French President Emmanuel Macron’s ambitious goal of creating a vibrant and competitive French economy through major economic reforms came crashing down last week when riots over issues ranging from fuel taxes to inequality forced him to backpedal on some of his key reform ideas.

With an approval rating of around 20 percent and plummeting, Macron shifted from a market reformer to a populist in order to ameliorate angry voters.

Shortly after reducing taxes and regulations on businesses while at the same time weakening some of Europe’s strongest employment protection rules, Macron capitulated to protesters by increasing the minimum wage through a government-funded wage subsidy, eliminating taxation of overtime pay and by rescinding a tax increase on low-income pensioners.

It is doubtful that Macron could have retained his presidency by doing any less. The cost of this newfound populism will be about 0.4 percent of French GDP, which may strain France’s ability to maintain a fiscal deficit within the prescribed limits of the eurozone.

Macron’s proposals to strip away decades of sclerotic economic policies is spot on, and the recent protests clearly threaten his broader agenda of increasing the efficiency and competitiveness of France.

There is virtually universal agreement among economists that France desperately needs economic policy reforms to increase job creation and economic growth and to reduce unemployment that has stubbornly remained around 9 percent 10 years after the financial crisis.

In comparison, German unemployment is now 3.4 percent, down from roughly 8 percent during the financial crisis.

France has long been the poster child of economic policies that have depressed competition, raised costs, reduced productivity growth and that have created regulations that benefit very few while significantly harming many.

With youth unemployment hovering near 20 percent or more for most of the last 35 years, the last thing France should do is destroy job opportunities for young people. But this is exactly what France did for years through a morass of driving school regulations that raised the cost of driver training to a cost between $2,000 to $4,000.

Poorly-designed economic policies have had an enormous negative impact on the French economy. Since 2000, economic growth in France has averaged a shade over 1 percent per year, and is averaging only about 0.5 percent per year after adjusting for population growth.

The Heritage Foundation’s Economic Freedom index ranks France 71st, slightly ahead of Tonga and other very poor countries but behind Albania, which is not exactly the pinnacle of economic success, having recently borrowed $400 million from the International Monetary Fund to shore up its economy.

Punitive tax policies and poor economic performance have led many of France’s best and brightest to leave. In 2017, Macron campaigned for the presidency in London, of all places, which is home to 300,000 French citizens, more than the number who live in the French regions of Bordeaux or Nantes.

Today’s grossly inadequate economic performance is inconceivable when viewed from the perspective of France’s former economic heights. Between World War II and the mid-1970s, France was one of the world’s most successful economies.

Real GDP growth averaged 5 percent per year at that time. Real GDP per person — the conventional measure of living standards — was doubling every 17 years. At today’s miniscule growth rate, it will take 140 years for French per capita real GDP to double.

Macron and his advisers now face the difficult task of convincing voters to trust market-based economic reforms that will require some short-term sacrifice in order to achieve higher long-run growth. France grew so quickly after World War II through the 1970s because the French chose to make those short-term sacrifices.

The share of output devoted to consumption fell substantially, and the share devoted to investment rose by 50 percent during France’s postwar economic renaissance. These investments significantly increased worker productivity and French competitiveness in the rapidly expanding global economy.

French workers, who today are perceived to enjoy more vacation time than workers in any other country, worked as much as 46 hours per week, and 50 weeks per year, in the 1950s. Today, the French work 40-percent less than they did back in the day, reflecting a smaller proportion of the population working, as well as a much shorter workweek.

This enormous decline in market work is not because today’s French workers value leisure more than their grandparents. Rather, it is because tax rates are much higher than when their grandparents worked, and these higher taxes have depressed the incentive to work.

To restart his reform program that includes reforming the complicated French pension system as well as reducing government spending, Macron must regain the confidence of French voters for them to accept the short-term economic sacrifices and dislocations that will ultimately create higher economic growth.

With Macron’s economic reforms in place, French GDP growth could increase from its current rate of 1 percent per year to 3 percent per year for several years.

It has been nearly two generations since France offered its workers and businesses a vibrant and flexible market economy. Most French voters have never lived in such an economy. Some are skeptical whether they will benefit from Macron’s reforms, and others simply don’t know.

