Social Econ Blog

From Ezra Klein:

It happens every year. It's not that you resolve to be virtuous on Thanksgiving, just reasonable. Two plates of food, and no more. One piece of pie, and that's enough. But when you're sitting at that table, staring at that food, there is no more self-control. No more reasonable. You stop when you can hardly breathe.

Or maybe I'm projecting. This column, however, will not be about exercising self-control at the table. It's Thanksgiving! Rather, this column will be about something far more powerful: exercising some economic principles.

For a long time, economists operated under the "rational actor model." Human beings were thought to be rational creatures who correctly weighed costs and benefits and calculated the best choices for themselves. Then some economists met some human beings and realized we don't really work like that. The result has been the rise of "behavioral economics," which attempts to build the responses of actual human beings into its models.

MIT economist Dan Ariely is a pioneer in the field. His bestselling book "Predictably Irrational" is as good an introduction to the discipline as you'll find. Human beings, he argues, aren't just irrational: They are irrational in predictable ways and in predictable circumstances. That means we can plan for that irrationality beforehand, when we're still feeling rational.

I asked Ariely how he would set up his Thanksgiving feast to limit overeating without having to exercise self-control. His answer was to construct the "architecture" of the meal beforehand. Create conditions that guide people toward good choices, or even use their irrationality to your benefit.

"Move to chopsticks!" he exclaimed, making bites smaller and harder to take. If the chopsticks are a bit extreme, smaller plates and utensils might work the same way. Study after study shows that people eat more when they have more in front of them. It's one of our predictable irrationalities: We judge portions by how much is left rather than how full we feel. Smaller portions lead us to eat less, even if we can refill the plate.

Speaking of which, Ariely suggests placing the food "far away." In this case, serve from the kitchen rather than the table. If people have to get up to add another scoop of mashed potatoes, they're less likely to take their fifth serving than if they simply have to reach in front of them.

"Start with a soup course," he says. That is what economists refer to as a default: Rather than putting everything on the table for people to choose, you begin by making the choice for your guests. If the first course is relatively filling and relatively low in calories, everyone will eat less during the rest of the meal.

Indeed, it's not a bad idea to limit the total number of courses. Variety stimulates appetite. As evidence, Ariely brings up a study conducted on mice. A male mouse and a female mouse will soon tire of mating with each other. But put new partners into the cage, and it turns out they weren't tired at all. They were just bored. So, too, with food. "Imagine you only had one dish," he says. "How much could you eat?"

What you eat, of course, is also important. Studies show that people aren't very consistent in the amount of calories they eat each day, but they're very consistent in the volume of food they eat each day. Thanksgiving is an exception to that consistency, but probably not to the underlying rule. Satisfaction doesn't depend on caloric intake; low-calorie, high-fiber foods and foods high in water content are filling. Thus, the more broccoli rabe there is at the table, the better.

Speaking of which, take a page out of the pilgrims' book and make sure all the food at the table was cooked by someone in the house. Economists believe that the obesity epidemic is largely attributable to the rise in food we don't make for ourselves. In 1900, it was hard to snack on potato chips because it was time-consuming for a member of the household to make potato chips. Today, of course, things are different, and there is a surfeit of vending machines and drive-throughs and supermarkets. But on Thanksgiving, make like you're in Plymouth, and ensure all of the food is homemade. There will be fewer calories available if Grandma's stuffing isn't supplemented with bowls of chips and cheese.

For all that, Ariely's main advice is not to worry too much about Turkey Day. "I don't think Thanksgiving is a time to watch your diet," he says. "How many calories can you put away in a day? Maybe 5,000 or 6,000 calories, if you really try hard." The problem, he says, is another human irrationality: remembering to pay attention to the season's big meals but not the everyday ones in between. The solution to overeating, Ariely says, "comes from [making] small changes across many normal meals."

That seems rational. But if you insist on trying to cut back at Thanksgiving, Ariely does have one more piece of advice: "Wear a very tight shirt."

