I am your intrepid reporter, deep in the trenches of real mommy blogs and neighborhood Facebook groups. This year, a local entrepreneur is offering to take one job out of the hands of working parents: making a personalized valentine for every kid in your child’s school classroom.
Would anyone actually consider paying for this? Yup.
Continue readingThere are reality TV shows dedicated to the spectacle of Americans drowning in their own material goods. What a year to be alive. Household income is rising around the world, as will clutter issues.
For now, I’m abstracting away from irrational hoarders. Lots of people have items that they would happily sell at a small price if only a buyer would come to their home. I see people posting items for sale all the time online, with the condition that the buyer come to them. (Most of these items are “used”, but some are brand new in the box.)
Why is there not a truck circling every American neighborhood offering to haul away unwanted stuff in exchange for a small payment?
Continue readingIn the immortal words of Haddaway, “What is love?” Despite being in bed all of Tuesday, and not being up-to-the-task of teaching Wednesday, I mustered enough energy to talk with the Economics Club at FSU about the “Economics of Romance”.
In that talk, I started with some good economics jokes — some of which can be found here. Skipped some really bad economics pick-up lines, and waxed about the dangers of thinking at the margin in a world that thinks about levels. For example, the next time your spouse asks whether the presentation you’re writing is more important than them …. well, don’t try to explain marginal thinking to them.
Continue readingDo you know how old you are?
I’m 33. Specifically, I’m 33 years, 29 days old. I don’t know the time of day that I was born, but my mom probably remembers within a couple of hours. My dad did not keep track of my age. Growing up, it was normal for him to take me to a sports registration event and need to ask me for plenty of my details in order to complete the paperwork.
Do you know the age of your children? Is it normal for parents to lose track? Or is it just the dads? …Or just my dad? I have no idea what is typical.
But I do have some decent evidence that, had my dad lived in 1850, he would not have been such an anomaly. Consider exhibit A: A histogram of US ages in 1850. The population was only about 23 million at the time and we have the age for about 19 million of those people. So the graph is relatively representative (IPUMS census data).
That’s the question I asked my Western Economic History class.
Continue readingIn a previous post, I contrasted the income and property taxes, but I left out the other important tax: the retail sales tax. So let’s rectify that omission.
The retail sales tax is like the “Little Engine that Could,” delivering a steady stream of revenue to governments, while mostly staying out of the passionate debates surrounding the income and sales taxes. About 23% of state and local tax revenue comes from general sales taxes in the US, roughly equal to income taxes, and if you include selective sales taxes it’s slightly larger than the property tax share.
But there’s a problem with sales tax. The sales tax “base,” basically the extent of economic activity that the base covers, has been shrinking. A lot. As Jared Walczak has recently written, in just the past 20 years the “breadth” of the sales tax (how much of the potential base it covers) has fallen from about 50% to 30%.
As Walczak also notes, there are seven or so broadly agreed on principles of sales taxes, but I would say there are two primary ones (the first two on his list):
But US states violate these two principles in various ways, leading to (oddly enough) a tax base that is simultaneously too narrow and too wide. Why is this?
Continue readingWe noted earlier the hubbub over a hive of little investors on Reddit outfoxing some big Wall Street firms who had made massive short bets on the stock of GameStop. Some of the narrative around this event has painted short selling as a secret, evil practice only available for the big guys. But none of that is true.
Continue readingI’ve been a homeowner not quite long enough to watch the entire run of Parker Lewis Can’t Lose in one sitting, but I have already arrived at the incontrovertible conclusion that being a landlord is foolish. Renting is a blissful paradise that I am wistfully nostalgic for, a glorious time when I had only one job: feasibly above-average economist. Now I’m also the worst plumber, woodworker, mason, electrician, and landscaper I’ve ever met. To be clear, none of that is true. Rather, I am a poor home inspector and over-qualified errand boy who moonlights as the manager of a hastily assembled team of contractors to whom I write a litany of checks.
