American Economic Association Meeting in Boston


The American Economic Association is holding its annual meeting in Boston, January 3-5, 2015. The event is very reasonably priced for non-members and is packed with interesting speakers. One of the good things about economics is that many papers are understandable by anyone with a good high school math background.

Saturday, January 3

Saturday at 0800 is going to be an exciting time. Gregory Mankiw, the Harvard professor who sometimes steps out into the popular realm (example New York Times article) leads “A Discussion of Thomas Piketty’s Capital in the 21st Century.” (Note that a 10:15 paper, by two Swedish economists looking at “socio-economic mobility across three generations in Sweden in the period 1813-2010” found that, for earnings, there was “no association at all between grandfathers and grandsons” (so Piketty is wrong about dynastic accumulation), but for social status/class there was a “clear association” (leading to genteel poor?).) Simultaneously in the Hynes Center, Room 201, Maya Rossin-Slater and Miriam Wust present “Parental Responses to Child Support Obligations: Causal Evidence from Administrative Data” (full text). This is important because child support systems are designed under the presumption that parents’ behavior won’t be affected by writing child support checks to the person who sued them and/or that paying $50,000 per year to a plaintiff will improve the quality of parenting delivered every other weekend (embedded in a larger system of custody and divorce law that assumes people won’t follow economic incentives that are held out). Here’s how we summarized the paper in our forthcoming book:

[the authors] found that what a mother might have gained financially from child support, the child lost in terms of reduced contact with and effort from the father: “mothers, who have substantial say in custody decisions [in Denmark], have the opposite incentive to refuse to share custody and instead receive the higher payment [for child support, compared to shared custody]. … fathers may treat financial transfers as substitutes for other forms of non-pecuniary investments and contact with children, which would also lead to a negative relationship between child support obligations and father-child co-residence.” The economists found that “an increase in the father’s obligation may lead to less attachment to his existing children and more time available to invest in new offspring.” (See the “Divorce Litigation” chapter for our interviewees’ perspective on how the main opposed interests in a divorce lawsuit are the plaintiff parent and the children, not the plaintiff and adult defendant.) The researchers also found that fathers who were ordered to pay more child support were more likely to have new children, thus diluting the time and energy available to prior children, and that fathers who were ordered to pay more child support reduced their working hours due to “market distortions generated by the ‘tax-like’ nature of child support mandates.” Mothers who received more child support cash for existing children were motivated to have additional children, either with or without a live-in partner: “mothers receiving higher child support payments for current children may expect higher transfers for future children if they separate again.” Note that this research was done with data from Denmark, where child support is tax-deductible and capped at $8,000 per year. The effects that they observed would presumably be larger in the U.S. where child support payments are not tax-deductible and can be $25-100,000 per year.

The authors also question an additional building-block assumption of the U.S. child support system. The government assumes that a typical woman who has custody of a child and cannot meet all of her own expenses from child support revenue will, rather than work, turn to the various taxpayer-funded welfare programs offered to women with children. Thus a dollar of child support extracted from a custody lawsuit loser is a tax dollar of welfare saved. Rossin-Slater and Wust say that it isn’t so simple: “Our results suggest that although child support mandates may shift some of the cost of single-mother household support from welfare programs to the non-custodial fathers, they also pass part of this cost on to other government programs such as disability insurance and early retirement.” (i.e., fathers in Denmark will retire or declare themselves disabled in order to cut their child support obligation from $8,000 per year back to the “basic/minimum” $2,000 per year)

If you’re a shareholder in a public company that underperforms the S&P 500 and want to know why most of what would have been your dividend money nonetheless goes to an apparently mediocre CEO, there is a “CEO Incentives and Compensation” session at 10:15 am.

