Bryan Caplan's Blog, page 114

Highlighting a Waste of Time, by Bryan Caplan

Garett Jones' top catchphrase is, "If only there were a vast empirical literature on X."  When you're well-aware of the vast empirical literature to which he's alluding, it's funny.  Whenever you discover a new-to-you vast empirical literature, though, it's humbling.  The world's packed with vast empirical literatures.  Anytime you open your mouth in earnest, you're probably running afoul of one of them. 

Dunlosky et al.'s "Improving Students' Learning With Effective Learning Techniques" (Psychological Science, 2013) is an outstanding example.  I've been in school for almost four decades, teaching for almost two.  But I never investigated the effectiveness of any of the pedagogical methods this paper explores.  The results are shocking.  Some ubiquitous study techniques are crummy - and some rare study techniques rock.

Let's start with a prime example of a crummy yet popular approach: highlighting. 

As an introduction to the relevant issues, we begin with a description of a prototypical experiment. Fowler and Barker (1974, Exp. 1) had undergraduates read articles (totaling about 8,000 words) about boredom and city life from Scientific American and Science. Students were assigned to one of three groups: a control group, in which they only read the articles; an active-highlighting group, in which they were free to highlight as much of the texts as they wanted; or a passive-highlighting group, in which they read marked texts that had been highlighted by yoked participants in the active-highlighting group. Everyone received 1 hour to study the texts (time on task was equated across groups); students in the active-highlighting condition were told to mark particularly important material. All subjects returned to the lab 1 week later and were allowed to review their original materials
for 10 minutes before taking a 54-item multiple-choice test. Overall, the highlighting groups did not outperform the control group on the final test, a result that has unfortunately been echoed in much of the literature (e.g., Hoon, 1974; Idstein & Jenkins, 1972; Stordahl & Christensen, 1956).

However, results from more detailed analyses of performance in the two highlighting groups are informative about what effects highlighting might have on cognitive processing. First, within the active-highlighting group, performance was better on test items for which the relevant text had been highlighted (see Blanchard & Mikkelson, 1987; L. L. Johnson, 1988 for similar results). Second, this benefit to highlighted information was greater for the active highlighters (who selected what to highlight) than for passive highlighters (who saw the same information highlighted, but did not select it). Third, this benefit to highlighted information was accompanied by a small cost on test questions probing information that had not been highlighted.

Overall:

On the basis of the available evidence, we rate highlighting and underlining as having low utility. In most situations that have been examined and with most participants, highlighting does little to boost performance. It may help when students have the knowledge needed to highlight more effectively, or when texts are difficult, but it may actually hurt performance on higher-level tasks that require inference making. Future research should be aimed at teaching students how to highlight effectively, given that students are likely to continue to use this popular technique despite its relative ineffectiveness.

In light of this evidence, Caplan Family School has abandoned highlighting.

Coming soon: Two underused pedagogical methods that work.

HT: Nathaniel Bechhofer

(14 COMMENTS)

Where Was the Backlash Against Desegregation?, by Bryan Caplan

Many moderately pro-immigration thinkers, most notably Tyler, see the Open Borders movement as self-defeating.  Why?  Because excessive immigration provokes nativist backlash.  In effect, there's a policy Laffer Curve; when you ask for too much immigration, you get less immigration than if you ask for less.

As you may know, I regard immigration laws as morally comparable to Jim Crow laws.  But I'm not going to ask, "Should the opponents of desegregation have moderated their demands?"  That's non-responsive to Tyler.  Instead, I'm going to ask, "Where was the backlash against desegregation?"  After all, segregationist laws were abolished in just a few short years, over the vociferous objection of most white Southerners.  Auspicious circumstances for a backlash, no?  And yet no serious movement to reinstate Jim Crow ever got off the ground.

I suppose you could call George Wallace a form of backlash.  Or perhaps the partisan realignment of the South.  But if you warned the proponents of desegregation, "Tread carefully!  If you push too hard, there will be George Wallace and partisan realignment," they wouldn't have trembled.  Nor should they have.  If this is what qualifies as backlash, it is not a bang but a whimper.

Anything I'm missing?

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The Prohibition of Evacuation, by Bryan Caplan

When disaster looms, governments routinely evacuate their citizens.  At minimum, they urge them to leave the danger zone.  They normally supplement this cheap talk with stronger nudges like the Emergency Alert System and official door-to-door warnings.  Governments occasionally even require their citizens to get out of Dodge.

Evacuation policy blends humanitarian and pragmatic motives.  If you care about people, getting them out of harm's way is common sense.  But even when governments feel little sympathy for disaster victims, they try to evacuate them anyway.  As long as you're under pressure to "do something" in the face of disaster, it's vastly cheaper to prevent people from becoming disaster victims than it is to rescue them after they've already become disaster victims.  Better still, evacuees foot most of their own rescue bill; the government installs the "Evacuation Route" signs, but the population flees in their own cars with their own gas.  People who stay and lose everything, in contrast, are in no position to practice self-help. 
 
