Pursuit of Truthiness

my gut tells me I know economics

Just the Economics of Contraception Mandates

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Today the Supreme Court ruled that closely held corporations like Hobby Lobby cannot be compelled to cover contraception as part of their health insurance. Most people will interpret this decision in terms of respect and status- they like it because they think it shows respect for religious beliefs, or dislike it because they think it lowers the status of women.

 

If you are one of the people for whom politics is more about policy than status (there are dozens of us!), you will probably find these papers by me and RomneyCare/ACA architect Jonathan Gruber enlightening. Rather than insisting that the decision should make you happy or outraged, I will leave it to you to connect the dots on what these papers mean for contraception mandates as policy.

Written by James Bailey

June 30, 2014 at 3:57 pm

How is Regulation like a Snake-Eating Gorilla?

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People as diverse as Alfred Marshall, Thorstein Veblen, Freidrich Hayek, and Russ Roberts have said that economists try to be physicists when the subject really has more in common with biology. But while people have said this since at least the 1800’s, there are only a couple areas where biology and economics have blended- game theory, evolutionary economics, agent-based computational economics, and some shared statistical techniques. We are still, for the most part, aspiring physicists.

 
While the actual physics-lite techniques we use work well enough, I think biology is a much better source of metaphors to describe the economy. One I don’t recall having heard before is invasive species. Suppose a new invasive species enters an ecosystem, leading to bad results for the native species. People clamor for the government to “do something”. So the government releases a new invasive species in order to take out the old one. This does not go as planned. In an episode of the Simpsons (possibly discussed in Homer Economicus, which I still need to read), Springfield is threatened by invasive bird-eating Bolivian tree lizards. Principal Skinner suggests that the problem can be solved by importing a new invasive species, Chinese Needle Snakes, to eat the tree lizards. But what about the new Chinese Needle Snake infestation? Simple, just bring in snake-eating gorillas….

 
This is a great way of describing the unintended consequences of regulation. The government sees some problem out there in the economy, like expensive housing. In order to “do something” and try to solve the problem, they come up with a solution like rent control, without thinking of how their “solution” could end up being worse than the original problem (by reducing the quantity and quality of housing supplied by the market). Rather than admitting their mistake and reversing course, they act by introducing another solution into the market ecosystem to try to correct the problems stemming from their first “solution”- like requiring rooms to stay available for rent if they were ever rented out. Then developers are even more reluctant to take the risk of building new housing, or investing in the improvement of current apartments. A few more “solutions”, and we are well on our way to snake-eating gorillas terrorizing the countryside.

Written by James Bailey

June 4, 2014 at 12:15 pm

Against Talent

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Innate talent really does determine a huge portion of how good we are at various tasks. But for the most part we are better off ignoring this fact.

 

There is a large innate component to intelligence, but kids deciding it is cool to succeed in class effortlessly based off of smarts leads to big wastes of potential later on. The problem is that your innate ability, or talent, is unchangeable by definition. But the amount and type of effort you spend on something is under your control.

 

I’ve been thinking that if I want to become excellent at ultimate Frisbee, it would have to be as a handler rather than a cutter, because cutters can benefit enormously from the innate talent of height and high sprint speed*. But of course, in addition the innate components, a huge amount of being a good cutter is about deliberate practice. In fact, this dominates to such an extent that some of the very best deep threats have no height advantage at all. My wife can beat people deep all day, despite being 5 inches shorter than me and a bit slower. In the NFL, we have the examples of 5’6’’ wide receivers like Wes Welker becoming stars. When I say I can’t be a great cutter because I lack the height and sprint speed, it is just an excuse for my current mediocrity- one that holds me back from putting in the effort necessary to get better.

 

I just attended the American Economic Association’s conference on teaching. I have thought that I will never be a truly great teacher because I lack natural charisma and extroversion. But two people who seem to be truly great teachers, Dirk Mateer and Kenneth Elzinga, insisted at the conference that they are naturally introverted nerds too, and that they got to be as good as they are through practice and a constant focus on how they can become better. Elzinga said that his college speech professor told him to provide updates on how close he was to the end of the talk, “in order to give hope to the audience”; and that no one else received the same advice, implying he was the worst in the class. But despite a complete lack of natural speaking talent, he became a great teacher through outworking and out-thinking other professors. My favorite example of something no one else would think of, or put in the effort to do if they did think of it, is that he writes a personal letter to every student who fails his class- in his intro to economics classes of 1000 students. The fact that you lack talent- or have lots of talent- should not be used as an excuse for failing to put in the hard work and hard thinking needed to become the best you can be.

