Monday assorted links
The Seattle Minimum Wage Study
The Seattle Minimum Wage Study, a study supported and funded in part by the Seattle city government, is out with a new NBER paper evaluating Seattle’s minimum wage increase to $13 an hour and it finds significant dis-employment effects that on net reduce the incomes of minimum wage workers. I farm this one out to Jonathan Meer on FB.
This is the official study that was commissioned several years ago by the city of Seattle to study the impacts of raising the minimum wage, in a move that I applauded at the time as an honest and transparent attempt towards self-examination of a bold policy. It is the first study of a very high city-level minimum wage, with administrative data that has much more detail than is usually available. The first wave (examining the increase to $11/hr) last year was a mixed bag, with fairly imprecise estimates.
These findings, examining another year of data and including the increase to $13/hr, are unequivocal: the policy is an unmitigated disaster. The main findings:
– The numbers of hours worked by low-wage workers fell by *3.5 million hours per quarter*. This was reflected both in thousands of job losses and reductions in hours worked by those who retained their jobs.
– The losses were so dramatic that this increase “reduced income paid to low-wage employees of single-location Seattle businesses by roughly $120 million on an annual basis.” On average, low-wage workers *lost* $125 per month. The minimum wage has always been a lousy income transfer program, but at this level you’d come out ahead just setting a hundred million dollars a year on fire. And that’s before we get into who kept vs lost their jobs.
– Estimates of the response of labor demand are substantially higher than much of the previous research, which may have been expected given how much higher (and how localized) this minimum wage is relative to previously-studied ones.
– The impacts took some time to be reflected in the level of employment, as predicted by Meer and West (2016).
– The authors are able to replicate the results of other papers that find no impact on the restaurant industry with their own data by imposing the same limitations that other researchers have faced. This shows that those papers’ findings were likely driven by their data limitations. This is an important thing to remember as you see knee-jerk responses coming from the usual corners.
– You may also hear that the construction of the comparison group was flawed somehow, and that’s driving the results. I believe that the research team did as good of a job as possible, trying several approaches and presenting all of their findings extensively. There is no cherry-picking here. But more importantly, without getting too deep into the econometric weeds, my sense is that, given the evolution of the Seattle economy over the past two years, these results – if anything – *understate* the extent of the job losses.
This paper not only makes numerous valuable contributions to the economics literature, but should give serious pause to minimum wage advocates. Of course, that’s not what’s happening, to the extent that the mayor of Seattle commissioned *another* study, by an advocacy group at Berkeley whose previous work on the minimum wage is so consistently one-sided that you can set your watch by it, that unsurprisingly finds no effect. They deliberately timed its release for several days before this paper came out, and I find that whole affair abhorrent. Seattle politicians are so unwilling to accept reality that they’ll undermine their own researchers and waste taxpayer dollars on what is barely a cut above propaganda.
I don’t envy the backlash this team is going to face for daring to present results that will be seen as heresy. I know that so many people just desperately want to believe that the minimum wage is a free lunch. It’s not. These job losses will only get worse as the minimum wage climbs higher, and this team is working on linking to demographic data to examine who the losers from this policy are. I fully expect that these losses are borne most heavily by low-income and minority households.
What I’ve Been Watching: Four Indian Movies
In honor of Prime Minister Narendra Modi’s visit to the United States here are four Indian movies, not movies about India, but Indian movies, that are well worth watching. Most are available on Netflix.
Kahaani is a Hindi mystery-thriller starring Vidya Balan as Vidya Bagchi (there is a funny scene involving the pronunciation of Vidya, I wonder if she gets that a lot?) a pregnant software engineer who arrives in Calcutta from London in search of her missing husband. A police officer offers to help her and they start following the clues. It soon appears that her husband was not the man she thought he was. The further they explore the more mysterious and dangerous the situation becomes. Calcutta is featured in a lovely way–many of the scenes were shot guerilla style on the street, during the festival for Durga. There are allusions to the films of Satyajit Ray. The tension between Vidya and the police officer, who grows to like and become attracted to her, even as they search for her husband, is nicely handled. The ending brings plot, theme and location together in a way that is cleverly foreshadowed. The director knew what he was doing.
