Fri, 13 October 2017
My guest today is Jamie Pavlik of Texas Tech University.
Jamie has done a ton of research on corruption and development. She has examined corruption in the developing world, with multiple papers examining corruption in Brazil. She has also looked at international comparisons of corruption, and corruption in the United States specifically.
We discuss her work on corruption as well as some of the statistical issues with spatial econometrics.
Fri, 6 October 2017
My guest today is Thomas Sampson of the London School of Economics.
Our topic for today is the economic impact of Brexit. Long-time listeners will recall that I did an interview with Sam Bowman on Brexit immediately after the vote occurred. Think of this as a follow-up to that episode now that the dust has settled and we have a better idea of what Brexit is going to look like. Thomas has written multiple papers on the subject, including Brexit: The Economics of International Disintegration, which is forthcoming in the Journal of Economic Perspectives. Its abstract follows:
This paper reviews the literature on the likely economic consequences of Brexit and considers the lessons of the Brexit vote for the future of European and global integration. Brexit will make the United Kingdom poorer because it will lead to new barriers to trade and migration between the United Kingdom and the European Union. Plausible estimates put the costs to the United Kingdom at between 1 and 10 percent of income per capita. Other European Union countries will also suffer economically, but their estimated losses are much smaller. Support for Brexit came from a coalition of less-educated, older, less economically successful and more socially conservative voters. Why these voters rejected the European Union is poorly understood, but will play an important role in determining whether Brexit proves to be merely a diversion on the path to greater international integration or a sign that globalization has reached its limits.
Globalization and economic integration have been on more or less a constant rise since WWII, and Brexit is a rare reversal of this trend. Thomas argues that it is important to understand the causes of Brexit to see if this is just a temporary blip on the way to global economic integration or the start of a reversal of the post-WWII trend.
Fri, 29 September 2017
My guest today is Karl Smith, he is the director of economic research at the Niskanen center.
Our topic for today will be market power. Karl has written a series of posts on the Niskanen center blog discussing markups and market power. The debate was sparked by a paper by Loecker and Eeckhout that claimed that average markups in the American economy had risen from 18 percent in 1980 to 67 percent today.
There are many different interpretations one might have for this data. What Karl points out is that these markups have mainly risen among smaller firms. Wal-Mart has very low markups, but niche specialty firms such as the local vegan café have relatively high markups. This makes sense in the context of monopolistic competition, where consumers pay a small premium in return for greater product differentiation.
Noah Smith had this response to Karl's article:
"Robin Hanson and Karl Smith both have posts responding to De Loecker and Eeckhout’s paper and attacking the Market Power Story. Both give reasons why they think rising markups indicate monopolistic competition, rather than entry barriers. But both seem to forget that monopolistic competition causes deadweight loss. Just because it has the word 'competition' in it does NOT mean that monopolistic competition is efficient. It is not."
As Tyler Cowen points out, this is not necessarily the case. What is inefficient in a partial equilibrium model may not be inefficient in a general equilibrium model.
Fri, 8 September 2017
My guest today is Fabio Rojas. He is professor of sociology at Indiana University Bloomington.
Fabio is the author of three books, the first is From Black Power to Black Studies: How a Radical Social Movement Became an Academic Discipline, published in 2007. The second book, coauthored with Michael Heaney, is Party in the Street: The Antiwar Movement and the Democratic Party after 9/11, published in 2015. The third book, Theory for the Working Sociologist, was published just recently in 2017.
We begin the conversation by talking about the discipline of sociology in general. What should an undergraduate student know about sociology, and furthermore, what should other social scientists know about the field? We discuss the distinct methods that make sociology sociology.
Moving on, we discuss the relationship between activism and scholarship, particularly as it pertains to sociology but also as it pertains to black studies, the subject of Fabio's first book.
Evicted: Poverty and Profit in the American City by Matt Desmond
Fri, 1 September 2017
We recorded this on August 24th, 2017, the same day Peter published an op-ed in the National Post titled "Canada needs blood plasma. We should pay donors to get it." The op-ed argues in favour of allowing people who donate blood plasma in Canada to be compensated in return:
Peter and I discuss the best and most popular arguments against compensating blood plasma donors, and organ donors in general, then Peter gives counterarguments to each of these objections.
