Economists and manifestos

I’ve had a few conversations over the past few weeks about how extremely long the academic publishing cycle is, particularly for economists. Combined with the lack of cohesive response to the financial crisis and 2010’s crisis of conscience at the AEA meetings regarding disclosure of funding sources, economists aren’t looking so good at the moment.

To address at least one of these concerns, a group of economists has put together a Manifesto for Economic Sense, which essentially calls on the fiscal and monetary policy-making bodies of the United States and Europe to kick things into high gear in order to end  “massive suffering” being inflicted. A rather impressive list of economists has signed it and though I wouldn’t call it beautiful prose (we’re economists after all), I’m a fan.

In short: The economy is suffering from lack of demand–companies aren’t borrowing or hiring, people don’t have jobs and thus aren’t buying things, which becomes more and more problematic (one person’s spending is another person’s income). Monetary policy is exhausted and fiscal policy is politically motivated and crappy, so let’s agree to focus on facts and push for credible, reasonable economic policy that will promote job growth, confidence and resilience. Sounds good to me.

h/t @JustinWolfers (Again, I don’t do everything he tells me to do!)

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Thank goodness for lawyer friends

I posed a question earlier today about the Medicaid (not Medicare as I wrote earlier) portion of the Supreme Court decision on the Affordable Care Act that came down this morning. My question, essentially, was how is the decision to compel states to cover certain groups under Medicaid by threatening complete loss of funding different than when the drinking age was raised in the US to 21 by threatening to take away state highway funding? In addition, by holding that part of the law unconstitutional, how is the Supreme Court not denying Congress the ability to change legislation? It seems to me very confusing that the Supreme Court could come along and say you actually cannot change the law. I mean, it’s Congress, right? They make laws, they change laws, they get rid of laws?

I either didn’t express my question very well or no one wanted to answer me, but luckily, I talked to my go-to-lawyer friend tonight who actually read the brief and explained the decision to me. I still don’t totally buy that the reasoning in the brief, but at least I got an explanation.

In short (and correct me if I’m totally mashing your words on this), is that federal highway funding constituted a very small portion of a state’s overall finances. So denying federal highway funding would have constituted a very small burden for any given state. In contrast, because Medicaid represents a much larger proportion of a state’s budget, 20% (or so?) and because the vast majority of that is federally funded, requiring the state to cover more people (and increase its own outlay) amounts to coercion because a state wouldn’t be able to cover those people without federal funds.

The answer to the second part of my question, which I think makes even less sense, is that Congress still has the ability to make laws and distribute funds, but this law represented a radical departure from the formerly existing law, not merely an amendment, which places an undue burden on the states who don’t want to expand access.

Thank goodness for lawyer friends.

Clearly, not a lawyer

I have to admit that I don’t entirely understand the Supreme Court ruling today. Lots of people are concentrating on Roberts joining the “liberals”, which is semantically frustrating, but that’s not what I’m confused about.

This part about the expansion of Medicare is what I find perplexing, and perhaps someone can explain. If Congress is allowed to expand Medicare, but not allowed to coerce states into accepting the expansion by threatening to take away their funds, doesn’t that mean that Congress doesn’t have the power to amend legislation to meet the current need? What is it about Medicare that says states were guaranteed access to a certain flavor of coverage in perpetuity? Surely I’m missing something. Didn’t we do essentially the same thing with raising the drinking age?

It’s been a crazy week for the Supreme Court, for sure. I like the Maddow Blog’s breakdown. Short, simple, sweet. Though there’s tons more about it all over the place, including fellow economists Don Taylor of Duke (written here, on TV earlier link) and Harold Pollack of U Chicago at TNR.

Update: The Incidental Economist starts to get at my question, but not really. As does SCOTUSblog. Maybe I’m asking the wrong thing…

The goddess is coming

Girls, we have been told, or at least some would like us to believe, are the key to development. There’s been a lot of talk about productivity differentials being resolved by decreasing discrimination in the US, but much of the world has yet to catch up in this manner. Girls, getting them to school, keeping them from getting pregnant and dying in childbirth early on, giving them skills to earn wages and get jobs. All these things, clearly, are important, but there’s also not much hard evidence regarding just how important.

This is pretty much all I think about these days (that and, what the heck am I going to do India in two weeks). At a ladies’ tea on Saturday (yes, I do teas; you expect me to write about economics or go cycling all the time?), a friend said she was sure the Goddess was coming. This is a very Boulder thing to say, but all the same, I had to agree. My head, of course goes to the much more terrestrial outcomes of things like: women are becoming more educated than their male peers, earning more money, taking on higher leadership roles, but it’s the same sentiment, I think.

