Alex Tabarrok

Fresh off his defeat (according to me!) in the signaling battle, Tyler is on fire in the rematch. Some heavy blows are thrown in our battle over artificial intelligence and the future of jobs. Is there a knockout? You be the judge! Either way, I guarantee a better debate than any you have seen recently.

Why do left wing governments sometimes support policies which harm their constituents? In A Theory of Political Entrenchment Gilles Saint-Paul, Davide Ticchi and Andrea Vindigni offer an answer:

A partially self-interested left-wing party may implement (entrenchment) policies reducing the income of its own constituency, the lower class, in order to consolidate its future political power. Such policies increase the net gain that low-skill agents obtain from income redistribution, which only the Left (but not the Right) can credibly commit to provide, and therefore may help offsetting a potential future aggregate ideological shock averse to the left-wing party.

The basic idea may also be put this way.  A left wing government might not want to pass policies to educate the masses or open markets to small business firms because such policies are likely to be successful and in the process create a class of skilled workers and petty bourgeoisie who will vote against the left-wing party and its policies of income redistribution. By keeping its constituents poor, the left-wing party keeps its constituents beholden because only the left-wing party will support income redistribution.

The left-wing party might even pass policies that the right-wing party wants in order to build its own future power base. The authors give the example of the Democrats under Bill Clinton supporting NAFTA which may have harmed the left-wing constituency of labor. The authors show, moreover, that the effect is likely to be bigger the bigger are political rents and the more stable are political careers. In other words, Bill Clinton passed NAFTA so that Hillary Clinton could run against it. An interesting idea if not wholly convincing.

Hat tip: Nicholas Tabarrok

Taking a test on a hot and polluted day can result in a measurably lower score which, if the test is for something like a university entrance exam, can have permanent consequences. I find both of these results hard to believe which doesn’t necessarily mean that they shouldn’t be believed.

Heat Stress and Human Capital Production by Jisung Park

How does temperature affect the human capital production process? Evidence from 4.6 million New York City high school exit exams suggests that heat stress on exam days reduces test scores and educational attainment by economically significant magnitudes, and that cumulative heat exposure during the school-year prior may affect the rate of learning. Taking an exam on a 90°F day relative to a 72°F day leads to a 0.19 standard deviation reduction in exam performance, equivalent to a quarter of the Black-White achievement gap, and a 12.3% higher likelihood of failing an exam. Teachers clearly try to offset the impacts of exam day heat stress by selectively boosting grades just below passing thresholds, while existing air conditioning seems to have a limited protective effect.  These findings may have implications for estimating the social cost of carbon, for designing education policy, and for understanding of climate in explaining income gaps across individuals and nations.

The Long-Run Economic Consequences of High-Stakes Examinations: Evidence from Transitory Variation in Pollution by Avraham Ebenstein, Victor Lavy and Sefi Roth.

Cognitive performance during high-stakes exams can be affected by random disturbances that, even if transitory, may have permanent consequences. We evaluate this hypothesis among Israeli students who took a series of matriculation exams between 2000 and 2002. Exploiting variation across the same student taking multiple exams, we find that transitory PM2.5 exposure is associated with a significant decline in student performance. We then examine these students in 2010 and find that PM2.5 exposure during exams is negatively associated with postsecondary educational attainment and earnings. The results highlight how reliance on noisy signals of student quality can lead to allocative inefficiency.

Power Poses Are Dead

by on September 26, 2016 at 3:11 pm in Economics, Science | Permalink

wonder-woman-power-poseDana Carney one of the co-authors of the famous paper (462 citations) that led to the famous TED talk (36 million views) and innumerable articles in the popular press on “power poses” (e.g. This Simple ‘Power Pose’ Can Change Your Life And Career) writes that after reviewing the evidence:

    1. I do not have any faith in the embodied effects of “power poses.” I do not think the effect is real.
    2. I do not study the embodied effects of power poses.
    3. I discourage others from studying power poses.
    4. I do not teach power poses in my classes anymore.
    5. I do not talk about power poses in the media and haven’t for over 5 years (well before skepticism set in)
    6. I have on my website and my downloadable CV my skepticism about the effect and links to both the failed replication by Ranehill et al. and to Simmons & Simonsohn’s p-curve paper suggesting no effect. And this document.

