Month: January 2021
Let me turn over the microphone to David Neumark and Peter Shirley:
The disagreement among studies of the employment effects of minimum wages in the United States is well known. What is less well known, and more puzzling, is the absence of agreement on what the research literature says – that is, how economists even summarize the body of evidence on the employment effects of minimum wages. Summaries range from “it is now well-established that higher minimum wages do not reduce employment,” to “the evidence is very mixed with effects centered on zero so there is no basis for a strong conclusion one way or the other,” to “most evidence points to adverse employment effects.” We explore the question of what conclusions can be drawn from the literature, focusing on the evidence using subnational minimum wage variation within the United States that has dominated the research landscape since the early 1990s. To accomplish this, we assembled the entire set of published studies in this literature and identified the core estimates that support the conclusions from each study, in most cases relying on responses from the researchers who wrote these papers.
Our key conclusions are: (i) there is a clear preponderance of negative estimates in the literature; (ii) this evidence is stronger for teens and young adults as well as the less-educated; (iii) the evidence from studies of directly-affected workers points even more strongly to negative employment effects; and (iv) the evidence from studies of low-wage industries is less one-sided.
Here is the full NBER paper.
Not too much, as I argue in my latest Bloomberg column. Here is one excerpt:
In September 2020, Kraken, one of the leading crypto exchanges, obtained a banking license from the state of Wyoming, thereby giving it access to the federal payments infrastructure. Part of the deal is that Kraken has to hold 100% reserves for its crypto assets, in essence treating them as a parking garage is supposed to manage cars. It is easy to imagine federal regulators forcing crypto exchanges into the banking system on a larger scale, and perhaps banks buying up or merging with crypto houses, again with stringent reserve requirements.
It is unclear what such regulation would accomplish. Crypto exchanges would become more bureaucratic and less innovative, as they would have a greater stake in the financial status quo. Non-U.S.-based crypto exchanges, and anonymized systems, could still be used to transfer funds secretly or illegally. Still, banks are something the federal government has a lot of experience regulating, and U.S. regulators would achieve a certain illusion of control.
A more general principle is that the platforms easiest to regulate also tend to be the most legitimate and the least likely to engage in or encourage wrongdoing. Again, the net effect will be to make crypto, at the global level, harder to monitor and control.
The better strategy would be to encourage the ascendancy of American-based crypto firms, and slowly allow them to evolve into a more traditional part of financial markets.
There is a plausible argument that, eventually, crypto exchanges should be regulated as financial clearinghouses. But the crypto platforms are currently small and are not sources of systemic macroeconomic risk. It remains to be seen how they ought to evolve or which functions they ought to serve, or indeed if they will succeed at all.
Recommended, I cite Hayek at the very end.
Jeff Kaufman has some good parenting tips:
A few weeks ago Anna (4y) wanted to play with some packing material. It looked very messy to me, I didn’t expect she would clean it up, and I didn’t want to fight with her about cleaning it up. I considered saying no, but after thinking about how things like this are handled in the real world I had an idea. If you want to do a hazardous activity, and we think you might go bankrupt and not clean up, we make you post a bond. This money is held in escrow to fund the cleanup if you disappear. I explained how this worked, and she went and got a dollar:
When she was done playing, she cleaned it up without complaint and got her dollar back. If she hadn’t cleaned it up, I would have, and kept the dollar.
Some situations are more complicated, and call for bets. I wanted to go to a park, but Lily (6y) didn’t want to go to that park because the last time we had been there there’d been lots of bees. I remembered that had been a summer with unusually many bees, and it no longer being that summer or, in fact, summer at all, I was not worried. Since I was so confident, I offered my $1 to her $0.10 that we would not run into bees at the park. This seemed fair to her, and when there were no bees she was happy to pay up.
Over time, they’ve learned that my being willing to bet, especially at large odds, is pretty informative, and often all I need to do is offer. Lily was having a rough morning, crying by herself about a project not working out. I suggested some things that might be fun to do together, and she rejected them angrily. I told her that often when people are feeling that way, going outside can help a lot, and when she didn’t seem to believe me I offered to bet. Once she heard the 10:1 odds I was offering her I think she just started expecting that I was right, and she decided we should go ride bikes. (She didn’t actually cheer up when we got outside: she cheered up as soon as she made this decision.)