On reflection, the moral and practical logic of evacuation doesn't stop at national borders.  (Logic rarely does).  From a humanitarian point of view, letting people leave dangerous countries is only common sense.  The fewer people who experience a disaster, the better.  From a pragmatic point of view, moreover, allowing an anxious foreigner to emigrate at his own expense is far cheaper than bailing him out after tragic events leave him a desperate refugee.  Better for the international community to let people save themselves from minor tragedy than rescue them from major tragedy.

In practice, of course, the world's governments brutally discourage cross-national evacuation.  Suppose you foresee natural or social disaster for your country.  If you wisely try to get out Dodge, the world's immigration restrictions dog you at every turn.  Once disaster hits, you might be able to apply for refugee status.  But as we've seen, that's a long shot.  The safe countries may eventually take you in if the mood strikes them.  But it's an uphill political battle.  Whatever you think about immigration in general, desperate refugees look like a big burden on taxpayers. 

The root problem, of course, is that governments spurn the logic of international evacuation.  Instead of encouraging non-citizens to leave dangerous countries post-haste, they impose deadly bureaucratic delays.  And when a refugee crisis emerges, safe countries are shocked - shocked! - by the horror.  Their complicity - the fact that their own immigration restrictions prevented the refugees from saving themselves back when there was still time - never enters their minds. 

My point, as usual, is that open borders is justice, not charity.  Saving perfect strangers may be a matter of charity.  But letting strangers save themselves with the willing assistance of people other than yourself is a matter a justice. 



(16 COMMENTS)

Civilization Bets Considered, by Bryan Caplan

My civilization bet with Garett Jones fizzled out.  Now it's time to review all my other offers.

Richard writes:

The hardest, fairest measures I can think of are low
birth rates plus increasing wealth. Might want to use polity scores too.
Then again, Japan has all these things, and many don't see it as
"Westernized."

Posted August 18, 2015 11:13 PM

All reasonable, even though I see low birth rates as a bad thing.  Per-capita GDP will keep rising.  The Total Fertility Rate will decline in the Third World and remain below replacement in the First World.  Polity Scores will rise.  I'll bet on any or all of these for the next fifty years.

Maxim writes:

Because "western civilization" is so broad, I wonder if
the least bad way to do this would be to track Pew's polls of people in
other countries and "do you have a favorable view of... [The US, France,
etc.]" That certainly seems to be the most literal way to do it, though
I suppose the drawback is when western civilization acts contrary to
the *ideal* of western civilization, such as but launching a war or
something. Which are we trying to measure here, western civ as it
actually exists or as our ideal vision of it?

If the ideal vision, you may want to measure with some basket of
values (like Western movie sales sales of The Wealth of Nations
non-religiosity in surveys, or something like that...

Posted August 19, 2015 12:05 AM

As written, these are too vague to bet.  But suitably refined versions seem reasonable.

ChacoKevy writes:

How about tracking the S&P vs Hang Seng in ability to generate revenue in neutral global markets?

Posted August 19, 2015 12:31 AM

I see China's entry into the capitalist world as a great triumph of Western civ.  So comparing S&P vs. Hang Seng seems off-point.

Dangerman writes:

I don't think defining "reasonable" is the hard part of
this bet... I think defining "Western" civilization is the difficult
part.

What about metrics that used to commonly be associated with "Western
Civilization" like: (1) percentage of the population that identifies as
Christian; (2) the pervasiveness of monogamy as the fundamental social
structure underlying family formation; or (3) stable to
above-replacement fertility rates.

I predict that over any given moderate timeline (2-10 years) at least
two out of three of the above metric will decline, and so "Western
Civilization" is NOT in fact winning.

Will pre-pay $100.

Posted August 19, 2015 12:42 AM

"Western" is indeed the rub.  I see religiosity, monogamy, and high fertility as three ways that the pre-20th-century West resembled other pre-modern societies.  Not only are these traits not distinctively Western; they're now distinctively non-Western. 

Andrew S writes:

I'd go for measures that emphasize individual liberty to
quantify western civilization (especially versus places like Beijing or
Tehran). Measures I would use:

1) Percentage of articles published in a country's major newspapers (or online news sites) critical of its government.

2) Number of officially banned books

3) Percent of country in jail for victimless crimes (drugs, politics, speech, etc.)

4) Correlation between probability of being in jail and personal wealth prior to being charged

5) Number of an enumerated list of individual rights that are not
prohibited or restricted by law (practice religion x, travel within
country, dance in street, ...)

Posted August 19, 2015 2:16 AM

(1), (2), (3), and (5) all seem good as long as we've got solid measures.  (4) could, for all I know, be higher in Western countries, so I wouldn't want to bet on it.

mico writes:

Observant Islamic population of the globe will grow faster than the non-islamic population of western countries.

Most western countries will have both immigrant chauvinist and native
nationalist parties polling over 20% of the vote consistently within 30
years, except Asian countries whose populations will collapse.

The current western culture set doesn't even manage population
replacement so in the absence of genocidal treatment of others (again
not western in the sense you mean) the question is when not if it dies.