Many sessions seem to be aimed at trying to understand the Collapse of 2008 and predict the next one. Also at 10:15 am on Saturday is a session looking into why the ratings agencies turned out to be worthless. “Did Government Regulations Lower Credit Rating Quality?” by Behr, Kisgen, and Taillard, concludes that “defaults and other negative credit events are more likely for firms given the same rating if the rating was assigned after the [1974] SEC action compared to before. … the market power derived from the SEC led to ratings inflation.” Did Jack Nicholson’s sponsorship of a child in About Schmidt (awesome movie, though very different from the novel; disclosure: my cousin Harry produced it) make a difference? At 10:15 session “Developing Hope: The Impact of International Child Sponsorship on Self-Esteem and Aspirations” says “yes” (on average). History buffs will skip all of these 10:15 sessions and head to the Boston Marriott Copley for a session on “The Economy of Ancient Israel.” The “dismal science” does not shy away from looking at war. At 10:15 session on “conflict and development” includes a paper by David Yanagizawa-Drott that villages that suffered the most violence in the Rwandan genocide had the highest living standards six years later: “These results are consistent with the Malthusian hypothesis that mass killings can raise living standards by reducing the population size and redistributing productive assets from the deceased to the remaining population.” At “Health Insurance Reform” session confirms the world’s most stuffed-with-cash health care system is not going to suffer any lean years due to government tweaks. A “Competitive Bidding in Medicare” paper concludes that there is little actual competition among America’s health insurers. A session on “The Minimum Wage, Family Income and Poverty” reveals that economists have no idea whether or not a higher minimum wage reduces poverty.

Are those crazy Super Bowl ad rates justified? A paper in a 12:30 pm Digital Media Economics session concludes “yes” by looking at movie ticket sales (for movies advertised during the Super Bowl) in the cities in which Super Bowl teams are based and therefore in which more fans are watching. Why is the U.S. a more tolerant society today than it was in the 1970s? A paper by Berggren and Nilsson in the 12:30 “Economic Freedom and Minority Groups” session suggests that it might be due to the deregulation started by Gerald Ford and the tax rate reductions started by Ronald Reagan: “We suggest, as one explanation, that a greater scope for voluntary transactions and private usage of incomes and wealth creates more meetings that increase understanding for people different than oneself – or at least for the value of letting people different than oneself have their say.”

At 2:30 there is a session on “Explaining the Energy Paradox.” Why do Americans buy fuel-inefficient cars and houses? Why has no American residential developer carved out a niche in German-style double-wall houses that can be heated or cooled for almost nothing? Why did the Federal Weatherization Assistance Program not work? (“overly optimistic engineering estimates of returns to the energy efficiency investments,” say the economists; translation: Americans are stupid). “Investor Behavior,” at the same time, explores the 2012 8X increase in the value of shares of DI Corp. “because the company’s chairman and CEO is [South Korean rapper] PSY‘s father.” (translation: investors worldwide are stupid; related: MIT Gangnum Style) A 2:30 session on “Redistributive Taxation” includes “Income Inequality Influences Perceptions of Legitimate Income Differences” by Harvard’s Kris-Stella Trump. She finds that people think the system under which they live is a good one: “When income differences are (perceived to be) high, the public thinks of larger income inequality as legitimate.” She calls this “system justification motivation.” [We found this to be true when interviewing divorce litigators in different states. Generally a litigator in State X thought that State X’s system was fair and just and so did a litigator in State Y, despite the fact that State’s X and Y had completely different outcomes for the same fact patterns.] Larry Summers talks about “Secular Stagnation” in a 2:30 pm session as well. “Do Vehicle Crash Tests Save Lives? Impacts on Market Decisions and Accident Mortality” by Damien Sheehan-Connor of Wesleyan says that Americans bought safer cars in response to Insurance Institute for Highway Safety tests and manufacturers designed safer cars in response to the testing (translation: Americans are not stupid). Why do venture capital firms underperform the S&P 500? Three Harvard researchers in “The Cost of Friendship” ” find that venture capitalists who share the same ethnic, educational, or career background are more likely to syndicate with each other. This homophily reduces the probability of investment success, and the detrimental effect is most prominent for early-stage investments..” Why do hedge funds underperform the S&P 500? “Recovering Managerial Risk Taking from Daily Hedge Fund Returns: Incentives at Work?” by Kolokolova and Mattes finds that “During earlier months of a year, poorly performing funds reduce their risk. The risk reduction is stronger for funds with higher management fees, shorter notice period prior to redemption, and recently deteriorating performance, which is consistent with a managerial aversion to early fund liquidation and loss of future management fees. Towards the end of a year, poorly performing funds gamble for resurrections by increasing risk.” Why does money invested in private equity (even with geniuses such as Mitt Romney at the helm!) tend to underperform the S&P 500? Korteweg and Sorensen say that “Based on past performance alone, an investor needs to observe an excessive number of funds to identify the PE firms with top-quartile expected returns, implying low investable persistence.”

