Division of Labour: September 2013 Archives
September 30, 2013
This Guy Could Be a GOP Senate Candidate

Saudi Sheikh Has This ‘Scientific’ Warning: Driving Affects Women’s Pelvises and Ovaries

Posted by E. Frank Stephenson at 09:09 AM

If a Public Choice Tree Falls in the Woods Would a Behavioral Economist Hear It?

Part of the abstract of a new NBER WP from Jeffrey B. Liebman and Neale Mahoney:

Many organizations have budgets that expire at the end of the fiscal year. Faced with uncertainty over future spending demands, these organizations have an incentive to build up a rainy day fund over the first part of the year. If demand does not materialize, they must rush to spend these resources on low quality projects at the end of the year. We test these predictions using data on procurement spending by the U.S. federal government. Using contract-level data on a near-universe of federal contracts, we document that spending in the last week of the year is 4.9 times higher than the rest-of-the-year weekly average. Using a newly available dataset that tracks the quality of $130 billion in information technology (I.T.) projects, we show that quality scores for year-end projects are 2.2 to 5.6 times more likely to be below the central value.

Seems like a cool paper. One thing about the paper does strike me as odd--at least in this earlier ungated version, there's no citation of Bill Niskanen's work on bureaucracy.

Posted by E. Frank Stephenson at 08:14 AM

Sports Econ Time

1. Jacksonville Jaguars are offering free beer to fans who buy tickets. The team might need to throw in some free food too as it is now 0-4 after a 37-3 beatdown yesterday by the Colts.

2. A recent WSJ article on student attendance at college football games contained this paragraph that caught my eye:

Student indifference is easy to spot at matchups they expect to be lopsided: 45% of the student seats went unused at Georgia's non-SEC games. In the Big Ten, Michigan's student section had wide swaths of empty rows before kickoff Sept. 14 against Akron, the week after a stirring home win over rival Notre Dame. At Ohio State, the student no-show rate hit 26% for a game last season against lowly UAB.

The uncertainty of outcome hypothesis--the notion that fans are more interested in contests in which there is some uncertainty about which team will win--has mixed empirical support in the sports econ research. The paragraph above, albeit anecdotal, suggests that uncertainty of outcome plays a role in student attendance at college football games.

Posted by E. Frank Stephenson at 07:23 AM

September 27, 2013
Tragedy of the Schwinn Update

An excerpt from an article about Paris's bike share program:

While North America has been buzzing with enthusiasm over the relatively recent introduction of bike-share, there’s been some sobering news recently from a city that's had its system in place since 2007. Home to the largest bike-share program outside China, it turns out Paris has been losing its bikes to theft and vandalism. A lot of bikes.

According to figures unearthed by Le Monde last week, 9,000 bikes from Paris' Vélib' bike-share system were damaged or stolen last year. [snip] The costs incurred by this wave of theft and vandalism are huge. A new bike costs €650, while repairs to damaged or vandalized bikes cost €450 on average. The Paris City Hall official responsible for monitoring the scheme reckons thefts and repairs cost €1 million last year.

Most of the theft and vandalism is taking place in Paris's outlying districts.
Even with ongoing repairs and replacements making up some of the shortfall, Paris bike-share numbers have dwindled sharply. Of the 23,800 bikes that have been provided or promised since it launched, only 14,000 will now remain in service.

Posted by E. Frank Stephenson at 09:04 AM

September 26, 2013
Markets in Everything: Grammar Grumble Mugs

These would be a perfect gift for Carpe Diem's Mark Perry. (HT: Lauren Heller)


Posted by E. Frank Stephenson at 02:07 PM

September 25, 2013
The Life and Times of the Unaffordable Care Act

Double Down: Obamacare Will Increase Avg. Individual-Market Insurance Premiums By 99% For Men, 62% For Women

Posted by E. Frank Stephenson at 08:39 AM

"It looks like a good day for Mr. Alban"

So said Robert Kerr, senior director of government relations for the National Association of Enrolled Agents, a tax-preparers trade group, after an appellate court hearing on IJ's case against the IRS's desire to regulate tax preparers. My former student Dan Alban is an IJ staff attorney; IJ won at the district court level earlier this year but the IRS appealed. The IRS appears to be grasing for straws--it claims that an 1884 statute covering compensation for dead horses is the basis for its authority to regulate tax preparers.

UPDATE: On its website, Mr. Kerr's organization said "Cutting to the proverbial chase, it was not a great day to be Uncle Sam." Sweet!