Posted August 19, 2015 2:27 AM

Since the non-Islamic population of Western countries is shrinking, I'd lose the first bet unless there's a high threshold for "observant."  The chauvinist/nationalist party bet is interesting, but too vague to bet.  Is the U.S. Republican Party already "native nationalist"?

Aside: A culture that makes converts doesn't need biological population replacement to survive.

Eric Rall writes:

1. Percentage of population proficient in English as a
first or second language. Proxy for Anglo-American cultural influence
and for the value placed on business, educational, and cultural contact
with the West. Might also be worthwhile to include French and German
proficiency, if you don't want to just use Americanization as a proxy
for Westernization.

2. McDonald's franchises relative to the population. McDonald's is
widely seen as a symbol of Westernization in general and Americanization
in particular, so franchises flourishing signals both cultural
acceptance of Westernization and institutional access to western
businesses.

3. International revenue for Hollywood movies. Same logic as #2, with emphasis on cultural acceptance.

4. Percentage of Western-educated people in powerful or influential
roles (political office-holders, CEOs, college professors, etc).
Potentially problematic, since a decline could indicate an improvement
in the perceived quality of domestic educational institutions rather
than a decline in value placed on a Western education.

Posted August 19, 2015 4:27 AM

I'll bet on more specific versions of (1), (3), and (4) .  (2) is too narrow, since McDonald's is an inferior good.  Multinational franchising in general though is bet-worthy. 

Grant Gould writes:

These are suggestions, not offers to bet, as I doubt our views diverge enough to find odds between them.

* Fraction of earth's population who are legally permitted to blaspheme every god, prophet, avatar, and messiah

* Number of countries in which a double-digit fraction of the
population has seen one of the highest-grossing American films of the
past ten years (note: Measure must include estimate of people watching
via piracy!)

* Fraction of the world population that believes that fraud and
embezzlement are more serious crimes than divorce or homosexuality

* Fraction of the world population where the expected (severity times
likelihood) punishment for tax evasion exceeds the expected punishment
for complaining about tax rates

Posted August 19, 2015 8:45 AM

The "legally permitted to blaspheme every..." requirement is so stringent, and population growth in the First World so low, that I wouldn't want to bet at even odds.  I would bet that a continuous global ranking of de facto religious freedom will rise.  (2) and (3) seem good, as does (4), assuming low expected punishment for complaining is what counts as "Western."

Peter H writes:

So we want a measure that's concrete, tied to participation in the global community, and hard to game.

How about change in % of GDP that constitutes foreign trade? It's
imperfect as a measure of westernization, but not terrible as it tells
us about engagement with the world at some level. First derivative of
the foreign trade percentage gives us the answer to "getting more or
less western" and has a nice zero point, as well as controlling for
current patterns - we're just looking for direction of the trend.

So what say you Bryan?

Posted August 19, 2015 1:27 PM

I'll bet on this over the medium-term (10 or more years), even though there are signs of a cyclical reversal right now.

phil writes:

I think total share of world economy held by western
countries (US, Canada, EU, Australia) is likely (maybe almost certain)
to fall

you could probably find a lot of takers at a certain ratio of that question

I suspect you largely attribute that to a 'Westernization of the
rest' effect and wouldn't find that a particularly attractive bet

Correct.

Posted August 19, 2015 2:01 PM


Daniel Fountain writes:

I would classify "Westernization" as "expanding
individualism". That is to say a respect for the choices of the
individual. Modern Western Civilization is, at its heart, a society of
live and let live. Obviously there are grotesque exceptions but this is
the creed by which the west has taken over in the last 200 years or so.

For legal institutions there is one clear metric by which to gauge:
Percent of individuals in jail or fined for a non-externality inducing
actions. Also along these lines is the percent of laws dedicated to
banning non-externality inducing actions.

Since virtually everything creates externalities, this isn't a good bet.  Betting on fraction of the population in jail for canonically "victimless crimes" is okay, though.

For social institutions the biggest innovation western civ has to
offer is the education of all groups. So a country could be said to be
westernizing if the mean education level of women is closer to the mean
education level of men over time.

If you rephrase to "average female education minus average male education is rising," I'll sign.

Similarly the lack of racial crimes is
a core tenant of modern western civ, so the less racially based crime
there is the more the country is westernizing.

Interesting, but too vague to bet.

Posted August 19, 2015 7:41 PM



















Brad writes:

How about the number of visa applications from
China,Russia,and other non-western Nations. Measure where the world's
people are moving.

Posted August 19, 2015 9:08 PM

If they move to Western countries, does this show Westernization or the opposite?

Bottom line: If I said a metric is good, I'm ready to bet on it at even odds once the metrics and stakes have been clearly specified.  For the rest, I'm open to revisions.

(1 COMMENTS)

Caplan Family School Attendance Contract, by Bryan Caplan

My wife and I have decided to homeschool our elder sons for middle school.  I homeschooled them during the last five weeks of summer vacation as an experiment, and we're all happy with the results.  I'll blog my rationale for homeschooling later.  For now, here's the attendance contract.

