Afternoon roundup

A closing of some of the tabs

First, a set from closing a pile of the week's accumulated stories from the Stuff papers. I wonder whether the people who complain about the absence of real journalism bother reading what The Post and Sunday Star Times have been putting out lately. 

• National's 'tax relief' won't be a tax cut "because the only real cut is a spending cut, anything else is just rearranging who pays what and in which generation."
• "If Health New Zealand can't find doctors, his iwi will." Some of the social services already being provided by Ngāti Toa.
• Andrea Vance asks "How did the cost of moving two schools blow out to more than $400m?"
• Promising work on methane vaccines for cows. Including great context from Dave Frame. [And here's Dave Frame and Adrian Macey over at Business Desk on methane]
• A path from John Birch through to anti-fluoride activism in NZ that runs through ZAP - a group I'd not heard of for at least a decade. Just great stuff from Charlie Mitchell here. 
• Poor response rates in the 2023 Census, and speculation that it might be the last census as we know censuses. 
• This one is just beautifully written. Joe Bennett on a walk up a hill.

  There’s a lot to be said for being a cattle beast. You live with friends. Your food is all about you. You own nothing but an ear tag. And castration frees you from the main source of worry and expense. Admittedly you make one bad journey in the end, but you don’t see it coming, and your mates go with you. And you’re spared the horrors of old age.

And the rest of the tabs. Or some of the rest. I'm drowning here but the computer needs to be rebooted.... 

• One hypothesis on why Google Search doesn't work as well as it once did.
• Another climate stress test, another finding of zero systemic risk justifying RBNZ's continued prudential excursions into climate issues. Unless prudential reg now is meant not to guard against systemic risk and instead starts from assuming that bank directors are idiots and that bank shareholders need to be protected against bad decisions.
• NZ's NPS-UD doesn't go hard enough. British Columbia's enabling apartments up to 20 stories near transit stations. 
• A new (to me anyway) metastudy on workforce diversity. Effects are significant and positive, "but insubstantial."
• "If the government believes making it more difficult to recruit offshore is going to get 50,000 people off the dole they are as deluded as all those who came before them who wanted to believe the same thing. I get the politics. I don't get the economics."
• RBNZ now investigating whether we should have a central bank digital currency.
• The Government really ought to push ahead with the Rule of Two for Medsafe Approvals. It would unlock access to RSV vaccines. Come on......
• Taiwan wants NZ to do more in supporting anti-authoritarianism. I wonder whether we ought to be doing more in supporting scholarships for promising students from the Islands to study in NZ.
• After my Insights column on the Christchurch Cathedral cost-benefit assessment, a reader pointed us to the business case for a major Tauranga city redevelopment project. I'd hope that, if central government is putting money into this, it pushed hard on checking whether the increases in tourism are plausible (and net national rather than within-country diversion). And whatever arguments one wants to have about appropriate discount rates for social projects as compared to infrastructure projects, expect infrastructure spending (like museums) to be portrayed as social investment where the lower discount rate allows a higher NPV for purported benefits. Bit of a Lil Lisa's Slurry problem here. 
  
  
  

Afternoon roundup

So many tabs across so many windows. A selection:

• Tauranga has a gang problem. Cat burglars. And the problem is growing.


• Fun field experiment: telling people to discriminate less can do more harm than good. 


• Henry Cooke went through the Emissions Reduction Plan. He finds that, of 284 total actions, 158 are plans to have plans, 121 are policies, and 5 are 'barely relevant'. Check his work.


• Rather silly from Business NZ. They took the ILO "Preliminary list of cases as submitted by the social partners Committee on the Application of Standards", where they've raised complaint about the Fair Pay Agreements, and retitled it "Worst cases' breaches of international labour treaties." 


• Rent controls in St Paul, Minnesota, wound up not having the intended distributional effect. "...the tenants who gained the most from rent control had higher incomes and were more likely to be white, while the owners who lost the most had lower incomes and were more likely to be minorities."


• New Zealand has a massive shortage of housing. We have no shortage of land, agricultural or otherwise. If a developer is willing to pay enough for a paddock to convince the farmer to forgo all the net future value of all the future crop production on it, that's hard evidence it's worth more in housing. Mayors begging for government to ban development on agricultural land... well, it ain't going to help solve the housing shortage. All of this is being made worse by the pushes with the Emissions Reduction Plan. This government will wind up wrecking its housing supply agenda.


• Robin Hanson's guess for the best bang-for-buck altruistic research on a low(ish) budget? Better trials on figuring out how to boost uptake of prediction markets. 


• We'd caught a great podcast on the scandal around the 1950s rigging of American game show Twenty-One. The contestant had the answers, and was told when to take a dive. Meanwhile, Australia's election debate...

Costly discrimination

Danish kids are happy to pay to avoid having to work with someone of a different ethnicity. In this clever field experiment, Danish kids with traditionally Danish-sounding names were willing to forego expected earnings in order to avoid being paired with someone with a Muslim-sounding name - and vice-versa. 

It's a great experimental design. Kids do a first round stuffing envelopes on their own, paid a piece rate. For the second round, they have to choose a day to come in, and they'll be partnered with another kid with a joint payoff for how much the team gets done. They're given information on what the other kid achieved in the first round. Because the framing is choice of day to come in for the task rather than choice of partner (though the day determines the partner), there's less chance that the participants would expect the experimenter to be inferring racial preference. 

Team productivity in this task depends on the productivity of each of the workers in the prior round - there's no diversity benefit or penalty. Of course it's just envelope stuffing.

Preference-based discrimination is symmetric. Participants with Danish-sounding names were willing to pay to avoid being partnered with participants with Muslim-sounding names, and vice-versa. 

The insignificant estimate on Danish-sounding indicates that the tendency to discriminate is not different across ethnic types, after controlling for differences in prices. We think that this is a remarkable result for two reasons. First, attention both in the literature and policy debates usually focuses on discrimination of the minority group by the majority group because members of the majority group are more often in the position to discriminate, and workers from the minority group tend to be disadvantaged. However, our results suggest that observing more frequent discrimination of minorities may simply be due to the fact that majority decision makers have more opportunities to discriminate rather than a stronger ethnic animus.

This too was interesting:

Second, this result highlights the importance of controlling for prices when measuring discrimination. From simply looking at discrimination percentages, a layperson may be misled to conclude that decision makers with Danish-sounding names are more likely to discriminate. In fact, decision makers with Danish-sounding names discriminate in 44 percent of the cases, while those with Muslim-sounding names do so in only 33 percent of the cases (however, p = 0.517, χ2 test). Yet, these differences do not reflect differences in animus because decision makers with Danish-sounding names face a lower price on average than decision makers with Muslim-sounding names (€5.2 versus €7.8, p = 0.078, KS). The reason is that workers with Danish-sounding names are systematically more productive (116 letters) in round 1 than participants with Muslim-sounding names (100 letters). According to regressions (2) and (4) in Table 3, these price differences explain the observed differences in taste-based discrimination across ethnic types (Danish-sounding is insignificant, but Price is significant).

