Thursday, March 31, 2011

Correlation, causation and data

Here's a cool short post from the guys at Freakonomics about using data to advocate a viewpoint. You may recognize the name of the purported offender.

Many of you have had econometrics or are now enrolled in 422 (others will have me for 422 next spring), so hopefully if you can't relate to this, you soon will. People want answers. Analysts included. During tumultuous economic times this is especially so. Our job as economists is to seek those answers, find the truth, whatever it may be, and report it as objectively as possible. But many times the truth is "we don't know". People (especially those paying for analysis) don't seem to like that answer, which can create unfortunate pressures that can lead to tenuous conclusions.

Hopefully this class has increased your awareness that economics is messy, and "one size fits all" solutions are very rare.

For your work, be open about what you know, what you don't know, and what your assumptions are. When reading the work of others, question assumptions, check the data and always know your sources.

Thanks to RH for the link.

Thursday, March 10, 2011

Health and economic growth in India

Here's a quick summary of a study suggesting that gains in economic growth did not result in gains in child nutrition.

Why might this be the case?

Tuesday, March 8, 2011

More on the college premium

Krugman follows up on his Sunday piece with a recent blog post at NYT and another here where he answers my question.

Obviously the question of whether the college premium is going up, going down or staying flat is a matter of supply and demand for labor. On the demand side, technology can be a substitute for labor, and as tech improves (cheaper, better/smarter machines) the demand for substitutable labor should fall. But labor can also be a complement to technology, so as tech improves we should see an increase in demand. I think the jury is out in terms of the net effect, but clearly this is a matter of what types of labor serve as complements and what types are easily substituted.

Good stuff here from NBER.

As for the supply... here's a bit of info from the economist.

Interesting and related material here.

Monday, March 7, 2011

Krugman flips the script on education and growth

From today's NYT.

Krugman notes that the outsourcing of low-education jobs may be reaching a plateau, and that outsourcing of high-ed jobs may be speeding up. If so, strong education policy may not be the golden ticket to growth. Interesting perspective. I buy the "hole in the middle" argument, though I'm not sure I buy the idea that high-tech or high-ed jobs are "more offshorable". I haven't yet read the Blinder and Krueger paper, but it seems there's a parallel between these ideas and traded goods vs. non-traded goods. Which types of labor are easily outsourced to the lowest and/or most educated bidder?

How might this affect the college premium? The grad school premium? Will the effects vary by discipline? What might this do to the demand for certain college majors in the U.S.?

Boomers and the dependency ratio

From the Census Bureau.

Cause for concern?

Kristof on Islam and economic growth

Nicholas Kristof has a great column in Sunday's NYT.
Note the role of the accumulation of capital.

He has a brief follow-up in his blog today.

Thursday, March 3, 2011

So much news, so little time...

Sorry for the blogging hiatus. I've been playing catch-up for a couple of weeks now.

There's a lot going on in the world that relates to our class, so let's dig in.

Big stories:

Unrest in the middle east and north Africa continues. What are the implications for those nations and for the rest of us? I'll post links to related stories and analysis soon. Feel free to send me links to what you're reading.

An obvious market connection is that gas prices are rising quickly. What are the implications of energy prices for economic growth and development? Read about it here at the WSJ, here at The Press (New Zealand), and here at the San Francisco Chronicle (note the estimate of a "fear premium" in a linked Business Week story).

In what some are labeling a "Cairo moment", attempts at union-busting are causing a stir in Wisconsin and Ohio. One side of the argument is that state's obligations to public union workers (pensions, health care) are exacerbating budget shortfalls. Curtailing collective bargaining will therefore rein in spending, they say, and help states climb out of severe budget shortfalls.

The other side argues that without unions, the working class will have little political power and will be taken advantage of, resulting in a shrinking middle class and more inequality (among other things). Unions provide a needed balance to the political power of corporations, they say, especially in light of the Supreme Court's recent ruling on political contributions. From this perspective, union busting is simply an attempt at knee-capping the principle contributor to one party's interests. One side says differentiating between private sector and public sector unions is at the heart of the matter, the other side downplays the distinction.

Whether the arguments of 2011 are for budget austerity or simply a political power-play, what role does collective bargaining play in economic growth and development? Read about the issues here at the NYT, here at MSNBC, and here at Fox News.

Here is a pro-union look at income, equality and unions by Ryan Witt at The Examiner. Interesting, but we have to be careful jumping from correlation to causation. Read more on the pro-union perspective here from the Center for American Progress Action Fund. You can also check the AFLCIO for their perspective.

Here is a paper from Holcombe and Gwartney presenting a detailed and non-technical look at the effect of unions on economic growth via their effect on labor laws. The paper provides great information and a thought-provoking thesis. But we have to keep in mind that CATO is a conservative think tank, so as with the links above, you sort of know the conclusions before starting the paper.

Here's a piece from two economists at LSE suggesting the effect of unions is negative, but can be offset.

Here's a link to an old blog post from Greg Mankiw on the subject. Here's a YouTube video of Krugman providing a different perspective and an excerpt from a Krugman interview at AFL-CIO.

Interesting related aside: Matthew Kahn (environmental econ prof at UCLA) has some interesting research related to unions and manufacturing firms' location decisions (and associated pollution).

Taking it one step further, if this is about politics then we have to think about how (and if) political regimes are related to economic growth.

OK, that's a ton of reading... I don't expect you to get through it all in one sitting, by try to consider both sides of the arguments and give thought to what we know and what we don't know. Like most of the issues under study this semester, these are complex and opaque relationships, and there are strong opinions on both sides.