I do think there is some risk with this approach that the child will have a bad time just to get the money, or say they are having a bad time and they are actually not, but this isn’t something we’ve run into. Another risk, if we were to wager large amounts, would be that the child would end up less happy than if I hadn’t interacted with them at all. I handle this by making sure not to offer a bet I think they would regret losing, and while this is not a courtesy I expect people to make later in life, I think it’s appropriate at their ages.
I also recommend the board game Wits and Wagers. In the game you make bets based on questions like “In what year was the computer game Pong released? or “How many ridges are on the outside of a dime.” It’s a clever and fun game because it teaches you not only to estimate and bet accordingly but also to adjust your bets based on seeing how other people bet. Thus, it often happens that a player will less background knowledge can win, precisely because they are less confident and so pay more attention to the information available in other people’s bets. Aumann would approve.
Hat tip: Julia Galef.
Armin Laschet, the newly elected leader of Germany’s Christian Democrats, is coming under mounting scrutiny over statements he has made in the past defending Russian president Vladimir Putin and the Assad regime in Syria. Mr Laschet, prime minister of North Rhine-Westphalia, beat rival Friedrich Merz in a digital leadership election on Saturday. He is seen as representing continuity with Angela Merkel’s moderate policies. But in the past Mr Laschet, who has strong chances of succeeding Ms Merkel as chancellor after September’s Bundestag elections, has expressed views on Russia and Syria that put him outside the CDU mainstream and which have now come back to haunt him…
Mr Laschet in a Twitter message [had] said there was a lack of evidence to prove that Russia was behind the novichok attack on Sergei Skripal and his daughter Yulia in Salisbury in 2018.
CDU Baden-Württemberg lists Huawei as top sponsor of this weekend’s party congress
This will be a tough one for Biden.
Voters in the North would like to see a referendum on a United Ireland sometime in the next five years, while voters in the UK believe Scotland is likely to become independent within the next decade, according to a series of polls.
The Sunday Times commissioned a series of surveys across the UK gauge attitudes towards the Union.
The findings highlight some of the difficulties facing Boris Johnson and the UK government as he struggles to keep the country together following its departure from the European Union.
In Northern Ireland, 47% still want to remain in the UK, with 42% in favour of a United Ireland and a significant proportion – 11% – undecided.
However, asked if they supported a referendum on a United Ireland within the next five years, 51% said yes compared to 44% who were against.
In Scotland, the poll found 49% backed independence compared to 44% against – a margin of 52% to 48% if the undecideds are excluded.
The Irish result seems to be a more rapid shift than the Scottish one. Here is the full article.
The Miami Heat are bringing back some fans, with help from some dogs.
The Heat will use coronavirus-sniffing dogs at AmericanAirlines Arena to screen fans who want to attend their games. They’ve been working on the plan for months, and the highly trained dogs have been in place for some games this season in which the team has allowed a handful of guests — mostly friends and family of players and staff.
Starting this week, a limited number of ticket holders will be in the seats as well, provided they get past the dogs first.
“If you think about it, detection dogs are not new,” said Matthew Jafarian, the Heat’s executive vice president for business strategy. “You’ve seen them in airports, they’ve been used in mission-critical situations by the police and the military. We’ve used them at the arena for years to detect explosives.”
Here is the full story, the first game under this regime is Thursday.
Bureaucratic politics is a politics of privilege. By 1956, the wages of the highest-ranking party and government personnel were set at 36.4 times those of the lowest rank. (By way of comparison, the highest wage in the “corrupt” Nationalist government in1946 was 14.5 times that of the lowest wage.)
That is from the new and important The World Turned Upside Down: A History of the Chinese Cultural Revolution, by Yang Jisheng, who himself participated in the Cultural Revolution.
The spiritual gap between Iran’s Shia ayatollahs and the people they rule is widening. The strictures of the theocracy and the doctrine of Shia supremacy alienate many. So growing numbers of Iranians seem to be leaving religion or experimenting with alternatives to Shiism. Christians, Zoroastrians and Bahais all report soaring interest. Leaders of other forms of Islam speak of popular revivals. “There’s a loyalty change,” says Yaser Mirdamadi, a Shia cleric in exile. “Iranians are turning to other religions because they no longer find satisfaction in the official faith.”
…The repression isn’t working. The state says over 99.5% of Iran’s 82m people are Muslim. But its numbers are not reliable. A poll of more than 50,000 Iranians (about 90% of whom live in Iran) conducted online by Gamaan, a Dutch research group, found a country in religious flux. About half of the respondents said they had lost or changed their religion. Less than a third identified as Shia. If these numbers are even close to correct, Iran is much more diverse than its official census shows.