They conclude:

Using a sample from Denmark, we find that discrimination is common even at a substantial price, that majority and minority groups are equally likely to discriminate for given prices, and that the demand for discrimination is highly elastic. Our best estimate is that the probability to discriminate falls by about 9 percent if the price of discrimination goes up by 10 percent.

Denmark may be more polarised than other places; would be very interesting to see this repeated elsewhere.

There are a host of interesting implications for policy, which the cautious blogger leaves as exercise for the reader. The elasticity of immigration restrictions with respect to the stringency of workplace diversity mandates or the legal status of repugnant homeowner covenants is one fun one to think about. Second best policy in a world of crooked timber....

Oh: Jean-Robert Tyran is one of the paper's authors. He also wrote my most favourite ever experimental economics paper.

Repugnant intent?

The Ontario courts have struck down a bequest that would have established scholarships with particular restrictions on eligibility:

An obituary says Priebe worked as a radiologist at Windsor’s Hotel Dieu Hospital for years before retiring more than 20 years ago.

Court documents say his will was written in 1994, more than two decades before he died at age 83 on New Year’s Day 2015.

In it, he instructs his trustee, the Royal Trust Corporation of Canada, to provide funds for awards and bursaries for white, single, heterosexual men in scientific studies at the University of Western Ontario or the University of Windsor.

“Students with the necessary academic qualifications who through work histories have demonstrated that they are not afraid of hard manual work in their selection of summer employment shall be given special consideration in the selection process,” the document says.

“No awards to be given to anyone who plays intercollegiate sports.”

A similar award is also to be created for a “hard-working” white, single woman “who is not a feminist or a lesbian.”

The will was written in 1994 in Ontario. Ontario, then, under Bob Rae's administration, was pushing pretty hard on affirmative action policies. One reading of the bit above is that it's a reaction to that policy environment: the donor wished there to be scholarships for groups that otherwise were not given special attention (though who of course could do well in general scholarships). Note the exclusion of athletes, who can get athletic scholarships.

The Judge thought differently:

An Ontario judge has ruled that a deceased doctor’s plan to create scholarships for white, single and heterosexual students as part of his will amounts to discrimination and must be quashed as a matter of public policy.
In a decision published last week, Ontario Superior Court Judge Alissa Mitchell says the stipulations laid out in Dr. Victor Priebe’s will “leave no doubt” that he intended to discriminate based on race, marital status and sexual orientation.

As a result, she says, they are “void as being contrary to public policy.”

... “I have no hesitation in declaring the qualifications relating to race, marital status, and sexual orientation and, in the case of female candidates, philosophical ideology...void as being contrary to public policy,” Mitchell wrote in her decision.

“Although it is not expressly stated by Dr. Priebe that he subscribed to white supremacist, homophobic and misogynistic views... (the provisions laid out in the will) leave no doubt as to Dr. Priebe’s views and his intention to discriminate on these grounds.”

Here is one list of Canadian scholarships, many of which have interesting eligibility requirements, some of which could be read as having strong implicit ideological constraints. Just not the same constraints as Priebe.

HT: Marina Adshade

Racial bias in mortgages?

Simon Collins at the Herald asked me for comment on a paper alleging racial bias in mortgage lending; his story's now up.

The paper is available here. It shows, using ordered logit regression, that people who self-identify as being more easily identified as Maori are less likely to own their own home, correcting for income and a few other variables. The paper's empirics say absolutely nothing about mortgages or banks. But the study nevertheless concludes:

"To sum it up in one sentence: results from a large national probability sample of Māori indicate that the more Māori you look, the less 'mortgage worthy' you are."

Here are a few alternative hypotheses:

• The empirics correct for current employment and current income but not past employment and past income. If Māori employment histories are more varied than non-Māori, and if this also follows the "is identified as Māori " indicator, Māori will have less accumulated wealth at any given level of income, and this is not controlled in the study.
• If those who look more Māori are given preference in state housing, then home ownership would also be attenuated.
• If parental resources are negatively correlated with looking more Māori , then that also affects ability to put together a deposit on a house. Note too the potential influence of holding household wealth under Māori land tenure.

I also think they've an error in how they described the magnitude of the effect. Remember that this is an ordered logit regression. So you can't just take the point estimate and multiply it by the number of interval steps to get an accumulated effect; you have to ask your stats package to give you a predicted value at the different values of the category. At page 11, it really looks like they linearised from the point estimate:

Some readers may be wondering how large this effect is in practical terms. One way to think about it is like this: when statistically adjusting for numerous other demographics, such as differences in income, region of residence, and education, a Māori person with a score of 5.55 on our Perceived Appearance measure of Māori identity would be twice as likely to not own their home relative to someone with a score of 1 in Perceived Appearance. This is a statistically significant association, which in our view represents a large and extremely important difference in the rate of home ownership based solely on merely appearing more Māori.

They have an odds ratio of 0.82, which ought to mean that a step change increase in perceived appearance score from the mean score reduces likelihood of owning a home by 18%. I don't think that means that if you go 5.55 steps in the other direction (1/0.18) from the mean score doubles your likelihood of home ownership, except under some pretty strong assumptions. But it's been a little while since I've played around in ordered logit.

Here's the bit where Collins quoted me - entirely fairly:

However Dr Eric Crampton of the NZ Initiative think-tank said there could be many other explanations for this besides racial bias. For example, people who looked more Maori might have parents who did not have freehold properties to use as collateral for loans, a factor that was not surveyed.

"Banks would be throwing money away if they decided to not lend to somebody simply based on looks," he said.

Mortgage brokers Bruce Patten in Auckland and Karen Essex-Mooney in Blenheim both said they had never seen a mortgage application turned down because the borrowers were Maori. They said many borrowers now applied online and never actually met the lenders.

New Zealand Bankers' Association chief executive Kirk Hope said racial stereotyping was not in the banks' or their customers interests especially within such a competitive part of the banking sector.

Drug testing and discrimination

If employers assume that minorities are more likely to take drugs than are other groups, and if you think that drug-taking makes for a worse employee, they could be fuelling a really bad equilibrium. Individuals can't easily signal that they're clean without simultaneously seeming weird (by, for example, voluntarily offering to undergo drug testing), so they pool with drug users and are less likely to get a job offer.

