Monthly Archives: February 2008

No, I don’t think so. But David Leonhardt at the NYT has a thoughtful column describing the sense of disappointment that has set in. He finishes on the right note, though, I think:

Already, academic studies have shown that Intrade’s record is better than that of any single poll or any single pundit. Come Tuesday — when voters in Wisconsin and Hawaii go to the polls — I’ll be back at Intrade to try to figure out what’s going on. If you have any better ideas of where to look, let me know.

Felix Salmon has more.

Tyler Cowen never ceases to amaze:

Popular economics books reveal their true colors most clearly when they talk about sex. In Freakonomics sex is not holy but rather sex and reproduction lead to the birth of criminals…For Harford sex is a slightly naughty pleasure, and a pleasure to be mocked, but at least it is a real pleasure; this American reviewer again cannot help seeing the British tinge of his work.

There is more, much more. Do I agree? I’m not saying.

I was astonished when the enormous Old Theatre at the LSE was packed out at least fifteen minutes before I gave my talk on 6 Feb. Lots of people were turned away, including some for whom I’d reserved seats. I’m a bit embarassed about that, although obviously pleased that the event was popular.
But… there will be another chance to hear me talk about “The Logic of Life” at the Cass Business School on 12 March. Details are here – along with details of other talks in The Lake District, Glasgow, Oxford, Cambridge, Bristol, Singapore, Wellington and several Australian cities too. Looks like we’ll arrange a couple more London events later in the spring, too.

We just moved our blog platform and none of my posts seem to be going live at the moment, but in a spirit of hope, let me link to the latest from Bryan Caplan on whether racial discrimination means that African-Americans have little incentive to become educated (randomised trial says no incentive, Bryan’s regressions say otherwise) and Kevin Grier, who is discussing my chapter on cities.

In the New Statesman, Mario Pisani, a former Nico Colchester fellow at the FT, asks how economics got to be so cool all of a sudden:

One of the earliest examples of what many call “pop economics” was Steven E Landsburg’s book The Armchair Economist. He recalls how “in 1991, when I first approached publishers, my covering letter began thus: ‘When lawyers or executives meet for lunch, they more often speculate about economics than about evolutionary biology. Yet bookstore shelves are well stocked with books on evolution and almost empty of economics.’ Nobody could say the same thing today. Dozens of good writers have stepped in to explain the economic way of thinking to a wider audience.”

The essay is pegged on the publication of The Logic of Life, but ranges widely. Even readers who are fed up of my linking to reviews of The Logic of Life should enjoy this one.

Yesterday I reported on Bryan Caplan’s thoughtful criticisms of chapter six of The Logic of Life. One of the things that worried me most in that chapter is the possibility that employers don’t value qualifications or experience of minority groups, which in turn means that the victims rationally invest less in education and work experience, which in turn feeds statistical discrimination.
Bryan is quite right to point out that there is nothing inevitable about this. It might well be that a victim of discrimination had a higher return to education, not a lower one. I argue that this is true for women and that is a likely explanation of the fact that women tend to be better educated than men. Bryan thinks the same story is true for African-Americans:

I tested these claims using one of the world’s best labor data sets, the NLSY. The results directly contradict Tim’s self-fulfilling prophesy story. Blacks actually get a substantially larger return to education than non-blacks! The same goes for experience, though the result is not statistically significant. The real lesson of the data is that if you are young, gifted, and black, you should get a ton of education, because it has an exceptionally large pay-off.

Bryan is very smart so I take that claim seriously. But it’s informal work, not published in a journal. Bryan says he will tell us more, and I’ll look forward to that. I set it against the results of a large (n=5000) randomised audit trial from Marianne Bertrand and Sendhil Mullainathan, who find that qualifications and experience on an apparently-black CV do not result in a higher chance of being invited to interview. Qualifications and experience on an apparently-white CV, of course, substantially improve those chances.
Let’s recognise the limitations of that trial. It is just one experiment, and focuses on employers only in Boston and Chicago. It’s also true that a distinctively black name may indicate something about social class as well as race. And I admit that an interview call-back is not the same thing as a job. But I still find a randomised trial awfully persuasive even when set against peer-reviewed econometrics, let alone Bryan’s informal analysis.

One commenter (at Bryan’s blog, EconLog), writes:

Bryan, this is a good post, but you need to cite your sources…If this isn’t published, Hartford [Harford, please - TH] can’t be faulted.

I wouldn’t put it quite that way. Bryan can be unpublished but right. I can still be wrong even if I “can’t be faulted”. For now, I think Bryan’s critique is powerful but unproven.

For CV-audit junkies, this paper by Judith Rich and Peter Riach is well worth a read: shows discrimination in favour of men in a traditionally-male occupation (engineering) and in favour of women in both traditionally-female and mixed occupations. All the firms surveyed are based in England.

Update: Bryan links to further research supporting his calculations.

