Month: March 2016

Coordination Failure in Work and Leisure Makes People Poor and Unhappy

People often bunch their activities at common points in time. Most people work from 9 am to 5 pm rather than from 10 pm to 6 am. One reason is that these are daylight hours, but another reason is because everyone else is working during this time. If you and your coworker are in the office at the same time, it is easier to collaborate. Furthermore, it makes working more fun to be there with other people.

…Most generally, many economic activities bunch or cluster in time because it pays to coordinate your economic actions with those of others. That just means that we want to be investing, producing, and selling at the same time that others are investing, producing, or selling. In short, economic activity tends to cluster together in time just as it clusters together in space. (What do we call a cluster of economic activity in space? A city.)

The desire to coordinate work-time amplifies shocks and so can contribute to business cycles (hence, time bunching is one of the transmission and amplification mechanisms discussed in our principles textbook from which the quote is drawn).

People “also like to party at the same time and to see movies and concerts with other people” so there is a desire to coordinate leisure-time as well as work-time. The coordination of leisure-time is the subject of an excellent paper by Young and Lim, Time as a Network Good: Evidence from Unemployment and the Standard Workweek, in Sociological Science.

WeekendEffectFrom the abstract:

Drawing on two independent data sets, with more than half a million respondents, we show that both workers and the unemployed experience remarkably similar increases in emotional well-being on weekends and have similar declines in well-being when the workweek begins. The unemployed look forward to weekends much the same as workers. This is in large part because social time increases sharply on weekends for both workers and the unemployed. Weekend well-being is not due to time off work per se but rather is a collectively produced social good stemming from widely shared free time on weekends. The unemployed gain comparatively little benefit from their time off during the week, when others go to work.

Figure 2, from their paper, shows the basic story. Workers report more positive emotions (top panel) and fewer negative emotions (bottom panel) than the unemployed but both workers and the unemployed are happier and less stressed on weekends.

Thus, coordinated leisure is more valuable than free time per se.

The benefits of coordination also occur at longer time scales. It’s March Break at GMU this week so both my wife and I have some free time. Unfortunately, GMU’s March Break is not coordinated with that of Fairfax County schools so we can’t plan any family travel time! In two weeks, the situation will be reversed. Ugh.

George Mason University could raise the value of its March Break to many of its employees by coordinating with Fairfax County Schools–a free way to raise faculty and staff salaries! If only some Angel could make this possible.

The benefits of coordinated leisure also suggest that a national holiday is of more value than everyone having a day off but potentially a different day, so-called flex-time. I wouldn’t go as far as the French, who shut down in August, but it’s odd that the United States has lots of winter holidays but only one summer holiday. Let’s coordinate to create a national summer holiday. A 3-day summer-weekend will increase everyone’s happiness.

How much are free apps and other on-line services worth?

A recent Wall Street Journal article (Aeppel 2015) argued that measured productivity growth is badly underestimated because measured GDP does not include ‘free’ apps and other online media services. This paper introduces an experimental GDP methodology which includes advertising-supported entertainment like Facebook in final output as part of personal consumption expenditures. This paper then uses that experimental methodology to recalculate measured GDP back to 1998. Contrary to the Wall Street Journal article, including ‘free’ apps in measured GDP has almost no impact on recent growth rates. Between 1998 and 2012, real GDP growth rises by only 0.009% per year.

There is also this:

Some firms have been creating software, which is already captured in the national accounts as investment. Other firms have been creating intangible investments in marketing, customer contact, business know how or other organizational capital. These intangible investments can pay off either in (1) eventual use of advertising or (2) moving customers to a premium service that does charge a fee. Despite their long-run value, expenditures on organizational capital are not currently captured in the national accounts as output. If we treat these expenditures on organization capital as intangible capital investment, then the productivity boom from 1995 to 2000 becomes even stronger and the weak productivity growth of the 2000’s is nearly unchanged.

That is from a new paper by Leonard Nakamura and Rachel Soloveichik (pdf), and I thank Hal Varian for the pointer.

