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Thoughts on the Behavioural Economics of Education

I’m in the second year of my PhD, and I’m working to develop a research program; hopefully one that gets me a finished dissertation as soon as possible.

I’m drawn towards studying education because (1) I have spent my entire life in schools and (2) schools are seriously, and obviously, messed up. The marginal benefit of an additional perspective on education could be very high if that perspective were to shape education reform in some way.

Source: SMBC
Source: SMBC

It’s a cliché to make fun of “soft” degrees, so I’m surprised there isn’t a large body of research on why people choose to pursue them anyways. However, there is a body of research on why people fail to treat education as an investment more generally, as detailed in the working paper “Behavioral Economics of Education: Progress and Possibilities” by Lavecchia, Liu, and Oreopoulos. To avoid typing out Lavecchia, Liu, and Oreopoulos many times, and to make it seem like I’m periodically pausing to laugh, I will refer to them as LOL.

LOL use the dichotomy of “system 1” versus “system 2” thinking. System 1 is the unconscious, mostly automatic part of our brains that says “Don’t get out of bed, it’s warm and nice here and getting to work on time isn’t so great anyways.” System 2 is the part that rationally deliberates our long-term choices and says “You need to get up and go to work because working yields the following long-term benefits: (1) wages, (2) the promise of future wages, (3)…” LOL include the obligatory footnote saying that neuroscientists dispute whether this is actually what the brain is doing, but go on using the dichotomy anyways because it’s an extremely useful way to organize our thinking about the brain even if that’s not how it literally works. Continue reading Thoughts on the Behavioural Economics of Education

Violence, Lynchings, Civil War, and Witch Trials with Cornelius Christian

Cornelius Christian is an Assistant Professor of Economics at St. Francis Xavier University. His research concerns development economics, economic history, and the economics of conflict and violence, which is the topic of this episode of Economics Detective Radio.

Cornelius’ paper “Lynchings, Labour, and Cotton in the US South” deals with violence against black people in the post-reconstruction South. Historians have hypothesized that there was an economic motive to lynchings, noting that more of them occurred when cotton prices were low. Black and white workers competed with one another in the agricultural labour market. Cornelius’ findings indicate that lynchings were used by white labourers to scare black workers out of the labour market, thus raising their own wages. He finds that lynchings happen in the wake of economic shocks when agricultural wages are low. He also finds that, when lynchings occur in a given area, black people tend to migrate out of the area and agricultural wages rise for the remaining white workers. Continue reading Violence, Lynchings, Civil War, and Witch Trials with Cornelius Christian

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Newcomb’s Problem and Order in Game Theory

I’ve read a lot of LessWrong recently, and I learned about a particular paradox known as Newcomb’s problem. In the problem, an alien superintelligence called Omega presents you with a choice. He gives you two boxes, box A and box B. He puts $1000 in box A and either $0 or $1,000,000 in box B. You can then choose whether to take both boxes or just box B, but the catch is that Omega will only put $1,000,000 in B if he predicts that you will only take B. And given that Omega is able to perfectly predict the future, everyone who chooses only B will get $1,000,000 while everyone who chooses both will get $1000.

The maddening thing about this problem is that, as you sit puzzling over whether to take both boxes, the monetary amounts have already been decided and placed in the boxes. There’s either $1000 or $1,001,000 sitting in front of you, and so it would seem that taking both would be weakly better than taking only one. And yet, everyone who takes only one gets $999,000 more than everyone who takes both. How could it be that the “right” answer gives less money than the “wrong” answer? Continue reading Newcomb’s Problem and Order in Game Theory

The Trolley Car Approach to Public Policy

Scott Alexander has an article at Slate Star Codex discussing the use of edge cases in moral philosophy:

There’s a tradition at least as old as Kant of investigating philosophical dilemmas by appealing to our intuitions about extreme cases. Kant, remember, proposed that it was always wrong to lie. A contemporary of his, Benjamin Constant, made the following objection: suppose a murderer is at the door and wants to know where your friend is so he can murder her. If you say nothing, the murderer will get angry and kill you; if you tell the truth he will find and kill your friend; if you lie, he will go on a wild goose chase and give you time to call the police. Lying doesn’t sound so immoral now, does it?

This is a great way of doing philosophy, but reading it, I realized I had heard it before. I’ve heard this sort of argument in the context of policy debates.

Here’s a particularly striking example (h/t to Jason Brennan):

abolish_capitalism

Unlike the case of the door-to-door murderer, which is a deliberately fanciful way of examining a broader moral truth, this is a policy proposal made on the basis of a fanciful scenario. The argumentation goes like this:

  1. In an unlikely scenario, economic system A would allow bad outcome X
  2. Therefore, abolish A (and substitute it with another system, such as B)

There are a lot of errors packed into this line of thinking. What if bad outcome X happens under both systems? What if changing systems just substitutes bad outcome Y for X? What this fails to do is compare the relevant alternatives. Is the implicit claim that under socialism, nobody would ever starve? Millions of Soviet citizens beg to differ. Continue reading The Trolley Car Approach to Public Policy

Income and Wealth Inequality with David R. Henderson

…or How I Learned to Stop Worrying and Love Inequality.

David R. Henderson is a research fellow at Stanford University’s Hoover Institution, and a professor of economics at the Graduate School of Business and Public Policy, Naval Postgraduate School, in Monterey, California.

