Economics

SCORE Replications- Final Call

James Bailey5 Comments

The Systematizing Confidence in Open Research and Evidence (SCORE) project is an attempt to replicate hundreds of social science papers, and to search for patterns that predict what types of papers are more likely to replicate. You can read all about it at their site, and get a sense of its bigger picture importance in this great post by someone who participated in their prediction markets.

I’ve been involved in the project replicating and reviewing papers, and I plan to do a long post about what it taught me later this year. For now I just wanted to highlight that you can still join the project now, but the chance is ending soon, probably at the end of the month. I think its a great opportunity to advance science, work with the Center for Open Science on a DARPA-funded project, and get paid:

We are recruiting researchers and data analysts across the social-behavioral sciences for replication projects that use existing data that was not part of the original study. For these projects, you will select an original finding to replicate, receive or find alternative data to test the original claim, plan the preregistration of your analysis, receive peer review of your plan, and report your findings in a structured format. You will receive $3,000-$7,800 for each replication study, and you will also be eligible for co-authorship on the report of all replication studies.

Are Special Elections Special?

Jeremy HorpedahlLeave a comment

While the United States does have its problems with democracy, one area where we shine is direct democracy. Rare at the federal level, at the state and local level direct democracy is quite common in the US, much more so than most other democracies (Switzerland also stands out). Almost half the states have some form of citizen initiative or referendum process, and it is used frequently in most of those states. But even more direct democracy takes place at the local level.

And much of that direct democracy at the local level takes place through what are called special elections. I’m not talking about elections to fill unexpected vacancies in office — though of course those do happen. I’m talking about actual voting on issues. Many of these issues revolve around questions of public finance: whether to raise a local sales tax, to approve a property tax millage, or to issue bonds for a capital project.

One very relevant example for me is an upcoming special election in my city of Conway, Arkansas. Citizens are being asked to approve the issuing of bonds to construct a community center, pool, soccer fields, and some other amenities. The bonds would be secured by a tax on restaurants. The tax already exists — city councils can put these in place without a public vote. But to issue bonds, the citizens must be asked. I wrote an op-ed about it in my local paper (if that is gated, try this blog post).

The key is that this is a special election. There are no other issues on the ballot. It takes place on February 8th, not a date that probably stands out in voters minds as an election date. What will this special election mean for voter turnout? A lot of academic research, including a paper that I wrote (currently under review, but summarized here), finds clear evidence that voter turnout will be much lower. Will the result be different? Again, a lot of evidence suggests yes. For example, property tax elections in Louisiana were less likely to pass with higher turnout, and less likely to pass in a general election (my research finds a similar result for sales tax elections in Arkansas).

But why are tax increases less likely to pass in special elections? On this question there are many theories, but they are hard to test. Is it because different kinds of voters show up at special elections, representing a different sample of the population? Possibly, but evidence is hard to find.

A new paper just published in the American Political Science Review sheds some light on these questions.

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“Pfumvudza” Planting Technique Revolutionizes Crop Yields in Zimbabwe

Scott Buchanan2 Comments

Birth of a New Farming Method

Brian Oldreive is a Zimbabwean, born there in 1943. A star cricket player as a young man, he moved on to become a successful tobacco farmer. In 1978, he became convinced (given the harm that tobacco causes) that he should no longer grow tobacco. When he tried to switch to food crops like corn (called maize in Africa), using standard agricultural practices, he could not make a go of it. He ended up losing his farm and his livelihood due to his moral stand against growing tobacco. He went to work for another large farm, but even there it was a struggle to grow food at a profit. Soil was eroding and crop yields were falling.

He began to think that maybe there was a better way to farm than the usual Western model. One day in 1984 when he was walking in the forest, he noticed that the trees and bushes there grew just fine, with no help from humans, no plowing or irrigation. How was that possible? He observed two things. First, the ground was covered with a thick layer of leaves and other debris, which formed a natural mulch. Beneath this mulch layer (“God’s blanket”), the soil was moist. This was while the region was experiencing drought, and regular farmers’ fields were parched. Secondly, the undisturbed mulch layer naturally decayed to return nutrients to the soil.