The 2:30 slot includes a “Puerto Rico and Cuba” session that would no doubt be enlivened by a panel discussion about the recent political changes. The papers already scheduled show that Puerto Rico’s government policies starting around 1940 have led to the county becoming impoverished from an income point of view: “After seven decades of government sponsored development efforts, a benign macro environment compared to the rest of Latin America, and massive transfers from the mainland, GNI per capita remains at Uruguayan or Argentinian levels.” On the other hand, presumably due to federal welfare programs, consumption per capita is quite high: “Puerto Rico has succeeded in ensuring a standard of living for its citizens largely divorced from the productivity of its workers.” For actual divorce issues, there is a 2:30 pm “Structural Models of Family Interactions” session that looks at “Welfare Effects of Divorce Legalization” in Chile and “Deadbeat Dads” (trying to answer the question of why women would get pregnant with low-wage fathers). “Unemployment Insurance and Disability Insurance in the Great Recession” calls into question the assumption that Americans go on SSDI when their unemployment insurance runs out: “Only 28% of SSDI awardees had any labor force attachment in the prior calendar year, and of those only 4% received UI income.”

Is it all about the Benjamins? A 2:30 session “Well-Being: Measurement and Policies” suggest that maybe we can move “Beyond GDP”. Weina Zhou’s study of Chinese youths “sent down” for hard manual labor actually ended up doing better as 40-55-year-old adults and “these findings are robust against a variety of family backgrounds.” (time to plant some daffodil bulbs!) A “Cycling to School” paper finds that giving girls bicycles was “much more cost effective at increasing girls’ secondary school enrollment [in India] than comparable conditional cash transfer programs in South Asia.”


Sunday morning at 0800 we can learn that Americans are awesome malingerers: “increasing [worker’s compensation] benefit generosity by 10 percent leads to 2 to 4 percent increase in injury duration.” Planning to mortgage the house to send the kids to a private school full of Tiger-Mommed achievers? “Top of the Class: The Importance of Ordinal Rank” by Murphy and Weinhardt suggests that this is a bad idea. Kids who score at the top of their primary school class develop more confidence and do better in secondary school. Planning to stay at home or hire a top-shelf nanny so that your toddler won’t have to be parked in day care? “Early and Bright? Child Care for Toddlers and Early Cognitive Skills” by Drange and Havnes found that Norwegians randomly assigned to start day care at 15 months rather than 19 actually ended up doing better at age seven. Planning to give your children a lot of dinner-time lectures about different career options, backed up by BLS data? “Educational Choice and Information on Labor Market Prospects: A Randomized Field Experiment” (Pekkarinen et al.) did this in 97 randomly chosen high schools in Finland. There was no effect on the students’ decisions to enroll in higher education programs. An entire 8:00 am session is devoted to “Effects of the Minimum Wage Policy in China” and Fang and Lin conclude that “minimum wage changes had led to significant adverse effects on employment in the Eastern and Central regions of China, and had resulted in disemployment for females, young adults, and low-skilled workers.” Did King Bush II’s TARP program (a.k.a. “take all of the money and give it to the Wall Street banks”) benefit anyone outside of Manhattan? Berger and Roman of University of South Carolina conclude that it did (preview paper).

At 10:15 one can learn about “Lying, Beliefs and Psychological Games.” A paper by Smeets, et al., “Lying, Guilt, and Shame” (preview) concludes that avoiding shame is a much more powerful motivator for truth-telling than avoiding guilt. This is consistent with our interviews with divorce litigators, who reported that custody and child support plaintiffs were comfortable lying in order to win their lawsuits because they were doing it “for the benefit of the children.” (see this story on Meri Jane Woods, for example, convicted of downloading child pornography and yet unashamed because “I only wanted to protect my children [by cementing a previous custody victory]”). A 10:15 paper in the “Traffic” section confirms a theory that I have published here from time to time (example from 1.5 years ago) that people with money will abandon the suburbs due to the U.S.’s descent into Third World levels of traffic congestion. “Traffic Congestion and Gentrification” (Martin and Nicholson) says that there is “a connection between gentrification pressure and increased traffic congestion levels within [metropolitan areas].” “Divergence of Fortune: The Unequal Effects of Economic Liberalization in India” (Kali and Sarkar) notes that states within India that had a lot of natural resources also had a lot of “state planning” and have ended up falling far behind other states due to “red-tape, bureaucracy and unionization.” Does government intervention work better in the U.S.? “Do Commercial Health Care Prices Influence Medicare Spending?” (Romley and two others from USC) suggests not: “We instrument for commercial prices and hospital concentration using population-based instruments and find that a market-level commercial price index that is 10% below its average is associated with Medicare spending that is 3.7% above its average (p < 0.01). These results suggest that providers may respond to low commercial prices by shifting service volume out of the commercial sector into Medicare.”