Ec303 Hw 3 Solutions

Quiz2 Solutions

EC303 – Assignment 3

Dick Armey on Larry Summers, and, by extension me and my friends:

"I don’t consider Larry Summers a serious economist," [Dick] Armey said. “You can get a Ph.D. from Harvard without ever having seriously considered the subject.”

Given our brief discussion of terrorism and economics in metrics on Friday, here's an old post on some the stuff we talked about:

Today, we will discuss terrorism. Economics provides a great deal of insight into the problem of terrorism. The decision to commit a terrorist act is just that ... a decision. As such, we can identify the relevant tradeoffs and design policies that should reduce the probability of terrorist acts.

Terrorism has its roots in group level hatred. The suppliers of group level hatred are frequently the demanders in the market for terrorist acts (though they needn't be the same people), and the people who demand hatred are usually the people who end up actually carrying out (or supplying) terrorist acts. The whole thing is further confused by the fact that frequently demanders and suppliers of terrorism are the same people.

As such, if we hope to be successful in our "War on Terror", we need to focus on policies that dramatically change either the supply or demand of terrorists. And this ultimately requires reducing the supply and demand of hate.

To begin, focus only on the market for terrorist acts. A key component in our current strategy is negative deterrence. Gary Becker's classic model of criminal behavior suggests that criminals tradeoff the expected benefits (probability of success * value of success) of a criminal act against the expected costs (probability of being caught * penalty). Much of our current terrorism policy is designed to increase the probability of detection and increase the penalties associated with participating in terrorism. This effectively raises the price of terrorist acts by shifting the supply curve up.

The effectiveness of supply side polices is limited, however, by the amount of substitution available in the terrorism production function and the low price of terrorist acts. If we raise the price of attacking a government building, terrorists can attack shopping malls; if we profile all middle-eastern looking men, terrorists can recruit people who look different. Ultimately, the biggest cost faced by terrorists is probably the lives of any suicide attackers. Reducing the supply of suicide bombers would likely making committing terrorism more difficult. However, consumers of terrorist acts have done a good job of convincing their "employees" that there are substantial eternal rewards for their sacrifice. But even reducing the number of willing suicide bombers won't make a huge impact. Killing people in public places is unfortunately cheap. Benn Steil and Robert Litan estimate:

...acts of terror are cheap to carry out. The truck bomb used at the World Trade Center in February 1993 cost $400. The cost of training and support of the 19 individuals who participated in the 9/11 airline hijackings is estimated at only $500,000. Terrorist operations since 9/11 have been even cheaper: the October 2002 Indonesia bombings cost $50,000; the November 2003 Istanbul attacks cost less than $40,000; and the March 2004 Madrid bombings, carried out with dynamite and cell phones, cost less than $10,000. As Defense Secretary Donald Rumsfeld admitted in a memorandum leaked to the press in October 2003, "The cost-benefit ratio is against us! Our cost is billions against the terrorist cost of
millions."

(Source) Ultimately, there is not a whole lot that we can do to make the price of terrorist acts prohibitively high.

Even if we were successful at increasing the price of terrorist acts, the reduction in the equlibrium quantity of terrorist acts depends on the elasticity of demand. Peter Boettke and Christopher Coyne argue in their paper "Liberalism in the Post-9/11 World" that the demand for terrorist acts is highly inelastic (this approach is similar to Becker, Murphy, and Grossman's work on the failure of the "War on Drugs"). As such, supply-side policies are unlikely to reduce terrorist acts.

Reducing terrorism, then, requires fundamentally changing preferences for terrorist acts and prompting an inward shift in the demand curve. Unfortunately, this is extremely difficult. Some of the policies Glaeser outlines in the "Political Economy of Hatred" (e.g., increase ties between groups, promote hating the haters, etc.) will likely have some effect. However, it is important to note that blanket prescriptions like reducing poverty and increasing education are not likely to automatically improve things (Krueger and Maleckova document no relationship between income and education and individual decisions to be terrorists and only small relationships between country level poverty and education and terrorism). Indeed, some rich dude can always set up and fund his own terrorist group (see Al Queda and SPECTER).