Caplan Family School Permanent Attendance Contract

1.      
The Caplan Family
School (henceforth CFS) exists for the benefit of its students.  Its goals are to help students create an
intellectually stimulating childhood and a promising adult career for
themselves. 

2.      
To achieve these
goals, the CFS curriculum is comprised of (a) material students are likely to
use in the future, and (b) material students find interesting in the
present.  "Material students are likely
to find useful in the future" includes material students are likely to use in
future grades.  Exposing students to
diverse samples of potentially
interesting material counts as useful.

3.      
Bryan Caplan and
Corina Caplan are the directors of CFS. 
Bryan Caplan is its head teacher. 
Directors have equal and final say over all CFS decisions, but the head
teacher is responsible for all day-to-day CFS affairs.  Directors may select other teachers to assist
the head teacher. 

4.      
All CFS teachers
promise to competently and entertainingly teach the curriculum, treating all
students with kindness and respect at all times.  The head teacher will be responsible for all
legal and external test deadlines.

5.      
CFS is a special
school for highly motivated students with exemplary behavior.  Students promise to work hard on the assigned
material every school day without complaint, and to treat their teachers with
kindness and respect at all times. 

6.      
Students are
entitled to politely suggest ways to improve CFS, but may not question
directors' final decisions during school or commuting time.

7.      
Every CFS parent
and student retains the right to unilaterally end attendance, but agrees to give
one week advance notice of this decision. 
Students who leave CFS will begin public school the first school day
after their CFS attendance concludes. 
CFS students who move to public school are expected to have an
optimistic, can-do attitude toward their studies. 

8.      
The regular CFS
school year begins on September 8, 2015 and continues year-round.  Vacation time will be set on a case-by-case
basis.

9.      
CFS students
should expect to graduate at the end of 8th grade.  Students will attend a conventional high
school so they can build strong transcripts for college admission.  The head teacher and students will both work
to ensure a smooth transition to high school, but the head teacher is
responsible for all legal and bureaucratic issues.

(10 COMMENTS)

Open Borders Meetup November 21, by Bryan Caplan

Supporters and fellow travelers of the Open Borders movement are invited to a November 21 meetup at my house in Virginia.  If you're interested in attending this or any future meetups, join the permanent Facebook group. 

(1 COMMENTS)

A Stillborn Civilization Bet, by Bryan Caplan

When I solicited bets on Western civilization, my former co-blogger Garett Jones zeroed in on economic freedom.

A possible "hardy weed" bet, @bryan_caplan: if 2 or more OECD countries will have their freedom scores fall 10+ points by 2035, I win.

-- Garett Jones (@GarettJones) August 21, 2015

I'm more familiar with the Fraser scale than the Heritage scale, so Garett converted:

@bryan_caplan The (intra-year) EFW sigma is 0.82, the Heritage sigma is 11.3. So -10 Heritage ~ -0.75 EFW. I'd readily take -0.8. (2/2)

-- Garett Jones (@GarettJones) August 26, 2015

Frankly, I found Garett's proposed bet strange on its face.  Economic freedom has much to do with Western civilization, but they're quite distinct.  I proposed we instead bet on global per-capita GDP, global absolute poverty rates, global life expectancy, or global violence rates.  Since Garett was firm on the metric, I suggested we bet on global average economic freedom scores.  (I'd also happily bet on economic freedom for any major region of the world).  He didn't want to take that bet either.

Since I had no strong views on how much OECD members' economic freedom scores fluctuate, I decided to review the past 42 years of data for all OECD members.  On the Fraser scale, about 5 countries changed more than 1 full point during this period.  The trend was toward more economic freedom, but the 1970s - when the Fraser scales began - probably had the lowest peacetime economic freedom in the 20th century.  While I don't expect economic freedom to fall in coming decades, aging (combined with our lavish old-age programs) pushes in that direction. 

The upshot is that I think I'm fairly likely to lose Garett's proposed bet, so I'm refusing it.

As far as I can tell, Garett sees this a major concession on my part.  I don't.  To the best of my knowledge, I've never claimed that rich countries' economic freedom is unlikely to modestly fall.  As long as mankind's per-capita GDP, absolute poverty, violence, and lifespan continue to noticeably improve, I say Western civilization is thriving. 

I'm tempted to say that Garett's refusal to bet on any of these is a major concession to me, but that's not fair either.  To the best of my knowledge, Garett never claimed that mankind's per-capita GDP, absolute poverty, violence, and lifespan won't continue to noticeably improve.  The real lesson is that our disagreement here is minor.  By ordinary standards, Garett is almost as optimistic as I am.

P.S. Garett and I will be debating some of these issues at Northwood College this November.  Stay tuned for details.

P.P.S. I'll review other proposed civilization bets later this week.

(14 COMMENTS)

Funny Bargains, by Bryan Caplan

The worker-employer bargain has many funny features.  Scott Alexander points out a few:

1. Employers sometimes yell at workers for small mistakes; workers aren't supposed to yell at employers no matter how big the employers' mistakes.

