Society

Zoning Out

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“Arguably,” writes economist Edward Glaeser,

Image result for zoning lawsland use controls have a more widespread impact on the lives of ordinary Americans than any other regulation. These controls, typically imposed by localities, make housing more expensive and restrict the growth of America’s most successful metropolitan areas. These regulations have accreted over time with virtually no cost-benefit analysis. Restricting growth is often locally popular.  Promoting affordability is hardly a financially attractive aim for someone who owns a home.  Yet the maze of local land use controls imposes costs on outsiders, and on the American economy as a whole.

…[The] most productive parts of America are unaffordable. The National Association of Realtors data shows median sales prices over $1,000,000 in the San Jose metropolitan area and over $500,000 in Los Angeles…America’s affordability problem is local, not national, but that doesn’t mean that land use regulations don’t have national implications. Historically, when parts of America experienced outsized economic success, they built enormous amounts of housing. New housing allowed thousands of Americans to participate in the productivity of that locality. Between 1880 and 1910, bustling Chicago’s population grew by an average of 56,000 each year. Today, San Francisco is one of the great capitals of the information age, yet from 1980 to 2010, that city’s population grew by only 4200 people per year.

…Land use controls that limit the growth of such successful cities mean that Americans increasingly live in places that make it easy to build, not in places with higher levels of productivity. Hsieh and Moretti (2015) have estimated that “lowering regulatory constraints” in areas like New York and Silicon Valley would “increase U.S. GDP by 9.5%.” Whether these exact figures are correct, they provide a basis for the claim that America’s most important, and potentially costly, regulations are land use controls.

…Land use controls may be benign even if they restrict growth and increase prices. Their proponents argue that they prevent environmental damage and reduce the downsides of local growth to the community. Theoretically, it is at least conceivable that America’s web of locally-constructed zoning codes have worked out to be a finely tuned system that functions like a perfect Pigouvian tax internalizing all the offsetting externalities of all new construction.

Yet such a view seems untenable. Getting the right national policy requires comparing the social costs of building in one location versus the costs of building elsewhere. Few localities seriously consider the negative impact that restricting buying will have on non-residents of their town. No locality considers the impact that their local rules may induce more building elsewhere.

We’ve written on zoning laws before. As Glaeser concludes, “Reforming local land use controls is one of those rare areas in which the libertarian and the progressive agree. The current system restricts the freedom of the property owner, and also makes life harder for poorer Americans. The politics of zoning reform may be hard, but our land use regulations are badly in need of rethinking.”

Minimum Wage: The Danish Experience

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Ready for the second minimum wage paper in a row today? A new working paper looks at the Danish experience, where the minimum wage increases drastically when individuals turn 18 years old. So what happens when individuals become adults? “Danish minimum wages cause an increase in average wages of 40 percent when workers reach age 18. This increase in wages causes a 33 percent decrease in employment when workers turn 18, almost all of which comes from job loss” (pgs. 30-31).

As economist Alex Tabbarok observes,

In a section of the paper that adds important new evidence to the debate, the authors look at the consequence of losing a job at age 18. One year after separation only 40% of the separated workers are employed but 75% of the non-separated workers are employed. Different interpretations of this are possible. The separated workers will tend to be of lower quality than the non-separated and maybe this is correlated with less desire to have a job. Without discounting that story entirely, however, the straightforward explanation seems to me to be the most likely. Namely, the minimum wage knocks low-skill workers off the job ladder and it’s difficult to get back on until their skills improve.

Seattle Minimum Wage Ordinance: Lost Jobs, Hours, and Income

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A brand new NBER paper finds (quite unsurprisingly, despite what The Washington Post says) that

the Seattle Minimum Wage Ordinance caused hours worked by low-skilled workers (i.e., those earning under $19 per hour) to fall by 9.4% during the three quarters when the minimum wage was $13 per hour, resulting in a loss of 3.5 million hours worked per calendar quarter. Alternative estimates show the number of low-wage jobs declined by 6.8%, which represents a loss of more than 5,000 jobs. These estimates are robust to cutoffs other than $19. A 3.1% increase in wages in jobs that paid less than $19 coupled with a 9.4% loss in hours yields a labor demand elasticity of roughly -3.0, and this large elasticity estimate is robust to other cutoffs.

