The Prisoner’s Dilemma of Non-Competes

by  Alex Tabarrok in

I agree with Tyler, that the FTC ban on non-competes is overly broad and not tailored to fields where the drawbacks outweigh the benefits. Additionally, the FTC’s authority to enact this rule, rather than Congress, is questionable.

Nevertheless, I don’t think banning non-competes is without merit. The reason is not the standard Twitter-econ view that non-competes are bad for workers. Indeed, some non-competes, so-called “gardening leave”, pay the worker during the non-compete period. Sounds pretty good! More generally, non-competes are just one item in the wage bargain like hours, health and pension benefits. As a result, the FTC is quite wrong to think that banning non-competes will raise wages–the most immediate effect will be to reduce wages. Indeed, more workers will be willing to work at lower wages precisely to the extent that non-competes were a burden. Can’t have it both ways. Instead of being bad for workers, my skepticism about non-competes is that they are bad for industry.

The problem with non-competes is that every firm wants non-competes on the workers it fires but no firm wants non-competes on the workers it hires. However, firms only control the terms on which they hire workers so it’s possible for each firm acting in its self-interest to create a situation which is in the interests of none. Or, to put it differently, firms may approve of the decision to ban non-competes because it’s a package deal, firms can’t restrict their own former employees but they gain the ability to recruit freely from competitors.

More generally, worker mobility often carries externalities. As I wrote earlier, ideas are in heads and if you don’t move the heads, often the ideas don’t move either. The innovation that results from mobility is a public good. Non-competes are a type of intellectual property, call it intellect property. Once again, firms want to lock up their intellectual property but they also want to use ideas from other firms. Firms only control the former decision not the latter so IP in general has a prisoner’s dilemma issue which is one reason IP in the US is too strong (see the Tabarrok Curve) and non-competes are part of that package. Ultimately, if the innovation effects are important, wages could rise but those effects would be for more or less all workers not specifically for those with non-competes.

Governments aren’t good at the fine details of optimizing IP so perhaps a heavy-handed approach is the best we can expect. Non-competes also aren’t a huge issue for most firms, even firms that use them, so given the above I am willing to give the experiment a try.

The Norwegian ban on smart phones in middle schools

by  Tyler Cowen in

Here is a new paper by Sara Abrahamsson.  Perhaps there is Norwegian exceptionalism at work, but the results reflect my expectations reasonably closely.  The basic setting is that smart phones were banned in middle school, but at varying (and exogenous) rates around the country.  Here are some of the core findings, noting that reading the paper gives some different impressions from some of the Twitter summaries:

1. Grades improve, for instance for the girls it goes up by 0.08 standard deviations.  Worth doing, but hardly saving a generation.  For girls, the biggest improvement comes in their math scores.

2. The girls consult less with mental health-related professionals, with visits falling by 0.22 on average to their GPs, falling by 2-3 visits to specialist care.

3. “I find no effect on students’ likelihood (extensive margin) of being diagnosed or treated by specialists or GPs for a psychological symptom and diseases.”  So more visits, but those visits don’t lead to much.

4. Bullying falls, by 0.42 of an SD for girls, 0.39 of an SD for boys.  That is a larger effect than I would have expected.

5. The grade gains are highest for students with lower SES backgrounds.

6. When you look into the details of the data (p.22), the improvement in grades does not seem correlated with the decline in the number of visits to mental health professionals.

So if you ban smart phones from schools, grades go up by a very modest amount, bullying falls by a less modest amount, and actual mental health diagnoses stay the same.  In the United States at least, parents seem to hate cellphone bans, because they cannot reach their kids at will.

And there you go.  Here is some commentary on the p values in the paper.

Why do I prefer current airport procedures?

by  Tyler Cowen in

Michael Stack writes me:

“Hi Tyler – you wrote about preferring current airport procedures to pre-9/11 procedures. Do you plan to elaborate on this? I have a hard time understanding why you’d feel that way.

Here is the list I produced – these are guesses as to why you might feel the way you do:

  • Because friends/family can’t meet you at the gate, it reduces crowding in some of the stores, restaurants, and waiting areas.
  • Security imposes a higher cost on travelers which reduces crowding – what are the pricing effects? Is this a transfer from airlines? From travelers?
  • You’re very worried about another terrorist attack and think our security substantially reduces the chance of an attack.

I can’t really think of many other reasons you’d prefer the current approach.”

