Voting (or lack thereof) in May election.

As recent article by Statscan suggests that 7.5 million people didn't vote in the May federal election.The reasons are summarized by the following graphic:

If you do the math and read between the lines (amalgamating "not interested," "didn't like candidates/issues," and "forgot"), this suggests that almost 40% or 3 million voters didn't vote because they were uninterested.

Some interesting differences across Canada emerge in the Statscan analysis:

• Lack of interest as a reason for not voting was highest in Quebec;
• Lack of interest didn't seem to differ across age groups;
• Lack of interest was lower among voters with university education;
• Among immigrants with Canadian citizenship who didn't vote, only 13% cited lack of interest.

I know that there are all sorts of analysis we'd like to do on this data to really get at the heart of the matter (Any grad. students interested in working on a paper?) but I think the results point to some interesting questions regarding voter behavior.

Taxation for Cultural Change

Now that the month of Movember is over, I thought I would post some interesting evidence on the use of taxation to achieve cultural change.

In 1705, Peter I of Russia implemented a tax on beards: Individuals who wore beards were required to pay a levy and, as evidence of having paid the tax, had to wear

a copper or silver token with a Russian Eagle on one side and on the other, the lower part of a face with nose, mouth, whiskers, and beard. It was inscribed with two phrases: "the beard tax has been taken" and "the beard is a superfluous burden".

Whatever you may think of beards and mustaches as aesthetic facial hair, Peter had his reasons. He was particularly interested in increasing trade and political interactions with the rest of Europe, much of whom viewed Russia as archaic. To try and change this perception:

Peter ordered his noblemen to wear fashionable Western clothes instead of their archaic long costumes. To add insult to injury, Peter personally cut off the beards of his noblemen. All men except the peasants and priests had to pay Peter's yearly beard tax and wear a medal proclaiming, "Beards are a ridiculous ornament."

E-Commerce in Africa

CBC's radio show Spark had a recent discussion of African E-Commerce (episode 130). Basically, individuals are increasingly using cel phones to conduct business transactions using texting services whereby they are able to communicate their inventories of goods, their demands for goods, and transfer funds between banks and individuals. Without cel phones, these transactions involved individuals traveling from village to village with their goods, incurring significant time costs while traveling between. These can be particularly high given that traveling to purchase some goods may require an individual to miss a day's wages. As such, cel phones serve the role of infrastructure in reducing the opportunity costs of engaging in transactions.

There are a lot of digital conveniences we take for granted in the Western world. Ok, let’s be honest and say we take most of them for granted. If we want something –anything– it is available at our fingertips. So what’s it like in places where the infrastructure still doesn’t exist to make those digital conveniences viable? Femi Akinde is the founder and CEO of Slimtrader, a company that is looking to change the way people in sub-Saharan Africa do business…all through their cell phones.

Do Incentives Affect Fertility? The Case of Quebec

Quebec has been experiencing lower-than-average birthrates for some time. Going back to 1997, the porvincial government has attempted to increase birthrates, the number of monthers returning to the labor force and fathers' involvement in child rearing through a set of policies grouped under the rubric of "Family Policy." A recent episode of the Current discusses these policies and their effects. From the episode:

The Quebec Government is pulling out all the stops for parents these days. If you're a working couple with two children in Ottawa, you'll probably pay 80 to 100 dollars-a-day for childcare. Across the river in Gatineau, Quebec ... you'd pay 14-dollars-a-day. You'd get better parental leave too. There's even a special leave just for Dads. And as of last month, if you're infertile, the Quebec Government will cover the cost of In Vitro Fertilization.

The Quebec Government has spent 13 years overhauling its Family Policy. The goal has been to boost two demographics ... new births and working women. As part of our project Shift, our Quebec Producer Susan McKenzie decided to take a look at whether the program has worked and whether it's sustainable. We aired her documentary, Baby Bump.

Countersignalling and the genius of John Cage

There's a paper by Kim-Sau Chung and Peter Eso on signaling when an individual has career concerns. This paper has been around for a couple of years, but this is the first time I saw it applied to music and particularly John Cage's 4'33". From Jeff Ely's Cheap Talk blog on economics and more:

Which type of artist debuts with obscure experimental work, the genius or the fraud? Kim-Sau Chung and Peter Eso have a new paper which answers the question: it’s both of these types.

Suppose that a new composer is choosing a debut project and he can try a composition in a conventional style or he can write 4’33″, the infamous John Cage composition consisting of three movements of total silence. Critics understand the conventional style well enough to assess the talent of a composer who goes that route. Nobody understands 4’33″ and so the experimental composer generates no public information about his talent.

There are three types of composer. Those that know they are talented enough to have a long career, those that know they are not talented enough and will soon drop out, and then the middle type: those that don’t know yet whether they are talented enough and will learn more from the success of their debut. In the Chung-Eso model, the first two types go the experimental route and only the middle type debuts with a conventional work.

The reason is intuitive. First, the average talent of experimental artists must be higher than conventional artists. Because if it were the other way around, i.e. conventional debuts signaled talent then all types would choose a conventional debut, making it not a signal at all. The middle types would because they want that positive signal and they want the more informative project. The high and low types would because the positive signal is all they care about.

Then, once we see that the experimental project signals higher than average talent, we can infer that it’s the high types and the low types that go experimental. Both of these types are willing to take the positive signal from the style of work in exchange for generating less information by the actual composition. The middle types on the other hand are willing to forego the buzz they would generate by going experimental in return for the chance to learn about their talent. So they debut conventionally.

Now, as the economics PhD job market approaches, which fields in economics are the experimental ones (generates buzz but nobody understands it, populated by the geniuses as well as the frauds) and which ones are conventional (easy to assess, but generally dull and signals a middling type) ?

If you're not familiar with John cage's famous piece, here's a rendition of it:

If you haven't read the Cheap Talk blog before, its worth checking out. Also, Jeff Ely's web page has a great version of the classic Asteroids game.

Health Codes Violations, Single Motherhood, and the Breakfast I had Last Week

I'm currently teaching Economics 349: the Economics of Social Problems. I thought I'd use our department blog to help raise some examples of the types of issues that arise in the Calgary area which relate (even tangentially) to the course. (To those students in the course, some of this stuff may serve as fodder for term papers.)

Last week, some friends and I had breakfast at Nellie's Cosmic Cafe on 17th Ave SW in Calgary. We were pretty shocked to learn a day or so later that the restaurant chain had been fined $60,000 for health code violations. We all had the same thoughts: Eww! This was one of our favorite restaurants. (Note: In the sense of fairness, I want to mention that according to news reports nobody reported getting sick from the food at Nellie's and no personal claims were filed. The fines were based on the findings of health inspectors.)

Among my friends we talked quite a bit about this case (waiting a requisite 48 hours before making any jokes about it). When we thought about the problem, there are a number of things that struck us.

Basically, the health code protects "the public" from the externalities associated with poor workplace practices in a restaurant. However, we had a couple of questions about the chain of events. I'm sure there are others, but these jump to mind as worthy of discussion.

First, the restaurant had apparently been warned for over a decade. Why did it take so long for investigators to act? It raises the issue as to whether the law is being equally applied to all. A local eatery in my neighborhood received a fine after one visit by an inspector last year, and for something more innocuous than what Nellie's was apparently fined for. What does this say about the application of these laws?

Second, in her statement the owner of Nellie's mentioned "she was devastated by the charges and that it was difficult for her, a single mother, to keep proper monitoring of all the locations." I know of several single-mothers who were somewhat insulted by this statement. At the risk of sounding like a real jerk (which I probably am), it suggests that single mothers are less able to, in this case, manage a business than other individuals i different circumstances (e.g., married mothers). We often see examples of certain groups (here, single mothers) being stereotyped by more salient and visible examples of individuals of their "type" (e.g., the single-mother owner of Nellie's). In making this statement, what information is communicated and what inferences might others make about single mothers writ large?

Discuss.

Zombie Economics (John Quiggin)

Economist John Quiggin has a new book (in progress) entitled Zombie Economics. Now, don't think its about a microeconomic analysis of the undead's behavior or the costs and benefits of eating brains. Rather,

Before the global financial crisis ideas like the Efficient Markets Hypothesis and the Great Moderation were very much alive. Their advocates dominated mainstream economics and their influence, acknowledged or not, guided the thinking of the practical men and women whose decisions created a financial system in which tens of trillions of dollars of interlinked obligations were built on a foundation of speculative, or entirely spurious investments, and a global economy in which both households and nations lived far beyond their means.

Today these ideas appear to be defunct. Commentators who were proclaiming, a year or two ago, that the business cycle had been tamed, and replaced by a Great Moderation in economic activity, have admitted their error or, more commonly, moved on to talk of other things. The claim that financial markets make the best possible use of economic information, and can never be subject to irrational bubbles, is rarely made, and usually hedged with all kinds of qualifications and escape clauses.

