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In his State of the Union speech, President Trump said, “Since the election, we have created 2.4 million new jobs, including 200,000 new jobs in manufacturing alone.” Is the latter good news?

Politicians seem to have a fetish for manufacturing. But economists tend to be unconcerned about the composition of employment across sectors.

Proponents of the virtues of manufacturing believe governments should actively seek to encourage it, as manufacturing has historically enjoyed fast productivity growth. They bemoan the large fall in manufacturing employment since 1979, arguing that if more resources and employment had been directed to the sector, faster growth and higher living standards would have resulted.

A new paper by Robert Lawrence suggests this reasoning is precisely backward. His evidence suggests there is a direct tradeoff between manufacturing employment and productivity growth.

Suppose a new innovation trickles through the manufacturing sector, raising the productivity of workers. This increases supply. The extent to which these feeds through to higher output or lower prices depends on the elasticity of demand – i.e. the slope of the demand curve.

Lawrence suggests that for the manufacturing sector as a whole, demand is not very responsive to price changes. As prices fall in part due to fewer workers being needed to produce the same output, demand does not really change. Consumers pocket the savings and spend more on services. This is compounded by workers spending relatively more on services from higher incomes resulting from the productivity improvements.

As a result, between 1947 and 2017, the share of consumer spending going to goods has fallen from 62 to 33 percent. Similar declines in manufacturing employment have been seen across developed economies. And this is robust to trade patterns. Lawrence outlines “985,000 US manufacturing jobs estimated to have been lost due to Chinese imports between 1999 and 2011 represents less than a fifth of the total loss of over 5 million US manufacturing jobs over the same period.”

Why does this matter for Trump’s tweet? Well, because the uptick in manufacturing employment since 2010 actually has come during a period of slow manufacturing productivity growth. Between 2010 and 2016, output per full-time employee in manufacturing fell by 2.2 percent vs. growth of 4.3 percent between 2000 and 2010. Manufacturing prices actually rose relative to a general GDP deflator during this period. Given manufacturing demand is largely fixed and unresponsive, worse productivity means the need to employ more workers to keep a steady output.

This implies two things. First, that apparent manufacturing employment success may merely be a signal of a less innovative sector with weakened productivity. Second, even if government initiatives were successful in improving manufacturing productivity, this would not generate significant blue-collar employment.

Economist John R. Lott Jr. of the Crime Prevention Research Center released a working paper in which he purports to find that illegal immigrants in Arizona from 1985 through 2017 have a far higher prison admissions rate than U.S. citizens. Media from Fox News to the Washington Times and the Arizona Republic have reported on Lott’s claims while Attorney General Jeff Sessions and Representative Paul Gosar (R-AZ) have echoed them from their positions of authority. However, Lott made a small but fatal error that undermines his finding. 

Lott wrote his paper based on a dataset he obtained from the Arizona Department of Corrections (ADC) that lists all admitted prisoners in the state of Arizona from 1985 to 2017. According to Lott, the data allowed him to identify “whether they [the prisoners] are illegal or legal residents.” This is where Lott made his small error: The dataset does not allow him or anybody else to identify illegal immigrants.[i] 

The variable that Lott focused on is “CITIZEN.” That variable is broken down into seven categories. Lott erroneously assumed that the third category, called “non-US citizen and deportable,” only counted illegal immigrants. That is not true, non-US citizen and deportable immigrants are not all illegal immigrants. A significant proportion of non-U.S. citizens who are deported every year are legal immigrants who violate the terms of their visas in one way or the other, frequently by committing crimes. According to the American Immigration Council, about 10 percent of people deported annually are Lawful Permanent Residents or green card holders—and that doesn’t include the non-immigrants on other visas who were lawfully present in the United States and then deported. I will write more about this below. 

Lott mistakenly chose a variable that combines an unknown number of legal immigrants with an unknown number of illegal immigrants. Lott correctly observed that “[l]umping together documented and undocumented immigrants (and often naturalized citizens) may mean combining very different groups of people.” Unfortunately, the variable he chose also lumped together legal immigrants and illegal immigrants.

The criminologist who sent me the ADC data also sent along a more detailed dataset for the stock of prisoners in Arizona for June 2017. This newer dataset’s CITIZEN variable is just as unusable as the same variable in the 1985 to 2017 dataset but it has an additional variable that allowed us to somewhat better identify incarcerated illegal immigrants: whether the prisoner has an Immigration and Customs Enforcement (ICE) detainer. 

ICE sends detainers to correctional facilities to request that particular prisoners be released into ICE’s custody for deportation at the end of their sentences. ICE detainers are based on the strong suspicion that the prisoner is an illegal immigrant or a legal immigrant who violated the terms of his visa and is deportable. ICE detainers are far from perfect as ICE even occasionally deports American citizens. Although the ICE detainers in Arizona prisons overstate the number of illegal immigrants by including some folks who are legal immigrants, perhaps by quite a substantial amount, they are a somewhat narrower identifier than the variable that Lott used for the 1985-2017 ADC dataset.