Drishyam is a Hindi film starring Ajay Devgn as Vijay Salgaonkar, a successful family man and businessperson who runs a small cable TV service in Pondolem, Goa. Vijay hasn’t had more than a 4th grade education but he’s smart and he picks up things by watching people and movies. He’s respected in his town but he butts heads with Gaitonde, a corrupt police officer. At this point Drishyam seems like it is going to be a straightforward morality tale about a good man caught in a corrupt system but the story goes in a very different direction when his wife (the beautiful Shriya Saran) and daughter kill a young man. The young man is the son of the police inspector general, a tough as nails woman, played by the stunning Tabu. How is Vijay going to extricate his family from this awful situation? His love of movies will come in useful. Devgn drives the film forward with an excellent performance that reminds me of Gary Cooper. Tabu is superb as the police inspector who must be stronger than the men in her life but who is also the mother of the victim.
Drishyam has been remade four times, this is the fourth. I hope to convince my brother to make it a fifth time!
Court is a Marathi-language courtroom drama. It won the Best Film award in the Horizons category at the 2014 Venice International film festival and the Luigi De Laurentiis (Lion Of The Future) award for it’s first-time director Chaitanya Tamhane. It has won many other awards since, including a 100% positive tomatometer. But can I recommend it? 
Courtroom drama brings to mind Henry Fonda as the one person who turns around the jury of 12 Angry Men or Tom Cruise as the lawyer who pushes Jack “you can’t handle the truth” Nicholson to confess.
Court is not that. There are no great speeches, no climax, no triumph of justice. The great virtue of Court is that it shows you how ordinary people participate in the boring, tedious, and mundane production of injustice. But that is also its vice. How do you show such a system? By being boring, tedious and mundane. Indeed, Court not only shows the mundane production of injustice it structures itself around that theme. Scenes drift on for longer than expected. The movie builds tension like a conversation with uncomfortable pauses. The audience begins to fidget and think “when will this be over.” That’s intentional. In a two-hour movie Tamhane makes you feel a little like what the people in Indian court must feel, trapped.
The nominal plot is about a people’s poet who is charged with encouraging, through one of his performances, a suicide by a sewer worker. I enjoyed the poetry slams performed by the defendant (the way these lively performances contrast with the other scenes is part of the message). This long piece on India’s sewer workers is good background that underlines the absurdity of the charges.
At the end of the day, I’m glad I watched Court, it has a lot to say about the Indian courts, caste discrimination, the strange carryover of British law (it’s notable that much of the movie is in English because courts operate in English, even when defendants do not) and the mundane production of injustice, the latter of which applies well beyond India. But I confess that I watched it on Youtube at 1.5 speed.
What makes Court interesting is not what happens when you watch it but how you think about it later.
Ok, Lion isn’t Indian cinema, it’s actually an Australian movie starring Dev Patel and Nicole Kidman but much of it takes places in India and it’s excellent. The movie is based on the true story of Saroo Brierley who as a five year old got separated from his brother and accidentally ended up on train that transported him from his small village to Calcutta, nearly 1000 miles away. Unable to find his way back home, Saroo ends up on the streets fending for himself until he is adopted by an Australian couple. Twenty-five years later and using every scrap of memory he has left, Saroo manages to deduce the location of his hometown using Google Earth.
With Nicole Kidman’s star power, Lion could easily have fallen into the trap of the white woman saving the brown boy but it rises above that and keeps its attention on Saroo and real emotion. It’s hard not to tear up more than once.
Do Americans spend more money on the health care of the poor than the rich?
From Twitter I see this statistic:
Ratio of mean health care spending in richest quintile to mean health care spending in poorest quintile
For the United States, as reported, that ratio is 0.884 for ages 25-64, and for 65 and up the ratio has two varying estimates, from 0.87 to 0.9.
If I am understanding the numbers and presentation correctly, that indicates more health care spending on the poorest quintile than the wealthiest quintile (for below 25 however the ratio is 1.3, namely more spending on the wealthy).
