• economic news summary and scientific research

    Why Shades of Gray Might Lead to Better Research

    Nov 18 • Behavioral Economics, Economic Debates, Economic Thinkers, Education, fiscal policy, Macroeconomic Measurement, Thinking Economically • 94 Views

    Imagine a scientific study that was based on shades of gray. Presented with words that appeared as near black, near white and all that was in between, participants who had been identified as a liberal, conservative or moderate had to decide how light or dark the color samples were. The goal was to see if physiology and politics correlate.

    They did.

    The moderates perceived more shades of gray than far left liberals or far right moderates. Because experimenters were able to conclude that your physical and mental states were linked, they had a publishable study that would generate career boosting publicity.

    Instead, they thought (something like),”If our results are too good to be true, maybe they aren’t.” So they replicated the study. Sadly, they wound up with different data that indicated no correlation between the grays we see and the politics we practice. The experience though took them to questions about confirming scientific results.

    Scientific Accuracy

    After their shades of grade experience, University of Virginia professor Brian Nosek and his colleagues established the Reproducibility Project. Its purpose was to reconsider the conclusions of reputable scientific studies. Occupying three and one half years and involving 100 studies, the project recreated selected psychological research that had been published during 2008. Their conclusion? Thirty-nine percent of the studies they replicated produced the original result.

    Like me, you might be thinking about how the Reproducibility Project takes us to accuracy questions. Faced with decisions on bacon and coffee, Obamacare and quantitative easing, how can we select the studies with the most accurate recommendations? While replica studies provide some answers, they can be expensive and time consuming.

    One alternative might be a prediction market.

    Prediction Markets

    Dr. Nosek’s team established a prediction market by asking a group of psychology researchers to bet money on whether they thought an experiment’s results could be replicated.

    Used to forecast election winners, the timing of interest rate hikes, or sports victories, the price of a bet on a certain outcome can reflect its likelihood. During the primaries leading up to the 2012 presidential election, the University of Iowa prediction market for the Republican presidential nomination had a dollar payoff for a correct outcome and zero for all other bets. With the price of a contract representing the probability that market participants believed the event would happen, a 22-cent contract displayed a candidate’s 22% probability of winning.

    Similarly, as Dr. Nosek explained, “A price of 75 indicates that the market perceived a 75 percent likelihood of replication success…” In his prediction market, the crowd had 71 percent accuracy. By creating prices through supply and demand, the group accurately predicted the results of 71 percent of the replications in the Reproducibility Project.

    Illustrating that a prediction market can be more accurate than a survey, below, the two are compared for the Reproducibility Project.

    Assessing scientific accuracy through prediction markets

    From: “Using prediction markets to estimate the reproducibility of scientific research”

    One article calls this prediction market a handy reproducibility “gut-check.”

    Our Bottom Line: Some Wisdom

    As economists with research that ranges from the cost impact of healthcare legislation to the size of the investment multiplier, we also have replication issues. So, let’s just conclude with a quote from Brian Nosek:

    “…science operates as a procedure of uncertainty reduction…The goal is to get less wrong over time.”

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  • economic news summary and Marriage Markets

    How U.S. Marriage Markets Differ

    Nov 17 • Behavioral Economics, Demand, Supply, and Markets, Economic History, Economic Humor, Economic Thinkers, Education, Entertainment, Gender Issues, Households, Labor, Lifestyle, Thinking Economically • 114 Views

    For people who want to get married, it could be wise to think about supply and demand.

    Dating Pools

    supply and demand in dating and marriage markets

    From: xkcd

    Where are we going? To how marriage markets differ.


    Since 1979, more women were enrolled in college than men. According to Harvard economist Claudia Goldin, the reason is the pill. Once women could time the birth of their children, they could plan a career and aspire to financial independence. As labor force participation became more valuable, so too did college.

    For gender ratios at colleges, below you can see the proportion of women for selected years. At 50.9 percent, women become the majority in 1979.

    Marriage markets and supply and demand and male female college ratios

    From: Forbes and National Center for Education Statistics

    College Graduates

    Because assortative mating means college graduates want to go out with each other, then again, women could face an imbalance. Among college educated individuals in their 20s, there are four women for every three men. For those in their 30s, the ratio is five women for every four men.

    Still though, it depends where you live. The “educated man deficit” is high in Fort Lauderdale while we have an “educated woman deficit” in San Jose.

    Marriage markets and gender ratios

    Metro Areas

    However, if we just look at age and gender across the U.S., the situation changes.

    First, the big picture, age 18-64. (I guess the women are in the East and the men in the West.):

    Marriage markets, supply and demand and male female ratios


    Then, for individuals age 45-64, there are more single women across the country:

    Marriage market, supply and demand and male female ratios

    With a younger cohort, aged 35-44, the balance changes:

    Marriage markets, supply and demand and male female ratios

    And flips to more single men when the cohort is ages 25 to 34:

    Male female sex ratios

    Our Bottom Line: Marriage Markets

    Explained by Nobel economics laureate, Gary Becker (1930-2014), forget love and marriage. Instead think supply, demand and marriage markets. On the supply side, we have women who have become “more valuable” because of higher pay and more education. Meanwhile, the demand for those women depends on the gender ratio in that area. Where there is an “educated man deficit,” fewer women on that supply curve are finding mates.

