Wednesday, October 29, 2014

Deception in experiments

Link here

A joint letter from the presidents of Stanford University and Dartmouth College will be sent to nearly 100,000 Montana voters to apologize for an experiment by three political-science professors at the two institutions. The letter comes after voters and state officials objected to a mailer, sent by the professors, that featured the state’s official seal and offered information about the political leanings of candidates for the state’s Supreme Court as part of an attempt to see whether such information would alter how Montanans voted.
The article is interesting and the issues aren't confined to political science.  I have a paper that will be published soon examining how economists view and define deception in economic experiments.  Once the article is posted online I will link to it here.

Sunday, October 26, 2014

$125K teachers salaries: More evidence that a school voucher program could work?

Link to Vox article describing a unique approach taken by a school

The $125,000 number was eye-catching, but it was just the start of the school's approach to teaching. Teachers were also eligible for a bonus of between 7 to 12 percent of their salary. The teachers, who are not unionized, went through a rigorous selection process that included a daylong "audition" based on their teaching skills. The typical teacher already had six years of classroom experience before they were hired.

Many teachers I know oppose the idea of vouchers.  They shouldn't.  Well, the good ones shouldn't.  If schools are free to compete (especially if you get rid of unions), you wouldn't necessarily expect lower overall teacher salaries.  You would expect better teachers to be compensated well, and poorer teachers to be compensated poorly (or fired).

Tuesday, October 14, 2014

My newest publication: the value of graphic warning labels to smokers

The title of my newest paper, published at the Journal of Economic Behavior and Organization, is titled  "The Economic Value to Smokers of Graphic Warning Labels on Cigarettes: Evidence from Combining Market and Experimental Auction Data".

Many countries now require prominent pictorial health warning labels (HWLs) on the front and back of cigarette packages. In the US, pictorial HWLs have been adopted, but tobacco industry litigation has delayed their implementation. This intervention could have value to smokers, if it increases their information and changes their smoking behavior. In this paper we estimate the value of two different health warning labels for cigarette packages relative to the current US labeling policy. Our methodology does not depend on the personal values of policy makers or other individuals, as the value of information estimates we derive are based solely on smokers’ own consumption choices, not any public health or other effects. We introduce an approach to valuing information with a surplus measure that couples willingness-to-pay from non-hypothetical experimental auctions with time-series revealed preference demand estimates. We find that a pictorial HWL has a large value to smokers, and a higher value than a label that only contains text, insofar as changing purchase behavior.

This was a collaborative work with three superstar scholars.  Stephan Marette's has exceptionally strong analytical skills and uses those skills to help society gain insight into real-world problems.  Jim Thrasher is one of the top experts on cigarette labeling in the world.   Last but not least, Jayson Lusk wrote the book on experimental auctions (literally) and is one of the most-prominent agricultural economists under 50.  It was a fun team to work with.

Saturday, October 11, 2014

Two Fracking Links

1. There are reports that NY Governor Cuomo interfered with an economic impact report on fracking.  That is a danger of economic impact studies, unfortunately.

Several area residents interested in hydrofracking had mixed reactions Wednesday about a recent news report that found that a federal study commissioned by Gov. Andrew Cuomo’s administration was edited or delayed before it was published.

2. A registry may be created to track fracking-related health complaints

In 2011 the Marcellus Shale Advisory Commission recommended a registry to collect health data from people living nearing fracking operations. Three years later that registry has yet to be created, and a state Senate panel says such a database is an important step toward tracking and responding to public health complaints related to gas drilling.
State Sen. John Yudichak (D-Luzerne) says individual health studies are fine, but the state needs to develop data that covers all parts of the commonwealth.
I agree with an organization doing this in theory, but the anti-fracking community could so easily abuse this system for their benefit.  If you're an anti-fracking advocate, it would pay to quietly get groups of people to report health complaints that are consistent with the alleged issues fracking could cause.  

Then, when bans or tax policy issues come up, you'd be able to rely on data for your decisions.  It's faulty data, but the public likely wouldn't know.  

Economists don't like hypothetical surveys because of potential bias.  The same bias could easily come into play here which could lead to bad policy decisions.

Saturday, October 4, 2014

Learning economics through pictures - price discrimination and cruising

Price discrimination is the practice of charging different buyers different prices for the same product, even when there are no cost differences.  (Note, the word "discrimination" has a negative connotation but price discrimination can actually improve the well-being of society.  Further, military and senior discounts are forms of price discrimination.)

Here is a picture of cruise pricing on  All prices are for the same cruise, just different dates.  

This is a classic example of price discrimination.  The cost to the cruise company is the same on for each trip.  The cruise company has to pay the same amount for fuel, materials, and labor.  However, the demand to cruise from December 29-January 2 is considerably higher.  The 4 day stretch around New Years Eve is a popular time to celebrate, many people are off from work and almost all kids are off from school.  Because of this difference in demand, the same four day cruise costs 350% more during peak times than during the off-peak time.

The cruise industry also engages in other forms of price discrimination.  I'll post about those soon.

Wednesday, October 1, 2014

New documentary on fracking

Link here

“There’s been so much myth and misinformation about fracking that has clouded the mainstream media, and the industry has been so late in joining the conversation,” noted producer Chris Faulkner, CEO of Breitling Energy Corporation. “I just couldn’t stand seeing only part of the story – the worst-case scenario part – being told over and over again.”