Economics

Homicide Data by Weapon

by on June 16, 2016 at 12:06 pm in Data Source, Economics, Law | Permalink

Here is FBI homicide data by weapon for 2014:

HomicidebyWeapon2014

In 2014, 248 people were killed by rifles. Rifles would include “assault weapons”. Thus, more people are killed by knives than by assault weapons. Indeed, more than twice as many people are killed by “hands, fists, feet, etc.” than by assault weapons. (Some of these numbers could change slightly with “Firearms, type not stated” although most of these are probably handguns).

The data may be uncomfortable to both left and the right. The left because banning “rifles” would obviously not save many lives even if one assumed no substitution effect towards other weapons and banning “assault weapons”, however defined, would do even less. The right because handguns are by far the primary weapon used to kill.

The percentage of new doctorate recipients without jobs or plans for further study climbed to 39% in 2014 from 31% in 2009, according to a National Science Foundation survey released in April. Median salaries for midcareer Ph.D.s working full time fell 6% between 2010 and 2013.

The reason: supply and demand.

And this:

Ph.D.s still earn a significant premium over others in the labor market and their overall rate of unemployment remains low, though a growing number are taking jobs that don’t use their education. At the same time, their median incomes have been falling. Computer scientists earned $121,300 in 2013, down from $129,839 in 2008; engineers saw a drop to $120,000 from $125,511 and social scientists fell to $85,000 from $90,887.

Here is the WSJ piece, via the excellent Samir Varma.

Regulation and Rents

by on June 15, 2016 at 8:01 am in Economics | Permalink

Here’s James Bessen writing in the Harvard Business Review:

…in 1992 Congress passed the Cable Television Consumer Protection and Competition Act in response to high cable TV rates. Regulators expected cable prices to fall by 10%. Instead, however, cable companies changed their programming bundles, prices did not fall, and corporate valuations increased. The chart below shows that the aggregate market value of cable companies relative to assets (Tobin’s Q) rose following the Act, compared to valuations of other firms.

W160518_BESSEN_EVENWHEN-1200x846

Regulation doesn’t seem to have reduced profits in the cable industry and may have increased profits. Is there a general lesson here? In a new paper, Bessen finds that the answer is yes:

The pattern around the 1992 Cable Act is representative: I find that firms experiencing major regulatory change see their valuations rise 12% compared to closely matched control groups. Smaller regulatory changes are also associated with a subsequent rise in firm market values and profits.

This research supports the view that political rent seeking is responsible for a significant portion of the rise in profits. Firms influence the legislative and regulatory process and they engage in a wide range of activity to profit from regulatory changes, with significant success. Without further research, we cannot say for sure whether this activity is making the economy less dynamic and more unequal, but the magnitude of this effect certainly heightens those concerns.

Addendum: Reed Hundt, chairman of the FCC from 1993 to 1997, discusses cable TV regulation during this period in the comments.

With less than 1% of China’s GDP, it [Wenzhou] has accounted for nearly a tenth of bankruptcy cases nationwide over the past three years. It established one of China’s first courts dedicated to handling such cases. “Other cities hear ‘bankruptcy’ and get scared. Here, we are tasting how sweet it can be,” says Zhou Guang, who heads the Wenzhou Lawyers’ Association.

Here is the full story.

That is a recent paper by Onder and Terviö (pdf), publisher version here, here is the abstract:

We investigate divisions within the citation network in economics using citation data between 1990 and 2010. We consider all partitions of top institutions into two equal-sized clusters, and pick the one that minimizes cross-cluster citations. The strongest division is much stronger than could be expected to be found under idiosyncratic citation patterns, and is consistent with the reputed freshwater/saltwater division in macroeconomics. The division is stable over time, but varies across the fields of economics.

Or put it this way:

The likelihood of citing a paper by an author from another university in the same cluster is about 16% higher than the likelihood of citing a paper by an author from the other cluster.

lake

Oddly, Northwestern and Penn are in the freshwater cluster of citations.  Yale and Michigan are the only two schools whose cluster changes with the specification.