 

*(you can infer that sprint speed probably has a huge genetic component by the fact that of the 76 people who have ever run the 100m in less than 10 seconds, 72 were of West African descent)

Written by James Bailey

May 30, 2014 at 11:16 pm

When More Taxes Mean Less Government

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I am writing this while sitting in the DMV. The Department of Motor Vehicles is often used as an example of how government provides services poorly relative to the private sector. This example is used for a good reason- I would never put up with these sort of wait times if I weren’t legally required to “buy” their products, and in the private sector competition means that multi-hour waits are an extreme exception rather than the norm.

But I have yet to see people recognize that the DMV is a great example of how a single-minded obsession with cutting taxes is not the best way to shrink government. Suppose that we cut the DMV budget in half, and cut taxes accordingly. Most people would say we had just successfully shrunk the government. It would be true that the government was taking fewer literal dollars from people, and spending less on its own employees. But government didn’t really shrink- it merely changed the way it is extracting resources from the population. Instead of paying more dollars in taxes, people will spend more time in lines at the DMV- a terrible fate. The value of people’s lost time could easily exceed the tax savings.

The same idea applies to many regulations. When we went from a draft to an all-volunteer army, government spending went up, but the true size and coercive power of the government went down. We could probably avoid the distortions of the minimum wage if conservatives would embrace wage subsidies, but wage subsidies are clear examples of government spending, while the minimum wage is a hidden tax on employers. Dollars taxed and dollars spent is not a perfect measure of the size and scope of government- in fact, sometimes more taxes and spending can shrink the true size of government.

Of course, there can be other ways to shrink government too. Even better than throwing more money at the DMV so they can hire more employees would be to change the incentives of current employees. Imagine that the manager of a DMV ran a real risk of getting fired when the lines got long, and had the chance to get a bonus when wait times decreased. Private sector-style incentives could lead to private sector-style efficiency. Ideally we can do smarter government, rather than increasing spending. But maybe sometimes, smarter government means more spending, and more spending means a smaller government footprint overall.

Written by James Bailey

May 8, 2014 at 2:19 pm

Why Academics Are Depressed

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Depressed PhD students are in the news again with two articles in the Guardian.
Depression among PhD students is no big mystery; they spend their 20’s beating their head against tough problems for ramen wages with the threat of expulsion constantly hanging over them. What is more surprising is that the problem continues once grad school is over.

On the face of it, professors have the sort of jobs no one should complain about. We have no real bosses. We get paid to talk and write about what we are interested in. We are teachers who only have to be in a classroom for 2.5-10 hours a week, 30 weeks a year. We have good pay and, after tenure, unparalleled job security.

But while the job really is objectively great, and I am annoyed every time I hear academics complain about it, I do see why it can lead to depression.

First of all, independence is a double-edged sword. Many of us were drawn to academia by the idea that we would have no boss, could choose our own projects, and weren’t even required to work closely with any coworkers. But if one side of a coin is independence, the other is isolation. Academics can do all of their research behind a closed door in their office, or at home, without talking to anyone else. Even teaching can mean talking at students the whole time rather than talking with them.

But I think the biggest problem is that academia makes us compare ourselves to the very best people in our field, and leaves us little room for self-delusion about how we are doing in that competition.

In most jobs, you might not think of yourself as in competition against anyone at all. If you do compare your performance to others, it is probably to others at your own company. It is easy enough to convince yourself that you are the best in your organization, or at least that you are above average. Only a few jobs like sales will have publicly shared, objective measures that can prove to you that you are below average at your job.

The biggest part of the job for most academics is research, and the biggest measures of research are published articles and citations thereof. Research is a national, or even international, game. As a researcher trying to publish articles and get them cited, you are in direct competition with the best and brightest all over the world. It is not enough to be the best in your department, or even the best in your state. The top journals publish only a few hundred articles a year, in a profession with tens of thousands of people.

Most journals have a 80-95% rejection rate. We are regularly told that our work is not good enough- sometimes in excruciating detail, with several pages of referee reports explaining problems with your paper, and sometimes with no explanation at all. Even many of the best articles by the best academics get rejected. This constant negative reinforcement is wearing, and keeps our opinion of ourselves from getting too high. There is a lot of evidence that most people are overconfident about their abilities in general; but depressed people seem to be the one exception, the people who know exactly how good they are. It is not clear how much this is depression-inducing brain chemistry reducing overconfidence versus people with realistic self-assessment becoming more depressed, but the later could explain exactly why academics are depressed.

Written by James Bailey

March 9, 2014 at 12:25 pm

Job Market Thoughts: Getting an Academic Job Coming Out of a Low-Ranked Program

*This post is meant to organize my thoughts on the economics job market I just went through ahead of a presentation on the market I will give to younger Temple grad students, but it may be useful for others*

The Basic Story

I went on the economics job market this year, my 5th year at Temple. I expected the market to be difficult, since academic economics is fairly hierarchical, rankings-obsessed, and pedigree-driven, and Temple was dead last in one recent ranking of graduate programs (though for the record, I think the department would do better in updated rankings). I applied broadly to academic jobs in the US, sending out about 120 applications; I did not apply outside of the US or academia. I had 12 job interviews, 2 flyouts, and one job offer. I will start as an assistant professor of economics at Creighton University this fall. I am happy with this placement: Creighton is a good school, one which impressed me more every time I learned more about it or interacted more with the people there. The teaching load is a decent 3-2 (3 classes in the Fall, 2 in in the Spring), and the money is very good.

I credit my relative success primarily to three things: getting two papers published, picking a hot field (Health Economics), and being willing to search broadly. I hope you notice that the second two things take essentially no effort on your part, so I highly recommend them.

I’m going to try to describe what went right and wrong on the market. I think it is good to hear lots of people’s stories; even as someone who had read many guides to the job market and listened to many stories, I found plenty to be surprised about.

Managing Expectations

You can definitely get a tenure-track academic job with a low-ranked economics PhD (we do have it good compared to other fields). The only question is how good the job will be. I tried to go in with low expectations, telling myself I had to be satisfied with a job teaching a 4-4 at West Podunk State, since in the grand scheme of things any tenure-track job is a good one. John List is our hero from going from grad school at Wyoming to being a professor at Chicago, but even he had to work his way up from an initial placement at Central Florida. You have to be truly excellent and/or lucky to place at a school as good as the one you are graduating from, much less a better one.

Apply Broadly

This doesn’t mean you shouldn’t apply to the better schools; applying usually only costs you a few minutes, and you never know what might happen. I was pleasantly surprised when I got 5 interviews at research schools (schools where the econ department has a PhD program), and stunned that one of them was from an Ivy League school with a top-10 econ department.

But applying broadly cuts both ways. Think three times before deciding you are above a certain job and so shouldn’t apply. First, the job might be better than you think- a lot of details only become clear in the interview (eg, some schools had much higher or lower teaching loads than I expected). Second, you might not do as well as you think- try to imagine whether you would really turn this department down if the job market has run its course and they are your only offer. Finally, getting more interviews and flyouts means more practice for you- within limits, limits us low-ranked people are unlikely to exceed, more interviews are better.

Pick a Good Field

Health, environmental, and urban are hot right now; theory and economic history are not. There are a lot of openings in general applied/empirical micro (which includes health, labor, and many other subfields), but there are also a lot of candidates. I was surprised by the extent to which field mattered. More than half of my interviews, and all of the best ones, were for positions that were only hiring in health. I also do labor economics and applied econometrics, but had only one interview for a labor-only position and one for econometrics-only. I had an even lower success rate with the open field and applied micro positions- 4 interviews, even though these made up the vast majority of positions I applied for.  It would have made sense to put more time into tailoring my applications to the health-only positions.

Your Advantages

You may not believe it, but there are some advantages to coming out of Temple. We get the chance to teach our own classes early and often, which is not common at higher-ranked schools; this can give us a big advantage when applying to teaching schools. Even better, sometimes the very fact that Temple is low-ranked can help you. Interviewing is difficult and costly for the schools too; schools can only interview 20-30 candidates at AEA’s, and fly out 2-6 candidates to campus. Most places are not trying to pick the absolute best economist on the market to offer a job to, because they know that person will turn them down. They want to pick the best economist who has a good chance of actually going to their school, and staying there.

As Thomas Schelling pointed out, in bargaining weakness can be strength. In this case, the weakness of your school strengthens your ability to credibly say you will accept an offer if the school gives you one. I was shocked to find out that even we can  end up being too good for our own good: I had a preliminary interview at the Southern Economic Association where the entire 40 minutes was them talking up the school and trying to figure out if I would actually be willing to come there; this no West Podunk State, but they were convinced that with my publications I would do better.

