Ploughs vs. sticks

There is small strain of the economics literature that deals with religion and culture and tries to take these things at face value. While much of economics (and economists) take culture out of the picture when creating models, there are whole conferences devoted to how culture influences our decision-making.

Much of the reason that culture is often excluded from economic models is that it is, or at least seems, endogenous. Culture determines our decisions which determines our culture, so we have a chicken-and-egg argument. You could say, then, that the point of the field of Economic History—which aims to bring economic reasoning to historical events and data–is to tease out which came first, the culture or the decision, the tradition or the allocation.

A recent paper by Alberto Alesina, Paola Giuliano and Nathan Nunn tackles this chicken-and-egg question by comparing places where the plough was readily adopted and places where more labor (digging with sticks, weeding by hand) than capital prevailed as the dominant agricultural tool. They argue that fertility, or how many children one decides to have, was influenced on a societal level by the adoption of the plough. The reasoning is rather straightforward. The plough, as a labor-saving device, reduced the need for women and children in the fields, thus creating a less egalitarian culture–where women stayed at home instead of working outside the home–and one where women had less children.

They note the fertility result as surprising; their original hypothesis had been that a plough would increase fertility as it increased the time mothers would have to bear children. I don’t find it particularly surprising, knowing it takes a lot of hands to run a farm, but I do think it’s an interesting attempt to identify the source of cultural norms.

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The evolution of marriage

Mark Oppenheimer has a semi-profile of Dan Savage, semi-critique of modern marriage in the NYTimes Magazine this weekend. Savages suggests that as we begin to expand the definition of marriage to include gay couples (as NY did last week and RI sort of did yesterday), we might also want to decrease our expectations around fidelity.

Interesting quote:

“In the feminist revolution, rather than extending to women ‘the same latitude and license and pressure-release valve that men had always enjoyed,’ we extended to men the confines women had always endured. ‘And it’s been a disaster for marriage.’ ”

Savage argues that before feminist movements sought marriage equality, men ran around with concubines and mistresses and it was mostly accepted. While this is a rather sweeping generalization, it is interesting to think about what would have happened if marriage had become more egalitarian in the sense that women were allowed to pall around, as opposed to men now being held to higher standards.

My interest in the subject is less on the benefits of nonmonogamy, and more on how a culture of “working through” cheating would affect divorce rates and children.

A number of papers in economics have recently tried to tease out the effect of divorce on children, but the trend, as Savage suggests, is towards advocating stability over monogamy. It’s not that he’s saying nonmonogamy for all, necessarily, just “the cultural expectation should be if there’s infidelity, the marriage is more important than fidelity.” When most of these papers talk about stability, they often refer to the mother having more than one partner or the father moving in and out of the picture multiple times, but the divorce brings a lot of trauma regardless of whether the parents ever remarry. The negative affects appear to be amplified when you add in new boyfriends and step-parents.

My research, however, shows that some of the negative effects may be in place whether or not the couple ever divorces. A lot of the economic reasoning behind the findings suggests that people are forward-looking and adjust their behavior (particularly investment in children) in anticipation of divorce. So, if we create a culture whereby sticking it out is the norm, we essentially raise the costs of divorce by increasing public admonition or shunning by peers or some other means. We could think about retreating from no-fault and unilateral divorce laws, but let’s say we don’t want to return to those dark ages, either.

We raise the costs of divorce and if we succeed, we keep more marriages intact. But if negative effects are in place before, or even in the absence of, divorce, and can be attributed to something other than anticipation of divorce, then we don’t really solve the problem of hurting kids. We maintain stability, in some sense, as a parent or parent’s lover isn’t walking in and out constantly, but kids aren’t stupid. Especially older children will likely notice something is amiss, behavior will change and we’ll still likely see negative effects. Will they be measureable? Will they be significant enough to observe? Perhaps not on average, but I don’t think asking parents to stay together, unhappy, solves the problem.

The other large problem with raising the costs of divorce is differentiating between socially acceptable causes for divorce and not socially acceptable causes. If we say that one-night stands should be overlooked, what about a weekend fling? Or a two-week fling? Or a month-long tete-a-tete? Where do we draw the line? Savage realizes the Schwarzeneggers, for instance, were doomed, but what’s in the middle? And the intersection of cheating and intimate partner violence is much larger than I think Savage realizes. Infidelity is often a tool of abuse and while a culture that overlooks a fling might seem a big leap from a culture that overlooks a slap or controlling money or a broken arm, I think we’re far enough down that road already.

