Month: December 2014

Capuchin monkeys are not fooled by Veblen goods

From Rhia Catapano,

…Using a capuchin population previously trained in a token market, we explored whether monkeys used price as an indicator of value across four experiments. Although monkeys demonstrated an understanding of which goods had which prices (consistently shifting preferences to cheaper goods when prices were increased), we observed no evidence that such price information affected their valuation of different kinds of goods.

In other words, the monkeys don’t think that the more expensive goods are more valuable per se.  Yet the monkeys are judged cognitively deficient for getting the problem right!:

These results suggest that human pricing effects may involve more sophisticated human-unique cognitive capacities, such as an understanding of market forces and signaling.

Hat tip goes to Diane Coyle.

Sentences about Chilean inequality, and is Chile overrated?

Chilean inequality has been going down lately, pre-transfer that is, but this is not in every way reassuring news:

“In this case, the fall of inequality would be bad news over the long term,” Mr. de la Torre told me. “We would be specializing in sectors that require less knowledge.”

That is from a very good column on Chile by Eduardo Porter.  In my view, although Chile of course has done very well, it is one of the most overrated countries in the world today, economically speaking that is.  They have not overcome their educational problems or their class problems, the glorious run of copper is over, they will have a hard time continuing to move up the quality ladder, and their policies are moving in a more redistributive but not growth-enhancing direction.

Way back when, Alex and I used to select the most underrated and most overrated countries, in the sense of which country-specific mutual funds you might short or buy.  My pick this year for the most overrated country is, I am afraid to say, a country I love dearly and that is Chile.

What is your pick?

Facts about Hurricane Katrina, and the benefits of regional migration

In 2006, the year after the storm, wage and salary income for the average Katrina victim in our sample is roughly $2,200 lower than their matched counterparts.  Remarkably, the earnings gap is erased the following year, and by 2008, the hurricane victims actually have higher wage income and total income than control households.

That is from a new NBER working paper by Tatyana Deryugina, Laura Kawano, and Steven Levitt.  I agree with this claim:

…strong ties to a place, especially a place with limited economic opportunities such as New Orleans, have adverse economic consequences.  When forced by an exogenous shock to migrate, people are able to choose from a wide range of possible locations to move to, and they seem to choose places that offer them better economic opportunities.

You will find an ungated version here.

Conditional assurance contracts for reporting sexual assault

Callisto, an online sexual assault reporting system under development by a nonprofit called Sexual Health Innovations, aims to change this and provide better options for victims of sexual assault on college campuses.

The project builds on the idea of “information escrows” proposed by Ian Ayres and Cait Unkovic in a 2012 Michigan Law Review article. Mr. Ayres, an economist at Yale’s law school, and Ms. Unkovic, a graduate student at the University of California-Berkeley, suggest that reporting of misbehavior that is difficult or costly for victims to disclose might be increased if people had the option to report that information to a third party who would make the disclosure only if others also reported misconduct by the same individual.

There is more here, from Brendan Nyhan.

Alcohol, poverty, and self-control in India

Those are the topics of the job market paper (pdf) from Frank Schilbach of Harvard:

High levels of alcohol consumption are more common among the poor. This could have economic consequences beyond mere income effects because alcohol impairs mental processes and decision-making. Since alcohol is thought to induce myopia, this paper tests for impacts on self-control and on savings behavior. In a three-week field experiment with low-income workers in India, I provided 229 individuals with a high-return savings opportunity and randomized incentives for sobriety among them. The incentives significantly reduced daytime drinking as measured by decreased breathalyzer scores. This in turn increased savings by approximately 60 percent. No more than half of this effect is explained by changes in income net of alcohol expenditures. In addition, consistent with enhanced self-control due to lower inebriation levels, incentivizing sobriety reduced the impact of a savings commitment device. Finally, alcohol consumption itself is prone to self-control problems: over half of the study participants were willing to sacrifce money to receive incentives to be sober, exhibiting demand for commitment to increase their sobriety. These findings suggest that heavy alcohol consumption is not just a result of self-control problems, but also creates self-control problems in other areas, potentially even exacerbating poverty by reducing savings.

I saw the pointer from Sendhil Mullainathan on Twitter.

Good sentences about male and female technological unemployment

I think that if you look only at males in isolation, you will see this in the data. That is, men are working much less than they used to. For some men, this leisure is very welcome, but for others it is not. In that sense, I think that we should look at the [technological unemployment] fears of the early 1960s not as quaint errors but instead as fairly well borne out.

For women, the story since the 1960s is different. In the economy as a whole, the share of labor devoted to preparing food, washing clothes, and cleaning house has gone down. Also, a higher share of the remaining work in these areas is coming from the market, via restaurants and cleaning services, rather than from unpaid female labor. The upshot is that, from the 1960s to about 2000, we saw a continuation of the trend for women to increase their share of market work and reduce their non-market labor. So, while men were increasing their leisure, women were increasing their market work. Combining men and women, you would not see a decline in market work.

It seems that around 2000, the trend for more market work by women reached its peak, making the trend toward technological unemployment more visible. From now on, what was happening to men before will be what happens to the total labor force. That is, leisure will go up, and some of it will be less than voluntary.

