Sunday assorted links
1. Rumors about Grōk AI. And the announcement. And new version of Twitter search.
2. Taylor Swift and BTS fans against Milei (NYT, is this the new politics of coordination?).
3. Are people especially impatient for information?
6. “Africa needs to think big.” (David Pilling, FT).
Does mobility make people nicer?
In much of modern life, cooperation takes the form of people engaging in costly behavior that helps another. It is easy to understand how cooperation might be achieved in small communities where members interact repeatedly. However, in our modern world, there is a high degree of relational mobility – where individuals can easily change locations and/or social groups. How does this affect cooperative behavior? I examine this question from both theoretical and empirical perspectives. I first develop a model of repeated prisoner’s dilemma. Individuals are matched but have some ability to leave the relationship. This is sufficient to show that, perhaps surprisingly, greater relational mobility actually leads to more cooperation in equilibrium, and the model predicts a stronger effect when players are more patient. I take these predictions to the data by first conducting a meta-analysis of twelve prisoner’s dilemma experiments that varied the amount of mobility in and out of relationships. I also examine the predictions of the model using data from the World Values Survey and Gallup World Poll. I find that looking across individuals, more relational mobility in the region is associated with greater cooperation and that this relationship is stronger when individuals are more patient. Both the experimental and the observational evidence are consistent with the theoretical mechanism.
That is from the job market paper of Ziqi Lu of Harvard economics. His entire portfolio looks interesting…
Child street vendors in India
Street vending is an important source of self-employment for the urban poor. I use primary observation, survey, and experimental data from Delhi to study this market. Partnering with street vendors to randomize both prices and the passersby they solicit to try to make sales, I find that even with identical goods, child vendors are 97% more likely to make a sale and earn more than twice that of adult vendors. Despite no differences in valuation for the goods, couples, and female customers are 90% and 27% more likely to buy than male customers. Females and couples are 50% more likely to be targeted by vendors than males and are charged higher prices on average (1.15-2 times) than males. I show that these findings are consistent with a model that incorporates altruism and a cost of refusal in the buyer’s decision-making. I find that passersby are more altruistic towards children than adults in an incentivized dictator game. Additionally, requesting passersby to buy, increases the purchasing probability twofold for adult vendors and fourfold for child vendors. Survey data confirms that vendors target females or couples, over males, because they consider who would find it harder to refuse. The paper demonstrates that sellers leverage insights into consumer social preferences to inform their selling strategies, which can be effective in markets with personal selling.
That is from the job market paper of Ronak Jain, job market candidate from Harvard, updated draft to be uploaded by mid-November.
Occupational dynasties
Children often follow their parents in the same occupation. The literature has previously documented occupational persistence, but whether it has economic implications remains an open question. Using administrative data from the Netherlands and a unique policy experiment, this paper documents the prevalence of occupational transmission and estimates its effects and selection for medical doctors. I find that children are twice as likely to enter a parent’s field, with this rate substantially increasing for those above the top quartile of the parental income distribution. In addition, OLS estimated returns to occupational persistence are 2.5%. I focus on the medical profession to decompose these “naive” returns into a treatment and a selection effect of occupational transmission. I find that ’dynastic’ doctors experience a 24% income boost relative to their ’non-dynastic’ counterparts, corresponding to 58% higher returns from the medical profession. Furthermore, I identify a substantial negative selection bias in the OLS estimates, explaining why naive returns considerably underestimate the effects of occupational persistence. The large treatment effect together with the unequal incidence along the income distribution highlights the critical role of occupational transmission in exacerbating inequalities.
That is from Maria Ventura, a job market candidate from LSE.
Saturday assorted links
1. A sympathetic psychological perspective on Thomas Sowell.
2. “To “help gamers keep the crunch to themselves,” Doritos is debuting what it calls “Doritos Silent.” Gamers download Doritos Crunch Cancellation software and when the technology is turned on, the software detects the crunching sounds and silences it while keeping the gamer’s voice intact.” Link here.
3. Critique of Greg Clark on persistent status.
4. Do early morning classes change academic trajectories?
5. Top economists are not SES diverse, including compared to other academic fields.
6. “Projects developed in partnership with policymakers are 15 to 20 percentage points more likely to result in observed policy change.” (Alix Bonargent job market paper from LSE).
Income security for American workers has been rising
American workers are doing relatively well, but there is still a lot of anxiety about their plight. To many commentators, the US worker is suffering: Whether the culprit is outsourcing, trade with China, or the sheer daily turbulence of capitalism, that worker faces increasingly volatile income prospects. One political scientist even wrote a whole book about this worry.
Fortunately, the reality is much brighter. One study of this question, performed by a group of economists from Wharton, Stanford, the University of Minnesota and Brookings, suggests that income volatility has mostly been declining for the last seven decades — and especially for the last four. Whatever volatility risks remain, they used to be much worse.
One striking feature of these results, posted last week and based on data from the US Census Bureau and the Social Security Administration, is how widespread are the gains in job security. They are not going to just a scant few workers. They are long-running for both women (dating to the 1950s) and men (dating to the 1980s). They hold across most demographic groups and by gender, age, earnings level and cohort.
