Noah Smith on non-market goods

Here.

He argues they're substantial and they ought to be considered when thinking about policy. I agree. What's interesting about his list is that a lot of these things are directly related to market goods - like satisfaction at work.

I have a few thoughts on this, since these issues come into gender economics a lot:

1. We do have a few tools for smuggling this stuff in: specifically, externalities and compensating differentials. They're pretty blunt tools, though, and they're better at accounting for non-market things without really thinking in depth about them. Nancy Folbre, for example, has written a lot about care as a positive externality and implications for the time spent caring for others. And she is among the economists who has thought most deeply about the sort of problems Noah raises.

2. Folbre brings to mind one important way that we've accounted for non-market activities: when they require time, we (well, some of us) have been including them in our models for decades: child care, home production, etc.. Macro models endogenizing these things as well as fertility also do that. The reason of course, is that you can still do constrained optimization and the price you're thinking about is just the opportunity cost of the time you spend in the non-market activity. Again, though, this has limits - but it it's still an important approach that economists are uniquely positioned to take, since time is a major constraint on most people.

3. So what do we do about it? Well many surveys do have these sorts of variables that we certainly ought to play around with. But I think we should simply be collaborating more with other social scientists like psychologists and sociologists. I've been working with a sociologist for years now and am just starting up a research relationship with a psychologist friend of mine who sometimes comments here (she goes by Dr. J). She is quite interested in these satisfaction and personal aspiration issues. These relationships have helped to keep me well rounded (and let me specialize in what I do best). Along the same lines, I think economists ought to always be involved with projects that have site visit or interview components to the extent that they are able to as well. Nothing illuminates what's actually going on in the world than sitting down and talking with someone. Often its fairly straightforward to translate what they're saying into economics lingo (although of course something might be lost in translation). We're still faced with optimization under constraints and strategic thinking in a lot of these cases. But at the very least it provides context to other research.

Upon finishing the first part of The Hobbit (unfortunately I did not see it in theaters)...

...I am less amazed now that Jackson is stretching it out into three movies and more amazed that he didn't do LOTR in nine movies. It's very nice not to race through everything.

Tyler Cowen shares David Sinky on Scientific Labor Markets

Insofar as I wade into policy preferences, my view of the scientific labor market is that the problems are principally demand side problems rather than supply side problems so if we should be doing anything as public policy we ought to buy science (or the derivatives of science) rather than supply more and more scientists to the market. At an NBER conference I once characterized this as the Field of Dreams strategy: "if you build it, they will come" (that made Richard Freeman laugh - a great triumph and endorsement, IMO). If you make investments in the scientific outputs you feel are lacking, the scientific labor market appears to be pretty good at getting the bodies where they need to be to make that output. The interesting market failures are on the demand side.

However, Tyler Cowen shares thoughts from David Sinky this morning presenting an alternative view with some interesting arguments. I am bolding the ones I particularly like:

"Since it seems that the supply of talented researchers in any specific area is likely fairly inelastic in the short term, to what extent do you see cash funding (as opposed to supply of talent) as a major constraint to specific scientific research in either the short and medium terms?

Even if we believe that this funding will lead to a proportional increase in clean-tech research, I suspect that returns may be quite low since the impacts of this funding would seem to be:

1. Pulling smart people from their private sector efforts into publicly funded research

2. Funding marginal projects by lower quality researchers where returns are likely to be significantly lower than average returns to research funding (which may be quite low already)

3. Increasing the funds available to established, high-status labs and researchers. If a large percentage of a lab’s output is due to the abnormally high human capital of its lead researchers, the binding constraint is their time and mental resources rather than cash so the returns on additional cash would not be very high.

4. Allowing institutions that were already going to fund this sort of research to direct additional funds to other priorities such as undergraduate academics (stem or otherwise), student amenities or other unrelated research initiatives. I suspect much of this logic also applies to donations to “cancer research charities” which I believe may be one of the single least efficient use of charitable dollars.

In general, I am disappointed that neither the right nor the left seems interested in trying to estimate the return to marginal government spending on research (either in aggregate or for specific programs).

The points above lead me to suspect it is quite low in aggregate but I’m open to being convinced otherwise if you think there is good evidence to do so."

I don't know if I agree that number three is true, but I really couldn't say. This is something for someone like Paula Stephan - who has spent a lot of time thinking about the economics of labs specifically - to weigh in on.

