Monday, September 25, 2006

Yuan Update

I just finished covering Exchange Rates in the principles class, so this round-up will make a nice suggestion for further reading.

Mark Thoma covers the recent renewal of Senators Schumer and Graham's call for a tariff against Chinese imports. Somehow they think taxing ourselves 27% will get the point across to the Chinese. What? They argue that the Chinese fixing their currency is a violation of free trade. So they feel we should then further sacrifice free trade? I thought an eye for an eye leave you both blind?

But Mankiw points out that fixed exchange rates are not inconsistent with free trade.

Here is a question for the Senators to ponder: How do New York and South Carolina manage to have free trade between them? There is no floating exchange rate to bring interstate trade flows into equilibrium. By using a common currency, the two states effectively have a fixed exchange rate, and somehow everything works out just fine. David Hume explained why.

And according to Menzie the prospect is for the dollar is that it will likely continue to depreciate, making a yuan devaluation vis a vis the dollar much more diffiuclt to engineer.

Keywords: Exchange Rates, ECO120

Sunday, September 24, 2006

Oktoberfest - Good For Wages

From Marginal Revolution:

...we conjecture that binge drinking conveys unobserved social skills that are rewarded by employers.

Here is the full and very carefully done paper. I've known for a while there is a correlation between drinking and wages, but only recently have I started thinking it might be more than a trick in the data. The effect disappears for women, once educational attainment is taken into account. So should you encourage your sons to drink, so as to learn rituals of social bonding, or is their binging simply a signal of sociability? I'll note, by the way, that I am a not very social person who also doesn't drink much, verging on not at all.

I think this is a prime example of how econometrics can help us understand complicated relationships. And there is no doubt that this matches some theoretical intuition you might have. Who make the best salesmen? I'm not being sexist here but this is really something you see only in males (as the data suggest). I think the best salesmen are the guys that were the life of the party, and they were ALWAYS partying. I'm not advocating anyone take up binge drinking, but I am pointing out the importance of developing the ability to socialize.

So, as Oktoberfest approaches we can all turn to building important job skills.

Update: Andrew Gelman offers a link to this Journal of Research article as well.

Friday, September 22, 2006

Unemployment Kills

Another reason to lower unemployment from the Journal of Health Economics:

In this note we test if unemployment has an effect on mortality using a large individual level data set of nearly 30,000 individuals in Sweden aged 20–64 years followed-up for 10–17 years. We follow individuals over time that are initially in the same health state, but differ with respect to whether they are employed or unemployed (controlling also for a number of individual characteristics that may affect the depreciation of health over time). Unemployment significantly increases the risk of being dead at the end of follow-up by nearly 50% (from 5.36 to 7.83%). In an analysis of cause-specific mortality, we find that unemployment significantly increases the risk of suicides and the risk of dying from “other diseases” (all diseases except cancer and cardiovascular), but has no significant effect on cancer mortality, cardiovascular mortality or deaths due to “other external causes” (motor vehicle accidents, accidents and homicides).

Keywords: ECO120, ECO301, ECO305

Monday, September 18, 2006

Matching Donors

Would you give your sibling your spare kidney? Would you give a perfect stranger your spare kidney? I would give my brother mine, but I would not give a stranger mine. The odds are that I'm probably not a good match for my brother, but I may be a good match with someone else. Someone who would be willing to give their sibling a kidney, but is likewise not a good match. Thus we have a matching problem. Well this website,, while not specifically designed to solve the problem I point out is designed to help match live donors with patients. Of course wouldn't this be easier if we were just able to sell them? Or at least allow them to be sold once we die?

Keywords: Organ Donation, ECO120

Tuesday, September 12, 2006


Mayor Daley vetoed a living wage proposal tied to big box retailers. It is shocking that a democrat would veto this, but more shocking is that it is Daley's first use of his veto power in 17 years. Bravo man.

"I understand and share a desire to ensure that everyone who works in the city of Chicago earns a decent wage," Daley said in the letter. "But I do not believe that this ordinance, well intentioned as it may be, would achieve that end."Rather, I believe it would drive jobs and businesses from our city, penalizing neighborhoods that need additional economic activity the most," Daley said."In light of this, I believe it is my duty to veto this ordinance."

The measure would require that employees of retail stores with at least 90,000 square feet operated by companies with a minimum of $1 billion in annual sales be paid at least $10 an hour and receive $3 an hour in fringe benefits by 2010.

Keywords: Minimum Wage, ECO120

Tuesday, September 05, 2006

Selection Bias

Selection Bias occurs when a sample is not random in some way that has important consequences for the inference you want to draw from your sample. Marginal Revolution points to another study which tries to identify which types of people self select out of experiments.
Students were significantly less likely to participate if peers nominated them as being higher on narcissism or non-assertiveness. Results suggest it may be more difficult to obtain sufficient numbers of people high in narcissistic traits than individuals with other personality traits.

And who is more likely to participate?
There was a significantly higher probability of participation if peers nominated someone as having more histrionic, obsessive–compulsive,self-sacrificing, and intrusive/needy characteristics.

Keywords: Selection Bias, ECO307

Sunday, September 03, 2006

Incentives and Oral Sex

While Marginal Revolution won't talk about Oral Sex, this blog will. Tim Harford has a great short piece in Slate on the much talked about increase in teenage oral sex. From the article:

The rest is basic economics. When the price of Coca-Cola rises, rational cola-lovers drink more Pepsi. When the price of penetrative sex rises, rational teenagers seek substitutes. Perhaps we shouldn't be surprised that even as the oral-sex epidemic rages, the Centers for Disease Control and Prevention reports that the percentage of teenage virgins has risen by more than 15 percent since the beginning of the 1990s. Those who are still having sex have switched to using birth-control methods that will also protect them from sexually transmitted infections. Use of the contraceptive pill is down by nearly a fifth, but use of condoms is up by more than a third. The oral-sex epidemic is a rational response to a rise in the price of the alternative.

Do you think this will raise the interest of an 18 year old undergrad in a principles class? Probably, too bad I can't send the link to my colleagues as a few of them are so uptight they might file a sexual harassment grievance against me. Its a shame really.

Keywords: Sex