In June 2017, 1,823 prisoners had ICE detainers out of 49,848 total prisoners in Arizona adult correctional facilities.[ii] According to this measure, the maximum percentage of illegal immigrants in Arizona prisons is about 3.7 percent of all prisoners. However, the ADC data is probably off. The public ADC website records only 42,200 prisoners, quite a bit fewer than the 49,848 in our dataset. We hypothesize that some prisoners were admitted to prison but never deleted from the database when the ADC released them. For instance, Arizona records one prisoner who was born on January 29, 1900. If not a typo, the oldest man in the world would be in the Arizona state prison system but it is more likely that his record was never deleted after his release.

Even if we assume that 100 percent of the prisoner overcount in the June 2017 ADC database were U.S. citizens, subtract them from the denominator, and leave the numerator that assumes that all prisoners with an ICE detainer were illegal immigrants, those illegal immigrants would still be a maximum of only 4.3 percent of all prisoners. In 2014, the last year for which Pew published its estimates of the illegal immigrant population by state, there were about 325,000 illegal immigrants in Arizona who comprised 4.9 percent of the state’s population. Since the population of illegal immigrants has held steady since then, the illegal immigrant incarceration rate was likely lower than their percent of the Arizona state population in 2017 (Figure 1). It is important to repeat that those with ICE detainers are not all illegal immigrants so the percentages in Figure 1 are the maximum possible shares of illegal immigrants in Arizona prisons in June 2017, depending on the two different estimates of the total size of the incarcerated population.

Figure 1

Illegal Immigrant Incarceration Rate and their Percent of the Arizona Population

Sources: Arizona Department of Correction, American Community Survey, and Pew Research Center.

The equivalent of the “non-U.S. citizens and deportable” variable in the June 2017 ADC database is called “criminal aliens,” another category that is not synonymous with illegal immigrants. In Arizona’s ADC regulations, the government first determines whether a prisoner is a criminal alien and then investigates whether he or she is an illegal immigrant. In June 2017, only 38.3 percent of criminal aliens had ICE detainers on them and, thus, were more likely to be illegal immigrants. As a back-of-the-envelope estimation, I assumed that 38.3 percent of “non-U.S citizens and deportable” are actually illegal immigrants in the ADC’s larger 1985-2017 dataset. This back-of-the-envelope calculation turns Lott’s finding on its head. Whereas he found that 11.1 percent of the admissions to Arizona prisons in 2014 were illegal immigrants, the real percentage is a maximum of 4.3 percent, below the 4.9 percent estimated illegal immigrant share of the state’s population. 

Lott’s controversial empirical findings regarding the high admission rate of illegal immigrants to Arizona prisons, a finding that contradicts virtually the entire body of research on the topic, stems from his simple misreading of a variable in the 1985-2017 ADC dataset. Lott thought that “non-U.S. citizens and deportable” describes only illegal immigrants but it does not. There is no way to identify illegal immigrants with precision in the 1985-2017 ADC dataset and their population can only be estimated through the residual statistical methods that Lott derides as “primitive.” Using another variable in the June 2017 ADC dataset that Lott did not analyze reveals that, at worst, illegal immigrants in Arizona likely have an incarceration rate lower than their percentage of that state’s population.

Special thanks to Andrew Forrester for his help with this blog post. 

[i] There is no reliable way to identify native-born Americans in the ADC datasets. 

[ii] There were detainers on 17 U.S. citizens and 33 legal immigrants who are non-deportable. Including them raises the number of prisoners with ICE detainers to 1,873 or 3.76 percent of all ADC prisoners in June 2017.

As we near the release of President Trump’s new budget, some of his proposals are leaking to the press. The Washington Post reports that the president will propose cutting renewable energy and energy efficiency subsidies by 72 percent. That would be a good start, although 100 percent would be better.

Spending for the Energy Department’s Office of Energy Efficiency and Renewable Energy (EERE) is set at $2.04 billion for the current fiscal year, which ends Oct. 1. Last year, the administration asked for $636.1 million, a decline of more than two-thirds, although Congress did not implement the request. For 2019, the administration’s draft proposal would lower that request even further, to $575.5 million.

We will see whether Congress goes along, but the story does show that, so far, Trump is siding with his conservative budget director, Mick Mulvaney:

The Energy Department had asked the White House for more modest spending reductions to the renewable and efficiency programs, but people familiar with the process, who spoke on the condition of anonymity to share unfinished budget information, said the Office of Management and Budget had insisted on the deeper cuts. …“It shows that we’ve made no inroads in terms of convincing the administration of our value, and if anything, our value based on these numbers has dropped,” said one EERE employee…”

Apparently, the White House budget office has concluded, as I have, that energy subsidies are a waste of money.