Macron’s ability to govern France and to implement his economic reforms no longer depends on the quality of his economic ideas. Rather it depends on his skills as a salesman of those ideas. And if Macron succeeds, France can look forward to a much brighter economic future.

 

 

On Friday, November 30^th, the California Policy Lab (CPL) hosted colleagues from the law enforcement and research communities for a conference on policing innovation and reform. Over the course of the day, participants heard from local and national law enforcement leaders, researchers, practitioners, and subject matter experts about the challenges of implementing policing reform on the ground, how they measure success, and how they develop evidence to guide future policy decisions.

The day began with opening remarks from CPL-UCLA’s Executive Director, Janey Rountree, and UCLA’s Dean of Social Sciences, Darnell Hunt. Both spoke about the critical need for partnerships between practitioners and researchers to catalyze innovation in policing. Their comments set the stage for the conference’s first panel, which highlighted examples of successful partnerships, entitled “Collaborative Research Partnerships: Leveraging Data and Science to Inform Policing Innovations”.

During the first panel, participants heard first from Chief Jonathan Lewin, of the Chicago Police Department’s Bureau of Technical Services. Chief Lewin discussed the transformational impact of Chicago’s Strategic Decision Support Centers—rooms in which police officers and analysts work together to use insights from data analysis to target resources for preventing gun violence. The Cook County State Attorney’s Office also shared their experience partnering with the research community, by discussing the launch of a new data portal to advance transparency and the creation of “Hacking for Justice” trainings. Participants also heard from Kristen Mahoney, Deputy Director for Policy at the Department of Justice (DOJ)’s Bureau of Justice Assistance. Deputy Director Mahoney shared lessons from DOJ’s Public Safety Partnerships program, including the importance of exchange programs for law enforcement to learn about new tools for improving crime fighting. Finally, CPL affiliates Dr. Steven Raphael of UC Berkeley and Dr. Aaron Chalfin of the University of Pennsylvania shared findings from their research on foot beats in San Francisco, and police pursuits in Los Angeles, respectively.

Following the first panel, a distinguished group of Police Chiefs assembled during for a lunchtime session about the challenges and opportunities encountered by leaders in the field of policing. Superintendent Eddie Johnson from the Chicago Police Department spoke about strategies for improving morale and building community trust, emphasizing the importance of showing personnel you care through action, and of taking time to listen to divergent perspectives. Chief Anne Kirkpatrick of the Oakland Police Department also spoke about the role of leadership in strengthening community trust, noting for the audience that “Leadership is about followership. People follow leaders. They obey rank, but rank is not leadership”. Additionally, Deputy Chief of the Los Angeles Police Department (LAPD), Sean Malinowski spoke about LAPD’s experience working with CPL on quick turnaround projects that have a meaningful impact on the Department’s policies and operations.

The second session of the day focused on building for the future, highlighting strategies for improving hiring, training, and officer support. The session opened with a presentation by Lizzie Peters of the London Mayor’s Office for Policing and Crime (MOPAC). Peters spoke about supporting the professionalization of policing, including MOPAC’s efforts to put evidence-based practices into action. Dr. Jyoti Belur of the UCL Institute for Global City Policing also discussed best practices in police training, and in particular, efforts to ensure that police departments are representative of the communities they serve. CPL-UCLA’s own Nefara Riesch presented next on her research with CPL Affiliate Dr. Elizabeth Linos. Their research on LAPD recruitment demonstrated that applying insights from behavioral science to communications with candidates can make an impact on persistence in police hiring processes—an important finding as departments focus on recruiting and retaining the next generation of talent. Additionally, participants heard from Superintendent Richard Smith of the London Metropolitan Police Services about his work building the case for direct entry into leadership roles in British policing. Dr. Steven Sultan of the Los Angeles Sheriff’s Department provided final remarks and shared his perspective on the unique benefits of embedding psychological services within law enforcement agencies.

