Hypothetical Bias

i passed out again, but i'm investing in human capital

a recent NBER working paper finds that binge drinking leads to higher wages in men (but no effect in women).  the authors conjecture that

binge drinking conveys unobserved social skills that are rewarded by employers.

the truth is, i knew this in high school, and was investing in my future wages. a lot.

How not to treat a journal referee

I was sent a paper to referee awhile back and given a mid-October deadline. I found some time last weekend to read the paper and wrote the review earlier this week after the kids had gone to bed. Next, I went to the journal's website to submit the review, logged in with the user name and password that they had sent me and looked for the paper number. Hmmm. Not there.

So, I emailed the managing editor the review and my recommendation. Next morning, I get a return email thanking me for the review, it will be helpful to the authors as they go about revising the paper, etc. And, well, the reason you couldn't find the paper on the website was because the editor rejected the paper yesterday.

Argggghhhhh!

Next time, at least with this journal, I'm waiting until after the deadline to even read the paper.

Bloopers

Ron Oaxaca visited the economics department on friday and gave a talk on monopsonistic labor market discrimination. The Ronald Oaxaca*. At the beginning of the seminar he described some additional results in the presentation but not in the paper as bonus features similar to those included on a movie DVD.

Now, I'm sure that I'm well known for my insightful comments at seminars. I remember grilling Tim Haab about not including income in a conditional logit model of recreation demand (the answer is you really don't need to, and it is a pain, which I understand 15 years later).**

So, back to Oaxaca, I blurt out "a lot of times those are the bloopers!" I'm an idiot, sure, but to my partial credit it got some laughs. And, without missing a beat, Oaxaca described how I might be right and then gave a great talk.

*I wanted to have this Chris Farley conversation with him:

Me: remember that one paper you wrote?

Him: which paper?

Me: the one with the wage decomposition?

Him: yes

Me: where you can determine the difference in wages that is unexplained between men and women?

Him: yes

Me: whites and non-whites?

Him: yes

Me: that was great ... (slapping my forehead) idiot, why did I say that!

**Note: I'll never forget the two grad students at UK, listening to Hamersmesh give a talk with twins data, giggling uncontrollable because they wanted to know if any siamese twins were in the sample.

Mainstream media makes it sound as if a rejection at JPE is a surprise

From BusinessWeek, Freakonomics vs Moneyball:

Freakonomics author Steven Levitt has repeatedly criticized Moneyball, Michael Lewis's 2003 best-seller that says the Oakland A's used statistical analysis to win games with moderately paid players. Lewis argued that the A's won on the cheap in part by telling batters to draw walks by being patient at the plate. Levitt countered that the team's powerful pitching was the key to its wins.

Last year, Levitt rejected an academic study that endorsed the book's findings, saying it didn't prove its point persuasively enough to be published in the University of Chicago's prestigious Journal of Political Economy, of which he is co-editor. ("We reject 94% of the papers that are submitted," Levitt notes.) Authors Raymond Sauer of Clemson University and Jahn Hakes of Albion College managed to get the paper into the latest issue of the not-quite-so-serious Journal of Economic Perspectives. Sauer isn't troubled by Levitt's rejection. "He had very insightful comments," he says. "It was a cordial exchange." And it's one that may continue: So far this season, the A's have the fifth-best record in baseball -- with both a middle-of-the-road payroll and some fine pitching.

So far, so good

As almost everyone expected, the Fed didn’t do anything today.  Their statement:

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.

The moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market.

Readings on core inflation have been elevated, and the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.

Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen. Voting against was Jeffrey M. Lacker, who preferred an increase of 25 basis points in the federal funds rate target at this meeting.

Clearly, the slowing housing market and substantial decline in oil prices will help keep inflation under control.  Mr. Lacker again is the lone voice wanting another rate increase.  Based on the data so far, the Fed seems correct in stopping, though of course they are keeping their options open.

Initial reaction in the financial markets is pretty muted--no real surprises in the decision or statement.