Month: November 2017

American health equality is rising

Recent research shows increasing inequality in mortality among middle-aged and older adults. But this is only part of the story. Inequality in mortality among young people has fallen dramatically in the United States converging to almost Canadian rates. Increases in public health insurance for U.S. children, beginning in the late 1980s, are likely to have contributed.

Here is the full article, by Janet M. Currie, via the excellent Kevin Lewis.

The costs of street harassment of women, with respect to India

This paper examines the impact of perceived risk of street harassment on women’s human capital attainment. I assemble a unique dataset that combines information on 4,000 students at the University of Delhi from a survey that I designed and conducted, a mapping of the potential travel routes to all colleges in the students’ choice set using an algorithm I developed in Google Maps, and crowd-sourced mobile application safety data. Using a random utility framework, I estimate that women are willing to choose a college in the bottom half of the quality distribution over a college in the top quintile for a route that is perceived to be one standard deviation (SD) safer. Alternatively, women are willing to spend an additional INR 18,800 (USD 290) per year, relative to men, for a route that is one SD safer – an amount equal to double the average annual college tuition. These findings have implications for other economic decisions made by women. For example, it could help explain the puzzle of low female labor force participation in India.

That is the excellent job market paper by Girija Borker at Brown University, this is one of the most novel and important works I have seen this job market season.

Corporate income tax rates in Nash equilibrium

This is from the job market paper of Yang Shen, a candidate at Brown University:

I calibrate a three-country version of the model to data on trade, MP, and corporate tax rates for Germany, Ireland, and the United States. I then compute the Nash equilibrium corporate tax rates and calculate the associated welfare changes. The United States would undertake the largest tax cut in the Nash equilibrium, in an attempt to widen market entry of marginal firms. All three countries would experience welfare gains under the Nash tax rates.

In her model, the United States should cut its corporate tax rate by eleven percentage points.  Shout it from the rooftops, as they say…

Monday assorted links

1. Unpopular ideas about blockchains?

2. GMU economics job market candidates.

3. “Even so, Yudkowsky endorses anti-modesty for his book readers, who he sees as better than average, and also too underconfident on average.”  From our very own Robin Hanson.

4. What happened to the Notre Dame economics department?

5. American gun culture as stemming in part from Native Americans.

6. An early, metallurgical great stagnation?

Logical Thought==Efficient Markets

A remarkable new paper on logical induction by Scott Garrabrant, Tsvi Benson-Tilsen, Andrew Critch, Nate Soares, and Jessica Taylor dramatically extends Ramsey’s Dutch book arguments in support of Bayesian epistemology and in so doing demonstrates deep connections between logical thinking and efficient markets. The research was supported by the Machine Intelligence Research Institute.

We present a computable algorithm that assigns probabilities to every logical statement in a given formal language, and refines those probabilities over time. For instance, if the language is Peano arithmetic, it assigns probabilities to all arithmetical statements, including claims about the twin prime conjecture, the outputs of long-running computations, and its own probabilities. We show that our algorithm, an instance of what we call a logical inductor, satisfies a number of intuitive desiderata, including: (1) it learns to predict patterns
of truth and falsehood in logical statements, often long before having the resources to evaluate the statements, so long as the patterns can be written down in polynomial time; (2) it learns to use appropriate statistical summaries to predict sequences of statements whose truth values appear pseudorandom; and (3) it learns to have accurate beliefs about its own current beliefs, in a manner that avoids the standard paradoxes of self-reference. For example, if a given computer program only ever produces outputs in a certain range, a logical inductor learns this fact in a timely manner; and if late digits in the decimal expansion of π are difficult to predict, then a logical inductor learns to assign ≈ 10% probability to “the nth digit of π is a 7” for large n. Logical inductors also learn to trust their future beliefs more than their current beliefs, and their beliefs are coherent in the limit (whenever φ → ψ, P∞(φ) ≤ P∞(ψ), and so on); and logical inductors strictly dominate the universal semimeasure in the limit.

These properties and many others all follow from a single logical induction criterion, which is motivated by a series of stock trading analogies. Roughly speaking, each logical sentence φ is associated with a stock that is worth $1 per share if φ is true and nothing otherwise, and we interpret the belief-state of a logically uncertain reasoner as a set of market prices, where Pn(φ) = 50% means that on day n, shares of φ may be bought or sold from the reasoner for 50¢. The logical induction criterion says (very roughly) that there should not be any polynomial-time computable trading strategy with finite risk tolerance that earns unbounded profits in that market over time. This criterion bears strong resemblance to the “no Dutch book” criteria that support both expected utility theory (von Neumann and Morgenstern 1944) and Bayesian probability theory (Ramsey 1931; de Finetti 1937).

