Economic Rockstar

Connecting Brilliant Minds in Economics and Finance

025: Dan Hamermesh on the Economics of Beauty: Attractive People Are More Successful

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025: Dan Hamermesh on the Economics of Beauty: Attractive People Are More Successful 

Dan Hamermesh is Professor in Economics at the Royal Holloway University of London and at thePortraitHamermeshwithoutJacket University of Texas at Austin. Dan researches the economics of beauty. He received his Ph.D. from Yale and has since taught at Princeton, at Michigan State, and at Texas. He has held visiting professorships at universities in North America, Europe, Australia and Asia, and lectured at almost 250 universities in 48 states and 33 foreign countries. His research, published in nearly 100 refereed papers in scholarly journals, has concentrated on time use, labor demand, discrimination, academic labor markets and unusual applications of labor economics (to beauty, sleep and suicide).

Professor Hamermesh has received many notable and distinguished honors and awards in recognition for his contribution to the field of economics. These include the Mincer Award and the IZA Prize in Labor Economics, the John R. Commons Award, as well as many teaching of excellence awards.

Daniel’s teaching include Microeconomics; Macroeconomics; Econometrics; Economics of Labor and Economics of Life.

Daniel is the author of many books including Demand for Labor: The Neglected Side of the Market, Beauty Pays: Why Attractive People Are More Successful, The Economics of Time Use and Economics Is Everywhere. He is also a regular contributor to the Freakonomics blog and podcast.

Economic Themes:

In this interview, Dan mentions and discusses:

Speculation, inter-temporal maximisation, labor economics, incentives, wages, welfare payments, comparative advantage and externalities.

Economists:

In this interview, Dan mentions:

 John Maynard Keynes, Gary Becker, Gregg Lewis, Robert Lucas and Michael Lewis.

Influencers:

Gary Becker and Gregg Lewis

A lot of my stuff is the weird kind of stuff that Becker pioneered – Dan Hamermesh.

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Gregg Lewis had a concern about data – about doing it right, making sure you were right. That’s a crucial thing. One has to take data seriously – Dan Hamermesh.

Advice:

Do what you think you’ll enjoy, because if you think you’ll enjoy it the odds are pretty good you’ll do well at it. You’ll be motivated to work hard and to succeed – Dan Hamermesh

Find out:

  • how economics can be used beyond the theoretical framework we see in textbooks.
  • why we should think about economics in things we see or do in the real world.
  • how students of economics can inspire their professors in a two-way mutual learning process.
  • how economics is everywhere – we just need to think, see and interpret.
  • how economics is enjoying a revival in reaching to mass audiences.
  • why we should read interesting books on economics.
  • if happiness is related to how beautiful or attractive you are.
  • why better-looking men are happier.
  • how to recognise if you are beautiful.
  • what good-looking attorneys, prostitutes, politicians and NFL quarter-backs have in common.
  • if economists should be studying the effects of being attractive and ugly.
  • if people have an increased need to become beautiful.
  • whether increased spending on cosmetics, hair and clothing by women will have a pay-off in the labor market.
  • if plastic surgery to alter beauty results in higher earnings.
  • about the disability benefits available to obese people.
  • if an obese person is perceived to be less beautiful than a slim person.
  • if there is a relationship between ugliness and where a person lives.
  • why Dan was interested in studying the economic impact of beauty.
  • which economic markets show evidence of the impact of beauty.
  • how Dan first met his wife of 42 years.
  • what Dan thinks of Abercrombie and Fitch’s ‘six-pack’ hiring policy.
  • if being attractive prohibits opportunities in the labor market.
  • if you should work in the private or public sector if you are good-looking.
  • how to identify an externality on the side-walk.
  • why you should do what you’ll enjoy rather than chasing the money.

Why Attractive People Are Happier and Economically Better-Off.

Attractive people have been found to be happier than not-so-good-looking people. Better-looking men receive higher incomes, which make them happier overall. Attractive women are also happier, but their happiness is more direct in that their happiness is the result of knowing that they are good-looking. Attractive women do receive higher incomes but this is not a direct link to their happiness as it is for men.

“The beauty itself is directly more salient to them than it was for men, even though the overall effect was identical for both genders” – Dan Hamermesh.

How someone realises if they are attractive or not is due to the reinforcement by other people in making you aware whether you are good-looking or ugly. “Better-looking babies are treated better by their parents and by other people. Better-looking 5 year olds are treated better in kindergarten than ugly ones. When you’re chosen for teams or go out in High School, the better-looking people do better. And they also, given even the amount of education they attained, they’ll do better in the labor market. They’ll get better jobs, make higher pay, even within the same occupation” (Dan Hamermesh). Good-looking attorneys, prostitutes, politicians and National Football League quarter-backs make higher pay than their uglier colleagues.

In the labor market, the top one-third of people who are considered good-looking will earn 10 to 12% more in income independent of any differences that might exist between them and those not considered good-looking.

A woman’s increased spending on cosmetics, hair and clothing will not increase her perceived beauty and will also have a minimal pay-off on the labor market for her. Plastic surgery for cosmetic reasons does not have a benefit in terms of increasing earnings in the labor market. You do it to feel good. It’s not an economic investment, it’s a feel-good investment.

“Unless a person is morbidly obese, people do not view him or her as being any uglier than anybody else, all things taking together” – Dan Hammermesh.

Does Location Determine Whether You Are Beautiful or Ugly?

I ask Dan whether a person’s good looks are determined by the area in which they live. The reason I ask this is based on our earlier discussion on why attractive people typically earn a higher income. It can be fair to suggest that cities or regions that pay more would consequently attract good-looking people.

Dan states that “if you’re a good-looking person, you’re going to flock to an area where your looks pay off more. And if you’re a bad-looking person, you might want to go away from an area where looks pay off. In the UK, where people who were born in Scotland and Wales, if they’re good-looking, are more likely to migrate to South-East England (London) than other people”.

Also, “people who were born in South-East England (London) who are bad-looking appear to move to outlying areas where their looks aren’t so important”.

“Looks not only affects where we live in terms of what we make, but where we choose to live in terms of where we spend out adult lives. You’ll go where you get the biggest bang for your buck or, in this case, the biggest pounds for your beauty.”

Economic Markets Where Beauty and Attractiveness Are Present:

  1. Labor Markets: Higher wages and better conditions.
  2. Marriage Markets: A good-looking woman will attract a man who earns more.
  3. Market on Unsecured Loans: Attractive people are more likely to get a loan and on better terms.

Recommended Books:

Where To Find Dan Hamermesh:

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022: Josh Angrist on Taking the Con Out of Econometrics – Kung Fu Style

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022: Josh Angrist on Taking the Con Out of Econometrics – Kung Fu Style

Master Joshway, better known as Josh Angrist, is the Ford Professor of Economics at MIT and a ResearchAssociate in the NBER’s programs on Children, Education, and Labor Studies. Josh received his B.A. from Oberlin College, spent time as an undergraduate studying at the London School of Economics and as a Masters student at Hebrew University. He completed his Ph.D. in Economics at Princeton.

Angrist’s research interests include the effects of school inputs and school organization on student achievement; the impact of education and social programs on the labor market; the effects of immigration, labor market regulation and institutions; and econometric methods for program and policy evaluation.

Josh is a Fellow of the American Academy of Arts and Sciences, The Econometric Society, and has served on many editorial boards and as a Co-editor of the Journal of Labor Economics.

Josh is the author (with Steve Pischke) of Mostly Harmless Econometrics as well as Mastering ‘Metrics.

Find out in this episode how Josh went from High School drop-out to Professor of Economics at MIT.

Never forget that, at the most, the teacher can give you fifteen percent of the art. The rest you have to get for yourself through practice and hard work. I can show you the path but I can not walk it for you – Kung Fu Master Tan Soh Tin

Economic Themes:

In this interview, Josh mentions and discusses: econometrics, clinical trials, randomized trials, instrumental variables, regression, health insurance, longitudinal studies, selection bias, fairness, human capital, the quantity-quality trade-off, specification testing, robustness, time series, BLUE, Gauss-Markov, labor economics, regression, reverse causality, spurious correlation and data mining.