The first two I think are widely recognized concerns. Of course what you're funding has to be of value and the whole problem with market failures in science (and anything) is that you know there is high social value work to be done but knowing that doesn't tell you exactly what that work is.

Four is an empirical question.

I think that in theory the measurement of returns to research is important but it's very difficult, for at least two reasons. First the benefits can be far off into the future if we're thinking about basic research. Think about the economic returns to relativity. Yes, I mean Einstein - we're going back that far. The most obvious answer today is GPS and cell phones right? Relativity has had an enormous payoff but you had to wait a hundred years for the really interesting stuff. One answer to that is that after discounting the benefits are minimal in the long run, but that raises the second problem that we've seen with climate change: what's the right discount rate? Who should we care about - just ourselves or future generations? Because of the way we experience time we're stuck with a sort of temporal autarky. I can't go back 100 years and compensate someone for discovering relativity. That leads to less science than there ought to be. Should this problem be remedied or not? Do I have standing in the policy decisions of 100 years ago if I am affected by those policy decisions (as I certainly am). Do people 100 years from now have standing in today's policy decisions that affect them - or should we discount them according to our preferences?

"Earth hour" is pure posturing, and pretty useless in itself...

...but at least it's coming from a good place.

Thank God tomorrow we'll be done with all the sanctimonious counter-posturing that are the complaints about Earth hour, which are equally useless and probably not coming from a good place.

People - if you think the idea here is to do away with capitalism and modern technology I think you've rather missed the point.

When I was in elementary school I remember we had this book that was something like "365 things you can do to save the planet" - one for each day. My parents weren't hippies or anything - it was just a good kids book with a lesson, etc. etc. I remember feeling like the book contained solemn duties. I wasn't weird about it or anything, I just remember feeling like this was important. It was the planet after all! And it was stupid little stuff. Conservation, conscientiousness, and instilling the value that you know what: the place isn't here just for you.

That's all Earth hour is.

It's just a hokey awareness raising effort that has more to do with responsible lifestyles than anything else - and absolutely nothing to do with the overthrow of capitalism. And honestly there is something genuinely solemn about that mindset. I got that element right at least, and I was just a dumb kid.

So stop complaining. You sound like an idiot.

Why Keynes and not Hicks?

Jonathan considers the question.

The Keynesianism we have is really Hicksianism. I do think economists appreciate this. I think most economists know IS-LM as we use it is not in the General Theory (of course you can yank it out of there if you wish, but be prepared to get nagged by some post-Keynesians). So of course the Keynesianism that grew out of IS-LM great out of Hicks (for the rest of this post though, when I talk about Keynesianism I'll be referring to old Keynesianism/IS-LM not the newer stuff).

So if we know this why do we still praise Keynes?

This is going to sound a little fuzzy, but I think it's because Keynes taught us how to think about things and Hicks taught us how to model things. Those are two very different tasks, and it's the former task that tends to loom large in our psyches. When we want to walk someone through the logic of a Keynesian answer to a question, we always go back to the props that the General Theory furnishes us with. The catchy passages in the book don't hurt - many people have pointed this out. But I don't think it's just that. It's how compelling the argument is. Hicks doesn't give us anything like this sort of intuitive argument that we can whip out when we need it. He gives us the model. The model is important, but it doesn't frame the theory the way Keynes does.

As an example of what I mean, think about the theory of the Phillips Curve or the NAIRU. These are big ideas associated with Phillips and Friedman, respectively. That's because they presented us with the idea and when we think about the idea we're drawn back to their exposition of the idea. But lots and lots of people have modeled the Phillips Curve and the NAIRU - some models explaining the same phenomenon but with strikingly different explanations. Some models are constructed differently but give us basically the same story. A model is just a bit of math to illustrate a concept - it's smaller than a "theory". You can have lots of different models of the same theory.

Now Hicks's model was a big deal. But I think Keynes still looms large because he ultimately gave us the concept of Keynesianism.

I would be careful not to understate Keynes's contribution, though. Liquidity preference theory of the interest rate is essentially original to him (you can find wisps of antecedents in Franklin and Fisher), and it's actually one that Hicks was skeptical of early on (Hicks referred to it as seeming like interest rates were being pulled up by their own bootstraps). I think the fact that we have preferred the Hicksian version of liquidity preference is that his exposition is more Marshallian than Keynes's (which gives us this nebulous idea of lots of potential states of the economy). Keynes wanted to present a picture of multiple potential states - an unclosed model - because he was presenting an alternative to the idea (we can argue about how prevalent it was) that the economy is always going to be operating at full employment or at least tending towards it. That view of things - that model of the bigger idea - didn't last as the model that we use to represent the bigger idea, because most of us are more comfortable with closed models and unique equilibria.