The authors are quick to acknowledge that their algorithm holds only in the limit which makes it impractical to implement. Nevertheless, the first fully rational beings on the planet will surely be artificial intelligences.

Job market papers of 2017-2018

As you may have noticed, I’ve been surveying various job market papers from this year.  So far, here are my subjective impressions of what is going on overall.  The number of money and macro papers is way down.  Development economics is still flourishing and expanding, even relative to a few years ago, though I worry I am not seeing many generalizable results and that the fixed costs of continuing to do this kind of research throughout your career are quite high.  Purely applied areas such as water and transportation are making their way into job market papers at the top schools.  MIT and Harvard are still the two best graduate programs with the best students.  Papers from business and public policy schools, on the technical side, are coming closer and closer to economics, and they may be more interesting, so consider those places for your hiring.  I’m seeing Turkish, Korean, and Chinese graduate students working on the big picture institutional and political economy questions.  The total number of candidates seemed slightly down, though that could be my imagination.

The best films of 2017

I thought the year started very slowly, but later picked up, here were my favorites.  There are reviews behind the linked items, or occasionally a link to outside information.  With the foreign films, as always, I classify these according to the year I saw them, not the year of their initial overseas release.  Here goes:

Toni Erdmann (rollicking German satire about parents and children)

After the Storm (Japanese complacent class, plus pending doom)

Magnus (the chess prodigy)

Tower (animated with graphics, about the Texas tower shooting in Austin, history of violence and how people respond to it)

Wonder Woman

Paths of the Soul

Dunkirk (uses angles better than any movie ever)

Get Out (racial discrimination, plus a satire on both horror and Sidney Poitier)

Columbus (architecture in the Indiana town, when to leave home)

Two Trains Runnin’ (history of rediscovering the blues)

The Florida Project (the Brazilians and Cubans find American lower income groups tough to deal with)

Faces, Places (Agnes Varda, travel, memories, art, and the transience of it all)

Thor: Ragnarok

The Square (European intellectual mainstream is bankrupt)

For visuals and the staging of scenes, the winner was Dunkirk.  For social science, Get Out and The Square and Paths to the Soul (pilgrimage) were the richest.  If I had to pick a single winner, it would be the Chinese-Tibetan Paths to the Soul, replete with tales of signaling, social cooperation, journeying, and life and death, especially when seen on the large screen.

Audio of Robert Nozick?

Nozick was one of the smartest and quickest thinkers, and I feel sorry for those who never had the chance of experiencing him in person.  Recently I received this email from Michael P. Gibson:

Robert Nozick is one of my intellectual heroes and I have wondered why there aren’t any recordings out there of his lectures. Well, after some probing around, I’ve discovered there are!

http://hollis.harvard.edu/primo_library/libweb/action/dlDisplay.do?vid=HVD&search_scope=default_scope&docId=HVD_ALEPH009785781&fn=permalink

Alas, they are 17 audiocassettes at Hollis at Harvard. Do you think it’s worth a bleg on MR to see if some enterprising Harvard student out there might digitize them and make them accessible to the public?

Anyone?  Do you know of any other recordings of his lectures?  It’s a shame he was never on Firing Line.

What is driving the decline in entrepreneurship?

Nicholas Kozeniauskas, a job candidate from NYU, has a job market paper on that topic:

Recent research shows that entrepreneurial activity has been declining in the US in recent decades. Given the role of entrepreneurship in theories of growth, job creation and economic mobility this has generated considerable concern. This paper investigates why entrepreneurship has declined. It documents that (1) the decline in entrepreneurship has been more pronounced for higher education levels, implying that at least part of the force driving the changes is not skill-neutral, and (2) the size distribution of entrepreneur businesses has been quite stable. Together with a decline in the entrepreneurship rate the second fact implies a shift of economic activity towards non-entrepreneur firms. Guided by this evidence I evaluate explanations for the decline in entrepreneurship based on skill-biased technical change, changes in regulations increasing the fixed costs of businesses and changes in technology that have benefited large non-entrepreneur firms. I do this using a general equilibrium model of occupational choice calibrated with a rich set of moments on occupations, income distributions and firm size distributions. I find that an increase in fixed costs explains most of the decline in the aggregate entrepreneurship rate and that skill-biased technical change can fully account for the larger decrease in entrepreneurship for more educated people when combined with the other forces.

This is one of the more important papers of this job market season.

Saturday assorted links

1. The Bitcoin futures contract on the CME will have cash settlement, not Bitcoin settlement.  What should you infer from that?