The day’s final session built on the sessions preceding it, with a panel on strategies to measure, improve, and earn public trust and cooperation. Superintendent Jon Simpson of the London Metropolitan Police Services discussed how surveying community members can improve customer service in policing, through their “Rate Your Police Constable” program. Next, Sujeet Rao of Elucd shared his work using technology to measure public sentiment in partnership with police departments. Following this, participants heard from Dr. Emily Owens of the University of California, Irvine about promising findings from her research on the impact of supervision on reducing officer use of force. Additionally, Dr. Rebecca Neuster of the Vera Institute discussed Compstat360, a tool used by law enforcement that integrates data-driven crime monitoring with community needs and feedback. Finally, San Francisco’s District Attorney, George Gascon, offered his views on how police departments can better empathize with community members, by understanding how certain actions might be perceived as oppressive.

The conference concluded with remarks from LAPD Police Chief Mike Moore, who emphasized that “academic relationships are what we [law enforcement] need”. Indeed, the sessions throughout the day made this case, showcasing the tremendous potential inherent in partnerships between the research and law enforcement communities. Given the vital work done by law enforcement every day, and the critical lens through which this work is viewed, this type of collaboration is now more important and urgent than ever before.

A recent article in Bloomberg Opinion has cited a new study by UCLA Department of Economics Professor Martin Hackmann and University of Georgia professor Vincent Pohl.

According to Bloomberg:

The study uses comprehensive data on 1.4 million skilled nursing-home stays between 2000 and 2005 in California, New Jersey, Ohio and Pennsylvania. It takes advantage of two facts. First, Medicaid payment rates to nursing homes tend to be lower, by about 20 percent in the sample used, than private payers’. Second, Medicaid patients generally have minimal or no cost-sharing for nursing-home stays, whereas private payers typically have significant cost-sharing, so the incentives for consumers are much different depending on whether Medicaid is paying or not.

The study reaches three core conclusions. First, nursing homes are more likely to discharge Medicaid patients (for whom they receive lower payments) when they are at or near capacity than when they are not. The financial incentives thus seem to influence provider behavior: Nursing homes discharge Medicaid patients to make room for better-paying private patients, unless they have enough room for both.

Second, earlier discharges of Medicaid patients when nursing homes are full don’t seem to harm the patients — in terms of mortality, rehospitalization or other measures. The implication is that many nursing-home stays are unnecessarily long, since earlier discharge doesn’t carry negative consequences and since Medicaid patients are held longer when other beds are available at the nursing home. (One could perhaps argue that the evidence just shows that nursing homes are properly discharging patients only when they’re ready, but the authors try to adjust for this possibility in various ways. Fundamentally, Medicaid patients are unlikely to become magically healthier just as other available beds in the facility disappear.)

Third, the authors extrapolate from their statistical analysis to assess changes in both provider incentives and consumer cost-sharing. In particular, they examine increasing costs for patients. They then compare the impact to a change in how the nursing homes are paid, moving partially away from the current structure of a payment per day (which encourages longer stays) and instead making part of the payment a lump sum per admission. As they conclude: “providers react more elastically to financial incentives than patients, so moving to episode-based provider reimbursement is more effective in shortening Medicaid stays than increasing resident cost-sharing.”

Professor Dora Costa, Chair of UCLA’s Economics Department & Kenneth L. Sokoloff Chair in Economic History, was recently featured in The Atlantic for her paper, “Intergenerational transmission of paternal trauma among US Civil War ex-POWs.”

According to The Atlantic:

The most recent [article] is a new study in the Proceedings of the National Academy of Sciences this week by researchers from [UCLA’s Department of Economics]. They found that the sons of Union Army soldiers who endured grueling conditions as prisoners of war were more likely to die young than the sons of soldiers who were not prisoners. This is despite the fact that the sons were born after the war, so they couldn’t have experienced its horrors personally. In other words, it seemed like the stresses of war were getting passed down between generations.

“By no means is it saying that whenever there’s trauma, that means it’s going to be transmitted,” Dora Costa, the lead author of the Civil War study and an economist at UCLA, told me. “The epigenetic story is optimistic because it allows for the possibility of reversibility through maternal nutrition.”

In addition to having her research publicized in The Atlantic, Professor Costa has also been cited by the Los Angeles Times, El Pais, and the ars TECHNICA.