Texas Taxes

Somehow my preparation for the ASSA meetings distracted me from this piece of news:

In what some have dubbed the "pole tax," the Lone Star State will require its 150 or so strip clubs to collect a $5-per-customer levy, with most of the proceeds going to help rape victims. The tax goes into effect on New Year's Day.
....
The strip clubs are suing to block the tax, which state officials estimate will raise more than $40 million a year, based on liquor sales figures. If accurate, the estimate suggests at least 8 million people a year go to Texas strip clubs to get a lap dance or watch women pole-dance in a G-string.

I should point out the estimates imply there are 8 million visits, that does not mean 8 million unique visitors. From the NHSLS data I find the average number of visits for someone who has gone to a strip club is approximately 4.45 yielding 1,797,753 unique visitors. Though this may even be skewed upward as the median number of visits is 2.

Externalities

Ever walk through the grocery story, annoyed at the woman apparently talking to herself, only to realize she is actually talking on a cell phone? Its a good example of a negative externality, not unlike air pollution. Often externalities are mitigated by social norms. For instance a stern look at the offending woman in the grocery store will hopefully get her to lower her voice if not hang up. Other solutions are often imposed by store owners themselves who impose bans on cell phone use in their stores. In this article covering internet access on airlines we see that different airlines are responding differently.

We think decency and good sense and normal behavior" will prevail, said Jack Blumenstein, chief executive of Aircell LLC, which is launching service on some American and Virgin flights in 2008.

In many ways, airlines are facing issues similar to those encountered by Wi-Fi networks on the ground — at airports, coffee shops and other public places.

Glenn Fleishman, editor of the Wi-Fi Networking News site, said operators of public networks generally do not filter because users are conscious that others can see what they surf. A coffee shop employee might occasionally ask a customer to leave, Fleishman said, "but those stories tend to be pretty far between."

Airplanes, however, are different because customers are in closer quarters and are more likely to include kids.

Allowing porn could subject an airline to harassment complaints much like an employer that refuses to clamp down, said John Palfrey, a Harvard Law School professor.

"I think they have a right to (filter), but I come up short of saying they have the responsibility," Palfrey said. "I'd rather have the responsibility in the hands of passengers and require them to be accountable for what they do on laptops and airplanes."

NPR on Healthcare

NPR had a great Talk of the Nation on the current state of the Healthcare system. I disagree with Uwe Reinhardt, but he clearly lays out the issues like only a good economist can.

Entrepreneurship

The next Economic Indicators Breakfast meeting will be April 2nd and we'll be discussing entrepreneurship. In preparation, I'll be linking to a lot of the research I come across on the topic. Here is a paper which is part of a larger publication coauthored by Dean Karlan from Yale.

Can one teach entrepreneurship, or is it a fixed personal characteristic? Most academic and policy discussion on micro entrepreneurs in developing countries focuses on their access to credit, and assumes their human capital to be fixed. However, a growing number of microfinance organizations are attempting to build the human capital of micro entrepreneurs in order to improve the livelihood of their clients and help further their mission of poverty alleviation. Using a randomized control trial, we measure the marginal impact of adding business training to a Peruvian village banking program for female micro entrepreneurs. Treatment groups received thirty to sixty minute entrepreneurship training sessions during their normal weekly or monthly banking meeting over a period of one to two years. Control groups remained as they were before, meeting at the same frequency but solely for making loan and savings payments. We find that the treatment led to improved business knowledge, practices and revenues. The microfinance institution also had direct benefits through higher repayment and client retention rates. Larger effects found for those that expressed less interest in training in a baseline survey have important implications for implementing similar marketbased interventions with a goal of recovering costs.

Eat Breakfast

Another reminder of the adage that breakfast calories are near free. This is a back door verification of something that has been found in other studies.

One of the major determinants of childhood obesity is the number of meals they eat. Missing breakfast and eating fewer meals, according to the authors, “may lead to higher concentrations of 24 hour insulin, which, in turn, can lead to increased fat deposition and higher body weight.” Children of working mothers eat fewer meals and having fewer meals significantly increases obesity.

Maybe breakfast is the most important meal of the day.

Cable TV Is Good For Women

According to Jensen and Oster:

Cable and satellite television have grown rapidly throughout the developing world. The availability of cable and satellite television exposes viewers to new information about the outside world, which may affect individual attitudes and behaviors. This paper explores the effect of the introduction of cable television on gender attitudes in rural India. Using a three-year individual-level panel dataset, we find that the introduction of cable television is associated with improvements in women's status. We find significant increases in reported autonomy, decreases in the reported acceptability of beating and decreases in reported son preference. We also find increases in female school enrollment and decreases in fertility (primarily via increased birth spacing). The effects are large, equivalent in some cases to about five years of education in the cross section, and move gender attitudes of individuals in rural areas much closer to those in urban areas. We argue that the results are not driven by pre-existing differential trends. These results have important policy implications, as India and other countries attempt to decrease bias against women.

Sex Dolls

A man in Madison is accused of stealing sex dolls.

Among the items that were found was a Linn Thomas talking love doll, priced at $269.99, which is shaped to resemble the porn star of the same name. According to one review by an Internet retailer, the 5-foot-3-inch doll vibrates and blurts out recorded encouragements to its user.

Why Care About Strip CLub Patrons?

So in preparing my paper for the ASSA in New Orleans, I began undertaking the worst of ex-post justifications for why one should care about strip club patrons. My argument is that we have a lot of experimental evidence that decision making differs among different conditions or contexts. Yet we haven't really looked at who puts themselves in those contexts.

So here are some of the cites for the experimental work.

Aharon, I., N. Etcoff, et al. (2001). "Beautiful Faces Have Variable Reward Value fMRI and Behavioral Evidence." Neuron 32(3): 537-551.

The brain circuitry processing rewarding and aversive stimuli is hypothesized to be at the core of motivated behavior. In this study, discrete categories of beautiful faces are shown to have differing reward values and to differentially activate reward circuitry in human subjects. In particular, young heterosexual males rate pictures of beautiful males and females as attractive, but exert effort via a keypress procedure only to view pictures of attractive females. Functional magnetic resonance imaging at 3 T shows that passive viewing of beautiful female faces activates reward circuitry, in particular the nucleus accumbens. An extended set of subcortical and paralimbic reward regions also appear to follow aspects of the keypress rather than the rating procedures, suggesting that reward circuitry function does not include aesthetic assessment.

Ariely, D. and G. Loewenstein (2006). "The Heat of the Moment: The Effect of Sexual Arousal on Sexual Decision Making." Journal of Behavioral Decision Making 19(2): 87–98.

Despite the social importance of decisions taken in the ‘‘heat of the moment,’’ very little research has examined the effect of sexual arousal on judgment and decision making.Here we examine the effect of sexual arousal, induced by self-stimulation, on judgments and hypothetical decisions made by male college students. Students were assigned to be in either a state of sexual arousal or a neutral state and were asked to: (1) indicate how appealing they find a wide range of sexual stimuli and activities, (2) report their willingness to engage in morally questionable behavior in order to obtain sexual gratification, and (3) describe their willingness to engage in unsafe sex when sexually aroused. The results show that sexual arousal had a strong impact on all three areas of judgment and decision making, demonstrating the importance of situational forces on preferences, as well as subjects’ inability to predict these influences on their own behavior

Burnham, T. C. (2007). "High-testosterone men reject low ultimatum game offers." Proceedings of the Royal Society B: Biological Sciences 274(1623): 2327-2330.

