You’ve probably heard the phrase that US states are often “laboratories of democracy.” The phrase comes from a Supreme Court case. It’s well known enough that it has a short Wikipedia page. The basic idea is simple: states can try out different policies. If it works, other states can copy it. If it doesn’t work, it only hurts that state.
The 2020-21 pandemic has provided a number of possibilities for the “states as laboratories” concept. Here’s three big ones I can think of (please add more in the comments!):
Do states that end unemployment benefits sooner have quicker labor market recoveries? Or are these not the main drag on the labor market?
Do states that offer incentives for vaccination have higher vaccination rates? And what sort of incentives work best?
These are all good questions, but let me throw some cold water on this whole concept: we might not be able to learn anything from these “experiments”! The primary reason: the treatments aren’t randomly assigned. States choose to implement them.
Let’s think through the potential problems with each of these three areas:
A key discovery of nineteenth century science was that diseases can be transmitted via pathogens in human waste. In regions of high population density, this can lead to epidemics if adequate sanitation facilities are not available. A milestone in epidemiology was the 1854 cholera outbreak in London. A physician named John Snow analyzed the incidence of the disease and concluded that the Broad Street public water pump was the source of infection. Even though he had no explanation in terms of germ theory at that time, he persuaded the authorities to remove the handle of that pump. This stopped the cholera epidemic. The well from which this pump drew had been dug a few feet away from an infected cesspool. A replica of this pump still stands in London:
I could include as an alternative title: “Labor Theory of Value for Me, Compensating Differentials for Thee”, but alternative titles are kind of pretentious.
The market for art is, for all but the most famous artists, incredibly thin, where transactions for a given artist are sufficiently far between that there is rarely a “market price” to simply point to when setting a bid or ask price. If you’ve ever purchased art, you will be aware of the urge to feel like artist asking prices are always more expensive than they should be. This could be because we, as failed aesthetic creatures, undervalue art. It could be because non-artists rarely understand the cost of inputs (paints, brushes, metals, wood, plaster, etc…). It could be because we underestimate the total hours of labor that go into a piece of art, so even if we assess the market value of the artist’s time appropriately, we fail to appreciate how many hours a piece represents. Those are all reasonable guesses, but I tend to think that those phenomena are at work in how we estimate the value of just about anything.
Instead, what I think is at work here is that we tend to impute “compensating differentials” into the bid prices we internally calculate. “Compensating differentials” is the term economists use when referencing the additional (reduced) pay individuals receive in the market for unpleasant (fun) jobs.
I suspect that when considering original pieces of art for non-famous artists we have a tendency to factor a negative compensating differential in our bid that boils down to “Lucky, you, you get to be an artist. Part of your payment is my letting you be an artist.” Many of us have a tendency to do this when grousing about the wages of professional athletes, tavern musicians, or the lady selling birdhouses at a craft market. If a job looks like it is fun, or at least more fun than your job, then the product of their labor should be relatively cheap. And it’s not just artists, either. When complaining about the price of landscapers (they get to work in the fresh air!) or furniture makers (it’s a hobby!) or really anyone that grumpy old person inside of you wants to scream at “They’re lucky they get paid at all!”
We rarely think this way when considering our own wages. When it’s our time and energy, we are quick to eschew not only any concept of market pricing, but also any compensating differentials for the fun or high status aspects of our work. To make matters more hilariously self-serving, while we are uninterested in acknowledging the value of the non-pecuniary delights that we benefit from in our own work, we actively go hunting for any negative aspect that might be unappreciated in our wages. Sure, my job is safe, reliably paid, and absent social stigma, but what about my emotional labor*? Why am I not being paid more given the FOMO, shame, and generalized anxiety I feel every day in this cowardly office job when I should have been an artist? Why am I not being paid more to compensate for doing something I would prefer my hobbies to?
When we value our own work, our labor has intrinsic value that should be compensated. If the market fails to meet our own valuation (and it almost always does), it is a market failure. It should therefore be with some shame that when we wade into a labor pool as buyers of products absent a well-defined market price, we abandon any since of intrinsic value, quickly transforming into villainous music producers agitating to pay the naïve and aspirational in everything but money, because they should be grateful that you’re enabling their art. They’re lucky you’re paying them anything at all.
Fortunately for all of us, most of our individual grousing is lost in the wash of countless transactions setting prices for the products of all our labor. If the majority of goods we consumed were subject to the ridiculously self-serving logic behind what we (at least try) to pay artists, we’d all be in the same unemployment line, making plans to apply for the job the person behind you got fired from. Sure, they hated it, but to you it sounds pretty sweet– definitely nicer than your old crappy job.
