Author: Zachary Bartsch

IPUMS Data Intensive Workshop & Conference

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I just returned from the Full Count IPUMS data workshop at the Data-Intensive Research Conference that was hosted by the Network on Data Intensive Research on Aging and IPUMS. The theme of this conference was “Linking Records”.

It was the best workshop and conference that I’ve ever attended. I’d attended the conference remotely in the past. But attending the workshop was exceptional. Myself and about 20 other people were flown to the Minneapolis Population Center and put up in a hotel during our stay (that made the conference a low-stress affair). The whole workshop was well organized, the speakers built on one another’s content, and there was a hands-on lab for us to complete. I felt my human capital growing by the hour.  

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You, Parent, Should have a Robot Vacuum

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Do you have a robot vacuum? The first model was introduced in 2002 for $199. I don’t know how good that first model was, but I remember seeing plenty of ads for them by 2010 or so. My family was the cost-cutting kind of family that didn’t buy such things. I wondered how well they actually performed ‘in real life’. Given that they were on the shelves for $400-$1,200 dollars, I had the impression that there was a lot of quality difference among them. I didn’t need one, given that I rented or had a small floor area to clean, and I sure didn’t want to spend money on one that didn’t actually clean the floors. I lacked domain-specific knowledge. So I didn’t bother with them.

Fast forward to 2024: I’ve got four kids, a larger floor area, and less time. My wife and I agreed early in our marriage that we would be a ‘no shoes in the house’ kind of family.  That said, we have different views when it comes to floor cleanliness. Mine is: if the floors are dirty, then let’s wait until the source of crumbs is gone, and then clean them when they will remain clean. In practice, this means sweeping or vacuuming after the kids go to bed, and then steam mopping (we have tile) after parties (not before). My wife, in contrast, feels the crumbs on her feet now and wants it to stop ASAP. Not to mention that it makes her stressed about non-floor clutter or chaos too.

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MSNE Echoes PSNE

Zachary Bartsch1 Comment

Let’s talk game theory. I’ve written in the past about Pure Strategy Nash Equilibria (PSNE). They identify possible equilibrium strategies, even if players are unlikely to adopt those strategies in real life. Students don’t like the implausibility of many PSNE strategies, and they sometimes struggle to limit their conclusions to the premises that yield PSNE. Students have a similar dissonance to Mixed Strategy Nash Equilibria (MSNE).

What is MSNE? A set of MSNE strategies allow a player to choose some strategies probabilistically – with probabilities that are less than 100%. That’s the feature of MSNE that distinguishes it from PSNE. In PSNE, a strategy is chosen with 0% or 100% probability.

Here’s an example to illustrate. Imagine that you are shopping at the grocery store with your shopping cart. You’re at one end of the aisle and another shopper is at the other end and your heading straight toward one another at a snail’s pace. Ideally, you’d not hit each other or awkwardly arrive in each other’s path. For simplicity, let’s say that each of you can walk on the right or the left side of the aisle only.* Below is a simultaneous normal form game with arbitrary payoffs.

There are two PSNE in the above game: each person walks on their right or their left side of the aisle. If you and the other person are both walking on your respective rights or lefts, then neither of you has an incentive to deviate. The alternative is that you are heading straight for one another and one of you must veer from their path or play an awkwardly low stakes game of chicken.

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From Cubicles to Code – Evolving Investment Priorities from 1990 to 2022

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I’ve written before about how we can afford about 50% more consumption now that we could in 1990. But it’s not all bread and circuses. We can also afford more capital. In fact, adding to our capital stock helps us produce the abundant consumption that we enjoy today. In order to explore this idea I’m using the BEA Saving and Investment accounts. The population data is from FRED.

The tricky thing about investment spending is that we need to differentiate between gross investment and net investment. Gross investment includes spending on the maintenance of current capital. Net investment is the change in the capital stock after depreciation – it’s investment in additional capital not just new capital.  Below are two pie charts that illustrate how the composition of our *gross investment* spending has changed over the past 30 years. Residential investment costs us about the same proportion of our investment budget as it did historically. A smaller proportion of our investment budget is going toward commercial structures and equipment (I’ve omitted the change in inventories). The big mover is the proportion of our investment that goes toward intellectual property, which has almost doubled.

It’s easiest for us to think about the quantities of investment that we can afford in 2022 as a proportion of 1990. Below are the inflation-adjusted quantities of investment per capita. On a per-person basis, we invest more in all capital types in 2022 than we did in 1990. Intellectual property investment has risen more than 600% over the past 30 years. The investment that produces the most value has moved toward digital products, including software. We also invest 250% more in equipment per person than we did in 1990. The average worker has far more productive tools at their disposal – both physical and digital. Overall real private investment is 3.5 times higher than it was 30 years ago.

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Market Preserving Federalism in the USA

Zachary Bartsch3 Comments

One of my favorite economic journal articles is by Barry Weingast and has the short title “Market Preserving Federalism” (MPF). In this paper, Weingast lays out the conditions necessary for two tenuous equilibria: A) Federalism  & B) Federalism that preserves a market economy.  Given that we just celebrated Independence Day in the USA, it seems to me like a good opportunity to share some brief thoughts on this paper. I’ll speak in terms of the US for ease.

Weingast enumerates 5 features for MPF, starting with two that characterize a stable federalism:

F1) A hierarchy of governments, that is, at least “two levels of governments rule the same land and people,” each with a delineated scope of authority so that each level of government is autonomous in its own, well-defined sphere of political authority

F2) The autonomy of each government is institutionalized in a manner that makes federalism’s restrictions self-enforcing

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Not Just Consumer Prices

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We all know about inflation. One popular measure is the Consumer Price Index (CPI), which measures the change in price of a fixed basket of goods. The other popular measure used for inflation is the Personal Consumption Expenditures (PCE) price index. This index measures the price of what consumers actually purchase and captures the effects of consumers changing their consumption bundles over time. While the latter is a better measure for the prices at which consumers make purchases, it takes longer to calculate. In practice, the earlier CPI release gives a pretty accurate preview to the PCE price index.

While consumption is a substantial two-thirds of total expenditures in the US economy, other prices definitely matter. On average, a third of our income is spent on other things. Below is a stacked bar chart of quarterly GDP components – the classic Y=C+I+G+NX.* Investment spending composes a relatively stable 16.7% and Government spending composes about 16.5% of GDP. We almost never hear much about the price of these other things.

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Advice For Travelling With Children

Zachary Bartsch3 Comments

My family regularly takes long trips up and down the east coast of the US. It takes us about 6 hours just to travel through Florida. We have several kids between the ages of 1 & 7 and we’ve got it down to a pretty good science. Here’s some great advice for travelling with children. A lot of it is OK advice if you cherry pick, but together their benefits compound.

1) Depart Early

It doesn’t matter if it’s a 3 hour trip or a two day trip. To us, ‘early’ means that our target departure time is 5 AM, but ‘early’ may mean something different for you and yours. Benefits include:

  • Kids may remain or resume sleeping for the first portion of the travel. That’s time that they are occupied.
  • Earlier arrival at your destination gives kids time to burn off some energy and adults time to decompress. For multi-day trips, we like to stop at a hotel that has a pool.

2) Carry-on Backpacks

Just as you would have a small personal item on an airplane, such as a purse, give each child a backpack that contains car-ride content (make sure that they put away one thing before beginning the next). Maybe ensure that each kid has a different color. This puts their stimulation in their own hands. The idea is not to avoid interacting with your kids. The idea is to help them take care of themselves. Here’s what to include:

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Future Consumption Has Never Been Cheaper

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Economics as a discipline really likes to boil things down to their essentials. There are plenty of examples. How many goods can one consume? Just two, bread and not bread. How can you spend your time? You can labor or leisure. How do you spend your money? Consume or save. It’s this last one that I want to emphasize here.

First, all income ultimately ends up being spent on consumption. Saving today is just the decision to consume in the future. And if not by you, then by your heirs. One determinant of inter-temporal consumption decisions is the real rate of return. That is, how many apples can you eat in the future by forgoing an apple eaten today? The bigger that number is, the more attractive the decision to save.

Further, since most saving is not in the form of cash and is instead invested in productive assets, we can also characterize the intertemporal consumption problem as the current budget allocation decision to consume or invest. The more attractive capital becomes, the more one is willing to invest rather than consume. The relative attractiveness between consumption and investment informs the consumption decision.

How attractive is investment? I’ll illustrate in two graphs. First, if the price of investment goods falls relative to consumption goods, then individuals will invest more. The graph below charts the price ratio of investment goods to consumption goods. Relative to consumption, the price of investment has fallen since 1980. Saving for the future has never been cheaper!

https://fred.stlouisfed.org/graph/?g=1p0C7

Of course, as in a price taker story, I am assuming that individuals don’t affect this price ratio. Truly, prices are endogenous to consumption/investment decisions. For all we know, it may be that the prices of investment goods are falling because demand for investment goods has fallen. But that doesn’t appear to be the case.

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Corporate Landlords Make Rent… Lower?

Zachary Bartsch6 Comments

Let’s keep it brief. Stick with me.

You know how perfect diversification means that one bears no idiosyncratic risk? That means that one is willing to pay more for some given return, driving up the price of assets included in such a diversified portfolio. That means that, without an informational advantage, index funds should place upward pressure on the price of assets that compose them. Anyone who invests in individual stocks, again without an informational advantage, would be priced out of the market because they bear idiosyncratic risk and would need to enjoy a risk premium that lowers the maximum price that they are willing to pay.

What about real estate?

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Taxes & Unemployment – Know Your Bias?

Zachary Bartsch2 Comments

Say that there is a labor market and that there is no income tax. If an income tax is introduced, then what should we expect to happen? Specifically, what will happen to employment, the size of the labor force, and the number of people unemployed? Will each rise? Fall? Remain unchanged? Change ambiguously? Take a moment and jot down a note to test yourself.

As it turns out, what your answer is depends on what your model of the labor market is. Graphically, they are all quantities of labor. The size of the labor force is the quantity of labor supplied contingent on some wage that workers receive. It’s the number of people who are willing to work. Employment is the quantity of laborers demanded by firms contingent on to wage that they pay. Finally, the quantity of people unemployed is the difference between the size of the labor force and the quantity of workers employed (Assuming that the labor force is greater than or equal to employment).

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