Month: May 2021

The Essential James Buchanan

The Essential James Buchanan is an excellent new primer on Buchanan written by Don Boudreaux and Randy Holcombe. It’s part of the Essential Scholar series from the Fraser Institute which also includes Hayek, Nozick, Locke, Smith and Hume among others. Each book can be downloaded in entirety or by chapter and each comes with introductory videos and a guide to further readings. Boudreux and Holcombe’s chapter on Buchanan on government debt is especially clear and concise. All the books in the series are written by experts, such as Erik Mack on John Locke, Steven Landsburg on Milton Friedman and Sandra Peart on John Stuart Mill. Recommended.

Network Structure in Small Groups and Survival in Disasters

I wonder if this kind of result might apply to more than just disasters:

People in disaster and emergency situations (e.g., building fires) tend to adhere to the social obligations and expectations that are embedded in their preexisting roles and relationships. Accordingly, people survive or perish in groups—specifically, alongside those to whom they were connected before the situation emerged. This article uses social network analysis to expand on this collective behavior account. Specifically, we consider structural heterogeneity with respect to the internal configurations of social ties that compose small groups facing these situations together. Some groups are composed of cohesive subsets of members who can split off from each other during evacuation without violating their group’s internal role-based expectations. We argue that groups that possess this “breakaway” structure can respond to emergencies more flexibly. We explore this using data from the Beverly Hills Supper Club fire of 1977, which killed 165 people. Our data include 303 groups (“parties”) that consisted of 746 people who were present in the dining room where most of the fatalities occurred. Fatality rates were significantly lower in groups that were internally structured such that they could split up in different ways during the escape while still maintaining their strongest social bonds.

That is from Benjamin Cornwell and Jing-Mao Ho, via the excellent Kevin Lewis.

Offense vs. defense in the current NBA

…I do have to grudgingly admit the evidence seems to suggest that defense has become less important during this unusual regular season.

One way to look at this is the spread in ratings on both ends of the court. The standard deviation of teams’ defensive ratings relative to league average is the lowest it’s been since the 1984-85 season, while the standard deviation in offensive ratings is the second highest we’ve seen since 2007-08. That’s one way of showing that offense is not just winning the battle with defense but also controlling it.

Another way to show that is the correlation between a team’s defensive rating and its overall win percentage (.546). That’s the lowest it’s been since 1985-86. Meanwhile, there’s a far stronger correlation between a team’s offensive rating and its win percentage (.848). In general, offense tends to relate better to winning games than defense in the NBA. Typically, the two figures are much closer together than we see now.

That is Kevin Pelton, there is further discussion at the ESPN link.  Good news for the Wizards!  It also means you can’t trust your usual intuitions about who might be most likely to win the NBA title this time around.

Unmask the Vaccinated?

Ilya Somin points us to legal scholars Kevin Cope and Alexander Stremitzer who make the case that vaccine passports may be constitutional necessary:

Here’s why governments may be constitutionally required to provide a vaccine passport program for people under continuing restrictions. Under the U.S. Constitution, the government may not tread on fundamental rights unless the policy is “the least restrictive means” to achieve a “compelling” government interest. Even some rights considered nonfundamental may not be infringed without a rational or non-arbitrary reason. Before vaccines, blanket lockdowns, quarantines, and bans on things like travel, public gatherings, and church attendance were a necessary measure to slow the pandemic. The various legal challenges to these measures mostly failed—rightly, in our view. But now, a small but growing set of the population is fully vaccinated, with high efficacy for preventing transmission and success rates at preventing serious illness close to 99 percent or higher.

Facilitating mass immunity—and exempting the immunized from restrictions—is now both the least liberty-restrictive method for ending the pandemic through herd immunity and the most effective one. Imagine a fully vaccinated person whose livelihood is in jeopardy from ongoing travel or business restrictions. She might go to court and argue: “I present little or no danger to the public. So restricting my freedoms and preventing me from contributing to society and the economy isn’t rational, let alone the least restrictive means of protecting the public. Since you’re not lifting restrictions for everyone, the Constitution requires that I be exempt.”

This argument alone should be enough to justify mandating that passports be made available where COVID restrictions are still in place….

The NYTimes also notes that surveys suggest that the right to go maskless could increase vaccine take-up:

Enforcement is an issue but this might work well with universities and workplaces. See Ilya’s post for more.