Posted by E. Frank Stephenson at 08:13 AM

September 24, 2013
Confusing Costs and Benefits

I think I've finally come across someone who makes my favorite Chinese copier salesman look smart on trade issues. Check out the first minute or so of this video in which he claims that a trade deficit means that we (the U.S.) has been running a loss for the past 30 years because we've had a trade deficit with China. This is, of course, incredibly confused because exports are the cost and imports are the benefit. Looking only at the trade balance, a trade deficit would mean we're getting benefits exceeding the cost (in exports) that we pay for them. Of course, the gap is explained by capital flows, but it is still profoundly wrong to claim that a trade deficit means we've been operating at a loss.

Posted by E. Frank Stephenson at 12:21 PM

Quick Hits

The last few days have been fairly hectic but here are a few things that caught my eye:

1. Bill Anderson asks Should Government Control Wall Street?

2. John Cochrane on McDonald's and the Minimum Wage (A follow up question for my lefty friends: Cochrane describes the minimum wage as a "one-time wealth tax on the existing shareholders" of McDonald's and other employers of minimum wage workers; if society as a whole--a nonsensical construct of course--is concerned about the well-being of low-wage workers why should shareholders in McD's etc. be the ones footing the bill?)

3. The summary of a recent NBER WP finding that public health insurance creates a "powerful work disincentive."

4. The summary of a recent NBER WP finding that unemployment insurance extensions increased the unemployment reate and the duration of unemployment spells (who'd have thunk it?).

5. A plot of the hotness-IQ tradeoff in academia. At least econ is above the line ...

6. The controversy following NASCAR's Richmond race is an example of perverse incentives created by tournaments. Galliland allowing Logano to pass him is also an example of Coasian bargaining.

Posted by E. Frank Stephenson at 12:12 PM

September 17, 2013
Other Than That, Mrs. Lincoln, ...

Part of the abstract of a new NBER WP:

A representative consumer born at the start of Stalin's policies in 1928 experiences a reduction in welfare of -1 percent of consumption, a number that does not take into account additional costs of political repression during this time period.
Posted by E. Frank Stephenson at 08:06 AM

September 16, 2013
Apparently Households Do Not Have Zero Transactions Costs

The abstract of a new NBER WP by Shing-Yi Wang:

This paper examines whether an individual-level transfer of property rights increases the individual's bargaining power within the household. The question is analyzed in the context of a housing reform that occurred in China that gave existing tenants the opportunity to purchase the homes that they had been renting from their state employers. The rights to each housing unit were granted to a particular employee, so property rights were defined at the individual level rather than the household level. The results indicate that transferring ownership rights to men increased household consumption of some male-favored goods and women's time spent on chores. Transferring ownership rights to women decreased household consumption of some male-favored goods.
Posted by E. Frank Stephenson at 01:07 PM

Economic Freedom in Action on PBS this fall

The Economic Freedom of the World index is going to be featured this fall in a PBS documentary. Here's the trailer:

Posted by Robert Lawson at 11:14 AM

Markets in Everything: Vick Dog Chew Toy Edition

There's even a version with prison stripes!

Posted by E. Frank Stephenson at 09:04 AM

Time for Chair Control?

Looks like a need to think beyond gun control:

Man Faces Assault Charges For Chair Attack At San Francisco Main Library

Posted by E. Frank Stephenson at 09:02 AM

September 15, 2013
(Perverse) Incentives Matter: New York Housing Program Edition

From Edward Kosner's review of David Dinkins's "A Mayor's Life" in yesterday's WSJ:

Mr. Dinkins's social-welfare plans for his administration were straight from the New Deal-Great Society playbook.... Reality soon intervened: A plan to give the homeless priority in city-sponsored housing unleashed a tsunami of citizens who abandoned their homes to get in on the ground floor of the new program.

Repeat after Hayek: The curious task of economics ...

