Zingerman's misbehavior

A different title for this annarbor.com story would be "Elected Officials Meet with Zingermans' Owner to Discuss Raising Costs of Zingerman's Competitors".

Unlike their food, this sort of behavior does not leave a very good taste in one's mouth.

Addendum: More coverage of the meeting. It is testament to something that Zingerman's is comfortable having the media take pictures as it lobbies elected officials to harm its competitors.

Assorted links

1. The Daily Mail on rats in NYC. Keep this handy when competing with departments in NYC for junior job candidates.

2. Bill Gates on the minimum wage. It's as though he had run a business or something.

3. What non-locals think about various Ann Arbor landmarks. From an entertaining ad campaign by a local bank.

4. Missing out on the (non-existent) hookup culture.

5. P.J. O'Rourke book event at CATO.

Hat tip on #1 and #3 to Charlie Brown.

Frontiers of public finance

"Questions of Justice and Law Raised When an Employee Benefits Plan Beneficiary Strangles His Grandmother, the Participant, to Death" 

Questions of Justice and Law Raised When an Employee Benefits Plan Beneficiary Strangles His Grandmother, the Participant, to Death, 32 Tax Management Weekly Report 1756, 12/23/2013

ALBERT FEUER, Law Offices of Albert Feuer

A young man, Christopher Jackson (“Christopher”), strangled to death his grandmother, Rosemarie Little (“Rosemarie”), a beloved Skadden Arps legal secretary and churchgoing woman, who had chosen Christopher to receive part of her death benefits under her employer’s 401(k) plan and life insurance plan. Earlier this year a federal court decided that Christopher was entitled to none of Rosemarie’s life insurance benefits, and next year a federal court will determine whether he is entitled to any of her 401(k) plan benefits.

This article suggests that depriving Christopher of Rosemarie’s death benefits may be unjust, may be prohibited by ERISA, and may cause the Skadden Arps 401(k) plan to lose its tax-qualification.

To determine the just result, more facts need to be known about Christopher’s schizophrenia, past behavior, and his interactions with Rosemarie, who had raised him from the age of seven. It is difficult to achieve justice without considering the intentions it would be most reasonable to expect Rosemarie to have expressed, if she would have had such opportunity to do so with the knowledge of how she died and Christopher’s punishment.

Under the basic ERISA principle that plan terms determine benefit entitlements, as recently reaffirmed by the Supreme Court in Heimeshoff v Hartford Life & Accident Ins Co., 2013 U.S. LEXIS 9026 (Dec. 16, 2013), Christopher is entitled to receive and keep his death benefits from both Skadden ERISA plans. ERISA preempts non-criminal state laws that would override ERISA benefit rights, such as those laws that would deprive slayers of death benefits. ERISA does not preempt generally applicable criminal laws that would deprive slayers of death benefits. However, Christopher’s criminal sentence did not require him to give up any of Rosemarie’s death benefits. Thus, Christopher may not be deprived of those benefits.

Finally, because tax-qualified plans must make benefit payments pursuant to their plan terms, if the Skadden Arps 401(k) plan fails to pay Rosemarie’s death benefit to Christopher the plan may lose its tax-qualification. The Code makes no exception for payments made pursuant to a court order, such as the one the Skadden plan is seeking in the interpleader action it initiated.

Hat tip: Charlie Brown

Terri Lynn Land

The person sitting next to me on my flight home from DC on Friday turned out to be Terri Lynn Land, the red team candidate for the US Senate in Michigan to fill the seat being vacated due to the retirement of Carl Levin.

Plane time is usually work time for me, but once in a while I will talk if the person seems interesting enough, and Terri passed that bar. I think the last person to pass the bar (other than people I know - I've ended up next to both Randy Eberts and John Abowd on flights from DTW to DCA) was a Rolling Stone reporter going to Amsterdam for a pot festival a few years ago.

Terri and I talked about her activities as county clerk and then Michigan Secretary of State, about legalizing marijuana (she seemed open) and legalizing prostitution (she did not seem open but was surprised to learn it is legal in Canada), about building more (literal) bridges to Canada from Michigan and about border openness in general (she seemed quite keen on this, which you would expect from a Michigan politician of either flavor), about the corrupting (in a broad sense) influence of life as a politician in DC, and about our common appreciation for former president Gerald Ford.

Terri seemed most passionate about the public management aspects of what she accomplished as county clerk and secretary of state, such as making lines shorter at the DMV via sensible administrative and technological reforms. It is certainly true that the DMV in Michigan is substantially better run than what I experienced in Maryland.

Overall, I came away with a positive impression, in large part because she seemed eager to listen and not so eager to push for my vote.

Six-year-old moment of zen #1

"It's only cool when I do it."

