There is something morally instructive about watching a preschooler melt down. It was the morning of my __th birthday yesterday. Kids still had to be dressed and fed and shipped to school on time.
My daughter, who is almost 5, was screaming on the stairs instead of coming to breakfast. Upon inspection, I realized that her head was through the arm hole of the sleeveless dress she had chosen to wear to school. I offered to help her. She screamed louder and lurched away from me. Her pride was more hurt than her neck at the thought of accepting help. She was not yet really wearing the Anna (the character from Frozen) dress because of the snafu of the sleeves. She stomped around screaming for minutes, refusing all offers of help or comfort from me.
Adults do this kind of thing all the time, although it looks different. People do the stupidest things and then dig in instead of accepting help and reversing course.
My daughter is exceptionally brilliant and kind. She is loved by everyone she meets. Even she has these moments, because we all do. That is some behavioral economics for you.
Scatterplots are a great investigatory tool. You can scatterplot raw data for two variables and, if the relationship is strong, then you can see the functional form that relates x and y (linear, polynomial, exponential, etc.). However, there are two data characteristics that are a scatterplots Achilles’ heel: large samples and discrete variables. And they create misleading scatterplots for the same reason.
Examine the below scatterplots for y vs the discrete variables x1, x2, & x3 on the interval [0,10]. What do you think slopes or correlations are?
When music rights make the news, it’s generally because a superstar’s entire catalog is selling for hundreds of millions of dollars. That may be why I always assumed that buying music rights would be difficult and expensive- that you’d both have to know the right people to even hear about potential deals, and have to be quite rich to afford them.
But this week I found out about Royalty Exchange, a site that currently lists hundreds of music rights for sale. They certainly appear to make the process of finding and buying rights, and collecting royalties, easy (I haven’t bought any yet so can’t say for sure). They currently list songs and partial catalogs from all sorts of artists you’ve heard of:
When I say I find many listings to be surprisingly cheap, I mean this relative to the hundred million dollar deals you hear about. Of those that offer a list price (as opposed to simply asking for offers), the vast majority are over $10,000, and many are over $100,000. Overall I’d put it in the “luxury car” bucket- expensive enough that its a bad idea for a normal middle-class person to buy one, but cheap enough that they could if they really wanted to. It’s a bit of a better idea than a luxury car, since its more investment than consumption. But if I actually bought the Flogging Molly catalog like I want to, I’d be taking an unnecessary risk by putting a large proportion of my net worth in a single investment. Their music is great and I think it will maintain its popularity, but if I’m wrong and people stop listening to it I’d lose out. So, for most people it’s a bad idea in the same way that putting half your retirement account into a single company’s stock is bad idea. But I’m surprised its even possible.
Why are these rights so affordable? Sometimes, of course, its because the artist isn’t that popular. But why are the rights to songs and musicians that are household names affordable? It seems to mainly be because the rights have been sliced and diced so that you’re only buying a small piece of them. Consider Miley Cyrus above. First of all its only the rights to one of her songs (admittedly a hit song). Second, you’re only buying the rights for ten years (lifetime rights are sometimes available but naturally they cost more). Finally, you’re only buying some of the rights, in this case the right to get paid when someone publicly performs the song (but not when someone streams it or buys a copy):
Even given all that though, I’m surprised how cheap the rights are. I expected that people would overpay for them because they like an artist, or for the bragging rights. But the yields seem pretty reasonable, often over 10%. Yields could rise or fall over time as an artist becomes more or less popular, or as the economics of the music industry change, but current prices generally seem justified by the income stream. I look forward to having enough money that this could make sense as an investment for me; I expect I might in 10 or 20 years, but maybe some of you are already there.