Just musing for the moment, but here’s a link to the World Bank’s 2012 report on Gender Equality. It’s long, and is perhaps not as optimistic as my friend, but  points out some pretty exciting things, like “gender gaps in primary education have closed in almost all countries,” and “over half a billion women have joined the world’s labor force over the last 30 years.” The website is also good and much more navigable if you don’t feel like reading the whole report.

Celebrating Title IX

I’m starting a paper on adolescent girls as a consultancy project this week with a dear friend and coauthor. I love working with her and I’m so excited to see where we can take this project. We’re evaluating a range of programs and research aimed at improving outcomes for girls. We’ve cast a wide net early on and have a list a mile long of subjects and projects, from how water infrastructure reduces risk of rape for refugees to how allocation of assets to mothers improves girls’ education levels. I’m excited for this project because it takes a rather comprehensive approach. As an economist, often I’m asked to identify effects from singular events (by how much longer did you go to school if your mother spent an extra year in school?) as opposed to larger, integrative solutions. Econometric rigor and cost-benefit analysis requires the former, but it’s also nice to take a step back and look at the bigger picture.

Title IX is one of those bigger picture pieces of legislation that has far-reaching, integrative effects, and today it turns 40. I never knew a world where there wasn’t a swim team or lacrosse team for me to play on, and I’m pretty grateful for that. Sometimes, it seems small in the face of problems like FGM, but I’m glad we’re far past that. Happy anniversary, Title IX!

Betsey Stevenson has two great papers on Title IX and girls’ participation in sports in the US. Here, the 2010 ReStat paper and here, the 2007 Contemporary Economic Policy Paper. The 2010 paper is also a really nice example of using natural experiments for causal identification.

If you have even more time, check out the rolling links on the National Women’s Law Center blog, where bloggers from all over are celebrating Title IX with stories of coming into their own through sports, advancement opportunities that arose from the legislation, memoirs of struggling for fair treatment, hopes for the future and more.

h/t @SandraFluke

An education story, not an age story

Like much of changing and exciting news in demography, the New York Times’ story about births to women under 30 appears to be largely about education. Kathryn Edin, who wrote a book I’ve lauded several times in this space and use extensively in my own research, responds in an article Harvard Magazine.

“What the article essentially got wrong is that this is aneducation story, not an age story,” explains Edin, professor of public policy and management at Harvard Kennedy School and a prominent scholar of the American family. She points out that 94 percent of births to college-educated women today occur within marriage (a rate virtually unchanged from a generation ago), whereas the real change has taken place at the bottom of the socioeconomic ladder. In 1960 it didn’t matter whether you were rich or poor, college-educated or a high-school dropout—almost all American women waited until they were married to have kids. Now 57 percent of women with high-school degrees or less education are unmarried when they bear their first child.

The statistic put forth by the Times severely undercounts the issue when we don’t take into account education. College-educated women, it seems, are waiting for marriage to have kids, and non-college-educated women are having kids before they’re married. Importantly, it’s still a large group of women that are choosing to have kids without being married, and as I argue in my dissertation, it’s a group that merits more attention. We don’t know much about them.

The Gender Wage Gap

Heidi Hartmann talks about the different ways we measure the gender wage gap today on the Institute for Women’s Policy Research Blog. It’s a bit dense, but really informative. Near the end, she makes a strong case for examining the determinants of the wage gap, rather than questioning whether it exists. In particular, she points out a subtle, but important point regarding what I like to dichotomize as outright versus institutionalized discrimination.

Several comprehensive literature reviews that have been published in peer reviewed scholarly journals conclude that about 25 to 40 percent of the wage gap remains unexplained. But most of these studies do not assess whether some of the differences observed between women and men that might help explain the gender wage gap, like college major, are themselves the result of discrimination or of limited choice sets faced by women and men. In a world where most social workers are women and most engineers are men, few women and men may consider training for occupations that are nontraditional for their gender.

Girls and young women go into fields that pay less. It’s also hard to go into a field dominated by men. It’s not that women can’t perform in these fields, but it’s not particularly easy. I’m in one, and without the help of many amazing mentors (male and female), and female role models, I wouldn’t be here. We owe it to girls to figure out why. Case in point. And here is some good, related reading. And here’s Feministing today on the pay gap in medicine.

h/t Mark Price

Betsey Stevenson and Justin Wolfers on why we study families

I’m often asked why my research is economics and not sociology. Justin Wolfers and Betsey Stevenson give one answer as part of a longer Q&A on their research:

Your other areas of research focus include marriage, divorce, and family. Why would these areas interest economists? Or business leaders?

Dr. Stevenson: Economics is about how people make decisions optimally, given that they’re facing constraints. That framework can be applied anywhere, not just to things that are about dollars and cents and the economy. Families and labor markets are intimately connected, and to understand one, it’s helpful to understand the other. That’s because decisions about labor force participation and about what kinds of jobs to take and what kind of hours to keep are made within the context of family lives. What happens in families affects the way people make those kinds of decisions. And what happens in labor markets affects the decisions people make about families. Economists are also interested in families because we have come to realize that there are many parallels between family and labor markets.

