Slovakian Asks Good Questions About American Suburbs

My questions are:

  • What do you actually do? Are you always stuck inside? What did you do when you were a child and couldn’t drive?

  • Why do you have these sorts of strange regulations? Are your officials so incompetent? Is this due to lobbying from car or oil companies? I don’t get it.

  • Why is there no public transport? It seems like the only thing is the yellow school bus, idk.

  • He says there can be only one family houses. Why? Why can’t you have idk a commie block in the middle of such a suburb? Or row houses or whatever.

  • Why are there no businesses inside these? I mean, he says it’s illegal, just why? If I lived in such a place, I’d just buy a house next to mine and turn it into a tavern or a convenience store or whatever. Is that simply not possible and illegal?

  • These places have front and backyards. But they’re mostly empty. Some backyards have a pool maybe, but it’s mostly just green grass. Why don’t you grow plants in your yards? Like potatoes, cucumbers, tomatoes or whatever. Why do you own this land, if you never use it?

Originally from Reddit.

Systemic Bias versus Concentrated Bias

Discrimination exists but rather than being systemic Campbell and Brauer argue it’s due to a small number of prejudiced individuals.

Discrimination has persisted in our society despite steady improvements in explicit attitudes toward marginalized social groups. The most common explanation for this apparent paradox is that due to implicit biases, most individuals behave in slightly discriminatory ways outside of their own awareness (the dispersed discrimination account). Another explanation holds that a numerical minority of individuals who are moderately or highly biased are responsible for most observed discriminatory behaviors (the concentrated discrimination account). We tested these 2 accounts against each other in a series of studies at a large, public university (total N = 16,600). In 4 large-scale surveys, students from marginalized groups reported that they generally felt welcome and respected on campus (albeit less so than nonmarginalized students) and that a numerical minority of their peers (around 20%) engage in subtle or explicit forms of discrimination. In 5 field experiments with 8 different samples, we manipulated the social group membership of trained confederates and measured the behaviors of naïve bystanders. The results showed that between 5% and 20% of the participants treated the confederates belonging to marginalized groups more negatively than nonmarginalized confederates. Our findings are inconsistent with the dispersed discrimination account but support the concentrated discrimination account. The Pareto principle states that, for many events, roughly 80% of the effects come from 20% of the causes. Our results suggest that the Pareto principle also applies to discrimination, at least at the large, public university where the studies were conducted. We discuss implications for prodiversity initiatives.

The cause of discrimination matters because as Hambrick notes writing about this paper in Scientific American:

 In recent years, the view that most people engage in discriminatory acts because of implicit biases has gained widespread public acceptance. In a 2016 presidential debate, Hillary Clinton commented that “implicit bias is a problem for everyone.” Campbell and Brauer’s findings suggest it’s still not clear the extent to which implicit biases explain discriminatory conduct. (Other work has called into question the validity of implicit bias measures for predicting real-world discrimination.) Research aimed at answering this fundamental question will inform the design of interventions that may one day meaningfully reduce levels of discrimination.

….If, for example, a small number of explicitly prejudiced people are responsible for most or all of the discrimination occurring in a company, an intervention that requires all employees to undergo implicit bias training will probably fail to address the problem. Research suggests that interventions that convey the message that nearly everyone engages in discriminatory behavior may even make the workplace atmosphere worse for marginalized employees, because after the training, nonmarginalized employees may avoid interacting with them out of fear of unwittingly discriminating.

China’s Bizarre Authoritarian-Libertarian COVID Strategy

It’s difficult to understand China’s COVID strategy. On the one hand, China has confined millions of people to their homes, even to the extent of outlawing walking outside or having food delivered. Many thousands of other people have been taken from their homes and put into quarantine centers. On the other hand, vaccination is not mandatory! I can understand authoritarianism. I can understand libertarianism. I have difficulty understanding how jailing people, potentially without food, is ok but requiring vaccinations is not. (Here’s a legal analysis of China’s vaccine policy.) Moreover, put aside making vaccines mandatory because as far as I can tell, China has only recently started to get serious about non-coercive measures to vaccinate the elderly. The Washington Post notes:

The vaccination drive has been mild compared to some of the other pandemic-control measures and did not prioritize the elderly. Some younger people have been required to get vaccinated for their jobs, but vaccination of retirees remains optional. Incentives like eggs, grains and other foodstuffs — a staple of China’s vaccination drive since last year — are now being bolstered by home checkups, mobile clinics and the widespread mobilization of public servantsto ensure the elderly get shots.