…Importantly, the lost income associated with the hours reductions exceeds the gain associated with the net wage increase of 3.1%…[W]e compute that the average low-wage employee was paid $1,897 per month. The reduction in hours would cost the average employee $179 per month, while the wage increase would recoup only $54 of this loss, leaving a net loss of $125 per month (6.6%), which is sizable for a low-wage worker (pgs. 35-36).

According to The Washington Post, economist David Autor described the study as one “that is likely to influence people,” calling it “very credible” and “sufficiently compelling in its design and statistical power that it can change minds.”

Given how past evidence has been ignored, I doubt it.

Minimum Wage and Worker Commutes

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Do minimum wage increases cause low-wage workers to commute out-of-state more? A brand new paper in Regional Science and Urban Economics answers in the affirmative. According to the Cato Institute’s blog,

[Terra McKinnish] seeks to exploit the variation in minimum wage rates between states and the compressing effect of the 2009 federal minimum wage increase to analyze whether a relative increase in a minimum wage within a state led to more commuting into that state to work for under 30s or more commuting out of the state to work.

…McKinnish employs difference-in-differences techniques to try to find the answer, using commuting records of people earning both low and modest hourly rates to control for other factors which could influence commuting, such as the health of the economy.

Upon doing all this, three key findings arise from her work:

  1. Prior to the 2009 federal minimum wage increase, there is no evidence that low-wage workers commuted at higher rates (relative to moderate-wage workers) to neighboring states with a higher minimum wage.

  2. After the federal minimum wage increase, low-wage workers modestly increased out-of-state commuting out of states most affected by the federal minimum wage increase.

  3. Moderate-wage workers reduced the rate at which they commuted out of states most affected by the federal increase following the rise in the rate (consistent with the idea that increasing minimum wages leads to employers replacing low productivity workers with higher productivity ones).

In short, “this study is further evidence to support the Econ 101 view of minimum wages.” Or, as the paper itself highlights, these “[r]esults are consistent with a disemployment effect of minimum wage increases.”

Does Imprisonment Reduce Repeated Drug Offenses?

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Ha. Nope. According to a recent article in the Journal of Experimental Criminology,

Image result for drug offendersImprisonment for drug crimes as opposed to non-prison sentences such as jail stays and terms of probation was not associated with a reduction in the likelihood of recidivism. That “null” finding held for all felony drug offenders as well as for different racial, ethnic, gender, and age groups and for inmates with different punishment histories. The sole and notable exception was for whites. For white drug offenders, imprisonment—as compared to being sentenced to community sanctions such as jail, intensive probation, or probation— appeared to increase recidivism. The results of this study thus do not support the argument that prison appreciably reduces or increases recidivism for most drug offenders, but they do suggest the possibility that it may do so for white drug offenders.

These results “raise questions about the benefits that stem from tough-on-crime anti-drug legislation.”

“In short,” the authors conclude,

this study echoes other scholarship that has raised questions about the wisdom of imprisoning drug offenders if the goal is to increase public safety. That does not mean that legislation should necessarily change. Public policy reflects a range of considerations, and evidence about the effectiveness of a particular policy, such as imprisonment, on one outcome, recidivism, constitutes but one factor that may be relevant. Even so, the study adds to others in calling attention to the need to carefully assess the empirical foundation for criminal justice policy.