But habits of mind and thought are hard to change, especially when there is no ready-made alternative. The ideas that brought the global financial system to the brink of meltdown, and have already caused thousands of firms to fail and cost millions of workers their jobs, still underlie the thinking of those who are trying to respond to the crisis and, to a large extent, of the commentators and analysts who assess those responses. These ideas are neither alive nor dead; rather, they are undead, or zombie ideas. Hence the title of this book.

Its worth reading. His analysis and the resulting implications of the efficient market hypothesis (and other theories) are insightful and well-written.

Alberta Puts Forth New Rules for Pay Day Loans

I wrote previously about the ways in which pay-day loans result in individuals paying more for financial services. Now Alberta has put forth a new set of rule for pay-day lenders. Some highlights:

Starting in September, businesses will be prohibited from charging more than $23 in fees and interest for each $100 borrowed.

Giving customers a two-day cooling-off period in which they can return the money and cancel the loan without paying any costs.

Ordering companies to use plain language in contracts.

Requiring them to post their costs prominently in outlets.

Rollover loans — where people with more than one loan pay extra charges — will be banned.

The province will also license any companies that wish to operate in Alberta.

Research of Twitter

I was forwarded this post by someone who had read my previous comments on Twitter. Although most social networking sites are dominated by women (i.e., women produce most of the content and are followed by men and women):

Although men and women follow a similar number of Twitter users, men have 15% more followers than women. Men also have more reciprocated relationships, in which two users follow each other. This "follower split" suggests that women are driven less by followers than men, or have more stringent thresholds for reciprocating relationships. This is intriguing, especially given that females hold a slight majority on Twitter: we found that men comprise 45% of Twitter users, while women represent 55%. To get this figure, we cross-referenced users' "real names" against a database of 40,000 strongly gendered names.

Even more interesting is who follows whom. We found that an average man is almost twice more likely to follow another man than a woman. Similarly, an average woman is 25% more likely to follow a man than a woman. Finally, an average man is 40% more likely to be followed by another man than by a woman. These results cannot be explained by different tweeting activity - both men and women tweet at the same rate.

What I found more interesting is the "usage distribution" of Twitter:

Twitter's usage patterns are also very different from a typical on-line social network. A typical Twitter user contributes very rarely. Among Twitter users, the median number of lifetime tweets per user is one. This translates into over half of Twitter users tweeting less than once every 74 days. At the same time there is a small contingent of users who are very active. Specifically, the top 10% of prolific Twitter users accounted for over 90% of tweets. On a typical online social network, the top 10% of users account for 30% of all production.... This implies that Twitter's resembles more of a one-way, one-to-many publishing service more than a two-way, peer-to-peer communication network.

Upcoming Fund Raiser in Calgary

I've been doing some research on charitable giving, not looking at the motives as much as the mechanisms organizations use to raise funds. So its in this respect that I'm posting the following regarding an upcoming event in Calgary to raise funds for Janus Academy, a school specializing in the education of children with autism:

Trent Reznor on Ticket Scalping, the Ticket Market, and Auctions

Here's the post from Trent Reznor of Nine Inch Nails. Reznor offers some interesting ways to stop scalping (e.g., printing names on tickets) and some thoughts on how the ticketing agencies will change with future consolidation (e.g., auctioning tickets).

Happiness and Well-Being by U.S. State

The new Gallup-Healthways Well Being index is available. The index is an attempt to “measure what it is that people believe constitutes a good life, who is feeling good about life, and who is in need of a helping hand,” and has 6 sub-scales: life evaluation, emotional health, physical health, healthy behavior, work environment and basic access.

Here are a few interesting facts about well-being in the U.S.:

1. People in Utah report the highest levels of well-being; Wes Virginia the lowest.
2. There is only a small (but statistically significant) positive relationship between median income and well-being.
3. My home state (California) falls behind Wyoming and Utah.
4. In terms of healthy behavior (one of the many reports you can generate from the survey's web page) is lowest in the southern states.
5. In terms of emotional health, those states closest to the Canadian border score higher than do those in the south.
   

The Canadian Institute for Advanced Research has a group that studies well-being and happiness.

Thrift Stores and the Recession

As people start grappling with the recession, they look for means of saving money. This usually means cutting back on purchases and holding on to items a bit longer than maybe one would in more abundant times.