I thought this sort of deep insight did not arrive until age > 12.

Movie: Jack Ryan, Shadow Recruit

The NYT nails this one:

 “Shadow Recruit” is a competently made, moderately diverting variation on a genre standard. 

That is surprising given all the star-power and directorial heft.

The thing that bugged me that the NYT does not mention is that there are lots of little issues of the "Why don't the chairs on the bridge of the Enterprise have seat belts?" variety. I don't mean the usual sillinesses that are shared with the genre as a whole, such as the resolute absence of any regular police, or the good guys being fantastic shots while the bad guys are unable to hit the broad side of a barn. Instead, what I have in mind is, for example, one shot early on that shows Jack Ryan, who is supposedly 2/3 of the way through a doctoral dissertation on monetary economics at the LSE at the time, reading an introductory macro textbook on a bench. Why would he do that? Similarly [minor spoiler], if the bad guy's computer can be accessed via the building's electrical system, why do they need the outlet in the bad guy's office rather than just one in the lobby?

Recommended if you want a standard issue medium-good genre film.

Blast from the past: the "Bartman"

Assorted links

1. An Economist blogger takes down Jesse Myerson, who has rediscovered real socialism.

2. The Atlantic on pit latrines.

3. Inside the GM Willow Run factory as it travels the long road to demolition.

4. Nightlife in Newcastle from the Atlantic.I went out once on a Friday night in Newcastle with a student of Peter Dolton's and can attest that this sample is not highly selected.

5. Some thoughts about self-directed learning. I would love to learn about a serious academic book on this.

IZA Young Labor Economist Award

Congratulations to my colleague Martha Bailey, Michigan alum Brad Hershbein, and their fine co-author Amalia Miller on sharing the IZA Young Labor Economist Award this year.

You can see a nice picture and learn about their award-winning paper here.

Food stamp participation

I really like this Atlantic piece on the reality of food stamp (a.k.a. SNAP) participation. Economists tend not to pay much attention to program aspects other than benefit levels and eligibility rules, but they can matter. High time costs, incomprehensible communications from the program, and uncertainty of benefits can all deter participation conditional on eligibility.

One can try to frame some of this as an effort to induce self-sorting among the eligible between the more and less deserving (it acts as an "ordeal mechanism" in the technical jargon) but my guess is that at least some facets of the process deter the worst off among the eligible rather than the best off.

Plus it is just not very nice, as a society, to make the lives of poor people even more unpleasant and uncertain.

Movie: American Hustle

American Hustle is great fun indeed. Well written, well acted, and chock full of glorious '70s music, objects and cultural references (e.g. how long has it been since you thought about Wayne Dyer?). Jennifer Lawrence impresses in particular, playing a character that could not be more different than the one she plays in the Hunger Games movies, and doing so convincingly.

The NYT likes it too.

Highly recommend

Literati

A very nice piece on the Literati bookstore in Ann Arbor from Poets and Writers magazine.

Imitation, flattery, etc.

Someone called Ravinder Kumar is repeating my blog posts (albeit with a long lag).

Odd, that.

Hat tip: Jason Kerwin

Book: Mrs. Dalloway by Virginia Woolf

It took me a while to warm up to Mrs. Dalloway, mostly because it took me a while to get used to the writing style, but once I did I really enjoyed it and was sorry to see it end. The book tells the story of one day in London in the period not long after World War 1 from the perspective of several interacting characters. It is fascinating as a document of social history, it is wickedly funny (and quite pointed) at times in its implicit social criticism, and, in the end you care a lot about the odd band of characters it portrays.

Recommended.

More on the minimum wage

The Washington Post fact-checker disagrees with Obama's reading of the literature. The more disappointing bit here is that his remarks were presumably run by people (in particular economist people) in the administration who should know better.

Economists for a higher minimum wage

This post is about why I will not be adding my name to the current petition of economists in favor of increasing the US minimum wage, which you can view (and add your name to, if you are a Ph.D. economist) here.

The current list features some heavy hitters (e.g. Larry Summers and Larry Katz), some usual suspects (e.g. Robert Reich) and some (to me anyway) surprises (e.g. Melissa Kearney and Angus Deaton).

Here is the petition's survey of the state of play of the empirical research:

In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market. Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front.

Oddly, for a petition from (mostly) academic economists, no citations to the literature are provided to support these claims.

Even more oddly, the research summary fails to distinguish between employment effects in the short-run, which can be estimated using compelling partial equilibrium identification strategies, and employment effects in the long-run, which generally cannot. Unfortunately, the compelling evidence we have about low short-run employment effects is largely irrelevant to policy, which should concern itself with long-run effects. My favorite minimum wage paper shows that small short-run effects are quite consistent with large long-run effects.