Furthermore, we discuss the United States' recent legalization of compensation for bone marrow donors. In 2012, The Institute for Justice successfully argued in front of the 9th Circuit Court of the United States that bone marrow should be exempted from the 1984 National Organ Transplant Act (NOTA), since bone marrow can be extracted from blood and does not thus count as an organ. Blood was specifically exempted from NOTA.
Fri, 25 August 2017
Samuel Hammond is returning to the podcast today to discuss the relationship between capitalism and social justice.
The controversial ad featured generic protesters and Kendall Jenner sharing a Pepsi with police. While the ad was insensitive and more than a little absurd, Sam pointed out that Pepsi has a history of promoting social justice and racial harmony through its marketing.
Back in 1940, Pepsi was a small player compared to Coca-Cola; the latter selling 25 sodas for each one Pepsi sold. In order to compete, Pepsi's CEO Walter S. Mack Jr. decided to do something the other companies weren't doing: marketing specifically to African Americans:
"In 1947, [Mack Jr.] hired Edward F. Boyd, an African-American adman who later became known as one of the fathers of niche-marketing. Boyd crafted ads for Pepsi that celebrated black cultural and professional achievements, and above all portrayed African-Americans as normal, middle-class consumers. It was this marketing push that ultimately drove Pepsi’s rise to the number two soda company in America."
In pre-civil-rights America, this was a major achievement, and it served a deeper social purpose by extending social recognition to black Americans.
We also discuss some other interesting niche marketing campaigns, like Subaru's marketing strategy targeting lesbians in the 1990s. Finally, we tie it all back to capitalism as a force promoting diversity and inclusion, with references to Becker's work on taste-based discrimination.
Fri, 18 August 2017
This episode’s guest is Vincent Geloso, here to talk about his work on Cuban healthcare statistics. He recently released a working paper with coauthor Gilbert Berdine titled "The Paradox of Good Health and Poverty: Assessing Cuban Health Outcomes under Castro." The abstract reads as follows:
In spite of being poor and lacking in economic opportunities, the population of Cuba enjoyed significant improvements in health outcomes under the Castro regime. Many have praised the ability of the regime to overcome the barriers of poverty and economic stagnation in order to improve health outcomes. Many have also argued that efficient features of Cuba’s health policy should be imported regardless of political considerations. In this paper, we argue that these improvements are probably overestimated, but that they are real nonetheless. We also argue that some of these improvements were an integral part of health policy and could only have been realized by the use of extremely coercive institutions. While efficient at fighting certain types of diseases, coercive institutions are generally unable to generate economic growth. On the other hand, the poverty such coercive institutions engender may have actually helped improve health outcomes, providing us with a false impression of the efficacy of the health care system in Cuba.
We have a wide-ranging discussion about Cuban health statistics, what they mean and don't mean, how good health could be achieved by forcing people into healthy behaviours, and how well other Latin American countries have done in comparison to communist Cuba.
Photo credit: Eric Marshall
Fri, 28 July 2017
Noel recently released a working paper titled "The Effects of Land Redistribution: Evidence from the French Revolution." It is coauthored with Theresa Finley and Raphael Franck. The paper examines the consequences of the land auctions held by the Revolutionary government in France. The abstract reads as follows:
This study exploits the confiscation and auctioning off of Church property that occurred during the French Revolution to assess the role played by transaction costs in delaying the reallocation of property rights in the aftermath of fundamental institutional reform. French districts with a greater proportion of land redistributed during the Revolution experienced higher levels of agricultural productivity in 1841 and 1852 as well as more investment in irrigation and more efficient land use. We trace these increases in productivity to an increase in land inequality associated with the Revolutionary auction process. We also show how the benefits associated with the head-start given to districts with more Church land initially, and thus greater land redistribution by auction during the Revolution, dissipated over the course of the nineteenth century as other districts gradually overcame the transaction costs associated with reallocating the property rights associated with the feudal system.
What's so interesting about this particular instance of land redistribution is the fact that it was all sold to the highest bidder rather than being given to the poor. This breaks with the pattern of most attempts at land reform throughout history. People have been trying to take land away from the rich and give it to the poor since at least Tiberius Gracchus in the second century BCE. But the Revolutionary government needed money and they needed it fast. So they concocted a plan to seize and auction off all French lands owned by the Catholic Church, which comprised about 6.5 percent of the country.