China is shutting down factories costing its economy trillions of dollars and the best they come up with to get elderly people vaccinated is egg incentives???!

It’s difficult to understand what the Chinese leadership is thinking. It’s conceivable that the Chinese vaccines are much less effective than we have been led to believe but that seems unlikely. As far as we can tell the Chinese vaccines are not quite as good as the mRNA vaccines but good enough to prevent severe disease and pass FDA approval in the United States. My best guess is that President Xi Jinping is so powerful and insulated from reality and alternative viewpoints that he is just soldiering on either oblivious to the pain and foolishness of his policies or indifferent, much like Mao before him during the great famine.

The Essential Women of Liberty

Here’s another excellent book in the Essential Scholars series. You can download the book for free, find additional resources, introductory videos and more at the Women of Liberty web page.

This series of essays, written by leading scholars in the United States, Canada and Europe, explores the lives and ideas of some of the most influential women over the past few centuries whose work contributed enormously to the democratic, prosperous and free societies that many people enjoy today. They are a remarkably diverse group of women. Their lives span the eighteenth to twenty-first centuries and their contributions are significant despite the barriers each faced. Some were educated at prestigious universities while others only had informal schooling. Some were academics, others writers and journalists, and still others activists. What they had in common was an understanding of the power of freedom and liberty, and their influential advocacy of such during their lives. These essays are a celebration and recognition of their lives and contributions.

I Hate Paper Straws!

I am interviewed by James Pethokoukis at his substack Faster, Please! Here’s one Q&A:

JP: American political debates are generally more interested in redistribution than long-term investment for future innovation. What are the incentives creating that problem and can they be fixed?

A big part of the incentive problem is that future people don’t have the vote. Future residents don’t have the vote, so we prevent building which placates the fears of current homeowners but prevents future residents from moving in. Future patients don’t have the vote, so we regulate drug prices at the expense of future new drug innovations and so forth. This has always been true, of course, but culture can be a solution to otherwise tough-to-solve incentive problems. America’s forward looking, pro-innovation, pro-science culture meant that in the past we were more likely to protect the future.

We could solve many more of our problem if both sides stowed some of their cultural agendas to focus on areas of agreement. I think, for example, that we could solve the climate change problem with a combination of a revenue neutral carbon tax and American ingenuity. Nuclear, geo-thermal, hydrogen–these aren’t just clean fuels they are better fuels! Unfortunately, instead of focusing on innovation we get a lot of nonsense about paper straws and low-flow showers. I hate paper straws and low-flow showers! There is a wing of the environmental movement that wants to punish consumerism, individualism, and America more than they want to solve environmental problems so they see an innovation agenda as a kind of cheating. Retribution is the goal of their practice.

In contrast, what I want is for all of us to use more water, more energy and yes more plastic straws and also have a better environment. That’s the American way.

Subscribe to Faster, Please! for more.

Learn Public Choice!

The Public Choice Outreach Conference is a compact lecture series designed as a “crash course” in Public Choice for students planning careers in academia, journalism, law, or public policy. The Outreach Conference will be online Monday July 25 to Saturday July 30, noon to 1:15 est daily. Sign up here!

Everyone welcome. Teachers please do let your students know about this opportunity!

Monday, July 25
An Introduction to Public Choice—Alex Tabarrok
Tuesday, July 26
Arrow’s Theorem and All That—Alex Tabarrok
Wednesday, July 27
Public Choice and Development Economics—Shruti Rajagopalan
Thursday, July 28
Public Choice and The Military Industrial Complex—Abby Hall Blanco
Friday, July 29
Government by Insurance or Who vouches for You?—Robin Hanson
Saturday, July 30
Hayek and Buchanan—Peter Boettke

Sign up here!

