithm, Bob needs to be personally responsible for what that algorithm does.

Wednesday, May 24, 2017

The State of Global Financial Integration

Before the Great Recession, cross-border financial assets were on the rise. Since then, the overall rise in cross-border assets has leveled off and the pattern of cross-border assets has shifted somewhat from international debt  to foreign direct investment--and also by the rise of global "financial centers." Philip R. Lane and Gian Maria Milesi-Ferretti lay out the patterns in "International Financial Integration in the Aftermath of the Global Financial Crisis," which appears as IMF working paper WP/17/115 (May 10, 2017). They summarize:
"In particular, we have shown how the very fast growth in cross-border positions in relation to global GDP has come to a halt since the financial crisis, reflecting both a retrenchment of cross-border banking activity and the increased weight of less-financially-integrated emerging and developing economies in global GDP. Across country groups, we have documented the disproportionate role played by financial centers—both small offshore centers and a few larger advanced economies—in total holdings, as well as the growing but still relatively modest role played by emerging and developing economies. Across financial instruments we have shown how the retrenchment in cross-border banking activity and the much more modest increase in portfolio positions relative to pre-crisis trends has been offset by rapidly increasing FDI [foreign direct investment] positions. These have reflected to an important extent claims on and from financial centers, where pass-through financial vehicles as well as the shifting domiciles of multinationals have played a crucial role."
Here's an illustrative figure of global financial external assets and liabilities. The height of the bars shows the rise up to 2007, and the leveling out since then. The colors of the bars show three categories, the fairly familiar categories of advances and emerging/developing countries, and the perhaps less familiar category of "financial centers," which in this paper includes "advanced economies with sizable financial center activity (Belgium; Hong Kong S.A.R.; Ireland; Luxembourg; Netherlands; Singapore; Switzerland; and the United Kingdom), emerging economies with similar characteristics (Mauritius and Panama) as well as small financial centers (such as Bermuda and the
Cayman Islands)." The authors note of these financial centers that "as of 2007, these accounted for close to 10 percent of world GDP but over 43 percent of global financial assets. By 2015, their share in world GDP had declined to 8 percent, but their global share of external assets remained around 43 percent."


When the authors look at these international asset holdings in more depth, holdings related to international banking and overall do debt are falling in recent years, but the level of asset holdings related foreign direct investment is rising. In turn, this offsetting rise in FDI seems to be driven in substantial part by activities occurring through the financial centers.  They write: 
We also document how cross-border FDI positions have continued to expand, unlike positions in portfolio instruments and other investment. This increase is primarily explained by FDI positions vis-à-vis financial centers, which include an important role for so-called special purpose vehicles. This suggests that the increased complexity of the corporate structure of large multinational corporations is playing an important role in this respect. ...

While most of the larger financial centers have important multinational corporations with
extensive cross-border activities, other factors play an important role in explaining both the size and composition of FDI claims and liabilities as well as their dynamics.
The first is the growing importance of Special Purpose Entities. These are legal entities with “little or no employment; or operations, or physical presence in the jurisdiction in which they are created by their parent enterprises which are typically located in other jurisdictions (economies)” (OECD, 2008). Such vehicles are used to raise capital or hold assets/liabilities and generally perform no production activities. Statistics on the relative importance of SPEs in total FDI are only available for a limited set of countries. Helpfully, those include the Netherlands and Luxembourg, which are the countries with the largest stocks of FDI claims and liabilities after the United States. The vast majority of their FDI claims and liabilities (over ¾ for the Netherlands and over 90 percent for Luxembourg) are indeed SPEs. Total FDI claims by SPEs for just these two countries have grown by over $3.5 trillion between 2007 and 2014—over ¼ of the increase in the stock of global FDI claims during the same period.
The second factor is the increased tendency of multinational companies to move their
domicile to a financial center. To the extent that the company is moving from a country
where it has larger production facilities than in the financial center this will generally
increase the stock of global FDI (think for instance of a U.S. pharmaceutical company with important local production facilities moving its headquarters to Ireland). In that case, global FDI would increase by the value of the U.S. production facilities minus the value of any facility previously located in Ireland. Indeed, the stock of FDI claims overseas by Ireland has increased by $600 billion between 2007 and 2014, and by that date it is over 5 times Irish GDP. The counterpart to an increase in FDI assets in the countries hosting re-domiciled firms is a matching increase in foreign portfolio equity liabilities, given that the underlying shareholders of the entities remain the same.
My own interpretation of these patterns is that the kind of foreign direct investment which involves a company taking real management interest in running a firm elsewhere, and which often involves transfers of skill and technology, may well be in decline. However, the kind of foreign direct investment that involves setting up foreign headquarters and foreign financial vehicles as a way of pushing back against tax and regulatory issues is on the rise. 

Tuesday, May 23, 2017

Meat Substitutes:Soy, Mealworms, and Crickets

Meat, and especially beef, has a heavy environment footprint by the time you take into account the farm products and land needed to produce it. In particular, if one looks out at the emerging and not-yet-emerging markets across the global economy, and start calculating what kinds of farm output would be needed for a large share of the world to have the meat consumption of high-income countries, it's hard to see how it would work. However, there are ongoing efforts to think about how one might increase world production of protein with a smaller environmental footprint.

For example, I've written before about "First Burger Grown from Stem Cells Served in London" (January 21, 2014). In "Tradeoffs of Cultured Meat Production" (May 16, 2016), I pointed to some studies suggesting that "carneries"--that is, factories that produce meat--could have a much smaller effect on land use and associated environmental costs than traditional meat production.