This cannot have been easy to write. Bravo.

Anti-mind, anti-man, anti-life

by on September 24, 2016 at 7:30 am in Medicine, Religion, Science | Permalink

Curing disease is good, right? No. Jemima Lewis, writing in the Telegraph, says curing disease is a sickeningly bad idea:

…the Zuckerberg-Chans have the most ambitious vision yet: developing new technologies and medicines to tackle every disease ever invented.

We’d better hope they don’t succeed. What would it do to the human race if we were granted eternal health, and therefore life? Without any deaths to offset all the births, we would have to make room on earth for an extra 208,400 people a day, or 76,066,000 a year – and that’s before those babies grow old enough to reproduce themselves.

Within a month of Mr Zuckerberg curing mortality, the first wars over water resources would break out. Within a year, the World Health Organisation would be embarking on an emergency sterilisation programme. Give it a decade and we’d all be dead from starvation, apart from a handful of straggle-bearded tech billionaires, living in well-stocked bunkers under San Francisco.

I’m shocked that anyone can write such depraved things in a major newspaper. In a decent culture this kind of thing would be relegated to some sick corner of the dark web. I suppose I shouldn’t be surprised, however. Ayn Rand villains exist. Look around.

The Decline of Car Culture

by on September 23, 2016 at 2:52 pm in Data Source, Travels | Permalink

UMTRI: About 87 percent of 19-year-olds in 1983 had their licenses, but more than 30 years later, that percentage had dropped to 69 percent. Other teen driving groups have also declined: 18-year-olds fell from 80 percent in 1983 to 60 percent in 2014, 17-year-olds decreased from 69 percent to 45 percent, and 16-year-olds plummeted from 46 percent to 24 percent.

Cars used to represent freedom. Today WiFi does. The decline of young drivers is likely another reason the roads are getting safer.

Hat tip: @counternotions.

Addendum: Steven Kopits argues (youtube) that this has more to do with lack of employment of young people than with a change in culture.

This Andrew Gelman post on the replication crisis and the role that blogs have played in generating that crisis starts off slow but just builds and builds until by the end it’s like holy rolling thunder. Here is just one bit:

Fiske is annoyed with social media, and I can understand that. She’s sitting at the top of traditional media. She can publish an article in the APS Observer and get all this discussion without having to go through peer review; she has the power to approve articles for the prestigious Proceedings of the National Academy of Sciences; work by herself and har colleagues is featured in national newspapers, TV, radio, and even Ted talks, or so I’ve heard. Top-down media are Susan Fiske’s friend. Social media, though, she has no control over. That’s must be frustrating, and as a successful practioner of traditional media myself (yes, I too have published in scholarly journals), I too can get annoyed when newcomers circumvent the traditional channels of publication. People such as Fiske and myself spend our professional lives building up a small fortune of coin in the form of publications and citations, and it’s painful to see that devalued, or to think that there’s another sort of scrip in circulation that can buy things that our old-school money cannot.

But let’s forget about careers for a moment and instead talk science.

When it comes to pointing out errors in published work, social media have been necessary. There just has been no reasonable alternative. Yes, it’s sometimes possible to publish peer-reviewed letters in journals criticizing published work, but it can be a huge amount of effort. Journals and authors often apply massive resistance to bury criticisms.

If you are interested in the replication crisis or the practice of science read the whole thing.

Aside from the content, I also love Gelman’s post for brilliantly mirroring its metaphor in its structure. Very meta.

