The American Economist

Much has been written about the methodology of economic science. Little has been written about the methodology of applied economics, and most applied economists think of applied economics as subject to a scientific methodology. But, as Classical economists recognized long ago, that cannot be correct as the methodology of science is designed to minimize the integration of values, while applied policy analysis requires the integration of values into the analysis, ideally in as transparent ways as possible. This article suggests that applied policy economics should consciously follow an engineering, not a scientific, methodology because engineering methodology allows for the conscious blending of philosophical methodology, used to arrive at consensus on values, with scientific methodology used to arrive at consensus on scientific facts and understanding.

JEL Classifications: B40, B41, A12, A13

This article provides evidence about the impact that public and private research had on premature mortality and hospitalization due to cancer in the United States during the period 1999-2013. We estimate difference-in-differences models based on longitudinal, cancer-site-level data to determine whether the cancer sites about which more research-supported articles were published had larger subsequent reductions in premature mortality and hospitalization during the period 1999 to 2013, controlling for the change in the number of people diagnosed. Premature (before age 75 years) mortality is inversely related to the number of research-supported articles that had been published 9 to 15 years earlier, controlling for incidence and non-research publications. The number of hospital discharges attributed to cancer is also significantly inversely related to the number of research-supported articles previously published. Public and private research reduced the number of years of potential life lost before age 75 years due to cancer in 2013 by 566,000.

JEL Classifications: I1, I18

The article provides the empirical framework and steps toward the evaluation of the spatial consequence of the 17% interest rate ceiling in Arkansas using a new database from the trade association for installment lenders, the American Financial Services Association. The specific contribution of this study is to build and apply the installment loan accessibility index within the context of the spatial regime models. Results suggest strong evidence of spatial clustering of counties with similar (low or high) installment loan usage rates across the study area and two spatial regimes at work. The loan accessibility index is a strong predictor of the installment loan usage in the study area. That is, an increase in the loan acquisition costs due to the 17% interest rate cap puts interior counties’ residents at disadvantage compared with residents of border counties who can cross the borders to get small dollar loans.

JEL Classifications : C51, C52, G23, G28

This study examined whether a person’s gender influences his or her real estate trading sentiments. Previous studies have suggested that risk aversion, loss aversion, and expectations of probabilities can affect trading sentiments. Thus, this study inferred that a person’s gender can inform these three factors and thus lead to differences in real estate trading preferences between genders. More noticeable expectation adjustment behavior was observed in men than in women. However, no significant expectation errors were observed in both genders. Moreover, this study observed that gender differences in risk aversion were affected by the fear index, whereas gender differences in loss aversion were affected by unemployment rates. Stock market rallies affected only men’s perceptions toward real estate value. Overall, a more noticeable optimism was observed in men, who were significantly influenced by house price changes.

JEL Classifications: G10, R30

The uncertainty-of-outcome hypothesis suggests that, subject to a rooting-interest constraint, fans prefer competitive sporting events with uncertain outcomes. In a logical extension of that preference, professional-sports leagues institute rules, such as reverse-order-of-finish drafts and salary caps, intended to help achieve competitive balance among their franchises. This article analyzes the results of the 34 National Basketball Association (NBA) playoffs held since 1984 to determine whether they reflect the competitive imbalance observed for regular-season play, relying on the entropy concept as a measure of uncertainty/information content to do so. It is shown that unlike regular-season competitive balance, playoff entropy has not systematically changed over time.

JEL Classifications : D47, D84, Z20, Z21

This note derives a new formula for determining a monopolist’s optimal multitier pricing scheme for any given number of tiers. It further characterizes Gabor’s (Review of Economic Studies) two-tier pari passu marginal revenue function to the n -tier case. By introducing the individual tier’s marginal revenue and the pari passu marginal revenue in a linear demand case, this note provides a perceptive graphical representation of the optimal pricing scheme, revealing that all tiers’ outputs are equal, the last tier’s price is always higher than the marginal cost, and an increase in the number of tiers increases social welfare. In a class of nonlinear demand functions, it shows that starting from the first tier, the tiers’ outputs are monotonically increasing (decreasing) if the demand function is strictly convex (concave). It also shows that the equal-tier-output property preserves in the linear demand case with the total output fixed as a constraint.

JEL Classification : D01, D21, D42, L12, L21

This article describes a strategy for using the minimum wage as a classroom debate topic. Classroom debate is an active-learning strategy that encourages students to develop skills that are often lacking in the college curriculum. Specifically, classroom debate promotes critical thinking and encourages students to see topics from various perspectives. Economics topics are well suited for classroom debate because most of the policy arguments have at least two well-reasoned positions. The minimum wage is an economics topic that students tend to care deeply about because it speaks to issues of poverty, income inequality, discrimination, and the economic value of education, and many students in the college demographic earn minimum, or near-minimum, wage. Instructors who use the minimum wage debate in their classrooms will find that students will apply an “economic way of thinking” to issues at the core of the curriculum.

JEL Classifications : A21, A22, J3

Learning must inherently involve practice. It is true for athletes, for musicians, for almost any area of learning. However, this commonsense approach stops short when it comes to student homework where the debate about whether to allow multiple attempts continues. Proponents claim the value of practice and learning by reworking. Opponents cite grade inflation, student guessing behaviors, and superficial learning rather than true mastery. Meanwhile, the increased use of online homework management systems that easily allow for multiple graded attempts intensifies the need for a data-based answer to the question. It is further complicated by the increase in adult learners and online education. Would multiple homework attempts increase student learning? Would the effect be the same for adult learners in a fully online environment as found in previous studies of traditional students? This natural experiment divided a sample of 917 online students in an entry-level university economics course into two groups to look at the relationship between multiple graded homework attempts and exam scores. The results show mean exam scores increased from 60.34% to 70.77%, when multiple homework attempts were allowed. In addition, 76.89% of variance in exam scores was explained by variance in homework scores. This strong relationship suggests that multiple graded homework attempts increased student learning as measured by the increased exam scores.

JEL Classifications: A22, C93, D01, 121