This happens whether or not the employer is right about the relative rates of drug use. If the employer is wrong, that employer will bear some losses by failing to hire quality candidates, and especially when labour markets are tighter. But, worse, initial misperceptions on relative drug use can turn into a bad self-reinforcing equilibrium: if everyone is going to think you're a stoner regardless of whether you do drugs, why not at least enjoy the consumption benefits? We then get the same kind of pernicious equilibrium that Glenn Loury talks about in his work on discrimination.

One way of breaking that equilibrium is to allow employers to require drug testing: it lets clean employees quickly demonstrate that they're clean and consequently breaks the pooling equilibrium. Drug-using potential employees are worse off, because they can't mask type as easily, but those who aren't benefit by the separation.

That's the theory. Abigail Wozniak shows that the empirics hold up. Here's an early ungated version of her paper; here's the NBER Working Paper.

Nearly half of U.S. employers test job applicants and workers for drugs. A common assumption is that the rise of drug testing must have had negative consequences for black employment. However, the rise of employer drug testing may have benefited African-Americans by enabling non-using blacks to prove their status to employers. I use variation in the timing and nature of drug testing regulation to identify the impacts of testing on black hiring. Black employment in the testing sector is suppressed in the absence of testing, a finding which is consistent with ex ante discrimination on the basis of drug use perceptions. Adoption of pro-testing legislation increases black employment in the testing sector by 7-30% and relative wages by 1.4-13.0%, with the largest shifts among low skilled black men. Results further suggest that employers substitute white women for blacks in the absence of testing.

It feels good to oppose mandatory testing, thinking that it somehow is nicer for minority groups. But that opposition mostly works to encourage employers to substitute over to groups that they believe are less likely to take drugs. Another for the continuing series here on feeling good while doing harm.

I note this now because Twitter tells me that Radio New Zealand will be talking drug testing in 15 minutes.

Previously:

• Feeling good, doing harm
• Feeling good, doing harm: aid edition
• Hunt it to save it
• Competing for aid

Academic discrimination audits

Profs in fields where the opportunity cost of time are more valuable use tighter filters in deciding whether to reply to an email; that filter may have discriminatory effect.

Milkman et al run a field experiment sending academics in a pile of fields the following email:

Dear Professor [Surname of Professor Inserted Here],

I am writing you because I am a prospective doctoral student with considerable interest in your research. My plan is to apply to doctoral programs this coming fall, and I am eager to learn as much as I can about research opportunities in the meantime.

I will be on campus today/[next Monday], and although I know it is short notice, I was
wondering if you might have 10 minutes when you would be willing to meet with me to briefly talk about your work and any possible opportunities for me to get involved in your research. Any time that would be convenient for you would be fine with me, as meeting with you is my first priority during this campus visit.

Thank you in advance for your consideration.

Sincerely,
[Student’s Full Name Inserted Here] 

If you're an academic, you're probably getting pretty frequent form-letter-style emails from students wishing graduate supervision. You're probably also getting a billion other emails - you need a way to triage. 

I'm not particularly proud of it, but there's one tranche that just gets the delete button: emails sent that are clearly form letters of the following type:

Dear Professor (name in different font)",

I am writing seeking supervision in [field in different font, or named field far different from anything I research] at [University name in different font]. 

[Describes work experience tangentially related to proposed field of study, or a research project coming from his/her undergraduate study. Or suggests willingness to write a thesis in anything, if I have scholarship money. Generally reveals no understanding of what I'm interested in, no particular interest in Canterbury over other places, and provides no expectation that an answer's really expected - zero investment in this application over others. It's clearly a mass-broadcast distribution.]

There are many many potential students in many countries who seem more interested in getting a student visa out than really in pursuing a thesis. My replying would waste everyone's time, as, until recently, I had no potential funding for graduate students, and none of these students could go anywhere without funding.

I don't get dozens of these emails a day; more likely a dozen or more a month. I imagine that if I were at a top US school, I'd be getting rather more of them. I'd definitely reply to a letter like the one they sent out, because very few of the academic spam emails I get ever suggest a personal meeting: if a potential student would take the time to get to Christchurch, why wouldn't I at least reply?

But then I imagine what it would be like if I were in a city of several million people, with loads of internationals students in town seeking extensions of their undergraduate student visas. Signing up at grad school extends the visa: the prof needs some way of distinguishing emails from people who are actually interested in pursuing study, and those for whom it's just a way of extending the visa.

Anybody who really had come all the way to my town and wanted desperately to meet with me would find some way of signalling that in the intro email. Like "I liked your work on [fill in the appropriate blank] and want to extend it [proposes some relevant extension]." Not "I have considerable interest in your research."

Based ONLY on time constraints and visa-seeking behaviour, I would expect the following:

• The greater the number of these solicitations received, by field, the more likely there'll be no reply;
• Fields more likely to have scholarship money or RA work will get more such solicitations;
• Profs in fields getting more of these kinds of solicitations will use tighter filters in deciding what to delete;
• One not-nice but non-crazy filter is to downweight emails from foreign-sounding names where the correspondent reveals zero real knowledge of the prof's work or field. The slightest signal that this indicates actual interest in the prof's work would go a long way. Otherwise, a Bayesian reckons the person sending the email either doesn't know enough to signal an actual knowledge of the prof's work (a bad signal in itself), or really is more interested in something other than the prof's work - like a visa. We should expect then no particular gender effects, no particular difference between Caucasian and Black names, but a difference between those and ones that have a higher probability of being a student on international visa. 

Here's what the paper finds:

Here is the rank order of the gap, on average across all disciplines:

• Chinese female at Private School: -29%
• Indian Male, Private School: -21%
• Indian Female, Private School: -19%
• Hispanic Male, Private School: -18%
• Chinese Female, Public School: -17%
• Black Female, Private School: -16%
• Black Male, Private School: -14%
• Indian Male, Public School: -13%
• Chinese Male, Private School: -11%
• Chinese Male, Public School -10%

All others below 10%. 

If all that were going on were filtering based on "weed out students who have indicated no interest in my research and who are more likely to be international", I'd have expected Chinese males to have fared worse than Blacks or Hispanics; I doubt that my story is all that's going on. I do expect that it's an important part of what's going on, but only part of it. In particular, I can't see how this story explains within-race gender gaps. But I do note that the only substantial discrimination among those at public universities was against foreign-sounding names. 

I wonder what would have happened if the field experimenters had spent a couple minutes, when getting the contact and other details for each prof in the study, also getting the abstract from that prof's most recent paper and saying something about it in the letter. If my story's explaining part of what's here going on, then the gap between foreign-sounding and domestic-sounding names should drop. 

Finally, I always wonder about these kinds of studies and whether race is the only thing signalled. Would the results have been the same if one of the white-sounding names were Cleetus?