To his credit, Savage advocates each couple figuring the process out for themselves. Monogamy, he says, still works for some couples even if it doesn’t work for all. Keeping it together for the kids may seem like a noble goal, but it’s not a one-size-fits-all goal, and the associated negative externalities could be large.

Potlatch, Denver style

A friend put out a call on facebook today for a food swapping event in Denver. Given that food sales are highly regulated by the government (try getting a license to sell food, not fun), it’s perhaps unsurprising that people want to unload their extra canned peppers or limoncello. But from the point of view of economics, barter, or trade without money, is a rather odd process.

Though not entirely the same, the food swapping event reminded me of Potlatch, an old Native American tradition of sharing the harvest in Northwest. The tribes who did really well, catching a lot of salmon, etc, would invite all the tribes who didn’t do as well to partake in the bounty. The point was to make sure that all food was consumed, but also avoid war and provide a sort of intertemporal trade. If you did well this year, you share in the hopes that if you don’t do well next year, someone will share with you. You could also see it as a form of insurance. Economic Historians tend to view Potlatch this way, but it also highlights the fact that economics doesn’t have a good framework for incorporating the value of community or cultural norms. (Case in point, a recent working paper by economists has the word culture in quotation marks, indicating its social significance, but lack of academic standing.)

But what do you call this modern-day Potlatch? In Denver, a city of about a million people, the odds of running into one of your bartering partners again are small, but perhaps on some level it’s insurance. Otherwise, we’re forging bonds with people we might never meet again, we get homemade goodies, feel good about the earth, piss on the idea of a monied society?

Barter in general gets a lot of press in Boulder, at least the word-of-mouth kind of press. I know lots of folks who try to barter for goods and services before offering money. You like someone’s t-shirt, so you offer to trade your own for it, you need yoga therapy, so you offer to trade a photography session for it. While many people swear by it, I also know just as many people (and often the same people who tout it) who come away feeling cheated or like they’re not getting their time’s worth. It’s a noble goal, I guess, to diminish the importance of money in society and close the gap between consumer and provider. In some cases, I think it works really well, particularly when you’re trading for two similar goods. A t-shirt for a t-shirt, an hour of massage for an hour of web editing, a jar of canned tomatoes for a jar of apple butter. But it becomes a lot trickier when we try to barter for things that are very different, eggs and chickens or photography and armchairs or programming for cookies.This is where people start to get cross, where valuations diverge and a perception of someone not holding up their end of the bargain chips away at the relationship.

Perhaps, there’s value in just thinking that we can do without money, or without the money printed by our big, bad government. That represents much of the justification behind local currencies as well. Or maybe, we just want to feel like things we do are valuable, that a connection from a barter–you care about what I made enough to give me something you made–is that much stronger than a connection made by a dollar, even if that relationship is temporary. Maybe there’s a psychological high from that interaction onto which we put a high value.

Or maybe I just live in a place totally detached from reality.

Types of help

Two papers have surfaced recently on the effectiveness of aid. I use the term ‘aid’ loosely as one type of aid is intended to help the economy and another is intended to lift the fortunes of women running microenterprises. The stimulus paper tells us that the one-time stimulus payments of 2008 boosted spending by more than the reduction in withholding 2009. The microenterprise paper tells us that in-kind grants did more to increase profits for small businesses than cash grants. Both papers, however, tell essentially the same story, that how people are given money affects the way that they use it, and thus how useful it will be in terms of attaining certain outcomes.

A dollar is not just a dollar, particularly when there is a specific policy goal in mind.

Same-sex marriage makes me better off

I laughed out loud a bit reading this article on how same-sex marriage is actually good for straight women. With only the title to guide me, all I could come up with in terms of expectations was that there would be some long rant about how if gay men can marry, maybe that will reduce the stigma associated with being gay which means that fewer gay men will marry straight women, or that women who had foregone marriage in solidarity would now be able to get married. Let’s say I was pleasantly surprised when the article rather took on equality within marriages as opposed to making some tenuous, crazy link (what was I thinking?!).