Automatic Tax Filing?

Pro-publica regularly reports that H&R Block and Quicken lobby against allowing the IRS to pre-fill tax forms. Sure, of course they do and that’s bad. It doesn’t quite follow, however, that “Filing Taxes Could Be Free and Simple” if only for such lobbying. In fact, Lucas Goodman, Katherine Lim, Bruce Sacerdote & Andrew Whitten estimate that less than half of tax forms could be filled out correctly by the IRS and those are the simpler types where the costs of private tax preparation services are lower:

Each year Americans spend over two billion hours and $30 billion preparing individual tax returns, and these filing costs are regressive. To lower and redistribute the filing burden, some commentators have proposed having the IRS pre-populate tax returns for individuals. We evaluate this hypothetical policy using a large, nationally representative sample of returns filed for the tax year 2019. Our baseline results indicate that between 62 and 73 million returns (41 to 48 percent of all returns) could be accurately pre-populated using only current-year information returns and the prior-year return. Accuracy rates decline with income and are higher for taxpayers who have fewer dependents or are unmarried. We also examine 2019 non-filers, finding that pre-populated returns tentatively indicate $9.0 billion in refunds due to 12 million (22 percent) of them.

Jeremy Horpedahl has an excellent post explaining why:

…there is one major thing missing from your income tax withholding estimate: your spouse’s income. You see, the United States is one of the few remaining OECD countries that primarily taxes income based on the family unit (you can use “married filing separately” as a status, but generally there is no benefit and you might lose some deductions). Most countries tax based on your individual income, even if you are married. This is important for two reasons. First, it means there is a “secondary-earner penalty,” where one spouse faces a much higher marginal tax rate (this is different from the “marriage penalty,” but that’s a topic for another day. For purposes of a pre-filled tax return, the second and larger issue is that your employer has no idea how much tax to withhold because it is dependent on how much your spouse makes (and whether you are married).

Moving the US to a system of individual taxation…would simplify the calculation of your taxes.

The other major factor that Jeremy mentions is that the US simply tries to do a lot through the tax code so we have lots of itemized deductions or special tax structures–veterans, widows, widows of veterans–which make it difficult to pre-fill taxes without either simplification or a major overhaul of the administrative data system.

Jeremy also worries that pre-filling will further disconnect the payment of taxes from services rendered thus making costs more opaque. Probably true, although I think that ship has sailed.

The Minimum Wage, Rent Control, and Vacancies or Who Searches?

In an interesting new paper Federal Reserve economists Marianna Kudlyak, Murat Tasci and Didem Tüzemen look at what happens to job vacancy postings when the minimum wage increases.

The vacancy data in our analysis come from the job openings data from the Conference Board as a part of its Help Wanted OnLine (HWOL) data series. HWOL provides monthly data on vacancies at detailed geographical (state, metropolitan statistical area, and county) and occupational (six-digit SOC and eight-digit O*Net) levels starting from May 2005. HWOL covers around 16,000 online job boards.

…Our identification strategy exploits the idea that different occupations can be differently impacted by minimum wage hikes due to differential mass of occupation-specific wage distributions concentrated around the prevailing minimum wage. We formalize this idea by analyzing wage distributions by occupation at the state level using micro data from the Current Population Survey (CPS). We identify occupations with large shares of employed workers at or near the state-level effective minimum wage and we refer to these occupations as “at-risk occupations.” We then estimate vacancy growth in at-risk occupations relative to vacancy growth in other occupations around the time when minimum wage increase takes place in the state, and relative to growth in vacancies in at-risk occupations at the national level.

…We find a statistically significant and economically sizeable negative effect of the minimum wage increase on vacancies. Specifically, a 10 percent increase in the level of the effective minimum wage reduces the stock of vacancies in at-risk occupations by 2.4 percent and reduces the flow of vacancies in at-risk occupations by about 2.2 percent.