That is from Arnold Kling.

Assorted links

1. The political economy of Bitcoin.

2. Pizza Hut reads your mind.

3. Chris Rock won’t play colleges any more: “You can’t even be offensive on your way to being inoffensive.”

4. The economics of Seinfeld.

5. How much do different quintiles benefit from government?

6. Twitter-driven economic history reading list.  And more writers’ book picks from The Guardian.  And NYT’s 100 Notable Books of 2014.

7. “Watch two Japanese women fry shrimp with a “cooking detonation” cannon.”

8. Cochrane covers Deirdre McCloskey on Piketty.

9. Profile of Reihan Salam.

Our Guild-Ridden Labor Market

Could right and left unite in opposing occupational licensing? In an excellent primer Morris Kleiner makes the argument:

One unifying theme about the growth of occupational regulation has been the opposition from both the left and right of the political spectrum. Many on the left are concerned about the reduction in job opportunities, the increase in prices, and the diminished availability of services for those in or near poverty. On the right there is concern for economic liberty and access to the labor market and jobs. Many licensed professions are relatively low-skilled jobs, such as barbers, manicurists, nurse’s aides, and cosmetologists. The social costs of a bad haircut may be negligible, but the social costs of creating additional employment barriers for disadvantaged populations are not. Licensure laws often exclude ex-felons—defensible in many professions, but not in all, and such prohibitions make it extremely difficult for ex-offenders to find post-prison employment, thereby contributing to America’s high recidivism rate.

…If both the left and right oppose more occupational regulation, why is it growing? From the time of medieval guilds, service providers have had strong incentives to create barriers to entry for their professions in order to raise wages. In contrast, consumers who will be affected by the higher costs due to licensure are unorganized and arguably underrepresented in the political process.

Read the full post and Kleiner’s excellent book for many useful references. Here are previous MR posts on occupational licensing.

Questions from Brad DeLong

Read them!  Here is one:

One Question for Ryan Avent: What are these local-area “institutional reforms” to overcome NIMBYism? In California, I know that every local elected official curses the Jarvis-Gann Proposition 13 as preventing them from recouping enough via property tax revenue to offset the costs of providing services to a new development, thus changing local governmental officials from reliable boosters for their town to grinches suspicious of every project. Are we looking for a federal government carrot to allocate funds county-by-county based on population growth? Or what?

Read them all.

Rage in Jerusalem, by Nathan Thrall

I enjoyed this LRB piece, here is one excerpt:

All Jerusalemites pay taxes, but the proportion of the municipal budget allocated to the roughly 300,000 Palestinian residents of a city with a population of 815,000 doesn’t exceed 10 per cent. Service provision is grossly unequal. In the East, there are five benefit offices compared to the West’s 18; four health centres for mothers and babies compared to the West’s 25; and 11 mail carriers compared to the West’s 133. Roads are mostly in disrepair and often too narrow to accommodate garbage trucks, forcing Palestinians to burn rubbish outside their homes. A shortage of sewage pipes means that Palestinian residents have to use septic tanks which often overflow. Students are stuffed into overcrowded schools or converted apartments; 2200 additional classrooms are needed. More than three-quarters of the city’s Palestinians live below the poverty line.

Since 1967 no new Palestinian neighbourhoods have been established in the city, while Jewish settlements surrounding existing Palestinian areas have mushroomed. Restrictive zoning prevents Palestinians from building legally. Israel has designated 52 per cent of land in East Jerusalem as unavailable for development and 35 per cent for Jewish settlements, leaving the Palestinian population with only 13 per cent, most of which is already built on. Those with growing families are forced to choose between building illegally and leaving the city. Roughly a third of them decide to build, meaning that 93,000 residents are under constant threat of their homes being demolished.

And this:

The crucial difference between the mid-1980s and today is that Palestinian civil society is now much weaker, and so, too, is the likelihood of coherent political organisation of the kind that emerged soon after the First Intifada began. The groups that then channelled political activity have been supplanted, either by the institutions of a technocratic PA whose existence is premised on close co-operation with Israel, or by NGOs whose foreign funders make assistance conditional on the pursuit of apolitical development projects or vague peace-building strategies that explicitly rule out non-violent confrontation with Israel and any initiative likely to drive up the costs of military occupation. Palestinian society is afflicted with dependency, and it is dependent on forces that wish to preserve the status quo.

It is interesting (and controversial) throughout.

I have two students on the job market this year

Lotta Moberg, who does international, development, and macro, with a current focus on Special Economic Zones, and

Alexander Schibuola, who does macro, money, and capital theory.

I recommend them both very highly.  Of course I have more to say about them than that, so if you are interested either email me or request their letters of recommendation through normal channels.

The Future of US Economic Growth

Cato is holding a conference this Thursday (Dec. 4) on The Future of US Economic Growth. Speakers include Nobelist Edmund Phelps, Ed Glaeser, Dale Jorgenson, John Haltiwanger and Erik Brynjolfsson. I will speak in the afternoon on the topic of entrepreneurship and whether economic dynamism is in decline. I will have some surprising things to say about dynamism and regulation. More information at the link.