Gender quotas

Annick Masselot of Canterbury's Management department wants gender quotas on boards of companies listed on the NZX.

UC associate professor Annick Masselot said the NZX should go further with the introduction of quotas.

"In fact I think they have a duty to do that . . . Diversity is not an option."

She said NZX's diversity rules should at least match rules from the Australian sharemarket that required companies to disclose whether they had a formal diversity policy, and "if not, why not".

Masselot said several studies found that having women on boards led to an improvement in financial metrics.

Countries including Norway had introduced gender quotas in company boards using hard legislative measures. Others, including Australia had increased the number of women on boards with the use of "soft" self-regulation, she said.

The NZX would have the power to introduce gender quotas, but did not consider it appropriate to introduce them and had no intention to do so, a spokeswoman said.

I wouldn't be surprised if there were some studies finding benefits, but I doubt that they'd be sufficient to overturn the general conclusion that quotas aren't necessarily that hot an idea.

Adams and Ferreira, in the Journal of Financial Economics, found that mandating gender quotas for directors reduces firm value for well-governed firms. Forcing Boards to take on more women can help performance where those firms had existing problems that could be solved by greater Board monitoring. But on average, greater diversity yielded worse firm performance in the set of S&P firms (500, MidCaps and SmallCaps) studied.

Given that our previous findings suggest that more gender-diverse boards have stronger governance, these results imply that, on average, tough boards do not improve firm value. But they do not imply that tough boards never add value. There is no reason to expect tough boards to add value in all firms. The value of a tough board should depend on the strength of the other governance mechanisms. If firms have otherwise strong governance, having a tough board could lead to overmonitoring. But if firms have otherwise weak governance, we would expect tough boards to be particularly valuable.

I read this as a strong argument for shareholders' demanding greater female board representation if they think the Board has governance issues. But as for quotas:

Our results highlight the importance of trying to address the endogeneity of gender diversity in performance regressions. Although a positive relation between gender diversity in the boardroom and firm performance is often cited in the popular press, it is not robust to any of our methods of addressing the endogeneity of gender diversity. The true relation between gender diversity and firm performance appears to be more complex. We find that diversity has a positive impact on performance in firms that otherwise have weak governance, as measured by their abilities to resist takeovers. In firms with strong governance, however, enforcing gender quotas in the boardroom could ultimately decrease shareholder value. One possible explanation is that greater gender diversity could lead to overmonitoring in those firms.

More generally, our results show that female directors have a substantial and value-relevant impact on board structure. But this evidence does not provide support for quota-based policy initiatives. No evidence suggests that such policies would improve firm performance on average. Proposals for regulations enforcing quotas for women on boards must then be motivated by reasons other than improvements in governance and firm performance.

Nominalism

An Eleanor by any other name might be as smart, but would have worse odds of winding up at Oxford. A snippet from Greg Clark's work on names and surnames:*

It isn't that the name itself is particularly powerful, or destructive; rather, the sorts of people who wind up naming their daughters Eleanor are very different, on average, from the sorts of people who wind up naming their daughters Kayleigh. From the BBC piece:

However, there is no evidence that it's the names causing such a marked discrepancy, rather than other factors they represent, Clark says. Different names are popular among different social classes, and these groups have different opportunities and goals.

"That's something that's emerged in modern England that didn't exist around 1800," he says. When he re-ran his study, but this time looking at students attending Oxford and Cambridge in the early 19th Century, he found the correlation between names and university attendance far less marked. First names simply weren't the social signifiers they are now.

What's happened since then is a move towards unusual, even unique, names. Before 1800, Clark says, four first names referred to half of all English men. In 2012, according to the Office for National Statistics, the top four names (Harry, Oliver, Jack, Charlie) accounted for just 7% of English baby boys (and the picture was much the same in Wales).

Similarly in the US, in 1950, 5% of US parents chose a name for their child that wasn't in the top 1,000 names. In 2012, that figure was up to 27%.

As late as the 18th Century, it wasn't uncommon for parents to call multiple children the same name - two Johns for different grandfathers, for example. Now parents increasingly look for unique names or spellings of names. As Jean Twenge points out in her book the Narcissism Epidemic, Jasmine now rubs shoulders in naming lists with Jazmine, Jazmyne, Jazzmin, Jazzmine, Jasmina, Jazmyn, Jasmin, and Jasmyn.

Our baby-naming algorithm, which wound up choosing Eleanor for our girl, started with a domain of names in the top 1000 from 1880 to 1930 in the US, then eliminated any names that were in the top-100 any time in the last three decades. So you rule out the made up stuff while also ruling out having too many classmates with the same name. But we're the kind of people who would choose that kind of algorithm.

I especially liked the BBC piece's pointing to Figlio's work on names. It's pretty common for researchers to use audit studies to test for racial discrimination: they send out otherwise-equivalent vitae, but put a 'black-sounding' name on some and a neutral one on others. They tend to find a penalty for having a black-sounding name. The problem with these kinds of studies is that they simultaneously test for black-sounding and for class-linked names: instead of testing black versus white, they're effectively testing lower-class versus upper-class names. Here's Figlio:

This paper investigates the question of whether teachers treat children differentially on the basis of factors other than observed ability, and whether this differential treatment in turn translates into differences in student outcomes. I suggest that teachers may use a child's name as a signal of unobserved parental contributions to that child's education, and expect less from children with names that "sound" like they were given by uneducated parents. These names, empirically, are given most frequently by Blacks, but they are also given by White and Hispanic parents as well. I utilize a detailed dataset from a large Florida school district to directly test the hypothesis that teachers and school administrators expect less on average of children with names associated with low socio-economic status, and these diminished expectations in turn lead to reduced student cognitive performance. Comparing pairs of siblings, I find that teachers tend to treat children differently depending on their names, and that these same patterns apparently translate into large differences in test scores.

I wish that audit studies instead used a cross-cutting method that would test Da'Quan against Dwayne and Cleetus instead of just against Peter. Put it into a 2x2 matrix with race on one axis and class on the other.

First names may just be signals, but "just signalling" hardly means unimportant. If you're economising on time while going through the resumes or university applications, and if a Cleetus is less likely than a Peter to know which fork to use at the important dinner with a client or donor, well, a Cleetus would have to be better than a Peter to get a second look. Because parents who have some minimal social capital expect this to be at least somewhat likely to be true, they make different naming choices than those who don't.

Colby Cosh is right:

The parents who need Crampton’s naming algorithm most will give up long before they hit “Borda count”.
— Colby Cosh (@colbycosh) April 14, 2014

The separating equilibrium separates.

I'd tell you to avoid giving your kids dumb names, but if you're reading this, you almost certainly already know it.

* I really need to get his book. The interview teasers have been very tempting.