I believe this comes as a surprise to many people, though it is arguably intuitive, since poor people become sick more often, and furthermore sick people are more likely to lose income.
I tracked down the source paper by Eric French and Elaine Kelly (pdf), and it does seem to be true, noting that the numbers exclude long-term care for the elderly. By the way, that piece is full of fascinating, under-reported medical expenditure statistics, for other countries too.
A number of points suggest themselves:
1. You still might feel we are neglecting the health care of the poor, but I am not sure the majority of the American public would react that way, upon hearing these numbers. Usually the poor get less of things, as measured by expenditures, even if they might “need” it more. Health care is an exception to what is otherwise a pretty general rule. I believe it should be such an exception, but to what degree? I see a lot of pretty aggressive intuitions out there, mostly without serious justification or without any presentation of what the stopping point should be.
2. Those numbers don’t prove anything, least of all normatively. Still, they do point my attention in the direction of wondering — yet again — if public health programs are not better than spending more on health care coverage of the poor. Let’s stop or at least limit poor people from getting sick so many more times.
3. That poor people get sick more times, how much of this is a) poor environment including higher stress and exposure to crime, b) genes, c) inability to afford proper preventive care, d) bad decision-making, including diet, lifestyle, and exercise, and e) sickness causing poverty, and f) other factors. I know of plenty of individual papers on these topics, but would it go over well to write an “apportionment” paper doling out the relative responsibilities?
4. How much should our decisions on the best health care policy depend on the answer to #3? How many people are even willing to talk about this right now?
5. Why does the ratio flip so significantly toward the wealthy for younger people? Can we use that fact to make any general inferences about the apportionment outlined in #3? On the surface, it seems to suggest a significant possible role for d) and e), since those might affect children less.
6. What else?
The original pointer was from a retweet by Garett Jones, the tweet from Houston Euler, the Great Firewall is making direct links to them very costly right now.
Sunday assorted links
1. In one study, young children learn how to deceive in ten days.
2. “A new kind of elevator uses linear motors, similar to those in maglev trains and HyperLoop, to whiz its cabins through shafts, and will be able to move people up, down, left, or right.” Link here.
3. New Chinese movie stars Stephon Marbury as Stephon Marbury (NYT). And this: “There is indeed a statue of Marbury in Beijing. “People say it doesn’t look like me,” Marbury said. “But I know it does, because I know the face I made when they made the statue.””
4. Boris Becker is now bankrupt (no Beijing statue).
5. Employees committed to family are more motivated and productive (WSJ).
Canada’s “Shortage” of Marijuana
I never imagined that Canadian finance ministers would one day worry about a shortage of marijuana. Welcome to 2017.
Bloomberg: The biggest challenge for Justin Trudeau’s forthcoming legal recreational marijuana market is a shortage of pot, the finance minister of Canada’s most-populous province says.
…Finance ministers were told demand is “quite high” for marijuana already in Canada, he said. “So we want to make certain that, when we do proceed, there is sufficient supply to accommodate the activity because what we’re trying to do is curb the illicit use and organized crime that now exists around it.”
The finance ministers’ worry, however, is misplaced. Canada’s system is not as open to entry as Colorado’s, so even with new licenses being approved rapidly, demand will increase faster than supply once legalization happens and prices will increase. That much is true. But much of the new demand will come from people who were deterred from buying illegally. As far as these buyers are concerned, the total price–including the price of possibly being caught–will have fallen, even as the money price rises. Many people who were buying illegally will also prefer to buy legally, even at the higher price. In other words, even if the price of legal pot is higher than the current illegal price, the demand for illegal pot will fall putting pressure on the criminal element.
As usual, the finance ministers forgot to think at the margin.
Hat tip: Daniel Lippman.
China supercomputer fact of the day
A new ranking shows that for the second year running, the world’s fastest supercomputer is TaihuLight, housed at the National Supercomputing Center in Wuxi, China. Capable of performing 93 quadrillion calculations per second, it’s almost three times faster than the second-place Tianhe-2. And in third spot this year is a newly upgraded device, called Piz Dain, at the Swiss National Supercomputing Centre, which recently had its performance boosted by the addition of Nvidia GPUs.