Posted by E. Frank Stephenson at 03:37 PM

September 13, 2013
The Effect of Live Vs. Internet Classes

The abstract of a new paper in the Journal of Labor Economics (JSTOR) by David Figlio, Mark Rush, and Lu Yin:

This article presents the first experimental evidence on the effects of live versus Internet media of instruction. Students in a large introductory microeconomics course at a major research university were randomly assigned to live lectures versus watching these same lectures in an Internet setting where all other factors (e.g., instruction, supplemental materials) were the same. We find modest evidence that live-only instruction dominates Internet instruction. These results are particularly strong for Hispanic students, male students, and lower-achieving students. We also provide suggestions for future experimentation in other settings.
Posted by E. Frank Stephenson at 08:14 AM

The Effect of Employment Protection on Teacher Effort

That's the title of a new Journal of Labor Economics paper (JSTOR) by Brian Jacob. The abstract:

In 2004, the Chicago Public Schools and the Chicago Teachers Union signed a new collective bargaining agreement that gave principals the flexibility to dismiss probationary teachers (those with fewer than 5 years of experience) for any reason and without the hearing process typical in many urban districts. Results suggest that the policy reduced annual teacher absences by roughly 10% and reduced the incidence of frequent absences by 25%. The majority of the effect was due to changes in the composition of teachers in the district, although there is evidence of modest incentive effects for young untenured teachers.

Incentives matter yadda yadda ...

Posted by E. Frank Stephenson at 08:10 AM

September 11, 2013
Houston, We Have a Principal-Agent Problem ...

Bay Area McDonald's manager accused of robbing his own restaurant

Posted by E. Frank Stephenson at 09:03 AM

Where's the Consumer Financial Protection Bureau When You Really Need It?

Apparently there's a financial product that is being pitched to young consumers by means such as a video contest and, in Minnesota, a $9 million ad campaign featuring cartoons of Paul Bunyan and his blue ox. The product being pitched is a bad deal for the young adults being targeted and it costs considerably more than in recent years.

So this seems like a case just waiting for the CFPB to lower the boom on the folks peddling this financial product right? Deceptive mortgages, outrageous credit card fees, and products taking advantage of young adults ... it should all be right in the CFPB's wheelhouse. And what a great opportunity for Sen. Pocahontas Warren to pay a visit to her old stomping grounds and to trumpet its protection of consumers from such a product. (BTW, where are all those state AGs to do a replay of their Joe Camel suits against the folks peddling Paul Bunyan and the blue ox?)

Well no. It turns out that the product is Obamacare insurance coverage and the government is desperately trying to get young adults to sign up for overpriced insurance to help offset older, more costly Obamacare recipients.

Posted by E. Frank Stephenson at 08:54 AM

September 10, 2013
Wonder How the French Fare in the World Happiness Report

I'm not a big fan of happiness research, but for what little it may be worth:

Something to smile about? Americans are not the happiest people on earth, but we do rank a respectable No. 17, among 156 countries evaluated for a new United Nations report.

The second annual World Happiness Report, released Monday, finds the highest levels of happiness in Denmark, Norway, Switzerland, the Netherlands and Sweden, all in northern Europe. The lowest ranked were Rwanda, Burundi, the Central African Republic, Benin and Togo, all in Africa.


Happiness in the United States fell slightly, but Americans remained happier than people in the United Kingdom (ranked 22nd), France (25th) or Japan (43rd).

(Source) Note the ranking of the French--it looks like former president Sarkozy's notion of happiness adjusted GDP would not reduce the gap between U.S. and French GDP.

Posted by E. Frank Stephenson at 08:24 AM

September 09, 2013
Undergraduate Research Opportunity

Berry's Undergraduate Business and Economics Rearch Journal is accepting submissions for its 2014 edition. The call for papers is here. Note that UBER is not focused on Berry students--I think it has published only 1 Berry student authored piece in its 4-5 year history. Note, too, that articles cannot have faculty co-authors. I think UBER also likes to include non-Berry students as referees so strong students interested in refereeing should also contact the editorial board.

Posted by E. Frank Stephenson at 12:39 PM

Paging Dr. Galston ...

Here's another tidbit for William "Government is a Good Venture Capitalist" Galston:

The Energy Department conceded Friday that the federal government will lose $42 million on a loan to a shuttered Michigan van manufacturer — part of the same program that provided a $529 million loan to an electric car maker that also has gone under.
Posted by E. Frank Stephenson at 08:51 AM

Are Tenure Track Professors Better Teachers?

That's the title of a new NBER WP from David N. Figlio, Morton O. Schapiro, and Kevin B. Soter. Of course, they could have just called the paper "Lynne Kiesling Rocks." Here's the abstract:

This study makes use of detailed student-level data from eight cohorts of first-year students at Northwestern University to investigate the relative effects of tenure track/tenured versus non-tenure line faculty on student learning. We focus on classes taken during a student's first term at Northwestern, and employ a unique identification strategy in which we control for both student-level fixed effects and next-class-taken fixed effects to measure the degree to which non-tenure line faculty contribute more or less to lasting student learning than do other faculty. We find consistent evidence that students learn relatively more from non-tenure line professors in their introductory courses. These differences are present across a wide variety of subject areas, and are particularly pronounced for Northwestern's average students and less-qualified students.