Previously:

• Class Etiquette
• Time to re-run the algorithm

The costs of paid parental leave

The Labour Party has had a bit of support for its proposed extension to paid parental leave; the bill has made it through first reading but is likely to be vetoed for its likely budgetary effect as paid parental leave here is covered by the government.

I've not run the numbers on what the legislation is likely to cost the government in terms of budgetary effect. But I'm a bit worried about another potential cost: employers being more reluctant to take on female employees with high risk of childbearing.

Even though the government pays those on parental leave, employers still bear costs in having to sort out temporary replacement cover while remaining in some uncertainty about whether the employee will return or will decide to spend a longer time out of the workforce. Pascal Petit showed in a French field experiment that employers are reluctant to take on employees who are more likely to take maternity leave.

It's a bit of a toss-up whether an extended paid leave period makes women more or less likely to seek to return to the workplace after a spell of maternity leave. The longer one is out of the workforce, the harder it is to return, but sorting out early childhood care for an older child could be easier. The cost to employers is likely to increase: it takes employees longer to get back up to speed after a longer period away, and it's also harder to try to cover the vacancy with internal resources.

If Labour's serious about the proposal, they might consider adding an amendment paying a small bonus to an employer where there's been a successful return to the workplace subsequent to maternity leave. It would encourage them to make the arrangements to facilitate the return, and to be less reluctant to hire women of higher maternity risk.

Banning hate

You can't ban hate. You can put in laws banning discriminatory treatment in employment or consumer markets, but if the differences in treatment arose from real differences in costs rather than hatred, you're probably doing more harm than good.

Today's edition? Here:

"Fat hatred" should be banned like racism or sexism, says a pro-fat scholar who argues that obesity isn't a health problem.

Massey University lecturer Cat Pause says "the war against fat" and "fat phobia" were much more damaging than carrying a few extra kilos or, in her case, a lot.

"Obesity is not a big health problem. If you really look at the science, that is what comes through."

...In New Zealand – the world's third-fattest nation – more than a quarter of the population are classed as obese.

But Dr Pause, who has a PhD in human development, says it is "fattism" that should be feared, not expanding waistlines.

She called on New Zealand to be the first country to outlaw discrimination against fat people, which has been described as the "last socially acceptable form of prejudice".

Fat people were having to live in a culture that openly hated them, she said.

I agree with Cat that policy moves trying to bash fat people really aren't warranted.

But suppose that she's wrong and most other folks are right about the actual health or other costs of obesity. What happens if we mandate that health insurers ignore weight if weight actually does predict health problems? We effectively socialise the private costs of being obese. What happens if we mandate that employers provide reasonable accommodation for the obese? Employers start avoiding hiring them in the first place for fear of having to make unreasonable accommodations. If we ban airlines from requiring larger passengers to purchase extra seats to prevent overflow into the neighbour's seat, we again socialise the costs of obesity, either by making every other passenger pay extra for the obese person's extra free or subsidized seat, or by giving random draw unlucky lotto tickets to other economy-class passengers.

Further, if markets are competitive, any firm that unreasonably penalizes the obese will be out-competed by one that doesn't. Discrimination ought only persist if it either reflects something real, or something that other customers value - which is also real, though subjective. You can imagine a nightclub that only lets in thin people being successful in the market. But discrimination against the obese in this situation would be little different than discrimination against the ugly, or bars banning economists' entry because we're argumentative. You could maybe make the case that banning nightclubs from having exclusive entry policies can shift social norms such that, in a few decades' time, the ban would no longer be needed. But it would be a pretty speculative proposition; there seem to be reasonably fixed beauty preferences that correlate with a mix of genetic fitness (symmetry) and fertility (waist-hip ratio). And preferences against having economists around ought to be understandable to anybody who reads this blog.

The more that is done to ban markets from responding to any real costs of obesity, the more justified are policies that try to tax the correlates of obesity like excess sugar consumption. It's more efficient to let markets sort out costs associated with the output than to have governments tax the inputs where people have very heterogeneous production functions, where the costs of obesity are heterogeneous across activities, and where insurers very likely have a better handle on whether any individual case warrants higher premiums.

Parental leave and benefits

Put yourself in the place of an employer faced with two excellent and similarly qualified candidates for a position. You'd be very happy with either. But one, a young women, comes with maternity leave risk. If she decides to have a child, you will bear costs of worsening productivity over the course of the pregnancy despite her best efforts, costs of finding a temp worker to cover her position while she is on maternity leave, and the uncertainty of whether she will indeed return when leave concludes. She may also wish to move to flexible time arrangements on return. The other, male, doesn't. You're running a small business where losing a skilled worker for a short period is a very real burden, even if somebody else is paying her salary while she's on the government's paid parental leave scheme. Whom do you choose?

Cactus Kate makes the case:

I will never apologise for being honest enough to say that I don't like employing women of child bearing age especially if they have just got married or are loved up with a boyfriend because you know the next step. Babies. It is bad enough for a small business losing a staffer for 12 (as it is in HK at 4/5th pay) or 14 weeks, try employment laws where you can't sack a woman while she is pregnant (that's nine months of secure employment) even if she is hopeless at her job or not turning up, try the woman who at 11 weeks and a few days of investment and patience waiting for her to return to work, then hands you their bloody resignation. Try co-workers having to pick up the slack while she is away as you can't afford a temp.

In many cases they cope fine which means on return to the workforce it's pretty clear the new mothers position can be made redundant anyhow. This is the reality of parental leave. It indicates pretty quickly to an employer just how crucial a woman is or isn't to an operation. In many ways it's a rehearsal for redundancy.

We can wish that employers would willingly take on these costs. And many who do find that they wind up with a very loyal and committed employee if they do. But it is a risk. And it's a risk that, at least in data from a very nicely designed field experiment in France, has employers shy away from employing women with high maternity risk. Lower employment isn't the only way that the policy's costs can be shifted; Jon Gruber finds that costs of mandated maternity benefits through US employer-provided health insurance tends to be borne through lower wages for women [HT: @KevinMilligan]. And it's a pretty plausible candidate explanation for the lesbian pay gap; my excellent honours student, Hayden Skilling, is investigating this as his honours project this year.

New Zealand currently requires employers to hold a woman's position open for a year if she takes maternity; the government provides paid leave scaled to the woman's salary (and subject to a relatively low cap) for 14 weeks. The Labour Party proposes extending this to 26 weeks; the bill has been drawn from the ballot. It is likely to pass first reading, but likely to be killed afterwards because of the budgetary implications.

