Category: Economics

Do female department chairs matter?

Appointing female managers is a common proposal to improve women’s representation and outcomes in the workplace, but it is unclear how well such policies accomplish these goals. Using newly-collected panel data on academic departments, I exploit variation in the timing of transitions between department chairs of different genders with a difference-in-differences research design. For faculty, I find female department chairs reduce gender gaps in publications and tenure for assistant professors and shrink the gender pay gap. Replacing a male chair with a female chair increases the number of female students among incoming graduate cohorts by ten percent with no evidence of a change in ability correlates for the average student.

That is from a new paper by Andrew Langan, who is a job market candidate from Princeton this year.  He has another paper with Leah Boustan, here is an excerpt from the abstract:

We find that schools with better outcomes for women also hire more women faculty, facilitate advisor-student contact, provide collegial research seminars, and are notable for senior faculty with awareness of gender issues.

In yet another piece he estimates the value of unpaid cooking time in Mexico, always higher than you think I would say.

Can You Outsmart an Economist?

Can You Outsmart an Economist? is an excellent book of puzzles put together by Steven Landsburg. Steve includes a lot of classics such as the Girl Named Florida Problem, the Potato Paradox and Newcomb’s paradox, the former two problems are presented in slightly different and in the first case improved forms so you might not recognize them on first reading. Steve also includes many economic puzzles, Bayes puzzles, common knowledge problems and more. Readers of this blog will certainly know some of the puzzles but will also find lots of novel problems and puzzles. Also included are philosophical paradoxes. For example, the headache problem.

A billion people are experiencing fairly minor headaches, which will continue for another hour unless an innocent person is killed, in which case the headaches will cease immediately. Is it okay to kill that innocent person?

The puzzle here isn’t the answer. The answer is obvious. The puzzle is that smart people can’t agree which answer is obvious.

Overall, this is the best and most diverse collection of puzzles that I know. It’s meant to be dipped into and sampled at leisure. My only complaint is that the puzzles are followed by answers which makes it too easy to fool yourself into thinking you always knew the answer! Answers in the back of the book would have been a minor form of commitment. Recommended.

Will the decline of galleries reshape art?

Heidi Mitchell reports (NYT):

“The gallery is a format that is struggling,” said the Argentine curator Ximena Caminos, formerly of the Malba museum in Buenos Aires and now chief creative officer of the Honey Lab cultural space in Miami’s Blue Heron hotel and residential project, which is now under development. “It’s transactional; the artist doesn’t have that much creative freedom, and there is a lot of pressure to make money in a short period of time.” Artists, she said, are seeking new places to showcase their work, especially if the pieces are large in scale.

If the number and relevance of galleries were to decline (continue to decline?), how might this affect artistic content?  Here are a few hypotheses:

1. More artists will commission pieces for corporate lobbies and condominiums, as the article reports.  That will tend to favor mainstream abstract art and disfavor political statements and obscenities.

Erica Samuels notes:

“There is a great responsibility on the real estate developers that maybe they don’t even realize, while at the same time, the stigma of an artist working with a rich developer is fading.”

2. Corporate-owned works are usually less liquid and may not be sold at all, short of bankruptcy or liquidity crunches, when they are sold under panic conditions.  Artists therefore will be less likely to have dominant dealers who prop up their prices and cultivate markets for them.  That will likely encourage greater artistic output, though also lower quality output, as might be defined by elites.  The resulting art will have to appeal to buyers at first glance, as the artist cannot count upon “sophisticated” galleries to persuade or educate potential buyers.

3. Some artists will take their craft directly to the street, as is done in Belfast or Newark, New Jersey.  They will paint for local community status, and for the joy of it, and for political self-expression, rather than for pay.  They will use cheaper materials, brighter colors, and indulge in themes and images with strong local meaning.  Political art and paid art will separate further.

4. Galleries pursue their own coherent reputations, which encourages carried artists to fit into slots which match gallery reputations.  So there are “conceptual art galleries,” “Pop Art galleries,” and so on, and artists in turn target those styles, so as to achieve entry to galleries.  When galleries are weaker, the slottable categories are created by some other set of intermediaries — might it someday be Instagram hashtags?  eBay search terms?  Something else?  In any case, those new slots or styles might have to be less “you know it when you see it” and more “you can type those words into a search function.”

5. The decline of browsing has hit published books as well, especially fiction, which saw a big decline in sales over 2013-2017: “The most commonly shared view is that it has become extremely difficult to generate exposure for novels. Fiction, more than nonfiction, depends on readers discovering new books by browsing. Now, with the number of physical stores down from five years ago (despite a rise in ABA membership), publishers cannot rely on bricks-and-mortar stores providing customers with access to new books.”  It is easier to type the topic of a non-fiction book into a search function.  In this world it is harder to develop new authors [artists], and the link directly above, while about books, is a good way to start thinking about the galleries issue.