So how does the war in Iraq fit into all of this? Initially, it was about reducing the probability of attack by raising the price of engaging in terrorism. The fear was that Saddam Hussein would provide WMD to terrorists, so we needed to intervene in order to "raise the price" of this type of terrorist attack. At the same time, we would "shock and awe" other states who might be willing to sell weapons to terrorists. Thus further raising the price of terrorist activities.

After this rationale turned out to be based in fantasy, the rationale changed to "bringing democracy to the middle east". Setting aside the question of why you would choose to promote democracy from the barrel of a gun in Iraq rather than working to increase democracy in semi-democratic places like Turkey or Egypt, the idea of reducing terrorism via democracy, I guess, works like this -- Creating a democracy in Iraq is supposed to generate more freedom and tolerance. This, in turn, should increase ties with the West and lead to less hatred of the West and more intolerance of terrorists and terrorist groups. This should reduce the supply of terrorists, reduce the demand for terrorism, and make it harder for those who do still demand terrorist acts to operate.

This is not a crazy theory in the abstract, but, in practice, there are a number of problems. The historical record for producing liberal democracies at will is not very good. Boettke and Coyne also consider this issue. They point out that of the 15 times the US attempted reconstruction efforts from 1898-1996 only four were democracies after 10 years. As they remind us, economics predicts that "conflict should not persist where gains from exchange exist." However, in most reconstruction efforts (and Iraq in particular) a number of barriers exist that prevent peaceful bargaining. I encourage you to check out their interesting arguments.

Another interesting paper on the economics of terrorism:

10. The Economic Cost of Harboring Terrorism
by Efraim Benmelech, Claude Berrebi, Esteban F. Klor - #15465 (LS PE POL)

Abstract:

The literature on conflict and terrorism has paid little attention to
the economic costs of terrorism for the perpetrators. This paper
aims to fill that gap by examining the economic costs of committing
suicide terror attacks. Using data covering the universe of
Palestinian suicide terrorists during the second Palestinian
uprising, combined with data from the Palestinian Labor Force Survey,
we identify and quantify the impact of a successful attack on
unemployment and wages. We find robust evidence that terror attacks
have important economic costs. The results suggest that a successful
attack causes an increase of 5.3 percent in unemployment, increases
the likelihood that the district's average wages fall in the quarter
following an attack by more than 20 percent, and reduces the number
of Palestinians working in Israel by 6.7 percent relative to its
mean. Importantly, these effects are persistent and last for at
least six months after the attack.

http://papers.nber.org/papers/W15465

Here's a interesting chart on the ideological positions of state legislatures relative to their US congressional counterparts. Given this graph it is not at all surprising that California is screwed (particularly given its various supermajority rules):

The estimates are based on state legislative voting, which might make you wonder how you could possibly compare legislators in one state with those in another. The trick is that some state representatives (for example, Barack Obama) also end up in Congress. There are enough of these overlap cases that you can put legislators from all 50 states on a common scale.

...

Here’s Boris’s graph showing the estimated positions of Democratic and Republican legislators in all 50 states in the past decade:

Longer post:

The chart below gives a nice summary of state attitudes on gay rights issues, based on estimates from national polls. It’s from a new paper, by Jeffrey R. Lax and Justin H. Phillips, both of Columbia University, that was recently published in the American Political Science Review. (Methodology for the survey estimates is on page 32 here.)

Bubbles are placed to represent public opinion on a gay rights issue, with bubbles farther to the right indicating greater public support. For example, the red bubble on the line for California shows that slightly less than half of Californians say same-sex couples should have the right to marry.

Filled-in bubbles signify that the policy has been adopted in that state (either by legislative or judicial action). The red bubble for California, for example, is not filled in, indicating that gays in the state are not currently allowed to marry.

Jeffrey R. Lax and Justin H. Phillips Opinion is estimated using data from 1994-2008, weighted toward the most recent levels of support. Policy is as of June 2009.

So who is more liberal on gay issues: the public or the public servants who write and interpret law?

Let’s take a look at the graphic above, keeping an eye on the dashed vertical line in the middle that designates 50 percent support for any given policy. Bubbles to the right of that line have support from the majority of a state’s population; bubbles to the left of the line have support from less than half the state’s population.

