Author: Zachary Bartsch

Interest Rates & Wining

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There’s so much to say about interest rates. Many people think about them in the context of whether they should refinance or in terms of their impact on borrowing. But interest rates also matter for production beyond impacting loans for new productive projects. Interest rates aren’t just a topic for debtors.

Interest rates impact all production that takes time. That’s the same as saying that interest rates affect all production – but the impact is easier to see for products that require more time to produce.

There’s this nice model called ‘Portfolio Theory’. Taken literally, it says that everything you own can be evaluated in terms of its liquidity, the time until it will be sold, its expected returns, and the volatility and correlation of those returns. Once you start to look at the world with this model, then it’s much easier to interpret. Buying a car? That’s usually a bad investment. It’s better to tie up a smaller amount of money into that depreciating asset rather than to let a larger sum of money experience dependably negative returns. Of course, this assumes that there are alternative uses for your money and alternative places to invest your resources – hopefully in assets with growing rather than decaying value. People often recommend purchasing used cars rather than new cars. Both new and used cars are bad investments and you can choose to invest a lot or a little.

Producers make a similar calculation. All kinds of things motivate them: love, tradition, excellence…  But everyone responds to incentives. Consider vintners. They might be a farmer of grapes and a manufacturer and seller of wine. They might like to talk about nostalgia, forward notes, a peppery nose, and other finer things. But even they respond to prices and opportunity cost.

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Florida Ballot Initiatives 2024

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The November election in Florida will include 6 proposed amendments to the Florida State Constitution. They only pass if at least 60% of voters vote YES. Here are some brief takes from an economic perspective.

Amendment 1: Partisan Election of Members of District School Boards

Currently, school district boards are locally elected and they do not have a party affiliation listed on the ballot. If passed, the amendment would permit party affiliation to be on the ballot. Partisan primaries would also be introduced, reducing the number of candidates in the general elections. The argument in favor is that party affiliation itself communicates information to voters. Removing that information forces voters to abstain, vote randomly, or to vote based on other information.

An argument against is that, in Florida, only registered party members may vote in primaries. If passed, parties will endorse particular candidates according to the primary results, winnowing the field. I happen to live in a county with an overwhelming republican majority, so the party-endorsed candidate will probably win. The outcome will be that the median republican primary-voter will choose the winning candidate in the primary rather than the median voter during the election. Voting “YES” aggregates information from a smaller set of voters.

I’ll vote NO.

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Federalism in Action: The Case of Alcohol and Local Autonomy

Zachary Bartsch4 Comments

Where would you expect Federalism to occur? In other words, where would expect a government to devolve authority to a lower government. Importantly, this is different from freedom vs authoritarianism. The lower government might choose to be more or less free. For example, right now in Florida there is a state-wide constitutional amendment on the ballot that would enshrine each individual’s right to hunt and fish. Ignoring the particulars of what that means, it’s clearly a step toward centralizing policy rather than decentralizing it. Central governments can be strong and protect citizens, or they can strip us of rights. Either way, being small players and far-removed, it’s difficult for us to affect the policy decisions.

That concern is philosophical, however. Maybe my opinion shouldn’t matter (one could easily argue). Even as a matter of prudence, one-size-fits all sets a standard, but the standard may not be a good fit for every locality and circumstance. There is a trade-off between ease of navigating a uniform policy across the land and customized policies that are particular to local priorities. Given that Americans can vote, is there a way for us to think about when a policy will be (should be?) centralized vs decentralized?

There is a great case study by Strumpf & Oberholzer-Gee* on the matter of alcohol policy after the end of national prohibition. The US has a dizzying array of liquor laws across the country and even across states. Some states have a central policy of dry or wet, while others devolve the authority to lower governments. How should we think about that policy? What determines the policy of central versus devolved authority?

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Interpreting New DIDs

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If you didn’t know already, the past five years has been a whirl-wind of new methods in the staggered Differences-in-differences (DID) literature – a popular method to try to tease out causal effects statistically. This post restates practical advice from Jonathan Roth.

The prior standard was to use Two-Way-Fixed-Effects (TWFE). This controlled for a lot of unobserved variation over individuals or groups and time. The fancier TWFE methods were interacted with the time relative to treatment. That allowed event studies and dynamic effects.

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Human Capital is Technologically Contingent

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The seminal paper in the theory of human capital by Paul Romer. In it, he recognizes different types of human capital such as physical skills, educational skills, work experience, etc. Subsequent macro papers in the literature often just clumped together some measures of human capital as if it was a single substance. There were a lot of cross-country RGDP per capita comparison papers that included determinants like ‘years of schooling’, ‘IQ’, and the like.

But more recent papers have been more detailed. For example, the average biological difference between men and women concerning brawn has been shown to be a determinant of occupational choice. If we believe that comparative advantage is true, then occupational sorting by human capital is the theoretical outcome. That’s exactly what we see in the data.

Similarly, my own forthcoming paper on the 19th century US deaf population illustrates that people who had less sensitive or absent ability to hear engaged in fewer management and commercial occupations, or were less commonly in industries that required strong verbal skills (on average).

Clearly, there are different types of human capital and they matter differently for different jobs. Technology also changes what skills are necessary to boot. This post shares some thoughts about how to think about human capital and technology. The easiest way to illustrate the points is with a simplified example.

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The Consumingest States of 2023

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This post is quick and simple. We all know that states have different land areas and different populations. We also know that different states produce different amounts of output. We have a pretty good sense for which are the ‘big’ states since these things often go hand-in-hand. But what about household spending on consumption? It’s easy to imagine that some states produce plenty but then invest the proceeds. So, which states consume the most relative to their income?

