Results of equal opportunity programs that will MAKE YOU GASP!!

Image result for LINKBAITDo Equal Employment Opportunity Statements Backfire? Evidence From A Natural Field Experiment On Job-Entry Decisions
by Andreas Leibbrandt, John A. List – #25035 (LE LS)

Labor force composition and the allocation of talent remain of
vital import to modern economies. For their part, governments
and companies around the globe have implemented equal employment
opportunity (EEO) regulations to influence labor market flows.
Even though such regulations are pervasive, surprisingly little
is known about their impacts. We use a natural field experiment
conducted across 10 U.S. cities to investigate if EEO statements
in job advertisements affect the first step in the employment
process, application rates. Making use of data from nearly 2,500
job seekers, we find considerable policy effects, but in an
unexpected direction: the presence of an EEO statement dampens
rather than encourages racial minorities’ willingness to apply
for jobs. Importantly, the effects are particularly pronounced
for educated job seekers and in cities with white majority
populations. Complementary survey evidence suggests the
underlying mechanism at work is “tokenism”, revealing that EEO
statements backfire because racial minorities avoid environments
in which they are perceived as regulatory, or symbolic, hires
rather than being hired on their own merits. Beyond their
practical and theoretical importance, our results highlight how
field experiments can significantly improve policymaking. In
this case, if one goal of EEO regulations is to enhance the pool
of minority applicants, then it is not working.

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Peer learning and financial education

Peer Advice on Financial Decisions: A case of the blind leading the blind?
by Sandro Ambuehl, B. Douglas Bernheim, Fulya Ersoy, Donna Harris – #25034 (PE)

Previous research shows that many people seek financial advice
from non-experts, and that peer interactions influence financial
decisions. We investigate whether such influences are
beneficial, harmful, or simply haphazard. In our laboratory
experiment, face-to-face communication with a randomly assigned
peer significantly improves the quality of private decisions,
measured by subjects’ ability to choose as if they properly
understand their opportunity sets. Subjects do not merely mimic
those who know better, but also make better private decisions in
novel tasks. People with low financial competence experience
greater improvements when their partners also exhibit low
financial competence. Hence, peer-to-peer communication
transmits financial decision-making skills most effectively when
peers are equally uninformed, rather than when an informed
decision maker teaches an uninformed peer. Qualitative analysis
of subjects’ discussions supports this interpretation. The
provision of effective financial education to one member of a
pair influences the nature of communication but does not lead to
additional improvements in the quality of the untreated partner’s
decisions, particularly in novel tasks.

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Imagine if policy makers understood what Nancy Cartwright says here, rather than thinking that the elements of evidence-based policy are self-evident

Posted in Economics and public policy | 2 Comments

Me at the Australian Institute of Family Studies

The AIFS puts on a mean Annual Conference. They fussed over us speakers trying to make sure we weren’t just a bunch of talking heads. I would have liked to have attended more of it, but had another conference at which I had pontification duties at the same time.

In any event, I participated in two very well ‘curated’ (as we say these days) panels, one lasting two hours – yes, that’s right. My opening statement to this panel is above, and the whole thing, should you wish to check it out is below. It was a great panel. And below it is a forty minute panel I was on which discussed families, behavioural economics and nudges more generally. That was just me and Sam Hannah-Rankin who seems, at least from the outside, to be doing a good job of running her innovation unit in DPC.

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The decline and fall of Australian economics

Image result for economicsI reproduce here a fine review of what seems like a fine book. I’m not buying the book because of the outrageous price the academic publishers are charging. It’s an interesting story of practical contribution – economics as clarified policy commonsense as I like to think of it. But, along with so much else, it’s been swept away by the new philistinism managerialism. Academics are hitting their KPIs, filling in their forms, but making original contributions to Australian policy problems? Not so much.

It reminds me of something Tom Fitzgerald said in his Boyer Lectures a long time ago:

What is inspiring . . . is the example of Australian economists who arrived at independent conclusions contrary to the world orthodoxy, who invited criticism from the most eminent upholders of that orthodoxy, and, on being rejected, put their argument in an international forum, to gain ultimately a large measure of acceptance for their initial heresy.  Today they are far better remembered and admired by an eminent American economist, the Nobel Prize winner Paul Samuelson, than by any Australian counterparts.  . . .  Professor Samuelson has recently referred to them as ‘my-down-under-heroes’

If this beautiful, elegiac book does not move you to be proud to be an Australian or New Zealand economist then I fear you may need a heart transplant. A delicious little morsel at just over 250 pages, Alex Millmow’s A History of Australasian Economic Thought still manages to convey a distinct sense of what was a diverse but definably unique branch of economic thought in Australia and New Zealand. I commend Professor Millmow for this volume and recommend it highly.