The ultimatum game is a simple negotiation with the interesting property that people frequently reject offers of ‘free’ money. These rejections contradict the standard view of economic rationality. This divergence between economic theory and human behaviour is important and has no broadly accepted cause. This study examines the relationship between ultimatum game rejections and testosterone. In a variety of species, testosterone is associated with male seeking dominance. If low ultimatum game offers are interpreted as challenges, then high-testosterone men may be more likely to reject such offers. In this experiment, men who reject low offers ($5 out of $40) have significantly higher testosterone levels than those who accept. In addition, high testosterone levels are associated with higher ultimatum game offers, but this second finding is not statistically significant.

Loewenstein, G., D. Nagin, et al. (1997). "The Effect of Sexual Arousal on Expectations of Sexual Forcefulness." Journal of Research in Crime and Delinquency 34(4): 443.

Decisions to commit crimes are often made under the influence of visceral feelings such as anger or sexual arousal. Rational choice models of offender decision-making assume that individuals can anticipate, in an unaroused state, their responses to such visceral feelings. This assumption is tested in an experiment in which sexually aroused and nonaroused males predict their own behavior in a date rape scenario. Aroused and nonaroused participants were asked a battery of questions designed to measure their perceptions of the costs and benefits of acting in a sexually aggressive manner, their level of arousal, and a probabilistic prediction as to how aggressively they would act in the conditions described in the scenario. The authors find that sexual arousal does increase subjects' expectations of their own sexual aggressiveness and that this impact is not mediated by perceptions of the costs or benefits of such aggression.

Lynn, M. (2007). The Determinants and Consequences of Female Attractiveness and Sexiness: Realistic Tests with Restaurant Waitresses.

Waitresses completed an on-line survey about their physical characteristics, self-perceived attractiveness and sexiness, and average tips. The waitresses’ self-rated physical attractiveness increased with their breast sizes and decreased with their ages, waist-to-hip ratios, and body sizes. Similar effects were observed on self-rated sexiness, with the exception of age, which varied with self-rated sexiness in a negative, quadratic relationship rather than a linear one. Moreover, the waitresses’ tips varied with age in a negative, quadratic relationship, increased with breast size, increased with having blond hair, and decreased with body size. These findings, which are discussed from an evolutionary perspective, make several contributions to the literature on female physical attractiveness. First, they replicate some previous findings regarding the determinants of female physical attractiveness using a larger, more diverse, and more ecologically valid set of stimuli than has been studied before. Second, they provide needed evidence that some of those determinants of female beauty affect interpersonal behaviors as well as attractiveness ratings. Finally, they indicate that some determinants of female physical attractiveness do not have the same effects on overt interpersonal behavior (such as tipping) that they have on attractiveness ratings. This later contribution highlights the need for more ecologically valid tests of evolutionary theories about the determinants and consequences of female beauty.

Van Den Bergh, B. and S. Dewitte (2006). "Digit Ratio (2D: 4D) Moderates the Impact of Sexual Cues on Men’s Decisions in Ultimatum Games." Proceedings- Royal Society of London. Biological sciences 273(1597): 2091-2095.

Three experimental studies demonstrate that ‘sex-related cues’ impact human decision-making in ultimatum games. In the ultimatum game, two individuals divide a sum of money. The proposer offers a portion of the money to the other player, the responder. If the responder accepts the offer, the money is distributed in agreement with the proposer’s offer. If the responder rejects the offer, neither player receives anything. Our studies show that exposure to pictures of sexy women or lingerie increases the likelihood of accepting unfair offers. Digit ratios of responders are reliably associated with their behaviour: males with lower digit ratios are more likely to reject an unfair split in neutral contexts, but more likely to accept unfair offers in sex-related contexts.

Waldherr, M. and I. D. Neumann (2007). "From the Cover: Centrally released oxytocin mediates mating-induced anxiolysis in male rats." Proceedings of the National Academy of Sciences 104(42): 16681-16684.

Sexual activity and mating are accompanied by a high level of arousal, whereas anecdotal and experimental evidence demonstrate that sedation and calmness are common phenomena in the postcoital period in humans. These remarkable behavioral consequences of sexual activity contribute to a general feeling of well being, but underlying neurobiological mechanisms are largely unknown. Here, we demonstrate that sexual activity and mating with a receptive female reduce the level of anxiety and increase risk-taking behavior in male rats for several hours. The neuropeptide oxytocin has been shown to exert multiple functions in male and female reproduction, and to play a key role in the regulation of emotionality after its peripheral and central release, respectively. In the present study, we reveal that oxytocin is released within the brain, specifically within the hypothalamic paraventricular nucleus, of male rats during mating with a receptive female. Furthermore, blockade of the activated brain oxytocin system by central administration of an oxytocin receptor antagonist immediately after mating prevents the anxiolytic effect of mating, while having no effect in nonmated males. These findings provide direct evidence for an essential role of an activated brain oxytocin system mediating the anxiolytic effect of mating in males.

Wilson, M. and M. Daly (2004). "Do pretty women inspire men to discount the future?" Proceedings of the Royal Society B: Biological Sciences 271(0): S177-S179.

Organisms 'discount the future' when they value imminent goods over future goods. Optimal discounting varies: selection should favour allocations of effort that effectively discount the future relatively steeply in response to cues promising relatively good returns on present efforts. However, research on human discounting has hitherto focused on stable individual differences rather than situational effects. In two experiments, discounting was assessed on the basis of choices between a smaller sum of money tomorrow and a larger sum at a later date, both before and after subjects rated the 'appeal' of 12 photographs. In experiment 1, men and women saw either attractive or unattractive opposite-sex faces; in experiment 2, participants saw more or less appealing cars. As predicted, discounting increased significantly in men who viewed attractive women, but not in men who viewed unattractive women or women who viewed men; viewing cars produced a different pattern of results.

Linkfest

Too lazy to comment heavily on these links, but I want to preserve them somewhere.

1. Teens prosecuted for racy photos...of themselves. File under absurdly wasteful prosecutions.

2. Never trust estimates from advocacy groups, they usually exaggerate. The UN is no different.

3. Sex Tourism for women.

4. You can't legislate abortion away. They still happen with the same frequency.

5. Realistic estimates of the porn industry.

6. Another wage effect of female menstruation. Increased absenteeism.

7. Trends in female anatomy. Boobs are getting larger.

Bonding

I was just interviewed for a piece on WSLU/WPR concering this article in the Journal Sentinal.

According to the Legislative Fiscal Bureau, the state had $8.28 billion in general-obligation, transportation and environmental debt in mid-2006; the same debts totaled $4.41 billion in 1996.

The 87% increase was three times the U.S. inflation rate over that period.

Figures show that debt rose the most - by $1.8 billion- under Thompson between 1996 and 2001, when he resigned to become a cabinet secretary for President Bush. Debt increased by more than $1.5 billion in Doyle's first three years.

Todd Berry, president of the Wisconsin Taxpayers Alliance, said the growing debt is another risky budget decision governors and legislators have made to benefit themselves politically.

Also rising is annual debt-service payments on those bonds: Principal and interest payments on general-obligation bonds will exceed $700 million for the first time this year; and payments on transportation bonds will cost an additional $174 million.