I recently wrote here about why governments pick losers: I was only aware of some older thoughts on the subject by Mancur Olson and Gary Becker, but Richard Baldwin writes to alert me to some more recent work he’s done with Frédéric Robert-Nicoud. Those interested in the technical analysis or the extensive bibliography should check it out (NBER version is here, final version was published in the JEEA, 2007).
Others will simply appreciate this line: it is not that government policy picks losers, it is that losers pick government policy.

Bryan Caplan has an excellent post criticising the discussion of racial discrimination in "The Logic of Life". I’m going to read it a few more times but I think I’m sticking to my guns for the most part. But it is well worth reading:

Tim could object that I’ve overlooked a subtler way for statistical discrimination to harm a group. After all, he heavily emphasizes a few experiments showing that statistical discrimination could be a "self-fulfilling prophesy." For example, he describes a resume experiment where otherwise identical fake resumes with "black names" were less likely to get a response. "High-quality applicants were more likely to be invited for an interview, but only if they were white. Employers didn’t seem to notice whether black applicants had extra skills or experience." If that is how employers treat black applicants, what’s the point of trying? As Tim asks, "Why bother to get a degree or work experience if you are young, gifted, and black?"
But is it really true that the market fails to reward blacks for getting more education? Is it even true that the market rewards them less? I tested these claims using one of the world’s best labor data sets, the NLSY.  The results directly contradict Tim’s self-fulfilling prophesy story.  Blacks actually get a substantially larger return to education than non-blacks! The same goes for experience, though the result is not statistically significant. The real lesson of the data is that if you are young, gifted, and black, you should get a ton of education, because it has an exceptionally large pay-off.
Why would this be so?  I’m not sure, but one simple story is that counter-stereotypical behavior stands out. When my sons were young, my wife was working a lot, so I often took my kids places on my own. Funny thing: Time and again, strangers came up and said, "Wow, you’re such a great dad!" But there were moms of young kids doing the same thing in plain sight, and the strangers rarely praised them.  Why not?  Because a dad taking care of two babies is counter-stereotypical, which grabs people’s attention.
Purely anecdotal, yes. But it is consistent with the small academic literature on counter-stereotypical behavior. If you clearly violate expectations, people not only notice; they often over-react.
The upshot is that stereotypes may actually be self-reversing rather than self-fulfilling. The marginal payoff of distinguishing yourself from the pack is high if people think poorly of the typical member of the pack.

I agree with the last paragraph, and discrimination against women seems to have this quality: educated women are paid something much closer to educated men, while uneducated women seem to be paid substantially less than uneducated men. Rational response: women should go to college. Actual response: women now outnumber men at college 4 to 3 in the US. (I think this discussion made the final edit and stayed in the book, but I’ll forgive Bryan because it was in chapter three anyway, not the chapter he’s currently discussing.)
I also suspect that one reason Bryan is complaining is that he expected a full chapter on statistical discrimination, a subject which he has studied quite closely, and read it in that light. My aims were broader (and therefore, yes, less focussed). What looks to an academic like "sugar coating" or digression looks to me (and I hope, most of my readers) like a wide-ranging treatment of a complex subject.

All that said, I’ll be re-reading Bryan’s post and thinking hard.

The economist Lena Edlund (whose own greatest hits include an economic “Theory of Prostitution”) finds that wherever the men are rich, the women are plentiful. Women outnumber men in the cities of almost every developed country, which is why the girls from “Sex and the City” were always grumbling that all the good men are taken. In Edlund’s home country, Sweden, the towns with the highest average male income are the towns with the largest proportion of women aged 25-34. Still think that money doesn’t buy love?

That’s me writing here.

The whole thing is worth a read, at the New Yorker:

Flawed as they are, though, the employment numbers represent a dramatic and valuable economic innovation. The idea that the government can and should give the public a reliable picture of the economy is a surprisingly recent one. It wasn’t until the Great Depression that the government began calculating a national employment rate, and it’s only in the postwar era that employment data have been systematically and rigorously collected. And if the results are imperfect, that’s because collecting up-to-date, accurate information about the U.S. economy, where millions of jobs are created and lost every year, is remarkably difficult. Imagine that you’re expected to track every job that has been created or lost this month. The new coffee shop that opened up in Baton Rouge, the guy who just got fired from your local auto-repair shop, and that kid who left his job to go to law school—you need to account for all of them. And you have to do this without much enforcement power or surveillance ability. Most respondents aren’t obliged to get back to you in a timely fashion—a major reason for the job-number revisions is that only two-thirds of surveyed businesses answer promptly—and there’s no monthly registry for new companies or for businesses that go under. Good luck.

Although one of the world’s sharpest  economics commentators, Surowiecki is a historian. Sometimes you can tell, and for the best of reasons.

The Undercover Economist: a guide

Publishing schedule: Excerpts from "The Undercover Economist" and "Dear Economist", Tim's weekly columns for the FT Magazine, are published on this blog on Saturday mornings.
More about Tim: Tim also writes editorials for the FT, presents Radio 4's More or Less and is the author of "The Undercover Economist" and "The Logic of Life".
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