Elon on SNL

He started by declaring that he speaks in a monotone and “has Asperger’s,” was funny and self-assured during the rest of the introduction, brought his mom on stage, and later played a variety of roles, including murderer, awkward guy at a party, a Mario character (Wario), and an Icelandic TV producer.  He played a financial analyst repeatedly asked to explain “What is Dogecoin?” (Dogecoin was down significantly during the evening).  The final skit was a gold-mining motif, something like “why are we panning for this gold when we can just invent our own currency?”  Elon’s plan was to dig a tunnel to get at the bad guys.  I enjoyed his line: “And I like self-driving horses, which are just…horses.”

He was funnier than any of the professional comedians.

Is there anything in American business history even vaguely comparable to this event?

From the comments, on restaurant labor and UI

I own a restaurant and bar in a rural community in western Washington. Our state minimum wage is currently $13.69 per hour which is what we pay our tipped front of the house employees. After tips these employees are making $25 to $35 per hour. Not bad for a job that requires no formal training.

We start our back of the house cooks at $17 hour and up. For full time employees we also offer health insurance.

We are still having major problems finding employees. I have ads for employees that get zero responses. I am not alone in this. Everyone in our area from Costco, to Walmart, to all of the construction companies which pay very well can’t find help. In all my years I have never experienced a labor market like this.

My anecdotal experience from talking with local individuals is that they are enjoying the paid time off and have no plans to come back until the bennies run out.

For those of you who think you can just pay more and raise prices by a nickel, you are out of touch. As a point of reference, in 2020 the minimum wage increased from $12 hour to $13.50. The increase in costs to my business based on 2019 hours was over $65,000 which is most of my profit. Then covid hit.

Finally, keep in mind that most restaurant workers are not going to learn to code. I’ve have had recovering drug addicts, felons, and people with other social and mental disorders work for us. The restaurant business is an opportunity for many people at the margins of society to be productive and to get their lives together. We give them structure, training, and a paycheck. But the big question is how can you pay someone $15 hour who is only giving you $7 of value? In the long run you can’t.

The current policies of paying people not to work in the long run is going to hurt a lot of small businesses and more importantly, a lot of people in the margins of society.

And Slocum chimes in:

Everyone commenting here and every restaurant owner out there facing labor shortages is perfectly aware that if they raise wages high enough, they’ll get all the applicants they could ever want.

But some of the commenters here (and restaurant owners themselves) also know that restaurant profit margins are not large and that they have limited pricing power because restaurant meals are highly elastic, and that as restaurants raise prices, their customers will come less frequently and buy less when they do come. They also know that wages are sticky — that when the pandemic UI ends, they won’t be able to simply reduce wages back to previous levels without having a big impact on employee morale.

And as a business owner, just how big a bidding war would you want to get into just to be able to bribe the least ambitious prospects into getting off their couches?

Here is the link to the comments.

Saturday assorted links

1. Furman and Powell on labor markets.  And monopsony oops.

2. New crypto journal.

3. “We find that the state‐level rules targeted at the beer supply chain vary between 1,177 and 25,399, with the average state implementing 10,212 formal regulatory restrictions.

4. Jean Monnet, guerrilla bureaucrat.

5. Byrne Hobart on Stripe.

6. “Last year, more anti-Asian hate crimes were reported to police in Vancouver, a city of 700,000 people, than in the top 10 most populous U.S. cities combined.”  Note however that data standards may not be uniform!  Still…

New results on Work from Home

Emphasis is added by TC:

Using personnel and analytics data from over 10,000 skilled professionals at a large Asian IT services company, we compare productivity before and during the work from home [WFH] period of the Covid-19 pandemic. Total hours worked increased by roughly 30%, including a rise of 18% in working after normal business hours. Average output did not significantly change. Therefore, productivity fell by about 20%. Time spent on coordination activities and meetings increased, but uninterrupted work hours shrank considerably. Employees also spent less time networking, and received less coaching and 1:1 meetings with supervisors. These findings suggest that communication and coordination costs increased substantially during WFH, and constituted an important source of the decline in productivity. Employees with children living at home increased hours worked more than those without children at home, and suffered a bigger decline in productivity than those without children.

That is from a new paper by Michael Gibbs, Friederike Mengel, and Christoph Siemroth.

