Transcript 2. Important questions that can be analysed with Economics

2. Important questions that can
be analysed with Economics
Some selected examples
1. The economics of discrimination
(males vs. females, black vs. whites,
etc.)
2. Poor and rich countries: what is the
difference?
3. The economics of superstars (rock
stars, football players, etc.)
4. Monetary policy: why you should
care about the ECB
1. The economics of
discrimination
Wage differentials by race (US)
What is discrimination?
• Is this necessary discrimination?
• Why do we observe these
differentials:
– Different characteristics
– Different preferences
– Discrimination?
Are Blacks worse workers?
Wage differentials by gender
Wage and employment differentials
by gender
Where does discrimination take
place?
• Where there are less working
women, the wage gap is
smaller…WHY?
• Selection must be important…
– Getting a job for a woman is more
difficult than for a man…
– The women who are working are the
very good ones…
How difficult is it to get a job for a
woman?
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BLIND AUCTIONS IN ORCHESTRAS
How difficult is it to get a job for a
woman?
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BLIND CVs
2. Why some countries are rich
and others are poor?
The tragedy of Africa!
The tragedy of Africa!
The catching up of India and
Cina
A fancier way of looking at the
same thing
Income distribution over
time
Why do some countries grow and
others remain poor?
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Human capital?
Investment in infrastructure?
Natural resources?
Culture?
Institutions?
– Good institutions may be antitrust
regulations, corporate governance,
conflicts of interest, etc.
Acemoglu et al. think it’s
institutions…
• Is it sufficient to look at whether countries
with some “good” institutions are richer
than others?
• Good instituions may be “endogenous”:
– rich countries are rich because they have
good insitutions or do they have good
institutions becasue they are rich?
• Acemoglu et. al. look at SETTLER’s
MORTALITY
-Acemoglu D., Simon Johnson and James Robinson, “The Colonial Origins of Comparative Development: An Empirical
Investigation” American Economic Review, December, 2001, volume 91, pp. 1369-1401.
2. Why does David Beckham
make 28millions euro a year?
The economics of superstars
The economics of superstars
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Economists have studied these cases
and found two conditions under which
these huge earnings emerge:
1. Quantity is not a substitute for quality: i.e.
watching many bad games does not
equal watching one very good game
2. Technology allows many consumers
(spectators) for each single good, i.e.
produce just one game, then very many
persons can see it.
The economics of superstars
• If I have the very big star I get a
huge number of spectators
• And now even more with
television…
• Without television, one had to go to
the stadium and at maximum I had
the stadium number of spectator per
game
• The value of having the big star has
The economics of superstars
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Think why this does not happen in other
markets
Take economics professors…
– If you get the very big star there still are
substitutes, i.e. lower level universities with
lower prices
– The number of additional students you get is
limited (by class size, congestion, etc.)
•
Should we broadcast economics
classes?
3. Why you should care about
what the ECB does
What is the European Central
Bank?
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It’s where we print euro notes and coins
It’s where the interest rate (the price of
money) is set (partially)
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…Incidentally…WHY DO WE USE
MONEY?
Interest rates
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You want to buy a house.
Go to the bank and ask for, say 200,000
euros
Money is not for free, you need to pay for
thaving this money in advance…
Say 3%...
It means you will have to give back to the
bank 206,000 euros
Mortgages
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There typically are many different types
of mortgages
– Fixed-interest
– Variable interest
– Mixed…
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Suppose you choose variable (now it’s
the most common) and then the ECB
rises interest rates…
All very nice…but…can I earn
a living with economics?
What do economists do?
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Research (academia, private
organizations, NGOSs, International
Organisations, etc…)
Financial sector (analysists, investment
bankers,…)
Consultancies (competition policies,
strategy, etc.)
Set up your own business (Soru is a
Bocconi economist!)