Thursday, December 04, 2014

If you think we're post-racial, read the lead article from the November 2014 American Economic Review

Alesina and La Ferrara conclude:

This paper proposes a test for racial bias in capital sentencing in the US over the period 1973-1995. We use the share of judicial errors in rst degree sentencing as an indicator of racial bias of such courts. Using an originally collected dataset, we uncover a bias against minority defendants killing white victims. The bias is present, according to our test, only in Southern States. More precisely, according to our interpretation rst degree courts tend to place less weight on the possibility of condemning an innocent in cases of minority defendants with one or more white victims relative to minority defendants who did not kill whites. The same does not hold for white defendants. This result is not explained by differences in observable characteristics of the crime or of the trial, nor by the ideological orientation of appeal courts.
The paper is really well done. 

Tuesday, November 04, 2014

Jung Hyun Choi and I write about Income Inequality across Cities.

We will be presenting at APPAM:

This paper investigates why the level of income inequality differs across U.S. cites. We also
explore why some cities experienced faster increases in the level of inequality than others.
Using the Decennial Census and the American Community Survey (ACS) from 1980 to 2011,
we explore whether the disparities in the level and the changes in the level of inequality can
be explained by MSA characteristics, including labor market conditions, skill distribution,
residential mobility, racial concentration, industrial composition and unionization. We also
examine how state level policies such as unemployment insurance benefits and minimum
wage level is associated with income inequality.

Our findings hows that negative labor market conditions, concentration of skilled workers
and racial segregation are positively associated with the level of income inequality. The level
of inequality in these cites also tends to rise grow at a faster pace. While differences in the minimum
wage level do not seem to have any association with income inequality across cities, we find some evidence that differences in unemployment insurance benefits and greater unionization lowered increases in the income inequality.

Thursday, October 30, 2014

How people who can't do math get shafted.

I have a car (an Accord, if you must know) that is 17 months old.  When I bought the car, the dealer offered me a car loan at 0 percent interest for 36 months, so I took it.  Even in the world of very low discount rates, accepting the loan allowed me to get a further small effective discount on the car.

The dealer called me today, saying I could trade the car in for a new car and not increase my payment; the payment would simply reset for 36 months.  I told him I needed to do a little math before calling him back.  The math I did was as follows:

Value of Old Car from Kelly Blue Book + PV of 36 months of payments = Cost of New Car.

Cost of New Car - Edmunds Value of New Car = $6000.

Yes, the dealer was trying to fool me into paying $6000 for...nothing.   In my particular case, he could not profit from informational asymmetry.  But for the person with the average math skills in the US?  That might be a different story.  We know this selling tactic must work sometimes, because otherwise I would not have gotten the call.

The first lesson from all this is we really need to do a better job teaching math.

The second lesson is that, in the meantime, we need to protect consumers from these sorts of practices.

Sunday, September 28, 2014

How the price of a Martini reveals the property value of a city

A Hendricks Gibson is basically a commodity (although the bartender does need to know what she is doing). But a good Gibson at the Starlight Lounge in LaCrosse, Wisconsin is $8; at the Roof Garden at the Peninsula Hotel in Beverly Hills is $16; at the King Cole Bar of the St. Regis Hotel in New York is $22. 
Let's say the cost of the cocktail, including labor, but exclusive of real estate, is $7. Then the implicit rent you are paying for sitting in a bar in LaCrosse is $1; in Beverly Hills on a rooftop is $9; and in NYC is $15. If one consults Zillow, one will find that this ratio of 1:9:15 for real estate in LaCrosse, BH and Manhattan is pretty close to the truth.
One key thing--all these drinks are served in competitive markets--there is true thickness in bars in these markets. And the people at the Roof Garden and the King Cole will let you sit a nurse your drink without hassling you about it.  So while having a drink in these lovely spots is very expensive, it is not a rip-off--one just has to pay the rent.
A drink at, say, Disney World, or FedEx field, doesn't count, because if you want to stay at the Park/Game and have a drink, you have to pay a monopoly price for a drink (in the case of the stadium of the Washington Football Team, you might even pay for a drink that is past its expiration date).
Needless to say, further research is necessary.

Saturday, September 27, 2014

How Piketty's care with language can improve economics

When I was a freshman in college, I read Fogel and Engerman's Time on the Cross.  I loathed the book, because it implicitly endorsed the idea that it is OK, "in the interested of science," to dehumanize those African-Americans that were placed in bondage by viewing them as capital (I loathed it for other reasons as well, but that is for another time.) It also contributed to the broad view currently within much of mainstream economics that it is (1) acceptable to treat human beings as objects, and (2) that it is embarrassing to embrace humanity.  I was embarrassed that the book helped Fogel ultimately won the Nobel Prize in economics.

