• The econlife.com Weekly Roundup

    Weekly Roundup: From Affluent Mates to Successful Names

    May 9 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Developing Economies, Economic History, Economic Humor, Education, Gender Issues, Government, Households, International Trade and Finance, Labor, Money and Monetary Policy, Regulation, Tech, Thinking Economically • 88 Views

    Our Posts Roundup

    Long lines reflect people's tradeoffs. Sunday 5.03.15

    What you say when you stand in line…more

    Everyday economics and Chinese Deposit Insurance Secures Healthy Markets Monday 5.04.15

    When a safer bank makes you feel insecure…more

    Everyday economics and the butterfly effect from container ships Tuesday 5.05.15

    The butterfly effect from a boat…more

    Everyday economics and your name Wednesday 5.06.15

    Why your name matters…more

    Everyday economics and how marriage makes us less equal Thursday 5.07.15

    How marriage makes us less equal…more

     

    Everyday economics and data leaks Friday 5.08.15

    The market data that needs more security…more

    Ideas Roundup

    • behavioral economics
    • tradeoffs
    • self-signaling
    • deposit insurance
    • moral hazard
    • butterfly effect
    • globalization
    • supply chain
    • transportation infrastructure
    • bias
    • human capital
    • assortative mating
    • income inequality
    • labor force participation rates
    • marriage markets
    • financial markets
    • information infrastructure
    • data security

     

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  • Everyday economics and data leaks

    The Data Leaks That Move Markets

    May 8 • Behavioral Economics, Economic History, Financial Markets, Government, Labor, Macroeconomic Measurement, Money and Monetary Policy, Tech, Thinking Economically • 105 Views

    During October 2012, Google’s quarterly earnings were scheduled for release at 4:30 just after the market close. The timing meant the news could be explained in a conference call and digested overnight. However, the document appeared at 12:30 pm—the middle of the trading day.

    Instead of digestion, it was instant heartburn.

    Surprised to see Google’s earnings so early, traders rushed from meetings to respond. With volume soaring and the stock plunging on missed expectations, trading in Google was halted for 2 1/2 hours.

    The firm’s financial printer admitted it had pressed the “submit” button too early. Twitter had a similar problem last month.

    Where are we going? To data release security.

    A Fed Leak

    Also during October 2012, recipients of a private newsletter heard some Fed info before anyone else.

    During their September meeting, the FOMC planned a third round of monthly QE purchases of approximately $40 billion and said inflation and unemployment guidelines could shape future decisions. The clients of Global Medley Advisors knew most of this on October 3rd. Because the world found out on October 4, a select few could make buy/sell decisions with facts no one else knew.

    When Fed authorities realized the contents of its minutes were in that investing newsletter, red flags popped. But it has taken until now for more about the investigation to reach the headlines. In addition to a Federal Reserve inquiry, the breach is the focus of a Congressional probe.

    Employment Data Security

    Sounding more secure than the Fed, the Bureau of Labor Statistics released employment numbers this morning. Days before their monthly announcement, they declare a lockdown when economists are processing the employment data. Office suites are isolated, trash pick-up stops, IT access is prohibited. Then, on the Friday of the 8:30 am release, reporters surrender all electronics as they enter a special room at 8 am to see the report. Just before the actual release, there is a countdown so that everyone at the same milli-second makes the call to the outside world.

    Our Bottom Line: Asymmetric Information

    Whether monitoring insider trading or government data that can move markets, market regulators try to give everyone access to the same information at the same time. Their goal is to avoid “asymmetric information” whereby some market participants, as with the Fed’s FOMC leak, know a lot while others know nothing.

    Correspondingly, but a topic we will save for another day, the timing of a data release from firms like Google and Twitter also matters.

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  • Everyday economics and how marriage makes us less equal

    Love, Marriage and Inequality

    May 7 • Behavioral Economics, Demand, Supply, and Markets, Economic History, Economic Thinkers, Education, Labor, Lifestyle • 135 Views

    Successful women and men who marry could be making income inequality worse.

    Where are we going? To marital sorting.

    Marriage Markets

    Nobel Laureate Gary Becker (1930-2014) first told us that men and women selected each other in marriage markets. Like all other markets, we had supply and demand. The men and women who were “bidding” for each other had a value based on what they could contribute to their lives together.

    Whereas women had originally been Becker’s “domestic specialists,” their role changed during the 1970s. It was all about the pill. Once they could “time” their children, more women entered professions that required more education, more time and paid higher wages.

    Consequently, a new cohort of females became a different kind of wife. In those households, both partners were earning income.

    And that takes us to marital sorting.

    Assortative Mating

    First we can ask if the educational resemblance of spouses has increased. You can see below that until 1960 or so, assortative mating declined. Since then, it has steadily risen.

    Income inequality and the  increase in assortative mating

    From: Educational Assortative Mating
    in Two Generations: Trends and Patterns Across Two Gilded Ages

    Income Inequality

    But, does that education matter? The St. Louis Fed provided one answer in this graph:

    Income inequality and education

    Another answer was given by researchers who compared income distribution when “like married like” to a counterfactual random set of pairing statistics. The result? To quote the study, “…if people matched in 2005 according to the standardized mating pattern observed in 1960, which showed less positive assortative matching, then income inequality would drop…” 

    So, we have a segment of the U.S. population in which women and men with more education have formed households. That cohort provides another lens through which we can better understand income inequality.

    Our Bottom Line: Marriage Markets

    Behavioral economist Gary Becker told us that our quest for a mate is really about markets. However, rather than looking at just one marriage market, we can instead perceive several. Because of markets where educational levels are similar, we have assortative mating in which like marries like and income inequality is exacerbated.

    Perhaps providing some marriage market clues, these graphs are interesting:

    Income inequality and marriage markets

    From: Federal Reserve Bank of St. Louis

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  • Everyday economics and your name

    Success and Your Name

    May 6 • Behavioral Economics, Businesses, Education, Labor, Lifestyle, Thinking Economically • 162 Views

    Reminding us of her grandfather (Charles), of her great-grandmother (Elizabeth), her grandmother (Diana) and a rather long list of English royalty, the newborn Princess Charlotte of Cambridge, aka Charlotte Elizabeth Diana Windsor, surely had her name carefully crafted.

    Names make a difference.

    Pronunciation

    One NYU study cites the name pronunciation effect. Not only do people with easier to pronounce names make a better initial impression on others but they have higher status positions at law firms. The reason could be what the researchers call processing fluency. Because it feels better when a name is easy to articulate, we react positively to the individual with the name.

    Familiarity

    If your name is Mary, John or some other common name, the odds are higher that you will be hired. A group from Marquette University concluded that the common name bias stems from similarity. We tend to favor people who are like us, who have our values. So, when names conjure an image of the people we know and trust and like, we have a positive inclination toward those people.

    The Alphabet

    Researchers have even identified a correlation between the first letter of your name and your success. They noticed that more people whose names began with letters toward the beginning of the alphabet were accepted by competitive colleges.

    Two other scholars concluded that people who grew up with “late alphabet” last names like Yardley or Zabar tended to make faster (and perhaps less wise) spending decisions. The rationale here is always being at the end of the line, they had less time to say, “yes.”

    And finally, people with names connoting nobility are more likely to occupy higher ranking positions.

    I guess that returns us to Charlotte Elizabeth Diana.

    Our Bottom Line: Human Capital

    By potentially impacting job opportunities, college admissions, and spending decisions, our names affect our human capital.

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  • The Economics of Prom Season

    Promonomics

    May 5 • Perspectives • 265 Views

    by Elizabeth Fournier

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