That $874 million is cash that can't be used for other important programs. By comparison, that amount is close to what it cost to run the state's prison system last year.

There are two real issues. The first is that the increase in bonding burdens future generations, which is alright if they are the ones who benefit. The second issue concerns the state's bond rating. As it falls debt service costs rise, crowding out other budget items.

The article could have been improved by publishing the debt as a percentage of the state economy, as it has grown by 50% over the last 9 years. That makes the outstanding debt about 2.9% of Gross State Product in 1997 and about 3.6% in 2006. Not exactly an enormous increase.

Mortgages

Some evidence that my prognostications were correct:

The areas studied, and the gross metropolitan product growth expected next year, include Appleton at 2.7 percent, Duluth, Minn.-Superior 2.6 percent, Eau Claire 2.8t, Fond du Lac 3.1, Green Bay 2.9, Janesville 3.3, La Crosse 3.1, Madison 3.4, Milwaukee 2.5, Oshkosh 2.7, Racine 2.3, Sheboygan 2.6 and Wausau 2.6.

Diffley said the result is better in Wisconsin because area prices and mortgage values did not climb as much or as rapidly as in other parts of the country.

Even a blind squirrel finds an acorn once and awhile.

Sex Ed

The Freakonomics Blog has an excellent post on abstinence education.

Turn now to the United States, where the Federal Government has spent upwards of $1 billion over the last decade on abstinence-only sex education. (Call it defensive dating.) The idea is that not teaching students about contraception, safe sex, etc., will lead to better outcomes, including less unwanted pregnancies and fewer sexually transmitted diseases.

Except … it turns out that teenagers are circumventing their abstinence education and having sex anyway. Studies have repeatedly shown that abstinence-only students have almost the same number of sexual partners, and have sex almost as early, as students who receive traditional sex ed. In fact, abstinence-only programs may actually increase the risk of STDs and unintentional teen pregnancies. That’s because those abstinence-only students who do have sex tend to be less likely to use protection.

That’s one of the reasons why New York State recently canceled its abstinence-only program, passing up millions of dollars in Federal aid. Congress nevertheless appears ready to continue funding for similar programs. Maybe abstinence-only would work better if the classes were administered by one of those stern South African driving examiners.

Gender

Dr. Giddings has recently posted on her bailiwick, gender issues (here and here) . Though its not exactly my area of study, I'm always interested in research on gender differences. I'm incredibly lucky to have a colleague like Lisa who will thoughtfully discuss these issues and not react the way Harvard's faculty did to Larry Summer's musings on gender. So with that preface I'll share some controversial recent research. The first piece, by Cawley and Liu , use time use data to identify the source of maternal employment's impact on increasing childhood obesity.

Recent research has found that maternal employment is associated with an increased risk of childhood obesity. This paper explores mechanisms for that correlation. We estimate models of instrumental variables using a unique dataset, the American Time Use Survey, that measure the effect of maternal employment on the mother’s allocation of time to activities related to child diet and physical activity. We find that employed women spend significantly less time cooking, eating with their children, and playing with their children, and are more likely to purchase prepared foods. We find suggestive evidence that these decreases in time are only partly offset by husbands and partners. These findings offer plausible mechanisms for the association of maternal employment with childhood obesity.

The second, by Noam Kirson, concerns how female labor force participation shortens the life of their male spouses.

This paper finds a strong positive correlation between female labor force participation and negative health outcomes for middle-aged men and women, and suggests that this correlation is mediated by household-level stress. At the cross-country aggregate level, I show that labor force participation of women is associated with increased mortality rates among both men and women. At the individual level, I find that married men whose spouses work are more likely to die within 10 years, to have high blood pressure and to self-report worse health outcomes. The findings do not appear to be the result of reverse causality. The mortality effects, both aggregate and individual, are especially large for deaths from ischemic heart disease, while weak to moderate for cancer. These findings match well with the medical evidence on the link between stress and health.

Of course this isn't the only mechanism by which women can shorten men's lives. They also "make" us do stupid, crazy things. Don't forget male life expectancy is much shorter than women's due largely to the increased likelihood of death from accident. We are the risk takers, and I mean that in the physical sense. From The Economist:

Chasing females can take years off life

IN THE cause of equal rights, feminists have had much to complain about. But one striking piece of inequality has been conveniently overlooked: lifespan. In this area, women have the upper hand. All round the world, they live longer than men. Why they should do so is not immediately obvious. But the same is true in many other species. From lions to antelope and from sea lions to deer, males, for some reason, simply can't go the distance.

One theory is that males must compete for female attention. That means evolution is busy selecting for antlers, aggression and alloy wheels in males, at the expense of longevity. Females are not subject to such pressures. If this theory is correct, the effect will be especially noticeable in those species where males compete for the attention of lots of females. Conversely, it will be reduced or absent where they do not.

The best thing I have read on the evolutionary psychology/biology of gender differences is this speech by Roy F. Baumeister (here). Read and discuss, preferably with the opposite sex and preferably in a room without sharp objects.

Economics in Movies and Music

Many economic principles and ideas appear in modern music and movies. Here you can find a list of movies and their principles and here you can find a weblog dedicated to discussing the economics in music lyrics.

The website for educators discussing the use of these methods is here.

Taxes

Its important to be able to discern truth from fiction or at least filter out the ideology. David Leonhardt helps in his column on taxes.

The top earners pay a bigger share of the government tab than in the past because their incomes have risen so sharply — even more sharply than their tax bills. (Mr. Fleischer was able to claim the opposite by looking only at income taxes.)

The affluent, in short, are paying less in taxes on every dollar they earn but earning many more dollars.

And despite what some politicians say, not even conservative economists believe tax cuts are self financing. There is no such thing as a free lunch. As James Surowiecki points out:

How much of an impact tax rates have—and how high taxes have to get before they have an impact—is a subject of much debate in economics, but it’s inarguable that they do matter. What supply-siders have done is start with that reasonable idea and extrapolate it to unreasonable lengths.

It’s the comparison between actual tax revenue in 2007 and what tax revenue would have been in 2007 had there been no tax cuts in 2001. And studies that make these types of comparisons—including one by Bush’s own Treasury Department that looked at the tax cuts’ impact on economic growth—find that government revenues would be greater had taxes not been cut.

I use to call myself a supply sider, but stopped years ago when the tax cut nuts laid claim to the name.

The Differences Between Men and Women

Larry Summers got in to a lot of trouble conjecturing on this topic, but I think this speech has it about right. But one of the interesting things he wrote:

The first big, basic difference has to do with what I consider to be the most underappreciated fact about gender. Consider this question: What percent of our ancestors were women?It’s not a trick question, and it’s not 50%. True, about half the people who ever lived were women, but that’s not the question. We’re asking about all the people who ever lived who have a descendant living today. Or, put another way, yes, every baby has both a mother and a father, but some of those parents had multiple children.

Recent research using DNA analysis answered this question about two years ago. Today’s human population is descended from twice as many women as men.

I think this difference is the single most underappreciated fact about gender. To get that kind of difference, you had to have something like, throughout the entire history of the human race, maybe 80% of women but only 40% of men reproduced.