* I know a more correct use of “emotional labor” is in reference to the comfort and therapy service industries, but this is a term that is regularly abused and stretched into meaning anything the writer wants, which is the appropriate caricature for my purposes here.
** P.S. If you’re curious about what to offer an artist who’s work doesn’t yet have a established market, I work with something akin to this simple rule:
1) Guess what you think a fair price is, X
2) Double it. This is your offerprice, 2X.
3) Ask the artist for the price, P. If X<P<2.5X ,shake hands and enjoy your art. If P > 2.5X, tell them that is a completely reasonable price but it’s out of your price range. Art is a luxury good, we can’t always afford everything we want.
4) If P < X, just give them X. They are likely young and are undervaluing their own work. Don’t be a cheap bastard.
I blogged earlier about a new textbook that I am adopting for an analytics course. The first few chapters are primarily an introduction to using the R coding language within RStudio. One of the resources I’m posting for students this week is screen capture videos of me manipulating data in RStudio.
Sometimes I make mistakes, shockingly. I’m a professional, and yet sometimes I still make careless typos in R. I found out that my version of R was outdated, right when I was in the middle of recording a lecture.
I could have deleted the footage of my mistakes. I could have re-recorded a clean smooth video in which I run command after command without saying “ok… I got an error”.
Sarah Ruden is an scholar of ancient literature who has translated classic works such as The Aeneid. Her new book is an English translation of the 4 first books of the Bible’s New Testament, the Gospels.
If you buy a standard Bible, there is usually only a 2-page preface to a 500+ page book. Ruden’s introduction and glossary takes up closer to 50 of the first pages. I would pay just to read the introduction. Ruden describes what it was like, as a professional translator of classics, to approach the Gospels. A reader who is already familiar with the Bible will learn as much from this introduction as from the translation itself. It’s rare to hear the Gospels discussed simply as books instead of as weapons wielded by all sides of the culture wars. I found it interesting to learn about how the Gospels, stylistically, compare to other ancient texts.
Ruben’s enthusiasm for listening to the voices of ancient writers is contagious. She makes it all sound so interesting that anyone, regardless of their previous stance on god (the lowercase g is her idea of what the ancients would write), will want to keep reading. Speaking as someone who has already read the New Testament, I have never been more excited to read the Gospels as I was after finishing Ruden’s introduction. Ruden promises to deliver to modern readers the voices of the ancient writers, with as much accuracy as possible.
Texas is one of the most regulated states in the country.
This is one of the surprises that emerged from the State RegData project, which quantifies the number of regulatory restrictions in force in each state. It turns out that a state’s population size, rather than political ideology or any thing else, is the best predictor of its regulations.
This is what I found, with my coauthors James Broughel and Patrick McLaughlin, when we set out to test whether a previous paper (Mulligan and Shliefer 2005) that showed a regulation-population link held up when we used the better data that is now available. We found that across states, a doubling of population size is associated with a 22 to 33 percent increase in regulation.
It’s almost summer. About half the US population has at least one dose of a COVID vaccine. For many Americans that haven’t had their employment impacted by the pandemic, their bank accounts are flush with cash and they are ready to do one thing with that cash: travel. See family and friends. See something other than the inside of your own home.
And for many Americans traveling this summer, they will fly. The airlines, no doubt, will appreciate your business. At this time last year, the world had so radically shifted that Zoom’s market cap was bigger than the 7 largest airlines in the world. In May 2020, air passenger traffic in the US was less than 10% of traffic in 2019. Today, we’ve recovered a lot, but we are still only back to about two-thirds of normal levels. And since airplanes are just a marginal cost with wings, flying all their planes at close to full capacity is crucial for airlines to return to profitability. They really need you to fly the friendly skies this summer.
One of the reasons that so many Americans are able to fly in today is because flying is, compared to historical prices, very cheap.
How cheap is flying to today compared to the past? Let’s look at some historical price data for flights.
The ransomware attack on the Colonial fuel pipeline that supplies the U.S. East Coast is such a rich story it is hard to know what to discuss in a brief blog post. As anyone who gets news feeds knows, the software that took out Colonial is supplied by a (probably Russia-based) criminal enterprise called DarkSide. DarkSide’s business model is called “Ransomware-as-a-Service” (RaaS). They partner with affiliates who use the software to perform the actual attacks. The affiliates get paid something like 10-25% of the ransom money.