Sadly for America, the upgraded Piz Dain pushes the Department of Energy’s Titan supercomputer, which is housed at Oak Ridge National Laboratory, into fourth spot. Able to make 17.6 quadrillion number crunches per second, Titan is just a fifth as fast as TaihuLight. In its defense, the U.S. still claims five of the top 10 spots, and it is home to 169 of the supercomputers that make up the fastest 500. China, meanwhile, can only claim 160.
Here is the full article.
What I’ve been reading
1. Sarah Binder and Mark Spindel, The Myth of Independence: How Congress Governs the Federal Reserve. I’ve only been reading the title of this one, as it came in the door just before I left for China. But I like it already, and even if this book were nothing more than its title it still would be better than much of what is written on monetary policy.
2. Frédéric Dard, The Executioner Weeps. French noir, full of cheap tricks, suspenseful, fun.
3. Robert Bickers, Out of China: How the Chinese Ended the Era of Western Domination. A very good book, substantive, readable, and full of information not readily available elsewhere. Yet the title is misleading, as most of the book, including the best parts, covers the first half of the twentieth century and in particular the Western presence and control in China (not quite domination). Later on, the author says plenty about the Cultural Revolution, but doesn’t seem to want to actually condemn it.
4. Fyodor Dostoyevsky, Crime and Punishment, Oliver Ready translation. I hadn’t read this one since high school, so thought it was worth another try. I can’t say I find Raskolnikov to be a convincing criminal, or a convincing character at all. Maybe this story is better read as man’s struggle for freedom, and his inability to obtain it, due to the social processing of all his actions, rather than as a novel of crime per se. I liked it, I didn’t love it. If it were published today, it would not receive rave reviews.
5. Slavoy Žižek, The Ticklish Subject: The Absent Centre of Political Ontology. While he is overrated by his trendy partisans, he is underrated by almost everyone else. Might this be his best book? Early Žižek is the best Žižek. We have not escaped from the spectre of the Cartesian self, and what might a truly emancipatory political project have to look like? 2017 is not the worst time to be reading this book. Here is one probably not very helpful review. Usually the best five pages in a Žižek book are very very good, but in this case it is thirty or more.
And I very much enjoyed this sentence and the few pages of exposition that followed: “The notion that best illustrates the necessity of a ‘false’ (‘unilateral’, ‘abstract’) choice in the course of a dialectical process is that of ‘stubborn attachment’: this thoroughly ambiguous notion is operative throughout Hegel’s Phenomenology.”
Marginal tax rates under the Senate health care bill
To see the problem, consider Brian’s situation. He’s a single adult, age 45, earning $35,000 a year. BCRA (section 102(b)(2)) expects Brian to contribute a little more than 8.3% of that income to purchase a health insurance policy. That’s about $2,911. The federal government would chip in the amount needed to let Brian buy a “median benchmark” policy in his region. That policy won’t be lavish: on average it will pay for 58% of covered expenses, but it might well let Brian avoid bankruptcy if he gets extremely sick. It will also get Brian low, pre-negotiated rates for a lot of medical treatment instead of being subject to astronomical “Chargemaster” prices that hospitals often charge the uninsured. So, if that Bronze policy costs $4,500, Brian would pay $2,911 and the federal government would pay $1,089.
Suppose Brian succeeds at work and gets a $5,000 raise; or suppose Brian gets a part time job to help supplement his income and earns $5,000 more. Now, because his income is $40,000, section 102(b)(2) of BCRA expects Brian to contribute 11.3% of his income to healthcare. Since that’s $4,558, Brian in fact pays for the whole $4,500 policy; the federal government pays nothing. So, although Brian’s raise is $5,000, he pays an extra $1,589 in premiums. His effective marginal tax is almost 32% just from the BCRA alone. When one combines his loss of a subsidy with increased income taxes of $1,488 and an increased payroll tax of $382.50 (double that if Brian’s new job is deemed self-employment), Brian’s gets to keep at most $1,541 of his new $5,000. His effective marginal tax rate is at least 69%. It’s probably even higher if Brian faces state income tax or suffers a phase out of other government income-based benefits.