Politics and Populism Make Us Stupid

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Political ignorance is a topic I’ve been reading up on as of late. It’s a tad depressing, if not all that surprising. A brand new Brookings paper builds off this research to argue the following:

  • Always empirically questionable at best, the populist-progressive idea that more participation will reliably improve either the products or the popularity of governance has taken a pounding in recent years, to the point where it is basically untenable. The populist model assumes that voters are better informed, more rational, and more engaged than is the case—or ever will be.
  • Even implausibly well-informed and rational voters could not approach the level of knowledge and sophistication needed to make the kinds of decisions that routinely confront the government today. Professional and specialist decision making is essential, and those who demonize it as elitist or anti-democratic can offer no plausible alternative to it.
  • Professional intermediaries make democracy more inclusive and more representative than direct participation can do by itself. In complex policy spaces, properly designed intermediary institutions can act more decisively and responsively on behalf of the public than an army of “the people” could do on its own behalf. Intermediated systems are also less likely to be paralyzed by factional disputes and distorted by special-interest manipulation than are systems designed to maximize voter participation and direct input.
  • Nonetheless, the predominant ethos of the political-reform community remains committed to enhancing individual political participation. This is a costly oversight. Some populist reform ideas are better than others, but, as a class, they have eclipsed a more promising reform target: strengthening intermediating actors such as political professionals and party organizations.

They review the literature on political ignorance to reveal the following:

  • Voters are very ignorant, and always have been.
  • Voters are ignorant because they’re rational, not because they’re stupid.
  • Voters are irrationally biased as well as rationally ignorant.
  • Providing more education or information isn’t a solution (though it’s worth doing anyway).
  • Even if voters were deeply informed and meticulously rational, elections still would not reliably tell us what the public thinks or wants.

What’s to be done? GMU law professor Ilya Somin suggests “foot voting“:

Image result for vote with feetIn many situations, the better approach to mitigating political ignorance is not to give up on empowering ordinary people, but to do so in a different way. Instead of putting our faith in political participation, we can instead give people more opportunities to “vote with their feet.”When people vote with their feet in the private sector, or by choosing which jurisdiction to live in within a federal system, they have much better incentives to acquire relevant information and use it wisely. Unlike ballot box voters, foot voters have the opportunity to make individually decisive choices that are likely to make a real difference. If you are like most people, you probably spent more time and effort acquiring information the last time you decided which TV or smartphone to buy than the last time you decided who to support for president or governor. That is likely because you knew that the decision about the smartphone would make a real difference, whereas the one about the presidency had only a miniscule chance of doing so.

We can enhance opportunities for foot voting by limiting government power and devolving it to lower levels. It is cheaper and easier to vote with your feet between states than between countries, and easier still to choose between localities or between competing alternatives in the private sector. There is also much that can be done to make foot voting easier for the poor and disadvantaged. Greater decentralization of power can also help mitigate the partisan bias and polarizatoin that both Rauch and I believe have exacerbated our political pathologies.

…I certainly do not claim that decentralization and foot voting can overcome all the dangers of political ignorance. Probably no one strategy can do that. But I think it can be be a bigger and less risky part of the solution than increasing the role of political professionals, even though there are indeed some situations where we should rely more on the latter. Be that as it may, Wittes and Rauch deserve credit for taking the problem of political ignorance seriously, and for their valuable contribution to the debate over this crucial issue.

Check both pieces out.

Big Data on Minimum Wage

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A brand new working paper looks at 2 million hourly wage workers from over 300 companies in order to determine the effects of minimum wage changes. As reported,

For the first time, a group of researchers at Washington University in St. Louis used a big-data approach to determine the effects of minimum-wage changes on business. Two professors and two doctoral candidates from the Olin Business School processed wage data on more than 2 million hourly workers from across the country over a six-year period. The results? There are winners and losers.

…“We found existing minimum-wage employees benefit from minimum-wage increases,” [co-author Radhakrishnan] Gopalan said. “Their wages go up, and they are no more likely to lose their jobs as compared to their counterparts in adjacent states. But following state minimum-wage hikes, companies are reluctant to hire new low-wage employees. In the one year following the wage hike, they increase the proportion of higher-wage (read: higher-skilled) employees and reduce the proportion of low-wage employees.”

