Carpe Diem, Society and Culture

In the latest ‘Factual Feminist’ video, Christina Sommers debunks the junk science behind the ‘Ban Bossy’ campaign

The Ban Bossy campaign and its star-studded brigade to empower girls to lead has garnered lots of media attention. But does their leader, Facebook COO Sheryl Sandberg, have all of her facts straight? In the latest video in the AEI series “The Factual Feminist” resident AEI scholar Christina Sommers takes a closer look the data, and finds what we should really be banning is poor research.

For example, in the March 23 Washington Examiner article “Unmasking the junk science behind the #BanBossy campaign,” commentary reporter Ashe Schow writes that:

Ban Bossy,” a new feminist campaign started by Facebook Chief Operating Officer Sheryl Sandberg, uses ancient surveys and misleading facts to claim the word “bossy” hurts girls. And, as you might expect, the claims don’t support the campaign’s mission.

In her article, Ashe Schow debunks 9 bogus claims from the Ban Bossy website that are either false or misleading, or based on outdated research. Ms. Schow concludes that:

Sheryl Sandberg said she was called bossy once and it really affected her. Maybe it did, but she’s a billionaire now and the chief operating officer of Facebook, so it couldn’t have hurt too badly. How did she actually deal with it? By kicking butt and taking names – that’s how. Why isn’t she teaching girls that?

In a related article titled “The ‘Ban Bossy’ campaign misfires,” Cathy Young also points to some of the questionable and shoddy research promoted in Sandberg’s Ban Bossy campaign and writes that:

Sandberg’s new campaign — “Ban Bossy” — is a spectacular misfire that promises empowerment but promotes the worst stereotypes of feminism: victimhood and speech policing. Let us by all means help girls fulfill their potential. But let’s not invent oppression where it doesn’t exist — and let’s not forget about boys who are falling behind.

Carpe Diem

Minimum wage hikes are largely neutralized by reducing non-monetary fringe benefits and increased work demands

I’ve argued before on CD that saying (or finding empirically) that minimum wage increases have no or very small effects on employment levels is not the same as saying that minimum wage increases have no negative effects on low-skilled and unskilled workers.  Reason? Even if employers maintain the same staffing levels of low-skilled and unskilled workers following a large increase in the minimum wage (e.g. 40% from $7.25 to $10.10 per hour) as before, many businesses will make adjustments to a variety of non-monetary factors to compensate for the higher, government-mandated monetary wage. Those adjustments might include reducing hours, fringe benefits and on-the-job training, and increasing expectations of work productivity (fewer workers or fewer hours to the same or more work). On net, those non-monetary adjustments could mean that many workers who keep their jobs (or find a job) won’t necessarily be any better off following a minimum wage hike, and could even be worse off.

The unavoidable and inevitable adjustments to non-monetary factors following minimum wage increases is the main topic of an op-ed in today’s Investor’s Business Daily by economist Richard McKenzie titled “Minimum Wage Hike Often Offset By Fringe Benefit Cuts.” Here are Richard’s key points:

…. wage income is not the only form of compensation with which employers pay their workers. Also in the mix are fringe benefits, relaxed work demands, workplace ambiance, respect, schedule flexibility, job security and hours of work. Employers compete with one another to reduce their labor costs for unskilled workers, while unskilled workers compete for the available unskilled jobs — with an eye on the total value of the compensation package. With a minimum-wage increase, employers will move to cut labor costs by reducing fringe benefits and increasing work demands…

Proponents and opponents of minimum-wage hikes do not seem to realize that the tiny employment effects consistently found across numerous studies provide the strongest evidence available that increases in the minimum wage have been largely neutralized by cost savings on fringe benefits and increased work demands and the cost savings from the more obscure and hard-to-measure cuts in nonmoney compensation.