Were it implemented, I'd expect that the policy will increase the amount of time that women spend on maternity leave. In Canada, Baker and Milligan found that a doubling of the compensated maternity leave entitlement significantly increased the amount of time women spent on maternity leave.* Employers will bear costs despite that the paid leave entitlement is covered by IRD: it will be harder for employers to cover leave internally and so more of them will have to find replacements willing to work on temporary contracts. A longer time outside of the workplace means skills have longer to erode. Women are also more likely to want to return on part-time or flex-time arrangements after longer periods outside of the workforce; Schott finds that the American Family and Medical Leave Act increased women's likelihood of returning to work part-time rather than full-time.** Finally, we may expect increased labour market participation among women anticipating maternity leave, but also increased employer reluctance to take on women of higher maternity risk except at lower wages. But, I don't have a great sense of the incremental cost above existing leave entitlements; what's true at the margin might not cash out as much in the aggregate.

If Labour's economics were just a bit stronger, they'd be trying to couple their policy with some kind of compensation mechanism for employers whose workers take maternity leave rather than embedding the lump of labour fallacy into the bill's explanatory note:

Extending paid parental leave from the current entitlement of 14 weeks to 26 weeks would support families and also create jobs across the economy as employers engage staff to replace those on paid parental leave. As the majority of paid parental leave is uplifted by women, it has the added benefit of creating jobs in areas of the economy where women work, while supporting families and the well-being of children.

Why not advocate for a maximum 35-hour work-week to encourage employers to hire more temp workers to cover the work not done?

* While the Canadian change increased breastfeeding rates, one of the NZ bill's other stated purposes, it had no effect on child health outcomes.

** While Schott finds increased workplace flexibility encourages post-natal female employment, we might reasonably worry that increased likelihood of moving to part-time or flex-time arrangements reduces an employer's willingness to invest in an employee's human capital or to take on the worker in the first place except at lower wages.

Note: updated a couple of times for clarity and to add links to a couple of helpful tweets from Kevin Milligan and Frances Woolley.

Update 2: @askessler recommends this IZA piece showing no long term benefits to kids from paid maternity leave extensions in Germany. 

Planning for gypsys

Mark Pennington over at Pileus analyzes the expulsion of the Roma Irish Travellers [who I had mistakenly thought had had a link long back with the Roma] from an illegal camp site at Dale Farm in Essex. Honestly, I'd not paid much attention and had just figured that they were camped out on public land or on somebody else's property. But that was wrong. Here's Mark:

There is no doubt in my mind that the decision to evict the Gypsies from the site was the correct one under the terms of British law and land use planning law in particular. There is, however, equally no doubt in my mind that UK law in this regard is oppressive and provides a prime illustration of what happens when private property rights are over-ridden in the name of third party ‘community interests’.

As I understand it, the Dale Farm residents bought the property from whence they were evicted, but they acted illegally in erecting a campsite which had not been granted planning permission. As noted in previous posts on this site development rights in the UK are nationalised – if you own a piece of land you have no right to develop it as such – merely a right to request permission to do so from a local government planning authority which purports to represent ‘the community’. As a consequence, all land use decisions are fundamentally politicised and this typically results in the triumph of local ‘nimbyism’.

The Dale farm residents and other gypsies are unfortunate victims of this nimbyism. Though they were wrong to break the law in erecting an illegal site, the reason that they did so was that it is so difficult for them to legitimately build sites anywhere in the country – even on land that they themselves own. Whenever they apply for permission this is typically refused owing to the hordes of local nimby’s pressuring the local authorities and indeed the national government to keep out what are seen as ‘undesirable residents’.

Mark notes the irony of that those protesting the eviction also favour the democratization of all property use, ensuring the politicization of all land use decisions and the repression of folks who scare the median local voter. As Jennifer Roback points out* racism is cheaper at the ballot box than in the market.

* I love this article, which anticipates some of the arguments that came in the Brennan and Lomasky work on expressive voting and in Caplan's Rational Irrationality model.

Affirmative action

A Chinese IT outsourcing company that has started hiring new U.S. computer science graduates to work in Shanghai requires prospective job candidates to demonstrate an IQ of 125 or above on a test it administers to sort out job applicants.

In doing so, Bleum Inc. is following a hiring practice it applies to college recruits in China. But a new Chinese college graduate must score an IQ of 140 on the company's test.

An IQ test is the first screen for any U.S. or Chinese applicant.

The lower IQ threshold for new U.S. graduates reflects the fact that the pool of U.S. talent available to the company is smaller than the pool of Chinese talent, Bleum said.

...

Moreover, unlike many of the larger IT offshore development companies, Bleum is focused on long-term engagements with its clients, not on one-time projects. Over time, it hopes to hire 100 to 500 U.S. workers to help support North American customers.

So says Computerworld, HT Slashdot. [Note the piece is a year old now]

So, is it differential thresholds for the Americans because they bring complementary skills that are relatively scarce in China? Or are they being hired for entirely different positions in tech support while the Chinese workers handle the harder programming problems? Tough to tell from the article.

Parental leave

Extended paid parental leave may be fun for the parents, but doesn't provide any measurable benefits for the kids. Kevin Milligan and Michael Barker exploited a discontinuity in Canada where kids born before 1 January 2001 were eligible for 6 months, and those after 12 months, of parental leave benefits. There was no difference in outcomes for the kids either side of the line.

The paper is here; Milligan also discusses the results in Canada's Globe and Mail.

We look at children born in the years just before and just after the 2001 expansion of paid parental leave through the Employment Insurance system from 25 weeks to 50 weeks. Looking across various measures of child temperament, physical development, and child security, we find very little evidence of an impact of this large expansion of parental leave entitlements. As one example, the pre-reform average age at which the child took his or her first steps was 9.46 months. Our study finds that this changed by only 0.06 months after the reform -- and that result is not distinguishable from zero. Our work in this study builds on previous studies we have written on the labour-market implications of parental leave and on the health implications for children.

New Zealand's Labour Party has been making noises about extending paid parental leave. The Canadian evidence suggests it doesn't provide that much benefit. And, I'd worry a fair bit that the more employers expect that they'll have to fill holes with temporary positions, the less likely they'll be to hire women they think likely soon to have another kid.

I don't get it

Canada's Supreme Saskatchewan's Appeals Court has ruled that civil celebrants cannot discriminate against same sex couples. So if they're licensed as celebrants, they have to take all comers.

I'm more a freedom of association guy. I don't like the kind of preferences that would have the celebrant turn down a gay couple, but I don't much think the government ought be forcing people to take clients. I know that mine is a minority view. I still hear Walter Williams's lectures on discrimination in the back of my head: how he discriminated when he chose Mrs. Williams over all the other women who wanted him and how nobody could have forced him to date a selection of women that reflected the diversity of America's ethnic composition before making his choice.