An article by Sophos Labs, a company that fights ransomware, gives details on how these attacks work. Typically, an attacker gets initial access to a company’s system by tricking some employee into revealing passwords or other critical information (“phishing”). The attacker then spends two or three months roaming around inside the systems, building up credentialling to get more and more access. They steal (“exfiltrate”) sensitive information like accounting, personnel, and R&D. This table shows some of the “tools” used in these attacks:
When it’s showtime, they encrypt the information on the company computers, which typically makes operations grind to a halt. They then demand ransom (in the form of Bitcoin). If the ransom is paid, they will send the victim a decryption program to allow them to decrypt their files. If their demands are not met, they will publicly release the stolen, sensitive information. So this extortion is a double threat, to both operations and information exposure.
Here is an example of (I believe) an actual ransom demand note:
(Sorry, the text is hard to read). DarkSide is professional in their own way. They assure their victims that they really will get their data restored if the ransom is paid: “…We value our reputation. If we do not do our work and liabilities, no one will pay us. This is not in our interests. All our decryption software is perfectly tested and will decrypt your data. We will also provide support in case of problems.” Think of that, a help desk for your ransomware.
DarkSide likes to align themselves with Robin Hood, kind of: “Take from the rich, and give to the poor keep it”. They claim to be apolitical, just in it for the money, and to not target nonprofits. They even offer to donate money to charities, so we can all feel good about this. (Charities typically refuse to accept stolen money, though).
In most cases, it is far cheaper for the victim to pay the ransom than to tough it out and try to scramble to restart their systems cold and to risk exposure of sensitive information. DarkSide, after all, has its reputation to protect, so they scale the ransom demands accordingly, but make sure the victims hurt if they do not pay.
Forbes cybersecurity expert Davey Winder explains that with the Colonial hack, however, Darkside (and the affiliate who did the actual hacking) stirred up something of a hornet’s nest.
If you cut off gasoline supplies to the Washington, D.C. area, you better think through the consequences. I am sure that top national security officials were grilled by top top government officials as to “How could this happen?”, and, “You aren’t going to let them get away with this, are you?”. After some days of public waffling on the issue, it seems Colonial did pay DarkSide some $5 million. But..apparently DarkSide did not get to keep the loot, though it is hard to know what is real and what is public theater.
According to Winder,
DarkSide was effectively forced into retreat by alleged law enforcement or unspecified government disruption of the publicity blog and the ransom negotiation dark web site.
The main Russian-language criminal forum that acted as a recruitment post for potential affiliates banned all ransomware groups from advertising. The cryptocurrency wallets used by DarkSide were, it has also been said, found and funds exfiltrated.
You can follow some of the links in the paragraph above for more of the details here. (Most people may not realize the Bitcoin is not as private as imagined. Every transaction is out in public view; although technically the identities of transactors is cloaked behind anonymous user’s ID numbers, sophisticated data analysis programs can be used to trace transactions pretty reliably).
DarkSide has announced some “nicer” guideline for its further extortions. It seems like the good guys at least partially won that battle, but the war goes on. Winder further comments:
The business model will change, just as it has always evolved, but it won’t go away. Why would it when there are so many big corporate targets out there continuing to make the mistakes that let these attackers onto their networks?
If I were king, this is what I might do: Sentence the CEO of any company which is successfully hacked to six months in prison. Overnight, you would see corporate priorities magically realigned, necessary resources allocated, internal security protocols enforced, and so on. I predict the incidence of such hacking would drop by an order of magnitude within three months of such an “executive order”.
American sports leagues are different from their international counterparts for a variety of reasons, but perhaps the simplest and most important is that they exist as singular entities, otherwise natural cartels whose network effects are explicitly codified as clubs whose barriers to entry ensure a steady stream of profits so long as their sport remains sufficiently popular. Negotiating against player unions of varying levels of organization, they routinely negotiate collective bargaining agreements that neatly establish the division of proceeds between capital and labor.
A common mistake made is questioning the choices made by teams as if they were independent firms competing against each other in a ruthless marketplace for economic survival like Sony, McDonalds, or Manchester United, when in fact their survival is largely pre-ordained by the cartel, their choices salient only to the prestige and short-term windfall profits of annual trophies.
Tom Wilson plays for the Washington Capitals, which happens to be my favorite team in the National Hockey League. He is extremely good at hockey. He scores goals, makes good choices in transition, plays commendable defense, and is extremely adept at physically hurting other players. It is for this last bit that he has received the most attention. His team gains a notable advantage when he is on the ice simply because the other team must allocate a disproportionate amount of their attention to where Wilson is and their own relative vulnerability. The other teams in the league, and many of their players, are increasingly of the publicly held opinion that this advantage is not gained in a manner within the rules of the game. Tom Wilson is a cheating bully who threatens the safety of every other player beyond an acceptable level who simply must be stopped immediately.