Right now our field is having a lively debate about how much behavior can be explained by evolutionary theory. But if evolution explains anything at all, it explains things related to reproduction, because reproduction is at the heart of natural selection. Basically, the traits that were most effective for reproduction would be at the center of evolutionary psychology. It would be shocking if these vastly different reproductive odds for men and women failed to produce some personality differences.

Most men who ever lived did not have descendants who are alive today. Their lines were dead ends. Hence it was necessary to take chances, try new things, be creative, explore other possibilities. Sailing off into the unknown may be risky, and you might drown or be killed or whatever, but then again if you stay home you won’t reproduce anyway. We’re most descended from the type of men who made the risky voyage and managed to come back rich. In that case he would finally get a good chance to pass on his genes. We’re descended from men who took chances (and were lucky).

So one of the main differences between men and women is that men are much bigger risk takers. Why does the image of some redneck saying "hey guys watch this..." come to mind?

Abortion and Crime

Looks like Levitt gets some support for his much maligned theory on abortion and crime. A paper by Anindya Sen finds much the same as he did, but pins it mostly on teens:

Donohue and Levitt (2001) attribute over half of the decline in U.S. crime rates during the 1990s to abortion legalization. This paper conducts similar research by exploiting cross-province time-series variation in Canadian data. The use of Canadian data allows me to separate the effects of teenage abortions from general abortion rates. This distinction is important, as more than a quarter of the drop in violent crime can be attributed to the increase in teenage abortions that occurred after legalization. These results suggest that lower crime rates from abortion legalization are due to better timing of births rather than lower cohort size. They are further substantiated by OLS estimates, which imply that the drop in teenage fertility rates during the 1960s and 1970s is responsible for more than half of the decline in violent crime rates witnessed during the 1990s.

Health Economics

I'm on sabbatical for the 2007-2008 academic year, retooling so that I can teach ECO 471 - Health Economics when I return. Here are some things I've learned so far:

1. More medical care spending doesn't lead to better health outcomes. This is found in the famous RAND experiments, cross state studies, and cross national studies.

2. The differences across income groups are larger than differences across racial/ethnic groups, but even after controlling for education, and income there are still important racial differences. Quite possibly we have at work

3. Sometimes increasing poverty can improve some heath outcomes.

4. Sometimes medical care is bad for you. After all To Err is Human.

5. Drugs are good, though not universally so. Then there is the problem of me too drugs.

6. Most improvements in life expectancy have been due to improvements in diet and public health, such as clean water, sanitation, etc.

My take away from all this is that there is a lot to improving health outcomes that is unrelated to heath care. It turns out that there are a lot of other factors that are more important. Your friends, the neighborhood you live in, your taste for risky activities.

Craig'slist

And I thought it was just used to sell old bike stuff.

“Craigslist has become the high-tech 42nd Street, where much of the solicitation takes place now,” said Richard McGuire, Nassau’s assistant chief of detectives. “Technology has worked its way into every profession, including the oldest.”

Loonie Power

The rising value of the Canadian Dollar has led to cross border labor flows...of strippers.

With the Canadian dollar surging against the U.S. greenback, Robert Katzman is dealing with situations they don't teach in Economics 101.

The owner of five strip clubs in Detroit and Windsor, Ontario, says American dancers are heading to Canada to earn the strengthened Canadian currency, and Canadian customers are heading to Detroit because their dollars go further there. He's fighting back by advertising more in the U.S. and offering free limo service to get Detroit men to visit his Windsor clubs. [...]

Mr. Katzman, the Windsor strip-club owner, is philosophical. He says that, last year, 90% of his dancers were Canadians. About 200 of them drove down from Toronto and Montreal to take advantage of the U.S. dollars American men typically paid with.

This year, he has more American women dancing in his Canadian clubs -- about 160 -- than he has Canadians.

It's a nine-hour trip from Montreal to Windsor, Mr. Katzman explains, and with the loonie as strong as the dollar, the dancers can earn just as much money up there. "As a business decision, it just doesn't make sense," says Mr. Katzman.

Ovulating Strippers

Yes, you read that right. From the latest Economist, ovulating strippers make more money.

“BECAUSE academics may be unfamiliar with the gentlemen's club sub-culture, some background may be helpful to understand why this is an ideal setting for understanding real-world attractiveness effects of human female oestrus.”

No doubt readers of The Economist are equally unfamiliar with this sub-culture, but for Geoffrey Miller of the University of New Mexico, who penned the words above in a paper just published in Evolution and Human Behaviour, such clubs are a field site as revealing of human biology as the Serengeti is of the biology of lions and antelopes. Dr Miller is an evolutionary psychologist—and the author of the theory that the large brains of humans evolved to attract the opposite sex in much the same way that a peacock's tail does. His latest foray, into the flesh-pots of Albuquerque, is intended to investigate an orthodoxy of human mating theory. This is that in people, oestrus—the outward signs of ovulation—has been lost, so that men cannot tell when women are fertile.

This theory is based on the idea that in evolutionary terms it benefits women to disguise when they are fertile so that their menfolk will stick around all the time. Otherwise, the theory goes, a man might go hunting for alternative mating opportunities at moments when he knew that his partner was infertile and thus that her infidelity could not result in children.

However, this should result in an evolutionary arms race between the sexes, as men evolve ever-heightened sensitivity to signs of female fertility. Dr Miller thought lap-dancing clubs a good place to study this arms race, because male detection of female fertility cues would probably translate into an easily quantifiable signal, namely dollars earned. He therefore recruited some of the girls into his experiment, with a view to comparing the earnings of those on the Pill (whose fertility was thus suppressed) with those not on the Pill.

The results support the idea that if evolution has favoured concealed ovulation in women, it has also favoured ovulation-detection in men. The average earnings per shift of women who were ovulating was $335. During menstruation (when they were infertile) that dropped to $185—about what women on the Pill made throughout the month. The lessons are clear. A woman is sexier when she is most fertile. And if she wishes to earn a good living as a dancer, she should stay off the Pill.

The article is here.

Fucking Fascinating

Steven Pinker proves again to be an uber mensch. He eloquently writes on the nature and taboo of swearing:

When used judiciously, swearing can be hilarious, poignant, and uncannily descriptive. More than any other form of language, it recruits our expressive faculties to the fullest: the combinatorial power of syntax; the evocativeness of metaphor; the pleasure of alliteration, meter, and rhyme; and the emotional charge of our attitudes, both thinkable and unthinkable. It engages the full expanse of the brain: left and right, high and low, ancient and modern. Shakespeare, no stranger to earthy language himself, had Caliban speak for the entire human race when he said, "You taught me language, and my profit on't is, I know how to curse."

I just have to remember to use the F word a bit more judiciously.

Partially Identified Models

I attended another UW-Madison seminar, this one on: "EL Inference for Partially Identified Models: Large Deviations Optimality and Bootstrap Validity". I have to admit, I was hanging on for dear life, understanding maybe 25% of what was going on. But I'm an applied researcher, as long as I can implement it in STATA, who cares? Only kidding...mostly.

I have to admit, I find the issues of partial identification very interesting. I just read a piece by Charles Manski, Identification Problems from the Social Sciences and Everyday Life. I also have read part of his book, Identification Problems in the Social Sciences and, while deeply interested I'm also deeply depressed. I'm pretty sure we don't know anything about anything. Well, maybe that is overly pessimistic, but his fundamental point (pun intended) is that point identification is really impossible except by absurdly tight assumption, we are better off in a world without point identification, but where we merely try to narrow the bounds of identification.