…“For an area experiencing fast growth, having a high minimum wage will be a bad deal for the new entrants as they might have a tougher time finding a job. On the other hand, if you’re in an area whose population is not growing very fast, then raising the minimum wage will definitely benefit your existing low-wage employees, and the number of new employees who are hurt will be a minimum. Optimal policy will also depend on the industry composition of the establishments in the local economy.”

This fits with previous research. It also fits comfortably into what the evidence shows worldwide.

The Trade-Offs of Paid Leave

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With Trump’s budget proposing paid family leave, it’s worth considering the economics behind it. Economist and author Charles Wheelan explains in his fantastic book Naked Economics,

Economists study how we acquire information, what we do with it, and how we make ecisions when all we get to see is a book’s cover. Indeed, the Swedish Academy of Sciences recognized this point in 2001 by awarding the Nobel Prize in Economics to George Akerlof, Michael Spence, and Joseph Stiglitz for their seminal work on the economics of information. Their work explores the problems that arise when rational people are forced to make decisions based on incomplete information, or when one party to a transaction knows more than another.

…Consider a small law firm interviewing two job candidates, one male and one female. Both candidates are…eminently qualified for the position. If the “best” candidate for the job is the one who will earn the most money for the firm…then I will argue that the rational choice is to the hire the man…Women still bear the bulk of child-rearing responsibilities. Demographics suggest that both candidates are likely to start families in the near future. Yet only the female candidate will take paid maternity leave. More important, she may not return to work after having the child, which leaves the firm with the cost of finding, hiring, and training another lawyer.

Is any of this certain? No…The female candidate is punished because the firm has no information on her specific circumstances but good data on broad social trends. Is this fair? No. (And it’s not legal either.) Yet the firm’s logic makes sense (pg. 105-106).[ref]He goes on to point out that professional women that take the paid maternity leave and run impose a cost on other women by making firms more likely to discriminate against women. His solution?: “a generous, but refundable maternity package. Keep it if you want to come back to work, return it if you don’t” (pg. 107).[/ref]

Obviously, Wheelan is not endorsing discrimination, but simply laying out the economic factors that incentivize it. Over at The Week, AEI’s James Pethokoukis lays out some of the evidence for the theory above:

Even the best ideas have downsides, and it’s up to policymakers to deal with them. Paid leave is no different.

A 2017 study, by UC Santa Barbara economist Jenna Stearns, of maternity leave policy in Great Britain found that access increases the probability of women returning to work, while job protection benefits result in higher overall maternal employment rates and longer job tenure. Sounds good! But there’s a tradeoff: Expanding job protected leave benefits led to “fewer women holding management positions and other jobs with the potential for promotion.”

Likewise, a 2013 study by Cornell University’s Francine Blau and Lawrence Kahn found family-friendly policies indeed make it easier to balance work and family. But they also “leave women less likely to be considered for high-level positions. One’s evaluation of such policies must take both of these effects into account.”

Few economists would be surprised at these analyses. In a classic 1983 paper on mandated benefits like paid leave, former Obama economist Lawrence Summers explained businesses would offset higher benefits with lower pay or hiring workers with lower potential benefit costs. You know, tradeoffs.

Paid parental leave obviously has real upsides. But we can’t ignore the downsides either: Lower pay, stingier promotions, and a potential employer favoritism toward the childless.

The trade-offs may very well be worth it. But we need to at least be aware of what they are.

Are Mormon Women Depressed?

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Mormon women deal with depression at higher levels because of the absurd demands placed on them by their faith and culture, right? Maybe not. Jana Riess over at Flunking Sainthood writes,

Overall, about a fifth of currently-identified Mormons say they have taken or are currently taking medication for depression—21%. The numbers are definitely higher for Mormon women than for men. 27% of women say yes, almost twice the number of Mormon men who do (14.5%). 

…[But] the rate of Mormon women suffering from depression may actually be lower than the national average for women. The data on this is inconsistent, though; Timothy Heaton’s research has indeed found that “LDS women are significantly higher in depression than non-LDS women.” So there is no consensus here.

