Women in Economics on Film

Media Matters on gender bias in economic reporting.

The relevant chart:

Male economists get more media appearances than female economists.

After Justin Wolfers shared this on Twitter yesterday, a few folks (including Nathaniel Bechhofer, Claudia Sahm, and your humble author) forwarded some hypotheses to explain the imbalance. Among them:

1. News organization taste-based discrimination: news studios don't like female economists and are therefore reluctant to invite them on the air.
2. Audience taste-based discrimination: producers don't think Joe and Jane Six-Pack are interested in hearing women talk economics, and are therefore reluctant to invite them on the air.
3. Participant selection: female economists respond affirmatively to appearance requests at lower rates than male economists.
4. Specialization: female economists select areas of concentration that may not be newsworthy (experimental econ, industrial organization, & al.)
5. A combination of the above

On hypothesis (1):

Pro-

• The stereotype of newsrooms being old boys' clubs persists, and even if there's no truth to it, there might be lingering heuristics that link economics to men, much like the heuristic that nurses or flight attendants are female. The bias doesn't have to be pernicious or conscious to work.

Con-

• Maladaptive taste-based discrimination has a short shelf life. Producers have an interest in maximizing ratings. If they can steal a few eyeballs by inviting incisive female economist guests on their show, they'd be derelict in their duty to shareholders not to.
• Speaking in my capacity as an insider to the profession, female economists are on average more attractive than male economists. Television appearances are partly about substance, but style matters too. Even if I were in the same intellectual league as Claudia, I'd expect that producers would still invite her over me. She's pretty. I'm not. Then again, maybe there's a bit of moral balancing going on there too. Brains and beauty could possibly alienate mediocre viewers or something. 

On hypothesis (2):

Pro-

• There is a gender imbalance in economics, but it's nowhere near as severe as it was even as recently as 50 years ago. If audiences expect economists to be male, they may react with sentiments along the lines of "who the hell does this broad think she is?" at their worst or "silly girl, business is a man's game" if they want to swap out rancor for condescension.

Con-

• The left more or less won the culture war. The idea of Middle America being a bunch of knuckle-dragging troglodytes stuck in 50s-era gender roles is a myth with very little basis in the survey data I frequently work with. However, recall that it's less a matter of whether or not the audience is enlightened and more whether or not programming directors believe that the audience is enlightened. The correlation there might be less than 1.

On hypothesis (3):

Pro-

• On average, women tend to be less confrontational than men and may therefore display a tendency to avoid media appearances that often devolve into bowtied shouting matches.
• Female economists may tend to value media appearances lower compared to male colleagues. If there's an ego component to being on TV and women don't get as much out of having their ego stroked, they may have a higher propensity to reject offers.

Con-

• Attend an AEA meeting or two. Tell me that after selecting for the economics profession that tenured female economists avoid confrontation. Ditto for the ego point (NO, I WILL NOT NAME NAMES. Don't ask.)

On hypothesis (4):

Pro-

• It's at least plausible. And of the hypotheses I've offered here, the easiest to test. 

Con-

@Spivonomist @bechhof @JustinWolfers counter ex: labor markets are big deal & there are lots women in labor economics...yet who 'experts'?
— Claudia Sahm (@Claudia_Sahm) January 13, 2015 

In all, I'd expect some mixture of these hypotheses to be true (and probably a dash of something-or-other I've omitted). Luckily for this question, there are indeed clear, testable hypotheses to help folks get at the underlying dynamics that could produce such a chart. Unluckily, the typical punter might be inclined to take it as prima facie evidence that there's something scurrilous afoot in economics journalism. Something not-quite euvoluntary even.

Compared to the alternative of state-mandated quotas, I'm fond of naming and shaming. However, it might be worth taking a little time to see if we point our fingers at the right targets before doing so. Assuming a conclusion is bad form in the peer-reviewed literature. It's no better form in activism.

Is Inequality a Legitimate Concern? Did the Framers Think So?

Is inequality a legitimate concern in a democracy?

There might be a moral obligation for them what has to help them what has not.  Moral egalitarianism, in other words.  Still, if that is YOUR religion, how can you avoid imposing it on others without violating the "Establishment Clause" of the 1st Amendment?