As a result of this behavior, thrift stores in Calgary (and elsewhere) are feeling a pinch. Paraphrasing from an article in the Calgary Herald (March 1 2009):

Calgary's social agencies are issuing calls for donations of household items as the recession begins to pinch city residents.

"We've noticed that people are not going out and buying new things; they're hanging onto what they have," said Sparrow. "We're also seeing new faces in our stores." At the same time, the agency has experienced a 20 per cent increase in demand for its Free Goods Referral program. Women in transition or coming out of a crisis are referred to the program by one of 60 community agencies and provided a voucher to obtain clothing and household items at a Women In Need thrift store. Sparrow's organization especially needs dishes, pots and pans, linens, flatware, as well as clothing and accessories, she said. Its Dover-area store also takes furniture. "We're hoping that when people start thinking about spring cleaning, they think about us and donate," said Sparrow.

It's an about-face from the boom, when thrift stores struggled to cope with a flood of donations. Some turned donors away and a few hired security guards to prevent people from dumping unwanted goods on their doorsteps.

Beth Heyd, operations manager of The Salvation Army's Thrift Stores, estimates donations of household goods have dropped by half. Normally, there'd be a dozen sofas in the furniture section of the Salvation Army's Horizon Heights stores at 36th Street and 32nd Avenue N. E., she said, but only one or two couches were available on Thursday. "My theory is that you'll give second thought to buying that new sofa if you're worried about getting laid off," said Heyd. Donations of used clothing remain strong, but she's noticed an increase in professionals, especially women, shopping for used business wear at the thrift stores.

Likewise, the Calgary Drop-In and Rehab Centre put out a call for donations of linens for the 2,000 homeless people who pass through its doors every day. "We are in desperate need of towels and blankets," said Louise Gallagher, director of public relations and volunteer services for the drop-in centre.

My wife and I did a big clean out of our closets today, taking several bags of clothing to a local thrift store. Next time you're struggling to get through your closet, think about doing the same.

the Case Against Multiple Choice Exams

I recently gave a midterm in my intermediate microeconomics class. A portion of the midterms was multiple choice at the request of many students. One of those against a multiple choice portion on the midterm sent me this. I have to say I agree. I hate taking multiple choice exams almost as much as i hate writing them.

Halloween Economics

With Halloween approaching, I thought it might be fun to bring to your attention a new paper by Dean Karlan et al. This is a great paper on an important and interesting field experiment.

In the paper, the authors discuss and experiment conducted on Halloween 2007 in which they had trick-or-treaters (you know the kids who show up at your door asking for candy) to choose from an ambiguous urn of types of candy or an urn in which the distribution of candy types was known. Here's the abstract:

We examine whether ambiguity aversion correlates with costume choice amongst children at Halloween. We conducted an ambiguity aversion experiment with children on Halloween during trick-or-treating and correlated this with their choice of costumes. We find that children wearing the most commonly chosen costumes are more likely to avoid a gamble with ambiguous odds. This inquiry is in line with a series of recent papers observing whether choices in simple experimental economics games correlate with theoretically similar non-laboratory behavior.

They actually conducted two experiments, but the second one resulted in such a long queue outside one of the author's house that it proved infeasible. In the results section, they discuss a number of kids who particpated in the experiment but were not wearing costumes. Who shows up to go trick-or-treating without a costume? Maybe you forget a bag or something to carry your Halloween bounty in, but no costume? Which brings up the other question, who gives kids with no costume a treat on Haloween? If they don't have a costume, aren't they chaperones? I usually offer the adults in this "trick-or-treaters" a choice between an urn with an ambiguous distribution of beer or known candy. When given this type of offer, they display no ambiguity aversion.


The complete paper is available here.

The Marginal Cost of Eggs

Over the weekend, I had breakfast at Chris' Cafe in Coleman, Alberta. The two-egg Denver omelet cost $7.75. The three-egg version costs $7.95. That's $0.20 for the marginal egg. At that price, you're losing money not getting the third egg!

The Economics of Drive-Throughs

A recent article in the Calgary Herald (“Customers are getting fed up over wait times at retail outlets”, August 27 2008) cited a new study finding evidence that "86% (of Canadian consumers) say that least once they have re-shelved their purchases or skipped the coffee and left the store" due to long lines.

