econlife - Jaywalking and the Tradeoff Between Order and Openness by Elaine Schwartz

Our story starts at 11 pm and a green traffic light. Except for one pedestrian, the streets are empty. There are no cars, no other people.

In Berlin, the individual crosses the street when the light turns red. In Boston, no one waits. Explaining the different behaviors, a psychologist from the University of Maryland says one culture is tight and the other is loose.

Where are we going? To how tight and loose social norms affect behavior.

Tight and Loose Social Norms

At home you could be someone who likes order. You load the dishwasher with the forks next to each other, the knives, next and then the spoons. But your mate does not.

On a national level, the parallel could be the Japanese World Cup fans who did some clean-up after the game because their culture tends to be more orderly. Their Brazilian hosts did not.

According to psychologist Michele Gelfand, our rules about rules vary. In a tighter culture, there are more rules and people are expected to observe them. Meanwhile, looser cultures not only have fewer rules but the boundaries are more ambiguous. Essentially we are looking at the power of social norms.

Dr. Gelfand suggests that national threats generate stronger social norms. The list could include invasions, natural disasters, diseases–wherever survival required coordinated behavior. Meanwhile, the countries or even communities that faced fewer existential challenges had less of a need for societal coordination. If you imagine a continuum, then Japan, Germany, Singapore, and South Korea are among the countries on the tight end while the other pole includes New Zealand, Greece, the Netherlands, and Brazil.

In the United States, states vary. On that scale, Dr. Gelfand says the tighter cultures are located in the South and some parts of the Midwest. They include Mississippi, South and North Carolina, Kentucky, and Louisiana. Meanwhile, some of the states that “veer looser” are New York, California, Oregon, Maine, and Massachusetts.

Our Bottom Line: Tradeoffs

As economists, we can focus on the tradeoff between order and openness. We can look at our investing habits, at corporate merger cultures, and even at our political preferences. Tighter cultures tend to have less obesity, less debt, and less alcoholism. Even pets are skinnier in Germany (I wonder if Dr. Gelfand has those stats.). Meanwhile, looser cultures have more creativity and tolerate differences. Explaining the response to COVID-19, Dr. Gelfand believes that tighter cultures have had more success containing the spread of the virus.

So perhaps we can say that late night behavior at a traffic signal could provide a clue about the strategies for fighting a pandemic.

My sources and more: Yesterday, this Hidden Brain podcast on tight and loose cultures made a long walk seem much shorter. From there, I looked at this Science article to see how 33 countries varied. But if you read just one article, do look at Dr. Gelfand’s comments on the spread of the coronavirus in the Boston Globe. Finally though, you could have some fun (as did I) taking her tight/loose quiz to quantify your own mindset.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - One Way That Norway Is Different from Nigeria by Elaine Schwartz

When it comes to New York City parking tickets, Norway and Nigeria are quite different.

As you know, a foreign diplomat need not pay a parking ticket. But many of them do. In  a 2006 parking ticket study, two economists found that diplomats from countries with minimal corruption were most likely to pay. The ones who didn’t came from countries where corruption was the norm and the U.S. was unpopular.

Including Norway, there were 22 countries (out of 146) with no outstanding parking tickets. Israel, Japan, Ecuador, the United Kingdom, Oman, and Greece also had none. Then at the other end, Kuwait topped the scofflaw list with 246 per diplomat. Nigeria was #15 with 58.6 for each consular official:

The cost to NYC was more than $18 million dollars between 1997 and 2002. However, in the home countries of those diplomats, the cost of corruption was much more.

The Cost of Corruption

The World Economic Forum considered the economic impact of public corruption. Looking at highly corrupt resource-rich nations, they suggested that people benefit less from their nation’s wealth. In addition, bribes cut the amount of tax revenue and make tax evasion more acceptable.

Tax Revenue

You can see the difference in tax revenue between more and less corrupt countries:

Education

Furthermore, corruption siphons public revenue away from schools and healthcare. In an IMF paper, researchers report that the share of spending on education and health is lower where corruption is widespread.

Below, where corruption is less controlled (blue bars), there is relatively less education and health spending:

Correspondingly, we wind up with an inverse relationship between corruption and student test scores. (As did I you may wonder if the correlation is misleading. However, the WEF notes that “the correlation remains significant even when controlling for GDP per capita.):

Our Bottom Line: Social Norms

When corruption becomes a social norm, it can be rather “sticky.” Consequently, when diplomats travel to New York City, behavior that is approved at home sticks with them. At the same time, that stickiness prevails at home in private and public commerce as corruption channels money away from a more efficient destination.

Finally, I thought you might want to see which countries are more corrupt so I went to the corruption index at transparency.org (whose criteria have been debated but still, the map conveys a pretty valid picture of corruption.)

Returning to where we began, Norway is #7 while Nigeria is #144 out of 180 countries  that are ranked from least to most corrupt.