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  • Economic News Summary and Academia Gender Discrimination

    Why Women Don’t Get the Credit They Deserve

    Nov 16 • Behavioral Economics, Economic History, Economic Thinkers, Education, Gender Issues, Lifestyle, Thinking Economically • 115 Views

    Please decide how you perceive Dr. Goldin in each of the following sentences:

    “Lawrence Katz, a professor at Harvard and a leading scholar of education economics, co-wrote a paper a few years ago with Claudia Goldin…”

    “Claudia Goldin and Lawrence Katz, both professors at Harvard and leading scholars of education economics, co-wrote a famous paper a few years ago in which they pointed out…”

    Planet Money journalist Adam Davidson initially used the first sentence in a NY Times Magazine article but then replaced it with the second one and apologized to Dr. Goldin.

    Where are we going? To expectations bias.

    Second Billing for Female Economists

    In economic research, co-authors are listed in alphabetical order and assumed to have contributed equally. Only when one author does more than the other(s) will that person’s name move out of the traditional sequence and precede the others.

    The press though usually ignores the proper author sequence. Referring to a paper co-written by Anne Case, an esteemed Princeton economist and her husband Angus Deaton, Princeton Nobel laureate, they cited Deaton first.

    This is a screen shot from an academic journal of the paper’s title and its authors:

    gender issues and female economists

    Yes, we could say Deaton was named first by the press because of his Nobel. However, in a NY Times Upshot column, economist Justin Wolfers convinces us with a host of examples that what happened to Dr. Case is the rule rather than the exception. Citing his own experience, Dr. Wolfers recalled that Anne Marie Slaughter in her article, “Why Women Still Can’t Have It All,” slighted his significant other Betsey Stevenson, then chief economist at the Department of Labor, by naming her as the second author of a paper she had written with him.

    On the paper, this is how their names appeared:

    Gender issues and respect for female scholars

    The problem? When a female scholar’s work is inaccurately depicted as less than a male’s, her status diminishes and so too do our expectations.

    Our Bottom Line: Expectations Bias

    Less scholarly images of women could be shaping our behavior when they create an expectations bias. Shown by the following experiment, what we expect can determine what we believe.

    During a 1960s lab experiment, Harvard professor Robert Rosenthal falsely labeled average rodents as either smart or dumb. Because his students seemed to have an affinity for the rats they assumed were smart, they handled them more frequently and more gently. Since touch affects a rat’s behavior, the “smart” ones not only outperformed the “dumb” ones but also were tamer, cleaner, more pleasant and more likable. Dr. Rosenthal concluded that his students had demonstrated an expectations bias that affected their subsequent attitude.

    Similarly, whenever the press lists a male economist as lead author instead of the female economist who belongs there, that journalist is reflecting and reinforcing an expectations bias that stops female economists from getting the credit they deserve.

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  • economic news summary and credit card winners and loser

    Credit Card Winners and Losers

    Nov 15 • Businesses, Financial Markets, Lifestyle, Money and Monetary Policy, Thinking Economically • 113 Views

    At a Sotheby’s auction in Hong Kong, a Chinese businessman used his credit card to buy a $36 million ancient ceramic cup. He got nearly 422 million American Express points.

    I hope they don’t drop the cup.

    Winners and losers from credit cards

    On the other side of the transaction, American Express collects a fee from retailers that averages 2.5 percent per sale.

    Credit Card Losers

    Because retailers typically raise prices to pay their card fees, you and I helped to pay for Mr. Liu’s rewards points. But if we used a card that offers points for transactions, we still get something in return. Those who pay cash do not.

    And that is the problem.

    The less educated and less affluent you are, the more likely you will pay with cash or a debit card. However, the people who pay with cash or cash equivalents get nothing in return. Consequently, when it comes to credit cards, the poor subsidize the rich.

    More specifically, according to a San Francisco Fed 2014 paper, as we move from an associate’s degree to a bachelor’s degree and beyond, we find an increasing preference for a credit card. Individuals with a four year degree are “three times more likely to prefer credit cards over cash.” Similarly, as we ascend the income ladder, so too does the probability that we will pay with a card. But the higher we go, the more we prefer a credit card over a debit card.

    Our Bottom Line: The Regressive Impact

    When lower income individuals suffer more of a financial hit than those who are wealthier, we can call the impact regressive. In addition, because the effect is felt by third party, it is a negative externality.

    So, when Liu Yiqian used his Amex Card this month to buy a $170 million Modigliani painting, he created a regressive negative externality for those of us who have much less.

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  • The econlife.com economics news summary

    Weekly Roundup: From Fast Food Grades to Movie Reviews

    Nov 14 • Behavioral Economics, Environment, Households, Labor, Macroeconomic Measurement, Money and Monetary Policy, Regulation, Tech, Thinking Economically • 67 Views

    Posts Roundup

    economic news summary and movie inflation Sunday 11.08.15

    When movies have too many stars…more

    animal welfare grades and demand elasticity Monday 11.09.15

    How Starbucks got an “F”…more

    economic news summary and airline productivity Tuesday 11.10.15

    Why baggage can help airline productivity…more

    Economic news summary and Low Unemployment Leads to a War of Economics Wednesday 11.11.15

    Deciding when unemployment is too low…more

    economic news summary and singles' day Thursday 11.12.15

    Where Chinese consumers spend money…more


    Bovine Economic news summary, methane and cows Friday 11.13.15

    Meat…a source of global warming…more

    Ideas Roundup

    • inflation
    • demand elasticity
    • tradeoffs
    • innovation
    • productivity
    • physical capital
    • monetary policy
    • interest rates
    • unemployment
    • consumer spending
    • externalities


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