Notice that there are many more unfilled bubbles on the right side of the line (representing policies that the majority of people support but that have not been put into effect) than there are filled bubbles on the left side of the line (representing policies that the majority of people do not support, but that have been implemented anyway).

Fair prices?, by Daniel Little: We live in a society that embraces the market in a pretty broad way. We accept that virtually all goods and services are priced through the market at prices set competitively. We accept that sellers are looking to maximize profits through the prices, quantities, and quality of the goods and services that they sell us. We accept, though a bit less fully, the idea that wages are determined by the market -- a person's income is determined by what competing employers are willing to pay. And we have some level of trust that competition protects us against price-gouging, adulteration, exploitation, and other predatory practices. A prior posting questioned this logic when it comes to healthcare. Here I'd like to see whether there are other areas of dissent within American society over prices.

Because of course it wasn't always so. E. P. Thompson's work on early modern Britain reminds us that there was a "moral economy of the crowd" that profoundly challenged the legitimacy of the market; that these popular moral ideas specifically and deeply challenged the idea of market-defined prices for life's necessities; and that the crowd demanded "fair prices" for food and housing (Customs in Common: Studies in Traditional Popular Culture). The moral economy of the crowd focused on the poor -- it assumed a minimum standard of living and demanded that the millers, merchants, and officials respect this standard by charging prices the poor could afford. And the rioting that took place in Poland in 1988 over meat prices or rice riots in Indonesia in 2008 are reminders that this kind of moral reasoning isn't merely part of a pre-modern sensibility. (For some quotes collected by E. P. Thompson from "moral economy" participants on the subject of fair prices see an earlier posting on anonymity.)

So where do contemporary Americans show a degree of moral discomfort with prices and the market? Where does the moral appeal of the principles of market justice begin to break down -- principles such as "things are worth exactly what people are willing to pay for them" and "to each what his/her market-determined purchasing power permit him to buy"?

There are a couple of obvious exceptions in contemporary acceptance of the market. One is the public outrage about executive compensation in banking and other corporations that we've seen in the past year. People seem to be morally offended at the idea that CEOs are taking tens or hundreds of millions of dollars in compensation -- even in companies approaching bankruptcy. Part of the outrage stems from the perception that the CEO can't have brought a commensurate gain to the company or its stockholders, witness the failing condition of many of these banks and companies. Part is a suspicion that there must be some kind of corrupt collusion going on in the background between corporate boards and CEOs. But the bottom line moral intuition seems to be something like this: nothing could justify a salary of $100 million, and executive compensation in that range is inherently unfair. And no argument proceeding simply along the lines of fair market competition -- "these are competitive rational firms that are offering these salaries, and therefore whatever they arrive at is fair" -- cuts much ice with the public.

Here is another example of public divergence from acceptance of pure market outcomes: recent public outcries about college tuition. There is the common complaint that tuition is too high and students can't afford to attend. (This overlooks the important fact that public and private tuitions are almost an order of magnitude apart -- $6,000-12,000 versus $35,00-42,000!) But notice that this is a "fair price" argument that would be nonsensical when applied to the price of an iPod or a Lexus. People don't generally feel aggrieved because a luxury car or a consumer device is too expensive; they just don't buy it. It makes sense to express this complaint in application to college tuition because many of us think of college as a necessity of life that cannot fairly be allocated on the basis of ability to pay. (This explains why colleges offer need-based financial aid.) And this is a moral-economy argument.

And what about that other necessity of life -- gasoline? Public complaints about $4/gallon gas were certainly loud a year ago. But they seem to have been grounded in something different -- the suspicion that the oil companies were manipulating prices and taking predatory profits -- rather than an assumption of a fair price determined by the needs of the poor.

Finally, what about salaries and wages? How do we feel about the inequalities of compensation that exist within the American economy and our own places of work? Americans seem to accept a fairly wide range of salaries and wages when they believe that the differences correspond ultimately to the need for firms to recruit the most effective personnel possible -- a market justification for high salaries. But they seem to begin to feel morally aggrieved when the inequalities that emerge seem to exceed any possible correspondence to contribution, impact, or productivity. So -- we as Americans seem to have a guarded level of acceptance of the emergence of market-driven inequalities when it comes to compensation.