The plan, for the refugees that is

The Turks are already playing host to over 2m Syrian refugees – and many more could be on their way, if and when the fighting in Syria resumes in earnest. And yet the EU wants Turkey to close the safety valve that allows many Syrians to cross the sea to Greece and the EU. As one German official admitted to me in Berlin recently: “We’re asking Turkey to keep its border with Syria open to refugees, but to close its border to Greece and to accept non-Syrian migrants that we turn back from the EU. I’m not sure I would agree to that, if I were them.”

That is from an excellent blog post by Gideon Rachman.  May I add something? I don’t see how that can work!

What about Coase?  Gideon has thought that one though too, I wonder if he plays chess?:

In their efforts to persuade Turkey to accept at least parts of this deal, EU officials have dangled various sweeteners – including billions in aid and the prospect of easing the visa regime for Turks wishing to visit the EU. The Europeans also say that they might accept more refugees, direct from camps in Turkey – to reduce the incentives to cross the sea to Greece. But the Turks are understandably sceptical that any such promise would actually be kept.

A decisive, unified EU really is important for solving some problems, but that is exactly what we do not have…

Addendum: Here is more:

According to draft reform options seen by the Financial Times, responsibility for all asylum claims could be shifted [away from the “initial country status” standard] to the European Asylum Support Office.

This offers advice to national governments but would be turned into a federal agency responsible for claims. If Brussels pressed ahead with this option it would mark another transfer of sovereignty to the EU and ultimately require treaty change.

So the new plan is that every EU nation will approve this?  And Plan B?  Ronald Coase I love you, but I just don’t see how this is supposed to work…

Sunday assorted links

1. Where did the genius of the Polgar sisters come from?

2. Oxford University philosopher Nick Bostrom says the discovery of fossilized complex life on another world “would be by far the worst news ever printed on a newspaper cover.”  On Robin Hanson’s “great filter” theory.

3. “Journalist who reported Minnesota county was ‘worst place to live’ is moving there.”  And ostensibly ordinary Pyongyang.

4. Sweden is growing at 4.5% a year.

5. Professional bridge has a cheating problem.

6. Which college majors benefit most from law school?  The paper is here.

Productivity slowdown or measurement problem?

Here is my new column for The Upshot, asking whether an undervalued tech sector might explain a significant part of the productivity slowdown.  The answer is not really, here are a few excerpts:

Chad Syverson, a professor of economics at the University of Chicago Booth School of Business, has looked more scientifically at the evidence and concluded that the productivity slowdown is all too real. These results are outlined in his recent National Bureau of Economic Research working paper “Challenges to Mismeasurement Explanations for the U.S. Productivity Slowdown.”

…the countries with smaller tech sectors still have comparably sized productivity slowdowns, and that is not what we would expect if a lot of unmeasured productivity were hiding in the tech industry.

…The productivity slowdown is too big in scale, relative to the size of the tech sector, to be plausibly compensated for by tech progress. Basically, under a conservative estimate, as outlined by Professor Syverson, the productivity slowdown has led to a cumulative loss of $2.7 trillion in gross domestic product since the end of 2004; that is how much more output would have been produced had the earlier rate of productivity growth been maintained. To make up for this difference, Professor Syverson estimates, consumer surplus (consumer benefits in excess of market price) would have to be five times as high as measured in the industries that produce and service information and communications technology. That seems implausibly large as a measurement gap.

Don’t forget that most of the outputs of the tech sector are paid for, or they induce a higher demand for broadband and smart phones, which do enter into gdp.  And this:

Or look at it this way: The tech economy just isn’t big enough to account for the productivity gap. That gap has caused measured G.D.P. to be about 15 percent lower than it would have been otherwise, yet digital technology industries were only about 7.7 percent of G.D.P. in 2004. Even if the free component of the Internet has become more important since 2004, it’s hard to imagine that it is so much better now that it accounts for such a big proportion of G.D.P.

As my column was published, this new piece by Byrne, Fernald, and Reinsdorf (pdf) came out from Brookings.  They reach similar conclusions as does Syverson, albeit using some different arguments and paths.  I’ll be giving it some independent coverage soon.