Land auctions take time though, and the government desperately needed funds in the short term, so they issued a monetary instrument known as the assignat that could be used in these land auctions. The land was eventually auctioned off and then traded in secondary markets, where much of it was consolidated into large estates that could employ capital-intensive agricultural practices on a large scale.
The evidence suggests that these land auctions added to the productivity of the regions where they occurred. Noel argues that this occurred because the reduction in transaction costs allowed for a more efficient allocation of property rights. One could argue, however, that the Church might have simply owned more productive land to begin with, and the paper uses a series of identification strategies to show that this is not the main driver of their results.
Rachel Laudan discusses the history of potatoes and other foods on EconTalk.
Photo credit: Early French banknote issue during the French Revolution (Assignat) for 400 livres, (1792), from the National Numismatic Collection at the Smithsonian Institution.
Thu, 20 July 2017
My guest for this is Ekaterina Jardim of the University of Washington. Ekaterina is one of the authors of the new minimum wage study that has been making headlines recently, "Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle." One reason this study is so interesting is that it was funded by the City of Seattle, which is something that governments aren’t obligated or expected to do when they enact major policy changes like these minimum wage hikes.
There was a broad theoretical and empirical consensus in the 1980s that higher minimum wages have disemployment effects on the low skilled, and then Card and Krueger (1994) started a new empirical literature that found no evidence of disemployment effects.
A major problem with Card and Krueger (1994) and with many of the other studies conducted over the past quarter century was their use of proxy measures for low-skilled workers. Instead of looking at workers who actually earned less than the new minimum wage, these studies looked at groups that they knew to contain many minimum-wage workers: generally teenagers or restaurant workers. This new study does not face this limitation because Washington State requires firms to report both the hours worked and the wages of all workers.
One criticism I’m seeing a lot in response to the media coverage of this study is the fact that they had to drop multi-location firms from the sample. The reason for this is that the data only shows what firms people work for, not their location. So if a firm has locations both inside and outside Seattle, you don't know whether a given worker in that firm belongs in the treatment or the control. Still, despite this limitation, the study's sample included over 60 percent of workers in Seattle. Furthermore, the study authors surveyed employers and found that the multi-site firms that were excluded from the sample actually reported more reductions in work hours than did the firms that remained in the sample. So if anything, this omission understates rather than overstates the effect of the minimum wage increase.
One big concern people have is just how much this study's results deviate from the established literature. The authors address this by repeating their analysis using employment in the restaurant industry as a proxy for low-skilled labour. They find that using this proxy for low-skilled labour reduces the measured impact of the minimum wage to near zero, consistent with past studies that have looked only at the restaurant industry.
It seems that this apparently robust finding, replicated in study after study over the past few decades, was actually a quirk of studying the restaurant industry, which tends to substitute high-skilled labour for low-skilled labour rather than cutting total labour hours as a short-run response to minimum wage hikes.
Kevin Grier explains the synthetic control method, which the minimum wage study uses to construct a control group.
Fri, 14 July 2017
My guest today is Kevin Erdmann, he blogs about economics and finance at Idiosyncratic Whisk.
Kevin has written a ton about housing, as evidenced by the titles of his blog posts. A recent one is labeled Housing: Part 239. This series is part of a larger book project that Kevin is publically drafting on his blog.
We discuss the housing bubble of the 2000s and the post-2008 housing market. I took my first undergraduate economics class in 2008, just as the financial crisis was beginning, so there's never been a time in my economics career when people weren't talking about this. And yet, I still have so much to learn!
Kevin makes an interesting distinction between "open-access cities" and "closed-access cities." Closed-access cities are places like San Francisco, New York, and San Jose that have restricted their housing supplies. Open-access cities are places like Houston and Phoenix with more elastic housing supplies. We talk about these factors and how they relate to the housing boom and bust, liquidity, and central bank policy.
Kevin points out that supply side restrictions on housing construction are necessary for demand-side factors to cause housing bubbles. That's because in a market with an elastic housing supply, more demand doesn't result in higher prices, it just causes more homes to be built.