There is more good news from the Post:

The draft document says the administration will once again ask Congress to abolish the weatherization program … The budget proposal would also eliminate state energy grants. The budget would ax research in fuel efficient vehicles by 82 percent, bioenergy technologies by 82 percent, advanced manufacturing by 75 percent and solar energy technology by 78 percent.

The proposal would cut funds for electric car technologies and fuel-efficient vehicles—at $307 million currently the biggest of the program areas—to $56 million in 2019.

… The plan would also chop spending on more efficient building technologies and research into geothermal, hydro and wind power.

These cuts would be splendid, and straight from the DownsizingGovernment.org playbook.

Nonetheless, there has been some bad news on energy policy. Energy Secretary Rick Perry has tried to aid coal and nuclear at the expense of electricity consumers. Also, the administration supports the ethanol boondoggle, and it just imposed special taxes on solar panels. As for the president, he has been talking nonsense about “beautiful clean coal.”

Still, I’m looking forward to the spending cut proposals in the budget to be released February 12.

Meanwhile, you can read about energy subsidies here and proposals for federal spending cuts here.

Last week, Bartlesville, Oklahoma, police released video from a nighttime SWAT raid on the home of a man suspected of selling marijuana—yes, marijuana—during which officers fatally shot his mother, 72-year-old Geraldine Townsend, after she fired a BB gun at the officers. As he is being cuffed and dragged from the house, Mike Townsend can be heard pleading with the officers to let him see his dying mother, but they refuse.

In December, Wichita, Kansas, police received what turned out to be a prank call regarding a non-existent hostage situation at the home of Andrew Finch. When the 28-year-old father of two went outside to investigate the flashing emergency lights, SWAT officers yelled at him to “Show your hands” and “Walk this way.” Seconds later, one of the officers shot and killed him. Andrew Finch was unarmed.

That same month, a six-year-old San Antonio boy was killed by deputies who were shooting at a suspected car thief, also unarmed, on the front porch of the boy’s mobile home. Two weeks before that, former Mesa County, Arizona, officer Philip Brailsford was acquitted of murder for shooting an unarmed man, Daniel Shaver, as he begged for his life in the hallway of a motel. And back in July, Justine Damond was shot and killed by a Minneapolis police officer after she called 911 to report a possible sexual assault in the alley behind her house. Damond too was unarmed.

Lack of systematic record-keeping makes it difficult to quantify the scope of the problem with precision, but according to The Washington Post, of the roughly 1000 people shot and killed by police last year, at least seven percent were unarmed. A study by Vice News of all shootings by police, including non-fatal ones, suggests the numbers are even worse: 20 percent of people shot by police were unarmed.

No one denies that police have a difficult, dangerous, and sometimes scary job, nor should we forget the heroism of officers like those who threw themselves between citizens and mass shooter Micah Johnson during a Black Lives Matter rally in Dallas in July 2016. But the time has come for a national conversation about the risks we expect officers to take in order to avoid shooting innocent people like Andrew Finch, Daniel Shaver, and Justine Damond—and also to ensure that they avoid creating unnecessarily dangerous situations by staging gratuitous nighttime SWAT raids to serve low-level drug warrants.

More specifically, it is time to reconsider a legal rule called “qualified immunity” that holds police to a much lower standard of care than ordinary citizens.

We expect homeowners not to leave firearms where children can get at them, and we expect permit holders to exercise great care in deciding when to carry a gun and when to use it. One of the ways we send that message is through tort law, which enables people to sue for injuries caused by the negligence or intentional misconduct of others. Importantly, tort law creates positive incentives by holding professionals to a higher standard than others when acting in their field of expertise. Thus, the standard of care for doctors in medical malpractice cases is not that of a layperson, but of a reasonably prudent professional with the same training and experience.

Incredibly, the opposite rule applies to police officers, who, notwithstanding their greater training and experience, are held to a much lower standard than ordinary citizens in the use of force. That’s because the Supreme Court has effectively rewritten a federal law that makes police officers liable for violating “any right” so that they are instead only liable for violating rights that are “clearly established” in light of existing case law. While that may seem like a relatively minor tweak, it is anything but—indeed, the Supreme Court has emphasized that the practical effect of this so-called qualified immunity doctrine is to protect “all but the plainly incompetent or those who knowingly violate the law.” That is a breathtakingly low standard, and patients would flee from a hospital that expected no more from its doctors.

