I recently gave two lectures on basic economics to an audience of attorneys. Here are my slides on compensating differentials, entitled “The Economics of Pleasure and Pain.” Enjoy.
I recently gave two lectures on basic economics to an audience of attorneys. Here are my slides on compensating differentials, entitled “The Economics of Pleasure and Pain.” Enjoy.
Nov 14 2019
Economists often use models where firms are assumed to maximize profits. Non-economists sometimes criticize these models, arguing that their assumptions about human nature are too simple. This debate over the behavior of humans won't be resolved anytime soon. Meanwhile, there is increasing evidence that fungi entrep...
Nov 14 2019
Editor's Note: As you know, we're big fans of book lists, like the ones we always read at Five Books. Last month, we posted Amy Willis's recommendations for the five best books for Introductory Econ. You can look forward to more such lists... Most recently we were struck by this Five Books list, in whi...
Nov 14 2019
I recently gave two lectures on basic economics to an audience of attorneys. Here are my slides on compensating differentials, entitled "The Economics of Pleasure and Pain." Enjoy.
READER COMMENTS
Phil H
Nov 14 2019 at 10:58am
I find two major things to disagree with in there.
One is fairly straightforward: “Strong doubts about the effect of regulation on safety.” I just take the prima facie evidence on this: 100 years ago people regularly died in most industries. Today we don’t. We have lots more regulations today than back then. I’m sure it’s true that you can find lots of safety regs that haven’t worked, but it seems like a wood-for-the-trees kind of oversight to think that regulation in general can’t improve safety.
Related anecdote: Coal mining in China used to kill thousands every year ten years ago. Then the government closed down the smaller mines and radically consolidated the industry in order to make it easier to regulate (this was all explicit, they call it modernization or “industry upgrading”). Now two orders of magnitude fewer people die in the mines each year.
Second issue: This talk doesn’t seem to distinguish between jobs that are intrinsically hard/yucky and jobs that are made hard/yucky by unpleasant management. There’s no way to stop bricklaying from being physically hard work; but temping can be great or horrible depending on the people. And interestingly, few people seem to complain about how physically hard bricklaying is. What we do complain about is the unnecessary (and uneconomic) hardship caused by unprofessional bosses.
Thomas Sewell
Nov 16 2019 at 7:46pm
Many regulations in the U.S. also post-date when the vast majority of market participants had already adopted the practice. Government regulation is many times a trailing factor, not a causative factor. Once enough people/businesses have adopted a new safety procedure, once the majority of people see some practice as better, or “more right” than what was done before, then it becomes “industry standard” and gets added to the pile of regulations after the fact.
Sure, sometimes regulations come first, before most people have adopted the practices defined in them, but those tend to either be highly disruptive (and thus unpopular), or else minor tightening of existing practices. Only once a “broad” regulation has popular support across society does it in practice begin to be enforced by the government. There isn’t typically a board of elite government regulators coming up with new best practices and then enforcing them on companies who aren’t already mostly following them.
Alexander Turok
Nov 17 2019 at 11:26am
That’s specious reasoning:
https://www.youtube.com/watch?v=xSVqLHghLpw
Loquitur Veritatem
Nov 14 2019 at 11:37am
Phil H says: “I just take the prima facie evidence on this: 100 years ago people regularly died in most industries. Today we don’t. We have lots more regulations today than back then. I’m sure it’s true that you can find lots of safety regs that haven’t worked, but it seems like a wood-for-the-trees kind of oversight to think that regulation in general can’t improve safety.” This is an post hoc ergo propter hoc argument.
The long-term decline in highway traffic fatalities, which predates the interstate-highway system, DOT, and the many safety regulations spawned in the wake of Ralph Nader) suggests that market forces (e.g., producers find ways to engineer safer products and offer them to willing buyers). Here’s an old but still relevant graphic:
Market forces may well have contributed to (if not driven) the general decline in work-related deaths. They were costly to employers (e.g., production delays, lower morale) even in the days before DOL and OSHA.
Phil H
Nov 14 2019 at 7:47pm
Hi, LV.
“This is an post hoc ergo propter hoc argument.” Yep, absolutely, it’s correlation, and I have not shown causation. But it’s very strong correlation. In *all* developed economies with reductions in car deaths, there are lots of traffic regulations. In those countries with poor traffic safety (Somalia, India, China), there is poor enforcement of regulations. When a strong correlation exists, I think that at the very least the burden of proof rests with the people who want to argue that there is no connection between these two things!
“Market forces may well have contributed to (if not driven) the general decline in work-related deaths.” Completely agree with this – I just think that regulation helped as well.
If you have time, this (relatively short) SSC post is relevant and really good: https://slatestarcodex.com/2019/03/13/does-reality-drive-straight-lines-on-graphs-or-do-straight-lines-on-graphs-drive-reality/
Jon Murphy
Nov 15 2019 at 10:52am
Well, no. I mean, by that reasoning, you need to prove there is no connection between US space funding and suicide by hanging.
Things can be correlated for many, many reasons. Part of any scientific process of testing a hypothesis is weeding out alternative explanations. So, if you want to claim a connection, you need to weed out other possible explanations for the same outcome.
robc
Nov 15 2019 at 2:09pm
I think they are both correlated with wealth.
Cars got safer as we got wealthier.
Wealthier societies can afford regulations*, even if unnecessary.
*at the expense of their great grandchildren being mega wealthy.
Thaomas
Nov 16 2019 at 12:36pm
I think this needs to be examined at a far more granular level. Maybe regulations helped in one industry and not in another. Figuring out the counterfactuals is not easy.
Loquitur Veritatem
Nov 14 2019 at 11:39am
Sorry about the missing graphic. You can see it by going to this link and scrolling down the page: https://politicsandprosperity.com/2008/01/27/cell-phones-and-driving-once-more-addendum/
Comments are closed.