Berkeley and MIT have the saltiest taste, while Minnesota and Rochester are the freshest of the fresh.  Chicago has a more neutral set of citation practices than many economists (not I) might think.  Chicago cites saltwater school papers at a higher rate than the general average, nonetheless Chicago ends up strongly in the freshwater camp because it is cited so much by other freshwater schools, and not so much by the saltwater schools.  A cynic might wonder if the Chicago economists are more open-minded than their critics, and I must confess that is consistent with my own anecdotal experience.

By the way, all this corresponds to hiring placement data.  Sadly, academic hiring is more clustered across camps of schools than is the case for…comparative literature.  If you are wondering, the saltiest Fed branch is in Boston, the least salty in Richmond.

Addendum: Bob Hall directs my attention to his posting: “In a 1976 paper, I introduced the distinction between fresh-water and salt-water economists. Bloggers using these terms are asked to contribute $1 to a fund that sends graduate students to MIT for one year and to the University of Minnesota for a second year.”

I study the effect that expanding Medicaid eligibility has on labor force participation of childless adults. The Affordable Care Act provided federal funding for states to expand public health insurance to populations that had never before been eligible for the benefit on a large scale, among those are adults without dependent children. A 2012 Supreme Court decision allowed states to choose whether or not they wanted to accept federal funds to expand Medicaid eligibility, resulting in a situation where roughly half of the population resided in states that had expanded Medicaid eligibility in 2014 and half did not. I exploit this variation by conducting a series of difference-in-differences and triple differences analyses both at a local level within one labor market, and nationwide to determine the relationship between Medicaid expansion and labor force participation. I find a significant negative relationship between Medicaid expansion and labor force participation, in which expanding Medicaid is associated with 1.5 to 3 percentage point drop in labor force participation.

That is from a Georgetown thesis by Tomas Wind, via Ben Southwood.  Given the possibility of paternalistic judgments in health care policy, the simplest question here is whether this class of individuals is better off as a whole, as a result of some of them choosing this trade-off.  Work is good for most people, and it is even better for their future selves, and their future children too.

That is the new Arnold Kling book, I very much liked the earlier draft I read.  Think of it as Fischer Black macro for 2016.  Here is Arnold:

The main point of the book is that you need to keep in mind the overwhelming complexity of specialization in a modern economy. Non-economists miss it when they use simple intuition. And academic economists tend to miss it when they build their “models,” particularly of the GDP factory.

Any reader of this blog will be able to follow the book. But what I really want is for everyone who is about to start graduate school in economics to read this book. I want to say to such students, “Don’t get too suckered in by what your professors are going to be showing you about how to do economics. Don’t let them lead you to forget about specialization and trade.”

WTF™ Citibank?

by on June 14, 2016 at 11:28 am in Economics, Law | Permalink

I had to verify this on several websites because it seemed like an April Fool’s joke but it checks out:

Citigroup Inc sued AT&T Inc on Friday, saying the phone company’s use of “thanks” and “AT&T thanks” in a new customer loyalty program infringed its trademark rights to the phrase “thankyou.”

Yes, Citi trademarked thankyou. No space! What an innovation! Now they are suing because AT&T has a similar customer loyalty program using “thanks” and “AT&T thanks”.

The IP system is out of control.

Hat tip: Mark Thorson.

An all-cash deal where the combined entity is trading down on the news is basically the exact opposite of bubble behavior.

That is from Conor SenGrodaeu remarked:

Microsoft had to move quickly before the ECB bought it

WSJ: In the 1960s the future of aviation seemed bright. In 1958 Boeing had built its first jetliner, the 707, which cruised at speeds of up to 600 mph. The Concorde came along in 1969, flying at Mach 2—more than 1,500 mph. An age of affordable supersonic flight seemed inevitable, promising U.S. coast-to-coast travel in just 90 minutes.

Today, neither the Concorde nor any other supersonic passenger jet operates. And the 707, still in limited use, remains one of the fastest commercial jets operating in the world. What happened?

Regulation happened. In 1973, shortly after Boeing abandoned the 2707, its Mach 3 government-funded competitor to the British- and French-made Concorde, the Federal Aviation Administration issued a rule banning supersonic transport over the U.S.

And why did we ban supersonic transport? It seems almost like a joke–because we were worried about noise. What would Chuck Yeager say? (He’s still alive and re-enacted his 1947 supersonic flight in 2012 at the age of 89).