I'm pretty sure this puts him in the same camp as Heckman in regards to the ever popular explosion in the use of IVs. As Manski points out, in many cases we replace bad assumptions with weak instruments, yielding no real improvement in the quality of results we generate.

Think about how big this statement is. If one of the identification problem arises with missing data, something EVERY survey suffers from, then the usual solution of ignoring it but treating it as missing at random, is the first egregious mistake in the process. And that say nothing about any of the other identification issues that inevitably arise.

Now I'm depressed again.

My Inner Economist

Tapping my inner Economist, I can't help but wonder if this website is dedicated to towns where the sex ratio is askew? Or maybe just towns where the hot chicks are blind? I once told a class I could guess the sex ratio at UW-L was skewed towards females merely by looking at the number of couples where the guy was obviously not as good looking as the girl. They were shocked. I think next time I'll just point them to the hotchicks with douchebags website.

Seasonal Effects in Housing

Econbrowser has some bad news about the current housing market:

In a typical year, most new home sales occur between March and August. In each of those months we usually might expect 35% more homes to be sold than at the seasonal low in December. This August, home sales were actually less than in December, the first time that's happened in the 44 years these numbers are available.

For comparison, using MLS data on home sales, the 7 Rivers Region saw 102 listings sold in December of 2006, while August of 2007 saw 155 listings sold. That is a 52% increase. Although August 2007 is 11% below August 2006, at least its not below December of 2006!

A Plug

A plug for a fellow economist and cyclist. Francisco Torralba has a new blog econweekly, you should check it out. Looks like he has a great post on what the goals of the Fed should be here.

I think the Fed should stop caring about recessions. In fact, Congress should mandate so.

I think it sounds like a pretty good idea, but good luck getting congress to mandate that.

Besides being an economist he is also a cyclist on the U Chicago club, and as a Catalan speaking Spaniard, I bet he can climb...

Milk Prices

According to this NYT piece:

Driven by a combination of climate change, trade policies and competition for cattle feed from biofuel producers, global milk prices have doubled over the last two years. In parts of the United States, milk is more expensive than gasoline. There are reports of cows being stolen from Wisconsin dairy farms.

I've heard as little as a few years ago, all dairy farms in Wisconsin were cash flow negative. I guess this means things have turned around.

For an interesting look into the economics of the dairy industry read this fedgazette piece which covers the price problems of 2002-2003. And this piece discusses the economies of scale disadvantage most Wisconsin farms face.

Technological advances in dairy production—from automated milking parlors to computer systems and management protocols—have dramatically increased dairy productivity, the number of pounds of milk a cow can produce. The average cow can produce four times more milk today than in 1930. But those technologies are most economical on large-scale operations, and small farmers have been unable or unwilling to grow large enough to incorporate them. A 1998 Minnesota State Colleges and Universities analysis of Minnesota dairy farms found that small dairy herds (under 100 head) averaged 17,699 pounds of milk per cow per year, whereas cows in large herds (300+) produced 21,284 pounds.

Left Behind

Yesterday I went to my first UW Madison Econ department seminar which played host to Derek Neal. He has some Chicago school data before and after the implementation of high stakes testing and in his paper entitled Left Behind By Design: Proficiency Counts and Test-Based Accountability.
His thesis is captured well with this quote.

"We were told to cross off the kids who would never pass. We were told to cross off the kids who, if we handed them the test tomorrow, they would pass. And then the kids who were left over, those were the kids we were supposed to focus on."*

They find evidence that high stakes testing, when the standard is set high enough to be unreachable for some results in no improvements in test scores in the tails of the distribution.

Some interesting observations:
1. High stakes testing leads to teaching more intensively to to the students close to the proficiency standard while ignoring the students in the tails of the distribution. Much like teaching to the test ignores important skills that are unrelated to those required for the test.

2. The higher the proficiency standards the more children are left behind, as the probability of them becoming proficiency decreases with rising standards, the teacher's effort shifts up the ability distribution. So if you really don't want to leave any children behind, you need to make sure the standards are attainable for all students. Of course this will result in less teaching effort being allocated to the upper tail of the distribution.

3. Even a value added metric is difficult to design in that we often treat test scores as cardinal measures when they are likely no better than ordinal. Thus the teaching effort may not be uniformly distributed across student ability if test gains are easy to get in certain areas of the ability distribution.

No Child Left Behind (NCLB) is up for renewal, and it doesn't sound like they have any hope of getting the incentives right.

It still seems to me to a value added approach would be a better direction for NCLB to go. It certainly minimizes the problems associated with merely comparing proficiency rates across very different schools. And it is more in line with what we mean when we talk about learning. Under NCLB, a school that has the brightest students and 100% proficiency would be considered successful even though the students might not be learning anything.

Time to Refinance?

When interest rates were falling, did you wonder as I did if it was the right time to refinance? I remember hearing a rule of thumb, if the interest rate had fallen by over 1% and you expected to be in your home for more than 5 years, it would most likely make sense to refinance. As an economist this answer was never precise enough for me. So I should have sat down and calculated the exact rate at which I should refinance, but the procrastinator in me always put it off. Now thanks to my good friend Sumit Agarwal, I don't need to do any heavy lifting or mathematical computation.

Sumit and his co-authors have a nice little calculator up at the NBER website.

Optimal Time to Refinance Calculator

Wow. Rates never fell low enough for me to refinance, so it looks as though my procrastination paid off. Well, it saved me the time it would have taken to calculate the optimal rate anyhow.

Foreclosures

A recent tribune article reports foreclosed properties are up from 2006 for La Crosse county.

Home foreclosures in La Crosse County this year are up by nearly a third over the pace in 2006, mirroring a statewide rise of nearly two-thirds.

Fifty-two La Crosse County properties have been foreclosed on through July of this year, with another 17 scheduled for foreclosure. That’s well ahead of the 40 foreclosures at this time last year, according to the La Crosse County Sheriff’s Department.

Of the 52 completed foreclosures in La Crosse County so far this year, 28 were in La Crosse, 10 in Onalaska, six in Holmen, five in West Salem, two in Bangor and one in Coon Valley.

Foreclosures statewide are up 63 percent this year to 5,925, compared with 3,627 filings in the first half of 2006.

Nationally, foreclosures are up 56 percent, according to a report by RealtyTrac, an online marketplace for foreclosure properties.

By my calculation there were 127 filed from 1/1/2007 to 7/31/2007 whereas there were 114 filed from 1/1/2006 to 7/31/2006, an increase of about 10%.

The difference could be merely definitional. The article cites data from the county sheriff and discusses foreclosed properties whereas I'm using court filings.

The chart below depicts foreclosures in the Wisconsin counties of the 7 Rivers region (Jackson, Juneau, La Crosse, Monroe, Trempealeau, and Vernon). The data for the remaining part of 2007 is estimated, but we appear to be on the same pace as last year. Thus making this year relatively unremarkable compared to last, which is when we saw the large spike. Hopefully that means we are through the worst of it.

Music Man

NYT Magazine has a good piece on Rick Rubin specifically and the music industry more generally.