TC again: My view is fully his third explanation.  Whether we like it or not, people and policymakers respond irrationally to terror attacks on airplanes, or terror attacks using airplanes.  I do think the current procedures stop or discourage some number of idiots, noting they likely would not stop a sufficiently sophisticated attack attempt.  But a lot of criminals are simply some mix of stupid and incompetent or poor on execution.  You don’t want to have attacks on airplanes become any more focal/copycatted than they already are.

I fully get all the “why don’t they just set off a bomb by the passengers waiting to get through security” points, and the like.  I just don’t think that is how it works.  Why don’t school shooters go to playgrounds instead, or wherever?  Maybe someday they will, but for now there is an odd stickiness in the nature of the events.

I don’t doubt that various features of the status quo could be improved, such as more security entry points being open and a better bureaucracy for generating and confirming pre-check privileges.  Some of those improvements, however, might be more rather than less intrusive, such as more spot checks of passengers at security or during boarding.

Many people have objected to the point I made, but I don’t think the benefit-cost analysis on this one is close.  Nor do I see a huge voter or elite demand to return to the pre-9/11 world for airports.

Wednesday assorted links

by  Tyler Cowen

1. U.S. vs. Taiwanese work culture.

2. Albert Wensemius and the rise of Singapore.

3. Unusual questions answered by Megan McArdle.

4. Why Panama dollarized.

5. New open access book on prices and games by Michael Richter and Ariel Rubinstein.

6. Canada now limiting immigration.

7. “In the fiscal year 2023, more than half of the irregular arrivals at the US’s southern border were from countries outside Mexico and northern Central America for the first time…”  FT here, source here.

7. Helen Vendler, RIP.

8. A possible plateau in opioid and drug overdose deaths? (limited data, but possibly true)

9. A different way to deal with non-competes?

What can LLMs never do?

by  Tyler Cowen in

By Rohit Krishnan, he and I are both interested in the question of what LLMs cannot do, and why.  Here is one excerpt:

It might be best to say that LLMs demonstrate incredible intuition but limited intelligence. It can answer almost any question that can be answered in one intuitive pass. And given sufficient training data and enough iterations, it can work up to a facsimile of reasoned intelligence.

The fact that adding an RNN type linkage seems to make a little difference though by no means enough to overcome the problem, at least in the toy models, is an indication in this direction. But it’s not enough to solve the problem.

In other words, there’s a “goal drift” where as more steps are added the overall system starts doing the wrong things. As contexts increase, even given previous history of conversations, LLMs have difficulty figuring out where to focus and what the goal actually is. Attention isn’t precise enough for many problems.

A closer answer here is that neural networks can learn all sorts of irregular patterns once you add an external memory.

And:

In LLMs as in humans, context is that which is scarce.

Interesting throughout.

What is the proper policy toward tourists?

by  Tyler Cowen in

That is the topic of my latest Bloomberg column, basically you should charge them fees rather than discourage them through other means>  Here is one excerpt:

By this reasoning, the Japanese decision to raise bullet train prices for tourists is exactly the right approach. In the meantime, the Japanese government, which faces high pension costs, has more money at its disposal. There is no need to resent or otherwise restrict the tourists at all, and indeed I have found the Japanese people to be extremely gracious and helpful to foreigners. Higher prices for tourist train tickets will make it easier for them to stay this way.

If there is any problem with Venice’s five-euros-a-day charge, it is that it is not nearly high enough, given crowding and accumulated wear and tear on the city. How about 50 euros? But with a smile!

The same goes for the bus in Barcelona: Why not raise the fare? Just for tourists. It is easy enough to (partially) enforce this differential treatment with spot checks on the bus line. An alternative or possible complement to this plan is to run more buses to the park, to alleviate congestion. Higher fees for tourists can help pay for them.

Here is an interesting problem:

Amsterdam has a more difficult challenge. Barcelona and Venice have some unique attractions and sites that can be priced at higher levels, with exclusion applied to non-payers. In contrast, for many Amsterdam tourists the attractions are booze, pot and sex, all of which have prices set in basically competitive markets. I’m all for more expensive tickets to the Rijksmuseum, but that might not make much of a difference to Amsterdam’s “party tourism” problem.

Worth a ponder.

More Tuesday links

by  Tyler Cowen

1. AI Camera turns your images into poetry.

2. Highly capable model locally on your phone.

3. Clara Piano reviews GOAT.  “Perhaps, in his emphasis on the importance of ideas, Cowen reveals that he is ultimately a Simonian. After all, the human mind is the ultimate resource.”