Oldreive parlayed those observations into a system of no-till agriculture which mimics the created order. He called this “Farming God’s Way”. The emphasis is on high productivity from a small plot. This involves precision planting at the proper time, crop rotation (corn/beans), and deep mulching to retain moisture and keep weeds down. Nutrients are supplied by both compost and chemical fertilizers.

This method can be practiced by farmers owning no tool other than a hoe. This breaks the cycle of farmers or nations going into debt to purchase expensive Western agricultural machinery, which then may become useless due to inadequate maintenance out in the bush.    

This approach contrasts with conventional farming practice which plows up the soil, leaving it to erode away when it rains and to dry out when it doesn’t rain. Plowing also disturbs the natural ordering of the microbial communities within the upper and lower soil layers. (There is aerobic metabolism near the surface, and a whole different anaerobic community in the soil lower down).

Oldreive started by planting one small plot using this approach in the estate he was then managing:

I decided to copy what God does in natural creation and I observed that the leaves fall down on the ground and the grass dies down and there is a protective blanket over the earth, and that is how God preserves soil to infiltrate the water that we receive…

Many people did not believe me and said I was wasting time. But I was not deterred because I was convinced that this method would work. I decided to put the model into practice by starting with just two hectares. I prayed for wisdom and God showed me how to plant maize into wheat straw residue. This is just the same as what God does in nature.

That two-hectare (about 5 acre) plot confounded the skeptics, yielding about ten times more corn per hectare than the local average yields. He then planted more acreage using this approach. Over the next few years, while a number of conventionally-run farms around him went broke, he kept expanding and growing more food with his system.

Oldreive believed these insights were gifts from God which were meant to be shared with others. Therefore, he shifted his effort towards teaching other Africans how to farm with this method.

Things Fall Apart in Zimbabwe

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Modern loneliness in Toy Story 4 and Taylor Swift

Joy Buchanan4 Comments

I just saw Toy Story 4 (2019) because I’m a parent (don’t keep up with new releases – watch Pixar movies). The depiction of utter loneliness of the Gabby Gabby doll is one of the memorable parts of the movie. She knows that other people are experiencing human interaction, but she has none. Not a single human person notices her or needs her. Can you imagine that being the main plot of a movie made in 1940?

Loneliness is not completely new for humans. In the past, a lonely person might have had extra time to focus on nature, God, or books, or just immediate survival. Today, lonely people can be inundated with images of faces while also knowing that they have no real local friends. The Toy Story toys are like modern rich people in the sense that material survival is far from their minds. The toys can sit on a shelf for decades, awake and alone. No physical needs drive them out to a grocery store or into a service sector job. They have time to obsess over their social status, and the result can be tragic. (The fate of sitting on a museum shelf for years was discussed at length in Toy Story 2.)

Gabby Gabby reminded me of a bleak 2014 song by Taylor Swift called “Wildest Dream”. Swift sings as a female protagonist who sleeps with a handsome stranger knowing that he will leave her right afterwards. Here’s what she is hoping for:

I can see the end as it begins

My one condition is

Say you’ll remember me

Taylor Swift, 2014

She’s concerned that the man won’t remember the encounter at all. That is some malaise, yes? She has no hope at all for a lasting relationship. That is an illustration of one way that loneliness looks in the modern world.

From a male perspective, also in 2014, a similar sentiment is expressed in “Stay with Me” by Sam Smith.

I don’t want you to leave, will you hold my hand?

Again, the singer is asking for someone from a one-night stand to help fill a void of human connection instead of immediately leaving. Swift and Smith wonder aloud if there is some way to at least temporarily feel like they are close to another person.

These forms of loneliness in pop culture resonate with the public. Toy Story 4 yielded over $1B at the box office globally. “Wildest Dreams” was on music charts around the world. These forms are somewhat new, due to new technology and changing social customs. I’m not trying to write the next Bowling Alone (2000) in this blog post, but merely noting some current illustrations, inspired by Toy Story.