Here is the rest of my latest Bloomberg column.
Behavioral Economics and GPT-4: From William Shakespeare to Elena Ferrante
There is a new paper on LLMs by Gabriel Abrams, here is the abstract:
We prompted GPT-4 (a large language model) to play the Dictator game, a classic behavioral economics experiment, as 148 literary fictional characters from the 17th century to the 21st century.
Of literary interest, this paper analyzed character selfishness by century, the relative frequency of literary character personality traits, and the average valence of these traits. The paper also analyzed character gender differences in selfishness.
From an economics/AI perspective, this paper generates specific and quantifiable Turing tests which the model passed for zero price effect, lack of spitefulness and altruism, and failed for human sensitivity to relative ordinal position and price elasticity (elasticity is significantly lower than humans). Model updates from March to August 2023 had relatively minor impacts on Turing test outcomes.
There is a general and mainly monotonic decrease in selfish behavior over time in literary characters. 50% of the decisions of characters from the 17th century are selfish compared to just 19% of the decisions of characters from the 21st century. Overall, humans exhibited much more selfish behavior than AI characters, with 51% of human decisions being selfish compared to 32% of decisions made by AI characters.
Historical literary characters have a surprisingly strong net positive valence across 2,785 personality traits generated by GPT-4 (3.2X more positive than negative). However, valence varied significantly across centuries. The most positive century, in terms of personality traits, was the 21st — over 10X the ratio of positive to negative traits. The least positive century was the 17th at just 1.8X. “Empathetic,” “fair” and “selfless,” were the most overweight traits in the 20th century. Conversely, “manipulative,” “ambitious” and “ruthless” were the most overweight traits in the 17th century.
Male characters were more selfish than female characters: 35% of male decisions were selfish compared to just 24% for female characters. The skew was highest in the 17th century where selfish decisions for male and female were 62% and 20% respectively.
This analysis offers a specific and quantifiable partial Turing test. In a few ways, the model is remarkably human-like; The key human-like characteristics are the zero price effect, lack of spitefulness and altruism. However, in other ways, GPT-4 reflects unusual or inhuman preferences. The model does not appear to have human sensitivity to relative ordinal position and has significantly lower price elasticity than humans.
Model updates in GPT-4 have made it slightly more sensitive to ordinal value, but not more selfish. The model shows preference consistency across model runs for each character with respect to selfishness.
To which journal might you advise him to send this paper?
Evan Soltas on the job market from MIT
Here is his home page, the job market paper is “Tax incentives and the supply of low income housing”:
Subsidies to developers are a core instrument of housing policy. How do they affect housing markets, and who benefits? I assess their impacts and incidence with a dynamic model of housing markets and new data on developers competing for Low-Income Housing Tax Credits. I estimate the model using three sources of variation: quasi-random assignment of subsidies, shocks to subsidy generosity, and nonlinearities in scoring rules for subsidy applications. I find that, due to displacement of unsubsidized housing, subsidies add few net units to the housing stock and instead reallocate units progressively. Households benefit from developer competition for subsidies, but competition also results in high entry costs, and developers still capture nearly half of the welfare gains. In counterfactuals, a stylized voucher program can generate the same household benefits at less fiscal cost.
Recommended!
Minimum wages and rents
This topic remains underdiscussed in the minimum wage debates, here are some recent results from Atsushi Yamagishi:
I analyze the effect of minimum wage hikes on housing rents using exogenous variation in minimum wages across local labor markets in Japan. I estimate that in low-quality rental housing market, a 10% minimum wage increase induces a 2.5%–4.5% increase in rents. Minimum wage hikes benefit workers in light of a spatial equilibrium model showing that changes in housing market rents work as a sufficient statistic for measuring utility changes arising from changes in minimum wages. The increase in housing rents also implies an unintended benefit for homeowners.
Atsushi Yamagishi is from Princeton economics, but that is not his job market paper, here is the whole portfolio, which looks quite interesting.
Friday assorted links
1. How did the railway affect the diffusion of ideas in 19th century Germany? (Caterina Chiopris is a job market candidate from Harvard).
2. Yiong Huang on “breaking the spiral of silence,” job market candidate from Harvard.
3. “Notably, at selective institutions, new [course] content focuses on societal issues, while at less selective institutions, new content emphasizes job-relevant skills.” Jacob Light is a job market candidate from Stanford.
4. My 2015 MR post on the future coming first to Israel (and Singapore).
Good Developments in Africa
The Guardian: Visas to visit Kenya are to be scrapped for other African nationals from next year as part of a movement towards opening up trade and travel within the continent.
“By the end of this year, no African will be required to have a visa to come to Kenya,” Kenya’s president, William Ruto, said at a climate change conference in Congo-Brazzaville.
Costly and time-consuming visa requirements, as well as high air fares, have long created barriers to inter-African travel for African passport holders; 32 out of 54 African countries still require the nationals of half or more countries on the continent to obtain a visa.
Good. Kenya should also scrap visas for US and European citizens!
This is part of Africa’s move to free trade with the The African Continental Free Trade Area (AfCFTA), the largest free trade area in the world measured by the number of countries participating. Eventually AfCTA will cover 1.3 billion people across 55 countries.