In addition to concerns that the short-run effects may differ substantially from the longer run effects due to delayed capital-labor substitution and other factors, I have three other concerns about the minimum wage:

1. It is poorly targeted relative to alternative policies such as the Earned Income Tax Credit (EITC). And, yes, I am familiar with the argument that the minimum wage and the EITC are complements; what is thin on the ground, so far as I am aware, is evidence of the empirical importance of this argument.

2. As pointed out recently by Greg Mankiw, it distributes the costs of the increased minimum wage in a less attractive way than alternative policies such as the EITC, which implicitly come out of general tax revenue.

3. Most importantly, raising the minimum wage fails to address the underlying issue, which is that many workers do not bring very much in the way of skills to the labor market. Rather than having a discussion about raising the minimum wage, we should be having a discussion about how to decrease the number of minimum wage workers by increasing skills at the low-skill end of the labor market. This would, of course, mean challenging important interest groups. It is also a bigger challenge more broadly because it is less obvious how to do it. But that is the discussion we should be having because that is the one that will really help the poor in the long run, in contrast to a policy that feels good in the short run but only speeds the pace of capital-labor substitution in the long run.

Millenials in the workplace

and the response


Hat tip: Ken Troske

Chris House starts a blog

My macro colleague Chris House has started a blog.

I liked the most recent post on rational expectations. My take as an outsider is that figuring out where expectations come from remains a high value item on the "to do" list of economics.

With Chris joining in, we now have three blogs on one side of one hallway at Michigan, as Miles Kimball's office lies between mine and Chris'.

News you can use: Robert Axelrod on when to launch your cyber-attack

Assorted links

1. Does carrying a condom make you a prostitute? It still puzzles me that New Orleans doesn't legalize, regulate and tax prostitution. They would make lots of money in additional tourism as it is presumably complementary with the gambling, outdoor drinking, music, dining and voodoo they already provide.

2. Self-help for the mentally strong (and those who want to become such). Standard stuff, but clearly presented.

3. Facts about Kentucky. Fact #26 relates to my earlier post about Appalachia.

4. An excellent Ph.D. comic.

5. Cambridge Attitudinal Disorder goes to China.

Hat tip on #3 to Dan Black and on #2 to a facebook friend.

On the incidence of virgin birth

Like a virgin (mother): analysis of data from a longitudinal, US population representative sample survey
BMJ 2013; 347 doi: http://dx.doi.org/10.1136/bmj.f7102 (Published 17 December 2013)

Abstract

Objective: To estimate the incidence of self report of pregnancy without sexual intercourse (virgin pregnancy) and factors related to such reporting, in a population representative group of US adolescents and young adults.

Design: Longitudinal, population representative sample survey.

Setting: Nationally representative, multiethnic National Longitudinal Study of Adolescent Health, United States.

Participants: 7870 women enrolled at wave I (1995) and completing the most recent wave of data collection (wave IV; 2008-09).

Main outcome measures: Self reports of pregnancy and birth without sexual intercourse.

Results: 45 women (0.5%) reported at least one virgin pregnancy unrelated to the use of assisted reproductive technology. Although it was rare for dates of sexual initiation and pregnancy consistent with virgin pregnancy to be reported, it was more common among women who signed chastity pledges or whose parents indicated lower levels of communication with their children about sex and birth control.

Conclusions: Around 0.5% of women consistently affirmed their status as virgins and did not use assisted reproductive technology, yet reported virgin births. Even with numerous enhancements and safeguards to optimize reporting accuracy, researchers may still face challenges in the collection and analysis of self reported data on potentially sensitive topics.

--------------

Measurement error is a wonderful thing!

Gated version here.

War on Poverty: Appalachian edition

A useful piece on Appalachia from National Review on-line. It is not smarmy or overly ideological and strikes a good balance between empathy and journalistic distance.

It also does a nice job of illustrating important issues in discussions of poverty. First, if the goal of the war on poverty was solely about "having enough", then the war has largely been won in Appalachia. People are not, generally, starving. They have some cash, some SNAP (the official name of what even most researchers still call food stamps) and some Medicaid or Medicare (and probably some other drugs too). In contrast, if the goal was to have the poor act like middle class people (or, even more ambitiously, to have them become middle class people), well, then, the war has not gone so well. Second, price levels matter. Housing is much cheaper in Appalachia, where the opportunity cost of the land is essentially zero than in most big cites. SNAP does not vary with local price levels and so represents a much more generous transfer in places with low costs of living.

As an aside, the claimed rate at which soda purchased via SNAP can be turned into cash, given at 50 cents on the dollar in the article, seems too low to me. The usual number one hears among researchers is more like 80 cents on the dollar, and the market ought to function particularly well in places like that profiled in the article, in which the market is thick on both sides.