*Noise: A Flaw in Human Judgment*

That is the new and very interesting book by Daniel Kahneman, Olivier Sibony, and Cass R. Sunstein.  Think of “noise” as the new major problem rather than bias.  Here is one excerpt:

…we presented our findings to the senior managers of an asset management firm, prompting them to run their own exploratory noise audit.  they asked forty-two experienced investors in the firm to estimate the fair value of a stock (the price at which investors would be indifferent to buying or selling).  The investors based their analysis on a one-page description of the business; the data included ismplified profits and loss, balance sheet, and cash flow statements for the past three years and projections for the next two.  median noise, measured in the same way as in the insurance company, was 41%.  Such large differences among investors in the same firm, using the same valuation methods, cannot be good news.

I will be covering this book more soon, you can pre-order it here.  And here Tim Harford does FT lunch with Kahneman, self-recommending.

The excellent Tim Sackett on the labor shortage

I’m a daily reader of your stuff and I just love the sharing you do. Thank you! I’m a blogger and analyst in the HR and Talent Acquisition space and speak to CHROs and Org Executives every day and over the past 90 days or so there has been a giant disconnect between something I frequently see Economists saying in the media verse what is reality in the job market. I was hoping you guys could tackle this subject in a future post!

Specifically, around this idea that extended Unemployment Insurance and the extra federal government stimulus being given out to unemployed workers having only a “marginal” effect on the amount of available workers. A great example of this –

Economists claim that these policies have little impact to availability of workers, but CHROs at every size company, every industry, in all markets are begging for workers right now, and every one of them I speak to complain that they have workers telling them they won’t come back until they have to because they can make as much, or more, or even slightly less, but don’t have to work because of these additional benefits.

Why the giant disconnects between what Economists believe about UI verse what the reality is on the ground for organizations trying to hire? Also, I’ll give you UI/Stimulus isn’t the only factor driving difficult hiring. We have a ton of older workers leaving the workforce for retirement, which is giving us this step-up kind of hiring, where younger workers are skipping traditional entry level jobs and getting opportunities up the job food chain, we have GenZ who doesn’t want to work some dirty, crappy $12/hr job, so we see fewer GenZ in the labor force than previous generations at the same age, fear of Covid, etc. I still believe, especially in the $12-22/hr job market, UI plays a significant impact to worker availability currently.

File under #TheGreatForgetting.  Noah fortunately remembers.

Friday assorted links

1. “Unlike some of these contests, the winner isn’t chosen at random. Instead, “your level of enthusiasm for watching home improvement shows will be a strong factor in the selection process,” according to the contest website.”  Link here.

2. Inequality amongst children.

3. Can bees smell Covid-19?

4. Which incentives for vaccines are most effective for which groups? (NYT)

5. Magnus Carlsen edition: That was then, and this is now (link fixed).

6. The best Ursula Le Guin books?

Four “dark horse” stories for 2021

From my Bloomberg column, here is one of them:

possible Chinese move against Taiwan has received a lot of attention, but a Russian union with Belarus could be a greater danger. Belarus might even agree to such a proposition, so it would be hard for NATO or the U.S. to decry it as a coercive invasion. Yet such a Russian expansion could upend political stability in Europe.

If Russia and Belarus became a single political unit, there would be only a thin band of land, called the Suwalki Gap, connecting the Baltics to the rest of the European Union. Unfortunately, that same piece of territory would stand in the way of the new, larger Russia connecting with the now-cut off Russian region of Kaliningrad. Over the long term, could the Baltics maintain their independence? If not, the European Union would show it is entirely a toothless entity, unable to guarantee the sovereignty of its members.

Even if there were no formal political union between Russia and Belarus, the territorial continuity and integrity of the EU could soon be up for grabs. The EU has more at stake in an independent Belarus than it likes to admit.

You will find three more undervalued possible news stories at the link.

Does performance pay increase alcohol and drug use?

I would like to see this replicated, but the result is interesting nonetheless:

Using US panel data on young workers, we demonstrate that those who receive performance pay are more likely to consume alcohol and illicit drugs. Recognizing that this likely reflects worker sorting, we first control for risk, ability, and personality proxies. We further mitigate sorting concerns by introducing worker fixed effects, worker-employer match fixed effects, and worker-employer-occupation match fixed effects. Finally, we present fixed effect IV estimates. All of these estimates continue to indicate a greater likelihood of substance use when a worker receives performance pay. The results support conjectures that stress and effort increase with performance pay and that alcohol and drug use is a coping mechanism for workers.

By Benjamin Arta, Colin P. Green, and John S. Heywood, via the excellent Kevin Lewis.