2. The Economist on surging blue collar wages.

3. The postwar British productivity failure.

4. What happens after you have spent $450 million on a “Leonardo”? (carrying costs > liquidity premium).  Of course the buyer shouldn’t insure it.

5. “Would you be inclined to buy makeup because a 10-year-old boy is showing you how to create a look on Instagram?”  (NYT)

6. Many Skopje statues to be removed.

How much of the racial wage gap is due to differing job recommendations from friends?

This paper estimates the extent to which inequality in jobs found through friends can account for the aggregate wage gap between black workers and others in the US. Data from the NLSY79 are used to estimate a job search model in which individual productivity is distinguished from social capital by comparing the wages and frequency of jobs found directly with those of jobs found through friends. Jobs found through friends tend to pay more, but this premium is lower for black workers; the difference can account for more than a tenth of the racial wage gap.

Here is the paper, by Nicholas Tenev, a job candidate from the University of Wisconsin.

Does easy divorce lead to more assortative mating?

Maybe so, there is a new paper (pdf) on that question:

This paper investigates how the adoption of unilateral divorce affects the gains from marriage and who marries whom. Exploiting variation in the timing of adoption across the US states, I first show that unilateral divorce increases assortative matching among newlyweds. To explain the link between divorce laws and matching patterns, I specify an equilibrium model of household formation, labor supply, private and public consumption, and divorce over the life cycle. Matching decisions depend on the anticipated welfare from marriage and divorce. The model has two key features (consistent with the data). First, working spouses whose partners do not work accumulate relatively more human capital during their lifetime, a fact that improves their outside value of divorce. Second, divorcees cannot sustain cooperation in public goods expenditures (interpreted as children’s welfare), leading to inefficiencies that are mostly harmful to the top educated. Under unilateral divorce, the value of divorce becomes a credible threat that shifts the bargaining power in marriage, making both household production and marriage less attractive. This pushes the marriage market equilibrium towards more positive sorting in education and lower welfare, particularly for the highest educated. I estimate the model using data from households that form and live under the pre-reform mutual consent divorce regime. Using the estimates, I then introduce unilateral divorce and solve for the new equilibrium. I find sizable equilibrium effects. First, the correlation in spousal education increases and people, particularly educated females, become more likely to remain single. Second, the gains from marriage decrease for the least and the most educated. Lastly, the marital gains from acquiring a college or higher degree decreases for women and men under unilateral divorce. These results reflect previously overlooked consequences of reducing barriers to divorce.

That is from Ana Reynoso, a job candidate from Yale University.  These are my words, not hers, but I think of this as yet another way that elites selfishly have pushed for looser social and sexual and romantic norms, without much worrying about the resulting broader impact on inequality and lower earners and the less educated.

Friday assorted links

1. Is the clustering of innovators responsible for about 20% of the increase in segregation by income?

2. “The Political Economy of Famine: the Ukrainian Famine of 1933.

3. Why didn’t the Soviets veto the UN resolution authorizing the Korean War?

4. Is the demand for male escorts going up? (model this)

5. Did extending the right to vote kick-start economic development in Sweden?

6. The Economist reviews Doug Irwin’s new book on the history of trade.

Cryptocurrencies don’t belong in central banks

That is the topic of my latest Bloomberg column.  Here is one excerpt:

An additional reason for skepticism stems from the nature of crypto assets. The word “cryptocurrency” is far more common than “crypto asset,” but it’s a misleading term. Bitcoin, for instance, is used only rarely in retail transactions, and for all its success it isn’t becoming more important as a medium of exchange. Bitcoin thus isn’t much of a currency in the literal sense of that term. There is a version of bitcoin, Bitcoin Cash, that changed the initial rules to be better suited as an exchange medium, but it isn’t nearly as popular.

If you think of these assets as “cryptocurrencies,” central bank involvement will seem natural, because of course central banks do manage currencies. Instead, this new class of assets is better conceptualized as ledger systems, designed to create agreement about some states of the world without the final judgment of a centralized authority, which use a crypto asset to pay participants for maintaining the flow and accuracy of information. Arguably these innovations come closer to being substitutes for corporations and legal systems than for currencies.

Put in those terms, an active (rather than merely supervisory) role for central banks in crypto assets is suddenly far from obvious. Consider other financial innovations: Does anyone suggest that central banks should run their own versions of ETFs or high-frequency trading? Is there a need for central banks to start managing the development of accounting and governance systems?

Central banks are too conservative anyway, which of course is how they should be.  Don’t forget:

…consider a simple question: Would any central bank have had the inspiration or taken the risk of initiating the bitcoin protocol in the first place?