6. Most galleries, either intentionally or not, create a distinction between what is shown on the floor and what is held in the back room.  Non-gallery art is less likely to be bifurcated in the same way, even if some pieces are more prominent on the home page than others.  That may make internet-displayed art less “bubbly,” less subject to elite manipulations and prejudices and enlightenments, and also both fuzzier and lower in price.

7. If there are fewer galleries, perhaps more will be bought and sold at auction.  The winning bidder will be less likely to be ripped off by say 3x on the price, so it will be easier to experiment with buying unfamiliar styles: “I liked the Persian carpet I saw at Sotheby’s, and figured the winning bid wouldn’t have too much winner’s curse in it.”  You can’t say the same when you go to a gallery relatively uninformed.

8. Galleries offer high implicit returns to regular buyers, who end up getting a crack at the best works in advance, even before the show opens.  That encourages buyer specialization, whereas internet and auction-based methods of selling do not.

9. What else?

*Persecution and Toleration: The Long Road to Religious Freedom*

That is the forthcoming book by my excellent colleagues Noel Johnson and Mark Koyama, due out next January, you can now pre-order here.

Here is the Amazon summary:

Religious freedom has become an emblematic value in the West. Embedded in constitutions and championed by politicians and thinkers across the political spectrum, it is to many an absolute value, something beyond question. Yet how it emerged, and why, remains widely misunderstood. Tracing the history of religious persecution from the Fall of Rome to the present-day, Noel Johnson and Mark Koyama provide a novel explanation of the birth of religious liberty. This book treats the subject in an integrative way by combining economic reasoning with historical evidence from medieval and early modern Europe. The authors elucidate the economic and political incentives that shaped the actions of political leaders during periods of state building and economic growth.

I have read the entire thing (a slightly earlier draft), very definitely recommended.

Young “stars” in economics

We use a novel dataset of job flyouts for junior economists to investigate three aspects of the market for “stars”. First, what is the background of students who become stars? Second, what type of research does the top of the market demand? Third, where do these students take jobs? Among other results, we show that stars are more international and less female than PhDs overall, that theoretical and semi-theoretical approaches remain dominant, that American programs both produce the most stars and hire even more, that the private sector is largely uncompetitive, and that there is a strong shift toward stars having pre-PhD full-time academic research jobs.

That is the abstract of a new paper from Kevin A. Bryan, also known as A Fine Theorem.  Via Beth Popp Berman.

And here is a point on the stickiness of academic rankings over time:

In economics, among the 13 programs with the most published pages in a Top 5 journal by their faculty between 2002 and 2009, all 13 were among the top 18 in the same ranking for publications between 1974 and 1978 (McPherson [2012])!

“!” is right!  And this:

…almost 80% of the faculty at a top 10 economics department did their PhD in a top 10, compared to 58% in mathematics and 63% in literature.

!!

Shopping While Black: Past, Present and Future?

The original Sears mail-order catalogue changed how African Americans in the South shopped:

…the catalogue format allowed for anonymity, ensuring that black and white customers would be treated the same way.

“This gives African Americans in the Southeast some degree of autonomy, some degree of secrecy,” unofficial Sears historian Jerry Hancock told the Stuff You Missed in History Class podcast in December 2016. “Now they can buy the same thing that anybody else can buy. And all they have to do is order it from this catalogue. They don’t have to deal with racist merchants in town and those types of things.”

More recently, Uber has alleviated many of the traditional difficulties that blacks have had hailing taxis.

In a heartfelt essay Ashlee Clark Thompson explains how the “grab and go” technologies now being tested at Amazon Go made her confront lessons learned from decades of shopping while black:

The idea of walking into a store, taking an item or several off the shelves and strolling right back out again boggled my mind. It ran counter to everything I had learned about being black and shopping.

…I grabbed one of the orange Amazon Go bags and began to make my way around the perimeter of the store. I was studying the various bottled waters and debating whether to get fizzy or still, or a bottle of kombucha, when I realized what I was really doing: I was stalling. The fear I had carried with me for decades reared its head as I stood in front of the refrigerated display. I was afraid to make a choice, remove it from a shelf and put it in my bag. I was afraid someone would pop out from behind a display of Amazon-branded merch and scream, “Get your hands off that!” And I was mad that this fear couldn’t even let me fully enjoy an experience that’s designed for everyone to grab and go, no questions asked.