Key (first time I laughed out loud) quote:

As same-sex couples marry, things get better for us, too. Remember the scary (and since-discredited) stories about how a woman is more likely to be killed by a terrorist than to find a husband after she turns 40? Or the one about how suitors are fleeing from Maureen Dowd because they’re afraid of her Pulitzer Prize? The poll showing evangelical women in patriarchal marriages are happier than Sarah Jessica Parker? Well, same-sex marriage shows that people can make long-term, loving, sexual bonds with each other even where neither is naturally inclined to tell the other what to do.

It’s a cheeky way of putting it, of course, and I’m railing inside against the insinuation that women harp on their partners, but I like how the author takes a historical perspective on women’s rights within marriage. She starts with how marriage stripped a woman of civic personhood and describes various efforts to maintain women in that lesser role until it evolved to where we are today.

As an economist, of course, I think she skipped one of the most salient examples of justifying inequality in marriage. The man who is credited with essentially founding family economics, Gary Becker, argued, and rather convincingly, that gains from marriage, in an economic sense, at least, came from specialization. Men earned higher salaries in the market than women did, so men should work for pay in the market and women should stay at home. It’s a lesson in comparative advantage taken from trade theory (one of my least favorite lessons in teaching principles). If you’re relatively better at something than your partner, you should each specialize in one thing and then trade to maximize gains. This makes your feasible consumption higher than if you tried to do both kinds of work yourself. Interestingly, it doesn’t really matter if you’re technically better at both things, you can still gain by agreeing to specialize and trade. Becker’s work doesn’t rule out that women might actually be better at both market work and home work, but since men did (and still do) earn higher wages than women, they’re going to be relatively better at bringing home the bacon than doing laundry and cleaning.

The scary part is that at face value, it almost seems reasonable. It’s only in reading the work carefully that it smacks of machismo. Becker’s ideas echo (although his work precedes some of it) several other scholars (of sorts) and others mentioned in the article whose work was used to justify keeping women from working and at home, cooking, cleaning and raising the kids. A lot of scholarly work has, unwittingly or not, served the interests of those desiring to maintain unequal marriages.

So, will same-sex marriage make us all more equal? It’s an interesting hypothesis, and one that might even be testable, but I’m not sure we have all the information yet. Legalizing same-sex marriage doesn’t mean same-sex marriage ‘works’ in the sense the author is proposing and we certainly don’t have the same kind of happiness data on same-sex marriage, yet. It’s also problematic that our most recent census won’t count any of these people as married, but the next one will (all these problems again of how we define family). However, there is hope. The process of state-by-state legalization of same-sex marriage means that we have something of a natural experiment. Though not randomly assigned (although you might argue that Iowa’s same-sex marriage law was more random–put in place by the judiciary–than New York’s–put in place by the legislature), the different timing of these laws means that we can measure how other things change within the states. I imagine, as the data become fuller, that lots of papers will come out about how same-sex marriage influences gay ‘brain drain’, women’s wages, etc. It’s exciting to think about.

How Markets Work

A conversation with a coauthor on the financial knowledge of Americans recently incited some deep thinking about market efficiency, one of the holy grails of economics. While discussing our results on investors in English stocks from 1690-1720 or so, she brought up a recent paper in which the authors gave a random sample of (contemporary) Americans a financial literacy test. The test consisted of only three simple questions on interest returns, inflation and volatility of stocks versus mutual funds. The vast majority of respondents failed the test, unable to answer any of the multiple choice questions correctly. It is disturbing in and of itself, but also begs the question of how models incorporate investors’ knowledge. The information may be out there, but if investors aren’t using it, or aware of it, how can we conclude that individuals are savvy enough to choose the right investments? To create optimal portfolios for their individual situations? To save adequately for retirement? To choose an affordable mortgage? All this without even adding in the risk of shocks like a financial crisis or a recession or a bubble.

It’s a good reminder, my coauthor noted, that markets may do what they are supposed to, but people in markets rarely do. Without the information we assume they have, without the forward-thinking savvy we assume they have, our models are profoundly lacking.

Changing a marriage paradigm

A few days ago, I mentioned the problem in the DRC of using rape as a weapon of war. Unfortunately, that weapon’s popularity only seems to be increasing, as my twitter feed overflows with news bites of 60 women raped in the DRC, 11 women raped in Sudan, etc.