Keynes also has a lot of good substantive contributions that are simply left unexploited by mainstream economists and have been taken up by heterodox economists.

Cesar Chavez Public Charter School 11th Grade Social Security Panel

Looks like I'll be here on Tuesday morning, taking part in a panel that will be listening to policy proposals from 11th grade economics students on what to do with Social Security. The idea is to talk with them about the issues at hand and give them feedback on proposals that they've been developing and preparing to present.

I have a feeling this will be fun and informative for me and the students, and it will manage to make me feel like I wasted a lot of time in high school :)

Gene schools me (although he graciously does not note that I conceded Bob's point)

I am too quick, sometimes, to focus on the point where I think the other guys is definitely wrong and concede the points that sound more reasonable to move past them.

I don't think minimum wage earners en masse are producing $22 of output for their employers and getting screwed. Monopsony power involves some exploitation but I can't imagine that much or else the marginal effect of the minimum wage would be far more positive.

But that does not mean the phenomenon has to be all that rare. Gene ably reminds us that asymmetric information's a bitch if you're on the right tail of an expected productivity distribution and don't have access to any signaling options.

Three points before sharing Gene's thoughts:

1. Bob suggests it ought to be easy to develop a business plan to take advantage of this - of course that need not be the case if it's costly to get information on all applicants' skills and only picking the undervalued ones.

2. Gene is defensive about being considered anti-marginalist. He need not be. He need not even invoke the "frictionless physics" analogy. Frictions in economics are marginalist - they just add new margins to think about.

3. This still might not be a wildly common occurrence (although probably more common than Bob or I originally suggested), because of internal labor markets. Once you observe an employee's productivity, given the high turnover in these industries, you're probably going to promote him and share some of those rents before you lose all of those rents.

Alright, here's Gene in his entirety because it's so good:

*****

How Labor Markets Really Work

Bob Murphy asks Daniel Kuehn:

"Do you think there are at least 1000 workers in the United States who produce more than $20/hour for their employers, yet they are only earning minimum wage?"

My guess would be: "Certainly."

Too many economists have no idea how companies hire people. I have done it at several places. Here's what happens:

Someone higher up in the company decides some task needs to be done. They give you the task. You say, "Well, OK, but I'll need a couple more programmers."

"How much will they cost?"

"Good Java programmers get around $100,000 per year."

"Hmm... can you get by with one full-timer and one part-timer?"

"Yeah, I guess so..."

"OK, do it."

Most likely, no one in the company has any real idea how much this project is worth. No one has any real idea what the value of the output of these 1 and 1/2 programmers is. All that matters is whether the higher up is pleased with the outcome of the project. And so long as her superiors are pleased, and the company as a whole makes money, things can go on this way forever.

So, my guess is that there certainly are well over 1000 workers in the United States who produce more than $20/hour for their employers, yet they are only earning minimum wage. As well as whole boatloads who earn the minimum wage but produce far less for their employers. Bob attempts to dismiss the possibility of such failures of wages to equal marginal products by saying that, if they existed, we could create "a business plan for how we can hire these 1000 (at least) people at $10/hour, and still make $10,000 in pure profit per hour."

There are at least two problems with the above attempt at a reductio:

1) Since the employers don't know (for the most part) who these people are we certainly can't either!

2) It is quite possible someone could make employer A $21 per hour, but make far, far less if employed by B. The factors of production are not homogenous and are not perfect substitutes for each other. 

(Ah, [some] Austrians! This point is in the forefront of their minds when they wish to critique some interventionist scheme, but when it comes to defending the near-perfect efficiency of the market, it goes walkabout.)

The same thing applies to other factors of production as well: Where I have worked, when someone "needed" a new computer, no one in the chain of approval asked "What will its marginal product be?" And no one would have known how to answer if they had. No, we justified it because, "Carl has been here two years, and yet he has the slowest computer in the group, and he's really griping about it." And the request would get approved in good times and turned down in bad times, which is absurd in a marginalist theory of how prices are set.

Final note: I am not "anti-marginalist," any more than I am against physics models that feature frictionless surfaces. I am just noting that it is an idealization, and the real world only resembles the model in a very rough fashion.