Economists:

In this interview, Josh mentions: Gary Becker, Shoshana Grossbard, Marina Adshade, Steve Pischke, Chris Blattman, Matt Holian, Christopher Sims, Russell Roberts, Greg Mankiw, Amy Finkelstein, Nancy Qian, Erlich, Ed Leamer, Steven D. Levitt, Stephen J. Dubner, Phil Oriopolis, Alan Kreuger, Orley Ashenfelter, David Card, Whitney Newey, Guido Imbens, Gary Chamberlain, Allan Meltzer, Scott Richard and Daniel Hamermesh.

On Mastering ‘Metrics: The intersection of the highway is a metaphor for causality. This is the theme of the book – ‘you’re facing a choice you’ll never know what the counterfactual was. You can imagine it’. The goal of econometrics is to reveal that in some way through statistical methods or experimentation. – Josh Angrist.

Josh and Steve’s book, Mastering ‘Metrics, is Kung Fu themed and they use that as a vehicle for humour.

MasterJoshwayMasterStevefu

Find out:

  • about Master Joshway and Master Steveway – the Kung Fu Economists.
  • how Josh went from working in a mental hospital to working in MIT.
  • why and how the Kung Fu theme was adopted by Josh and Steve.
  • where the names Master Joshway and Master SteveFu came from.
  • why Josh is a critic of macroeconomics.
  • the difference between traditional applied micro and applied micro today.
  • Josh’s views on using assumptions in microeconomics.
  • how to design an microeconomics experiment using randomized trials.
  • about health insurance in the US.
  • about Obama Care or the Affordable Care Act.
  • the Oregon Health Experiment where health insurance was offered as a lottery.
  • about Ireland’s upcoming health insurance policy change.
  • about the ‘Furious Five’ – not Kung Fu Panda – but the core research methods.
  • what’s a good economics experiment for family size.
  • where babies come from – Storks?
  • what are the chances of US married couples having a 3rd child if the first two are the same gender.
  • if people who come from large family sizes have worse outcomes?
  • about Gary Becker’s quantity-quality trade-off and how it relates to family size in China.
  • if capital punishment deters homicide.
  • why and how econometrics and specification tests are better today than they were in the past.
  • why Freakonomics is a must read for students or potential students of economics.
  • why being born later in the year is good for your educational attainment.
  • about Josh’s lucky breaks in life.
  • why Josh dropped out of school at 16 and about his army sergeant stripes.
  • about Josh’s hyper Jim Kramer-like teaching style.
  • about an amazing list of economists that have personally influenced Josh.
  • what helps Josh clear his head and keep in shape.

Macro v Micro

“Macro is a very theory-driven, model-driven field. They don’t run enough regressions or collect enough data and look for good experiments” – Josh Angrist.

“There’s nothing wrong with assumptions. That’s a misguided criticism. We have to simplify the world to learn anything about it. Otherwise you’re lost in the details.” – Josh Angrist.

“Every research project begins with the question. I have to convince my students of this and sometimes my colleagues – it isn’t let data come first, even though we’re very data-driven people. The first step is the question where it’s likely to lead me to a good research design.”

“In US census data, if you take married two-parent families who’d have at least two children, , the probability of having a 3rd child when they have a mixed sex is 0.37, and that goes to 0.43 or 0.44 when they either have two boys or two girls.”

“Ed Leamer in his paper, Let’s Take the Con Out of Econometrics, stated that nobody takes anybody else’s data analysis seriously. Nobody believes anything anybody else does.” Steve Pischke and Josh Angrist, in their paper, argue that that’s no longer true.

“The purpose of our book is to try to bring the way econometrics is taught in line with the way applied micro, at least, is done.” – Josh Angrist.

The traditional econometrics canon is built around a heavy mathematical framework that focuses on technical concerns, assumptions and many issues that are second-order statistics concerns, like heteroskedasticity or whether the model is really linear, that makes little sense and has nothing to do with modern empirical practice.

Recommended Books:

Josh Angrist on Freakonomics: “ It’s so engaging and well written and covers such interesting questions that I think it wins us a lot of converts to studying economics. My daughter got interested in economics by reading Freakonomics and she majored in economics.”

Papers:

Datasets:

Blog Posts:

Podcast Episodes:

Where To Find Josh Angrist:

Resources Used in the Episode:

www.incompetech.com Cartoon Battle Kevin McLeod Far East

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