Or is it just a consequentialist problem, steam control to prevent revolution or redistribution by force?  Jefferson really did seem to be concerned about the level of prosperity of the "smallest landholders."

Here is what Madison said that he said at the Convention:

The man who is possessed of wealth, who lolls on his sofa, or rolls in his carriage, cannot judge of the wants or feelings of the day laborer. The government we mean to erect is intended to last for ages. The landed interest, at present, is prevalent; but in process of time, when we approximate to the states and kingdoms of Europe; when the number of landholders shall be comparatively small, through the various means of trade and manufactures, will not the landed interest be overbalanced in future elections, and unless wisely provided against, what will become of your government? In England, at this day, if elections were open to all classes of people, the property of the landed proprietors would be insecure. An agrarian law would soon take place. If these observations be just, our government ought to secure the permanent interests of the country against innovation. Landholders ought to have a share in the government, to support these invaluable interests, and to balance and check the other. They ought to be so constituted as to protect the minority of the opulent against the majority. 

The first sentence is quite striking, and appears to contain a moral condemnation.  But the rest of the statement is pure consequentialist.  Here is the source; the statement above comes from June 26, 1787.

Local Man Reads Enlightenment Scholar. You Won't Believe What Happened Next!

Adam Smith, (1776). "An Inquiry into the Nature and Causes of the Wealth of Nations." Book V Ch.2 ¶71

The inequality with which a tax of this kind might fall upon the owners of different ground-rents would arise altogether from the accidental inequality of this division. But the inequality with which it might fall upon the inhabitants of different houses would arise not only from this, but from another cause. The proportion of the expence of house-rent to the whole expence of living is different in the different degrees of fortune. It is perhaps highest in the highest degree, and it diminishes gradually through the inferior degrees, so as in general to be lowest in the lowest degree. The necessaries of life occasion the great expence of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expence of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion.

House-rents are idle incomes. They are useful in their role as information, directing tenants towards frugality and landlords to improvement, but contrasted with profiteers, rentiers need direct no productive activity to maintain the luxuries and vanities which they possess.

My undergraduate training is in finance, so I carry with me an affinity for the 'underlying asset', the thing that is represented by a contract. My graduate training is in economics, so my affinity extends well down the rabbit hole, bobbing somewhere in the murky depths of, ugh, 'utility'. This is only to say that paper assets like financial instruments are puppets that stand in for freight cars full of coal, which in their turn hold the potential to create crayons, which in their turn are pointless sticks of colored wax until a toddler scribbles a likeness of the dog inside daddy's Fundenberg and Tirole Game Theory textbook.

Once that picture is there and daddy sees it and smiles outwardly while fuming inwardly, the tiny sliver of the mutual fund that contained a small proportion of that futures contract written against that coal delivery to the power plant that supplies the grid that the crayon factory draws from to process its raw materials finally delivers its modest contribution to human flourishing. Once you wade through the clacking reeds of finance, you end up with something actually delivered: people dig rocks out of the ground so that my kid can deface my textbooks. So capital gains taxes applied to common stock, corporate bonds, or derivative instruments thereon tax productive activities.

But what of capital gains taxes on government debt? Well, let's check with the US Treasury Department. From the outlay report for 2013:

Most of these are transfer payments. "Health" is probably productive. "National defense," even when it's not a total misnomer is still perhaps only marginally productive. "Other" includes line items like the Farm Bill, which are actively destructive. On net, after the reeds, holding Treasury instruments is a lot closer to Smith's House-Rentier than to being a productive factory owner or etsy shop curator.

A tax upon T-Bills, therefore, would in general fall heaviest upon the unproductive rich; and in this sort of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich Treasury bondholders should contribute to the public expence, not only in proportion to their interest income, but something more than in that proportion.

Towards a more euvoluntary tax code.

Is All Income Inequality Created Equal?

