Category: Economics

The Economic Motives for Foot-Binding

From Lingwei Wu and Xinyu Fan at AEA:

What are the origins of gender-biased social norms? As a painful custom that persisted in historical China, foot-binding targeted girls whose feet were reshaped during early childhood. This paper presents a unified theory to explain the stylized facts of foot-binding, and investigates its historical dynamics driven by a gender-asymmetric mobility system in historical China (the Civil Examination System). The exam system marked the transition from hereditary aristocracy to meritocracy, generated a more heterogeneous composition of men compared to that of women, and triggered intensive competition among women in the marriage market. As a competition package carrying both aesthetic and moral values, foot-binding was gradually adopted by women as their social ladder, first in the upper class and later by the lower class. Since foot-binding impedes non-sedentary labor, but not sedentary labor, however, its adoption in the lower class exhibited distinctive regional variation: it was highly prevalent in regions where women specialized in household handicraft, and was less popular in regions where women specialized in intensive farming, e.g. rice cultivation. Empirically, we conduct analysis using county-level Republican archives on foot-binding to test the cross-sectional predictions of our theory, and major findings that are robust and consistent with key theoretical predictions.

There are other interesting papers at the link, relating to culture and women’s issues.

The Spousal Wage Boost: Working Together to Beat the Gender Wage Gap

That is another AEA paper, by Andrew Langan and Betsey Stevenson, once again abstract only:

Individuals who work in the same occupation as their spouse have significantly higher earnings on average than similar people whose spouses work in different occupations. For instance, a lawyer married to a lawyer makes more than an otherwise identical lawyer married to a physician or a teacher. The earnings effect associated with such “same-occupation marriages” is negative for less-educated men but positive for other groups and stronger for women than men. This effect holds throughout the last several decades in cross-sectional US data, and cannot be explained by hours worked, education, self-employment, or other observables.

I have not read the paper, but I wonder if this is necessarily as feminist a result as it might at first seem…

Does Cognitive Imprecision Result in Under-Reaction or Over-Reaction?

That is the topic of a new paper by Michael Woodford, to be presented at this year’s AEA meetings.  Here at least is the abstract:

Men who score high on standardized IQ tests display forecast errors for inflation that are 50% lower than forecast errors for other men in a representative sample of Finnish households. High-IQ men, but not others, have consistent inflation expectations over time and their inflation perceptions align with past expectations. Only high-IQ men increase their consumption propensity when expecting higher inflation in line with the consumption Euler equation. High-IQ men are also twice as sensitive to interest-rate changes when making borrowing decisions. Heterogeneity in education, income, or financial constraints do not explain these results. Limited cognitive abilities are thus human frictions to the transmission and effectiveness of economic policy and inform research on heterogeneous agents in macroeconomics and finance.

How many papers are there in economics about psychological cognitive bias as a source of error, as opposed to low IQ as a source of error?  Might that be a bias of sorts and not one of IQ?

The Rising Value of Time and the Origin of Urban Gentrification

By Yichen Su, here is more from the AEA meetings:

I estimate a spatial equilibrium model to show that the rising value of high-skilled workers’ time is an important driving force behind the gentrification of American central cities. I show that the increasing value of time raises the cost of commuting and exogenously increases the demand for central locations by high-skilled workers. While change in value of time is an initial force behind gentrification, its effect is substantially magnified by endogenous amenity improvement. The model implies that welfare inequality in the recent decades increases by more than the rise in earnings inequality if the forces behind gentrification are considered.

You will find other interesting papers on gentrification at this link, for instance: “We find that areas with
more gay and lesbian couples are more likely to experience gentrification.”

Me on elitism in economics

He [Cowen] said that he agreed with the idea that influence of economics comes from a relatively small number of institutions, and he thinks the number is shrinking. “What used to be something like a ‘top six’ has over time become the ‘top two,’ namely Harvard and MIT.”

Cowen said that he doesn’t “find that entirely ideal, by any means.” But he also said that those departments deserve praise for their work. “Harvard and MIT are in fact remarkably good at finding, evaluating and attracting top talent. It is stunning how good they are at this, and we should not begrudge them that,” he said. (Cowen is an example, having earned his Ph.D. at Harvard. His undergraduate alma mater is George Mason, where he teaches.)

The centralization of top departments, he said, worries him less than do “pressures for conformity.”

Cowen added that he is sympathetic to Vigdor’s criticism, but that the centralization may be “an opportunity” for departments outside the elites to shine. “The centralized centers of influence are going to miss important ideas in their early stages,” Cowen said. “Both public choice and experimental economics came out of non-top schools,” including to some extent George Mason, he said. “So did blogging. If something is unfair, well, in part that is your big chance.”

That is from Scott Jaschik at Inside HigherEd, mostly about Jacob Vigdor and his critique of the economics profession.

The new economics of complaining

Barbara Deckert has a new weapon in the war against airplane noise — and she’s not afraid to use it.

