Applied Economics Seminar Series. "Economic Decision-Making Skill Predicts Income in Two Countries"
Published: 15 November 2024
20 November 2024. Professor Andrew Caplin, New York University (NYU)
Professor Andrew Caplin, New York University (NYU)
"Economic Decision-Making Skill Predicts Income in Two Countries"
Wednesday, 20 November 2024. 15:00-16:30
Online
Abstract
Jobs increasingly require good decision-making. Workers are valued not only for how much they can do, but also for their ability to decide what to do. In this paper we measure the ability to make good decisions about resource allocation, which we call economic decision-making skill. Our assessment requires an intuitive understanding of comparative advantage and is motivated by a model where decision-makers strategically acquire information about factor productivity under time and effort constraints. Economic decision-making skill strongly predicts labor earnings in representative samples of full-time workers in the U.S. and Denmark, conditional on education, IQ, numeracy, and other covariates. Economic decision-making skill is more valuable in management and other decision-intensive occupations.
Bio
Andrew Caplin is Silver Professor of Economics at New York University (NYU; US). He is a Fellow of the Econometric Society who works in many different branches of economics, ranging from microeconomics to macroeconomics, and from theory to application. He believes in the practical importance of academic research and made the first detailed proposal for equity sharing in the book Housing Partnerships, published by MIT Press in 1997. He has made contributions to psychology and political science, and specializes in disregarding boundaries within and between academic disciplines. He leads the National Bureau of Economic Research Program on Behavioral Macroeconomics and the Sloan Foundation Grant on Cognitive Economics at Work. His book An Introduction to Cognitive Economics: The Science of Mistakes is forthcoming as a Palgrave-MacMillan Pivot, and his article Data Engineering for Cognitive Economics is forthcoming in the Journal of Economic Literature.
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First published: 15 November 2024
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