MP: The government can pass a law making it illegal for an employer to pay an unskilled worker less than $7.25 or $10.10 per hour in monetary wages, but the government can’t prevent employers from reacting to higher minimum wages in ways that help businesses and hurt unskilled workers including: a) cutting workers’ hours or laying them off (or refusing to hire them in the first place), b) reducing or eliminating non-monetary forms of employee compensation, and c) investing in labor-saving technologies that substitute automation for unskilled workers. Many of those employer responses will be hard to quantify (or even detect) and will not show up in official employment levels or jobless rates for entry-level workers. But those responses will make low-skilled workers worse off, and could either completely neutralize the higher money wage, or could even be large enough to make workers worse off overall.

One more point from my previous post: Let’s not forget that the compassionate-sounding minimum wage law is in reality a coercive government-mandated price control, which prevents private citizens from engaging in mutually beneficial exchanges, with the threat of fines or jail time. The minimum wage law coercive government-mandated price control gives politicians and government bureaucrats control over the lives of ordinary citizens, and we’re all a little bit less free when price controls are imposed on the citizenry by government fiat and voluntary transactions are outlawed. If you’re willing to allow and accept government control over the wages for unskilled workers, what other powers are you willing to grant the government, and what other freedoms are you willing to sacrifice?

Carpe Diem

Quotation of the day on extractive industries…

… is from Karl Rove writing in today’s WSJ (“The Political Payoff Behind ‘Paycheck Fairness’“):

Mr. Obama is deeply hostile to extractive industries like oil and gas drilling and coal mining. But there’s one extractive industry—personal-injury lawyers separating corporations from their cash—that the president likes, even if every American ultimately picks up the tab for these lawsuits. Until the election is over and all value has been wrung from the Paycheck Fairness Act, Mr. Obama will use it to further the Democrats’ “War on Women” theme while offering his party’s paymasters images of future big paydays.

Carpe Diem

Shortest US graduation speech ever? Nobel economist Thomas Sargent’s list of 12 valuable economic lessons

Nobel economist Thomas Sargent really economized on words when he gave a graduation speech at his undergraduate alma mater UC-Berkeley on May 16, 2007. The entire text of his 335-word, two-minute speech appears below:

I remember how happy I felt when I graduated from Berkeley many years ago. But I thought the graduation speeches were long. I will economize on words.

Economics is organized common sense. Here is a short list of valuable lessons that our beautiful subject teaches.

1. Many things that are desirable are not feasible.

2. Individuals and communities face trade-offs.

3. Other people have more information about their abilities, their efforts, and their preferences than you do.

4. Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.

5. There are tradeoffs between equality and efficiency.

6. In an equilibrium of a game or an economy, people are satisfied with their choices. That is why it is difficult for well-meaning outsiders to change things for better or worse.

7. In the future, you too will respond to incentives. That is why there are some promises that you’d like to make but can’t. No one will believe those promises because they know that later it will not be in your interest to deliver. The lesson here is this: before you make a promise, think about whether you will want to keep it if and when your circumstances change. This is how you earn a reputation.

8. Governments and voters respond to incentives too. That is why governments sometimes default on loans and other promises that they have made.

9. It is feasible for one generation to shift costs to subsequent ones. That is what national government debts and the U.S. social security system do (but not the social security system of Singapore).

10. When a government spends, its citizens eventually pay, either today or tomorrow, either through explicit taxes or implicit ones like inflation.

11. Most people want other people to pay for public goods and government transfers (especially transfers to themselves).

12. Because market prices aggregate traders’ information, it is difficult to forecast stock prices and interest rates and exchange rates.