I know the rent is too d*mn high, but the interesting question is why? Thinking about high rise apartments, rowhouses, or detached homes, its seems pretty clear that there are significant returns to specialization and scale. Whether its 212 apartments or 25 detached homes, a team of salaried handymen, inspectors, and property managers offers considerable efficiency gains, a reality borne out by the inexorable rise of HOAs and their continuing growing reach into their constituents lives. But as anyone who’s ever attended an HOA meeting can attest, the limits to contracting and the value of our time provides the opportunity for an industrious individual or firm to bundle collective ownership and services into a single entity, selling the turnkey solution that is the modern rental residence, at considerable potential savings to the tenant in a competitive market.
So why are we so mad at our landlords? I see a couple possible answers:
(1) likely has some behavioral truth to it, but isn’t a very satisfying explanation*, while (2) has likely more merit in the short run or in areas where landlords have solved their collective action problem sufficiently to stymie growth of the housing supply at every turn (<cough> San Francisco <cough>).
But perhaps (3) is underappreciated. Everyone who’s ever lived in a major city, especially when they were young, has a story about how they were screwed over by their landlord. At the same time, landlords (particularly smaller, independent ones) live in terror of tenants arriving at a cost-benefit conclusion that paying their rent is a suboptimal decision. Plenty of states and cities have enacted tenant bills of rights, creating considerable variation across states, often making it incredibly difficult and costly to evict someone. Regardless of state laws, however, I am comfortable saying without any evidence or additional research that landlords and tenants continue to have a strained relationship. Tenants think landlords are getting rich off their backs without any labor, only the property their wealthy parents no doubt handed them on a silver platter, property they themselves acquired by exploiting their employees while running a puppy mill. Landlords, meanwhile, find out real quick they’re not actually making that much profit trying to keep a home intact as their hippie tenants burn sofas and flush paper towels while the bathtubs been flooding the 2nd floor for a month.
The interesting question, to my mind, isn’t whether landlords are exploiting tenants or vice versa, but rather why have property tenant laws evolved to such an inefficient equilibrium, where there doesn’t seem to be any satisfied parties?** If no one feels protected by a contract, then it’s likely not a very good one.
* The behavioral answer in (1) shouldn’t be dismissed too quickly, to be fair. Given that size of rent as a fraction of most household budgets combined with profits to be had churning tenants in supply-restricted cities, its possible that all parties are constantly trying to scam each other, leading to the observed acrimony.
**Yes, I know people have become quite wealthy as landlords, but my read on that market outcome is not the profitability of property management but rather of property speculation, with equal parts winners and losers. Rental management is principally in service of subsidizing said speculation and lower property tax rates.
I asked my friend Carrie what she does about the first-world problem of too many children’s toys in the house (especially right after Christmas). Her reply was genius and even includes some tips from psychology at the end. This method is economist-approved:
For [older elementary kids], they are really good about going through toys in their room with me. I sell at consignment sales twice a year, so I will pay them a small amount for each toy I take from their room to sell (they do not get money for the family toys in the playroom). I pay them whether or not the toy actually sells. I do not pay them what the full profit would be from each toy, but they get something for their unplayed-with toys. This is very motivating for them and helps them truly evaluate whether they want a toy or not. With [older girl]’s unwanted toys, I might pay her but keep them for [younger girl] if I think that she would enjoy it one day.
Continue readingI am grateful to Yang Zhou for inviting me to talk about a working paper (with Gavin Roberts) on Friday. Yang told me that this audience is not familiar with lab experiments, so I’m going to take a few minutes out of my time to set the stage for my research.
There is a new book out, Causal Inference by Scott Cunningham, that is the talk of #EconTwitter (Cunningham, 2021). The book is 500 pages of dense prose and code. Here is a review saying that Cunningham left out many key things that a practitioner would need to know. Causal inference from naturally occurring data is hard!
Lab experiments bring something important to the research community. Lab experiments give the researcher a lot of control, which is why they are particularly useful for causal inference (Samek, 2019).
Continue readingIn this brief post, I want to commend a few teaching resources that have been helpful over the past few months of teaching.
For teaching students the nuts and bolts of causal inference, the new Mastering Metrics videos with Josh Angrist on Marginal Revolution University are terrific. The causal animations from Nick Huntington-Klein (and other resources) are also very helpful. This app on linear regression from Luke M. Froeb and Keyuan Jiang is a helpful way to help students gain econometric intuition. They have a companion paper to the app on SSRN.
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