Moreover, the noise scare was overblown. Incredibly, it was only after the FAA banned supersonic transport over the US that a careful study was done at Heathrow airport and that study found that the Concorde taking off and landing was only modestly louder than a regular jet. Moreover, as the study reported:

Whenever there was a Concorde departure from Heathrow, subsonic jets recorded a higher or equal noise level at the relevant fixed monitoring sites on 2 days out of 3.

The technology to produce quieter supersonic aircraft exists today but we won’t see really big investment in the industry until the outright ban on supersonic aircraft is lifted. As Dourado and Hammond write:

If the original ban was an overreaction, today it’s an outright absurdity—and remains in place due more to regulatory inertia and the FAA’s deeply precautionary culture than a sober accounting of costs and benefits.

I suspect that we will eventually lift the ban and get quieter and faster supersonic aircraft. But when we do so don’t make the mistake of thinking that it was wise to wait. As I pointed out in my earlier piece on Uber of the Sky, technological development is endogenous. If you ban supersonic aircraft, the money, experience and learning by doing needed to develop quieter supersonic aircraft won’t exist. A ban will make technological developments in the industry much slower and dependent upon exogeneous progress in other industries.

When we ban a new technology we have to think not just about the costs and benefits of a ban today but about the costs and benefits on the entire glide path of the technology.

Many of you have been asking me about this NYT article on the pressures for rent control in Silicon Valley.  If no (or few) new apartment blocks will be built anyway, what is wrong with rent control in that setting?

One effect is that rent control will limit the incentive for prospective builders to fight to overturn current building restrictions.

A second effect of rent control is that it will lower the quality of the apartment stock.  This outcome has some second best properties, since a lower-quality, lower-price selection of apartments is probably what the market would have delivered under freer conditions.  Still, quality will fall in inefficient ways.  For instance sizes of apartments already are given, so landlords will cut back on maintenance.  Rather than well-maintained but smaller apartments, we will see overly large but run-down abodes.

At rent-controlled prices there will be excess demand for apartments.  The “plums” will go to those who bribe, those who are well-connected, those who are skilled at breaking the law, and, to some extent, those who have low search costs.  The latter category may include well-off people who hire others to search for them.

So overall I still don’t think this is a good idea.  Even if the current housing stock is fixed, rent control probably will create costs in excess of its benefits, and without significantly desirable distributional consequences.

Addendum: In the comments, Kommenterlein adds: “The rental housing stock isn’t fixed – it will decline rapidly with rent control as rental apartments are converted into Condos and sold at market prices.”

And David Henderson comments.

A key theme of the book is how the increased acceptance of gender fluidity and industrialization – which brought men out of the fields and into offices, where they have no inherent strengths compared to women – has destabilized traditional power structures.

[Frank] Browning said the gender revolution can help explain the resurgence of rightwing extremism in Europe and why it is possible for a former reality television show host to become the presumptive Republican nominee for US president – even though he has made racist, sexist and xenophobic comments.

“We’re going to see in a decade what we’ve seen in the last five years, a movement for which Trump happened to be the dandy on hand,” Browning said. “And gender is a big piece of that”. Browning said that today, men hold fewer positions of power and are being demoted in society. Simultaneously, people are exploring gender more openly and have easier access to online forums through which to explore differing types of gender and sexual expression.

Here is the article, I just ordered the book here.  Here is my earlier post on this topic.  File under speculative.

The support for Brexit from chefs and curry house owners, predominantly from Bangladesh, has come as a surprise voice in the debate, as the Leave campaign is widely perceived as anti-immigration.

Their argument centers around “freedom of movement,” one of the pillars of the European Union — meaning that citizens from across the community can essentially turn up in the country of their choice and try their luck at finding a job.

“It’s not that we think Europeans shouldn’t have a chance in Britain, it’s just that we feel the country should choose who it needs, what kind of skills they need, so that industries like ours are not short handed,” Khan told CNN.

Freedom of movement has put pressure on Britain’s migrant intake from outside the EU, prompting the government to almost double the minimum salary required for non-EU immigrants, from £18,700 ($26,610) to £35,000 ($50,000).

“This just doesn’t suit the industry. The average salary for a chef in the country is £25,000, so why should we have to pay a junior chef £35,000 to make curry? It’s just not affordable,” Khan said.