…We find that firms cut vacancies up to three quarters in advance of the actual minimum wage increase. This finding is consistent with the firms’ desire to cut employment and vacancies being a forward-looking tool to achieve it. This finding is also consistent with a typical announcement effect of a policy change. Formally testing for the parallel trends assumption in our triple-difference identification, we find that at-risk and not-at-risk occupations do not have statistically significant differences in their vacancy trends prior to the typical announcement period. But the negative effect persists even four quarters after the minimum wage increase. The cumulative negative effect of a 10 percent increase in the minimum wage on total vacancies is as large as 4.5 percent a year later.

…We find that vacancies in occupations that typically employ workers with lower educational attainment (high school or less) are affected more negatively than vacancies in other occupations. The negative effect on vacancy posting is exacerbated in counties with higher poverty rates, which highlights another trade-off that policymakers might want to take into account.

This reminded me of a similar paper on rent controls (ungated) by Are Oust that Tyler and I mention in the forthcoming edition of Modern Principles of Economics.

Are Oust studied rent controls in Oslo, Norway and found that during the rent control era it was common for landlords to require their tenants to be of a certain gender, age, occupation and even religion (which would be illegal in the United States). Landlords would also find ways to charge extra by asking renters for extra services such as baby-sitting, garden work or snow-clearing. When rent control was eliminated, however, the number of apartments increased and landlords no longer advertised these kinds of requirements. Perhaps most telling, in the rent-control era it was common for renters to advertise “Apartment Wanted” but when rent controls were lifted it became much more common for landlords to advertise “Apartments for Rent!”

In other words, in a free market firms search for employees and landlords search for renters but under the minimum wage and rent control, workers must search for jobs and renters must search for apartments to a much greater extent.

Learn to Code!

Gallup did a survey of tech boot camp graduates and the results are quite good.

A new study by Gallup and educational technology company 2U provides insight into these outcomes, based on interviews with 3,824 graduates of 2U-powered university boot camps, and helps shed light on what high-quality programs look like. 2U partners with more than 50 nonprofit universities to power their boot camp programs. Over more than a decade, 48,000 students have graduated from 2U-powered boot camps.

The boot camp graduates surveyed reported earning substantially more money one year after graduation than they were earning while attending the boot camp — regardless of whether they had bachelor’s degrees to begin with.

Now that’s a survey result not a causal estimate but tech boot camp graduates without a bachelor’s degree earn nearly as much as computer science graduates even though the tech boot camp is much cheaper and quicker.

Although graduates of 2U boot camps spent between one-quarter and one-third of what bachelor’s degree-holders typically spend on their programs, boot camp graduates reported earning as much or more money in the year after they graduated.

The median 2018 boot camp graduate without a bachelor’s degree reported earning nearly as much ($55,000) in the year immediately after their boot camp as the median computer science bachelor’s degree graduate ($56,421), and they earned roughly $10,000 more than non-computer science majors ($44,033).3

Boot camp graduates with a bachelor’s degree (which accounts for most of the surveyed graduates) earned even higher salaries — about $5,000 more — than their counterparts with less than a bachelor’s degree. Further, boot camp graduates with bachelor’s degrees are outearning U.S. workers of the same age with a bachelor’s degree.

Education is ripe for transformation.

David Theroux, RIP

I was saddened to hear of the sudden passing of David Theroux, the President of the Independent Institute. I was a professor of economics at Ball State University in Muncie, Indiana when David approached me to be the research director (later Vice-President) of II. I had great colleagues at Ball State but was never happy about living in Muncie. Nevertheless, leaving academia was a big leap. My career at the time, however, was in the doldrums and when things aren’t happening it’s good to throw some variance into the mix…so I leapt. David and his wife Mary made my wife and I feel very welcome in Oakland. I remember fondly my young children playing in their garden in their beautiful house in the Oakland hills.

David was a great intellectual entrepreneur. He was the founding Vice President for the Cato Institute and the founding President of the Pacific Research Institute for Public Policy. He started the Independent Institute on a shoestring budget in 1986, building it into a major institute that produced many important books and research articles.