Back in the library, the singer-songwriter's demo is ending. Rubin opens his eyes, blinks and says to Kusatsu: "We may have found one. Does he have any other songs I can hear?" While Kusatsu cues up the next sampling, Rubin texts an assistant on his BlackBerry. Within minutes, a chocolate protein drink is brought to him. As Rubin sips, he listens to the next track — a derivative, meandering song that drones like early Dylan without the lyric sophistication. With his eyes closed, Rubin begins to shake his head slowly. He looks disappointed. "And you wonder why people don't buy CDs anymore," Rubin says. "One song is great and the other is. . . . "
...
That old way of doing things is obsolete, but luckily, fear is making the record companies less arrogant. They're more open to ideas. So, what's important now is to find music that's timeless. I still believe that if an artist gains the belief of the listener, then anything is possible."
...
Rubin sees no other solution. "Either all the record companies will get together or the industry will fall apart and someone like Microsoft will come in and buy one of the companies at wholesale and do what needs to be done," he said. "The future technology companies will either wait for the record companies to smarten up, or they'll let them sink until they can buy them for 10 cents on the dollar and own the whole thing."

The CD is dead. I just bought a few after a very long hiatus and am regretting the fact that 11 of the 12 tracks are a complete waste. Next time I'm buying the one track I like DRM free. I've just got to train myself to listen to music differently. I'm still stuck in the album model of listening. Time to get good at making mix playlists. I guess I should go watch High Fidelity again.

HPA

HPA or Home Price Appreciation has clearly slowed and for the first time is actually negative. But the truth is it came along at the right time.

According to Michael Donihue and Andriy Avramenko of Colby College

During the period from 1990 to 2002, U.S. households experienced a dramatic wealth cycle, induced by a 369 percent appreciation in the value of real per capita liquid stock-market assets, followed by a 55 percent decline. However, despite predictions at the time by some analysts relying on life-cycle models of consumption, consumer spending in real terms continued to rise throughout this period. Using data that include the period from 1990 to 2005, traditional approaches to estimating macroeconomic wealth effects on consumption confront two puzzles: (i) econometric evidence of a stable cointegrating relationship among consumption, income, and wealth is weak at best; and (ii) life-cycle models that rely on aggregate measures of wealth cannot explain why consumption did not collapse when the value of stock-market assets declined so dramatically. We address both puzzles by decomposing wealth according to the liquidity of household assets. In particular, we find that significant appreciation in the value of real estate assets that occurred after the peak of the wealth cycle helped to sustain consumer spending from 2000 to 2005.

And what fueled the HPA? Well, low interest rates, and rising income of course.

The widespread nature of the recent international house price boom suggests that the underlying forces behind this sustained price increase may be common across countries. Many OECD countries have, over the past decade, witnessed sustained increases in living standards while housing affordability has further improved in recent years with the low interest rate environment experienced by many of these countries. In this paper we propose a theoretical model of house price determination that is driven by changes in income and interest rates. In particular, the current level of income and interest rates determine how much an individual can borrow from financial institutions to purchase housing and ultimately this is a key driver of house prices. The model is applied to a panel of 16 OECD countries from 1980 to 2005 using both single country-by-country and panel econometric approaches. Our results support the existence of a long-run relationship between actual house prices and the amount individuals can borrow and we find plausible and statistically significant adjustment, across countries, to this long run equilibrium.

It seems they miss an important factor in the recent HPA. The willingness of banks to take on clients they previously would not have. The so called sub prime market has really just been fueled by an increased willingness to lend given an particular interest rate and income level, or what the authors call an ability to borrow. Many more people were able to borrow during this boom, thus further fueling the home price appreciation. I do not know if this was an international phenomenon, and I'm not sure I could immediately produce a variable which captures that idea.

Hat Tip: The New Economist

Hard Drives

Apparently they are all used to store porn.

Unexpected candidness is a recurring theme of our CE-Oh no! series of posts, but this latest example from Bill Watkins, the CEO of Seagate, truly takes the biscuit. At a recent corporate dinner in San Francisco, the Texan CEO produced a quotable line edgy enough to give any PR people in the immediate vicinity an instant heart attack. In his exact words: "Let's face it, we're not changing the world. We're building a product that helps people buy more crap - and watch porn." We're gonna have to give the guy a break for two reasons: a) alcohol was readily available, and b), all those naughty digital photos have gotta be stored somewhere, and Seagate is in the digital storage business. Besides, the rest of Watkin's quotes are relatively thought provoking: his views on media distribution ("It's the content that's important"), Dell's problems -- no, not those ones -- ("They don't understand the consumer"), and other areas of the technology industry appear to be fresh and honest. Maybe just a bit too honest this time around.

Lou Dobbs the Real Moron

A recent episode of Lou Dobbs saw him again attacking immigrants and a group of economists in favor of more open borders. I'm proudly one of the 500 Jackasses of which he speaks.

Dangerous Ideas

Steven Pinker has a list of dangerous ideas listed in the form of questions. I provide my short reflexive answer to each.

Do women, on average, have a different profile of aptitudes and emotions than men? YES

Were the events in the Bible fictitious -- not just the miracles, but those involving kings and empires? YES

Has the state of the environment improved in the last 50 years? DK?

Do most victims of sexual abuse suffer no lifelong damage? NO

Did Native Americans engage in genocide and despoil the landscape? DK?

Do men have an innate tendency to rape? NO

Did the crime rate go down in the 1990s because two decades earlier poor women aborted children who would have been prone to violence? MAYBE

Are suicide terrorists well-educated, mentally healthy and morally driven? DK

Would the incidence of rape go down if prostitution were legalized? YES

Do African-American men have higher levels of testosterone, on average, than white men? DK

Is morality just a product of the evolution of our brains, with no inherent reality? NO

Would society be better off if heroin and cocaine were legalized? YES

Is homosexuality the symptom of an infectious disease? NO

Would it be consistent with our moral principles to give parents the option of euthanizing newborns with birth defects that would consign them to a life of pain and disability? NO

Do parents have any effect on the character or intelligence of their children? YES

Have religions killed a greater proportion of people than Nazism? YES

Would damage from terrorism be reduced if the police could torture suspects in special circumstances? NO

Would Africa have a better chance of rising out of poverty if it hosted more polluting industries or accepted Europe's nuclear waste? NO

Is the average intelligence of Western nations declining because duller people are having more children than smarter people? NO

Would unwanted children be better off if there were a market in adoption rights, with babies going to the highest bidder? YES

Would lives be saved if we instituted a free market in organs for transplantation? YES

Should people have the right to clone themselves, or enhance the genetic traits of their children? YES

Pinker captures my feelings on this best here:

"Sunlight is the best disinfectant," according to Justice Louis Brandeis' famous case for freedom of thought and expression. If an idea really is false, only by examining it openly can we determine that it is false. At that point we will be in a better position to convince others that it is false than if we had let it fester in private, since our very avoidance of the issue serves as a tacit acknowledgment that it may be true. And if an idea is true, we had better accommodate our moral sensibilities to it, since no good can come from sanctifying a delusion. This might even be easier than the ideaphobes fear. The moral order did not collapse when the Earth was shown not to be at the center of the solar system, and so it will survive other revisions of our understanding of how the world works.

I'm Back

So, I've been mired in university related stuff, some of which has to do with this blog some does not. Maybe I'll post more on that another time. For now let me leave you with this NYtimes piece on the recent court decision telling the FCC to Fuck off.