Sunday at 10:15 is also a time for feminist economics. Heidi Hartmann notes that “Women were at the heart of the Marxist analysis of capitalism … From Wages for Housework to women as serfs/peasants in a feudal mode of production to women as the reserve army of the unemployed, theorists had a lot to say about women’s economic roles in a capitalist society. … The feminist contribution was to explicate both the household and labor market components of women’s work in an advanced capitalist society that is also patriarchal, and to also explore the role of the state in regulating women’s labor power, as well as ameliorating some of the worst abuses of women.” Julie Matthaei of Wellesley College talks about “women’s unpaid reproductive work.” This seems like an odd subject given that Wellesley is an extremely prosperous suburb of Boston. A woman who had sex with two typical middle-aged male Wellesley residents could get paid more after-tax cash for her “reproductive work” than could a Wellesley College professor for teaching (e.g., a $250,000/year child support defendant would yield an annual cash revenue of $40,000 per year for 23 years (single child) under the Massachusetts Guidelines; glassdoor says that a Wellesley College assistant prof would earn about $80,000 per year pre-tax).

At 12:30 Andres Vargas of Purdue presents “Effect of Universal-Free School Breakfast on the Prevalence of Double-Dipping and Obesity among Adolescents: A Time Use Perspective” and notes “Preliminary results indicate a significant positive association between the availability universal-free breakfast programs and the prevalence of double-dipping [eating two breakfasts, the first at home] among adolescents.” That’s followed by “Breaking Bad: Are Meth Labs Justified in Dry Counties?” by three University of Louisville researchers. They found that meth labs are more common in dry countries and “[Kentucky] could reduce the number of meth lab seizures by 17 to 30 percent per year if all counties were wet.” Up against these papers is a session on “The Economics of the Internet” that starts with a paper on how social media such as Facebook encourage people to read news “with more emotional content and articles that show an individual’s perspective” (i.e., Americans will flee further from the boring statistics and vote their hearts to a larger extent). Glenn and Sara Ellison from MIT prove that the Internet works by showing that online prices for used books are higher than offline prices, indicating a better match between buyers and sellers online.

What if we all hunker down in our air-conditioned houses all summer using the efficient Internet? A Sunday at 2:30 pm session on climate change includes “Temperatures and Growth: a Panel Analysis of the U.S.” and the three economists note that “i) rising Summer temperatures depress growth, and ii) rising Fall temperatures increase economic growth. However, Summer temperatures are expected to increase at a faster pace relative to that of Fall temperatures. … , in net, rising temperatures can decrease the growth rate of US GDP by as much as one third, thus resulting in large welfare losses.” Burke of Stanford and Emerick of UC-Berkeley follow up with “Adaptation to Climate Change: Evidence from United States Agriculture” and depressingly note that “Longer-run adaptations appear to have mitigated less than half — and more likely none — of the large negative short-run impacts of extreme heat on productivity. Limited recent adaptation implies substantial losses under future climate change in the absence of countervailing investments.”