Emmanuel Saez of UC Berkley has recently updated figures for income statistics with 2012 numbers. The damning quote: "Top 1% incomes grew by 31.4% while bottom 99% incomes grew only by 0.4% from 2009 to 2012. Hence, the top 1% captured 95% of the income gains in the first three years of the recovery." Commentary has been interesting. On Twitter, Justin Wolfers caps off a quick overview with this: "If you thought the Great Recession would tame inequality, think again. The top 1% share is back near record levels."

 We here at EE have written about inequality before, and typically in the context of income inequality specifically, rather than wealth inequality. Buchanan would have rapped our knuckles if he'd have caught us. But before we go cut ourselves any switches, let me defend our approach. At least the way I see it, the EE project aims to peer into and categorize the commonplace moral approaches folks have towards the grand world of commerce. And the simple truth is that if you stop most folks on the street (and even well-educated folks with advanced degrees!), they'll tell you that money is money, be it pocket currency, income, wealth or OTC options. I have literally heard with my own two wrinkly ears business school professors conflate income with wealth. So is it worth thinking about income inequality to the exclusion of wealth inequality or timeline inequality or longevity inequality? To the extent that our focus reflects on pedestrian claims of fairness and justice, I'm willing to write us a hall pass.

With that said, let's think a little bit about the Saez report. As you might predict, my first reaction was a spot of frustration. It matters very much indeed what generates an increasingly large Gini coefficient. If we're talking about rents and special privileges granted by government fiat, fat paychecks to greasy fatcats with offices on K Street violate the very spirit of antitrust (collusion in restraint of trade) and are both unjust and unfair, as much to the academic economist as to the irate citizen or bloviating pundit. If, contrariwise, concentrated wealth is a matter of summing the returns to an increasing pile of modest, euvoluntary transactions, it becomes more difficult to claim that the outcome is unjust, even if it appears ex post to be unfair. More difficult, but not impossible.

So my priors are that yes, we've got plenty of the salacious rent-seeking/preservation action happening between Washington and Wall Street, but haven't there also been great advances in the hidden side of truck, barter, and exchange? Hasn't dynamic inventory management spread from sea to shining sea? Don't we have gigantic economies of scale now that we've got billions of people sharing network space? And don't we have this cohort issue where we expect newer workers to earn entry wages as more experienced workers move up into higher deciles, thereby skewing the moral intuitions of our feelings on this stuff? These are the thoughts I've picked up listening to Russ and Mike chew these topics on Econtalk. This is the marrow of my micro courses, of the bits and bobs I've collected studying Alchian and Allen, Friedman and Schwartz, Buchanan and Tullock, Hinich and Munger. These are also the priors I can't quite completely maintain in the face of the the first quote up there in the opening paragraph.

One thing I know for sure is that to get a good update on my priors, I'd want to take a good solid look at how the breakdown looks across industries. If we're seeing very different results in aerospace than in, say, cinder block production, we can say a lot more about the relative importance of political rents. As it is, my gut (a notably useless part of the body for rigorous analytical thinking) tells me that there's no f-ing way that these large numbers can be picked up by either technological advance or rent-seeking alone. This would seem to require a combination assault, where rising stars in the business world would have to both a) improve the delivery of their product and b) successfully lobby for the protection of their business model. At the same time, we'd need to see some decline in LFP among new entrants (more here). These combined efforts might produce these results. Might.

So where's the baby among all this bathwater? Good delivery of product sure sounds nice to me. The rest? Not so much. But Andrea's Question once again pokes its rough nose through the fabric of all my posturing. Yes, we want to get rid of rent-seeking, but what are you going to do about it, Sam? Propose a constitutional amendment? You've got this post series on the Constitution, after all. Well, sure I do. I can even think of what the language would be like. I'd return to something closer to an original interpretation of the Commerce Clause. But much like hitching your Conestoga wagon up to a team of unicorns, I have a hunch that the actual, real life bargaining set is null. Even very modest threats to the rent-preservation societies of America reveals a savage and fierce protection of political privilege. The accumulated rents of elites is gargantuan and even if it's in everybody's interests to eliminate them, coordination failures pretty much guarantee it won't happen. Coase was right.

And I'm afraid I can't hand you a decent second-best proposal. tax-and-transfer schemes are less than useless since the folks who have all the rents will be the ones to best avoid the schemes. Political solutions empower the folks who control the legislature. Duh.