2. Employers sometimes demand job applicants' bodily fluids; applicants fear to ask prospective employers for a cup of coffee.

3. Employers sometimes demand that workers stay late; workers rarely demand to leave early.

Scott takes these as strong symptoms that the supply-and-demand model of labor markets is deeply wrong.  The asymmetries exist because each worker needs his employer a lot more than his employer needs him.

Now let's consider two other bargains with similarly funny features.  First, the patron-waiter relationship.

1. Patrons sometimes yell at waiters for small mistakes; waiters aren't supposed to yell at customers no matter what.

2. Patrons sometimes ask waiters for elaborate special treatment (e.g. no nuts, extra nuts, sauce on the side, gluten-free sauce...); waiters aren't supposed to ask patrons for the smallest favor (e.g. a tiny bite of their dessert, or "Kindly eat over your plate").

3. No matter how diligent waiters are, customers are still allowed to tip them zero.

Second, consider the customer-Big Box Store relationship.

1. Customers can buy an item, try it, decide they don't like it, then get a full refund.

2. Customers can ask store employees to help them find a product, but store employees would never ask customers to help them stock the shelves - even for a minute.

3. Customers can be rude to the store manager, but the store manager still has to be polite to customers.

In all three cases, of course, economists have a standard mantra: it's all reflected in the price.  If being an employer is pleasant and being a worker is unpleasant, labor demand goes up, labor supply goes down, and the wage goes up.  If being a patron is pleasant and being a waiter is unpleasant, demand goes up, supply goes down, and the price of restaurant meals goes up.  If store customers and stores know they can return anything they don't like, demand goes up, supply goes down, and the price of store products goes up.  Why exactly is it so important to restaurant patrons that waiters never ask them for a bite of their dessert?  Norms, psychology, and status all play a role.  But as long as asymmetric conditions are reflected in the price, who cares about their source?

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Scott Alexander on Labor Economics: Point-by-Point Reply , by Bryan Caplan

To recap my last post, Scott Alexander's critique of libertarian labor economics amounts to a critique of mainstream labor economics itself.  If Scott were in my labor economics course, I could spend hours of classtime responding to his thought-provoking critique.  Since he's not, I'll do it here.  Scott's in blockquotes, I'm not.

It is frequently proposed that workers and bosses are equal negotiating
partners bargaining on equal terms, and only the excessive government
intervention on the side of labor that makes the negotiating table
unfair. After all, both need something from one another: the worker
needs money, the boss labor. Both can end the deal if they don't like
the terms: the boss can fire the worker, or the worker can quit the
boss. Both have other choices: the boss can choose a different employee,
the worker can work for a different company.

The first sentence is needlessly philosophical.  If I pay you $100 an hour to hop on one foot, is that "equal"?  Is it "fair"?  But the rest of the paragraph is correct.  The key intuition of labor economics is that employers pay workers to do
things that employers value more than workers disvalue.  "Value," as usual in economics, is equivalent to "willingness to pay."  The deals they strike may violate norms of equality or fairness, but remain mutually beneficial.

And yet, strange to
behold, having proven the fundamental equality of workers and bosses, we
find that everyone keeps acting as if bosses have the better end of the
deal.

Everyone talks as if bosses have the better end.  But talk is very different from action.  If everyone were trying to start their own businesses and hire workers, that would count as "acting as if bosses have the better end of the deal."  Most workers, however, make no effort to become entrepreneurs.  You could object that most workers don't have the money to open their own businesses, but most rich workers make no effort to become entrepreneurs either.  

During interviews, the prospective employee is often nervous; the boss
rarely is.

True.  The boss has different negative emotions, especially fear of hiring a bad worker.

The boss can ask all sorts of things like that the
prospective pay for her own background check, or pee in a cup so the
boss can test the urine for drugs; the prospective employee would think
twice before daring make even so reasonable a request as a cup of
coffee.

True.  But prospective employees routinely ask for things much more expensive than a cup of coffee.  They bargain over salary.  They ask about health insurance and other benefits.  At the same time, bosses fail to demand many other valuable concessions.  For example, they could charge applicants for the time they spend interviewing them. 

I'll admit that the details of the hiring process are complex.  If I were a job candidate, I wouldn't ask for coffee either.  But if the reason is deep fear of unemployment, why do I have the courage to inquire about salary and benefits?  This sounds more etiquette than "bargaining power."

Once the employee is hired, the boss may ask on a moment's
notice that she work a half hour longer or else she's fired, and she may
not dare to even complain.

This is true on some jobs.  But workers frequently respond to such requests with complaining or excuses.  Like, "I have to pick up my son."  Employers' threats to fire workers are much rarer than workers' complaining and excuse-making.

On the other hand, if she were to so much as
ask to be allowed to start work thirty minutes later to get more sleep
or else she'll quit, she might well be laughed out of the company.

Again, true on some jobs, especially when team production is important.  But requests to arrive late and leave early are common in most workplaces. 