Hat tip: Dan Black

Addendum: A reader suggests the following paper topic:  "We made the Food Stamps move to electronics to avoid their resale, but of course this was ineffective.  It did, however, require a new currency (Pepsi in this case) and may be distorted the price in the process, clearly lowering the welfare of the recipients.  How much?" 

I bet you could even get a grant from the poverty center at Kentucky to fund the writing of such a paper.

Addendum 2: The rate is 50 cents on the dollar at one store in Camden. Hat tip: Lowell Taylor.

Addendum 3: Paul Krugman's take on the article. I have never found the spatial mismatch literature particularly compelling when it is about mismatch within MSAs but there is more to be said, I think, about geographic mismatch on a larger scale, as with the maritime provinces in Canada, about which there is actually a literature, including some evaluations of programs that try to induce people to move to other parts of Canada where there is more economic activity.

Seems the Mounties are still mad

The RCMP (that's the Royal Canadian Mounted Police, as in Dudley Do-Right) managed to get rid of Bill Elliott, the commissioner who was supposed to fix up their operation (and, full disclosure, a distant relation of mine by marriage), but that, it seems, did not settle the matter. Now they (presumably) have their friends in the press going after his consolation prize gig in New York.

Ah, politics.

Hat tip: Christine Gribowski

Bivariate normal selection model

From the comments to an unrelated post:

Bill Greene visited my school (UConn) last year. We asked him about, whether it was essential to have exclusion restrictions in a Heckman selection model. He said no, that the non-linearity alone is sufficient for identification. When he got some push back, he recounted an anecdote where he was one of three reviewers on a paper where this was the central issue, and ended up losing the argument to the other two. The quote he ended with that stands out is, "I am comfortable in the non-linear world."

The next semester we had one of your students visit (she was working in Corporate Finance at the World Bank). She had a Heckman model in her paper under robustness checks, and I asked her why she didn't just make it her main model and sidestep some of the endogeneity issues that arose in the talk. She said that, since it didn't have exclusion restrictions that it was bad form. She said that Heckman wouldn't like it and Heckman's students wouldn't like it (I guess that includes you, right?).

I guess what strikes me most is that people at the top of the profession disagree on this issue. It doesn't strike me as an open question, so much as different people knowing all about the trade-offs, coming to different conclusions (and maybe different conclusions about the right "rules of thumb").

So if you think I've summarized the views correctly, I think a post your position and why you and Greene disagree would be interesting.

I don't think Bill and I actually disagree much. We certainly agree that, in the technical sense, no exclusion restriction is required to identify the bivariate normal selection model. That is a non-controversial matter of technical econometrics. Where it seems we might disagree is whether reporting estimates based on the bivariate normal selection model without an exclusion restriction adds any value. I would say it does not add any value, and actually subtracts value in some sense by potentially misleading econometrically uninformed readers.

I suppose that the counter-argument would be that it is better to do something than nothing, where something is the bivariate normal model without an exclusion restriction. That's fine, but I would choose a different something. In particular, I would much rather see a sensitivity analysis that fixes the rho parameter (the correlation between the unobserved components of the selection and outcome equations) in the selection model at different values and shows how it affects the estimates than estimates of rho without an exclusion restriction. The sensitivity analysis should, in my view, be accompanied by substantive arguments that limit the reasonable support of rho in the particular context under study. [The related versions of sensitivity analysis from the matching literature - see e.g. Ichino, Mealli and Nannicini (2008) Journal of Applied Econometrics - would be fine with me as well.] The sensitivity analysis approach seems much more honest about the nature of the evidence than simply reporting "selection corrected" estimates based solely off of functional form assumptions.

New offensive coordinator for Michigan

Michigan has hired former U of Washington coordinator Doug Nussmeier.

As one of my colleagues (you can guess which one) quipped: "New offensive coordinator: one day. New dean for Letters, Sciences and Arts: 18 months and counting".

Addendum: I am informed that should be "Literature, Science and Arts". This is, of course, all part of my on-going strategy to avoid being chair.

Dale Mortensen, RIP

Dale Mortensen passed on today.

He was a great economist and also a great man (and great fun to have a drink with).

Assorted links

1. UM medical school class of 1881. And a cadaver.

2. What college presidents do over break. Probably this is a best case scenario.

3. Very cool pictures of the old Cincinnati public library.

4. What happens to Pizza Hut when the pizza is gone.

5. Real estate agents gone wild.

Hat tip on #5 to Charlie Brown.

Benny Hill's Piccolo Song

I heard this on XM yesterday driving back from Canada.

Happy New Year!

Cute academic humor

This is sort of a mash-up of Ph.D. comics and videos of kittens and puppies.

Hat tip: Rudi Bachmann