The cheapest listing from an artist I’ve heard of, Busta Rhymes (only performance rights, only certain tracks)
In his NY Times column today, Ross Douthat argues that legalizing marijuana is a big mistake. Douthat makes a number of arguments, but let me focus on one point he makes in the column: that recent research suggests legalizing marijuana increases opioid deaths. This point is made in just one sentence of the essay, so let me quote it in full:
There was hope, and some early evidence, that legal pot might substitute for opioid use, but some of the more recent data cuts the other way: A new paper published in the Journal of Health Economics finds that “legal medical marijuana, particularly when available through retail dispensaries, is associated with higher opioid mortality.”
Kudos to Mr. Douthat for actually linking to the paper. That’s what the internet is for! Yet so many writers in traditional news sources fail to do this.
Now, on to the paper itself. There is nothing untrue in what Douthat writes. First, there was plenty of “early evidence” that legalizing marijuana reduced opioid deaths. More on this in a moment. And the study he cites by Mathur and Ruhm is particularly well done. It is published in the top health economics journal. But the main point of the paper is to say “we think the rest of the literature is wrong, and we’re going to try really hard to convince you that we are right.”
What does the rest of this literature say? Here’s a brief tour (all of these are cited in Mathur and Ruhm). The variable in question is opioid deaths.
I have done various maintenance and repairs on my cars over the decades. Usually, they turn out to be harder and more time-consuming than I thought. Changing the engine oil and oil filter has become genuinely harder since the oil filters have migrated deep up under the engine, where it is hard to access them without putting the car on a lift, and disposing of a milk jug of used oil has gotten more difficult. I used to be able to easily change out a light bulb in the headlight, but the last car where that needed doing required you to take apart much of the front end of the car to get at the headlight. However, I recently found that changing the cabin air filters in my two vehicles (van and sedan) is so easy, I wish I had started doing it years ago.
Why Change the Cabin Air Filter?
The cabin air filter filters the air coming into the passenger section of the car. It knocks out road dust and pollen, and other bits of whatever that might get sucked into your air system as you are going down the road. So, it protects your and your family’s lungs as well as the components of the air handling system. Typical recommendations are to change out the filter about once a year or every 15,000-20,000 miles.
The photo below shows the cabin air filter I just pulled out of my van after maybe 2 years and 25,000 miles, next to a relatively clean filter. Obviously, I let this one go a bit too long: it is grey with dust/dirt, and partly blocked with plant debris.
I have not been quick to change out these filters because garages or dealers often charge something like $80-$100 for this. And until recently, I never considered doing it myself, because for some reason I thought it was a hard job. I had read of people having to contort in unnatural positions with heads inserted under dashboards as they disassemble layers of car to get at the filter.
It Is (Often) Super Easy to Change a Cabin Air Filter
It all depends on where the filter is located. For most models of cars, you can find guidelines on line, including YouTube videos. There are some models where you indeed may have to unscrew a cover plate somewhere below the dashboard to expose the filter. But in most cars, you remove the glove box to expose the filter. That may involve undoing come screws or a snap or strut, and squeezing the edge of the glove box inward. For my Hondas, all I had to do was empty the glovebox, (authoritatively) squeeze in the edges, and the glove box pivoted down, and behold, there was the filter in its little holder. Then slide out the holder, pull out the old filter and put in the new filter (purchased at AutoZone for $20 each), slide the holder back in place, and finally tilt the glovebox back up until it snapped in place.
Ten minutes max, easy-peasy. Obviously, this saved money, but it also felt empowering. I highly recommend trying it.
Here are some show notes to a talk I gave in April 2023. I had the opportunity to talk to an undergraduate macroeconomics class at Indiana University East.
Minute
Topic
2:00
Research on Behavioral economics and Macroeconomics
4:25
Labor Market Equilibrium Concepts and Incomplete Labor Contracts
6:50
The Gift Exchange Game and the Fair Wage-Effort Theory
The “If Wages Fell…” paper directly inspired the “My Reference…” experiment. But I don’t cite “If Wages Fell…” in “My Reference…,” so you would never know how closely they are connected unless you listen to this talk.
The president of my university said that he wants the following strategy publicized.