The bit I really really don't get is why anybody would want to have their wedding day ruined by having an officiant there who hates them or who hates that they're being married. What kind of utility function gets more joy from the discomfort of someone forced to officiate over them than pain from having a horrible awkward wedding day?

We had no officiant at our wedding (more below). But had we been forced to have one, and we found that the officiant we'd picked hated Canadians and thought it a sin that Canadians be allowed to marry Americans, we'd have been looking for another officiant rather than a lawyer. I can understand the utility of making a political point. But getting smugness jollies by having someone who hates you and your marriage preside over your wedding? I just don't get some folks' utility functions.

When Susan and I married, we had no officiant at all. Pennsylvania law lets non-Quakers use the Quaker-style ceremony. The Quaker church hasn't a hierarchy, so weddings there simply formalize the community's recognition that a couple has married. So everyone in attendance at our wedding signed on as witnesses to our wedding contract; Susan and I officiated our own ceremony to which representatives of neither god nor government were invited. Instead we were married on the recognition of our friends and family - people we like, who like us, who we wanted there and who wanted to be there. Self-uniting marriages are recognized more broadly than Pennsylvania. I don't know why more libertarian atheists don't use them. You still need to get the marriage licence authorized by the state, but why invite the state to the ceremony if you hate the state?

Diversity hiring

Fortunately, we've never had diversity mandates forced on us at Canterbury. A report from the field in the US:

Even in this economy, we've had trouble recruiting minority faculty. We've made offers, but we keep losing out to places with higher salaries or lower teaching loads. Minority candidates are in much higher demand than others, so even in this market, they can command offers far sweeter than what we can muster. And faculty salaries here are determined by a pretty mechanistic collective bargaining agreement.

We've exhausted the low-hanging fruit. We advertise in venues likelier to attract minority applicants. We have racially mixed search committees. We screen job posting language carefully to ensure that nothing in them creates unnecessary barriers. The low-cost, nonconflictual stuff is already done.

Which means, in practice, that the available options are few.

One is to simply make the salary offers the contract allows, and to hope for the best. When we get turned down, turn to whomever else is available. It's legally clean, but in practice, it makes an already very white faculty that much whiter. It winds up placing a value of 'zero' on diversity, with predictable results.

Another would be to go above the grid and simply endure the grievances. If paying an extra, say, 5k will make the difference, and the Trustees have determined that the difference is worth making, then so be it. The advantage of this approach is that it stands a greater chance of actually recruiting people. The disadvantages, though, are several. For one, it virtually guarantees protracted legal battles with the union. For another, it stirs up resentments that tend to get ugly fast. And at a really basic level, it raises the question of just what, exactly, the candidate is being paid for.

Our Department is rather diverse. Judging by the flags next to our profile pictures, we've four full Kiwis, six half-Kiwis, three full Americans, one half-American, a Pole, a Canadian, two half-Canadians, a Finn, a Slovak, a half-Spaniard, three half-Brits, a Czech, a half-Frenchman, two Indians, two undisclosed (one German, one Kiwi) and some clown from Gondor. Maybe it's easier assembling an international cast if you're outside the States; the US seems committed to making it hard for foreigners getting PhDs in the states to stay there. Or maybe that's not the kind of diversity they're trying to achieve.

We're very lucky that, thus far, folks here seem to recognize that imposing quotas on departments forcing them to reflect the ethnic makeup of New Zealand would be devastating.

The lesbian pay gap

Says BoingBoing:

Lesbians make more money than straight women (And nobody really knows why)

Really? Nobody? I can think of a couple of explanations, pretty easily testable. But we'll get to that in a minute. BoingBoing points to Big Think:

The wage premium paid to lesbian workers is a bit of a mystery. Sure, lesbian women are better-educated on average, are more likely to be white, live predominantly in cities, have fewer children, and are significantly more likely to be a professional. But even when you control for these differences, the wage premium is still on the order of 6%.

It is fascinating when the data starts looking like the majority is being discriminated against. Is it wage discrimination, though, or is there an economic argument for why lesbians are getting paid more?

Well, a possible explanation has to do with the division of labor in a heterosexual union.

...

This theory is cleverly tested in a paper which calculates the wage premium paid to lesbians in two distinct groups—those who were once in a heterosexual marriage and those have never been married.* The assumption made is reasonable; lesbian women who were once married to men (about 44% of the lesbians in the sample) presumably have in the past had the expectation that they would have a marriage partner with a higher income. The never-married women might also have had this expectation, but it is much more likely that, on average, women in that group expected to be in a relationship with another woman with a comparable income.

Does the evidence support the theory that the wage premium can be explained by greater investment in more market-oriented skills by lesbian women? Well the premium does not disappear completely for the subset of previously married women but is reduced by about 17%, providing some support for the idea. At 5.2% though, the once-married lesbian premium is still high enough that I don’t think we can consider the case closed.

Here's my candidate explanations.

First, and most importantly, maternity risk. If an employer expects a lesbian employee to be less likely to take maternity leave, and if maternity leave imposes costs on an employer, then the employer will be more likely to hire and to promote the lesbian over the straight woman. What evidence do we have? Petit's field experiment showing that maternity risk is responsible for a fair bit of women's lower average salaries.

How could this be tested in the data presumably available in the original study? Test whether the wage gap between lesbian and straight women is larger for younger women than for post-menopausal women. That will confound with age cohort effects, but there may be a way around it: use state insurance mandates on assisted reproduction, or state policies with respect to same-sex adoption. If some states require that insurers cover fertility treatments as part of an employer's insurance package and others don't, or if some states make it easier for lesbians to adopt kids, then we'd expect the wage gap between lesbians and straights to be smallest in those states that make it easiest for lesbians to have kids.

Second, testosterone and negotiation strategies. Women, on average, are less aggressive in wage negotiations. If testosterone correlates with aggressiveness in salary negotiations, and some evidence suggests higher than average testosterone levels among lesbians as compared to heterosexual women (though that evidence is contested), then we've another candidate explanation.

I'd put money on the maternity risk variable. I'd only put money on the negotiations one at decent odds.

But really, if correcting for the observables reduces the wage gap between lesbians and heterosexual women from around 40% [the paper cites average hourly wages of $18.70 for lesbians and $13.34 for cohabiting non-lesbian females] to around 5%, odds are pretty high that there are a bunch of unobservables also correlated with job performance that aren't captured in the wage regression.

More broadly: if you think it's implausible that employers love lesbians so much that they pay them extra for no good reason, then shouldn't you expect the same when looking at the male-female pay gap?

Hot Professors and Gresham's Law

Frances Woolley over at Worthwhile Canadian Initiative finds that an economics professor's hotness, as measured by students on ratemyprof.com, increases male professor salaries but has no effect on womens' salaries.