HT: Craig Newmark

Carpe Diem

Energy fact of the day: Net petroleum imports are below 30%

oilimportsThe chart above displays another new energy milestone for the Great American Energy Boom: Net petroleum imports have been below 30% for the most recent five months (October 2013 to February 2014, EIA data here) – the last time that happened was in the spring of 1986, almost 28 years ago. Before a dedicated group of America’s petropreneurs finally “unlocked the shale code” with revolutionary technologies that were finally able to extract oil trapped in tight shale rock formations miles below the ground, America’s dependence on foreign sources of petroleum had been rising for 20 years and imports were providing more than 65% of US demand in the fall of 2005 (see chart). In the last seven years, thanks to the shale oil bonanza in states like North Dakota and Texas, the share of America’s petroleum supplied by foreign sources has fallen from 62% in early 2007 to below 30% this year. With the increases in domestic oil production forecast by the EIA (annual growth averaging 800,000 barrels per day through 2016), we can expect net petroleum imports to continue to fall over the next few years to new record low levels.

America’s oil and gas industry continues to be the strongest sector of the US economy and is helping to provide much-needed support to an otherwise sub-par economic recovery. The Great American Energy Boom is providing thousands of shovel-ready jobs both directly in oil and gas extraction and indirectly in all of the many sectors that support the energy sector, it’s creating thousands of new millionaires who are being paid oil and gas royalties, and it’s achieving the long sought-after goal of increasing America’s energy security by reducing dependence on foreign sources of petroleum, as the chart above helps to illustrate.

Ironically, there’s probably never been a US president more hostile to the oil and gas industry than Obama; and yet there probably has also never been a US president who has benefited more from the economic stimulus and shovel-ready job-creation that the oil and gas industry has delivered during Obama’s tenure.

Carpe Diem

Richard Epstein on the many problems with ‘equal pay’

In an excellent essay (“The Many Problems with ‘Equal Pay’”), Richard Esptein argues that “the market, not the President, should determine how much women earn,” here’s an excerpt (emphasis added):

Without exception, more sophisticated studies that seek to control for some of these differences narrow the perceived 77 percent gap. But they do not eliminate it entirely. One common inference is that the persistence of that measurement gap is indicative of some lurking discrimination between the sexes throughout labor markets. Not likely. A far better explanation is that these statistical studies cannot incorporate into their regressions each relevant variable that matters to a skilled manager or recruiter, even after controlling for hours worked or, most critically, years out of the work force. Such issues as a willingness to travel, working overtime in dangerous neighborhoods, making cold calls to prospective customers, handling risk, or responding to hostility in interpersonal relations are likely to be relevant in how much an employee is paid. The effect of any one of these variables could be small, but in aggregate, they really matter. Yet, they are too numerous and too difficult to quantify, to be incorporated into the statistical models that predict unequal pay. So it is just wrong to assume that any unmeasured variation should be attributed to some undocumented form of discrimination.

The claim that women are playing against a stacked deck is wrong for still other reasons. Labor markets are intensely competitive, so the claim about systematic pay gaps has to assume both that women managers are hostile to women’s economic welfare, and that competitive markets are massively inefficient in matching people with positions. Competition for labor tends to lead to efficient outcomes. Indeed, by the standard account, price discrimination cannot survive in competitive markets, which means that the differentials in wages track differences in performance. Put simply, one danger of the Equal Pay Act is that it could mandate equal wages for unequal work, i.e. for two workers with different productivity.

Our false preoccupation with pay equity is not costless, for it leads to bad labor market regulations that hurt all workers. Employment relationships will only form and endure when the gains from the deal exceed the costs of putting it together. Every time a government regulation imposes some new restriction on the contracting parties, it increases the costs of the deal and reduces the benefits it generates, thereby killing jobs for men and women alike.

One common theme that the president raises is that his proposals are good not only for women but also for American families and the economy as a whole. Of course, he is right to say that “when women succeed, America succeeds.” Any overall improvement in labor productivity reverberates across the economy. But the President is blind to the difference between the rising tide that raises all ships, and the dam that makes water flow into one channel and not the other. Market transactions raise all ships by improving levels of productivity. The President’s regulations shrink the size of the pie in the effort to give women a larger share of what remains. But that strategy never works. Increased pay for women is always a blessing—all other things being equal. But that improvement takes on a different hue when it comes at the expense of an overall decline of the income and economic prospects for men.

