Sponges Worthy or IUD and Diff-in-Diff

On my subway ride today I read an article on technology used in Seinfield episodes that we no longer use (movie phone, answering machines) and of course contraceptive sponges are no longer the method of today. Which is too bad because Avinash Dixit has created a model which helps show who is sponge worthy.

A good article in Slate helps us see the latest in birth control, particularly related to teens. The article first talks about falling teen birth rates and concludes that abstinence only education vs receiving information on birth control is not likely the cause. The author uses a simple method economists often refer to as difference in difference (diff-in-diff or DID for short). Suppose we see that Maryland had a teen pregnancy rate of 8% in 2000 and after 10 years of a new sex ed program that started that year we seen the pregnancy rate is 5%. We don’t know if the program is the cause in the reduction of teen births perhaps other factors. What we can do is compare Maryland to a similar state to one with similar other trends that had abstinence only. If we see in the other state that the teen pregnancy rate also fell 3 percentage points it is more likely that other factors besides the type of sex ed are at play. The article argues that all states have seen similar declines in teen pregnancy regardless of education. So using diff-in-diff we see no impact of sex ed.


The real change seems to be the new IUDs, that prevent pregnancy better than the pill for the average teen (since only 1 in 4 teens remember to take the pill each day and 10% of teens on the pill became pregnant in one year according to one study).

Piratz Bar Rescued?

Perhaps I should just write about Piratz or reality TV since my readership for an article on Piratz Tavern featured on bar rescue  got roughly 20 times more views than my normal posts.

To summarize Piratz is local tavern with a pirate theme. Piratz was not doing well so they were featured on the Spike TV show bar rescue. You can watch the episode here. 

In my previous post on Piratz which I wrote during the filming in February, I examined the impact of the show bar rescue on the bars it helps. What is incredible is the Piratz has by far more reviews on Yelp than any of the bars I looked up. Particularly in the last day or two as the show aired there are by my count 37 reviews of the place over the weekend. What is very interesting is that nearly all of them are 1 or 4 or 5 stars with few ratings in the middle. This does not appear to be just caused by the airing of the show as after the show filmed you see fewer by similar ratings of either 1 or 4 stars.

The owner says business is up (although that may be due to press from the show).
I guess I will have to do my research at the barrrr!!

 

At the Margin Mortgage vs Retirement

First, I am not a financial planner (or panther) and I have no formal training in this so the below is for informational purposes only and does not constitute financial advice, seek a professional (preferably not someone named Ponzi or Madoff).

So my thinking through to pay above the minimum payments on my 30 year mortgage versus retirement savings. In short paying money to my mortgage provides roughly a 3% return (after accounting for the mortgage tax deduction).

These two articles provide the pros and the cons of making extra payments.

In short I agree if you have other debt at a higher interest rate, pay that before your mortgage. If you get a matching contribution from your employer for retirement savings then put more in retirement.

Assuming you have no other debts or matching to take advantage of it seems to me the question comes down to a bet on future returns in your retirement account.

If you are investing conservatively (like in say bonds and money market funds in your retirement) then it would seem paying off the mortgage makes sense.

Most people early in their mortgage instead invest in stocks. So in short putting more in retirement funds is a bet that stock market will beat 3% a year.   I could look up the average return to various funds but I’m not sure how informative past performance is.

One thought I have been having though if the stock market substantially outperforms 3% then putting money in your mortgage was the worse move. However, if the market substantially outperforms 3% adjusting for inflation than you will not have needed as much contribution in retirement. If on the other hand the market under performs than the mortgage contribution was a better deal.

What complicates this is if stock prices go up due to inflation say inflation for the years 2020-2030 was 8% and stock market returned 9% (or real inflation adjusted stock returns are 9 - 8 = 1% after inflation). The stock investment was better, but the real or post inflation return is really low so now under investment in retirement might sting more.

To me inflation seems as big a source of potential variation in this calculation then predicting returns. With treasury yields at 1.4% it seems that inflation expectations are really low.  I’m not worried about inflation now, but who knows in 10 or 20 years.

Unfortunately as someone once said economists are bad at predictions particularly about the future. So I’m not sure on the optimal choice.

Minimum Wage Protest in Silver Spring

The group this is our dc was protesting the minimum wage of $7.25 in downtown Silver Spring today. I wasn't sure who was organizing the protest and not sure who I could talk with to find more information about why in Silver Spring?