A
boss may, and very often does, yell at an employee who has made a minor
mistake, telling her how stupid and worthless she is,

True on some jobs.  But as competent workers know, there are also plenty of bosses who turn a blind eye to incompetence out of pity.

but rarely could
an employee get away with even politely mentioning the mistake of a
boss, even if it is many times as unforgivable.

Simple explanation: If a worker messes up, the employer doesn't get what he paid for.  If a boss messes up, the employee still gets paid. 

The naive economist who truly believes in the equal bargaining position
of labor and capital would find all of these things very puzzling.

"Very puzzling"?  No, only mildly puzzling.  Remember: If employers value a conventionally "unequal" or "unfair" outcome more than workers disvalue it, we should expect employers to ask for it and workers to accede in exchange for money.  The central question for all of Scott's stylized facts, then, is: "Do employers plausibly value this outcome more than workers disvalue it?"  This framing doesn't clearly predict Scott's observations (or at least suitably toned-down versions thereof), but it doesn't predict the opposite either.

Let's focus on the last issue; a boss berating an employee, versus an
employee berating a boss. Maybe the boss has one hundred employees. Each
of these employees only has one job. If the boss decides she dislikes
an employee, she can drive her to quit and still be 99% as productive
while she looks for a replacement; once the replacement is found, the
company will go on exactly as smoothly as before.

This argument proves too much.  It also implies that store owners will feel free to berate their customers.  After all, if the store loses one customer, it still has plenty left.  Indeed, Scott's 99% argument implies that waiters will feel free to berate restaurant patrons.  After all, if one offended customer fails to tip you, you still get tips from your next 99 tables.

A far better story: Whenever people trade money for complex goods, the people who pay money feel free to berate and the people who receive money hold their tongues.  Why?  Because the people who pay cash for complex goods have plenty of good reasons to feel like they haven't gotten their money's worth.  The recipients of the money, in contrast, have little reason to complain as long as they get the pay they bargained for.

We previously proposed a symmetry between a boss firing a worker and a
worker quitting a boss, but actually they could not be more different.
For a boss to fire a worker is at most a minor inconvenience; for a
worker to lose a job is a disaster. The Holmes-Rahe Stress Scale, a
measure of the comparative stress level of different life events, puts
being fired at 47 units, worse than the death of a close friend and
nearly as bad as a jail term. Tellingly, "firing one of your employees"
failed to make the scale.

Being fired is definitely very stressful.  Rather than keep their workers on edge, however, most firms informally provide some insurance against this bad outcome.  It's called "job security" and most workers feel like they have some (see e.g. GSS variable identifier JOBSECOK).  Why do employers go out of their way to reassure their workers?  The standard labor economics story: Workers value job security more than it costs employers, so employers provide job security in tacit exchange for lower wages.

It's worth adding, moreover, that firing workers is no walk in the park.  Almost every workplace employs some visibly bad workers.  Why haven't they been fired?  Employers' squeamishness, or firing aversion, is the simplest explanation.

This fundamental asymmetry gives capital the power to create more
asymmetries in its favor. For example, bosses retain a level of control
on workers even after they quit, because a worker may very well need a
letter of reference from a previous boss to get a good job at a new
company.

This "level of control" is trivial.  How often do employers hit their past workers up for time or money? 

On the other hand, a prospective employee who asked her
prospective boss to produce letters of recommendation from her previous
workers would be politely shown the door; we find even the image funny.

Yes, it's funny.  But it doesn't mean much.  Informally talking to the prospective employer's current and past employees is much more informative.  Again, this looks more like etiquette than "bargaining power."

The proper level negotiating partner to a boss is not one worker, but all workers. If the boss lost all workers at once, then she would be at 0% productivity, the same as the worker who loses her job. Likewise, if all
the workers approached the boss and said "We want to start a half hour
later in the morning or we all quit", they might receive the same
attention as the boss who said "Work a half hour longer each day or
you're all fired".

This is definitely much more favorable for workers.  But why is this the "proper" negotiating level?  Would "proper" customer-CostCo relations require that all customers negotiate as a bloc with CostCo? 

[...]

The ability of workers to coordinate action without being threatened or
fired for attempting to do so is the only thing that gives them any
negotiating power at all, and is necessary for a healthy labor market.

"Any negotiating power at all"?  Absurd.  Most workers in the U.S. aren't in unions.  Most aren't even close to being in unions.  Yet most U.S. workers earn well above the minimum wage.  A simple supply-and-demand story can explain this.  Scott's story doesn't.  Furthermore, Scott's story ignores all the collateral damage of this "worker coordination," especially unemployment.  

About three hundred Americans commit suicide for work-related reasons
every year - this number doesn't count those who attempt suicide but
fail. The reasons cited by suicide notes, survivors and researchers
investigating the phenomenon include on-the-job bullying, poor working
conditions, unbearable hours, and fear of being fired.

I don't claim to understand the thought processes that would drive
someone to do this, but given the rarity and extremity of suicide, we
can assume for every worker who goes ahead with suicide for work-related
reasons, there are a hundred or a thousand who feel miserable but not
quite suicidal.