I bet a proper classicist could find us some illustrations of old-style loneliness. When I think of ancient loneliness, I think of to-be-King David hiding in desert caves trying to avoid being stabbed by a Bronze Age(?) sword. He chronicled some of those feelings as follows

Turn to me and be gracious to me, for I am lonely and afflicted. Relieve the troubles of my heart and free me from my anguish. … See how numerous are my enemies and how fiercely they hate me!

Psalm 25

David is lonely, but he’s also hiding from numerous nearby fierce enemies. So, it’s not exactly like Gabby Gabby who is sad that no one notices her at all. (In fact, maybe it puts our problems into some perspective.)

There is a recent 2020 New Yorker article, inspired by Covid lockdowns, on the history of loneliness. They consider the idea that this really is new. Maybe there would not have been a Gabby Gabby doll in ancient poems. As usual, economics is part of the story.

In “A Biography of Loneliness: The History of an Emotion” (Oxford), the British historian Fay Bound Alberti defines loneliness as “a conscious, cognitive feeling of estrangement or social separation from meaningful others,” and she objects to the idea that it’s universal, transhistorical, and the source of all that ails us. She argues that the condition really didn’t exist before the nineteenth century, at least not in a chronic form. It’s not that people—widows and widowers, in particular, and the very poor, the sick, and the outcast—weren’t lonely; it’s that, since it wasn’t possible to survive without living among other people, and without being bonded to other people, by ties of affection and loyalty and obligation, loneliness was a passing experience. …  to be chronically or desperately lonely was to be dying. The word “loneliness” very seldom appears in English before about 1800. 

The New Yorker, 2020

Lastly, Mike wrote a great piece on loneliness in art last year. He even introduced a formal economic model!

Fences, Schools, Dryer Lint, & Shower Levers

Zachary BartschLeave a comment

In game theory, coordination games reflects the benefits of everyone settling on the same rules. Settling on the same rules can avoid a conflict and destructive competition. For example, some rules may be arbitrary, such as on which side of the road we’ll all drive. It doesn’t much matter whether a country’s vehicles drive along the right or left side of the street. As long as everyone is in the same lane, we overwhelmingly benefit from our coordination. The matrix below describes the game.

The above game reflects that whether we agree to drive on the left or on the right is trivial and that the important detail is that we agree on what the rule is. Rules like this are arbitrary. No amount of cost benefit analysis changes the answer. Other coordination rules are seemingly arbitrary, but do have different welfare implications. For example, according to English common law, a farmer was entitled to prohibit a herdsman’s flock from trampling his crops even if the farmland had no fence. Herdsmen were responsible for corralling their flocks or paying damages if they grazed on the farm. With lots of nearby farms, total welfare was higher with a rule of cultivation rights rather than grazing rights.

But the property rights could have been assigned to the herdsman instead. The law could have said that the sheep were free to graze with impunity and that the onus was on the farmer to build fences in order to keep the sheep at bay. In a world where there are a lot of farmers who are very nearby to one another, a small flock of sheep can do a lot of damage. And so, the cost-benefit analysis prescribes that herdsmen bear the cost of restricting the flock rather than the farmer. The matrix that describes this circumstance is below.

The above matrix reflects that agreeing on any rule is better than no rule at all. And, the rule that is selected has societal welfare implications. Choosing the ‘wrong’ rule means that we could get stuck in a rut of lower payoffs because coordinating a change in the rules is hard.

Schools

Another way in which the specific rule can be important is by whether it instantiates or works contrary to pre-existing incentives. Before compulsory schooling laws were passed, US states already had very high school attendance rates. Most parents sent their kids to school because it was a good investment. The ages at which children should be required to attend is largely, though not entirely, arbitrary. And wouldn’t you know it, most states applied their compulsory schooling legislation to the age groups for which the vast majority of children were already attending school. Enforcing a law against the natural incentives of human capital investment would have been more costly. The particular ages of compulsory schooling had different welfare implications due to the differing costs of enforcement.

Dryer Lint

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South Carolina Certificate of Need Repeal

James BaileyLeave a comment

The South Carolina Senate just voted 35-6 to repeal its Certificate of Need laws, which required hospitals and many other health care providers to get the permission of a state board before opening or expanding. The bill still needs to make it through the house, and these sorts of legislative fights often turn into a years-long slog, but the vote count in the senate makes me wonder if it might simply pass this year. That would make South Carolina the first state in the Southeast to fully repeal their CON laws, although Florida dramatically shrunk their CON requirements in 2019.