The general problem with the history of economic thought, it seems to me (I am not a historian of economic thought), is the same as with all academic history. So involved in rooting out details of specific episodes and figures, it can be intimidating and apparently unnavigable for the generalist. Millmow’s book is a splendid corrective for this problem as regards the history of economic thought in Australia and New Zealand. It touches lightly on the various episodes in this history but with sufficient depth to give the reader a real appreciation for it, and sufficient orientation to it and the body of literature around it for the reader to seek deeper knowledge if they wish. Continue reading

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The Royal Commission and the wages of complacency: Scandals as far as the eye can see

Cross posted from Inside Story

In 1943, back working where he’d been during the first world war, the now-famous economist John Maynard Keynes wrote to a friend:

Here I am back… in the Treasury like a recurring decimal — but with one great difference. In 1918 most people’s only idea was to get back to pre-1914. No one today feels like that about 1939. That will make an enormous difference when we get down to it.

And so it did.

And here we are like Keynes’s contemporaries in 1918. Keen to return to the set-up we know got us into this mess. In the midst of the financial services royal commission, scandals stretch as far as the eye can see. They are rife in finance, of course, but are also evident in the way professionals — from the commanding heights of academia to policy-makers and opinion leaders — have failed to move beyond a vision of reform that was already stale at its zenith in the 1980s and 90s. After the global financial crisis, that vision stands today bereft and becalmed, increasingly irrelevant in today’s financialised, professionalised, digitised world.

Trauma, intellectual growth and reform

The postwar reforms were profound, giving us a generation of unmatched prosperity. But there’s also a more recent time when we turned our back on the bad old days. In response to the recessions of 1975 and 1982, and after prime minister Malcolm Fraser’s feints towards economic liberalisation, the Hawke and Keating governments turned “economic rationalism” — as it was then called — into a comprehensive program to refurbish our economic institutions.

In each case reform was built on new understandings that had originated in the academy. Where the Keynesian revolution had underpinned postwar reform, post-1960s reform was founded on a cluster of ideas. They included George Stigler’s critique of “regulatory capture,” Milton Friedman’s popularising of proposals for unbundling of delivery from the financing of government services (using vouchers and income-contingent loans, for instance), and Ronald Coase’s idea of reassigning property rights to achieve specific objectives (think pollution permits and spectrum auctions).

All these men were University of Chicago economists favouring greater reliance on markets. But they thought of these ideas as technocratic rather than ideological. Many of them — like income-contingent student loans and the liberalisation of airlines, tariffs and agricultural subsidies — had egalitarian implications and were supported by many from the centre left to the centre right.

The institutional refurbishment following the second world war lasted twenty-five-odd years. But it was only a few years before the Hawke-era reforms atrophied into a reductive formula under which change that looked more rather than less “market-based” was preferred on principle. This might reflect the lobbying power of business even with centre-left governments. But it was also the product of faltering intellectual progress in the academy and the political class’s wider failure of imagination and empathy for the people for whom they ostensibly govern. Continue reading

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Monetary policy settings: hawks, doves and the seat of the pants

What’s at stake in monetary policy? The most obvious answer is “jobs and growth” – to coin a phrase. The idea is that, by meeting its target of low and steady (2-3%) inflation, the RBA tries also to keep us as close as practicable to full employment. But, as we’ve realised since the GFC, there’s also “financial stability”. And right now they’re in some tension. For years the RBA has been reluctant to cut rates because low interest rates were what blew the financial bubbles that got us into this GFC problem – capiche?

Indeed, there’s been no shortage of people telling us that cutting rates as far as we already have is crazy. But there’s something else at stake. Economic ‘hawks’ and ‘doves’ are performing a different self-image. All pundits like to think they’re evidence based. Even so, those animal names came from military strategy. Hawks are serious and tough. What they have to say may not be nice, but they’re not afraid to tell us to take our medicine. They’re rigorous chaps.

Doves let in a little more love. Why some of them could even be chapettes (my spell-check suggests “chapattis” but I’ll just let that bit of algorithmic misogyny go through to the keeper). So how much is the debate a psychodrama between hawks and doves, and how much is it a careful weighing of the costs and benefits according to the evidence?

I’ve only read those complaining that rates are too low en passant as it were. I’ve not read them closely. So it enables me to propose a test which, in the full glory of my ignorance has some claims to objectivity. Here’s one commentator quoted by Gene Tunny which prompted me to pose my test.

…the RBA had recklessly underestimated the impact of its 2012 and 2013 rate cuts on house price growth and credit creation, which would precipitate a bubble and the need for unprecedented regulatory constraints on lending…

What I find unsatisfying about this is that it doesn’t paint the story as a dilemma which can only be solved by weighing pros and cons of the alternatives. It suggests that there’s one true path which, at least in principle, is pretty clear (perhaps the author sketched out the considerations I’m suggesting – I genuinely don’t know).

I think thinking this thing through needs to consider at least two things. Continue reading

Posted in Blegs, Cultural Critique, Economics and public policy | 5 Comments