Eff this, I thought. I’m getting some Vitamin Water.

Once the plastic bottle hit the bottom of my reusable bag, I glanced around to see if anyone noticed. The Amazon employees shuffled around the small store and restocked shelves. Tourists chatted in small groups as they pointed and looked for the sensors that were keeping track of our every move. One guy with his phone on a selfie stick recorded himself as he selected snacks. And then there were the folks for whom the novelty had worn off and just wanted a vegetarian banh mi sandwich.

No one cared what I was doing. Is this what it feels like to shop when you’re not black?

…Amazon Go isn’t going to fix implicit bias or remove the years of conditioning under which I’ve operated. But in the Amazon Go store, everyone is just a shopper, an opportunity for the retail giant to test technology, learn about our habits and make some money. Amazon sees green, and in its own capitalist way, this cashierless concept eased my burden a little bit.

The similarities in these cases are interesting but so are the differences. In the Sears case most of the effect of diminished discrimination was driven by greater competition in one-shop towns. In the one-shop town the owners sometimes took a share of their monopoly profits in invidious racism–this appears to explain why shop owners would prevent blacks from buying more expensive products (or perhaps the one-stop shop had to cater to racist customers who demanded invidious discrimination.)

In the Uber case my bet is that a large share of the reduction in discrimination was due to the fact that Uber drivers don’t carry cash and so are less worried about robbery and the app increases safety because it records in detail rider, driver and trip data. In other words, the Uber system reduced the value of statistical discrimination. It’s difficult to know for sure, however, because there was probably also some decline in invidious discrimination brought about by Uber hiding some rider information from drivers until trips are accepted.

The last case, the Amazon Go case, is in part a decline in the value of statistical discrimination since shoplifting is no longer a problem (in theory, assuming the technology works) but in this case the decline in statistical discrimination is driven by much finer discrimination. The moment a shopper enters the Amazon Go store, Amazon knows their name, address, entire shopping history, credit history and potentially much more. Moreover, a shopper’s every movement within the store is tracked to a level of detail that no store detective could ever hope to match. To the customer, especially the black customer, it may feel like they are no longer being watched but in fact they are watched more than ever before–the costs of technological monitoring, however, are mostly fixed which means that everyone is monitored equally. No need for statistical discrimination in the panopticon.

Addendum: A good dissertation might be to incorporates the cost of information, the value of statistical discrimination and the demand for invidious discrimination in a general theory that explains the various cases mentioned here and the effects of information bans such as ban the box.

Incentives matter

Chad Haag considered living in a cave to escape his student debt. He had a friend doing it. But after some plotting, he settled on what he considered a less risky plan. This year, he relocated to a jungle in India. “I’ve put America behind me,” Haag, 29, said.

He now lives in a concrete house in the village of Uchakkada for $50 a month. His backyard is filled with coconut trees and chickens. “I saw four elephants just yesterday,” he said, adding that he hopes to never set foot in a Walmart again.

His debt is currently on its way to default. But more than 9,000 miles away from Colorado, Haag said, his student loans don’t feel real anymore.

“It’s kind of like, if a tree falls in the woods and no one hears it, does it really exist?” he said.

The philosophy major concedes that his student loan balance of around $20,000 isn’t as large as the burden shouldered by many other borrowers, but he said his difficultly finding a college-level job in the U.S. has made that debt oppressive nonetheless. “If you’re not making a living wage,” Haag said, “$20,000 in debt is devastating.”

Here is the full story by Annie Nova, with photos and video.  Via the excellent Samir Varma.

Quote of the Day

The state-the machinery and power of the state-is a potential resource or threat to every industry in the society. With its power to prohibit or compel, to take or give money, the state can and does selectively help or hurt a vast number of industries…The central tasks of the theory of economic regulation are to explain who will receive the benefits or burdens of regulation, what form regulation will take, and the effects of regulation upon the allocation of resources.

Regulation may be actively sought by an industry, or it may be thrust upon it. A central thesis of this paper is that, as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.

Stigler, George J. 1971. “The Theory of Economic Regulation.Bell Journal of Economics Spring: 137–46.

My interview with Pioneer

Short, and mostly about boyhood, here is one bit:

If you became really good at something (physics, programming, art, music), how exactly did you first get hooked?

Learning is fun. I found that social sciences are a good vehicle for learning things all the time. That got me hooked. It made my travel more salient, and it enriched the time I spent with music and the arts. It helped me make sense of people, too. All that at once. That was a pretty potent brew, and it still is.

What are some weird things you worked on or did as a teenager?