Every time a plane flies over her suburban Maryland home, rattling her windows and setting her teeth on edge, she presses a small white button and feels a tiny sense of triumph.

That’s because with one click, Deckert has done what could have taken her hours to do a few months ago — she has filed a noise complaint with officials at the Maryland Aviation Administration.

Thanks to the ingenuity of a software engineer from Southern California, Deckert and hundreds of others with similar beefs, and the Airnoise button, have an easy way to register their annoyance with the jets that fly over their homes.

“It’s a fabulous tool,” Deckert said. “Clicking that button is really psychologically satisfying.”

Officials at airports from Seattle to Baltimore said Airnoise has led to a dramatic spike in complaints. At Baltimore-Washington International Marshall Airport, officials are almost certain Airnoise is the reason complaints surged to 17,228 in August from 2,692 the previous month. In San Diego, more than 90 percent of the complaints came through third-party apps like Airnoise.

That is from Lori Aratani at WaPo, via Eric J.  And there is this, a metaphor for our times:

The button has clearly gotten a lot of use: The plastic coating is partially peeled off. A few weeks ago, the battery gave out. So for now, she’s using her iPad to file complaints.

“People can try to discredit me, but I don’t worry about that,” she said. She paused and remembered the day she filed her first complaint with the Airnoise button.

“It felt so good,” she said. “It’s highly, highly therapeutic. It makes you feel like you can make a difference.”

Does Economics Make You Sexist?

That is the title of a new paper by Valentina Paredes, M. Daniele Paserman, and Francisco J. Pino, to be presented at the forthcoming AEA meetings:

Recent research has highlighted unequal treatment for women in academic economics along several different dimensions: promotion, hiring, credit for co-authorship, and standards for publication in professional journals. Can the source of these differences lie in biases against women that are pervasive in the discipline, even among students in the earliest stages of their training? In this paper, we provide direct evidence on the importance of explicit and implicit biases against women among students in economics relative to other fields. We conducted a large scale survey among undergraduate students in Chilean universities, among both entering first-year students and upperclassmen. The survey elicits measures of implicit bias, explicit bias, and gender attitudes. We document that, on a wide battery of measures, economics students are more biased than students in other fields. There is some evidence that economics freshmen are more biased already upon entry, before exposure to any economic classes. The gap becomes substantially more pronounced among upperclassmen, in particular for male students. We find evidence of an increase in bias in a limited sample of students that we can follow longitudinally. A significant part of the gap between economics and non-economics students can be explained by differential exposure to female professors.

Work through here is the top link is failing you.  I would note by the way that gender relations in Chile have a reputation for being especially…bifurcated.

Hayek in the Machine

Medium: Nanoeconomics is about human-machine exchange, and machine-machine exchange. It is the economics of distributed ledgers and artificial intelligence, of object-capability programming and cybersecurity, of ‘central planning’ in the machine, and of ‘markets’ in the machine.

As we’ve come to understand blockchains and other distributed ledger technologies as an institutional technology, we’ve also learned that not only can blockchains coordinate and govern decentralised human economies (as governments, firms and markets do) but they can coordinate and govern decentralised machine economies (or human-machine economies).

This extends what Hayek called catallaxy — the spontaneous order of the market — from the market coordination of human action to the coordination of human-to-machine and machine-to-machine economies.

Nanoeconomics is not a new idea. In their Agoric papers published in 1988, Mark Miller and K. Eric Drexler developed the idea of a computational system as a space for economic exchange. The development of object-oriented programming has created software agents, which vie for scarce resources in the machine. But right now, these agents are governed through planning, not markets. Miller and Drexler suggested an alternative: a market-based computation system. In this system:

“machine resources — storage space, processor time, and so forth — have owners, and the owners charge other objects for use of these resources. Objects, in turn, pass these costs on to the objects they serve, or to an object representing the external user; they may add royalty charges, and thus earn a profit.”

With global computers like the smart-contract platform Ethereum we now have the bones of such a market-based computational architecture.

Interesting post from Chris Berg, Sinclair Davidson and Jason Potts of RMIT Blockchain Innovation Hub in Australia and Bill Tulloh from Agoric.

China fact of the day

But China’s public capital stock per head is already far bigger than Japan’s at comparable incomes per head.

That is from Martin Wolf at the FT.  Here are the associated conclusions:

Slowing urban household formation means that fewer new homes now need to be built. Not surprisingly, returns on investment have collapsed. In sum, investment-led growth must come to an early end. Because of its size, China has also hit the buffers on export-driven growth, at a lower level of income per head than other high-growth east Asian economies. The trade war with the US underlines this reality. China’s working-age population is also declining. Given the huge rise in debt as well, sustaining fast growth will be very hard.

We will see, perhaps indeed in 2019, one way or the other.