I have doubts about whether the results generalize to other types of institutions. For example, my department has some evidence that students perform about 10 percentage points worse on our (common across all sections) end of semester assessment questions when their principles class is taught by a visitor than when they have one of my tenure track colleauges.

If the pattern between a place like Berry and a place like Northwestern really is different, there's probably a good explanation. Visitors at Berry and tenure track folks at Northwestern may have higher priorities--landing their next job in the case of visitors at Berry and focusing on research in the case of Northwestern's tenure track faculty. It's not that they don't care about teaching, but the relative priorities differ.

Posted by E. Frank Stephenson at 08:32 AM

Marriage as a Child Investment Commitment Device

The abstract of a new NBER WP from Shelly Lundberg and Robert A. Pollak:

Since 1950 the sources of the gains from marriage have changed radically. As the educational attainment of women overtook and surpassed that of men and the ratio of men's to women's wage rates fell, traditional patterns of gender specialization in work weakened. The primary source of the gains to marriage shifted from the production of household services and commodities to investment in children. For some, these changes meant that marriage was no longer worth the costs of limited independence and potential mismatch.

Cohabitation became an acceptable living arrangement for all groups, but cohabitation serves different functions among different groups. The poor and less educated are much more likely to rear children in cohabitating relationships. The college educated typically cohabit before marriage, but they marry before conceiving children and their marriages are relatively stable.

We argue that different patterns of child-rearing are the key to understanding class differences in marriage and parenthood, not an unintended by-product of it. Marriage is the commitment mechanism that supports high levels of investment in children and is hence more valuable for parents adopting a high-investment strategy for their children.

Posted by E. Frank Stephenson at 08:19 AM

September 08, 2013
San Francisco's War on Women?

Remember the 2012 political bit about a war on women? It seems like someone might want to take a peek at San Francisco's city government. Consider these recent headlines:

Woman Sunbathing In San Francisco Park Run Over, Killed By City Truck

Fire truck ran over Asiana plane crash victim, S.F. police say

San Fran's new motto: We're from the government ... we're here to run you over?

Posted by E. Frank Stephenson at 05:15 PM

September 06, 2013
Guess the Professor's Department

A news item:

A Michigan State University professor who came under fire for harshly criticizing Republicans and “closet racists” during a class last week has been pulled from the classroom, with the university reassigning his teaching duties to other instructors, the Detroit Free Press reported.

The professor, William S. Penn, drew criticism after a video of his classroom remarks was posted online by Campus Reform, a conservative group that describes itself as a watchdog rooting out bias and other problems on the nation’s college campuses. The group said the video showed Mr. Penn attacking Republicans, saying that they are cheap and “don’t want to pay taxes because they have already raped this country and gotten everything out of it they possibly could.”

The news article does not mention this chap's department/discipline. Take a guess--I've put the answer, and a related comment, below the fold.

Read More »

Posted by E. Frank Stephenson at 03:07 PM

September 05, 2013
Low Wage Employers Impose Costs on States?

So says Joann Weiner writing in the WaPo:

The states are well aware of the costs that low wages impose on them. For example, in 2008, an Ohio policy group reported that Wal-Mart, McDonald’s, Yum! Brands, and Wendy’s were the top employers with the largest number of employees using Medicaid, food stamps and Ohio’s cash assistance programs. Nearly 28,000 employees at these four companies applied for food stamps in 2008.

By covering these costs through various programs that help low-income people, the government picks up where the private sector leaves off.

For example, a single mother making $15,000 a year is entitled to various means-tested benefits that are targeted toward people with low earnings — the earned income tax credit, the child care credit, Medicaid, food stamps — that help her provide food, shelter and clothing for her family.

Raising the minimum wage would start to solve this poverty problem.

This is wrong-headed on several counts. First, even with the EITC programs in some states, someone making $15k per year probably receives less government assistance than someone making $0. Having someone employed for a low wage is better than no wage at all which would happen to many low wage employees if the minimum wage doubled to $15 per hour. Second, if a state chooses (of its own volition or via federal prompting) to have some sort of public assistance program that is a cost that the state has chosen to incur. Third, even if raising the minimum wage would reduce the welfare benefits (broadly defined) being paid to low wage workers, there's no reason why specific firms (i.e., their owners, customers, and other input suppliers) should be the ones footing the bill rather than the public at large.

Posted by E. Frank Stephenson at 03:05 PM

The Response of Medicare Part D Spending to Closing the "Donut Hole"

One of the features of Medicare Part D (the prescription drug part) designed to limit its cost is the donut hole, a range of spending over which the government subsidy decreases before resuming again. Over this range, people more or less pay for drugs out of pocket so they must compare the benefits of more spending to the (full, unsubsidized) cost of the additional medications. So the donut hole is a feature not a bug in the design of Part D.

So along comes the Unaffordable Care Act to close the donut hole. A new NBER WP examines the effect of the closing on prescription drug expenditures; part of the paper's abstract:

... we develop and estimate a dynamic model of drug use during the coverage year that allows us to quantify and explore the effects of alternative contract designs on drug expenditures. For example, our estimates suggest that "filling" the donut hole, as required under the Affordable Care Act, will increase annual drug spending by $180 per beneficiary, or about 10%. Moreover, almost half of this increase is "anticipatory," coming from beneficiaries whose spending prior to the policy change would leave them short of reaching the donut hole.
Posted by E. Frank Stephenson at 02:45 PM

Bruce Yandle on Declining Labor Force Participation

Read it here.

Posted by E. Frank Stephenson at 12:20 PM

September 04, 2013
Online (Lack of) Learning

The abstract of a new paper in Economics of Education Review:

Using a large administrative dataset from a statewide system including 34 community and technical colleges, the authors employed an instrumental variable technique to estimate the impact of online versus face-to-face course delivery on student course performance. The travel distance between each student's home and college campus served as an instrument for the likelihood of enrolling in an online section of a given course. In addition, college-by-course fixed effects controlled for within- and between-course selection bias. Analyses yield robust negative estimates for online learning in terms of both course persistence and course grade, contradicting the notion that there is no significant difference between online and face-to-face student outcomes—at least within the community college setting. Accordingly, both two-year and four-year colleges may wish to focus on evaluating and improving the quality of online coursework before engaging in further expansions of online learning.
Posted by E. Frank Stephenson at 03:15 PM

Two Interesting Reads

Nick Gillespie on college costs and Obama's plan to make an even bigger mess of the college marketplace.

David Henderson on Ronald Coase. I am pleased David included Coase's lighthouse article.

UPDATE: See also this piece on Coase being run out of UVA. I'd say he (and Buchanan who was also run off) got the last laugh.

Posted by E. Frank Stephenson at 03:01 PM

September 03, 2013
An Entrepreneur Abhors a Vacuum

Two examples of entrepreneurs acting to fulfill human wants:

Company Invents Way To Detect Date Rape Drugs In Drinks

Chinese contraption helps you 'Pee Straight' [Note: The need for this invention was created by Chinese police announcing fines of $15 for people with bad aim while using public facilities.]

Posted by E. Frank Stephenson at 06:47 PM

Average Marginal Labor Income Tax Rates under the Affordable Care Act

The abstract of Casey Mulligan's new NBER WP:

The Affordable Care Act includes four significant, permanent, implicit unemployment assistance programs, plus various implicit subsidies for underemployment. Every sector of the economy, and about half of nonelderly adults, is directly affected by at least one of those provisions. This paper calculates the ACA’s impact on the average reward to working among nonelderly household heads and spouses. The law increases marginal tax rates by an average of five percentage points (of employee compensation), on top of the marginal tax rates that were already present before the it went into effect. The ACA’s addition to labor tax wedges is roughly equivalent to doubling both employer and employee payroll tax rates for half of the population.
Posted by E. Frank Stephenson at 11:41 AM

September 02, 2013
Podcast: Milk and Competition

Russ Roberts and I talk about milk, and other things. And WH Hutt, a very fine man. At EconTalk...

Posted by Michael Munger at 11:21 AM in Economics

September 01, 2013
Government as Venture Capitalist or Political Entrepreneur?

Compare and contrast:

William A. Galston in Tuesday's WSJ: Government is a Good Venture Capitalist

Yesterdays WSJ: The U.S. government lost 75% ($2.7m) on the purchase and subsequent sale of 7,000 tons of sugar beets.

Of course, the sugar beet loss is really an example of political entrepreneurship--it isn't intended to be profitable but rather to support the sugar producer special interest.

Posted by E. Frank Stephenson at 03:42 PM

The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith

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