Among the highlights of Independent’s extraordinary publications are Crisis and Leviathan: Critical Episodes in the Growth of American Government by Robert Higgs (1986, with a 25th anniversary edition in 2012); Antitrust and Monopoly, by Dominick Armentano (1990); Beyond Politics: The Roots of Government Failure, by Randy Simmons (updated edition 2011); Out of Work, by Lowell E. Gallaway and Richard Vedder (1997); Entrepreneurial Economics, by Alexander Tabarrok (2002); The Empire Has No Clothes, by Ivan Eland (2004); Making Poor Nations Rich, edited by Benjamin Powell (2007); The Enterprise of Law, by Bruce Benson (2011); Living Economics, by Peter J. Boettke (2012); Liberty in Peril, by Randall Holcombe (2019); and many more.

All told, Independent Institute books produced under David’s direction received more than 50 prestigious book awards, including three Eric Hoffer Book Award Grand Prizes, the Templeton Freedom Award, two Mencken Awards for Best Book, eight Sir Antony Fisher International Memorial Awards for Best Book, three Benjamin Franklin Awards, ten Independent Publisher Book Awards, the Peter Shaw Memorial Award, and three Choice Magazine Awards for Outstanding Book.

David spotted talent in other people, encouraged them, and made things happen. He was a prime mover in launching Bruce Benson’s important work on the law merchant and a big supporter of the great Robert Higgs (who started The Independent Review).

I learned a lot from David, especially about militarism and libertarian foreign policy, the marketing of ideas, and also about what it means to be an entrepreneur. I recall two instances in particular. The first was during the Microsoft trial when we had published the excellent book Winners, Losers & Microsoft: Competition and Antitrust in High Technology by Stan Liebowitz and Stephen Margolis. II opposed the antitrust case against Microsoft, seeing it as waste of resources in a rivalrous industry (in retrospect, yup we got that one right). Larry Ellison at Oracle (a Microsoft competitor) didn’t like our work and hired detectives to buy the Independent Institute’s garbage and sift through it (yes, really!) to try to discredit us. The story become a page one headline in the New York Times (Independent Institute not really Independent!). I was worried about the impact on the Institute but David  always saw the positive even in “bad news.” At the time I found this frustrating as this seemed to me like a failure to see reality but David had the entrepreneur’s faith that vision, a positive attitude, and hard work can make reality. He kept calm and steered us through the difficulties to further strengths. I was wrong. David was right. He made it happen. The second time was when II was launching its scholarships for low-income children to attend private schools in Oakland. I sketched out a careful, well-thought out plan to get us ready to go in a year. David said no, “I want it ready in six weeks!”. I thought this was insane. But we did it! No surprise that David was an entrepreneur and I was an academic. Ultimately, of course, I returned to academia by moving to GMU but not before learning many valuable lessons from David and my years at the Independent Institute.

He will be missed.

The Myth of Primitive Communism

AEON: Today, many writers and academics still treat primitive communism as a historical fact. To take an influential example, the economists Samuel Bowles and Jung-Kyoo Choi have argued for 20 years that property rights coevolved with farming. For them, the question is less whether private property predated farming, but rather why it appeared at that time. In 2017, an article in The Atlantic covering their work asserted plainly: ‘For most of human history, there was no such thing as private property.’ A leading anthropology textbook captures the supposed consensus when it states: ‘The concept of private property is far from universal and tends to occur only in complex societies with social inequality.’

A Yagua (Yahua) tribeman demonstrating the use of blowgun (blow dart), at one of the Amazonian islands near Iquitos, Peru. JialiangGao www.peace-on-earth.org

In fact, although some tribes had communal sharing of (some) food, most did not. Private property, far from being unknown, was normal among all hunter-gatherers that have been studied. Manvir Singh writing in Aeon continues:

Agta hunters in the Philippines set aside meat to trade with farmers. Meat brought in by a solitary Efe hunter in Central Africa was ‘entirely his to allocate’. And among the Sirionó, an Amazonian people who speak a language closely related to the Aché, people could do little about food-hoarding ‘except to go out and look for their own’. Aché sharing might embody primitive communism. Yet, Hill admits, ‘the Aché are probably the extreme case.’

More damning, however, is a starker, simpler fact. All hunter-gatherers had private property, even the Aché….Individual Aché owned bows, arrows, axes and cooking implements. Women owned the fruit they collected. Even meat became private property as it was handed out. Hill explained: ‘If I set my armadillo leg on [a fern leaf] and went out for a minute to take a pee in the forest and came back and somebody took it? Yeah, that was stealing.’

Some proponents of primitive communism concede that foragers owned small trinkets but insist they didn’t own wild resources. But this too is mistaken. Shoshone families owned eagle nests. Bearlake Athabaskans owned beaver dens and fishing sites. Especially common is the ownership of trees. When an Andaman Islander man stumbled upon a tree suitable for making canoes, he told his group mates about it. From then, it was his and his alone. Similar rules existed among the Deg Hit’an of Alaska, the Northern Paiute of the Great Basin, and the Enlhet of the arid Paraguayan plains. In fact, by one economist ’s estimate, more than 70 per cent of hunter-gatherer societies recognised private ownership over land or trees.

Moreover, the sharing that some hunter-gatherers practiced was functional rather than ethical.

Whatever we call it, the sharing economy that Hill observed with the Aché does not reflect some lost Edenic goodness. Rather, it sprang from a simpler source: interdependence. Aché families relied on each other for survival. We share with you today so that you can share with us next week, or when we get sick, or when we are pregnant.

take away the function and the sharing disappeared, often brutally:

In their book Aché Life History (1996), Hill and the anthropologist Ana Magdalena Hurtado listed many Aché people who were killed, abandoned or buried alive: widows, sick people, a blind woman, an infant born too soon, a boy with a paralysed hand, a child who was ‘funny looking’, a girl with bad haemorrhoids. Such opportunism suffuses all social interactions. But it is acute for foragers living at the edge of subsistence, for whom cooperation is essential and wasted efforts can be fatal.

None of this should be surprising to anyone familiar with the property-rights tradition of Demsetz and Barzel. The primitive communism of hunter-gatherers is no different in principle from the primitive communism of the wifi service at Starbucks, the modern day police and fire departments, or the use of Shakespeare’s works. As Barzel put it, “New rights are created in response to new economic forces that increase the value of the rights.” Thus, in this respect, there are no major differences among peoples, only differences in transaction costs, externalities, and technologies of inclusion and exclusion.

Why are skyscrapers so short?

Brian Potter has a delightful primer on the physical, economic and regulatory barriers to building height beginning with the Great Pyramid of Giza and running to today. He concludes that the limit today isn’t technological–we could build much higher–but regulatory:

…we can estimate the magnitude of building height restrictions by comparing the cost of rent to the marginal cost of adding an additional floor. When Glaeser et al. 2005 did this for Manhattan, they found that the cost of rent was approximately twice the marginal cost of an additional floor, concluding, “the best explanation for why [developers] do not take advantage of this opportunity is the reason they tell us themselves: New York’s maze of building regulations effectively cap their building heights.” Cheshire et al. 2007 found similar magnitudes of rent-to-cost ratios in a variety of major European cities. When Glaeser et al. tried to estimate the size of building height externalities in New York, they concluded it was nowhere near the magnitude of the rent/construction cost difference, suggesting current height limits are far stricter than necessary.

These building height restrictions make us all poorer – not only do they cause a deadweight loss by artificially restricting the supply of available building space where it’s needed the most, but they also screen off the potential agglomeration benefits that accrue from increased density. This makes workers and businesses less productive and innovative than they could be, which not only hurts them, but everyone else who would benefit from cheaper and better goods and services.

The upshot is that there’s a lot of low-hanging fruit in building taller buildings. We don’t need to invent any new technology for pushing the boundaries of what’s possible to build, we just need to stop getting in our own way.

I concluded the same thing when I looked at building height in Mumbai, India. This video also contains a very nice explanation of the Floor Space Index also known as the Floor Area Ratio.

There is No Pink Tax

The so-called pink tax is an alleged tendency for products consumed by women to be more expensive than similar products consumed by men. In 2015 NYC put out a study under mayor Bill DeBlasio alleging a 7% pink tax across a range of goods. The pink tax is implausible. Products produced in competitive markets will be close to marginal cost. Even if firms have monopoly power it’s not obvious that women have systematically more inelastic demand curves–indeed, the stereotype tends to be that women are the more careful shoppers. Preferences differ systematically across genders leading to subtly different products even in categories which appear similar on the surface. To give just one example, the NYC study compared the price of a single 2-in-1 men’s shampoo+conditioner product to the combined price of a women’ shampoo plus a women’s conditioner (oz per oz). Give me a break. There are reasons why a one-and-done hair product appeals to men more than to women and why this will also be correlated with other characteristics which make the all in one product different and likely of lower quality.

In anycase, economists Sarah Moshary, Anna Tuchman and Natasha Bhatia have done a much more complete and careful study and they find that once you control for ingredients and compare like-to-like there is no pink tax. Indeed, sometimes men pay a bit more. Overall, there are no big savings from cross-buying. Women and men could save money by buying products primarily marketed to the opposite gender–like 2-in-1 shampoo+conditioner–but only by buying products that they prefer less than the products they choose to buy.

We find that the pink gap is often negative; men’s products command higher per-product prices in six of nine categories that we study and higher unit prices in three of nine categories. We then estimate the pink tax via a comparison of products manufactured by the same firm and comprising the same leading ingredients. Men’s products are more expensive in three of five categories when we control for ingredients. These findings do not support the existence of a systematic price premium for women’s products, but our results do reveal that gender segmentation in personal care is pervasive and operates through product differentiation. A back-of-the-envelope calculation implies that the average household would save 1% by switching to substantially similar products targeted to a different gender.

More Guns, Less Burglaries

In December 2008, a Memphis, TN newspaper published a searchable online database of names, zip codes, and ages of Tennessee handgun carry permit holders. We use detailed crime and handgun carry permit data for the city of Memphis to estimate the impact of publicity about the database on burglaries. We find that burglaries increased in zip codes with fewer gun permits, and decreased in those with more gun permits, after the database was publicized.

From a new NBER working paper by Alessandro Acquisti & Catherine Tucker. I’ve also been struck by the fact that compared to other industrialized countries the US has low robbery rates and especially so relative to burglaries.

Small Isn’t Beautiful

In our textbook, Modern Principles, Tyler and I discuss India’s small scale reservation laws which for decades made it illegal for large firms to produce many manufactured goods:

…traditionally most Indian shirts were made by hand in small shops of three or four tailors who designed, measured, sewed, and sold, all on the same premises. It sounds elegant but this was not London’s Savile Row, where the finest tailors in the world create custom suits for the rich and powerful. India’s shirts would have been cheaper and of higher quality if they were mass-manufactured in factories—the way shirts for Americans are produced. Why didn’t this happen in India? Shirts in India were produced inefficiently because large-scale production was illegal.

India prohibited investment in plant and machinery in shirt factories from exceeding about $200,000 – this meant that Indian shirt manufacturers could not take advantage of economies of scale, the decrease in the average cost of production which often occurs as the total quantity of production increases.

Do India’s small scale reservation laws seem somewhat quaint and foolish? Now consider, California.

A bill moving through the Legislature would shorten California’s normal workweek to 32 hours from 40 for companies with more than 500 employees. Workers who put in more than 32 hours in a week would have to be paid time-and-a-half. And get this: Employers would be prohibited from reducing workers’ current pay rate, so they would be paid the same for working 20% less.

The work week evolves with time. As productivity and wage rates increase, workers spend some of their wages buying more clothing and some of their wages buying more leisure (workers buy leisure by offering to work fewer hours at lower wages). There are no strong reasons to legislate the work week. What strikes me, however, is the absurdity of legislating a shorter work week for larger firms. Larger firms tend to be more productive–that is one reason they are larger! Thus, California wants to legislate a shorter work week for more productive firms. As in Harrison Bergeron the handicappers ensure equality by cutting down the productive.

Regulating the work week is a poor idea but if we are going to regulate I’d prefer a “Singapore style” plan where they limited small firms to 32 hours a week, thus encouraging production and employment in larger, more productive firms!

By the way, India has mostly eliminated it’s small scale reservation laws so you can see which countries are heading up and which down.

Addendum: Such a law would be “Singapore style” I am not saying they do this.