Instructions for consuming wine

On Jason Richwine

This piece from thinkprogress goes into some depths on the Kennedy School dissertation that led Jason Richwine to get fired from the Heritage Foundation.

It includes quotes from several people I know. I can certainly repeat what they and some of the others quoted in the article have said about the quality and seriousness of Richwine's dissertation committee.

The author is a bit more surprised than he should be that some dissertations are better than others, even at Harvard, but otherwise does a pretty nice job as a non-specialist dealing with a complicated topic and the somewhat arcane process by which dissertations get produced.

Hat tip: ASAK, on a roll with interesting things to read

Buying a car

We had to buy a new car last week, something I had managed to avoid since my Western Ontario days. My main memory from that purchase, which was in 1999 (!) was the joy of having the salesperson at the Honda dealership in London, Ontario lie to my face. Fortunately, I had followed the then-current advice about getting other offers via fax, plus I had read Consumer Reports so, though the experience was quite unpleasant, I did not get taken to the cleaners too seriously.

It struck me at the time, and it still strikes me now. that making the experience so unpleasant probably leads people to buy cars less often, and so may, on net, make the car industry worse off, relative to an equilibrium of posted prices and honest dealing. I suspect though that it is not in the interest of any individual dealer, and perhaps any individual brand, to go it alone in that regard. Saturn did not persist, despite its posted prices. I am told that now Mini occupies the posted price niche, though there are many ways to take advantage other than via the base sales price for the car.

What struck me about this round of car-buying is that the information environment is much richer. The document above is something I got via American Express. I believe that the same underlying firm also provides information via Consumer Reports. Our salesperson also provided a similar, but less informative (just the mean, not the distribution) document from Edmunds. The document above shows the distribution of purchase prices for the particular model of CR-V that we ended up buying over some time period in my local area. We stopped going back and forth with the dealer when we got down to about the 20th percentile of that distribution. As you would expect, each additional reduction in the negotiated price became more time consuming and less pleasant to accomplish. The 20th percentile is about where MC = MB given our time costs and tolerance for aggressive interaction.

We had a relatively (and relatively is a very important modifier here) unobjectionable salesperson. What struck me in standing around the dealership and also in our one conversation with the manager is that most of the staff other than our salesperson almost seem to deliberately dress and act like carnival hucksters. Is this really profit maximizing?  Our guy had a different approach. He was a bit chubby and rumpled and not as slick as the others; for that reason, he came off as more honest and sincere. The night we went to pick up our car he had several other customers and no one else in the dealership had any, so apparently his approach is working.

In any case, we like the car. I hope it lasts at least as long as my sadly departed Civic so that I don't have to go through the buying process again any time soon.

Oh, and a free paper idea. It seems to me that the much richer informational environment should have led to a reduced variance in sale prices. If you write the paper, please send me a copy.

Assorted links

1. What Bill Gates reads (short answer: lots of pop social science).

2. Someone should tell this reporter at the Seattle Times, and the mayoral candidates she writes about, that treating unconditional earnings differences between subgroups as if they mean something serves only to demonstrate ignorance of the relevant literature.

3. Literacy test for voters (not all voters, of course) in Louisiana before the civil rights era. How did the people who wrote and administered such things sleep at night? Or sit through a church service?

4. Avoiding budget hotels in China.

5. Cool space shuttle booster video.

Hat tip on #2 to Ken Troske.

Movie: The Way, Way Back

The Way, Way Back is a mighty mountain of sugar, but it is charming and well-done sugar.

A.O. Scott has a fine review at the NYT; there is no politics in the movie to throw him off. I particularly like this bit: "the older actors provide a vivid omnibus of the varieties of adult awfulness."

Recommended.

The labor market for teachers in North Carolina

Consider this teacher in North Carolina, who seeks a raise via moral suasion.

If we suppose that her husband makes as much as she does, so that they have a household income of $62,000, that puts them in the 62nd percentile of the US household income distribution and the 96th percentile of the world income distribution, according to this calculator. Even if we suppose that her husband makes only $20,000 per year (2000 hours at $10 per hour), which seems unlikely given positive sorting in the marriage market on education and income, the percentiles are 57 and 95.

There are several issues here, more than one can address in a single post. But one important one often negotiated in discussions of teacher pay is compensating differences. Many people like to teach. That drives teaching wages down, as implicitly part of the compensation is doing a job that one wants to do, and receives praise for doing from others, rather than, say, selling used cars. Teachers should make less in dollar terms than other jobs that require the same skills / investments but lack the non-pecuniary payoff. Formally, the margin teacher should be indifferent not between the money wages of their two best labor market options, but the utility levels associated with their two best options. Also, teachers in government schools, once they have taught for a while, essentially face zero employment risk. The labor market should (and likely does) price this aspect of the job as well, and it too will lead to lower teacher money pay.

I hope she finds a teaching job she likes better in another state.

Hat tip: ASAK

Economics moment of zen #9

"The estimates are tantalizing but the standard errors are annoying."

Sue Dynarski at the NBER summer institute