A competing session at 2:30 titled “Entrepreneurial Finance” includes a paper on “non-practicing entities” that file patent lawsuits: “Patent Trolls” by Cohen, et al. The paper notes that “NPEs typically target firms that are busy with other (non-IP related) lawsuits or that have high probability of settlement. Lastly, we show that NPE litigation behavior has a negative real impact on the future innovation of targeted firms.” As NPE litigation is roughly half of patent litigation in the U.S., it pays for a lot of luxury SUV purchases. The same-time “Corruption of Social Provisioning under Capitalism” session explores that phenomenon. First, it is worth nothing that this is one of many sessions and papers that use the term “social provisioning” as the assumed goal of an economic system, i.e., providing each human being in a society with the stuff that he or she needs. This is an alternative to the classical economics perspective of “resource allocation” or “market allocation of resources” that doesn’t fit developed societies today (since an American or European who does not work is allocated more than nothing). On the subject of how we ended up with a country full of paved roads and monster SUVs, Mary Wrenn from Cambridge UK offers “Envy in Neoliberalism: Revisiting Veblen’s Invidious Distinction” and notes that “Pre-capitalist societies attempted to suppress envy; familial and community relations held the emotion of envy in check through social sanctions. Capitalism, however, encourages envy. … According to advocates of neoliberalism, inequality serves an important social function – it is the great motivator, without which, individuals would not have incentive to improve. Inequality and by extension envy, are thus heralded as the prime catalysts of economic activity. As well, this research examines the role of schadenfreude and the shaming of the poor.”

What if every American had a good education? Would there still be crime? A 2:30 pm paper, “The Effect of Degree Attainment on Crime: Evidence from a Randomized Social Experiment,” says “We examine the effect of educational attainment on criminal behavior using the random assignment into Job Corps (JC) – the country’s largest education and vocational training program for disadvantaged youth… Our results indicate that the attainment of a degree is estimated to reduce arrest rates by at most 11.8 percentage points.”


Monday, January 5 starts off with an 8:00 am session on the auto industry. “Accelerator or Brake? Microeconomic Estimates of the ‘Cash for Clunkers’ and Aggregate Demand” (Melzer, et al) calculates that the $3 billion “cash for clunkers” program of summer 2009 was an almost complete waste of tax dollars, with no effect on the total number or fuel efficiency of cars purchased. “Food Choices, Novelty Consumption and Health: Evidence from the East German Transition to Capitalism” (Ziebarth and Dragone) confirms a pet theory of mine, i.e., that Americans eat more because there are so many different kinds of food here (e.g., 2004 posting): “the larger consumption of previously unknown or unavailable products may increase BMI and lead to persistent obesity. … The empirical evidence shows that, shortly after the fall of communism, East Germans changed their eating habits, gained weight, became more obese and less healthy. The change in eating habits and weight is still detectable a decade after capitalism increased food choices and welfare.” Speaking of food… “The Effect of SNAP Take-up on Shopping Behavior: Evidence from a Retailer Loyalty Panel” (Hastings and Shapiro) found that people who got food stamps stopped using coupons: “We find that following the start of SNAP benefits, households use significantly fewer coupons in their shopping. The effect is not driven by the composition or quantity of items purchased and is present only for SNAP-eligible items. We interpret the findings in terms of moral hazard and mental accounting in shopping effort.”

Also at 8:00 am is “Dumb and Dumber: The Trading Activity of Institutions vs. Retail Investors” (unclear if Jonathan Gruber was involved in crafting this session title). Peress and Schmidt report that day traders slow down their trading, and therefore do better, when there are sensational news stories keeping them “glued to the TV.” Jacobs and Hillert found that “stocks with names early in alphabet have about 5% to 15% higher trading activity and liquidity.” Devault, Sias, and Starks find that “institutional investors are the sentiment traders [more so than supposedly dumber individual investors] whose demand shocks drive prices from value.” The wrap-up is “Institutional Investors and Stock Return Anomalies” by Edelen, et al,: “trading against institutions significantly improves expected returns from anomaly strategies.”

An 8:00 session paper, “Leadership and the Single Woman Penalty: A Role Expectations Account of Early Career Barriers to Promotion for Female MBAs” (Merluzzi and Phillips) says “We contend that single non-mother status is inconsistent with the role expectations of both the leadership typically associated with men (agentic) and also women (communal) – resulting in a promotion penalty toward single women being considered for leadership positions. … we find single women the most disadvantaged group, particularly those with exceptional quantitative and analytical abilities.” So a single career woman who goes into a bar in Wisconsin and then spends the night with a dermatologist may be actually to earn more from the resulting baby than the $3 million in tax-free child support (over 18 years); getting out of “single non-mother status” and into “heroic single-mother status” could improve her chances of promotion to managerial jobs. (Note that child support in Wisconsin depends only on the custody lawsuit loser’s income; a woman who collects child support could get a job paying $10 million per year and her entitlement to support would not be impaired.)