Dr. Wolfers: The first place that people notice the similarities between family and economics is in what some have called the marriage market, which looks a whole lot like the labor market. People search for partners the same way they search for jobs. When you find a spouse or a job that looks like a good fit, you take it. And you must make a decision about how much time to spend searching for the perfect spouse or the perfect job before accepting a job or a spouse.

Related Content:

  1. Anticipating Divorce
  2. For Valentine’s Day, on Love and Marriage and Economics

Weighing in on the soda ban

I’ve been only nominally present on the internet lately due to family stuff I won’t bore you with, but the last few days have seemed especially filled with vitriol towards Bloomberg’s soda ban.

I understand the detractors to be of a particular political bent, but I’ve been surprised by both the magnitude of the response and the apparent blinding nature of the issue. People I generally consider intelligent and levelheaded have, in my mind, totally missed the boat to have a larger conversation on policy.

Will Wilkinson, in the Economist, provides an account (invoking Jonathan Swift a bit) for his stance against paternalism, but sets up false dichotomies.

GIGANTIC sugared soft drinks are disgusting. Let’s just get that out of the way. Can we also agree that the high-calorie drinks rich people like to consume—red wine, artisanal beer, caramel frappuccinos, mango smoothies with wheatgrass and a protein boost—aren’t at all disgusting? At any rate, we yuppie pinot-drinkers know how to look after ourselves. In contrast, the wretched classless hordes, many of them being of dubious heritage, lack the refinement of taste necessary to make autonomy unobjectionable. Those who abuse their liberty, filling the sidewalks of our great cities with repulsive shuffling blimps, can’t expect to keep it, can they?

All those high-calorie drinks that rich people consume are consumed by rich people for a reason. Well, several, probably. They taste good (except wheatgrass, yuck), they confer some sort of status on the drinker (conspicuous consumption), and they’re expensive. Have you seen the price of Bordeaux lately? 2010 Chateau LaTour is $1500 a bottle. Why, you ask, despite there being a glut of many other wines on the market? It’s likely because Bordeaux is one of the few foreign wines that has been introduced to China. And the Chinese love their red wine. But we (the US government) don’t intervene and say we have to make sure that wine grapes are affordable and vintners stay in business, so let’s incentivize more wine grape growing in France or prevent the Chinese from demanding wine.

But I digress. These drinks are expensive because the market recognizes both their inherent qualities and conspicuous consumption qualities, identifies demand and supply, and provides at the equilibrium price. Every one of my principles students could show you a graph to that effect.

The difference is that we do intervene with corn, a primary ingredient in sugary sodas, which artificially holds down the price. Sugary sodas are not just cheap because of supply and demand; they’re cheap because government intervention, particularly subsidies for growing corn, keeps corn abundant and cheap.

Again, my principles students could all give you a list of reasons why those subsidies are in place: we care about food security and being able to provide our own food in case of a crisis; we want to preserve a rural way of life; we want to make sure farmland is used for farming and not housing developments. But also, subsidies become entrenched, often far beyond their usefulness. Farmers are used to the guaranteed income and don’t want to give them up. Companies who buy corn want corn cheap, so they lobby to keep the subsidies in place. Pop includes high fructose corn syrup as an ingredient, a cheap alternative to sugar. They want to keep the price of corn low so they keep their profit margins while keeping their product cheap.

Subsidies are hard to get rid of because they have the property of concentrated benefits/diffuse costs. A few people benefit a lot from subsidized corn (and indeed we all benefit a little from low prices on foodstuffs that have subsidized corn as an ingredient), and we all pay a little through our taxes to keep those prices low. Subsidies, in theory, should stay in place as long as the benefits to society outweigh the costs. And perhaps the soda ban shows that the costs (increased obesity as a result of soda consumption–though perhaps a tenuous link) are greater than the benefits to society as outlined above. Or Bloomberg’s just a paternalistic whack.

Is banning pop in larger than 16-oz bottles the right answer? Probably not. Can Bloomberg single-handedly change US farm policy? Absolutely not. So he does what is within his control. Is it paternalist? Yes, totally. But if we were really worried about paternalism, why didn’t I hear all of these people crowing about laws that seek to limit abortion rights and intimidate mothers and prevent access to birth control? Make a distressed rape victim listen to a lecture about her child’s beating heart, allow her doctor to withhold information from her, and make her wait three more days before having an abortion? Sure! But increase the cost of consuming something whose cost is artificially low and presents potentially harmful negative externalities? The nerve.

Related:

Claire Potter makes a similar argument in the Chronicle of Higher Education.

Jobs, poverty and teen child-bearing

Several weeks ago, I printed out an NBER working paper on teen childbearing by Melissa Schettini Kearney and Phillip B. Levine. I had every intention of reading it then, but it just wasn’t going to happen at the end of this totally crazy semester. Since then, a few things forced my hand. I finished the semester (yay for surviving my first year of professoring!), the paper has been accepted for publication in the Journal of Economic Perspectives, Matt Yglesias put together a nice little review of the article in Slate, and a friend emailed me rather incensed by Yglesias’ review. From a quick scan of the JEP version, it doesn’t appear too much different from the NBER version, but my comments refer to the NBER version.

Yglesias’ review presents Kearney and Levine’s research as novel and surprising, but I think that misses the point. While the authors do a good job of aggregating statistics from several data sources and findings from different papers, the primary contribution of this paper is not novel, but rather confirming what we already know: that teen pregnancy is higher in the US than other places and; that poverty likely causes teen pregnancy more than teen pregnancy causes poverty. Past studies, cited in the paper, have shown that teen pregnancy has little to no effect on outcomes when you control for poverty, or within-family characteristics, and in some cases, may even result in better outcomes than if the teen hadn’t become pregnant. This is a significant theme in Edin and Kefalas’ ethnographic study, Promises I Can Keep, which I discussed here, and other research in fields such as sociology and demography.

Ultimately, the economics community thought it was an important paper as it went to a very prominent journal, but I really just see it as a good synthesis of what we know.

In related, and I think more exciting research, the link between poverty and teen child-bearing may be even tighter than suggested Kearney and Levine’s paper, though not in the way that the Kearney and Levine paper posit. A working paper by three Duke Sanford professors, Elizabeth Oltmans Ananat, Christina Gibson-Davis, and Anna Gassman-Pines examines the link between job losses and teen pregnancy.

I’m so predictable. I love this paper because even the anticipation of poverty, or joblessness, more specifically, predicts teen pregnancy rates. The authors show that when mass layoffs are announced in a North Carolina (before the layoffs actually occur), that county sees a subsequent corresponding reduction of births to teenagers in that county, but only for Black teenagers. The mechanism appear through both reduced pregnancy rates and reduced birth rates, which suggests that teens are both practicing safer sex and having more abortions when job prospects in their counties suddenly become dimmer.

There were a few places I thought the paper could improve, and the first one is my primary concern. Even though the authors find a statistically significant effect, I’m curious about the mechanism for how this affects teenagers. What evidence is there to show that teenagers would be affected by these job losses? Why aren’t they just in school and ignoring them? Initial information about their education level, school attendance, when they enter the workforce, etc, would be useful, to sell the story. I think the age and education of teens would be a big factor here. Wouldn’t you see a bigger effect for teens closer to graduation? Or a smaller effect in counties where teens are more likely to go to college (say wealthy Orange county, where Chapel Hill is located)?

The ability of inhabitants to migrate and commute is also problematic and suggests a (you guessed it!) spatial auto-correlation issue that I imagine is present. The authors claim they are underestimating the effects of job losses by ignoring migration and spillovers, but I wonder whether there are spillover effects that could be estimated through job loss in surrounding counties, rather than just say it’s a lower bound. Also, if spatial auto-correlation is present, that’s going to affect the standard errors, not just bias the estimates.
A minor, but I think incredibly important interesting, result is that the job losses also resulted in fewer black mothers reporting a father’s name on the birth certificate. The magnitude of the effect is approximately half of the effect of that on the pregnancy rate itself, which is pretty large. I think this result actually goes a long way towards answering my first question: Why do we think teenagers would be affected by this? If the story is that teens are being more careful about sex or having more abortions when their job prospects are low, is it really their own unemployment they fear, or also their partner’s? Teenage parents are less likely to be married than their older counterparts, so who is supporting them through their pregnancy? Paying for prenatal visits? Do teens feel they’re going to be working and raising their children? My own work shows that black mothers at any age are more likely to receive a promise of financial support and Edin & Kefalas suggest that the promise is key to the marginal have a baby (or at least stop trying not to have one) for mothers of low socio-economic status. I think this relationship could be teased out a little more.
All in all, it’s a good read, and presents an interesting counterpoint to the Levine and Kearney paper. L&K say poverty causes teen pregnancy, but the Duke paper says that teens are responsive to future job prospects, and respond by delaying (or at least trying to avoid) childbearing.
At first glance, the papers might seem incongruous, but it’s really a stock versus flows kind of issue. Other things equal, teenagers in poverty are more likely to become pregnant early due to a host of factors, but they still plan and have an idea about how they will care for the child. When that plan is disrupted, it appears it can affect some teens’ decision to bear children, on the margin.