Well, at least they're still making neat toys for us. I hear the new iPhone comes in candy-coated colors! Biometric scanning included gratis.

Euvoluntary Inequality? A Tale of One Cities

Greg Mankiw posted a thought-provoking graph last Friday. If you take it at face value, the "disappearing middle class" is more a matter of upward mobility than declining fortunes.

There are plenty of discussions that could be built on N. Greg's graph, from the changing role of wealth vs income welfare metrics in the economics profession over the years, to the nature of urban or information or plain ol' relative price economics, to the winnowing strand between the streams of the poor and the banks of the rich. I, iPad. But buried in there is a rather severe institutional and public choice critique that asks tough questions about the scope of euvoluntary exchange.

In ever so slightly related news, Bob Murphy micturated on a hornet's nest recently when he had the brazen audacity to challenge a climate change report in front of the "honorable" Senator from the Golden State Babs Boxer. His big point was that the report neglected to present present value calculations using a 7% discount rate, sticking only with much lower discount rates. His integrity was quickly questioned and testimony haughtily ignored as he's a sucker on the tentacle of the mighty and vast Kochtopus.

PAA, Sarah.

What was Murphy's point and why should anyone give two shakes about "discount rates"?

In simple terms, the discount rate is a measure of how much we care about the future. That's not exactly right though, because it's a composition of a bunch of different things, all grounded in (subjective, of course) risk and uncertainty assessment. Yes, there's some concern over future generations in there, but that's sort of like a field force, like gravity: it's always there and does nothing to help pick between 1%, 3% and 7%. Nor does it do much of anything to select the shape of the (implied) yield curve*.

Take two people. Alan and Brenda. Alan was born in the Grady projects in late 70s Atlanta. Brenda arrived a year later, swaddled in a designer bassinet in Buckhead. Alan's mom worked as a house cleaner and his dad was in and out of prison for petty larceny and minor drug offenses. Brenda's mom was an heiress and her dad a state senator. Alan learned sheet metal fabrication at Chattahoochee Tech, Brenda was a Rhodes scholar at Swarthmore. Both of them were diligent, prudent, and conscientious. Yet despite similar personality characteristics, Alan had a higher discount rate, that is to say, he planned less for the distant future than Brenda. Why? Not for lack of ambition or imagination, but because planning decades in advance is an outrageous luxury when your job is threatened by foreign competition, your life and liberty are threatened by criminal justice professionals, and your home is threatened by "urban renewal" projects. Are income differences between Alan and Brenda unjust? Are they brought about by non-euvoluntary exchanges?

Initial endowments are seldom if ever exogenous. Which means that neither are discount rates.

And discount rates help determine big choices. Choices like the sort of higher ed to pursue, the mating market to frequent, the career path to attempt. Discount rates limit alternatives.

Discount rates limit alternatives, so Alan's BATNA is necessarily different than Brenda's in almost every relevant major exchange scenario. Does the fact that Alan decided not to pursue an elite liberal arts degree suggest that becoming a metalworker was not euvoluntary? What about the times when Alan decided to spend $150 on a pair of sneakers instead of getting a $20 pair and putting the balance in a Traditional IRA? If Alan and Brenda's decisions are at least partly a function of their discount rates and their discount rates are generated by institutional uncertainty, it might be that measured income inequality has at least something to do with the logic of collective action.

The strange habit of politicians to shovel wads of cash from poor to rich is dismaying, but at least somewhat predictable. Less predictable and more worrying is the tendency to tinker with legislation in a pie-eyed crusade to fix problems generated by the unintended consequences of past legislative errors. Sure, the grand public works projects of decades past may have turned out horribly, but this time is different. Right? Alcohol prohibition was a disaster, but marijuana is different. Right? Stop-and-frisk is reasonably prudential for public safety. Right?

Constituent, please.

Inequality is a problem insofar as it's bolstered by unjust institutional arrangements. Stop making low-skilled labor unemployable by minimum wage and licensing restrictions, stop threatening them with prison, stop evicting them because some local city council wants to increase its tax base, and then maybe we can check back to see how euvoluntary exchange produces measured income inequality. Policy that encourages people to focus on the present will only ever exacerbate the problem.