If people are literally killing themselves because of bad working
conditions, it's safe to say that life is more complicated than the
ideal world in which everyone who didn't like their working conditions
quits and get a better job elsewhere (see the next section,
Irrationality).

Sensible points.  But the same holds in romantic relationships, too. 
In both cases, people are free to leave and find something better. 
When they're miserable, most workers and lovers exit.  Some don't. 
Why don't they leave?  Most obviously, because their alternatives are worse than the status quo.  This isn't a problem with the
labor market or the dating market.  It's a problem with having little
to offer. 

I note in the same vein stories from the days before labor regulations
when employers would ban workers from using the restroom on jobs with
nine hour shifts, often ending in the workers wetting themselves. This
seems like the sort of thing that provides so much humiliation to the
workers, and so little benefit to the bosses, that a free market would
eliminate it in a split second. But we know that it was a common policy
in the 1910s and 1920s, and that factories with such policies never
wanted for employees.

"Common"?  Very hard to believe.  But if Scott's history checked out, the question would remain: Why didn't the firms give their workers bathroom breaks in exchange for lower pay?  Scott's appeal to unequal bargaining power explains nothing unless the workers in question are earning the legal minimum wage.

The fundamental problem with Scott's bargaining power story is that it predicts that workers will receive similarly crummy treatment regardless of their skill.  If labor markets work poorly because employers don't need any single worker very much, why do major employers of corporate lawyers treat them so much better than they treat their janitors?  If you say, "Because corporate lawyers have better outside options," you're almost a mainstream labor economist.  Invoke supply-and-demand and you're there.

Scott's counter, perhaps, is that unemployment is much worse for janitors than corporate lawyers.  Objectively, that's right.  But subjectively, the difference is muted.  An unemployed corporate lawyer, like an unemployed janitor, feels like his whole world is collapsing.  If he doesn't find another job quickly, he risks his home and his family. 

More importantly, the "unemployment is worse for janitors than corporate lawyers" story implies that employers prefer to hire desperate workers.  In the real world, the opposite is true.  Employers favor currently employed applicants over unemployed applicants, and short-term unemployed applicants over long-term unemployed applicants.  That's why workers who are desperate for a new job doctor their resumes to look less desperate, not more.

Scott's challenge to labor economics made me think.  And in one sense, we agree.  The longer I study labor economics, the more convinced I am that the supply-and-demand model is too simple.  Yet the complications that count are almost the opposite of the ones that Scott discusses.  The chief failure in labor markets is that wages tend to be too high, leading to durably high unemployment. 

Why?  Mostly because so many workers view employers with resentment and suspicion.  To contain this resentment and suspicion, employers compress wages and avoid wage cuts even when there's high unemployment.  The unintended effect is to make unemployment far higher - and hence more traumatic - than it needs to be, especially for the least-skilled.  It's the Tinkerbell Principle at work.  Involuntary unemployment, free labor markets' chief shortcoming, exists largely because workers believe that free labor markets are bad for workers.

(27 COMMENTS)

Scott Alexander on Labor Economics, by Bryan Caplan

Whenever a new semester begins, I thank the universe for good students.  Good students have four key traits:

First, good students genuinely want to learn.  They don't study material
merely because they see it on the syllabus or expect it on the test.

Second,
good students fight the natural human tendency to forget material right
after the final exam.  Unlike most students, they consciously choose to
try to remember what they learn. 

Third, good students strive for what educational psychologists call Transfer of Learning.  They earnestly try to apply what they've learned outside the classroom. 

Fourth,
and perhaps most importantly, good students put Truth first.  They
aren't afraid to entertain and embrace socially unacceptable ideas.

I've never taught Scott Alexander, but when I read his take on labor economics, I immediately identified him as a most excellent student.  It's an extensive critique of what Scott sees as the libertarian view of labor-capital relations.  In truth, though, his critique is broader, because Scott targets models that economists across the political spectrum largely for granted. 

Since my latest labor economics class is now in session, this seems like a great time to sift through Scott's critique of my subject.  Since most of you haven't read what he has to say, though, this post will merely reproduce his key sections.  I'll respond later this week.  Here's Scott:

2.5: How do coordination problems justify labor unions and other labor regulation?

It is frequently proposed that workers and bosses are equal negotiating
partners bargaining on equal terms, and only the excessive government
intervention on the side of labor that makes the negotiating table
unfair. After all, both need something from one another: the worker
needs money, the boss labor. Both can end the deal if they don't like
the terms: the boss can fire the worker, or the worker can quit the
boss. Both have other choices: the boss can choose a different employee,
the worker can work for a different company. And yet, strange to
behold, having proven the fundamental equality of workers and bosses, we
find that everyone keeps acting as if bosses have the better end of the
deal.

