The Ambrosini Critique

Unions resist innovations in the production process that make the jobs their members do more routinized and thus more efficient; unions keep jobs fun:

Unions also give teachers power to resist changes that make their jobs less fun. I think the teachers genuinely believe that these changes are bad; but I also think that they strenuously resist learning anything to the contrary. There is really good evidence for the benefits of direct instruction in teaching disadvantaged children. But direct instruction moves the teacher into being more of a technician and less of a creative professional. Ian Ayers talks about this in Supercrunchers, giving the example of bank loan officers, which used to be a skilled, prestigious jobs, and are now almost a clerical role. Doctors and teachers are resisting an attempt to do similar things to their jobs through, respectively, evidence based medicine and direct instruction.

The alternative to unions is not to have boring, routine, yet highly productive jobs. The alternative is for workers to find new more fun jobs when their old jobs are routinized¹. This will drive up wages in the routinized jobs (via a supply effect) and encourage employers to replace the routinized jobs with technology, like computers, that are good at doing routine tasks.

1. Of course, the problem with this is that people’s identities are wrapped up in their job. “Get over it,” says the economist. “You’re an asshole,” says the sociologist. [↩]

Will Wilkinson is back from Turkey and it doesn’t look like he had a good time (something to do with goat rodeos). Apparently, like most places that aren’t here, retail prices in Turkey aren’t posted. Instead there’s an expectation that buyer and seller will negotiate a deal.

Will suggests the equilibrium quantity is less under “haggling” than under Walmart-like posted pricing. His argument is that buyers don’t exactly know their value of the good in question, posted prices are information about the buyer’s own value of that good and, given ambiguity aversion, the haggling system reduces quantity.

Clearly, people are uncertain about the value of goods to them and because they don’t have the good yet, they’re uncertain about their uncertainty (i.e. the probability they’ll have positive surplus from buying the good is unknown). Lots of economists believe people have ambiguity aversion and given how much attention the theorists are given it these days, I assume its grounded in some serious results in psychology¹.

Its not so clear that a posted price would help the buyer reduce his ambiguity, though. Post bargaining, the price is not uncertain, so the remaining (post bargaining, pre purchase) ambiguity is the same under both pricing systems. Its not clear, then, why posted prices would reduce ambiguity.

Maybe Will is thinking that the transaction costs under haggling systems are higher and this would imply lower equilibrium quantity. But what was all that about asymmetric information and uncertainty about surplus?

I think Will’s on to something. Especially if we lived in a culture that made haggling into sport and we actually got enjoyment out of participating in it, but in any case, those transaction costs wouldn’t be that large… Maybe some micro dude(tte) will pick this up and run with it?

1. or more likely the math is neat [↩]

I mentioned that I couldn’t find Prof. Knittel’s paper on gas demand on his website. I should have looked harder. Here it is:

Understanding the sensitivity of gasoline demand to changes in prices and income has important implications for policies related to climate change, optimal taxation and national security, to name only a few. While the short-run price and income elasticities of gasoline demand in the United States have been studied extensively, the vast majority of these studies focus on consumer behavior in the 1970s and 1980s. There are a number of reasons to believe that current demand elasticities differ from these previous periods, as transportation analysts have hypothesized that behavioral and structural factors over the past several decades have changed the responsiveness of U.S. consumers to changes in gasoline prices. In this paper, we compare the price and income elasticities of gasoline demand in two periods of similarly high prices from 1975 to 1980 and 2001 to 2006. The short-run price elasticities differ considerably: and range from -0.034 to -0.077 during 2001 to 2006, versus -0.21 to -0.34 for 1975 to 1980. The estimated short-run income elasticities range from 0.21 to 0.75 and when estimated with the same models are not significantly different between the two periods.

Basically, in the short run people are much less sensitive to gas prices than they used to be.

In fact, I’ve linked to this research before…

I’ve read a little bit of the immigration literature (its effects on wages, prices, government spending, etc) and it seems people always assume legal restrictions on immigration are heavy disincentives to illegal immigration. Its assumed immigration would be much greater if we opened up our borders.

Its this last assumption both excites people that care about world welfare (the “relevant moral community”) and its what scares Lou Dobbs. This last fact makes me want to stop thinking about this issue and just be ok with the assumption… I really hate Lou Dobbs…

Anyway, where was I? Oh, right… But maybe the assumption is wrong. Maybe policy makes migration more expensive, but maybe that additional expense is minuscule in comparison to the other costs of migration¹.

Here’s a paper I want to read: Some unexpected policy shift happened in one of the “receiving” countries in recorded economic history. Then all we need is a measure of legal and illegal immigration for that country (which should be totally easy to come by!) and we’ve got ourselves a natural experiment. What is the cost (in money or in reduced probability of migration or in terms relative to the other costs of migration) of immigration restrictions?

1. I suspect most potential migrants are credit constrained… you can’t really buy insurance against the risks of illegal immigration and native banks aren’t really going to give loans on the promise of much higher wages in a foreign country. Though, maybe they should. Anyone want to make some money? [↩]

The ideological character of much of the economics profession in the United States suggests that there are rewards for producing scholarship that confirms the idea that the minimum wage causes unemployment, and punishment for scholarship that finds otherwise.

— A guest blogger at CT

Empirical studies disconfirming theory is the name of the game. There’s also a big premium for coming up with theory that would explain that disconfirming evidence (while being parsimonious… *ahem* fast food joints don’t have a monopoly on the demand for low-skill labor *ahem*).

UPDATE: “Empirical studies disconfirming theory is the name of the game.” Here’s an example of an economist disconfirming her own theory.

Up betimes, and abroad to the Cocke-Pitt, where the Duke [of Albemarle] did give Sir W. Batten and me an account of the late taking of eight ships, and of his intent to come back to the Gunfleete —[The Gunfleet Sand off the Essex coast.]— with the fleete presently; which creates us much work and haste therein, against the fleete comes. So to Mr. Povy, and after discourse with him home, and thence to the Guard in Southwarke, there to get some soldiers, by the Duke’s order, to go keep pressmen on board our ships. So to the ‘Change and did much business, and then home to dinner, and there find my poor mother come out of the country today in good health, and I am glad to see her, but my business, which I am sorry for, keeps me from paying the respect I ought to her at her first coming, she being grown very weak in her judgement, and doating again in her discourse, through age and some trouble in her family. I left her and my wife to go abroad to buy something, and then I to my office. In the evening by appointment to Sir W. Warren and Mr. Deering at a taverne hard by with intent to do some good upon their agreement in a great bargain of planks. So home to my office again, and then to supper and to bed, my mother being in bed already.

— Sam Pepys May 10, 1665

Mother’s Day was meant to be — and still is — a celebration of a nineteenth-century ideal of motherhood, when mothers were supposed to dedicate themselves completely to nurturing their children and making a cozy, safe home

— Laura Prieto, an associate professor of history and women’s studies at Simmons College in Boston

Well, I don’t celebrate the 19th century version of motherhood on mother’s day. My mother worked all through my childhood and was a single mother through a good chunk of it and yet — and yet! — I celebrate her on Mother’s Day every year. Maybe the professor is right, though. Mom did nurture me and home was always cozy. Let’s all look forward to the day when those stodgy old ideals go by the way side¹.

1. There’s a possibility this quote was taken out of context. [↩]

After observing that lots and lots of genes can interact to determine a particular phenotype, Razib asks some good questions about Social Science:

I’ve been thinking about this when it comes social phenomena. Much of the verbal treatment presupposes a few large effect explanatory variables; but what if that’s not correct? What if most social phenomena are contingent upon thousands of small effect predictors? How are you going to talk about this? And since we don’t know the “gene” unit of social phenomena where do you even start? Of course quantitative social scientists focus on phenomena which do have independent variables of big effect; but most of the action might not be low hanging fruit, but rather dispersed in the canopy.

I’ll just observe that underlying any gene explanation, even ones that have many, many causal genes, is genetic theory (”One explanation to rule them all”) itself. When social scientists are trying to describe a particular behavior (e.g. why Davis undergrads go to The Graduate on Friday nights) then they may have to go after a multitude of explanations. If they’re trying to describe a type of behavior (e.g. demand for alcoholic beverages), this may not be the case.

UPDATE: I wrote this as a comment below, but I thought it fit better up here:
“I think his critique confuses a couple of things. First of all, there are several levels of abstraction even in the hard sciences. Chemists don’t reduce everything they study into sub-atomic behaviors and certainly biologist and geneticists don’t. Even if everything can be reduced, sometimes the emergent behaviors are so complex we, with our feeble minds, have to strip some of the complexity away. In other words, chemist *could* talk about sub-atomic behaviors of their chemicals — which represent billions of interactions between billions of sub-atomic particles — but they don’t, mostly because they, being human, aren’t suited for it.

The other thing he seems confused by, and this may be related to the first confusion, is the nature of social science. We’re not about predicting particular behaviors. We’re about predicting types of behaviors. Sometimes you hear a critique of economics suggesting we’re bad at predicting business cycles and so we don’t know much about business cycles. This is clearly false, we know a bunch about business cycles just as chemist know a bunch about specific chemical reactions. Do chemist not know chemistry because they can’t predict the velocity of a particular molecule during a reaction? Do they not know chemistry because they can’t predict the exact timing when a particular reaction will take place between two molecules (or if it will happen at all)? These questions are funny because we wouldn’t even suggest chemists should know these particular things.

I guess I’m saying social science is about general patterns of social interaction. This upsets people who want us to be seers.”

Doing the economics you run into this guy Paul Krugman every once in a while and you’re usually impressed. His papers are readable, theoretically enlightening and empirically relevant. One of my favorites is this one about the core and periphery in the world trade system.

And then there’s this NY Times columnist named Paul Krugman that is just terrible. He gets basic logic wrong. He makes wild, economically illiterate claims and he’s demonstrably biased and hypocritical.

And then there’s this great exchange between James Galbraith and this other guy named Paul Krugman. While arguing against trade as a cause of increasing inequality, he eloquently defends the use of precise notation in economics, he encourages the happy marriage of theory and data consummated on the importance of economic significance over the statistical or literary variety, and he observes the obvious, but often overlooked, truth that disagreement in a field of science doesn’t invalidate the whole of it. In other words, this incarnation of this Krugman fellow lays a smack down on Galbraith¹, i.e. do read the whole thing.

It occurred to me that these guys might actually — despite the large variation in disposition, cogency and temperament — be the same guy. I mean, that is a rather unusual name. Doing a google search on “Paul Krugman” pointed me to a blog authored by someone of that name. And what do you know? Its pretty good. He touches on many of the same topics as Paul Krugman the academic with the same mix of light but significant theory and data. He has an eloquent writing style like the fellow that had the exchange with Galbraith. He does have his moments of fire breathing similar to the columnist Paul Krugman, but those moments are few and brief.

I’m going to call it. These Paul Krugmans are all one and the same. The newspaper column is just a terrible medium for him.

1. h/t Thoma [↩]

National Geographic has more pictures of the Chaitén volcano eruptions.

(h/t BLDGBLOG via SMIEM)