One wonders whether deeper resentment about the workings of market forces will begin to surface in our society, as unemployment and economic recession settle upon us.

A non market oriented economics think tank:

[F]inancier George Soros is announcing a $50 million effort to speed things along. This week Soros is gathering some of the leading practitioners of the market-skeptic school, who were marginalized during the era of "free-market fundamentalism," among them Nobelists Joseph Stiglitz, George Akerlof, Michael Spence, and Sir James Mirrlees. He's also creating an "Institute for New Economic Thinking" to make research grants, convene symposiums, and establish a journal, all in an effort to take back the economics profession from the champions of free-market zealotry who have dominated it for decades, and to correct the failures of decades of market deregulation. Soros hopes matching funds will bring the total endowment up to $200 million.

A student forwarded this set of advice on how to use econometrics to improve your dating:

1. Sampling:
Choose randomly in the age group that you are interested in, and date every
single one of the girls in the sample for the same amount of time (so, you’d
have to dump them when the time comes, or you need to keep them with you as
long as the time takes, if they want to dump you first). Then you rate them,
look at the distribution, calculate the mean, and the standard deviation.

2. Now for every girl that you date afterwards, we need to do a hypothesis test:
H0: this girl’s rating is rating is the same as the observed mean.
Suppose the previous sampling follow a normal distribution, then you can do a
t-stats on the current girl friend’s rating is significantly larger than the
sample mean, then congratulations, you’ve found your “significant” other.

3. But in order to save time so that you won’t end up wasting your time on the
girls who are not statistically “significant”, you can run a multi-regression
on the sample, with repressors such as height, weight, Body Mass Index, color
of hair etc. Find out which one plays a major role in your rating, then with
these rules, you can narrow your girlfriend pooling to look for the significant
other.

Ezra Klein discusses the oft overlooked relationship between health-care costs and wages with MIT economist Jon Gruber:

"There are a few things economists believe in our souls so strongly that we have a hard time actually explaining them," he said. "One is that free trade is good and another is that health-care costs come out of wages." To put it another way: Economists are pretty united on this point. A firm's compensation for its workers is pretty static, and if relatively more goes to health-care costs, relatively less will go to wages, and vice-versa. But this isn't just a matter of theory. The following graph charts the percent growth in the median household income versus the percent growth in health-care costs since 1990. The correlation is striking:

The correlation between the two data sets is -0.8, which is incredibly high for this sort of thing. To give you an idea, I also ran the correlation between GDP growth and median wages over the period: It was 0.7, which is to say that there was a weaker connection between economic growth and median wages than between health-care costs and median wages.

There is, in other words, very good evidence that employers pass health-care savings onto employees. A Rand study by Dana Goldman, Neeraj Sood and Arleen Leibowitz examined a particular firm's response to a period of premium increases and found that "about two-thirds of the premium increase is financed out of cash wages and the remaining one-thirds is financed by a reduction in benefits." Another study by Katherine Baicker and Amitabh Chandra found that a 10 percent increase in premiums "results in an offsetting decrease in wages of 2.3 percent," which is fairly impressive given that income is much higher than health-care premiums.

There's good reason to think that if health-care costs can be tamed, wages will rise. But one of the big problems in health-care reform is that workers don't understand this connection. They think of health-care coverage as a "benefit," rather than a form of compensation engaged in a fairly zero-sum competition against their wages.

Over the weekend, the internet discussion of the global cooling chapter in the forthcoming book Superfreakonomics (the sequel to Freakonomics) really heated up (har har). It's hard to quickly encapsulate the issues, but here's an attempt: Levitt and Dubner argue that reducing CO2 emmissions is too hard (people don't like to change their behavior), costly, and unecessary because we can cool the planet using very "easy and cheap" geoengineered solutions. In the process, they present a highly misleading (and illinformed) view of climate science and compare advoctes for CO2 reduction to a religious cult.