In Syria, rape is being used as a weapon of war not only to wear down and instill fear in the masses, but also in the name of shame. In Syria, like in many Middle Eastern countries, women who are raped are thought to bring extreme shame upon their families, and are often murdered in ‘honor killings’ to restore the honor of the family.

A small group of men in Syria has publicly declared their intention to marry some of these rape victims in what I’m sure they see as resounding self-sacrifice to the cause of the revolution and a new Syria. I think it is laudable that men are leading the way to change a paradigm in Syria, but it’s also troubling that no one seems to have asked the women about their preferences.

Turning around the war on girls

A new book about the infamous “missing women” by Mara Hvistendahl is gathering quite a storm, at least if you look at it from the perspective the Wall St. Journal (subscription required, my apologies if you can’t read the article), twitter, and my inbox. Unfortunately, I cannot comment on the book itself yet, as I haven’t read it (don’t worry, I will!), but there is a lot of fodder provided by the book review’s author, Jonathan V. Last, and the literature in economics.

The question of missing girls as a result of sex-selection is not a new topic, by any means. Amartya Sen, a revered development economist and Nobel Prize winner, sounded the alarm more than 20 years ago now with an essay in the New York Times claiming that 100 million women were missing in the world, mostly in India and China, countries known to show strong son preference. He showed this by pointing out that while in the US and Europe, we see women outnumbering men, this does not hold true in much of the world. In fact, it’s quite the opposite, and the ratios are becoming worse. He doesn’t get much into the evolutionary science that guides the numbers, but he reminds us that boys outnumber girls at birth, but girls babies are more likely to survive, leaving countries like the US (where son preference is present, but perhaps not enough to encourage sex-selective abortion or infanticide) with a few extra women per one hundred men. Despite the fact that girls seem to be a bit hardier than boys, many developing countries–particularly in Asia and particularly those with a history of government-backed population reduction initiatives–are experiencing an outsize number of male births and an increasingly imbalanced sex ratio in older cohorts. Instead of a few extra men for every one hundred women, we start to see 110, 115 or more men for every one hundred women.

Emily Oster made waves and a career when she (erroneously, it seems) claimed that Hepatitis B, not sex-selective abortion, infanticide, femicide, or the systematic discrimination against girl children, was the root cause for much of the case of the missing women. (Note to budding PhD economists, write your job market paper on a really controversial topic). Women who had contracted Hepatitis B, the story went, were more likely to give birth to boys, thus skewing the ratio of boys to girls. Her arguments have been shown to be rife with problems in a number of papers and the question of missing girls remains a hot topic in economics. Last year, a colleague attended a conference in which her session was only for papers on “Sex-selective abortion in India.” For reference, most sessions at large conferences bring together diverse papers for sessions on “Topics in Education” or “Monetary Policy”. Rarely do we see four papers on the same subject.

Without reading Mara’s book, what’s interesting right now is that there should be natural economic consequences, right? A skewed sex imbalance means that women are suddenly a scarce resource and we should see that scarcity leads to higher prices in the market. Unfortunately, this does not always translate into desirable outcomes when we look at the big picture, and it does not necessarily mean that women are suddenly more valued (culturally), just more valuable (financially, opportunity-cost wise). In the marriage market, we might expect to see dowry payments dropping, or even reversed, where men are paying a bride price instead. We should see increased wage rates for work that women tend to do. The lack of women available to do “women’s work”, should push other individuals–either children, men or older women–into that work. Older women working is probably not sustainable. While putting more children to work is certainly not a desirable development goal, it might end up being the eventual outcome for communities with strong social norms against men doing women’s work. To some extent, I’ve heard anecdotal evidence of all these scenarios playing out in various communities.

An extreme sex imbalance also creates a serious problem with regard to who can get married and may even lead to increased violence. In the case that women now have more bargaining power in a relationship because they can earn more money, they are perhaps more likely to delay marriage. In the case where women don’t have more bargaining power and cultural norms dictate marrying them off anyway, we might see younger women getting married to older men (perhaps men who have gained enough standing to ‘earn’ one of the scarce wives), which reduces the pool of marriageable women for men of their age. Regardless of which scenario (or an alternate one) plays out, the lack of women entering the marriage market has the ability to create, in all these different ways, a group of young, directionless men who are more apt to engage in criminal, or merely unsavory, activities or take out their aggression on women.