Interestingly, the reporter interviewed a customer at Tim Horton’s. (For those not familiar with Tim Horton’s, it’s a very popular chain of Canadian coffee/donut shops. They are famous for something called a "double-double" which is a coffee with two creams and two sugars.) Being a non-Canadian, I find the Tim Horton’s phenomenon amazing: Aside from serving what I think is very bad coffee, every Tim Horton’s seems to have huge line of customers. In MacEwan Hall on the University of Calgary campus, there are at least three coffee places of which Tim Horton’s is the only one with a significant line (sometimes in excess of 25 people).

A new Tim Horton’s recently opened relatively close to my house. It is included with a Shell station and is about two blocks from another Tim Horton’s (located in an Esso station). What is amazing about the new Tim Horton’s (aside form the fact that people actually drink this coffee) is the lineup at the drive-through. My guess is that it averages six cars throughout the day and I’ve counted as many as 22 cars in the morning. This latter amount is so many that it blocks people from getting gas at the Shell station.

This leads me to wonder a bit about the environmental costs of drive-through services. Most of the cars in the lines are idling, which is probably the least efficient use of one's car. Moreover, most of the people in the drive-through are able-bodied and would be able to purchase their double-double from the line inside (where, incidentally, there are multiple servers as opposed to a single server at the drive through).

Due to these environmental costs, some communities have sought to regulate or even ban drive-throughs. I offer my $.02 on this issue: I think it would be wise for businesses offering drive-through services to include a surcharge for these services. Individuals using the drive-through are likely doing so as a matter of convenience and this convenience is something the company can charge for. By increasing costs the drive-through, firms will capitalize on this additional convenience they provide and increase the cost of idling your car in line. Essentially, this is a profit-maximizing way for firms to get individuals internalize the environmental externality they are imposing when waiting in line at the drive through.

Of course, there may be fairness issues regarding those individuals who use the drive-through because they are less mobile (e.g., the elderly, individuals with physical handicaps). I guess this is all simply food for thought (although I wouldn’t recommend Tim Horton’s donuts either).

Veblen Effects and Status Seeking

Thorstein Veblen argued that individuals have an innate desire to signal their wealth (and thereby obtain social status). In our department, both Curtis Eaton and I have done research on how this type of status seeking can affect behavior and economic outcomes. That said, I don't think either of us thought it would look like this:

Yesterday developer Armin Heinrich posted an iPhone app to the App Store called I Am Rich. The program displays a red gem, has no function but to display your wealth to others through ownership, and costs $1000.

Here's the complete post. (HT to Tyler Cowen.)

New research from the Economic Journal (June 2008)

The recent issue of the Economic Journal has some interesting articles on the effects of regulation on individual behaviors.

First, Sandra Black, Paul Devereux and Kjell Salvanes find that compulsory schooling laws reduce the rate of teenage childbearing. From their abstract:

This article investigates whether increasing mandatory educational attainment through compulsory schooling legislation encourages women to delay childbearing. We use variation induced by changes in compulsory schooling laws in both the US and Norway to estimate the effect in two very different institutional environments. We find evidence that increased compulsory schooling does in fact reduce the incidence of teenage childbearing in both the US and Norway, and these estimates are quite robust to various specification checks. These results suggest that legislation aimed at improving educational outcomes may have spillover effects onto the fertility decisions of teenagers.

Secondly, Thomas Dee finds that the legalization of same-sex marriages helps reduce the incidence of certain sexually transmitted diseases. From his abstract:

One conjectured benefit of a marriage-like legal status for same-sex couples is a reduction in the incidence of sexually transmitted infections (STI). In this study, I discuss how such a policy might influence risky sexual behaviour and STI rates. I also present reduced-form empirical evidence on whether same-sex partnership laws have reduced STI rates, using country-level panel data from Europe. The results suggest that these laws led to statistically significant reductions in syphilis but not in infections that are not sexually transmitted. However, their effects on the incidence of gonorrhoea and HIV were also smaller and statistically imprecise.

In the same issue, there are still some unanswered questions about the gender pay gap. From Alan Manning and Joanna Swaffield's abstract:

In the UK the gender pay gap on entry to the labour market is approximately zero but ten years after labour market entry, there is a gender wage gap of almost 25 log points. This article explores the reason for this gender gap in early-career wage growth, considering three main hypotheses – human capital, job-shopping and 'psychological' theories. Human capital factors can explain about 11 log points, job-shopping about 1.5 log points and the psychological theories up to 4.5 log points depending on the specification. But a substantial unexplained gap remains: women who have continuous full-time employment, have had no children and express no desire to have them earn about 8 log points less than equivalent men after 10 years in the labour market.