A key source of variation in academic salaries is the ability to obtain an outside offer. Hiring a senior academic, however, is a bit like buying a used car - one that is on the market is much more likely to be a lemon. Someone who is charismatic, likeable and well-organized - the traits that our hot professors seem to possess - may be more likely to convince a hiring committee that he's not a lemon. An outside offers story would be an alternative explanation of why we do not see a hotness premium for women - women are more likely to be in situations where they are unable to move because of family or other commitments.

When we estimated the returns to hotness, we controlled for research productivity - number of publications, citations, and holding a Social Sciences and Humanities Council research grant. Yet there might be further indirect effects of hotness if, for example, people who are fit and healthy are more likely to be hot and also are more productive researchers. We explored this possibility, but didn't find much - the relationships between hotness and research productivity were generally positive, but almost always statistically insignificant.

Where there is a stong relationship is (not surprisingly) between students' evaluations of a professor's hotness and their evaluations of his or her teaching. Hot male professors received significantly higher scores for clarity (0.76 on a 1 to 5 scale) and helpfulness (0.68 on a 1 to 5 scale) than their not-hot counterparts. There was very little difference, however, between the hot and the not in terms of students' ratings of the professor's 'easiness'.

But the pattern for women was quite different. Hot female professors had somewhat higher clarity scores, but the difference wasn't statistically significant. Where hot female professors received significantly higher evaluations was in terms of helpfulness (1.0 higher on a 1 to 5 scale) and "easiness" (0.43 on the same 1 to 5 scale - how I have struggled and failed to avoid the inevitable innuendos).

As a feminist, I find the results in one sense profoundly depressing. Men can have it all - be attractive and also well-paid. Women have a choice - you can go for it, be tough, negotiate a high salary, have high expectations of your students. But don't expect to see a chili pepper beside your name any time soon.

If the study had shown that female salaries were increasing in hotness, I'd expect complaints about how econ departments, typically heavily male, pay extra for eye candy.

Now let's suppose, for sake of argument, that there's no correlation in New Zealand: salaries are invariant to hotness.

As an exercise for the reader, work out the equilibrium where labour is mobile.

Corporate nannies

Nick Smith worries about the growing use of on the job drug testing by corporates.

Recreational cannabis use is rife in New Zealand.

There are, according to Auckland University's Alcohol and Public Health Research Unit, about 1.5 million pot smokers in this country, about 18 per cent of people aged 15-45.

More than half the adult population have inhaled at one time or another.

Illegality aside, it is uncontroversial to assert that what people do in their own home and in their own time is their business, not that of the Government or their employer.

So, corporate examination of people's personal lives by drug testing represents, at the very least, a gross invasion of privacy.

There is also an issue of fairness.

Cannabis stays in the system for up to 30 days and a positive urine test does not mean an employee is under the influence; it means that at some point in the last month they have consumed an illegal drug.

...

Nobody is arguing in favour of smoking on the job but workplace drug testing is being extended way beyond its initial, although dubious, safety justification.

If it were the Government rather than private companies implementing such policy there would be a public outcry at nanny state intrusion.

Perhaps this can be seen as another example of outsourcing government functions to the private sector.

Welcome to the new corporate nanny state.

When we chatted about it earlier, I asked Nick why an employer would ever test employees where it didn't make a difference for job performance and where it does annoy the employees. In short, Becker's discrimination model applies: companies compete for workers, and companies with an irrational fear of employees who are not less productive but who smoke marijuana on their own time will wind up having to pay more to attract staff. On the job drug testing is a disamenity in the overall pay packet requiring compensation.

I generally start from a model where I expect all employers to be completely selfish jerks and then work out why they’d give employees anything: from decent coffee machines to air conditioning in the office. They’re competing with other employers over a total compensation bundle, and if some amenities can be provided at cost lower than their monetary value to employees, then they’ll be provided with a lower monetary salary package. If some other disamenities, like mandatory overtime or working odd shifts or having to take drug tests, increase employer revenue by more than the monetized value of the disutility they impose on workers, then they’ll also provide those disamenities and higher wages. If we had monopsonistic employers with lots of power, then they’d have lots of scope for providing even inefficient disamenities, but that doesn’t characterize most of the workplaces out there. So I could buy inefficient employee drug testing in the “company town” in days of yore, but they don’t much exist anymore and mobility is cheap.

So why then would companies put in place drug tests where the workers' performance isn't likely to be an issue? Can we build a model generating inefficient workplace drug testing - testing where the value to the employer in improved productivity is less than the disutility to workers either of lifestyle changes or privacy violations?

There are a couple of ways. First, if customers put high value on that the product is delivered by a firm with drug testing, then it will be done regardless of whether drug use has any effect on workplace productivity. I don’t buy that story because I think it requires implausibly large customer willingness to pay for something that doesn't have any real effect on product quality. Second, you could maybe build a Glenn Loury statistical discrimination story leading to self-reinforcing equilibria where drug users underinvest in human capital because they expect workplace discrimination (and so drug users are in fact less productive, but only because of the inefficient self-reinforcing equilibrium), but I don’t particularly buy that one either.

Nick's finished piece has a better answer: union regs.

Madison Recruitment's Justin Pipe confirms the trend, saying increasing numbers of professionals are being asked to submit to drug and alcohol testing as part of companies' overall risk management policy.

Usually, Pipe says, it is firms that already have identified ''safety sensitive'' areas, such as operating heavy machinery or onerous driving requirements, that institute such intrusive policy.

On the basis that it is unfair to single out only one employee group, these businesses demand that all workers submit to regular drug and alcohol tests, he says.

Hays' Jason Walker disagrees, noting that such practices are still largely confined to the construction and roading sectors but, he says, testing in these areas are on the rise.

Greg Lloyd, Engineering, Printing and Manufacturing Union general counsel, sides with Pipe. His members, irrespective of the nature of their work, are being asked to provide urine samples for testing.

The EPMU took unsuccessful court action against Air New Zealand over testing of pilots and, Lloyd says, the airline now extends its policy to all members.

If pilot testing is efficient, and sufficiently so that the benefits of it outweigh the costs of imposing testing on all workers given a union constraint of an all-or-nothing regime, then I have a hard time blaming the company for pursuing testing. I can find fault with the union, but I have a hard time finding fault with the firm. If pilot testing is only efficient because of the tort regime, then blame should go to the tort regime.

I just have a hard time seeing why a firm in a competitive labour market would implement an inefficient employment practice. Some might do it by error of course.

And, I would be annoyed if the University here started imposing mandatory drug tests. I don't use anything that would upset them, but I'd still reckon it an intrusion eroding about 5% of the value of my overall pay bundle.

Any better models out there that would generate firms implementing mandatory employee drug tests when those tests are in fact inefficient?