Visas can have very high costs in reducing travel and trade. Africa is moving in the right direction. The US and Europe in contrast are adding visa requirements and the wait times to get a US visa are an absurd embarrassment.
My Conversation with Harriet Karimi Muriithi
This is another CWT bonus episode, recorded in Tatu City, Kenya, outside of Nairobi. Harriet is a 22-year-old waitress. Here is the audio, video, and transcript. Here is the episode summary:
Harriet is a 22-year-old hospitality professional living and working in Tatu City, a massive mixed-used development spearheaded by Jennings. Harriet grew up in the picturesque foothills of Mount Kenya before moving to the capital city as a child to pursue better schooling. She has witnessed Nairobi’s remarkable growth firsthand over the last decade. An ambitious go-getter, Harriet studied supply chain management but and wishes to open her own high-end restaurant.
In her conversation with Tyler, Harriet opens up about her TikTok hobby, love of fantasy novels, thoughts on improving Kenya’s education system, and how she leverages AI tools like ChatGPT in her daily life, the Chinese influence across Africa, the challenges women face in village life versus Nairobi, what foods to sample as a visitor to Kenya, her favorite musicians from Beyoncé to Nigerian Afrobeats stars, why she believes technology can help address racism, her Catholic faith and church attendance, how COVID-19 affected her education and Kenya’s recovery, the superstitions that persist in rural areas, the career paths available to Kenya’s youth today, why Nollywood movies captivate her, the diversity of languages and tribes across the country, whether Kenya’s neighbors impact prospects for peace, what she thinks of the decline in the size of families, why she enjoys podcasts about random acts of kindness, what infrastructure and lifestyle changes are reshaping Nairobi, if the British colonial legacy still influences politics today, and more.
Here is one excerpt:
COWEN: How ambitious are you?
MURIITHI: On a scale of 1 to 10, I will say an 8.5.
This episode is best consumed in combination with the episode with the village elder Githae Gitinji. The contrast between the two perspectives is startling. And here is my CWT episode with Stephen Jennings, concerning Tatu City itself.
My Conversation with Githae Gitinji
This is a special bonus episode of CWT, Githae is a 58-year-old village elder who mediates disputes and lives in Tatu City, Kenya, near Nairobi. Here is the audio, video, and transcript. Here is the episode summary:
In his conversation with Tyler, Githae discusses his work as a businessman in the transport industry and what he looks for when hiring drivers, the reasons he moved from his rural hometown to the city and his perspectives on urban vs rural living, Kikuyu cultural practices, his role as a community elder resolving disputes through both discussion and social pressure, the challenges Kenya faces, his call for more foreign investment to create local jobs, how generational attitudes differ, the role of religion and Githae’s Catholic faith, perspectives on Chinese involvement in Kenya and openness to foreigners, thoughts on the devolution of power to Kenyan counties, his favorite wildlife, why he’s optimistic about Kenya’s future despite current difficulties, and more.
Excerpt:
COWEN: What do you do that the court system does not do? Because you’re not police, but still you do something useful.
GITHINJI: What we normally do, we as a group, we listen to one another very much. When one person reaches that stage of being told that you are a man now, you normally have to respect your elder. Those people do respect me. When I call you, when I tell you “Come and we’ll talk it out,” with my group, you cannot say you cannot come, because if you do, we normally discipline somebody. Not by beating, we just remove you from our group. When we isolate you from our group, you’ll feel that is not fair for you. You come back and say — and apologize. We take you back into the group.
COWEN: If you’re isolated, you can’t be friends with those people anymore.
GITHINJI: When we isolate you, we mean you are not allowed to interact in any way.
COWEN: Any way.
GITHINJI: Any business, anything with the other community [members]. If it is so, definitely, you have to be a loser, because you might be needing one of those people to help you in business or something of the sort. When you are isolated, this man tells you, “No. Go and cleanse yourself first with that group.”
If you find his Kikiyu accent difficult, just read the transcript instead. This episode is best consumed in a pair with my concurrently recorded episode with Harriet Karimi Muriithi, a 22-year-old Kenyan waitress — the contrasts in perspective across a mere generation are remarkable.
Basil Halperin on the job market from MIT
Here is the home page, here is his job market paper (with Daniele Caratelli) “Optimal policy under menu costs”:
We analytically characterize optimal monetary policy in a multisector economy with menu costs, and show that inflation and output should move inversely after sectoral shocks. That is, following negative shocks, inflation should be allowed to rise, and vice versa. In a baseline parameterization, optimal policy stabilizes nominal wages. This nominal wage targeting contrasts with inflation targeting, the optimal policy prescribed by the textbook New Keynesian model in which firms are permitted to adjust their prices only randomly and exogenously. The key intuition is that stabilizing inflation causes shocks to spill over across sectors, needlessly increasing the number of firms that must pay the fixed cost of price adjustment compared to optimal policy. Finally, we show in a quantitative model that, following a sectoral shock, nominal wage targeting reduces the welfare loss arising from menu costs by 81% compared to inflation targeting.
Noteworthy!