That is from Seth Chandler. Ross Douthat has a good bottom-line take on the bill.
Let’s thwart China markets in everything
Toothpick crossbow that can shoot iron nails more than 20 metres (65 feet) the latest must-have toy in China https://t.co/z9PkpigjOB pic.twitter.com/duoHeZxoBF
Here is the story, via Mark Thorson.
Saturday assorted links
1. Profile of jazz pianist Craig Taborn (NYT).
2. How to think about work-life balance.
3. Screen shot of less sex for American teenagers (safe for work, indeed too safe).
4. Burton Malkiel now believes in smart Beta.
5. Why don’t people buy electric guitars anymore?
6. Avik Roy defends the Senate health care bill. I do recommend this piece. It does not convince me to support the bill, but it does show how much of the other reporting on this debate is bad, highly selective, and also excessively mood-affiliated.
What is the proper penalty for scientific fraud the culture that is China what would Gary Becker say?
In the past few months, China has announced two new crackdowns on research misconduct — one of which could lead to executions for scientists who doctor their data.
Scientists have been sounding alarms for years about the integrity of research in China. One recent survey estimated that 40 percent of biomedical papers by Chinese scholars were tainted by misconduct. Funding bodies there have in the past announced efforts to crack down on fraud, including clawing back money from scientists who cheat on their grants.
This month, in the wake of a fake peer review scandal that claimed 107 papers by Chinese scholars, the country’s Ministry of Science and Technology proclaimed a “no tolerance” policy for research misconduct — although it’s not clear what that might look like. According to the Financial Times, the ministry said the mass retractions “seriously harmed the international reputation of our country’s scientific research and the dignity of Chinese scientists at large.”
But a prior court decision in the country threatened the equivalent of the nuclear option. In April courts approved a new policy calling for stiff prison sentences for researchers who fabricate data in studies that lead to drug approvals. If the misconduct ends up harming people, then the punishment on the table even includes the death penalty. The move, as Nature explained, groups clinical trial data fraud with counterfeiting so that “if the approved drug causes health problems, it can result in a 10-year prison term or the death penalty, in the case of severe or fatal consequences.”
Here is the story, via the excellent Mark Thorson.
Regulation of Charlatans in High-Skill Professions
That is a new paper by Jonathan Berk and Jules H. van Binsbergen, here is the abstract:
We study a market for a skill that is in short supply and high demand, where the presence of charlatans (professionals who sell a service that they do not deliver on) is an equilibrium outcome. We use this model to evaluate the belief that reducing the number of charlatans through regulation increases consumer surplus. We show that this belief is false: both information disclosure as well as setting standards reduces consumer surplus. Although both standards and disclosure drive charlatans out of the market, consumers are worse off because of the resulting reduction in competition amongst producers. Producers, on the other hand, strictly benefit from the regulation, implying that the regulation we observe in these markets likely derives from producer interests. The model provides insights into the parameters that drive the cross-sectional variation in charlatans across professions. Professions with weak trade groups, skills in larger supply, shorter training periods and less informative signals regarding the professional’s skill, are more likely to feature charlatans. We conclude that the number of charlatans in equilibrium is positively related to the value added of that profession to consumers.
How does financial advising fit into this schema? Economic consulting? Blogging?
For the pointer I thank the excellent Kevin Lewis.
*Regulation and Economic Growth*
The author is James Broughel and the subtitle is Applying Economic Theory to Public Policy. I am biased, as James was my doctoral student and this is an adaptation of his thesis, but I think this is a great work and also well-written and fun to read. It’s the single best piece written on how to think about how regulation impacts economic growth — in particular once-and-for-all effects vs. growth rate changes — and that is one of the most neglected economic policy questions today.
Friday assorted links
2. Human beings haven’t actually domesticated cats very much.
3. Camels defeat the camel nationalism of the Qatar blockade.
4. The economics of pan-handling, long, recommended (pdf).
5. How long was China communist?
6. In defense of Paul Zukovsky (do not speak ill of the dead).