Source: Mercatus Center at George Mason University

This seems like good news; here at EWED we’re previously written about some of the costs of CON. I’ve written several academic papers measuring the effects of CON, finding for instance that it leads to higher health care spending. I aimed to summarize the academic literature on CON in an accessible way in this article focused on CON in North Carolina.

CON makes for strange bedfellows. Generally the main supporter of CON is the state hospital association, while the laws are opposed by economists, libertarians, Federal antitrust regulators, doctors trying to grow their practices, and most normal people who actually know they exist. CON has persisted in most states because the hospitals are especially powerful in state politics and because CON is a bigger issue for them than for most groups that oppose it. But whenever the issue becomes salient, the widespread desire for change has a real chance to overcome one special interest group fighting for the status quo. Covid may have provided that spark, as people saw full hospitals and wondered why state governments were making it harder to add hospital beds.

Is the Labor Market Back?

Jeremy Horpedahl1 Comment

Last month I asked if travel was back. Air travel has recovered a lot from the depths of the pandemic, but it was still only about 80-85% of pre-pandemic levels.

Labor markets also plummeted during the worst of the pandemic, and have slowly (and sometimes quickly) clawing their way back. But are we back to pre-pandemic levels?

The national unemployment rate is now under 4%, a level which is rarely reached even in the best of times. But there is considerable variation across states.

The latest BLS release of state unemployment data shows that some states are at their historic lows, with one state standing out: Nebraska currently has the lowest unemployment rate a state has ever recorded at 1.7% in December 2021 (the data go back to 1976). Utah is also just below 2% in December — at 1.9% it’s the 2nd lowest in history (after Nebraska, of course).

Of course, all is not well everywhere. California and Nevada have the highest unemployment rates, at around 6.5%. This is well above their pre-pandemic levels of about 4%, and also well above what you would expect during normal times, other than during and immediately following at recession.

So is the labor market back in Nebraska, Utah, and other similar states? Not so fast.

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Pledging for effective altruism

Joy BuchananLeave a comment

I attended an administrative board meeting for a large local nonprofit organization this week. The report from the finance committee included a comment that our “giving” is up while “pledging” is trending down. People are giving money when they feel like it or when they have extra money.*

However, the finance committee wishes that more people would pledge their giving at the beginning of the year, so that the organization can plan ahead. They are trying to make an operating budget and want to make promises to the staff. It’s nerve-wracking to plunge into the year with no idea how the whims of thousands of people will affect the final revenue a year from now.

I don’t have any sources for this, outside of the representative’s report this week. They said that nonprofits all over the country are seeing a decline in pledges and an increase in (impulse) giving.

I am looped into niche online chatter about Effective Altruism. “You should give money for malaria instead of re-painting a lobby in America.” Fair enough. Most Americans don’t subscribe, and I’m not trying to make a case for the malaria pills right now.

What about giving to the same causes you already give to, in a new way? Make a pledge. If you lose your job or cannot pay, then there is no consequence. It’s not a legal contract. It’s just an indication of your intentions that helps leaders plan.

Millennials just recently outnumbered Boomers as the nation’s largest living adult generation. Trends in anything adults do are likely to be “generational shifts” for the next few years. I suggest to my fellow Millennials that your money can be spent more effectively by the nonprofit sector if you commit proactively instead of reacting to crises. See if the groups you give to allow for pledging.

Lastly, I’d like to brag about my group for pivoting this January to provide for new Afghan refugees in Birmingham. Having extra money on hand from record 2021 revenue helped make that possible.

… and finally, pledging could be a good topic for economists to look at.

*New papers on giving after windfall income bumps are here (published) and here (working).

Has the Economic Theory Job Market Returned to Equilibrium?

James BaileyLeave a comment

When I was on the job market in 2014, everyone thought that it was terrible to be a theorist. The profession has moved dramatically toward empirical work, so all the hiring was there. But lots of new PhDs were still doing theory, so the supply of theorists exceeded demand and they had a hard time finding jobs.