I thought of Fogel and Engerman again when a recent review in the Economist of Edward Bishop's The Half Has Never Been Told complained that a book based on the perspective of slaves could not be objective.  (To the Economist's credit, it repudiated the review and apologized for allowing it to be printed, but also kept a link to it so that readers could see how misguided it was).  Again, an allegiance to "scientific detachment" led to a bizarre view of an evil institution.  A "detached" view of slavery helps legitimize its practice, and thus is not in any way objective.

And so we come to Thomas Piketty's Capital in the 21st Century.  I have some issues with the book, but I love the first third of it.  I particularly like his treatment of "human capital:"
There are many reasons to exclude human capital from our definition of capital.  The most obvious is that human capital cannot be owned by another person or traded on a market.
The language of economics often treats people as commodities: the phrases "representative agent" and "human capital" are examples of this.   Sometimes these phrases are useful abstractions, but they also contribute to the sometimes pernicious indifference of mainstream economics to issues of justice.  Piketty's take on human capital might make us a little less indifferent.

Monday, December 23, 2013

Hannah Harris Green in The Guardian on Race, Crime and Television

She writes:

The First 48 is an A&E true crime reality show that documents real police investigations for the first 48 hours after a homicide report, including what happens inside interrogation rooms. If this sounds dangerous and ethically questionable, that's because it is. Police accidentally killed a child as A&E's cameras rolled, and a legally innocent man came to beknown as a murderer after of his appearance on the show. Catastrophes like these have led to lawsuits, and now many cities refuse to work with The First 48....

...This portrayal is not representative of American crime statistics. Although homicide arrests are disproportionately high among African Americans, about the same total number of white people are arrested in homicide cases as black people. The First 48's overemphasis on black crime is symptomatic of a larger disrespect for African American communities, which many Americans deem inherently suspicious.....

...Even release from jail isn't necessarily enough to erase the stigma that comes from appearing on the First 48. Tyson Mimms of Louisville, Kentucky sued A&E in 2011 for invasion of privacy and defamation. For over a year, the episode aired repeatedly with an onscreen message saying that Mimms was "awaiting trial", even though his charges were dismissed due of lack of evidence before the episode first aired.

Thursday, October 24, 2013

UW-La Crosse Chancellor Joe Gow has issues with sifting and winnowing.

A geography professor at the University of Wisconsin-La Crosse, Rachel Slocum, made the mildly controversial point in an email to her students that Republicans in the House of Representatives had brought about the partial closure of the US government, and had therefore brought about the closure of the US Census web site.  This closure prevented her students from completing their assignments.  She never used abusive or offensive language.

Her point raised howls among the conservative blogasphere and media; when confronted with this, her boss, UW-La Crosse Chancellor Joe Gow, publicly reprimanded her for expressing a factually based opinion to her class.  In my view, it was his job to back her--not to agree with her opinion, but rather to defend her right to express it.

The irony is that Wisconsin is the very state that in many ways laid the foundation for academic freedom in state supported universities.  When Richard Ely was attacked more than 100 years ago for advocating in his classes on behalf of labor unions, the Regents of the University of Wisconsin rose to defend him.  As the Wisconsin Historical Society writes:
In 1894 Ely was teaching economics at Madison, including the various socialist and communist economic theories gaining popularity at the time. When this was discovered by Oliver E. Wells, State Superintendent of Public Instruction, Ely was attacked in the press not just for teaching left-wing theories to Wisconsin's youth but also for supposedly advising radical activists who were organizing a strike in Madison. When his dismissal was demanded, the university regents investigated his activities. 
After a series of witnesses had testified, the regents found no cause to fire Ely. Instead, they issued a famous statement defending the importance of academic freedom in a democracy. "Whatever may be the limitations which trammel inquiry elsewhere," they wrote, "we believe the great state University of Wisconsin should ever encourage that continual and fearless sifting and winnowing by which alone the truth can be found." That statement has become one of the foundation stones of intellectual freedom in America, and a hallmark of the University of Wisconsin.     
One wonders what Chancellor Gow would have done with Ely.  

Full disclosure: this is personal for me.  I was on the faculty at Wisconsin for 12 years (after getting my Ph.D. there), and was always proud to teach there, in part because of the plaque on Bascom Hill that memorialized sifting and winnowing.  It just made me feel good to walk by it, because I believed that the place I worked believed it.

But even more important, my mother taught at Wisconsin-La Crosse for decades, serving as chair of the English Department there for many years.  She also began the Women's Studies program there--surely, a controversial thing to do at the time she did it.   I can't help but wonder whether Chancellor Gow would have had the vision and the fortitude to support her important work.