A really great summary of the economists point of view on minimum wage debate is summarized here. The minimum wage theory is simple, if it is accurate is another question. If wages have to artificially go up then there are fewer jobs, since companies want to hire fewer workers at any given wage. For example if the Majestic movie theater makes $7 an hour for one additional employees before wages then it hires the employee at $6 an hour, but not if the minimum wage is $7.25.

A ground breaking study by Card and Krueger showed that when New Jersey raised its minimum wage that employment did not fall compared to its neighbor Pennsylvania that didn't raise the wage. The paper has been criticized for how it collected its data and the debate in labor economics continues.

In theory I would think a wage subsidy (where the government basically pays part of the wage) would probably achieve the best results, but I'm still not sure.

It is also important to note that most minimum wage workers are young and many are teenagers. 

Deworm the world #1 or overrated? We need more studies

Deworming children in developing countries has for a while been thought of as one of the best bang per buck interventions (link 1, link 2).  Recently a systematic review (basically someone looks for every article ever written about a subject in a systematic fashion) suggested the results of dewormings impacts might not have been as good as touted  in their conclusion the authors state

"Our interpretation of this data is that it is probably misleading to justify contemporary deworming programmes based on evidence of consistent benefit on nutrition, haemoglobin, school attendance or school performance as there is simply insufficient reliable information to know whether this is so."

Two groups IPA and J-PAL have issued a joint response saying the systematic review is misleading.

My take having done a systematic review (not of deworming, but instead of cash transfer impacts on nutrition) is that the authors likely found nearly all of the relevant evidence. IPA and J-PAL point to three papers not included. I'm familiar with the Kenyan papers and think highly of both of them. However, I believe the might not add as much as other potential studies as there was already evidence from Kenya that deworming works (see the famous Kremer and Miguel paper).

I think both sides should take this as a call to test the external validity of deworming, do you get equal bang for the buck in other deworming contexts. As this post suggests all worms might not have equal impacts and if different worms are in different places, we would expect different impacts.

The Economics of the Long Line for Popcorn

Local blogger Silver Spring Singular is frustrated by long lines for popcorn at the Majestic Movie theater in our fair city.

I thought if economists could explain why popcorn is damn expensive (the J. Political Economy paper Locay and Rodriguez suggests its because theaters have cheap ticket prices to get the cheapskates in the door and high popcorn prices for the spendthrifts)

So a quick conceptual model of long lines at the movie theater concession.

Problem: It takes up to 25 minutes to pay a lot for popcorn. Doesn't it seem like that hiring one or two extra people would increase sales sufficiently to pay for their wages (in short if you sell two extra popcorns you probably pay an hours wages.) and profit.

Explanations.

1. The Majestic doesn't have perfect information and is underestimating the loss of popcorn sales.

2. The Majestic couldn't increase profit by hiring more workers
2.A There might be fixed costs to hiring workers so the wage is higher than we think. You need to include training and hiring costs
2.B they may need to give workers a minimal number of hours so at the margin 5 hours might need an extra staff person might not be worth training. Also it could be seasonal since movie sales are higher in the summer and the holidays.

3. Maybe waiting in line gets you to purchase more things

4. My best guess. The Majestic is not profit maximizing. Probably the manager prefers having fewer employees that are easier to manage than do the extra work of hiring and supervising more employees


Conclusion: You should really only buy popcorn at the AFI as the popcorn there is superior.

Avoiding Cellphone Taxes

Like anyone who reads their cellphone bill I have notice a number of taxes. As page 2 of this cellphone shopping guide demonstrates the average cell phone bill includes a Federal Service Charge (to provide phones in rural and low income users), a 911 tax, a regulatory charge (whatever that is) and that taxes can approach over 20% of the total bill, mine looks to be over 10% for my wife and me.

So I have been looking for a new phone. Not because like the kids these days I'm getting a second phone for when I hit the clubs (Huffington Post).


With a prepaid phone I can get around a lot of these taxes. At least for now as I found a couple of local areas in Oregon and South Carolina that are trying to add 911 taxes to prepaid phones 

So my prediction as people realize they can save money with prepaid cellphone they switch, until enough people switch that taxes are increased on prepaid users.  We see (saw?) the same thing in airline industry where airlines avoided taxes by moving charges to bag fees and seat upgrades that don't pay taxes.