“We are very pleased with the court’s decision and continue to believe that the government regulation of content serves no purpose other than to chill artistic expression in violation of the First Amendment,” said Scott Grogin, a senior vice president at Fox. “Viewers should be allowed to determine for themselves and their families, through the many parental control technologies available, what is appropriate viewing for their home.”

Here is to hoping this means that Fox is vying for reruns of Deadwood.

Turn The Volume Down

You've got to love this guy's frankness.

Confused

Luke Ford of the porn industry blog LukeIsBack, asks me some questions about libertarianism on his Luke Ford.Net Blog.

Free Market Hustler

It's just basic economics. How to be a free market hustler. (ht: Freakonomics)

Shopko and Lewd Behavior

I'm going to publicly call for the elimination of all Shopko stores, because they clearly CAUSE lewd behavior. And until the city closes all Shopko stores I'm going to walk up and down the aisles to monitor them for any such behavior. From the Tribune:

Couple accused of exposure at local store

By DAN SPRINGER La Crosse Tribune

With Valentine’s Day approaching, a Black River Falls, Wis., couple apparently decided to show their affection a little too publicly while shopping at a La Crosse store Saturday evening, La Crosse police said.Security cameras at ShopKo on the South Side caught the couple strolling through the store with a cart — and the woman holding her companion’s exposed penis, according to police reports.A store official told police that when other customers approached, the woman would remove her hand and the man would pull his sweatshirt down. When alone again, the couple resumed the behavior, according to police reports.Michael J. Gerdes, 39, and Marteen E. Gerdes, 38, were arrested at 5:25 p.m. Saturday at the store, 3433 Mormon Coulee Road.The couple at first denied the behavior, then Marteen Gerdes admitted it was her idea and they were just “screwing around,” according to police reports.They were released on signature bonds, with lewd and lascivious behavior charges pending in La Crosse County Circuit Court.

HPV and Sex

I must admit, my libertarian sensitivites get a bit out of order when I hear the government mandate anything, but this might be a legitimate public health consideration:

From The Economist print edition: A new vaccine sparks controversy

“THE governor's action seems to signify that God's moral law regarding sex outside of marriage can be transgressed without consequence.” Those words came this week from Rick Scarborough of Vision America, a Christian lobbying group. The US Pastor Council and various Republican politicians have piled in too.

Usually, this sort of right-wing animosity is reserved for the likes of Hillary Clinton, but this week's attack was on one of the Christian right's favourite sons: Rick Perry, the deeply religious Republican governor of Texas. His offence? Promoting the use of a highly effective new vaccine that is sure to save many women from a nasty form of cancer. But to some people, it is tantamount to encouraging promiscuity.

On February 2nd Mr Perry bypassed the state legislature and mandated vaccination against the human papilloma virus (HPV). His order would affect all girls entering sixth grade (at about 11) unless their parents opt out in writing. Perhaps 20m Americans carry this virus, making it one of the most common sexually transmitted diseases in the country. Most strains are harmless, but a few can lead to cervical cancer, the second most deadly form of cancer in women.

Merck, a drugs giant, won federal approval for its HPV vaccine last year and has been lobbying for its adoption. California, South Dakota, New Hampshire and other states now make it available. Virginia, Maryland and the District of Columbia are considering the matter, while Washington state this week announced a voluntary scheme. But no state has mandated its use until now.

Why did Mr Perry do it? Some sneerers have noted that his former chief of staff is now a lobbyist for Merck. Others think that the wily governor is distancing himself from his conservative base so that he can make a plausible vice-presidential candidate in 2008. But there is another explanation: that he had the courage to make a politically difficult but sound policy decision. As he said this week: “If the medical community developed a vaccine for lung cancer,” he asked, “would the same critics oppose it, claiming it would encourage smoking?”

Time will tell if this really leads to substantial increase in teen sex. The differential adoption of the vaccine by State will provide a nice natural experiment. My guess is the results might be similar to this paper by Thomas Stratmann.

Laws requiring minors to seek parental consent or to notify a parent prior to obtaining an abortion raise the cost of risky sex for teenagers. Assuming choices to engage in risky sex are made rationally, parental involvement laws should lead to less risky sex among teens, either because of a reduction of sexual activity altogether or because teens will be more fastidious in the use of birth control ex ante. Using gonorrhea rates among older women to control for unobserved heterogeneity across states, our results indicate that the enactment of parental involvement laws significantly reduces risky sexual activity among teenage girls. We estimate reductions in gonorrhea rates of 20 percent for Hispanics and 12 percent for whites. While we find a relatively small reduction in rates for black girls, it is not statistically significant. We speculate that the racial heterogeneity has to do with differences in family structure across races.

Fetish and Phobia

I wonder what connection (if any) exists between phobias and fetishes, particularly sexual fetish. It has always struck me that some people have the most bizarre kinks, and as evidenced by the availability of porn, there are others who share them. Take bug crushing...bugs are a phobia for some, and the crushing of them is a fetish for others. I have to imagine this is the opposite side of the same coin.

From Marginal Revolution:

People who are weirder than I am

No, I am not referring to other bloggers, I mean Allen Shawn (son of William, by the way, former editor of The New Yorker, and brother of actor Wallace). He is deeply phobic, about many things, and his new Wish I Could Be There: Notes from a Phobic Life outlines the phenomenology of his fears. I learned:

1. The greatest thing he has to fear is fear itself.

2. The imprinting of painful memories, such as knowing to avoid a lit fire, can backfire and create persistent phobias. His phobias are remarkably specific.

3. There is a deep and poorly understood connection between phobias and the more general phenomenon of neurodiversity.

4. Self-awareness ain't no guarantee of nuthin'.

5. He claims that people placed in concentration camps (Theresienstadt) became depressed, but that their phobias usually disappeared.

6. The author has a deep interest in atonal music, which supports my hypothesis that it is mostly the neurodiverse who enjoy this art form. Other people simply can't hear the patterns, and furthermore the music gets on their nerves.

Half of the discussion is deadly dull, but it is still one of the more interesting books so far this year.

Porn Makes You Rational

A new paper looking at how testosterone and visual cues affect offers in the ultimatum game can be found here. This article in Nature sums it up:

High-testosterone men fight hardest for a large cut, the researchers found. But the most testosterone-driven men were also the most likely to slacken their cash demands after viewing sexy women. Perhaps they relaxed and began to care less about money. Or perhaps, the researchers suggest, with a 'mate' to impress the men were driven to have some wealth, however modest.

The sight of a potential mate might therefore actually make men more sensible, Van den Bergh says. "Since a few coins is better than no coins at all, men thus become more economically rational after exposure to lingerie or sexy women," he says.

There apparently has also been work which has shown men's rate of time preference changes after seeing "hot" looking women.

Pretty ladies make men want wealth with which to impress, according to a new study - even if they’ll be worse off in the long run.

Psychologists Margo Wilson and Martin Daly at McMaster University in Hamilton, Canada, asked students whether they would prefer, say, $19 tomorrow or $25 next week. They then showed them the faces of ladies whose attractiveness was ranked on the website ‘How Hot Am I?’.

After eyeballing pictures of pretty women, men were more likely to want immediate monetary gratification than to wait for a bigger bonus. Women’s calculations, on the other hand, were unaffected by male eye candy, as were men’s after ogling plainer women or fancy cars1.