These days, what’s weird? I play chess intensively for four years, ages 10 to 14. Then I studied economics for the rest of my life. Arguably I was less weird as a teenager than I am today. What’s weird is that I haven’t matured into a less intensive course of study.

Here is the full link, here is a link to Pioneer, a new venture capital enterprise to discover the “lost Einsteins.”  That may be you, so go apply.  Here is a Pioneer list of some specific projects of interest.

Data mining is not infinitely powerful

To say the least:

Suppose that asset pricing factors are just data mined noise. How much data mining is required to produce the more than 300 factors documented by academics? This short paper shows that, if 10,000 academics generate 1 factor every minute, it takes 15 million years of full-time data mining. This absurd conclusion comes from rigorously pursuing the data mining theory and applying it to data. To fit the fat right tail of published t-stats, a pure data mining model implies that the probability of publishing t-stats < 6.0 is ridiculously small, and thus it takes a ridiculous amount of mining to publish a single t-stat. These results show that the data mining alone cannot explain the zoo of asset pricing factors.

That is from a new paper by Andrew Y. Chen at the Fed.

Hobo Economicus

We collect data on hundreds of panhandlers and the passersby they encounter at Metrorail stations in Washington, DC. Panhandlers solicit more actively when they have more human capital, when passersby are more responsive to solicitation, and when passersby are more numerous. Panhandlers solicit less actively when they compete. Panhandlers are attracted to Metrorail stations where passersby are more responsive to solicitation and to stations where passersby are more numerous. Across stations, potential-profit per panhandler is nearly equal. Most panhandlers use pay-what-you-want pricing. These behaviors are consistent with a simple model of rational, profit-maximizing panhandling.

That is the new paper by Peter T. Leeson and R. August Hardy.

The culture and polity that is Seattle, Washington

Washington is at the top of “the terrible 10” states with the most regressive state and local tax systems, according to a report released this month by the Institute on Taxation and Economic Policy.

“These states ask far more of their lower- and middle-income residents than of their wealthiest taxpayers,” according to the institute.

This isn’t new news. My colleague Gene Balk wrote about the subject in April, highlighting a report from the Seattle-based Economic Opportunity Institute. That report found Washington taxation hardest on the poor, with Seattle the worst offender.

That is from Jon Talton, via Mike Rosenberg.

Interview with Chad Syverson

Interesting and substantive throughout, here is one bit:

Syverson: In general, we think companies that do a better job of meeting the needs of their consumers at a low price are going to gain market share, and those that don’t, shrink and eventually go out of business. The null hypothesis seems to be that health care is so hopelessly messed up that there is virtually no responsiveness of demand to quality, however you would like to measure it. The claim is that people don’t observe quality very well — and even if they do, they might not trade off quality and price like we think people do with consumer products, because there is often a third-party payer, so people don’t care about price. Also, there is a lot of government intervention in the health care market, and governments can have priorities that aren’t necessarily about moving market activity in an efficient direction.

Amitabh Chandra, Amy Finkelstein, Adam Sacarny, and I looked at whether demand responds to performance differences using Medicare dataOffsite. We looked at a number of different ailments, including heart attacks, congestive heart failure, pneumonia, and hip and knee replacements. In every case, you see two patterns. One is that hospitals that are better at treating those ailments treat more patients with those ailments. Now, the causation can go either way with that. However, we also see that being good at treating an ailment today makes the hospital big tomorrow.

Second, responsiveness to quality is larger in instances where patients have more scope for choice. When you’re admitted through the emergency department, there’s still a positive correlation between performance and demand, but it’s even stronger when you’re not admitted through the emergency department — in other words, when you had a greater ability to choose. Half of the people on Medicare in our data do not go to the hospital nearest to where they live when they are having a heart attack. They go to one farther away, and systematically the one they go to is better at treating heart attacks than the one nearer to their house.

What we don’t know is the mechanism that drives that response. We don’t know whether the patients choose a hospital because they have previously heard something from their doctor, or the ambulance drivers are making the choice, or the patient’s family tells the ambulance driv­ers where to go. Probably all of those things are important.

It’s heartening that the market seems to be respon­sive to performance differences. But, in addition, these performance differences are coordinated with produc­tivity — not just outcomes but outcomes per unit input. The reallocation of demand across hospitals is making them more efficient overall. It turns out that’s kind of by chance. Patients don’t go to hospitals that get the same survival rate with fewer inputs. They’re not going for productivity per se; they’re going for performance. But performance is correlated with productivity.

All of this is not to say that the health care market is fine and we have nothing to worry about. It just says that the mechanisms here aren’t fundamentally different than they are in other markets that we think “work better.”

Here is the full interview, via Patrick Collison.

The new CEA report on socialism is better than critics are claiming

That is the topic of my latest Bloomberg column, here is one excerpt:

More to the point, by far the longest section in the report covers a specific health-care bill, introduced in both the Senate and House and supported by 141 members of Congress, that has become a centerpiece of debate in the Democratic Party. It is hardly irrelevant.

The legislation would eliminate cost sharing, prevent private insurance plans from competing, and prevent private markets from supplementing government coverage (outside of, say, cosmetic surgery). The House version would even prohibit health-care providers from earning profits. These provisions are far more extreme than what is found in most Western European health-care systems. The analogies with traditional socialism are indeed apt — the bill is much worse than anything the Trump administration has proposed to date.

Many of the criticisms of the report have been directed at the section on health-care economics. The critics tend to proclaim their own moderate views and favorably compare some of the Western European health-care systems to that of the U.S. The goal is apparently to smash the report for associating those well-functioning health-care systems with Lenin and Mao. Yet I haven’t seen any of the report’s critics acknowledge the extreme nature of the current Democratic proposal, or that it might need rebuttal, and that such a rebuttal is inevitably going to sound somewhat over the top.

And:

The report also commits the now-unpardonable and immediately punished sin of supporting a doctrine of “false equivalence” — namely, that these days many Democratic ideas are as unacceptable as those associated with Trump.

There are further points at the link, controversial throughout.  Here is the report itself.

My Conversation with Ben Thompson

Here is the audio and transcript.  Here is the summary opener:

Not only is Ben Thompson’s Stratechery frequently mentioned on MR, but such is Tyler’s fandom that the newsletter even made its way onto the reading list for one of his PhD courses. Ben’s based in Taiwan, so when he recently visited DC, Tyler quickly took advantage of the chance for an in-person dialogue.

In this conversation they talk about the business side of tech and more, including whether tech titans are good at PR, whether conglomerate synergies exist, Amazon’s foray into health care, why anyone needs an Apple Watch or an Alexa, growing up in small-town Wisconsin, his pragmatic book-reading style, whether MBAs are overrated, the prospects for the Milwaukee Bucks, NBA rule changes, the future of the tech industries in China and India, and why Taiwanese breakfast is the best breakfast.

Here is one excerpt:

COWEN: Why should I want a tech device in my home at all? Take Alexa — I don’t have one, I’m pretty happy, my life is simple. I don’t want anyone or anything listening to me. What does it do for me? I know I can tell it to play me a song or buy something on Amazon, but that’s one-click shopping anyway, could hardly be simpler. Why do devices in the home have any future at all?

THOMPSON: The reality is — particularly when it comes to consumer products — is that in the long run, convenience always wins. I think people will have them in their homes, and they’ll become more popular because it’s convenient.

You can be doing whatever you want; you can say something like, “Set a timer five minutes,” or “What temperature should I grill my steak to?” And you’ll get an answer with your hands busy, and altogether it’s going to be a more convenient answer than it would’ve been otherwise.

And:

COWEN: How bullish are you on India’s tech sector and software development?

THOMPSON: I’m bullish. You know, India — people want to put it in the same bucket as, “Oh, it’s the next China.” The countries are similar in that they’re both very large, but they’re so different.

Probably the most underrated event — I don’t want to say in human history, but in the last hundred years — is the Cultural Revolution in China. And not just that 60, 70 million people were killed, or starved to death, or what it might be, but it really was like a scorched earth for China as a whole. Everything started from scratch. And from an economic perspective, that’s why you can grow for so long — because you’re starting from nothing basically. But the way it impacts culture, generally, and the way business is done.

Taiwan, I think, struggles from having thousands of years of Chinese bureaucracy behind it. Plus they were occupied by Japan for 50 years, so you’ve got that culture on top. Then you have this sclerotic corporate culture that the boss is always right, stay in the office until he goes home, and that sort of thing. It’s unhealthy.

Whereas China — it’s much more bare-knuckled competition and “Figure out the right answer, figure it out quickly.” The competition there is absolutely brutal. It’s brutal in a way I think is hard for people to really comprehend, from the West. And that makes China, makes these companies really something to deal with.

Whereas India did not have something like that. Yes, it had colonialism, but all that is still there, and the effects of that, and the long-term effects of India’s thousands of years of culture. So it makes it much more difficult to wrap things up, to get things done. And that’s always, I think, going to be the case. The way India develops, generally, because they didn’t have a clear-the-decks event like the Cultural Revolution, is always going to be fundamentally different.

And that is by no means a bad thing. I’m not wishing the Cultural Revolution on anyone. I’m just saying it makes the countries really fundamentally different.

Definitely recommended.