HT: Don Boudreaux

Update: Listen to Richard Epstein’s podcast about the gender wage gap myth here that accompanies the article cited above.

Carpe Diem

Wednesday morning linkage

oilweekly1. Chart of the Day: US oil production topped 8.3 million barrels per day last week for the first time in 26 years, going back to April 1988.

2. Markets in Everything: Watch the video above to see “Termite-Inspired Robots That Can Build Houses” – maybe a substitute or complement to 3D-printing?

3. Markets in Everything II: First-ever Pot Vending Machine to debut in Colorado.

4. “Markets” in Everything III: LibriVox provides free public domain audiobooks, with a goal “To make all books in the public domain available, for free, in audio format on the internet.”

5. Markets in Everything…. NOT: Belgium bans Uber, threatens €10,000 fine for each attempted pickup.

6. Markets in Everything… NOT IIIn an attempt to cut costs, Canada Post has announced plans to scrap all home mail deliveries, making Canada the first country in the G20 to be without a door-to-door service.

7. Who’d a-Thunk It? With the paperwork of medical insurance and the bizarre, politically driven inclusions, exclusions and mandates of Obamacare, more and more Texas doctors are opting out of insurance altogether and moving into the growing field called “Concierge Medicine.”

8. VIDEO: In the video below, AEI scholar Dr. Sally Satel discusses the benefits of e-cigarettes for both individuals and the U.S. as a whole.

Carpe Diem

Diamonds aren’t rare, they’re a terrible investment, and good substitutes are now available = diamond cartels aren’t forever

A Carpe Diem regular sent me an email about the Wisconsin-based Diamond Nexus company, which sells both lab-created diamonds and “diamond simulants” at a fraction of the cost of the “earth-mined” versions, see examples below of rings that sell for less than $1,000 with total carats of 1.24 or higher:

diamondsThe company operates a retail location in the Woodfield Mall near Chicago and they’ll soon be adding another retail location in downtown Milwaukee. All of their jewelry products are also available through the Diamond Nexus website, with customer service available by phone and live chat.

According to the company’s website:

Our diamond simulants contain a small amount of carbon along with other chemical components to give the optical appearance of a diamond, in which we can offer them at $149 per carat. Our lab diamonds are pure carbon, making them optically and physically identical to a mined diamond, however, because they have been created in a lab, we can sell them for 50% less than a earth-mined diamond.

In the video above, the company asks shoppers in a mall to compare a mined diamond ring valued at $3,743 to a nearly identical ring with one of the company’s lab diamonds that sells for $549. Even under close inspection with a jeweler’s magnifying glass, nobody could tell the difference between the $3,743 ring and the $549 version. Sure, they’re ordinary people, and not jewelry experts, but if you spend $3,743 on an earth-mined diamond and neither you nor anybody else can tell it’s different than the $549 “generic” substitute, is the extra $3,200 really worth it? Certainly not for me.

The company addresses and debunks seven of the common myths about diamonds, here are three examples:

Myth 1. Diamonds are rare.

There are TRILLIONS of carats of diamonds that will never be mined or sold to consumers. These aren’t some mythical reserves that we don’t know about, these are actual deposits that have been found but left untouched. Why you may ask? Well, if the people that control the diamond trade (we like to call them cartels because, well, they are) were to release all the diamonds they knew about, diamonds would cost pennies. So, being the “smart” people that they are, the cartels artificially hold back supply to drive up demand (read price). I know this doesn’t seem possible in this day and age but sadly it’s true.

2. Diamonds are a good investment. 

Much like a car, the minute you walk out of the store with a diamond, it starts to depreciate in value. A lot of customers come to us after their first marriage because they have gone through the process of trying to sell their expensive diamond ring. What they found out is that they could only get pennies on the dollar for their ring. This is exactly why we don’t think people should have to spend three months salary to get an amazing engagement ring. It’s not an investment, it’s a symbol of love!