I don't think Hayek would have liked this Johnny Cash classic...

"One Piece at a Time" came up on Pandora...

It's kind of sick that what I thought upon hearing it was "Hayek would have hated such flagrant disregard for capital specificity and heterogeneity".

More good gender econ from Rochester

So they have a graduate gender conference every year. It was a real shame to miss this year's because it was focused on labor.

The conference schedule is below. As I imagine happens with a lot of women's studies conferences, it's a lot of humanities or pomo type social theory. There was at least one economist there. As you know, that's not my style at all but pluralism is still good. Rather than shy away from that sort of thing, I think mixing it up with the more formal social science would probably be healthy.

Anyway - here's the conference schedule from this year with all kinds of funky formatting copying that I am not going to fix at 1:40 in the morning:

20th Annual International Graduate Research Conference in Gender and Women's Studies

Women in Labor: Gendering (Re)Production 

CONFERENCE SCHEDULE
Friday, March 1, 2013
Hawkins-Carlson Room

5:00pm-5:30pm Opening Reception

5:30pm-6:30pm Panel One: Cultural Products

Moderator: Grace Seiberling, Associate Professor of Art History, University of Rochester

• Marissa Schwalm (Binghamton University), "Blood & Ink: Women Pushing Equality with Graphic Autobiographies in the Workforce and the World"
• Caoimhe Morgan-Feir (OCAD University), "Spinning a Yarn of Bioart and Labour"

CONFERENCE SCHEDULE
Saturday, March 2, 2013
Hawkins-Carlson Room

10:15am-10:30am Opening Remarks

Honey Meconi, Director, Susan B. Anthony Institute for Gender and Women's Studies

10:30am-12:15pm Panel Two: Reproductive Bodiesf

Moderator: Alison Peterman, Assistant Professor of Philosophy, University of Rochester

• Jennifer Loft (University at Buffalo), "Inscribing the Indigenous Woman's Body: Reflecting on Trauma and Memory in Alliance with Jennifer Griffiths' 'Traumatic Posessions' "
• Rashida A. Manuel (University of Cincinnati), "Of Slaves and Surrogates: Reproductive Labor in the Twenty-First Century"
• Rachael Pack (University of Western Ontario), "Risky Reproducers and Genetic Hopelessness: Biopolitical Implications of the Crack Panic"

12:15pm-1:15pm Lunch

1:15pm-2:15pm Keynote Adress

"Work, Profit, and Care: Some Reflections from Feminist Economics"
Julie A. Nelson
Professor and Chair, Department of Economics, University of Massachusetts
Editor, Feminist Economics

2:30pm-3:45pm Panel Three: Gendered Divisions of Labor

Moderator: Rachel Remmel, Assistant Professor of American Studies, Eastman School of Music

• Kari L. Colosi (Binghamton University), " 'Speaking Up is My Job Now': Women's Political Activism and the Environmental Politics of Shale Gas Development in Rural Upstate New York"
• Aparna Parikh (Pennsylvania State University), "Jane in the Call Center"
• Susila Gurusami (UCLA), "Boys and Girls in White: Investigating the Socialization of Inequality in Medical Specialties"

4:00pm-5:00pm Panel Four: Confronting Public and Private Spheres

Moderator: Jeffrey Runner, Associate Professor of Linguistics, University of Rochester

• Anasa Hicks (New York University), " 'Like All Other Things': Domestic Work at the Moment of the Cuban Revolution"
• Ada Yuk Yin Lee (Chinese University of Hong Kong),"In-Betweeness: Gender Identities and Same-Sex Practices of Women-Loving Filipina Domestic Workers in Hong Kong"

Gender, economics, Rochester, etc.

What's so sad is that there is excellent and growing work by economists on gender, gendered power, family, reproduction, and discrimination going on. Not all economists work on gender related issues, of course, but I didn't think until tonight that you'd have a professional economist working counter to them by musing that he struggles to think of why rapists can't "benefit" from an unconsious woman that doesn't know the difference.

Landsburg is at Rochester, which is especially a shame given the city's pride of place in the women's rights movement and Susan B. Anthony's work in particular. The University of Rochester is home to the Susan B. Anthony Institute for Gender and Women's Studies. Of course Seneca Falls isn't too far away either - the Women's Rights Convention in 1848 was held there precisely because of the strong support for women's rights in the region.