My school is hiring in Game Theory / Industrial Organization this year, and based on my previous experience I expected a flood of applications from theorists- but it never arrived. We got substantially fewer applications than when we hired in Applied Micro a couple years ago, and even in the applications we did get, lots were out-of-field or doing empirical IO. I think we will still be able to hire well, I’m certainly happy with the three candidates we are flying out, but there is a lot less depth than I expected. It seems that PhD students have got the message that the demand for theorists is low, and so not many choose theory anymore.

I haven’t been able to find great data to either confirm or rebut my impressions; the closest is the data from this 2019 report with a low response rate. There is no “theory” field in it but I think the closest proxies are “Math & Quantitative Methods” and “Microeconomics”, which collectively made up 20% of demand but only 14% of supply.

I’d be interested to hear what everyone else has seen recently- is doing economic theory once again a sane career move?

What we pay for the thing that some workers do that most people do not

Joy Buchanan2 Comments

In middle school, I broke my leg in a soccer tournament game. I needed to go to the hospital and get extra support for the next month. Some of the workers who helped me were not highly paid, but my value of their services was very high.

Why bring this up? There has been conversation about the label “low skill” work this week. Brian Albrecht summarized the debate. Brian tangentially mentioned the “diamond-water paradox,” but I think it is worth talking more about that. Economists have a few models and stories that change the way you think about the world.

When I teach Labor Economics, we read an excerpt from Average is Over and then I explain the diamond-water paradox in class. I ask the students why diamonds cost more than water, even though water is more important. The answer can help us understand how wages get set for human workers (I say “human” because by that time we are deep in the topic of robot workers as substitutes).

I tell my students that some of the low-pay work performed by humans is extremely important. I’m still looking for the perfect illustration here. The one I use goes something like this, which is related to my broken leg anecdote… imagine if you tripped on train tracks and couldn’t get yourself out of the way of an oncoming train. How much would you pay a human to haul you to safety? Almost any human could perform the task. That service would be as valuable as a glass of water if you are about to die from thirst, which is to say that your value for it is almost infinite.

The key to understanding the market price of cleaners as opposed to the high wages for repairing Facebook code is marginal thinking. There is a lot of water, so the next glass is going to be cheap.

In writing Average is Over, Tyler Cowen is trying to understand why wages for the-less-highly-paid-skills have stagnated recently, while wages for the-highly-paid-skills are increasing along with GDP. He brings computers and technology into the conversation, as one culprit for recent changes. There is a limited supply of humans who can show up to a tech job and contribute reliably. “Programmers” are not the only highly paid class of workers, but it’s easy to see that the supply of people who are proficient with Python is limited.

I see two opposing forces in the tech world, which I have been following for a few years. First, we have boot camps, code clubs and all kinds of resources to both equip and encourage people to go into tech. I volunteer to advise a club that provides resources for female college students taking a technical route. On the other hand, lots of people who do get a foot into the door of a tech company become upset and quit.

Here is a quitter (a twitter quitter?):

https://twitter.com/krotondo/status/1427434279408062467

You can read about this specific situation at this woman’s website. It seems like she made the right choice for herself. She is actually on a mission to change tech for women. I’ll reproduce the text here, in case someone can’t see the tweet: “first day at my new job! i am now a ceramicist because it lets me have no commute, make my own hours, decide the value of my work, and bring people joy. make no mistake, i wanted to code, but tech fulfilled none of that. so i hand off the baton. please fix tech while i make pots!”

The point is that she is one of many people who have dropped out of the tech workforce. Those employees who remain are pushed up toward the “diamond market price” and away from the “water market price”. Here is a blog about “burnout” survey data from 2018.

Populations in rich countries are not growing and labor force participation is down. Could the market wage for lower-skill-requirement jobs in the US rise dramatically in the next century, or at least keep pace with the wage increases that were recently enjoyed by those-with-the-capabilities-that-are-highly-valued? Marginal utility still apply, but prices will change if supply shifts.

See my old blog about Andrew Weaver who is researching skills that are in demand.