My sources and more: I suspect that you will want to read more after this Bloomberg article on parking. So from there, I recommend this 2006 paper on diplomats’ parking tickets. After that, my path took me to The World Economic Forum and this IMF report.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - When Cash Is Not the Best Thank You by Elaine Schwartz

Assume you are going to a friend’s home for dinner. Having had no time to pick up a bottle of wine, instead you give your host $30.

Nobel laureate Alvin Roth calls that a repugnant transaction.

Everyday Repugnant Transactions

You can express your appreciation for a dinner at someone’s home with flowers and wine but not money. California says any restaurant serving foie gras will be fined as much as $1000. We have wedding registries so givers can be sure their gift matches what the bride and groom want. The other way is cash that, in most cultures (but not all), is inappropriate.

So yes, there are certain things we are not supposed to pay for. And when we do, the transaction is regarded as “repugnant.” It is a transaction that some people do not want others to engage in.

Medical Repugnant Transactions

In the U.S. selling a kidney is illegal. Considered a repugnant transaction, exchanging dollars for organs is called immoral by many people. They also worry about the poor being taken advantage of and commodifying a body part.

Kidney disease, however, is one of the top ten causes of death in the U.S. When someone needs a donor, the most likely possibility is a relative’s kidney but it might not match. And because people cannot sell them, the supply of kidneys among strangers is less than it might be.

WSJ recently told the story of a journalist whose brother needed a kidney. Although her own kidney did not match what he needed, she still could help him get one. The first step was giving her kidney to someone else.

This was the path of her kidney:

The idea of an exchange pool came from Alvin Roth. Hoping to help more donors and recipients find each other, he figured out how to bring them together. The key was to create kidney exchanges that are based on multiple pairs. With single pairs, Sue gives a kidney to Donna and Dave gives his to Sam. Moving to three pair and four pair exchanges, the complexities multiply but so too do the number of beneficiaries.

Our Bottom Line: Markets

Repugnant transactions create a conflict between market efficiency and morality. So Dr. Roth figured out how a non-money market could become more efficient.  As he explains in his book, markets work best when they are “thick” and avoid congestion. They also need simple and safe rules. “Thick” markets have many participants. Non-congested markets avoid the gridlock created by too many participants. For example, a congested market could have 1000 farmers each selling wheat. Because grouping the wheat into categories minimizes decision-making, you would lessen the congestion. And finally, as much as Adam Smith promoted laissez-faire markets with minimal government interference, safety rules can be crucial.

Al Roth constructed matching algorithms through which non-money markets could be thick, non-congested, simple, and safe. He made it possible to diminish the inefficiencies created by avoiding repugnant transactions.

My sources and more: If you want to meet Alvin Roth and hear more about repugnant transactions, HiddenBrain is the perfect start. Then, the LA Times has more on California’s food prohibitions. But if you read just one article, do go to WSJ for Yogita Patel’s kidney story. Finally, if you have the time, Roth’s book was good.


Please note that several of today’s sentences were in a previous econlife post and our featured image is from Pixabay.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - The Mom Penalty and the Dad Bonus by Elaine Schwartz

Elon Musk has five sons. In 2013, when asked about his time with them, he said, “What I find is I’m able to be with them and still be on email. I can be with them and still be working at the same time…If I didn’t, I wouldn’t be able to get my job done.”

Would most women have said the same thing?

The Mom Penalty

In 1979, women typically earned 63 cents for every dollar that men made. By 2003, the gap had shrunk to 81 cents for each dollar. In 2010, we even had ABC  News announcing that women earned 8% more than men if they were unmarried, under 30 and living in a urban area.

But that subset is small.

You can see below that other categories of women who are comparable to men in every other way get paid less:


The 4% Plunge

The number to remember is 4%. A mom’s wages plunge 4% per child. But it gets even worse because your affluence counts. For the top 10%, the motherhood penalty pretty much disappears. However, with the lower wage earner, it is 6%.

Hypothesizing why, we can cite a list of reasons.

Women could earn less because they…

• Spend more time at home to be with children.
• Select lower paid mom-friendly jobs.
• Have less energy and more distractions at work because of children.
• Experience employer discrimination.

The Dad Bonus

Meanwhile, men benefit from being fathers, especially those at the top. The reason could be that fatherhood implies stability, a wife to take over your responsibilities, and the need for a greater work commitment. For married (or even unmarried) white college-educated men. the daddy bonus can be as much as 8%. But lower wage earners benefit much less.

The fatherhood wage bonus:

Our Bottom Line: Confirmation Bias

A behavioral economist could say that the mom penalty and dad bonus are all about confirmation bias. Because employers expected children to affect the job done by women, they paid them less. Consequently they were reinforcing and perpetuating social norms that constrained women’s careers.

So yes, Elon Musk might be disparaged less for working when with his children than a mom. And, as a white highly educated dad, he has the biggest boost from the fatherhood bonus.

My sources and more: Recently, articles about professional women and children are everywhere. WSJ spoke about female innovators and the NY Times, about the economics profession (as did econlife). Meanwhile, these recent papers, here and here, and summaries of studies, refer to the motherhood penalty. And BusinessInsider had the Elon Musk fatherhood quote.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.