Every Saturday, an interesting poll. Every Wednesday, an article on economics.

Do you want to know what I have been reading? Check out my Tweets.

Saturday, March 13, 2010

Poll: What is your favorite comic?

My wife started a blog. She writes on much more interesting topics than economics: Home decorating, photography, crafts, and other fun/useful life tips. Today, her post is about why she loves FoxTrot comics.

In her post, she linked to this excellent FoxTrot cartoon about a good business plan. I'll have to admit that my first thought upon reading the comic was that Paige didn't understand opportunity cost....


I love comics that have to do with economics (and even those that don't). So, for today's post/poll I searched the internet for economics comics. Without further ado, this week's poll question is:

Which of these comics is your favorite?

(a) Foxtrot (above)

(b) Frank and Earnest

Frank & Ernest

(c) XKCD: Iterated Prisoner's Dilemma:


(d) XKCD: Daylight Savings (not really about economics, but appropriate timing)


So, which comic of the four do you like the best? The poll is open for a week. Vote early and often, and on the sidebar. Tell your friends to vote. And, don't forget to set your clocks ahead!

Wednesday, March 10, 2010

Some research I have read on the female-male wage gap

One of the striking empirical facts about the wages of women is that women have consistently made less than men. Even in Biblical times, the rate of pay for women was around 60 percent of men's wages.

One might be tempted to brand this difference in compensation as unfair, as there is no apparent difference between the ability of women and men to perform tasks in a modern economy. Clearly, American politics and women's rights should have made some progress. So, how much progress was made between Biblical times and 1980s in the United States? It turns out: not much. According to a paper in the 1988 Journal of Economic Perspectives by Smith and Ward:
Further, virtually all U.S. government sources indicated that women's wages had been fixed at roughly 60 percent of those of men throughout the post-World War II period.
By many accounts this difference in the compensation of women relative to men has diminished since the 1980s, and it did so in a predictable way (Smith and Ward's paper is an exercise in forecasting what would happen to this gap; they correctly foresaw a converging of wages). By the 1980s, women had already begun acquiring much more useful labor market skills: better training in high-paying occupations, longer tenures and better work experience.

These investments in the labor market have big payoffs, and it was foreseeable that women's labor market prospects would improve from the 1980s. Indeed, they have by most standard measures. Broadly speaking, women no longer make 60 percent of what men make, but 75 to 85 percent, depending on how that gap is measured (within occupation, within education group, within age group, etc.)

In fact, a big debate in labor economics is not whether the compensation-gap has closed significantly since the 1980s, but questions about what this means.

One side of the debate -- espoused in a Quarterly Journal of Economics paper by Casey Mulligan and Yona Rubinstein -- argues that women have had precisely the same opportunities to succeed in the labor market over this time of perceived improvement. Mulligan and Rubeinstein attribute the perceived growth in women's wages relative to men as a difference in the composition of the types of women who enter the labor force.

Here's their argument in three pieces.

First, Mulligan and Rubinstein observe that there are two types of women who do not work. (A) Women whose labor market skill set is poor, but they have better opportunities to work as the head of the household. (B) Women whose labor market skill is excellent, but are married to someone who has even better labor market skill. [There are other types, but this stark contrast is useful to see their point]

Second, M&R note that since the 1980s, the variance in the earnings distribution has skyrocketed for men and women. Low skill workers make a little more than they did in the 1980s, but high skill workers make significantly more. This has increased dramatically the returns to having excellent labor market skill.

Third, M&R observe that more women from group (B) work now than before. The composition of the types of women in the labor force has transformed dramatically toward the higher skilled women who didn't find it optimal to work before. Now, they do and this change has altered the female-male wage gap.

This is an interesting and important paper. Mulligan and Rubinstein tell a story that allows for the possibility that the market changed, but the women didn't. Their paper is interesting because it points out a channel through which women's opportunities relative to men didn't change, but their choices did.

On the other hand, it is not clear that this is the only direction of causation. It is plausible that women changed their human capital investment or family structure choices in response to this dramatic market change. It would be surprising if they didn't. That said, it's useful to have a clear and compelling theory for how the world works, and caveats aside, this paper is both clear and compelling.

*As I mentioned earlier in the post, this is a multiple-sided debate. I have some reading to do to understand the points made by the other side, but once I do, I'll probably include an update in a future blog post.

Saturday, March 6, 2010

Poll: Which number would you call?

This image has been circulating around the economics blog-o-sphere.