Of course, maybe that's the point.


*"Yield curve" has a technical meaning to do with interest rates. It's determined from the term structure of debt instruments, and it's a function of the spot price of securities of different maturities. Though it's subjective and personal, you can at least in your imagination impute a similar yield curve for people's individual discount rates, more or less.

Euvoluntary Exchange and its Outcomes: An Inquiry into Basic Minimum Income Level Determination

Being poor is no picnic. Or maybe it is a picnic, but one where the potato salad has gone bad and you get swarmed by fire ants and furious wasps and it starts raining and you locked your keys in the car and your phone's batteries are dead so you have to walk 5 miles back to town only to find that the towing company is closed for the long weekend.

But maybe you don't mind the bugs so much and you don't like potato salad anyway, and the rain feels refreshing. Maybe you enjoy the exercise and maybe this little town is charmingly rustic in just the way you love and maybe it turns out that when you spend the weekend at the local inn, you find the love of your life working as a clerk in the town courthouse.

Experience is subjective. So is poverty. Take it from a guy who lived for no short time well below the official government-determined poverty line.

Rise of the Machines

The always-interesing Robin Hanson talks about brain uploads here:

What do you think? In a world of machine intelligence, even where the minds are emulations of meat-generated human brains, how will the face of euvoluntary exchange adjust? With insanely fast clock speeds, uploads are likely to quickly outstrip traditional humans in population as well as wealth. Our descendants could end up in a world where BATNA disparity is far beyond what we encounter these days. How will moral intuitions change? How will the institutions of trade adapt? Will the basic lessons of economics still apply?

Labor is not Euvoluntary: Orphanarium Edition

From Delfi.lt, a story I can't find an English translation for. And the online translator isn't working for me. My Lithuanian readers won't have any trouble, but the other two of you might. Here's the skinny: temporary Lithuanian workers in Norway are having their kids taken into state custody on the grounds that they're living in unacceptably poor conditions.

Never mind that they're there of their own free will or that they've made the express, rational decision to save on material comforts in exchange for a higher standard of living back home in the future or that they're making remittance payments to relatives living in squalor back home. No, it's important that everyone is equal, and if that's not the case, the Norweigan Barnevern (CPS) will relocate your children as one of the delightful public services they offer.

How enlightened.

Bastiat squirmed.

Old Country Rules

I don't think I quite fully grasp the moral intuition behind the so-called "Buffett Rule" (a moniker so godawful that the only way I can mentally salvage it is to imagine tiny parrots mobbing a caricature of a man on a beach who just blew out his flip-flop after stepping on a pop-top). It seems to me that there are at least two components, and I'm not sure which one is more relevant to the morality of taxation. Note that in both cases, the warrant appears to be that taxes provide public goods where MB > MC. Questioning this assumption is ill-suited to the mission of EE, so I won't waste much time on its consideration.

The consequentialist reason:
The wealthy among us attach lower marginal value to income (or wealth). In terms of utility, they can afford to pay more in taxes.

The deontological reason:
Income inequality is bad for society. A high GINI coefficient, even devoid of context breeds social unrest. Poor people are demoralized and seething resentment grows, perhaps exacerbated by crass displays of idle wealth by the spoiled children of titans of commerce. Add to this an assumption that wealth is earned illegitimately, perhaps by coercion or by the rents generated by cronyism to bake a superb cake of "soak the rich".

I'm sure I'm missing plenty here. The fairness heuristic is frequently invoked, or social justice or simple indignance. This is all fine, all good and wonderful, but the EE hook is this feeling I think people have that wealth is often illegitimately earned.

And indeed, this is where I have much in the way of common cause with many of my more conventionally left-leaning friends. It's a fairly plain fact that lots of wealthy people have earned their fortunes by currying political favor rather than conducting euvoluntary exchanges. Not all, of course, but enough that I share some sentiments of pique. I propose however that the failing lies primarily in the metastasis of Congressional activity. Taxing the lampreys that cling to the flanks of leviathan cannot be done without poisoning the entire bay (how's that for a terrible metaphor?). Starving the beast of Big Government strikes me as a more appropriate policy response.