During interviews, the prospective employee is often nervous; the boss
rarely is. The boss can ask all sorts of things like that the
prospective pay for her own background check, or pee in a cup so the
boss can test the urine for drugs; the prospective employee would think
twice before daring make even so reasonable a request as a cup of
coffee. Once the employee is hired, the boss may ask on a moment's
notice that she work a half hour longer or else she's fired, and she may
not dare to even complain. On the other hand, if she were to so much as
ask to be allowed to start work thirty minutes later to get more sleep
or else she'll quit, she might well be laughed out of the company. A
boss may, and very often does, yell at an employee who has made a minor
mistake, telling her how stupid and worthless she is, but rarely could
an employee get away with even politely mentioning the mistake of a
boss, even if it is many times as unforgivable.

The naive economist who truly believes in the equal bargaining position
of labor and capital would find all of these things very puzzling.

Let's focus on the last issue; a boss berating an employee, versus an
employee berating a boss. Maybe the boss has one hundred employees. Each
of these employees only has one job. If the boss decides she dislikes
an employee, she can drive her to quit and still be 99% as productive
while she looks for a replacement; once the replacement is found, the
company will go on exactly as smoothly as before.

But if the employee's actions drive the boss to fire her, then she must
be completely unemployed until such time as she finds a new job,
suffering a long period of 0% productivity. Her new job may require a
completely different life routine, including working different hours,
learning different skills, or moving to an entirely new city. And
because people often get promoted based on seniority, she probably won't
be as well paid or have as many opportunities as she did at her old
company. And of course, there's always the chance she won't find another
job at all, or will only find one in a much less tolerable field like
fast food.

We previously proposed a symmetry between a boss firing a worker and a
worker quitting a boss, but actually they could not be more different.
For a boss to fire a worker is at most a minor inconvenience; for a
worker to lose a job is a disaster. The Holmes-Rahe Stress Scale, a
measure of the comparative stress level of different life events, puts
being fired at 47 units, worse than the death of a close friend and
nearly as bad as a jail term. Tellingly, "firing one of your employees"
failed to make the scale.

This fundamental asymmetry gives capital the power to create more
asymmetries in its favor. For example, bosses retain a level of control
on workers even after they quit, because a worker may very well need a
letter of reference from a previous boss to get a good job at a new
company. On the other hand, a prospective employee who asked her
prospective boss to produce letters of recommendation from her previous
workers would be politely shown the door; we find even the image funny.

The proper level negotiating partner to a boss is not one worker, but all workers. If the boss lost all workers at once, then she would be at 0% productivity, the same as the worker who loses her job. Likewise, if all
the workers approached the boss and said "We want to start a half hour
later in the morning or we all quit", they might receive the same
attention as the boss who said "Work a half hour longer each day or
you're all fired".

But getting all the workers together presents coordination problems. One
worker has to be the first to speak up. But if one worker speaks up and
doesn't get immediate support from all the other workers, the boss can
just fire that first worker as a troublemaker. Being the first worker to
speak up has major costs - a good chance of being fired - but no
benefits - all workers will benefit equally from revised policies no
matter who the first worker to ask for them is.

Or, to look at it from the other angle, if only one worker sticks up for
the boss, then intolerable conditions may well still get changed, but
the boss will remember that one worker and maybe be more likely to
promote her. So even someone who hates the boss's policies has a strong
selfish incentive to stick up for her.

The ability of workers to coordinate action without being threatened or
fired for attempting to do so is the only thing that gives them any
negotiating power at all, and is necessary for a healthy labor market.
Although we can debate the specifics of exactly how much protection
should be afforded each kind of coordination, the fundamental principle
is sound.

2.5.1: But workers don't need to coordinate. If working conditions
are bad, people can just change jobs, and that would solve the bad
conditions.

About three hundred Americans commit suicide for work-related reasons
every year - this number doesn't count those who attempt suicide but
fail. The reasons cited by suicide notes, survivors and researchers
investigating the phenomenon include on-the-job bullying, poor working
conditions, unbearable hours, and fear of being fired.

I don't claim to understand the thought processes that would drive
someone to do this, but given the rarity and extremity of suicide, we
can assume for every worker who goes ahead with suicide for work-related
reasons, there are a hundred or a thousand who feel miserable but not
quite suicidal.

If people are literally killing themselves because of bad working
conditions, it's safe to say that life is more complicated than the
ideal world in which everyone who didn't like their working conditions
quits and get a better job elsewhere (see the next section,
Irrationality).

I note in the same vein stories from the days before labor regulations
when employers would ban workers from using the restroom on jobs with
nine hour shifts, often ending in the workers wetting themselves. This
seems like the sort of thing that provides so much humiliation to the
workers, and so little benefit to the bosses, that a free market would
eliminate it in a split second. But we know that it was a common policy
in the 1910s and 1920s, and that factories with such policies never
wanted for employees. The same is true of factories that literally
locked their workers inside to prevent them from secretly using the
restroom or going out for a smoking break, leading to disasters like the
Triangle Shirtwaist Fire
when hundreds of workers died when the building they were locked inside
burnt down. And yet even after this fire, the practice of locking
workers inside buildings only stopped when the government finally passed
regulation against it.

(1 COMMENTS)