Call it the cheap channa argument, though note if this chain of reasoning were better known, it might help the prospects for Remain.  The story is here, and here are my previous posts on Brexit (which I nonetheless oppose, cheap channa or not).

For the pointer I thank Brennan McDavid.

Wealthier people are healthier and live longer. Why? One popular explanation is summarized in the documentary Unnatural Causes: Is Inequality Making us Sick?

The lives of a CEO, a lab supervisor, a janitor, and an unemployed mother illustrate how class shapes opportunities for good health. Those on the top have the most access to power, resources and opportunity – and thus the best health. Those on the bottom are faced with more stressors – unpaid bills, jobs that don’t pay enough, unsafe living conditions, exposure to environmental hazards, lack of control over work and schedule, worries over children – and the fewest resources available to help them cope.

The net effect is a health-wealth gradient, in which every descending rung of the socioeconomic ladder corresponds to worse health.

If this were true, then increasing the wealth of a poor person would increase their health. That does not appear to be the case. In important new research David Cesarini, Erik Lindqvist, Robert Ostling and Bjorn Wallace look at the health of lottery winners in Sweden (75% of winnings within the range of approximately $20,000 to $800,000) and, importantly, on their children. Most effects on adults are reliably close to zero and in no case can wealth explain a large share of the wealth-health gradient:

In adults, we find no evidence that wealth impacts mortality or health care utilization, with the possible exception of a small reduction in the consumption of mental health drugs. Our estimates allow us to rule out effects on 10-year mortality one sixth as large as the crosssectional wealth-mortality gradient.

The authors also look at the health effects on the children of lottery winners. There is more uncertainty in the health estimates on children but most estimates cluster around zero and developmental effects on things like IQ can be rejected (“In all eight subsamples, we can rule out wealth effects on GPA smaller than 0.01 standard deviations”). Overall for children:

Our results suggest that in a model of child development parameterized to match conditions in Sweden, the effect of permanent income on children’s outcomes is small. With the exception of obesity risk, we estimate precise zero or negative effects in subpopulations for which theories of child development predict larger benefits of wealth. For example, though the mechanism differs, investment models (Becker and Tomes 1979) and parental stress models (Bradley and Corwyn 2002) predict larger positive effects of wealth shocks in families with low incomes. The small impact of wealth on proxies for parenting behavior may explain why the shocks to permanent income appear to have few discernible intergenerational impacts.

One point to note is that they are looking primarily at children born prelottery although they do not find any health effects in infants born postlottery.

As the authors note, Sweden is an affluent society with an extensive social safety net. Nevertheless, there is still a significant health-wealth gradient in Sweden. We might get larger causal estimates of wealth on health elsewhere but the Swedish results bound how far we can reduce the gradient.

The bottom line: Is inequality making us sick? No.

Addendum: The methodological note below was an impressive sign of how research standards at the frontier are changing, expect to see more like this in the future:

To minimize concerns about undisclosed multiple-hypothesis testing, our intergenerational analyses were prespecified in an analysis plan posted in the public domain before running any regressions of child outcomes on the treatment variable (Cesarini et al. 2014).

Addendum 2: See the comments for useful additional information from Erik Lindqvist, one of the authors.

Pete asked that question, more specifically:

Economics tries to put a price on most everything, even things that are nearly impossible to quantify such as happiness. Where in your opinion does the economic approach currently fail the worst at measurement and quantification?

I believe economics does not measure “culture” very well, including the all-important “corporate culture.”  It is hard to think of a good way of encoding companies to reflect how things actually work inside the firm, all the harder for a region or nation.  In this context you could define culture as consisting of expectations about the reciprocal behavior of others, across a variety of contexts.  We do OK however if it is just a univariate measure of trust, see Knack and Keefer.

It is hard to measure rates of price inflation over longer periods of time.  Since 1900, has the American economy had massive inflation or massive deflation?  If you are spending fifty cents, it is massive inflation, as today that sum hardly buys you anything, but earlier you could have received a nice white shirt.  If you are spending 100k a year, there has been radical deflation.

Those to me are two of the worst failures of quantification in economics.  What else?

Here is Robin Hanson on “the data we need.”