4. Market liberalism, Chinese style.

5. Red flags for improper judicial conduct.

6. Data on the economics of bookselling, designed to dissuade would-be authors.

Four Thousand Years of Egyptian Women Pictured

by  Alex Tabarrok in

In an excellent, deep-dive Alice Evans looks at patriarchy in Egypt using pictures drawn from four thousand years of history. Here are three examples.

A wealthy woman, shown at right circa 116 CE. Unveiled, immodest, looking out at the world. A person to be reckoned with.

After the Arab conquests, pictures of people in general disappear, and there are no books written by women. With the dawn of photography in the 19th century we see (at left) what was probably typical, veiled women, and very few women on the street.

In the  1950s and 1970s we see a remarkable revitalization and liberalization noted most evidently in advertisements (advertisers being careful not to offend). Note the bare legs and the fact that many advertisements are directed at women (below)

1952cocamagda

This period culminates in a remarkable video unearthed by Evans of Nasser in 1958 openly laughing at the idea that women should or could be required to veil in public. Worth watching.

In the 1980s, however, it all ends.

traditionsEgyptians who came of age in the 1950s and ‘60s experienced national independence, social mobility and new economic opportunities. By the 1980s, economic progress was grinding down. Egypt’s purchasing power was plummeting. Middle class families could no longer afford basic goods, nor could the state provide.

As observed by Galal Amin,

“When the economy started to slacken in the early 1980s, accompanied by the fall in oil prices and the resulting decline in work opportunities in the Gulf, many of the aspirations built up in the 1970s were suddenly seen to be unrealistic and intense feelings of frustration followed”.

‘Western modernisation’ became discredited by economic stagnation and defeat by Israel. In Egypt, clerics equated modernity with a rejection of Islam and declared the economic and military failures of the state to be punishments for aping the West. Islamic preachers called on men to restore order and piety (i.e., female seclusion). Frustrated graduates, struggling to find white collar work, found solace in religion, whilst many ordinary people turned to the Muslim Brotherhood for social services and righteous purpose.

That’s just a brief look at a much longer and fascinating post.

Tuesday assorted links

by  Tyler Cowen

1. A literalist reading of Civil War.

2. Why it is so hard to get a reservation nowadays (New Yorker).

3. “There are currently 682 #AI-related bills (581 of them in the states) on the @MultiStateAssoc legislative tracker.”  Link here.

4. The econometrics of social media and mental health.  And more on the same.  A good piece.

5. Esther Duflo calls for $500 billion in climate reparations (FT).

Hiring discrimination sentences to ponder

by  Tyler Cowen in

Several common measures — like employing a chief diversity officer, offering diversity training or having a diverse board — were not correlated with decreased discrimination in entry-level hiring, the researchers found.

But one thing strongly predicted less discrimination: a centralized H.R. operation.

The researchers recorded the voice mail messages that the fake applicants received. When a company’s calls came from fewer individual phone numbers, suggesting that they were originating from a central office, there tended to be less bias. When they came from individual hiring managers at local stores or warehouses, there was more. These messages often sounded frantic and informal, asking if an applicant could start the next day, for example.

“That’s when implicit biases kick in,” Professor Kline said. A more formalized hiring process helps overcome this, he said: “Just thinking about things, which steps to take, having to run something by someone for approval, can be quite important in mitigating bias.”

That is from Claire Cain Miller and Josh Katz in the NYT.

Seasonality and the Invention of Agriculture

by  Tyler Cowen in

Forthcoming from the QJE, here is a new paper by Andrea Matanga:

The Neolithic revolution saw the independent development of agriculture among at least seven unconnected hunter-gatherer populations. I propose that the rapid spread of agricultural techniques resulted from increased climatic seasonality causing hunter-gatherers to adopt a sedentary lifestyle and store food for the season of scarcity. Their newfound sedentary lifestyle and storage habits facilitated the invention of agriculture. I present a model and support it with global climate data and Neolithic adoption dates, showing that higher seasonality increased the likelihood of agriculture’s invention and its speed of adoption by neighbors. This study suggests that seasonality patterns played a dominant role in determining our species’ transition to farming.

Here are various less gated copies.  Via Nicanor Angle.

Monday assorted links

by  Tyler Cowen

1. Are Indian women stronger relative supporters of Modi?

2. Apple to build on-device AI?

3. The remarkable economic recovery of Sri Lanka?.

4. “UK alcohol-related deaths up one-third on pre-pandemic levels…” (FT)

5. New Cass Sunstein book on campus free speech.

6. The Straussian approach to the new Taylor Swift.

7. Macro Musings podcast from Mercatus is now powered by AI.

8. AI helping to identify potential Parkinson’s treatments.