This created an internet firestorm -- particularly because the main climate scientist they rely on feels his views on the importance of CO2 emissions and geoengineering were misrepresented. Here's a very large collection of links on the issue. It can be a bit overwhelming, but I encourage you to read some of them. The authors "responses" can be found here (note -- there's a lot of attacking the messengers without responding to the message).

As part of a continuing series on why Argentina fared so poorly during the 20th century, Ed Glaeser discusses the potential role for education to explain country growth. This relationship is hard to identify in a regression, but note how he can still reach a conclusion by relying on a variety of complementary pieces of evidence:

... an extra year of school is associated with more than a 30 percent increase in per capita income.

...

One explanation for the extraordinarily strong relationship between national earnings and education is that the correlation is largely spurious.

Perhaps, richer countries choose to become more educated, so that higher income causes higher levels of education rather than the reverse. Perhaps countries with other positive attributes, like better governments, are both richer and better schooled. The individual level research has labored hard to find so-called “natural experiments” — like mandatory schooling laws that start abruptly and relatively arbitrarily in a particular year in a particular state — that enable researchers to estimate the returns to education holding individual aptitude constant. Cross-country work is not nearly as well-identified and it never will be.

Yet there are reasons to think that the education-income relationship is not mere happenstance.

Historic educational enrollments predict subsequent income growth quite well, even when holding past income constant, which seems to reject the view that education is just following income. Moreover, the link between initial education and subsequent income growth has proven to be remarkably robust, surviving any number of country-level controls, including controls for governmental quality. I’m not confident that all of the measured cross-national relationship between schooling and income is real, but more evidence supports that interpretation than any obvious alternative.

If the link between country level income and education is real, then we need to understand why the link between schooling and education gets magnified at the country level. Why should there be a social multiplier that causes the schooling-income link to increase at higher levels of aggregation?

One hypothesis is that there are spillovers from education, and that human capital enables places to gain access to better technologies. Human capital externalities occur when one person’s education makes his or her neighbors more productive. Comparing people within a country only picks up the direct effect of more education on the person being educated, and won’t reflect any of these externalities. Comparing across countries picks up all the externalities that would occur if one’s persons schooling provided benefits for everyone around.

Within the United States, researchers have found that when holding an individual’s own years of schooling constant, that individual’s earnings increase by around 9 percent as the share of college graduates in that individual’s metropolitan area increases by 10 percent. If you work around skilled people, you earn more, either because you have learned from those people or because more skilled entrepreneurs make production more efficient. After all, Buenos Aires in 1900 had significantly fewer innovative technologies than did Chicago in the same year, perhaps because of lower levels of schooling.

But country-level income and education may also be closely linked because of politics. There is a very strong correlation between quality of government and education. My work with Felipe Campante suggests that the link between Argentina’s low level of education in 1900 and its poor economic performance over the next century reflects, in part, the fact that Argentina’s lower levels of education led to worse political outcomes.

In addition to the paper manual, there are several fairly good STATA tutorials online that frequently show up when I google stata related topics. This one at UCLA has lots of really good stuff, and this one from Princeton has good coverage of the basics.

I am not sure people will go for all of this, but I certainly can imagine some of this in our future. Regardless, I like that people think about this stuff.

10/GUI from C. Miller on Vimeo.

Here's one argument that most of the benefits from school are non-pecuniary (i.e., not money):

Experiences and skills acquired in school reverberate throughout life, not just through higher earnings. Schooling also affects the degree one enjoys work and the likelihood of being unemployed. It leads individuals to make better decisions about health, marriage, and parenting. It also improves patience, making individuals more goal-oriented and less likely to engage in risky behavior. Schooling improves trust and social interaction, and may offer substantial consumption value to some students. We discuss various mechanisms to explain how these relationships may occur independent of wealth effects, and present evidence that non-pecuniary returns to schooling are at least as large as pecuniary ones

Oreopoulos and Salvanes go on to make a back-of-the-envelope calculation of the size of the nonpecuniary effects. They suggest that

about three quarters of the schooling effect on selfreported life satisfaction is due to non‐pecuniary factors. A 12 percent increase in annual earnings would then imply that the total non‐pecuniary gains are equivalently worth another 16 percent increase in earnings (for a total of 28 percent).