Discrimination is costly, especially in a competitive market. If the wages of X-type workers are 25% lower than those of Y-type workers, for example, then a greedy capitalist can increase profits by hiring more X workers. If Y workers cost $15 per hour and X workers cost $11.25 per hour then a firm with 100 workers could make an extra $750,000 a year. In fact, a greedy capitalist could earn more than this by pricing just below the discriminating firms, taking over the market, and driving the discriminating firms under. The basic logic of employer wage discrimination was laid out by Becker in 1957. The logic implies that discrimination is costly, especially in the long-run, not that it doesn’t happen.

discriminationA nice test of the theory can be found in a paper just published in Sociological Science, Are Business Firms that Discriminate More Likely to Go Out of Business? The author, Devah Pager, is a pioneer in using field experiments to study discrimination. In 2004, she and co-authors, Bruce Western and Bart Bonikowski, ran an audit study on discrimination in New York using job applicants with similar resumes but different races and they found significant discrimination in callbacks. Now Pager has gone back to that data and asks what happened to those firms by 2010? She finds that 36% of the firms that discriminated failed but only 17% of the non-discriminatory firms failed.

The sample is small but the results are statistically significant and they continue to hold controlling for size, sales, and industry.

As Pager notes, the cause of the business failure might not be the discrimination per se but rather that firms that discriminate are hiring using non-rational, gut feelings while firms that don’t discriminate are using more systematic and rational methods of hiring.

As she concludes:

…whether because of discrimination or other associated decision making, we can more confidently conclude that the kinds of employers who discriminate are those more likely to go out of business. Discrimination may or may not be a direct cause of business failure, but it seems to be a reliable indicator of failure to come.

The Department of Justice has sent a letter to UC Berkeley threatening a lawsuit unless the university modifies all of its free online educational materials to meet conditions of accessibility. In response the Vice Chancellor for Undergraduate Education writes:

…we have attempted to maximize the accessibility of free, online content that we have made available to the public. Nevertheless, the Department of Justice has recently asserted that the University is in violation of the Americans with Disabilities Act because, in its view, not all of the free course and lecture content UC Berkeley makes available on certain online platforms is fully accessible to individuals with hearing, visual or manual disabilities.

…We look forward to continued dialog with the Department of Justice regarding the requirements of the ADA and options for compliance. Yet we do so with the realization that, due to our current financial constraints, we might not be able to continue to provide free public content under the conditions laid out by the Department of Justice to the extent we have in the past.

In many cases the requirements proposed by the department would require the university to implement extremely expensive measures to continue to make these resources available to the public for free. We believe that in a time of substantial budget deficits and shrinking state financial support, our first obligation is to use our limited resources to support our enrolled students. Therefore, we must strongly consider the unenviable option of whether to remove content from public access.

In short, the DOJ is saying that unless all have access, none can and UC Berkeley is replying that none will. I sympathize with UC Berkeley’s position. The cost of making materials accessible can be high and the cost is extremely high per disabled student. It would likely be much cheaper to help each disabled student on an individual basis than requiring all the material to be rewritten, re-formatted and reprogrammed (ala one famous example).

An even greater absurdity is that online materials are typically much easier to access than classroom materials even when they do not fully meet accessibility rules. How many teachers, for example, come with captions? (And in multiple languages?) How about volume control? How easy is it for the blind to get to campus? In theory, in-class materials are also subject to the ADA but in practice everyone knows that that is basically unworkable. I guarantee, for example, that professors throughout the UC-system routinely show videos or use powerpoints that do not meet accessibility guidelines. Thus, by raising the costs of online education, the most accessible educational format, the ADA may have the unintended consequence of slowing access. Put simply, raising the costs of online education makes it more difficult for anyone to access educational materials including the disabled.

Addendum: By the way, if you are wondering, all of MRU’s videos for our Principles of Microeconomics and Principles of Macroeconomics courses are captioned in English and most are also professionally captioned in Spanish, Arabic and Chinese.

Robert Shiller on Open Borders

by on September 19, 2016 at 10:41 am in Economics | Permalink

Nobelist Robert Shiller writes that the next revolution will be an anti-national revolution:

For the past several centuries, the world has experienced a sequence of intellectual revolutions against oppression of one sort or another. These revolutions operate in the minds of humans and are spread – eventually to most of the world – not by war (which tends to involve multiple causes), but by language and communications technology. Ultimately, the ideas they advance – unlike the causes of war – become noncontroversial.

I think the next such revolution, likely sometime in the twenty-first century, will challenge the economic implications of the nation-state. It will focus on the injustice that follows from the fact that, entirely by chance, some are born in poor countries and others in rich countries. As more people work for multinational firms and meet and get to know more people from other countries, our sense of justice is being affected.