Going back to the shooting of Andrew Finch, we can see how better incentives might have prevented that tragedy. First, “swatting” is a well-known practice whereby someone calls in a fake emergency in the hopes of unleashing heavily armed police on an unsuspecting victim. Properly trained officers would take this into account in responding to calls like the one that led to Mr. Finch’s death. Second, officers would recognize that the many advantages they possess over laypersons, in this case more training, powerful weapons, and strength in numbers, translates into a duty of greater care, not less. An ordinary citizen who shot Mr. Finch under similar circumstances would not only be facing a ruinous civil suit but would almost certainly be charged with criminally negligent homicide. Finally, proper financial incentives would better motivate police departments to weed out officers who are not suited to their duties. For example, Philip Brailsford, the Arizona officer who shot and killed Daniel Shaver, had the words “You’re f*cked” etched onto his police-issued rifle. That should have been a red flag that he lacked the temperament for a job requiring good judgment and self-restraint under pressure.

There is no magic solution to the problem of police shooting unarmed citizens or creating needlessly hazardous situations by invading people’s homes in the middle of the night. But a good start would be for the Supreme Court to reverse its ill-advised foray into policymaking by abandoning qualified immunity and ensuring that police officers are held to the same standard of care as other professionals. In doing so, the court would embrace a key precept of the medical profession: First, do no harm.



As a general matter, governments are poorly managed compared to businesses in competitive markets. They tend to spend money on low-value activities, put up with sloth and waste, and follow failed policies for years without a course correction. I have examined the structural causes of federal waste and mismanagement in studies on Congress and the executive branch.

Many of the federal government’s structural problems also bedevil state governments. Yesterday, a Washington Post editor, Gene Park, described some of the dysfunction in Hawaii’s government that led to the false missile alert last month.

I could not figure out whether Park was mainly blaming institutional problems—such as union job protections—for government failures, or whether he was blaming the general culture of Hawaii and its government.

Certainly, the two factors are related. Flawed institutions such as labor unions create bad incentives and spawn a culture of waste. I would guess that people are similar everywhere, but different institutions across societies have shaped differing cultures or general behaviors. Of course, within societies people have many different personality traits, and governments likely attract workers seeking an environment of high job security and low performance expectations.

Is Hawaii’s government more mismanaged than other state governments? If so, is it because high unionization and other features of its government have created bad incentives, or is it because people in the state hold attitudes that undermine government efficiency?

Anyway, see what you think about Park’s article. Here are some excerpts:

This past week, we learned that the man responsible for the bogus Hawaii missile alert last month had kept his job for a decade, even though he had a history of performance problems and had been “a source of concern,” according to a Federal Communications Commission report. His fellow employees had expressed discomfort about his work, and the FCC said that he was “unable to comprehend the situation at hand and has confused real life events and drills on at least two separate occasions.” Although the emergency management worker, who remains unnamed, was a union member, he could’ve been fired at will. “Why, then,” Gizmodo understandably wondered, “was the employee in a position to send a false missile alarm to a couple of million people?”

As we say in the islands, e komo mai (welcome) to Hawaii.

I worked as a Hawaii state employee for a short time, serving as spokesman for a division of the Hawaii Department of Commerce and Consumer Affairs, and then spent more than seven years dealing with the government as a journalist. Anyone who knows how Honolulu functions can’t have been surprised by the FCC’s revelations. The sad part is that the worker’s ineptitude and the chaos he caused have exposed to the world old, ugly tropes about Hawaiian accountability and competence that residents would love nothing more than to shake off. “How many more non effective employees are on the job here in Hawaii?” asked a local on Hawaii News Now’s Facebook page.

There’s a strong assumption in the islands that once you enter the state government system, you’re set for life. … The prevailing notion is: You don’t have to work that hard.

And there is often no cost for screwing up. Vern Miyagi, the emergency management chief who resigned in the wake of the FCC report Tuesday, had made his reluctance to fire the alert author clear: “You’ve got to know this guy feels bad, right? I mean, he’s not doing this on purpose.” …

Culturally, Hawaii tends to reward seniority, not competence. Careers often advance only when incumbent workers resign or die. …

That’s a sentiment young people (and apparently 54-year-old members of Congress) hear often in Hawaii. The author of that 2006 newspaper column rued how “local values” insist on deference and conformity. …

I often heard residents of my old state parrot a Japanese saying: The nail that sticks out gets hammered down. And people who want reform, or just want to try something new, hear a common refrain in Hawaii’s private and public sectors: “That’s not how things have been done before.” Play your role, and you’ll be rewarded when you’re good and old.

That attitude has consequences. The FCC report shows it was no secret that the missile alert’s author was inept. Yet he somehow landed the critical job of telling an entire state whether its people could die in a nuclear blast. While 10 years passed, his supervisors did nothing to remove him from a job they knew he was unqualified for, nor did they implement procedures for what to do if someone accidentally sent a missile alert. It took a national embarrassment to dislodge him from his job.

More on the causes of government failure here and here.