At 10:15 on Monday there is another session on climate. “Adapting to Climate Change” (Barreca, et al.) says that the good news is that if you have an air-conditioned home you won’t die from a heat wave (the bad news is that fossil fuels will likely be burned to run that air-conditioner, thus making future heat waves more common). If breaking all of the windows on a city block and then paying people to re-glaze them is a guaranteed way to grow the GDP, isn’t an earthquake that breaks all of the windows in a city even better? “The Causal Effects of Environmental Catastrophe on Economic Growth” (Hsiang and Jina) says, unfortunately no: “The data reject long-standing hypotheses that disasters stimulate growth via “creative destruction” or that short-run losses disappear following migrations or transfers of wealth. Instead, we find robust evidence that national incomes decline, relative to their pre-disaster trend, and do not recover within twenty years.” How is the government helping? “Federal Crop Insurance and the Disincentives to Adapt to Extreme Heat” (Annan and Schlenker) says that “the federal crop insurance program gives farmers a disincentive from engaging in all possible adaptation strategies to cope with extreme heat thereby exacerbating potential losses.”

If you’re not depressed enough by Earth turning into Venus, the 10:15 slot also includes a session on how a lot of humans currently at work will be replaced by machines, including robots. According to the Harvard, MIT, and University of Chicago eggheads, the result will be more unemployment and income inequality. Laws requiring higher minimum wages should accelerate this trend because when wages for low-skill workers are high “automation increases [and] reduces the labor share [of national income].” A parallel session titled “Housing” shows that if you invite four economists over for dinner you’ll hear five opinions. “The Effect of Underwater Mortgages on Unemployment” (Schultz and Mumford) says “We find that underwater homeowners are twice as likely to move and are no more likely to experience a period of unemployment. We find no evidence to support the claim that the house lock from underwater mortgages caused an increase in structural unemployment.” while “Debt Overhang and Housing Demand – Evidence from United States Housing Markets” (Gupta) says “I find strong evidence supporting the hypothesis that debt overhang constrains the moving decisions of homeowners hence labor mobility…”

Was No Child Left Behind a complete waste of time and effort? “Performance Standards and Employee Effort: Evidence from Teacher Absences” (Gershenson) says that, at least in scrutinized schools, it reduced teacher “mental health days”: “teacher absences fell by about 10 to 15% and the probability of a teacher being absent 15 or more times in a given school year fell by about 30% in schools subject to increased accountability pressure in the second year of NCLB. The reductions in teacher absences in treated schools were primarily driven by within-teacher increases in effort and were particularly large among more effective teachers.” Why are such a small percentage of working-age Americans working? “Manufacturing Decline, Housing Booms, and Non-Employment” (Charles and two colleagues from University of Chicago) says that it is because of the decline of U.S. manufacturing, but people didn’t notice in the 2000s because of the (temporary) housing boom.

Have Americans made a sensible long-term choice in deciding to allocate most national wealth to the construction of McMansions filled with imported flat-screen (now OLED!) TVs? Two Turkish economists give their answer in “Collateral Damage: How Mortgage Loans Decrease U.S. Savings”:

mortgage payments have a substantial negative impact on both personal and private saving rates in the US.

We also find partial but robust crowding out effect of public saving rate on the two saving rates.

Why should we be concerned about a low saving rate? The primary reason is that a low saving
rate constraints the amount of investment that the economy can undertake.

… government policies designed to encourage mortgage borrowing, such as tax deductibility of mortgage interest payments, will have an impact on future economic growth through their impact on saving rate.

Who pays when the McMansions aren’t worth as much as originally hoped? “Distributional Costs of the Housing-Price Bust” (Bansak and Starr) says “housing busts amplify effects of downturn on less-advantaged groups.” (i.e., poorer people get hit the hardest). [Pair this one up with “The Sprawling Benefits of Housing Tax Policy” (Hanson and Hawley) at 1:00 pm: “We document that the benefits [of federal tax subsidies for housing] are concentrated in the suburbs of metropolitan areas and that they are unevenly distributed to higher income households within metropolitan areas.” That paper is followed by Kyle Mangun’s “The Global Effects of Housing Policy” which documents the energy savings from “removing the federal tax subsidy for housing. The primary channel is reducing the amount of housing consumed per person, and the secondary channel is in reallocating population from inefficient to more efficient locations.”]