The NBA’s marginal revolution in triple-doubles

If [Draymond] Green is truly gunning for triple doubles, there should be an increase in his production in the third stat category in games once he has secured a double-double. When Green has locked up a points/rebounds double-double, his assists per minute increases to 0.27 from 0.21. Similarly, when he has a points/assists double-double, his rebounds per minute rises to 0.44 from 0.28 and when he has an assists/rebounds double-double, his points per minute goes up to 0.69 from 0.40.

Here is the WSJ piece, which covers other players as well.  I still think that sports as a medium for teaching both economics and statistics to younger individuals (and others) remains a somewhat underexplored opportunity…

Underreported China fact of the day

Last week, China’s Ministry of Defense confirmed for the first time that construction on “support facilities” for the People’s Liberation Army-Navy (PLAN) in Djibouti, on the Horn of Africa, has started. Colonel Wu Qian, a spokesperson for the Chinese defense ministry, said on Thursday that “construction of infrastructure for the support facilities has started, and the Chinese side has dispatched personnel to Djibouti for relevant work.” China has been careful to avoid describing its facility in Djibouti as a “military” or “naval” base, preferring to use the terms “support facilities” or “logistical facilities” instead. Djibouti hosts military and support facilities for the United States, France, and even Japan’s Maritime Self-Defense Forces.

According to Wu, China will use the bases primarily to ensure that PLAN ships carrying out anti-piracy patrols in the Gulf of Aden, western Indian Ocean, and the Arabian and Red Seas are able to resupply and receive maintenance without making the long journey across the Indian Ocean to Chinese naval bases on the mainland. Wu added that the “facilities will mainly be used for logistical support and personnel recuperation of the Chinese armed forces conducting such missions as maritime escort in the Gulf of Aden and waters off the Somali coast, peacekeeping and humanitarian assistance.”

There is more here, via Santiago Suarez.

The polity (culture) that is France

As most of you probably know, there is a legal campaign against Uber going on in France, here is part of the back story:

It took only a few years for Uber and other platforms challenging the Parisian taxis’ monopoly to create more than 15,000 jobs. (About 5,300 are self-employed and the rest are employed by minicab companies.) They compete against the 17,000 taxis in Paris.

“There has been a tidal wave of start-ups in the banlieues, an entire generation wants to be Uber drivers,” says Sabrina Lauro at Planet Adam, a non-profit organisation that helps residents in the suburbs set up businesses. Uber appeals to those without a diploma or work experience, she said.

Research seems to bear this out. Charles Boissel, a PhD student at HEC Paris, a business school, found that most minicab registrations were in the “suburbs of northern and south-eastern Paris, where economic conditions are harshest”.

Here is the Anne-Sylvaine Chassany FT piece, recommended.

How replicable are economic experiments?

From The Economist:

In a paper just published in Science, Colin Camerer of the California Institute of Technology and a group of colleagues from universities around the world decided to check. They repeated 18 laboratory experiments in economics whose results had been published in the American Economic Review and the Quarterly Journal of Economics between 2011 and 2014.

For 11 of the 18 papers (ie, 61% of them) Dr Camerer and his colleagues found a broadly similar effect to whatever the original authors had reported. That is below the 92% replication rate they would have expected had all the original studies been as statistically robust as the authors claimed—but by the standards of medicine, psychology and genetics it is still impressive.

One theory put forward by Dr Camerer and his colleagues to explain this superior hit rate is that economics may still benefit from the zeal of the newly converted. They point out that, when the field was in its infancy, experimental economists were keen that others should adopt their methods. To that end, they persuaded economics journals to devote far more space to printing information about methods, including explicit instructions and raw data sets, than sciences journals normally would.

For the pointer I thank John B. Chilton.

Better Textbooks Raise Student Achievement Cheaply and Effectively

Teacher quality can be measured using value-added student achievement scores. Value-added scores, however, let us do much more. We can measure the value not only of different teachers but of different teaching methods. Thus, value-added scores and more generally big data are tools not just to weed out low-quality teachers but to raise the quality of all teachers.