Wish Me Luck

Despite having what would have been an excellent ASSA session turned down, I've decided to try my hand at organizing another one or two.

Here are the details of the first one:

Session: The Economics of Paid Sex Markets JEL: J4

Session Organizer: Taggert J. Brooks University of Wisconsin – La Crosse

Chair: Alan Krueger Princeton University

Paper 1:
"An Empirical Analysis of Street Prostitutes." Steve Levitt , University of Chicago and Sudhir Venkatesh, Columbia University

Abstract:

We collect transaction-level data on over 50 street prostitutes over the course of an 18 month period. We document that prostitutes working in the same area earn very different wages and these wage differentials can be partially explained by observable characteristics.
Considering the risks borne by the prostitutes, they are not particularly well compensated. The prostitutes engage in price discrimination across customers. We also explore the role of pimps.

Discussant: Lena Edlund

Paper 2:
"Enforcing Licensing Requirements: Implications for Disease Transmission in the Sex Market" Manisha Shah, University of Melbourne, and Paul Gertler University of California – Berkley and NBER

Abstract:

Several countries are pursuing the regulation of commercial sex work in order to decrease the spread of sexually transmitted infections (STIs) and reduce the probability of a generalized HIV/AIDS epidemic. In many Latin American countries, the commercial sex market is characterized by two sectors, brothel and street, where the latter is marked by riskier behavior (e.g., lower rates of condom use) and higher prevalence of STIs. This paper studies the public health effects of enforcing licensing requirements in a two-sector commercial sex market, where enforcement varies between sectors. Specifically, we use nationally representative data from Ecuador to examine the effect of enforcement in brothels vs. enforcement in the street on overall STI prevalence. We exploit regional variation in the frequency of police visits to verify sex workers are complying with licensing requirements. The major finding of this paper is that increasing police presence in the street sector is most effective in decreasing disease. We find that increasing enforcement by one police visit per month in the street significantly decreases STIs by 8 percent. The second major finding is that increasing enforcement by one police visit per month in the brothel sector has no significant effect on disease outcomes. We propose a partial equilibrium model which is an extension of our previous model in Gertler, Shah, and Bertozzi (2005) to explain these findings.

The model predicts that the cost of enforcement increases the price of commercial sex. As the price of sex increases, demand decreases and the overall number of clients decreases. The effect of enforcement on disease works through the increase in prices, as fewer clients implies less disease. In addition to the price effect, increased enforcement decreases the returns of one sector relative to another. For example, increased street enforcement encourages street sex workers into the less risky brothel sector, improving overall public health. However, increased brothel enforcement could encourage non-compliant brothel sex workers into the street sector, exacerbating public health problems.

We test the predictions of the model and find that an additional police visit in the street increases the price of non-condom sex by ten percent and decreases the number of clients. In addition, sex workers are significantly less likely to join the street sector for an increase in street enforcement. These results explain the 8 percent decrease in overall disease for a given increase in street enforcement. In the unlicensed brothel sector, however, prices do not significantly increase with enforcement. In addition, simulations show that non-compliant sex workers who leave the brothel sector switch to the street sector, resulting in potentially worse public health outcomes. The findings of this paper indicate that the efficacy of regulation does not result from stricter enforcement in the brothel sector but rather from clamping down on the street sector. To minimize perverse effects of regulation, enforcement should account for the underlying characteristics of the sex market and be concentrated in the sector which is marked by lower condom use and higher STI prevalence.

Discussant: Emily Oster, University of Chicago

Paper 3:
“In Da Club: An Econometric Analysis of Strip Club Patrons” Taggert J. Brooks, University of Wisconsin – La Crosse

Abstract:

Conservative estimates from the National Health and Social Life Survey
(NHSLS) suggest 17 million Americans went to a club that featured nude or semi-nude dancers in 1991. Their attendance comprises nearly 67 million visits, 10 million more than the attendance at major league baseball games that year. With reported total revenues earned by strip clubs at 15 billion dollars a year (Smyth, 2005; Thompson, et. al., 2003), the industry arrived at this point following a doubling of the number of strip clubs between 1987 and 1992 according to Hanna (2005). In this paper I estimate a hurdle model using the NHSLS to test two popular theories which purport to explain the rapid increase in the number of clubs. I find that for those who reported changing their behavior in response to AIDS/HIV they were much more likely to go to a strip club and more frequent visitors than those who did not change their behavior. On the second explanation I fail to find support for the belief that attendance at strip clubs was motivated by the desire to escape the uncertain rules of a gender integrated work place. The rise of societal sensitivities to sexual harassment in the workplace does not appear to explain patron attendance at a strip club.

Discussant: Scott Drewianka, University of Wisconsin - Milwaukee

Paper 4:
“From Sex to Gender”, Lena Edlund , Columbia University and Evelyn Korn Philipps-Universit at Marburg.

Abstract:

Humans are gonochoric, i.e., the male and female reproduction functions are in separate individuals. Here, we consider the alternative, hermaphroditism. A study of the pros and cons of hermaphroditism yields insights into gender roles as we know them.

Specifically, we find that: (i) female chastity is the preserve of gonochorism; (ii) secondary sexual differentiation, e.g., dimorphism, is a precondition for the existence of pure males; and (iii) only among gonochorsts could intra-male violence, a form of secondary sexual differentiation, be selected for.

Discussant: Ted Bergstrom, University of California Santa Barbara

The Curse of No Winners

Auction theory in economics suggests sometimes the winning bidder pays too much. They call the phenomenon The Winners Curse. Kind of like the LA Galaxy's recent acquisition of Becks.

In DC a "rare" license for a strip club went up for auction. There has been a moratorium on issuing new licenses for sometime (something which in fact is not legal, as we saw in Seattle).

But the $2 million minimum was too high, he decided, and neither he nor anyone else made a bid. Bidders also passed on two dance cages, complete with hydraulic-lift stages, that were going for $5,000 each. The auctioneer had more luck with the two 13-foot dance poles, which quickly went for $50 to Daniel Clark of Severn.

The license was being sold by club owner Ron Hunt, and as one of only 20 such licenses in the city, which has a moratorium on issuing additional licenses, it was considered a valuable asset.

"You're buying an asset that essentially can't be moved because there's so many approval hurdles to open a gentleman's club," Shulman said. "The city has been so developed with high-end real estate. People spend millions for a house, they don't want a gentleman's club next to it. There's no guarantee you could do it."

While the license allows an owner to open a club with nude dancing anywhere in the city that has commercial zoning, a club must sit at least 600 feet away from any schools, community centers and housing. Community members can protest the opening of such a club, and it must get approval from the District's Alcoholic Beverage Control Board

They want 2 million dollars? I'm pretty sure it would be cheaper to sue the city to end the moratorium. Besides, this site is one of the few remaining places that qualify under the zoning requirements. Which -by the way- are also illegal if they rule out every location within the municipality.

Catching Up

To say my posts have been sporadic would be kind. Non-existent would be a more appropriate characterization. So my plan as I get ready to transition into sabbatical starting in May is to post more frequently. Since I've recently implemented David Allen's Getting Things Done, one of the ways I will achieve this is to start knocking off my posts in draft. That means some of them may refer to rather dated news articles. I will try and note when they happened, but I will always make sure I connect their relevance to my research in some way.

So here is to more writing and blogging in 2007.