“Availability of Family-Friendly Work Practices and Implicit Wage Costs: New Evidence from Canada” (Fakih) says that workers pay for family-friendly employment (e.g., including on-site day care) by accepting lower cash wages and that unionization does not affect the extent to which a company will have family-friendly practices. Translation: there is no free lunch.

Much of the conference concerns the wars between workers and employers and between poor voters and wealthy targets of taxation. Monday’s 1 pm “Economic History” session is mostly about shooting wars. Researchers looking at health data from Germany and China independently conclude that being an infant during a shooting war is bad for long-term health. The same session includes “Seven Centuries of Economic Growth and Decline” (Fouquet), which isn’t as exciting as the title suggests, though it tends to confirm Gregory Clark’s Farewell to Alms in that the industrial revolution was not the only engine (so to speak) of sustained economic growth.

The French government managed to get more people to start companies. Did it grow the economy? “Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France” (Hombert, et al) suggests that it did not: “there are large crowd-out effects: Employment in incumbent firms decreases by a similar magnitude as the number of new jobs created in start-ups.” What kind of a crazy person would start a company anyway, when wonderful career opportunities exist in the professionals and in established firms? The answer is “people with bipolar disorder” according to “Mental Health and Entrepreneurship” (Dahl and Moser): “individuals with bipolar disorder are substantially more likely to become entrepreneurs.”

Are doctors with their Hippocratic Oath immune to financial incentives? “Financial Conflicts of Interest in Medicine” (Engelberg, et al) says they are still homo economicus underneath the white coat: “Using data from twelve drug companies, more than 300,000 physicians and nearly one billion prescriptions, we find that when a drug company pays a doctor he is more likely to prescribe that company’s drug. A payment from a pharmaceutical company corresponds to, on average, an additional 29 Medicare prescriptions per year, and this number rises to nearly 100 prescriptions if the payment is at least $1,000.” [Related: my review of Bad Pharma.]

“… you stand on the street today and spit, you’re gonna hit a college man,” said Joe Keller in All My Sons. If the U.S. is so replete with college graduates why aren’t we growing faster? “The Labor Market Returns to Colleges and Majors: Evidence from Chile” (Hastings) says “We show that most of the gains from higher education accrue to students attending highly selective institutions. The average gain from attending low-selectivity degrees, including private universities and technical and professional degrees are on average near zero, with many low selectivity degrees offering poor investment returns relative to no college.”

Piketty and other enthusiasts for new and higher taxes may want to head over to the 1:00 pm “Tax Compliance” session to see how many people will sit still to pay these. “Should I Stay or Should I Go? Tax-Induced Mobility and the Taxable Income Elasticity in Switzerland” (Martinez) says that both “top income” and middle-income Swiss moved from high-tax cantons to low-tax cantons and that “Switzerland, with its pronounced federal institutional setting and strong tax competition, serves as an ideal natural laboratory to study such tax related questions and to thereby learn more about tax induced mobility responses…” A study of Mexicans, “Local Public Goods and Property Tax Compliance: Evidence from Residential Street Pavement,” (Navarro and Quintana-Domeque) found that people were more likely to pay property tax when they could “observe public goods being delivered.”

Carolina Castilla of Colgate University went to India to conduct a “trust game” among married couples and reports her results at 1:00 pm in “Trust, Reciprocity and Trustworthiness between Spouses: Evidence from a Field Experiment in India”: “In these households, women are less trusting and less trustworthy than men because they receive more money and send less in return.”

As I noted in “Unions and Airlines”, lending money to a unionized airline is probably a bad idea (which is maybe why the industry has ended up with most of the expensive hardware owned by leasing companies?). This is confirmed with more rigor by “The Elephant in the Room: The Impact of Labor Obligations on Credit Risk” (Favilukis and Lin).

“Environment and Health,” at 1:00 pm in the Sheraton Boston’s Hampton Room, has a paper concluding that when nuclear power plants have been shut down and replaced by coal-fired plants, infants suffered from lower birth weight in those areas. I personally love Daylight Savings Time, but “Spring Forward at Your Own Risk: Daylight Saving Time and Fatal Vehicle Crashes” (Smith) says that DST “does not save energy and .. imposes high social costs on Americans, specifically, an increase in fatal automobile crashes.”