The purpose of an admission application is to find good matches between students and the university. We want the application to be easy for people to complete, but to filter out those with low conscientiousness and those who aren’t a good mission fit. If the application is arbitrarily difficult or convoluted, then we’ll lose great applicants. But, if it’s not costly enough, we’ll attract students who are closer to indifferent about attending. Those are the freshmen who don’t return for their sophomore year.
Predicting elections is hard. Poll aggregators and prediction markets can help. Many of the usual suspects like FiveThiryEight and PredictIt aren’t covering Sunday’s election in Turkey, partly due to their ownissues, and partly because US organizations often ignore foreign elections. But we do have several good predictors to consider, and they all list opposition candidate Kiliçdaroglu as a slight favorite.
Polymarket is most optimistic for the opposition, giving them a 67% chance. British betting site Smarkets gives them a 61% chance. Play-money site Manifold Markets gives them 56%. Finally, no-money prediction site Metaculus gives a 60% chance that the opposition wins, and a 79% chance that Erdogan leaves office if he loses the election. I’m not sure how the count the Swift Centre, a small closed panel of forecasters, but they are the exception in seeing Erdogan as a slight favorite.
My economist’s instinct is to trust the real-money markets more here, although Manifold and Metaculus outperformed them in the 2022 US midterms. The usual bias is to predict a win for the candidate you like more (which for Westerners on these markets means betting against Erdogan), and have real money on the line can help counteract this. On the other hand, some might use betting markets as a hedge and bet on the outcome they don’t want. In this case the betting markets are slightly more favorable to the opposition, but the gap is small.
Of course, the biggest real-money markets are those that don’t ask directly about the election: the markets for Turkish stocks and bonds. These have generally performed well in the past year as the opposition’s chances have risen, which may indicate that markets think a new Prime Minister with more conventional economic views will get inflation under control.
70,000: that’s the number of adults (age 25 and older) in the US that earned the federal minimum wage of $7.25 per hour in 2021.
Another 538,000 adults reported earning below the minimum wage, but these are likely to be workers that earn tips, which aren’t reported in their hourly wages. Legally, they must make at least $7.25 including their tips, though many of them earn more. The data comes from a 2022 report by BLS using CPS data (hopefully the 2023 report is coming out soon).
If we include all workers 16 and older, there are about 1.1 million people earning the federal minimum wage or less. That’s just 1.4% of hourly wage earners, and only 0.8% of all workers (including salaried workers). Crucially, this number has declined dramatically over time from a high of 15.1% of hourly wage earners (8.9% of all workers) in 1981. It has even declined significantly since 2010, the first full year that the $7.25 federal minimum was in effect, when 6% of hourly wage earners (3.5% of all workers) earned $7.25 or lower.
Perhaps, though, a big part of this decline is because most states (and even some cities and counties) now have minimum wages that are above the federal level, in some cases significantly above. Today, only 20 states use the federal minimum wage. No doubt this is important!
However, even if we focus just on those 20 states that use $7.25 per hour as the minimum, there were also large declines in the percent of hourly wage earners that earned $7.25 or less. Some states declined by 7 percentage points or more from 2010 to 2021, though all declined by at least 3 percentage points.
But maybe what’s going on is that employers are just providing wage increases that keep up with price inflation. So while fewer workers are earning the federal minimum wage, maybe they are no better off. We can address that possibility using BLS’s occupational wage data, which allows us to look at wages at the 10th percentile (these aren’t exactly minimum wage earners, but they are close). Real wage declines did happen in a few states (Alabama, Louisiana, and Mississippi), but most of these states experienced clear real wage growth from 2010 to 2021 at the 10th percentile of earners.
Here are the changes in percentage terms (once again, adjusted for CPI inflation).
Some might look at this growing irrelevance of the minimum wage as a reason to increase the federal minimum wage. But as the data from most states suggests, there are clear increases in wages happening already, suggesting that these are competitive labor markets. The case for raising the legal minimum wage in a competitive labor market is weak (it is stronger in a monopsony labor market).
Economist Writing Every Day 