One look at it, and you know that it is an image an economist would love [for evidence, there are posts about this image here, and here, and here, and it was supposed to be here, but that's where I lose the e-trail]. One of my friends messaged me with a link to this picture about a week ago, and ever since then, I have seen the picture crop up on blog after blog.

From what I can tell, most people have assumed that the $51 bid will win this auction, but I'm not so sure. It's pretty clear that the $50 bid is the actual owner. With that knowledge, how many people would call the higher bidder? I don't know the answer, so that makes it a good poll question for this week.

Which bidder would you call if you found the iPod Touch?

(a) The original owner ($50)
(b) The overbidder ($51)
(c) Neither. I've been looking for an iPod Touch!

As always, the poll is open for a week. Please vote early and often, and on the sidebar. Tell your friends and economist buddies to vote. I look forward to seeing what you have to say.

Wednesday, March 3, 2010

Performance-Enhancing Drugs and Competition

Today, one of my classes had an intense discussion on the issue of whether athletes should be allowed to use performance enhancing drugs (PEDs). A good friend of mine observed that no one forces athletes to use PEDs and fans love to see enhanced performance. So, my friend conjectured, why is there such a big fuss about the use of PEDs? He even proposed having a superhuman league along with a regular human league to appease others in the room. I think it is a touchy subject, but my friend hits on some good points.

Being an economist, I love watching sports because it is an entertaining forum for competitive behavior. Sporting events are an arena in which I can appreciate suitably ingenious strategies. For example, I am a huge fan of American football, but primarily because American football is a haven for interesting strategy. I'm not fond on seeing muscular guys get concussions, but I am fond on seeing a good game with some good strategy.

Given my inclination for watching sports, a natural question to ask is "What effect do PEDs have on the strategic nature of the game?"

In a calculating sense, PEDs have become part of the strategy. In this respect, it is just like training or batting practice or -- even -- drawing up the plays. Recognizing this aspect of PEDs is central to identifying what people identify as wrong with them. If a PED was not a substance that is injected into the athlete, but a specialized training regimen, people would not have a problem with it. That said, if eating raw spinach out of a can allowed someone to hit home runs like Mark McGuire did on his chase for 61, people would not have a problem with that activity either.

Apart from being something that athletes put in their bodies, there's something else going on with PEDs. The illegitimate status of PEDs comes from a confluence of two factors. First, taking a PED is an unnatural attempt to circumvent our typical human limitations. Second, with most PEDs, there are probably some adverse side effects. Coupled with the intense competition of sport, PED use by some players may induce competitors to take the drugs, and then everyone gets to suffer the side effects.

You may recoil and tell me that athletes willingly entered into this contract before joining the sport. That's true, but I would like to draw the analogy between these side effects of PEDs and the motivation for having rules that govern the safety of play in a sport. It is a penalty to grab someone by the facemask in football. It is also a penalty to "spear" (tackle by leading with your helmet down).

These rules make a sport civil, but they also protect the players from the dangers of intense competition in their sport. Rules protect athletes from each other (in the case of a facemask) and from themselves (in the case of spearing, a primary concern is neck injuries on the part of the tackler). At a basic level, rules banning PEDs perform the same function as rules governing the safety of play. As fans, we love to see intense competition, but the savages of competition give us pause.

My point is that there are two sides to the debate on the use of performance enhancing drugs. As an interesting counterpoint, I conjecture that PED use is commonplace in our society. To have a productive morning or evening, most people I know have harnessed the benefit of a favorite PED of mine. What is this performance enhancing drug? Coffee.

Saturday, February 27, 2010

Poll: What is the appropriate role for online learning?

If you have been following my blog, you have noticed that I have been posting mini-lectures on microeconomics to YouTube (in an effort to freely provide a close substitute for my book and solutions manual). My YouTube channel has been surprisingly popular: So far, it has more than 230 subscribers, and my videos have been viewed over 35,000 times.

Aside from the public comments on my videos, I have received e-mails and other solicitations regarding my YouTube project. Some are from students who want me to help with their homework. Others are from online learning sites that want to feature my videos.

Without giving too much away about why I am posting these videos (you can see my introductory video here), I'm going to lead into the poll question for the week.

What role should online learning play?

(a) Online learning should take over. Classrooms are for dinosaurs who use actual pencils.
(b) In-class instruction is irreplaceable. Online learning is too passive to allow for real learning.
(c) Some hybrid is optimal. Information transmission is most efficient through the Internet, but questions are better to answer in person.

As with all polls on this site, the poll is open for a week. Please vote early and often (on the sidebar). Tell your friends, your followers, your subscribers and your students to vote as well. I'm interested in hearing what you have to say.