The Amazon War and the Evolution of Private Law

It’s well known that to boost their sales, sellers sometimes post fake 5-star reviews on Amazon. Amazon tries to police such actions by searching out and banning sites with fake reviews. An unintended consequence is that some sellers now post fake 5-star reviews on their competitor’s site.

The Verge: As Amazon has escalated its war on fake reviews, sellers have realized that the most effective tactic is not buying them for yourself, but buying them for your competitors — the more obviously fraudulent the better. A handful of glowing testimonials, preferably in broken English about unrelated products and written by a known review purveyor on Fiverr, can not only take out a competitor and allow you to move up a slot in Amazon’s search results, it can land your rival in the bewildering morass of Amazon’s suspension system.

…There are more subtle methods of sabotage as well. Sellers will sometimes buy Google ads for their competitors for unrelated products — say, a dog food ad linking to a shampoo listing — so that Amazon’s algorithm sees the rate of clicks converting to sales drop and automatically demotes their product.

What does a seller do when they are banned from Amazon? Appeal to the Amazon legal system and for that you need an Amazon lawyer.

The appeals process is so confounding that it’s given rise to an entire industry of consultants like Stine. Chris McCabe, a former Amazon employee, set up shop in 2014. CJ Rosenbaum, an attorney in Long Beach, New York, now bills himself as the “Amazon sellers lawyer,” with an “Amazon Law Library” featuring Amazon Law, vol. 1 ($95 on Amazon). Stine’s company deals with about 100 suspensions a month and charges $2,500 per appeal ($5,000 if you want an expedited one), which is in line with industry norms. It’s a price many are willing to pay. “It can be life or death for people,” McCabe says. “If they don’t get their Amazon account back, they might be insolvent, laying off 10, 12, 14 people, maybe more. I’ve had people begging me for help. I’ve had people at their wits’ end. I’ve had people crying.”

Amazon is a marketplace that is now having to create a legal system to govern issues of fraud, trademark, and sabotage and also what is in effect new types of intellectual property such as Amazon brand registry. Marketplaces have always been places of private law and governance but there has never before been a marketplace with Amazon’s scale and market power. It’s an open question how well private law will develop in this regime.

Can less competition mean more meritocracy?

I am not so sure, but Dawei Fang and Thomas Noe say yes:

Uncompetitive contests for grades, promotions, and job assignments, which feature lax standards or consider only limited talent pools, are often criticized for being unmeritocratic. We show that, when contestants are strategic, lax standards and exclusivity can make selection more meritocratic. Strategic contestants take more risks in more competitive contests. Risk taking reduces the correlation between selection and ability. By reducing the noise engendered by strategic risk taking, dialing down competition can produce outcomes that better conform with the meritocratic ideal of selecting the best and only the best.

Here is the working paper, via the excellent Kevin Lewis.

The difficulties of African supply chains

Supply chain problems in Africa are quite complex, with most of them stemming from the sheer size of the continent. Africa’s land mass is greater than the USA, Europe, and China combined. Within this huge space there are 54 unique markets, few of which provide scale or adequate distribution infrastructure. Further complicating matters, there are over 2,000 languages spoken and very diverse cultural dynamics from one market to the next.

That is from an article by Chuma Asuzu, the piece is interesting throughout, most of all for infrastructure supply chain nerds.  I so, so wish there were more articles like this.

For the pointer I thank Omar Mohamed.  Omar also recommends this site on manufacturing.

Markets in everything those new service sector jobs

In a nation where people lead ever more busy lives and increasingly view their dogs as family members, professional dog walking is flourishing. And along with it is what might be viewed as the unusual art of dog walker communication. Many of today’s walkers do not simply stroll — not if they want to be rehired, anyway. Over text and email, they craft fine-grained, delightful narratives tracing the journey from arrival at the residence to drop-off. They report the number of bathroom stops. They take artistic photos, and lots of them.

“For an hour-long walk, I send six or eight, depending,” said Griffin, 44, who holds a treat in her hand when shooting to ensure her charge is looking at the camera. “Then I give a full report that includes not only peeing and pooping but also kind of general well-being, and if the dog socialized with other dogs.”

After walking a dog named Stevie Nicks earlier this year, Griffin’s blow-by-blow mentioned that the dog had collected a chicken bone from under a bush, then “crunched down on it and broke into 3 pieces.” At the end of another walk, Griffin related that she “picked the foxtails out of her little beard and mustache,” and explained precisely where the foxtails had come from — “the fence around the yard at the corner.”

Dog walkers’ notes are often more exhaustive than those parents get from the caregivers of their human children.

The article is interesting throughout:

“Ongoing, two-way communication is actually one of the most important components to a successful walk,” White said. “What we’ve heard from owners is the more details, the better. You can’t have too many details.”…

“All of our dog walkers have been really good communicators, but Perry wins the prize,” said Tucci, a nonprofit executive. His texts “are really are more logistical and poop-oriented than anything else. But they’re always so enthusiastic.”

Here is the full WaPo story by Karin Brullard.