The map above illustrates which states consume more of their income. There’s not much correlation geographically. But, among the ‘big’ states (Texas, California, New York, Illinois), the consumption per GDP is below the average of 67%. Can we make sense of this? As it turns, out more productive states also tend to have a higher per capita output. So, those higher GDP states also have richer populations on average. And, sensibly, those richer populations have lower marginal propensities to consume. They save more. But this is just spit-balling.

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More Immigrants, More Safety

Zachary Bartsch4 Comments

The headlines often read with the criminal threats that illegal/undocumented immigrants pose to the US native population. The story usually includes a heart wrenching and tragic story about a native minor who was harmed by an immigrant and a politician to help propose a solution. There’s also usually a number cited for how many such crimes happened in the most recent year with data. Stories like this are designed to provoke feelings – not to provoke thinkings.

First, the tragic story is probably not representative. Even if it is, the citation of a raw count of crimes is not communicative in a helpful way.  Sometimes politicians will say something like “one victim of a crime by an illegal immigrant is too many”.  But that seems like a silly argument to make *if* immigrants reduce the probability of being a victim of a crime.

I argue that (1) immigrants who commit crimes at a lower probability than the native population cause the native population to be safer and, counterintuitively, (2) immigrants who commit crimes at a *higher* probability than the native population cause the native population to be safer.

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Persistent Beliefs

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The things that happen between people’s ears are difficult to study. Similarly, the actions that we take and the symbolic gestures that we communicate to the people around us are also difficult to study. We often and easily perceive the social signals of otherwise mundane activities, but they are nearly impossible to quantify systematically beyond 1st person accounts. And that’s me being generous. Part of the reason that these things are hard to study is that communication requires both a transmitter and a receiver. One person transmits a message and another person receives it. Sometimes, they’re on slightly or very different wavelengths and the message gets garbled or sent inadvertently and then conflict ensues.

Having common beliefs and understandings about the world help us to communicate more effectively. Those beliefs also tend to be relevant about the material world too. A small example is sunscreen. Because a parent rightly believes that sunscreen will protect their child from short-run pain and long-run sickness, they might lather it on. But, due to their belief, they also signal their love, compassion, and stewardship for their child. A spouse or another adult failing to apply sunscreen to a child signals the lack thereof and conflict can ensue even when the long-term impact of one-time and brief sun exposure is almost zero.

People cry both sad and happy tears because of how they interpret the actions of others – often apart from the other external effects. Therefore, beliefs imbue with costs and benefits even the behaviors that have seemingly immaterial consequences otherwise. We can argue all day about beliefs. And while beliefs might change with temporary changes in the technology, society, and the environment, core beliefs need to be durable over time. Therefore, if this economist were to recommend beliefs, then I would focus on the prerequisite of persistence before even trying to find a locally optimal set.

Here are three inexhaustive criteria for a durable beliefs:

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Services, and Goods, and Software (Oh My!)

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When I was in high school I remember talking about video game consumption. Yes, an Xbox was more than two hundred dollars, but one could enjoy the next hour of that video game play at a cost of almost zero. Video games lowered the marginal cost and increased the marginal utility of what is measured as leisure. Similarly, the 20th century was the time of mass production. Labor-saving devices and a deluge of goods pervaded. Remember servants? That’s a pre-20th century technology. Domestic work in another person’s house was very popular in the 1800s. Less so as the 20th century progressed. Now we devices that save on both labor and physical resources. Software helps us surpass the historical limits of moving physical objects in the real world.


There’s something that I think about a lot and I’ve been thinking about it for 20 years. It’s simple and not comprehensive, but I still think that it makes sense.

  • Labor is highly regulated and costly.
  • Physical capital is less regulated than labor.
  • Software and writing more generally is less regulated than physical capital.


I think that just about anyone would agree with the above. Labor is regulated by health and safety standards, “human resource” concerns, legal compliance and preemption, environmental impact, and transportation infrastructure, etc. It’s expensive to employ someone, and it’s especially expensive to have them employ their physical labor.

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Recession Prospecting & Fed Tea Leaves

Zachary Bartsch4 Comments

Will a recession happen? It’s famously hard/impossible to predict. Personally, I have a relatively monetarist take. I consider the goals of the Federal reserve, what tools they have, and how they make their decisions. I also think about the very recent trend in the macroeconomy and how it’s situated relative to history. Right now, the yield curve has been inverted for quite some time and the Sahm rule has been satisfied, both are historical indicators of recession.

Recessions are determined by the NBER’s Business Cycle Dating Committee. They always make their determination in hindsight and almost never in real time. They look at a variety of indicators and judge whether each declines, for how long, how deeply, and the breadth of decline across the economy. So plenty of ‘bad’ things can happen without triggering a recession designation.

In my expert opinion, recessions can largely be prevented by maintaining expected and steady growth in NGDP. This won’t solve real sectoral problems, but it will help to prevent contagion and spirals.  The Fed can control NGDP to a great degree. In doing so, they can affect unemployment and growth in the short run, and inflation in the medium to long run.

One drawback of the NGDP series is that it’s infrequent, published only quarterly. It’s hard to know whether a dip is momentary, a false signal that will later be updated, or whether there is a recession coming. So, what should one examine? One could examine leading indicators or the various high-frequency indicators of economic activity. But those are a little too much like tarot cards and fortune telling for my taste.

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