Oddly, however, Shiller’s argument focuses not on immigration but on trade agreements. Trade agreements, he argues, will equalize wages through the factor price-equalization theorem but to do this we need a strengthening of the welfare state. The latter part of the argument and how it resolves with the former is, shall we say, underdeveloped.

Here is more from Erik Hurst discussing his new research:

On average, lower-skilled men in their 20s increased “leisure time” by about four hours per week between the early 2000s and 2015. All of us face the same time endowment, so if leisure time is increasing, something else is decreasing. The decline in time spent working facilitated the increase in leisure time for lower-skilled men. The way I measure leisure time is pretty broad; it includes participating in hobbies and hanging out with friends, exercising and watching TV, sleeping, playing games, reading, and so on.

Of that four-hours-per-week increase in leisure, three of those hours were spent playing video games! The average young, lower-skilled, nonemployed man in 2014 spent about two hours per day on video games. That is the average. Twenty-five percent reported playing at least three hours per day. About 10 percent reported playing for six hours per day. The life of these nonworking, lower-skilled young men looks like what my son wishes his life was like now: not in school, not at work, and lots of video games.

How do we know technology is causing the decline in employment for these young men? As of now, I don’t know for sure. But there are suggestive signs in the data that these young, low-skilled men are making some choice to stay home. If we go to surveys that track subjective well-being—surveys that ask people to assess their overall level of happiness—lower-skilled young men in 2014 reported being much happier on average than did lower-skilled men in the early 2000s. This increase in happiness is despite their employment rate falling by 10 percentage points and the increased propensity to be living in their parents’ basement.

It’s hard to distinguish “push” unemployment that is made more pleasant by video games from “pull” unemployment created by video games. I’m not even sure that distinction matters very much, at least if we aren’t talking about banning video games to increase employment. If elderly people started playing a lot of video games (as soon they will) would we worry that this was making retirement too much fun?

I’d be interested in knowing how much video games have displaced television. I watch more television than my kids, who play more video games. It’s not obvious that this is to their detriment.

Perhaps the issue is that video games like slot machines are so enticing that young people discount the future too heavily or don’t recognize the future cost of not being in the workforce. Maybe. Perhaps what we really need is a 3D, virtual reality, total sensory simulation, awesome video game that is so expensive that it encourages people to work.

Overall, the video game worry is a bit too reminiscent of the Dungeons and Dragons panic, or the earlier panics that books and radio were ruining children’s minds, for me to jump on board.

Anti-Surge Pricing

by on September 15, 2016 at 11:23 am in Economics | Permalink

From Imgur. Hat tip: Alex at LBRY.

Charting Charts Chart

by on September 15, 2016 at 7:24 am in Economics, Education | Permalink


From Priceonomics which notes:

In our sample of Times pieces, we only found one chart used outside the Business section before 1990….By the late 2000s, charts had become central to the journalism at the Times. The newspaper had a team of graphics reporters infusing the paper with innovative visualizations. For the Times web edition, those data visualizations were often interactive.

…The New York Times cemented their prioritization of visual journalism when they launched the data-driven news site the Upshot in 2014. The Upshot’s original team of fifteen included three full-time graphic journalists.

Computers are the obvious driving factor. Data analysis and visualization are powerful tools. I would guess that data IQ has been increasing ala the Flynn effect.

Sentence of the Day–Infrastructure

by on September 13, 2016 at 7:28 am in Economics | Permalink

Subsidizing Big Mac consumption would be a more effective way to provide jobs for the temporarily unemployed than subsidizing airport renovation.

From an excellent article on what infrastructure spending can and cannot do by Ed Glaeser.

Here’s another two:

Recovery Act transportation aid was twice as generous, on a per-capita basis, to the ten least dense states than it was to the ten densest states, even though higher-density areas need more expensive infrastructure (retrofitting New York with tunnels and bridges, for example, is far costlier than building in the greenfields of the West). Low-density areas are remarkably well-endowed with senators per capita, of course, and they unsurprisingly get a disproportionate share of spending from any nationwide program.