Thomas Piketty’s Capital in the 21st Century managed to do something unprecedented among equation-dense economic tomes, it became the #1 selling book on Amazon.com. The book tapped in to a hot topic among politicians and the general public: the high (and possibly rising) wealth and income shares of the top 1%. However, David points out that although the book was a best-seller, it wasn’t actually a best-reader. Amazon logs the sentences people highlight, and the top five most-highlighted sentences in Capital all appear in the first 26 pages. It seems that, at least among kindle readers, most people didn’t make it past the introduction. It appears that people buy the book to back up the views they already hold. Continue reading Income and Wealth Inequality with David R. Henderson

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Economics and the Cognitive Minefield

What sounds more difficult to you, figuring out supply and demand, or accurately measuring the Earth’s circumference? It must be supply and demand, because Eratosthenes figured out the other one two thousand years before anyone really managed any progress on that supply-and-demand stuff.

So now that we’ve established that supply and demand is much harder than accurately measuring the Earth’s circumference, we should ask ourselves why it is so. If you don’t know how Eratosthenes managed it, try thinking for a moment about how you might go about accurately measuring the Earth’s circumference with only the tools available in Ancient Egypt. Hint: you can compute the circumference of a sphere with the arc length and angle between two points. Continue reading Economics and the Cognitive Minefield

The Meta-Economics of Mathiness

The perennial debate about “mathiness” in economics has returned, this time sparked by a Paul Romer article in the AER P&P.

The arguments largely focus around the usefulness of mathematics for various applications. These are the technical arguments of practitioners. I’d like to abstract from these arguments and look at the issue as an economist.

The economics labour market is very competitive. Researchers need to demonstrate their quality to compete for the top academic jobs. Now, why should we expect this competition to produce anything besides the optimal research methods? Let’s apply some economics to this problem. Continue reading The Meta-Economics of Mathiness

It All Comes Back to the Minimum Wage Debate

I shared Jeffrey Tucker’s article about Hillary Clinton, and pulled out this quote:

Meanwhile, Hillary’s actual policies on women are a disaster waiting to happen. Consider her support for “equal pay for equal work.” What effect will this have on women in the workforce? It not only puts government in charge of micromanaging every aspect of payroll and personnel of every business in America. It also incentivizes managers to keep women in lower positions in a firm in order to comply with the wage mandates, and disincentivizes advancing women up the ladder by making the costs of ascending too high. The result will be the very “glass ceiling” that mainstream feminism abhors.

An intelligent friend, who shall remain nameless, replied:

I feel like this runs on the same logic that if you raise minimum wage to a livable wage, jobs will be destroyed and small business will crumble, when in fact the opposite has been shown to be true.

Now, this friend is not an economist. What I suspect is that the news sources he typically reads report heavily on the few studies that show positive employment effects of minimum wage increases, and ignore the rest of the literature.  This isn’t exclusively the territory of the left, I’m sure people who read only right-wing or libertarian news sources overestimate the disemployment effects in the other direction.

But look at the conclusion he drew! Since he got the false impression that raising the minimum wage has positive employment effects, he concluded that there is essentially no tradeoff in government artificially boosting any wage; in this case the wages of half (!) the population. But given the initial error, this extreme conclusion naturally follows. Continue reading It All Comes Back to the Minimum Wage Debate

Aladdin’s Biggest Anachronism isn’t Genie’s Jack Nicholson Impression…

…it’s Aladdin’s attitude towards wealth and poverty. That’s what struck me while re-watching this thoroughly enjoyable movie. After being called a “street rat,” Aladdin tells Abu, “Someday, Abu, things are gonna change.  We’ll be rich, live in a palace, and never have any problems at all.”

This is an extraordinary view for a peasant orphan in thirteenth century Arabia! It is a thoroughly modern view. Throughout most of history, if you were born into the lower classes, you lived in poverty. Your entire extended family lived in poverty. Everyone you knew, and all their ancestors stretching back as far as anyone could remember, lived in poverty. Imagining life without poverty would have been as fanciful as imagining life without gravity. Continue reading Aladdin’s Biggest Anachronism isn’t Genie’s Jack Nicholson Impression…

The Prima Facie Case that Great Depression Policy was Really Really Bad

As a Canadian, it’s very strange hearing Americans talk about the Great Depression. The American public education system apparently has a monolithic view on the subject. Based purely on my interactions with people who have passed through that system, I imagine their kindergarten classes must be something like this:

TEACHER: Alright students, what’s 1 + 1?

STUDENTS: 2!

TEACHER: What’s 2 + 2?

STUDENTS: 4!

TEACHER: What do you call someone who doubts the efficacy of FDR’s policies in bringing an end to the Great Depression?

STUDENTS: Insane!

The Great Depression is a complex historical event, so the level of confidence I see from American laymen certainly makes it seem like they’ve been brainwashed from a young age. Maybe it’s just the sort of Americans who make internet comments.

If you believe that it is clearly and obviously true that (1) the New Deal ended the Great Depression or that (2) World War 2 ended the Great Depression, this article is for you. I’m not going to make a slam-dunk case against these notions; if you’re looking for one, you’ll need to read something far longer than a blog post. I recommend Robert Higgs or Bob Murphy. My goal here is to make the case that these ideas, far from being obvious, are actually very counter intuitive given the facts. Continue reading The Prima Facie Case that Great Depression Policy was Really Really Bad