3. Only a diamond lasts forever. 

“Only a diamond lasts forever” was meant to make diamonds feel like heirloom jewelry that could be passed down from generation to generation. This is fairly true but to say they’re the ONLY gemstone that stands the test of time is an outright lie. Technology now allows us to engineer lab diamonds and diamond simulants that last just as long as mined diamonds. All of these stones cut glass, are just as hard as a diamond and last just as long, so don’t fall for the advertising hype!

MP: As more diamond substitutes like this become available at a fraction of the cost of “earth-mined” diamonds that also might be “blood diamonds,” and as consumers get educated about the biggest anti-consumer marketing fraud in history, I’ll make this prediction: “Diamond cartels are NOT forever.”


Carpe Diem

Obama uses statistical fraud to accuse dry cleaners of gender discrimination, just like his fraud about the 23% pay gap

The extent of President Obama’s “revolting pay gap demagoguery” and willingness to spread “statistical frauds” about women’s issues to gain popularity with female voters apparently has no limits. Last week he accused America’s dry cleaners of engaging in systematic and unfair gender discrimination by charging women higher prices than men. Watch the video above as Obama, surrounded by women, says:

We’ll talk about dry cleaners next, right? [Watch all of the women shake their heads in agreement.] I don’t know why it cost more for Michelle’s blouse than my shirt. We got to make sure that America works for everybody.

Obama’s accusation that dry cleaners discriminate against their female customers is based on the same statistical fraud that he uses to attribute the entire 23% unadjusted gender pay gap to gender discrimination by falsely assuming that he’s comparing wages of men and women doing the exact same work. In the case of dry cleaners, Obama’s new statistical fraud is based on the faulty assumption that dry cleaners engage in gender-based discrimination by charging women more than men for having the exact same clothing item cleaned.

Following Obama’s false claims of gender discrimination last Tuesday, the female Executive Director of the National Cleaners Association responded later the same day with this letter to Obama, here’s an excerpt:

Imagine my distress when during your remarks about Pay Fairness, you segued into a smear on the quintessential small business, the dry cleaner, by suggesting you should be targeting them for gender biased pricing. Mr. President, for dry cleaning services, gender pricing is a myth, and we can prove it with the math!

We hope that once you understand the math, you will follow up your national conversation about dry cleaners by publicly correcting the mistaken impression that the media has helped to foster among many Americans, including our First Family.

As an industry, dry cleaners do not charge more for a woman’s shirt than a man’s shirt, they charge more for a hand ironed shirt than they do a machine pressed shirt. If you check your own dry cleaning bill, you’ll find that YOU pay more for the laundering and finishing of your hand ironed tuxedo shirt, than you do for the automated processing of your everyday traditional dress shirt! The price is in the math as calculated by the labor required not the gender of the client!
Simple math. Hand ironing takes more time and requires more skill, and therefore costs the cleaner more to produce. Because it costs more to produce, he charges more for the work.

Hopefully, now that you understand the terrible injustice that has been done to the nation’s dry cleaners, and have made the issue part of the national conversation, you will see how you were misled and take steps to undo the hurt and damage that has been inflicted on fair minded, hard working small businesses.


Nora P. Nealis
Executive Director

Bottom Line: Just like Obama’s wage gap demagoguery implies that companies like Ford Motor Company hire male engineers for $100,000 but then pay women with the same exact credentials and experience a salary of only $77,000, Obama accuses dry cleaners of charging women more than men to have the exact same shirt cleaned and pressed. In both cases (wages and dry cleaning), Obama’s engages in the politically-motivated statistical fraud of comparing apples to oranges, and then uses fraudulent conclusions to appeal to female voters: women are paid less than men for doing the exact same work, and women pay more than men for having the exact same item dry cleaned. Complete false conclusions in both cases.