To be clear, they do not believe this.
The other teams and their players believe he is dangerous (he is). But they clearly do not think he is too dangerous. Tom Wilson is occasionally suspended or fined, his salary donated to charity. The players’ union (the NHLPA) has worked tirelessly to minimize the punishments he incurs for physically injuring the other members of the same union. The other teams within the league cartel has never once imposed a punishment on his employing team. Based on the relatively modest punishments doled out and the minimal interest the players union has in ensuring their members’ physical safety, it would be foolish to conclude that the NHL views Tom Wilson as a net negative or even symptomatic of a net negative institution within hockey.
The NHL sells hockey. Their cartel members aren’t competing with each other, they are competing as a league against other sources of entertainment, principally other sports. They are competing for attention. Three John Wick movies have left me convinced that violence is an excellent means of eliciting attention. The NHL isn’t punishing Tom Wilson or the Washington Capitals because every time he punches a player prone on the ice in the back of their neck, the possibility that a player may be paralyzed or killed receives twenty-five fold the attention that Connor MacDavid receives for being the most skilled player I’ve ever seen.
To be clear, the NHL doesn’t sell hockey or violence, they sell a bundle of goods that includes athletic skill, regional identity, cultural identity, and violence. Compared to the other major US sports, it’s not unreasonable to consider the violence within hockey to be the bundle component that overlaps the least with other competing products and, as such, contributes the most, at the margin, to their share of the market. Violence may literally be the most profitably thing the NHL sells.
Every time Tom Wilson or another players seriously injures a player, possibly ending a career or reducing the quality of the rest of their life, people will speculate on what sort of event will cause the NHL to change the nature of their sport, but I don’t know why there is any uncertainty.
They’ll change when revenues decline because fans prefer less violence in their sports entertainment consumption or when young athletes with brief peak earning windows express willingness to receive smaller wages in exchange for safer working conditions. Such things have been happening steadily for the last 25 years with all of the major sports, but hockey has put itself in a uniquely bad position to continue transitioning away from selling violence, one what may demand that teams earn smaller profits, and players smaller wages, in the short run in order to enjoy greater success in the long run. I guess it could happen naturally through artful negotiation, earned trust, and thoughtful planning.
You ever know a joke that you know only a small fraction of people will understand, but you tell it anyway?
Alabama is not a top international tourist destination, and I’m not going to argue that it should be. However, if you are ever in Birmingham, AL…
The restaurant scene if amazing. There are really excellent James Beard award winning restaurants. You can find authentic Southern cooking and BBQ. This is one of the most affordable places to make a foodie weekend. BhamNow curates some good articles on local restaurant news.
Our most famous place is the Birmingham Civil Rights Institute. The struggle for civil rights put Birmingham on the map (I don’t mean in a good way).
Something to understand about the city is that it’s small and easy to get around by car. You can do lots of things in one day. You could quickly go from the Civil Rights Institute over to the Art Museum (free admission).
If you like history or big machines then you will appreciate being able to walk through Sloss Furnaces. This is what remains of a real 20th century blast furnace. Unlike the Art Museum, I would say come see it now before it gets demolished or closed.
Also related to the defunct iron and steel industry is the park around the giant Vulcan statue. The park offers a great view of the city. There is a small museum about digging iron ore out of Red Mountain and how people could die in the steel mills. At this point I will mention, for our international audience, that Birmingham was named after the city in England. We aspired to be the “Birmingham of America”.
If you want to hike Red Mountain, a giant network of hiking trails is just a 15-minute drive from the city. The dirt is red. You can tell this was a rich iron seam. Two other good hiking spots are Ruffner Mountain and Moss Rock Preserve. None of the mountains around here are dramatic, but these are nice places to go when the weather is good. You might want to hike so you can justify eating more.
For kids, I recommend Railroad Park. It’s a nice city park where freight trains go by regularly. Birmingham was not built around a river – it was built around a railroad. Close by is the McWane Science Center that has lots of hands-on exhibits for kids. I would not recommend McWane for adults, although their IMAX movie offerings could be of interest and the Pizitz Food Hall across the street is fun.
If you live in the American South and have not yet visited Birmingham for a weekend, then you are missing out! Of course there are many more things I could say about the city, but just what I listed above will keep you busy.