At Brookings Thomas Kane reports on new research evaluating textbooks.

We matched each teacher to the students they were teaching and assembled data on students’ demographic characteristics, performance on prior state tests, and the averages of such characteristics for the peers in their classroom. We also estimated each teacher’s impact on student performance in the prior school year (2013-14) to use as a control. (We wanted to account for the fact that more effective teachers may choose to use particular textbooks.) After controlling for the measures of student, peer, and teacher influences above, we estimated the variance in student outcomes on the new assessments associated with the textbook used.

The textbook effects were substantial, especially in math. In 4th and 5th grade math classrooms, we estimated that a standard deviation in textbook effectiveness was equivalent to .10 standard deviations in achievement at the student level. That means that if all schools could be persuaded to switch to one of the top quartile textbooks, student achievement would rise overall by roughly .127 student-level standard deviations or an average of 3.6 percentile points. Although it might sound small, such a boost in the average teacher’s effectiveness would be larger than the improvement the typical teacher experiences in their first three years on the job, as they are just learning to teach.

What makes this research especially important is that textbooks have no unions and it’s easy to replace one textbook with a better textbook. Moreover:

An annual report on the effectiveness of textbooks would transform the market, by providing publishers and software developers with a stronger incentive to compete on quality.

State and local fiscal policy and pensions

In short, the reason why the unfunded liabilities of state and local pension funds are so much higher in 2016 than 30 years ago isn’t because the overall stock market performed poorly. Instead, it’s a grim story of mistiming the moves in the market (rather than just being steadily invested throughout), trying out alternative investments that didn’t pan out, not putting enough money aside in the first place, and overpromising what benefits could be paid. I have a lot of sympathy for the retirees and soon-to-be retirees who were depending on a pension from a state or local government, and are now finding that the money isn’t there to pay for the promises. But when blame gets assessed for this grim situation, it’s worth remembering that those who have been making the decisions about state and local pensions had a very favorable situation 30 years ago–that is, unfunded liabilities near zero, with a period of strong stock market growth over the next three decades coming up–and they messed it up.

That is from Timothy Taylor.  I would add that those decisions too are fiscal policy.  One reason many of us are often skeptical of government fiscal policy is because we see it being messed up so much, not because we are “aggregate demand denialists.”  I would note that automatic stabilizers often do not have these problems to the same degree.

Similarly, I have seen highly intelligent people calling for fiscal stimulus for Brazil.  I would (rather desperately) favor some new infrastructure spending for Brazil, but overall I see a country whose government has been spending far beyond its means for decades.  Brazil is a middle-income country, yet in terms of a percentage of gdp it basically spends as does the United States, and not very effectively.  They need less government spending, not more, and clearly their problems are structural and long-run in nature and closely related to the low quality of governance.

What I’ve been reading

1. Euny Hong, The Birth of Korean Cool: How One Nation is Conquering the World Through Pop Culture.  A genuinely good and fun introduction to South Korea today.

2. Clyde Prestowitz, Japan Restored: How Japan Can Reinvent Itself and Why This is Important for America and the World.  A not-absurd view of how Japan could be fully back on its feet by 2050.  Imagine a Japan which employs women at an especially high rate, moves almost completely to green energy independence, and revitalizes its investment and corporate governance; I found the chapter on “Englishnization” least plausible, however.

3. Leila S. Chudori, Home.  A classic Indonesian novel, recently translated, about Indonesian exiles in Paris, post-1965, and how they are unable to cut their emotional ties with the homeland.  If you are only going to read a few Indonesian novels, this should be one of them.

4. David Stubbs, Future Days: Krautrock and the Birth of a Revolutionary New Music.  Self-recommending.

5. Frits Gierstberg, European Portrait Photography Since 1990.  Mostly photos, not much text, the artists include Rineke Dijkstra, Jurgen Teller, Thomas Ruff, Nikos Markou, Anders Petersen, and Clare Strand.  This book made a strong impression on me, and I find it to be one of the best meditative tools for thinking about what Europe really is these days.  By the way, the under-representation of Islam (not popular with collectors?) is striking.