You Are A Human Being

We seem to forget this in grad school, stricken by the optimizer’s curse. The optimal behavior for succeeding in grad school, especially during coursework, is to become a boring math robot. But boring math robots are not who interviewers want to talk to and work with. During the job market, schools seem to select for confident but kind extroverts with good social skills. I sometimes struggled to be talkative, extroverted, and empathetic enough during flyouts. So try to regain your humanity as you near the job market.

You are more than your CV. I was surprised to see how important your overall life story can be on the market. When I told the interviewers at one school in a cold state that I grew up in Maine, they all paused to note this as a good thing- I could deal with the weather. I think Creighton was happy to hear that I had been willing to move to the midwest before, to go to college at the University of Tulsa. Several schools got to hear the story of how I met my wife in Nova Scotia. I hadn’t realized before having to explain it to interviewers that my life story was getting to be a complicated one, and that I have moved around an awful lot- Maine, Tulsa, Philadelphia, New Orleans, and West Florida, with a sprinkling of Nova Scotia and France. I think this helped with schools far from Philly (he’s been willing to move a lot before, so he should be willing to again) and hurt me with schools near Philly (one actually emailed me “there seems to be some confusion on our end as to which state you are currently living in”).

Jobs in Non-Economics Departments

Though I occasionally felt clueless about the market for jobs in economics departments, the markets in related fields were (and largely remain) a complete mystery to me.
Since my job market paper is about entrepreneurs, I thought I should apply for academic entrepreneurship positions. This field is young, so I don’t know if anyone understands it well yet. Most of the positions are in management departments.
As a health economist, I also applied to positions in schools of public health, usually in health policy & management departments. The market seems to run a bit later than economics. I’ve often heard that public health schools expect a larger quantity (and, according to economists, correspondingly lower quality) of publications, and this is clear in the job market- they ask applicants to send publications, rather than an unpublished job market paper. I encourage you to learn about the job market in other fields well ahead of time.

Mistakes:

Putting tailoring at the end of the cover letter, rather than the beginning (or both). If something makes you a particularly good match or particularly interested in them, hit them over the head with it- they aren’t going to carefully read 300 cover letters.

Do as little other work as possible during the fall of the job market. Teach as little as you can afford to (luckily, a Kauffman dissertation fellowship together with my wife kept me from being starving and homeless while I did no teaching last fall). I ended up coauthoring a whole paper during the fall, which reduced the time I spent on applications; this probably wasn’t smart.

Randomness

The whole process of the job market has a lot of weird elements. So much could depend on how tired someone on the search committee is when they get to your application, or when you walk in for your interview (once I got a big yawn from an interviewer right as they as their first question. I did not get the flyout). You will have to manage unexpected or misguided questions and comments. I got asked “illegal” questions (about marriage, kids, age) constantly; I laughed it off and answered them thinking it wouldn’t hurt me as a 20-something male with no kids. Even in hindsight I have little idea why some schools chose me for interviews and flyouts while others didn’t.

Start Now

My attitude on the job market throughout grad school was that no one was going to hire me just because Temple University gave me a PhD and some Temple professors had nice things to say about me. My goal was to get as many indications as I could from outside of Temple that I would be a good person to hire. This meant going after nationally-competitive fellowships, presenting at conferences, and above all publishing my work in academic journals. On the market I was pleasantly surprised how many people did know Temple and my advisors, but this is not something you want to rely on at a low-ranked place, and I don’t think I would have got either of my flyouts or any of the research-school interviews if I hadn’t published anything.

The Best Guides

There were 3 guides I kept coming back to every time I got to a new stage of the market. “The Academic Job Search Handbook” is a good general guide to the market. John Cawley’s AEA-recommended guide is a good economics-specific take on the market. Scaling the Ivory Tower is a wonderful bigger-picture guide of how to succeed in academia, written for classical-liberal students but applicable to everyone. I think this guide in particular (and the advice of the Institute for Humane Studies in general) is a big part of why I finished relatively quickly (5 years, compared to a median of 5.5 for econ nationwide and probably 7 at Temple) and with two publications.

I wish you good luck when your turn on the market comes.

Written by James Bailey

February 23, 2014 at 2:35 pm

Physicians Per Capita by State Multiyear Panel Data

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I was recently trying to get data on the number of physicians in each state for a paper I’m doing on the politics of health insurance mandates. I found that this data was very easy to find for a single year (lots of popular articles and sites) or a few years (Statistical Abstract of the US and the CDC), but hard to find for every year in a multiyear panel. It turns out that the answer is the Area Resource File from the Department of Health and Human Services, which has data from 1995 to 2011 (except 2009, because that would be too easy).

I hope this post will save someone from spending over an hour Googleing, as I just did.

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