Here is more from The Economist. Speculative, but interesting.
Dana is what I call one of the world’s information billionaires. For more specifics, here is part of his Wikipedia page:
Michael Dana Gioia (/ˈdʒɔɪ.ə/; born December 24, 1950) is an American poet and writer. He spent the first fifteen years of his career writing at night while working for General Foods Corporation. After his 1991 essay “Can Poetry Matter?” in The Atlantic generated international attention, Gioia quit business to pursue writing full-time. He served as the chairman of the National Endowment for the Arts (NEA) between 2003 and 2009. Gioia has published five books of poetry and three volumes of literary criticism as well as opera libretti, song cycles, translations, and over two dozen literary anthologies.
Gioia is the Judge Widney Professor of Poetry and Public Culture at the University of Southern California, where he teaches, as well as a Senior Fellow at the Trinity Forum. In December 2015 he became the California State Poet Laureate.
He is also well-known as a composer of opera libretti, and more recently as a spokesperson for the importance of Catholicism for culture. And he is brother of TedGioia, former CWT guest. And here is Dana’s home page.
I will be doing a Conversation with him — so what should I ask?
2. Never too much talent? Should you be bullish on the Nets?
7. Peter Huber tribute, he has passed away.
Yesterday I pointed out How Rapidly ‘First Doses First’ Came to Britain. The United States is also moving in that direction but more slowly. First we ended holding second doses in reserves. Now the CDC has new policies:
CNBC: The Centers for Disease Control and Prevention quietly changed its guidance on Covid-19 vaccine shots, saying it’s now OK to mix Pfizer’s and Moderna’s shots in “exceptional situations” and that it’s also fine to wait up to six weeks to get the second shot of either company’s two-dose immunization.
We will see what happens if new variants start to takeoff in the US, as seems likely, and as the number of people immunized starts to slow as we move from first does to having to vaccinate people for the second dose. More second doses means fewer resources for first timers. Biden’s 100 million in 100 days, for example, was already under-ambitious but it’s not even 100 million people it’s 100 million doses or only about 67 million people given that some will be in line twice.
Past research has found that experienced well-being does not increase above incomes of $75,000/y. This finding has been the focus of substantial attention from researchers and the general public, yet is based on a dataset with a measure of experienced well-being that may or may not be indicative of actual emotional experience (retrospective, dichotomous reports). Here, over one million real-time reports of experienced well-being from a large US sample show evidence that experienced well-being rises linearly with log income, with an equally steep slope above $80,000 as below it. This suggests that higher incomes may still have potential to improve people’s day-to-day well-being, rather than having already reached a plateau for many people in wealthy countries.
The paper I want to highlight in this post is “Price Floors and Employer Preferences” by John Horton. In this piece he conducts a randomized control trial on an online labor market, randomly assigning 4 different minimum wage levels ($0, $2, $3, and $4) to 160,000 job postings. This experimental design conveys several advantages over conventional empirical work. First, selection effects and biases based on the economic performance of the firms and the states/countries they are in are automatically controlled for by random assignment. Second, the online platform collects detailed measures on the pre-experiment attributes of all workers, the productivity of workers on the job, and the number of hours worked overall. These data are extremely important to analyzing the effects of the minimum wage but are not measured in the most popular empirical works on the topic. Finally, the computerized nature of the data leaves almost no room for measurement error.
…There are four main results: “(1) the wages of hired workers increases, (2) at a sufficiently high minimum wage, the probability of hiring goes down, (3) hours-worked decreases at much lower levels of the minimum wage, and (4) the size of the reductions in hours-worked can be parsimoniously explained in part by the substantial substitution of higher productivity workers for lower productivity workers.”
The significant reductions in hours worked come from two sources according to Horton’s analysis. First, firms are economizing on now more expensive labor; the labor demand curve slopes downward. Second, the substitution of higher productivity workers meant that jobs were completed faster, so the total hours worked went down. Both of these responses to the minimum wage hurt low productivity workers…
Interestingly, these results are consistent with finding little to no dis-employment effect in an observational study that only measures wages and headcounts (which is what the vast majority of the most popular studies do). This is because almost all of the effects of the minimum wage came from substitution of higher productivity for lower productivity ones, which wouldn’t show up in headcounts, and reduction in hours worked, which is not measured in most conventional data sets.
Here is the full short piece by Maxwell Tabarrok. File under “RCT gold standard for me but not for thee!”