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Actually, this is a tale of three versions of the same chart. The first one comes from John Taylor and shows fixed investment plotted against unemployment from 1990 to the present:

This is a very striking correlation, and Taylor jumps to an immediate conclusion, namely that “the most effective way to reduce unemployment is to raise investment as a share of GDP.” Because of this, he applauds the recent move to “lighten up on the anti-business sentiment coming out of Washington.” But Justin Wolfers isn’t so sure. Why start at 1990? What happens if you use the full time series all the way back to 1948? You get this:

Wolfers concludes that Taylor’s correlation is spurious, “advocacy, dressed up as science.” If you look at a longer timeframe, there’s virtually no correlation at all.

But Paul Krugman thinks the 1990-2010 data is worth looking at. However, after decomposing it, he concludes that the recent plunge in fixed investment is mostly due to the collapse of the housing bubble. Business investment isn’t doing badly at all — and in any case, surely the causation runs in the other direction, with unemployment affecting investment? So he flips the axes, replots the data to look at business investment only, and then Brad DeLong dresses up the chart a bit. Here’s what he gets:

Brad’s conclusion: not only is business investment a “bit stronger” right now than you’d expect from the data, it’s “substantially stronger. 2% of GDP stronger — that’s $300 billion a year more in business investment than we would have expected to see with the unemployment rate this high.”

Interesting! But I have an entirely different question. First: why did the correlation change so dramatically right around 1990 or so? Second: why did it apparently change again right around 2009? Brad attributes the 2009 break to changes in policy:

Had there been no fiscal and banking rescue policies and if investment had not been boosted by policy, the unemployment rate might as a result be at the 16% of the Blinder-Zandi Republican policy baseline, and only THE ONE WHO IS knows how low business investment spending would be — but it would surely be a lot lower than it is now.

But what about the break around 1990? What accounts for that? Or, perhaps more pertinently, what was it about 1990-2007 that was different from both the period before and after?

UPDATE: Possible answer here!

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WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

If you can, please support the reporting you get from Mother Jones—that exists to make a difference, not a profit—with a donation of any amount today. We need more donations than normal to come in from this specific blurb to help close our funding gap before it gets any bigger.

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