The last session described is in some ways the most future-oriented: “Returns to Child and Education Interventions”. It opens with “Returns to Schooling around the World” (Patrinos and Montenegro). “Demystifying the East Asian Education Tigers” says that Asian children do better on worldwide achievement tests because of “private tutoring and allocation of household time to [education]” not because they have better public school systems. [This is consistent with my write-ups of the Smartest Kids in the World book, e.g., on Korea versus Finland and the U.S.]

I’ll write more after attending the conference but my summary from reading the preliminary papers is that the good news and bad news are the same. The bad news is that humans are motivated by money and will assiduously follow economic incentives, even when the dollars involved are small. But that’s also the good news. If you want to fix a problem you just have to change the incentives so that people aren’t making money when they exacerbate the problem.


The program shows that Marxism is alive and well within the field of Economics, albeit renamed “Marxian.” Ismael Hossein-Zadeh of Drake University, for example, notes that “the Marxian theory of subsistence or near-poverty wages provides a more cogent account of how or why such poverty levels of wages, as well as a generalized predominance of misery, can go hand-in-hand with high levels of profits and concentrated wealth than the Keynesian perceptions, which view high levels of employment and wages as necessary conditions for an expansionary economic cycle.”

Note that there is also a continuing education program right after the conference. The “Health Economics” session is headline by Professor Jonathan Gruber of MIT, most famous for talking about the “stupidity of the American voter” in not understanding how much of their hard-earned wages would be transferred into the pockets of the health care industry by the Obamacare system.

4 thoughts on “American Economic Association Meeting in Boston

  1. Very nice summary. Thank you.

    Two comments:

    1. The intersection between government and marriage/child raising has indeed become bizarrely unfair to the productive spouse/gamete contributor. Massive reform is needed and I hope your efforts help bring about that reform. Until then one should consider transferring any significant assets to the next generations in an appropriate trust. (Even though inherited assets are generally “separate” and not subject to marital claims, practical considerations often blur the protective feature of the “separate property” concept.) Also, education is the most immediate way to ameliorate the effects of the punitive system which has developed. Productive people need to understand the extreme financial risk that comes from marriage (a rite which serves almost no necessary function) and from the more essential act of procreation. One should be very sure that their unmarried and childless loved ones know the probable returns (which are decidedly negative) that the government has imposed on those two life decisions.

    2. The super-insulated house, in its current state of engineering, is not appropriate for the southeastern U.S. The problems involve humidity, air-conditioning and mold. I don’t think that winter heating is an issue, but in the other seasons if ANY moisture can get inside a wall cavity, it can eventually hit a cold surface (cooled by A/C) where it will condense. If the wall doesn’t “breathe” (anathema to the passivhaus concept) then mold will result. I have seen this. On the other hand, if the design relies on something other than a highly impermeable wall cavity, that would be a different story.

  2. Very interesting summary- thanks.
    I was wondering what weather conditions had to do with meth labs when I realised you were referring to that quaint American penchant for banning stuff … like alcohol 🙂

  3. You reference to social mobility in Sweden reminded me of something that I read by Gregory Clark, who you’ve mentioned with admiration in the past. Referring to a study on social mobility in Sweden, he wrote the following:

    To a striking extent, your overall life chances can be predicted not just from your parents’ status but also from your great-great-great-grandparents’. The recent study suggests that 10 percent of variation in income can be predicted based on your parents’ earnings. In contrast, my colleagues and I estimate that 50 to 60 percent of variation in overall status is determined by your lineage. The fortunes of high-status families inexorably fall, and those of low-status families rise, toward the average — what social scientists call “regression to the mean” — but the process can take 10 to 15 generations (300 to 450 years), much longer than most social scientists have estimated in the past.

    He attributes this lack of mobility mostly to genetics.

    The notion of genetic transmission of “social competence” — some mysterious mix of drive and ability — may unsettle us. But studies of adoption, in some ways the most dramatic of social interventions, support this view. A number of studies of adopted children in the United States and Nordic countries show convincingly that their life chances are more strongly predicted from their biological parents than their adoptive families. In America, for example, the I.Q. of adopted children correlates with their adoptive parents’ when they are young, but the correlation is close to zero by adulthood. There is a low correlation between the incomes and educational attainment of adopted children and those of their adoptive parents.

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