A new website is launching which allows you to find the odds of ... well pretty much everything. A few that scrolled by just now:

1 in 10 the odds a man in the US does not own a pair of blue jeans

1 in 100,000 odd a man will be diagnosed with breast cancer in a year

1 in 4.76 the odds that an ever-married or cohabiting man has cheated during the relationship

1 in 9.09 the odds that an ever married or cohabiting man has cheated during the relationship

And here's an article for shark week fans -- you are twice as likely to be killed by a vending machine than a shark (do note this follow-up though which provides some important context).

Perhaps these will help people better maximize their expected utility.

The fake Nobel prize was handed out on Monday to Oliver Williamson and Elinor Ostrom. Here are some links that explain why they were honored (link, link, link, link).

For Ostrom, you can kinda boil it down to this Curb Your Enthusiasm clip.

I also neglected to pull this out of the archive:

I attended a conference yesterday on women professionals. Some interesting stuff was presented. I particularly enjoyed Linda Babcock's talk on women and negotiation. Babcock has written extensively on this topic. The results she presented yesterday were from this paper:

Two experiments show that sex differences in the propensity to initiate negotiations may be explained by differential treatment of men and women when they attempt to negotiate. In Experiment 1, participants evaluated candidates who either accepted compensation offers without comment or attempted to negotiate higher compensation. Men only penalized female candidates for attempting to negotiate whereas women penalized both male and female candidates. Perceptions of niceness and demandingness mediated these effects. In Experiment 2, participants adopted candidates’ role in same scenario and assessed whether to accept the compensation offer or attempt to negotiate for more. Women were less likely than men to choose to negotiate when the evaluator was male, but not when the evaluator was female. This effect was mediated by women’s nervousness about negotiating with male evaluators. This work illuminates how differential treatment may influence the distribution of organizational resources through sex differences in the propensity to negotiate.

For more on this topic, you can see facts and discussion of her book "Women Don't Ask" (with Sara Laschever) at this website. A taste:

Women Don't Like to Negotiate

In surveys, 2.5 times more women than men said they feel "a great deal of apprehension" about negotiating.

Men initiate negotiations about four times as often as women.

When asked to pick metaphors for the process of negotiating, men picked "winning a ballgame" and a "wrestling match," while women picked "going to the dentist."

Women will pay as much as $1,353 to avoid negotiating the price of a car, which may help explain why 63 percent of Saturn car buyers are women.

Women are more pessimistic about the how much is available when they do negotiate and so they typically ask for and get less when they do negotiate—on average, 30 percent less than men.

20 percent of adult women (22 million people) say they never negotiate at all, even though they often recognize negotiation as
appropriate and even necessary.

We talked about this in class recently, but I neglected to post this:

There is evidence that they might. Steven Landsburg discusses the evidence and the debate in two columns in Slate. The reseach it is based on is by Gordon Dahl and Enrico Moretti. Thier paper can be found here. Here is the abstract to the paper:

This paper shows how parental preferences for sons versus daughters affect divorce, child custody, marriage, shotgun marriage when the sex of the child is known before birth, and fertility stopping rules. We document that parents with girls are significantly more likely to be divorced, that divorced fathers are more likely to have custody of their sons, and that women with only girls are substantially more likely to have never been married. Perhaps the most striking evidence comes from the analysis of shotgun marriages. Among those who have an ultrasound test during their pregnancy, mothers carrying a boy are more likely to be married at delivery. When we turn to fertility, we find that in families with at least two children, the probability of having another child is higher for all-girl families than all-boy families. This preference for sons seems to be largely driven by fathers, with men reporting they would rather have a boy by more than a two to one margin. In the final part of the paper, we compare the effects for the U.S. to five developing countries.

What do you think is going on?

First, here's Malcolm Gladwell's latest New Yorker article on the relationship between football and brain damage.

Second, here's an interesting TED talk from a few years back on how we ended up with so many varieties of spaghetti sauce.

Quiz 1 Solutions

PS2