Second, there’s a known “gender gap” between men and women in the United States where mental health is concerned—and not just in Mormonism.

According to a publication of the Harvard Medical School, women “are about twice as likely as men to develop major depression,” based on a combination of genetic, hormonal, and emotional factors (and also the fact that even if men do develop depression, they are idiots about it they are less likely than women to seek the help they need). The World Health Organization has also found that depression is twice as common in women.

Bottom line, then: Mormon women appear to struggle more than Mormon men do with depression, or at least are getting treated for it nearly twice as often. This is not, however, an unusual or Mormon-specific gender dynamic.

But what are the factors that correlate with Mormon women who seek treatment?

  • Age doesn’t matter much: younger women are a little more likely to get treatment than older women.
  • Employment matters a little bit: unemployed women not looking for work–like stay-at-home moms–were a bit more likely to get treatment than full-timers and part-timers.
  • Politics matters: Democrats are more likely to take medication than Republicans.
  • Church activity matters: “very active” members are less likely to take medication than members who are “not active at all.”
  • Beliefs matter: A quarter of women who believe “all or most Mormon teachings” compared to 1/3 of women “who doubt or find some Mormon teachings hard to believe.”
  • Family size matters: “Women who have no children at all are a little more likely to take medication for depression than women who have one, two, or three children. In families of four or more children, women are also a bit more likely take medication. Overall, the women who were least likely to take medication for depression were those with one, two, or three children.”
  • Divorce matters: “Women who were divorced were almost twice as likely as married women to have taken medication for depression (41% vs. 23%). Never-married women fall in the middle at 34%.”

As Riess concludes, “The reality is nuanced and complex.”

Basking in Motivated Ignorance

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Vox covers the unsurprising results of a new study regarding political bias:

If you ever thought, “You couldn’t pay me to listen to Sean Hannity / Rachael Maddow / insert any television pundit you violently disagree with here” — you are not alone.

A study, recently published in the Journal of Experimental and Social Psychology,essentially tested this very question.

Two hundred participants were presented with two options. They could either read and answer questions about an opinion they agreed with — the topic was same-sex marriage — or read the opposing viewpoint.

Here’s the catch: If the participants chose to read the opinion they agreed with, they were entered into a raffle pool to earn $7. If they selected to read opposing opinion, they had a chance to win $10.

And yet,

A majority — 63 percent — of the participants chose to stick with what they already knew, forgoing the chance to win $10. Both people with pro same-sex marriage beliefs and those against it avoided the opinion hostile to their worldview at similar rates.

…This is a key point that many people miss when discussing the “fake news” or “filter bubble” problem in our online media ecosystems. Avoiding facts inconvenient to our worldview isn’t just some passive, unconscious habit we engage in. We do it because we find these facts to be genuinely unpleasant. And as long as this experience remains unpleasant, and easy to avoid, we’re just going to drift further and further apart.

Similarly, the researchers found that “[l]istening to a political opponent isn’t as awful as getting a tooth pulled, but it’s trending in that direction. It’s certainly a lot more awful than taking a leisurely stroll.”

What’s worse is that “partisans were unfamiliar with [the opposing side’s] viewpoints. So it’s not the case that people are avoiding learning about the other side because they’re already familiar. What’s going on here is “motivated ignorance,” as Matt Motyl, one of the study co-authors calls it.” Vox laments,

This is the dark truth that lies at the heart of all partisan politics, and makes me pessimistic that Facebook or any other social networking site can really solve the problem of people filtering into their own content bubbles. We automatically have an easier time remembering information that fits our worldviews. We’re simply quicker to recognize information that confirms what we already know, which makes us blind to facts that discount it. It’s the reason why that — paradoxically — as we learn more about politics and politically charged issues, we tend to become more rigid in our thinking.

Just more evidence that politics makes us mean and dumb. Here are a few useful steps to help you escape your political echo chamber: