Sat, 14 April 2018
The assiduous Vincent Geloso returns to the podcast to discuss his work with Rosolino Candela on lightships and their importance in economics. The abstract of their paper reads as follows:
What role does government play in the provision of public goods? Economists have used the lighthouse as an empirical example to illustrate the extent to which the private provision of public goods is possible. This inquiry, however, has neglected the private provision of lightships. We investigate the private operation of the world’s first modern lightship, established in 1731 on the banks of the Thames estuary going in and out of London. First, we show that the Nore lightship was able to operate profitably and without government enforcement in the collection of payment for lighting services. Second, we show how private efforts to build lightships were crowded out by Trinity House, the public authority responsible for the maintaining and establishing lighthouses in England and Wales. By including lightships into the broader lighthouse market, we argue that the provision of lighting services exemplifies not a market failure, but a government failure.
Economists have been using lighthouses as examples of pure public goods since at least John Stuart Mill. This modern debate on whether lighthouses really deserve their status as the archetypical example goes back to Coase (1974), who pointed out that many lighthouses in Great Britain had been privately funded through harbour fees. According to the theory of pure public goods, free riding should have destroyed this market, but it didn't. This has sparked a spirited debate about just how private those "private" lighthouses were, and whether the level of government intervention in the lighthouse market was necessary to solve the free rider problem.
Candela and Geloso's work on lightships shows that a pure private solution to the lighthouse problem actually existed historically. They detail the launching of the first lightship by the entrepreneurs David Avery and Robert Hamblin at the mouth of the Thames River in 1731, and the ways they were able to finance this apparently "public" good.
Fri, 6 April 2018
My guest for this episode of Economics Detective Radio is Bart Wilson of Chapman University. He is the author of many experimental economics studies. Our conversation today focuses on one particular study entitled Language and cooperation in hominin scavenging. The abstract reads as follows:
Bickerton (2009, 2014) hypothesizes that language emerged as the solution to a scavenging problem faced by proto-humans. We design a virtual world to explore how people use words to persuade others to work together for a common end. By gradually reducing the vocabularies that the participants can use, we trace the process of solving the hominin scavenging problem. Our experiment changes the way we think about social dilemmas. Instead of asking how does a group overcome the self-interest of its constituents, the question becomes, how do constituents persuade one another to work together for a common end that yields a common benefit?
You can view a video demonstration of the experimental software here. The animation is quite cute!
Derek Bickerton is the linguist whose theories Bart referenced in this episode.
Sat, 31 March 2018
My guests for this episode are Alex Nowrasteh and Andrew Forrester of the Cato Institute. Our topic is a working paper they recently published titled How Mass Immigration Affects Countries with Weak Economic Institutions: A Natural Experiment in Jordan. The abstract reads as follows:
Saddam Hussein’s unexpected 1990 invasion of Kuwait forced 300, 000 Kuwaitis of Palestinian descent to flee into Jordan. By 1991, this large exogenous population shock increased Jordan’s population by about 10 percent. Jordanian law allowed these refugees to work, live, and vote in Jordan immediately upon entry. The refugees did not bring social capital that eroded Jordan’s institutions. On the contrary, we find that Jordan’s economic institutions substantially improved in the decade after the refugees arrived. Our empirical methodology employs difference-in-differences and the synthetic control method, both of which indicate that the significant improvement in Jordanian economic institutions would not have happened to the same extent without the influx of refugees. Our case study indicates that the refugee surge was the main mechanism by which Jordan’s economic institutions improved over this time.
Does mass immigration destroy institutions? 1990s Israel as a natural experiment by Benjamin Powell, J.R. Clark and Alex Nowrasteh
Jared Rubin's interview about political power and economic growth is complementary with this one. Rubin's theory is that the rising political influence of the bourgeoisie partially caused the economic growth in Northwestern Europe in the early modern period. In Jordan in 1990, the Palestinian minority was particularly urban and bourgeois, so the massive influx of Palestinians increased the political power of the bourgeoisie, thus creating political pressure for increasing economic freedom.
Fri, 23 March 2018
Phil Magness returns to the podcast to discuss the public choice economics of universities. We discuss the internal politics of universities, their rising reliance on adjunct scholars to teach courses, the increasing numbers of administrators staffing universities, and the trends in faculty employment across disciplines.
Fri, 16 March 2018
Today's guest is Jeremy Horpedahl of the University of Central Arkansas. Jeremy's work builds on a famous theory from Bruce Yandle's 1983 article " Bootleggers and Baptists-The Education of a Regulatory Economist." The article explored the idea that laws are often passed or defended by coalitions of economic interests (bootleggers) and moral crusaders (Baptists). Though these two groups may be quite different, as in the canonical example, policies are unlikely to succeed without support from both groups.
Jeremy's work focuses on a particular example of bootleggers and Baptists in the modern world; specifically in Arkansas. Arkansas has many dry counties, where alcohol may not be sold. Many of these dry counties are adjacent to wet counties, where liquor stores just across the county line can sell to the residents of the dry county. When there are ballot initiatives to make dry counties wet, these liquor stores have the most to lose, so they often spend hundreds of thousands of dollars to prevent the prohibition laws from going to a vote.
Sat, 3 March 2018
My guest for this episode is Bryan Caplan of George Mason University. We discuss his latest book, The Case Against Education: Why the Education System Is a Waste of Time and Money, in which he argues that the social value of education is negative.
This may seem paradoxical, given that more educated individuals tend to earn more than less educated individuals. This can be explained in two ways: First, people who get more education were likely more skilled in the first place; in other words, there is a selection effect. Second, people who are already skilled can use education to demonstrate their skill to employers; economists call this signalling.
Signalling plays an important role in Bryan's understanding of the education system. He sees the causal effect of education on income as being 80 percent signalling and 20 percent learning. Most signalling models view signalling as negative sum: signals are costly, and to the extent that they help educated workers by pushing their resumes to the top of the pile, they harm uneducated workers by relegating their resumes to the trash bin. If everyone gets educated, then no one has a better chance of finding a job, but they bear the costs of many years and thousands of dollars of education.
Bryan draws on evidence from many different research areas to support his case, from economic research on the Sheepskin effect and comparisons between individual and national effects of education, to educational psychology research on "learning how to learn." We had an excellent conversation and I hope you will enjoy listening to it.
Fri, 23 February 2018
Today's guest is Russ Roberts, host of the quintessential economics podcast EconTalk. (If you haven't heard EconTalk, go subscribe to it right now, because it is excellent!)
We discuss EconTalk's role in the economics profession, the things Russ has learned in the course of making it, the importance of intellectual honesty, and the enduring insights of Adam Smith.
Here's the EconTalk interview with Bryan Caplan that I mentioned in the episode. Stay tuned for my own interview with Bryan!
"The first principle is that you must not fool yourself---and you are the easiest person to fool." - Richard Feynman
Fri, 9 February 2018
Algorithms, Algorithmic Discrimination, and Autonomous Vehicles with Caleb Watney
Today's guest is Caleb Watney of the R Street Institute. In our conversation, we discuss algorithms, particularly with respect to their role in judicial decision making. Later in the conversation, we discuss the algorithms that will one day replace ape brains as the primary controllers of our cars.
Caleb wrote a Cato Unbound essay in response to an article by Cathy O'Neil. O'Neil, a mathematician, argues that algorithms could potentially lead us astray. Her book Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy has sounded the alarm about the potential harms of an over-reliance on algorithms.
In Caleb's view, O'Neil has pushed too far in the anti-algorithm direction. He points out that private companies have used algorithms to generate amazing innovations. Government is a different story:
"The most compelling concerns about the improper use of AI and algorithms stem primarily from government use of these technologies. Indeed, all the tangible examples of harm O’Neil cites in her essay are the result of poor incentives and structures designed by government. Namely, hiring models at a public teaching hospital, teacher value-added models, recidivism risk models, and Centrelink’s tax-fraud detection model. The poor results of these kinds of interactions, in which governments purchase algorithms from private developers, could be viewed primarily as a failure of the government procurement process. Government contracting creates opportunities for rent-seeking, and the process doesn’t benefit from the same kinds of feedback loops that are ubiquitous in private markets. So it should be no surprise that governments end up with inferior technology."
We discuss the merits and demerits of algorithms, how different private and public incentives interact with algorithms, and the difficulties in creating algorithms that can be fair and transparent. Caleb's ultimate solution for many of the problems associated with algorithms used by the government is for those algorithms to be open source in order to foster public scrutiny of their processes and outcomes.
During the conversation, Caleb alludes to this paper by Kleinberg, Mullainathan, and Raghavan, which shows that there are three competing definitions of algorithmic fairness that cannot all be achieved simultaneously.
Fri, 2 February 2018
Sam Hammond returns to the podcast today to discuss the free market welfare state. He and Will Wilkinson have both written articles in this area recently, and we discuss some of the concepts they bring up.
People tend to think of government functions on a one-dimensional spectrum with "big government" on one end and "small government" at the other. Sam points out that the welfare state is separable from the other functions of government (regulation, command and control, protectionism, etc.). Not only is this true in theory, but it is played out in practice, with Nordic countries having very large welfare states as well as high economic freedom.
We discuss some of the problems with current welfare states and some ways to improve them.
"Food Stamp Entrepreneurs," a study that shows that access to food stamps makes people more likely to start businesses.
Fri, 26 January 2018
My guest for this episode is Scott Cunningham of Baylor University. We discuss his work on the decriminalization of indoor sex work and on the impact of Craigslist's erotic services page on violence against women.
The working paper on Craigslist generated a lot of media attention, with articles at Huffington Post and ThinkProgress. The most quoted statistic is that "Craigslist erotic services reduced the female homicide rate by 17.4 percent." We discuss this statistic, its possible causes, and whether or not it is implausibly large.
Scott mentions John Snow, the scientist who first discovered that cholera was spread by contaminated water sources. Here's the first video in a series on him.