One email I received concerning the book suggested that we should try to change cultural attitudes about the value of women in these societies. Perhaps, she suggested, we could provide cash payments to women who give birth to children or other incentives. It’s an interesting idea, but one that could easily backfire.

Before we can talk about incentivizing the birth of female children, we have to figure out whether the sex imbalance is hurting or helping women, whether it is hurting or helping societies and what exactly would happen to those girl babies if they were born. As for hurting or helping, I think the general consensus is that it’s hurting, but I don’t know that we know that much about the outcomes associated with sex imbalances, yet, and it may be different in different places. Sex imbalances are still, I believe, much more skewed in younger populations than older ones, so we’re still not seeing the full effect on the marriage and labor markets of the lack of brides and female workers. Even if they are in place, there’s certainly not a consensus on what they are.

If we’re going to pay people to have girls, that raises all sorts of policy issues. On the one hand, though perhaps unlikely, it does run the risk of tipping the imbalance in the other direction. It may be that we have to wait for cultural norms to play themselves out to see a natural increase in the value of girl babies as dowry payments decline. Alternatively , there is evidence that social norms marketing sorts of programs have indeed altered some social norms and could have an effect on the value of girls, which may be more useful than paying parents.

The saddest part of just paying parents to have the girl children is that we might see more infanticide and general neglect of girls. Much of sex-selective abortion has been shown to be a substitute for infanticide and neglect of girl babies. Though certainly not relevant in every case, this also not a situation in which we can restrict abortion in order to repopulate the world with women. Cultural norms and attitudes are what economists would call ‘sticky’ and how best to change them, if we even should change them (there’s another benevolent dictator argument to be had here), or let them run their course, is a complicated question. It’s certainly one for which we don’t have all the answers.

Sex for money is about more than the sex or the money

With Canada looking to decriminalize prostitution, and Sweden touting the success of its increased penalties for pimping and trafficking (the link’s a bit old now), it only makes sense, as economists, to ask why people would engage in transactional sex at all.

Psychologists and anthropologists, I’m sure, have plenty of their own answers. Economists, surely, could come up with a theory of prostitution (if they haven’t, I should get on that). Without too much effort, most people could name the most likely characteristics of women in the sex trade–low self-esteem, from families with a history of abuse, low educational attainment, etc. But there is also reason to ask why women would stay in the sex trade, which is actually a very different question than why do women enter the sex trade. At least one recent paper has explored the relationships between purveyors and consumers of transactional sex. They found, interestingly, that complex relationships form between the two parties, even to the point of providing extra income in times when sex workers couldn’t work or were experiencing a negative “shock”–i.e. illness, death of a family member or an STD outbreak.

The authors of the paper, which comes out of Busia, Kenya, a community rife with development economists testing their theories, found that transfers, or gifts of money, from regular customers increase by 67-71% on days around when a sex worker reported illness and 124% on days around death of friend or relative. In some sense, these regular customers are providing a form of insurance against negative shocks, or events that prevent them from working. The customers are still not providing full insurance for these shocks, meaning though they’re essentially gifting money to their favorite sex worker in order to make the burden of not working or of the extra expense less burdensome, they’re not making up a whole day’s pay, or covering the entire cost of a funeral.

But the question of whether sex workers are fully insured by their relationships with regular customers is less important than whether they are covering themselves better than they would be covered in other professions. Full insurance in poor communities and developing countries is unlikely to come by anyway, so it makes more sense to compare different insurance mechanisms. Here, economics actually does a pretty good job. We are good at comparing two situations in which only one small part of the equation is different (or rather, when we can assume that only one important part is different–if the other different bits are unimportant to the story, we don’t care that they are different, we assume that they do not affect our outcomes). So long as the average amount of the gift is more than the average amount of the transfer she would get had she not been in the sex trade, there is an incentive to enter or remain in the sex trade (the authors here don’t distinguish much between entering and remaining, though I think that’s an important topic for another day). The authors also show this difference to be quite large. Even if a transfer covers only 19% of the cost of a funeral–the average amount reported by the sex workers–that’s far more than zero. On the margin, at least, the incentive seems significant enough to induce women to enter the sex trade as the only arrangement with full insurance, or perhaps just more insurance, is likely marriage.