I think the EE questions are in yonder clam beds: just how much of America's accumulated wealth was generated by non-EE methods? Is the answer to this question relevant to tax policy? To Constitutional limits on the power of the Congress? Is it morally appropriate to treat non-EE political-rent-holders the same as euvoluntary market participants? Who should be held accountable for the scope of the corporate welfare-warfare state? Do the incentive effects of taxation change depending on the strength of a firm's presence on K Street?

By the by, the reason I make so many nautical references (since nobody asked anyway) is because I'm a former Sailor.

Is Inequality a Problem?

The question in the title is silly, since few advocate complete equality. The question is better posed, "Is TOO MUCH inequality a problem?"

Of course, this begs the question in the other direction, since "too much" is by definition a problem. Can a society be so unequal that even a devotee of the "no initiation of force" principle would agree that state action, in the form of direct redistribution or indirect taxes and subsidies in kind would be justified?

I bring this up because there was a very well executed discussion in the NYT on essentially this question (though they don't credit the "no initiation of force" point, since the NYT even supported the initiation of force in Iraq).

My own thought: Two years ago I would have said that inequality, simply qua inequality, could never be a problem. The reason is that relative wealth is simply not an allowable argument in a utility function, and therefore the government is never justified to act. Allowing the inclusion of the individual's reaction to inequality as a justification for state action is simply to take the sin of envy and raise it to the status of an artificial virtue, "social justice."

I found Hayek's view on this persuasive. The problem is not RELATIVE wealth, but the absolute destitution of the very poorest. If, in absolute terms, the poorest members of a rich society are unable to provide for themselves and their families the basics of food, clothing, shelter, education, and health care, than state action might be considered. But to be clear: the problem is not that income is too unequal, but rather that the poorest are simply too poor. (One place I discussed this was in this paper, on pages 3 and 4).

But now... not so fast. I would admit that I may have been wrong, and in fact almost certainly was wrong. There are two conditions in which inequality is a problem per se, without resort to the absolute poverty claim.

1. The bargaining power of the least well off is small enough, compared to the bargaining power of the rest of society, to render economic exchange by the least well off not euvoluntary. Sweatshops may be a problem precisely because they really are the best opportunity for the very poor.

2. The political power of the very wealthy swamps the power of the population, and in particular disenfranchises the median voter, because the peculiar institutions of large democracies tilt power toward the "median dollar." This is the argument made by many, but perhaps most tenaciously by my good friend Tom Ferguson, in books such as this one, especially the appendix. (UPDATE: Daron A offers some interesting observations extending the interaction)

But even then, having admitted there is a problem, I expect I will differ about the solution. The solution to the first problem cannot be to cut off access to the market. Closing the sweatshop does nothing but make rich lefties feel better, and does nothing to help the abject workers.

And the solution to the second problem cannot be to confiscate wealth. The solution is to reduce the ambitions of government, and in consequence sharply circumscribe its powers. If it is true that government controls every aspect of our lives, from whom we marry to what we eat, than I agree that the very wealthy will have disproportionate influence over those decisions. But then the answer can't be to get rid of the very wealthy; instead, the answer is get rid of the government controls.

Inequality: Should "we" do something?

Boston Review did a nice job with this exchange on inequality.

The lead essay.

The responses.

On this point, I thought Penn Jillette had some very fine observations. His views on religion are perhaps intemperate, though a thorough-going, "I'm not sure" would do us a lot of good.

Richard Epstein on Inequality

Is inequality unjust? Does it matter how the inequality came about, or is it prima facie unjust? And does it matter if the least well off are benefited by the exchanges that lead to the inequality? Richard Epstein ably makes the argument for why Rawlsians should be pro-market, and accept more inequality than they commonly countenance...

Watch Does U.S. Economic Inequality Have a Good Side? on PBS. See more from PBS NewsHour.

(nod to Tim Doran for the link)

Reihan Salam: En Fuego

Wow. Mr. Salam is doing some pretty cool stuff here. I'll just give the link, because he is dealing with some heavy problems, in a very interesting way.