In a forthcoming issue of Global Food Security, Peter Alexander, Calum Brown, Almut Arneth, Clare Dias, John Finnigan, Dominic Moran, Mark D.A. Rounsevell ask the question: "Could consumption of insects, cultured meat or imitation meat reduce global agricultural land use?" A "corrected proofs" version article has been freely available online since April 22, 2017, but at some point when the article is published in the journal it will only be available through libraries and subscriptions. (The doi address will remain https://doi.org/10.1016/j.gfs.2017.04.001.)

Here's an illustrative figure from the paper. The top panel shows calories per unit of agricultural land; the bottom panel shows protein per unit of agricultural land. On both measured, beef is the lowest producer on the far right-hand side. The most efficient producer in both cases is soybean curd, followed by mealworm larvae and adult crickets. Cultured meat is in the middle of the pack, not too different from eggs, poultry, and pork.


As the authors note (citations omitted): "The results here assume that insect feed uses the same mix of feeds currently used for conventional livestock. However, if half of food discarded by consumers could be used as feed for mealworms, this would replace 8.1% of current animal production." 

From a US perspective, mealworms and crickets may not sound like culturally acceptable alternatives. But there are lots of places around the world where demand for calories and protein is rising sharply, and where eating insects or worms is, if not always common, by no means taboo, either. Perhaps more to the point, after a certain amount of processing, protein from mealworms or crickets may not look or taste all that different from the mystery meat that already shows up in a number of places. Nuggets are nuggets, right? 

Monday, May 22, 2017

Rising Job Tenure and Its Tradeoffs

Given the tumultuous changes in the US economy in recent years, I would have guessed that average "job tenure"--that is, the average time that someone with a job has held that job--was declining. My guess would have been wrong. Henry R. Hyatt and James R. Spletzer present the evidence that job tenure has been mostly on the increase since about 2000 in "Shifting Job Tenure Distribution" (U.S. Census Bureau, Center for Economic Studies, May 2016, CES 16-12R). For example, they write:
"According to published statistics from the Current Population Survey (CPS), the proportion of workers with five or more years of tenure on their main job has increased from 44% to 51% from 1998 to 2014, and the proportion of workers with one year or less of tenure on their main job has decreased from 28% to 21%. We document a similar shift in the job tenure distribution for the years 1998 to 2013 using LEHD [Longitudinal Employer-Household Dynamics] microdata, which is nearly identical to the CPS tenure distribution once differences between these source data are accounted for." 
Here are a couple of illustrative figures. The top panel shows median job tenure in the Current Population Survey data, going back to 1951. The bottom panel shows the share of jobs that fall into certain job tenure categories: for example, the top line shows the share of employed people who have held a job for at least five years.
Here's a figure based on the Longitudinal Employer-Household Dynamics data, which is a database in which state governments send administrative records about who works where to the US Census Bureau, which combines them in a way that preserves anonymity for workers and employers. The database covers 95% of private sector jobs. Again, you can see the rise in the share of jobs held for more than five years.


What's going on behind these numbers? Hyatt and Spletzer forthrightly answer: "While there is ample evidence that the labor market is shifting toward more stable jobs, the causes and consequences of declining dynamics and increasing stability remain unknown." But they do massage the data in way that offers some clues. For example, they note that older workers tend to have stayed at their jobs longer, and the US workforce is getting older. So they ask: To what extent does the rise in job tenure just reflect an older workforce? Or they note that the US economy has been experiencing a slowdown in the start-up rate of new companies for about 20 years now, so more workers are with older firms. Again, to what extent does the rise in job tenure reflect the the fact that US firms are older?

The answers to these questions vary with whether they are using Census or LEHD data, but in rough terms, the older workforce can explain about one-third of the rise in job tenure and the growing age of firms can explain about one-sixth of the change, but about half of the rise in job tenure is not explained by the factors they are able to consider.

There is a knee-jerk temptation to feel as if longer job tenure is likely to be a good thing--more stability for workers. But there are tradeoffs.

1) To the extent that longer job tenure is being driven by fewer start-ups and a smaller share of the US workforce being employed at new firms, it is clearly a mixed blessing.

2)The US labor market "churns," as economists sometimes say. There are always millions of people separating from jobs and being hired for new jobs. In good times, the new jobs outnumber the separations; in bad times, it's the reverse. But along with the lower rate of start-up companies, the US labor market has been less showing less churn in the last 15-20 years. Both rates of hiring and of separation rates dropped off for the first decade of the 2000s, although they have rebounded a bit since then. Of course, some of the reason that job separation rates fell around 2007 is that, in a weak economy, workers have a greater tendency to hold on to the job they've got. In addition, jobs where someone has just been hired are on average shorter-term, and so the drop in the hiring rate seems linked to longer job tenure. But of course, a less flexible job market with lower hiring rates is a mixed blessing, too.

3) The job tenure calculations are based on workers with jobs. Thus, a worker who is unemployed for  a time and then returns to the workforce in a new job will tend to reduce job tenure. But there has also been a decline in the US labor force participation rate--that is, a greater number of adults who don't have jobs and aren't looking for a job. I suspect that if some of of these people had stayed in the labor force, they might have been more likely to be moving in and out of various jobs, which would have pulled down the average job tenure.

4) One benefit of longer job tenure is that workers develop experience and skills which make them a good "match" for their employers, and thus enable them to get wage increases. But at least in the last 10 years or so, "The increase in average real earnings since 2007 is less than what would be predicted by the shift toward longer-tenure jobs because of declines in tenure-held-constant real earnings. Regression estimates of the returns to job tenure provide no evidence that the shift in the job tenure distribution is being driven by better matches between workers and employers." Of course, earnings after about 2007 are sharply affected by the Great Recession.

But overall, the picture that emerges is that job tenure rates aren't up because of workers who are more productively  matched to stable jobs. Instead, job tenure rates are up from a combination of a less dynamic economy and a less fluid labor market, combined with a Great Recession that caused more workers to cling to the job they had.