What drives the male-female wage gap?

Economist:  Motherhood 

• Researchers took women undergoing in vitro fertilisation (IVF)—who clearly wanted children—and examined the difference in long-term wages between those who fell pregnant and those who did not. At first the mothers earned much less, but this gap shrank over time. 

• Now this approach of exploiting natural variation in fertility has been used in a new study, by Camille Landais of the London School of Economics and others. 

• It looks at women with Mayer-Rokitansky-Küster-Hauser (MRKH) syndrome, a rare condition in which a girl is born without a uterus but otherwise develops normally. These women know early in life that they will not bear children, ...

• Such early knowledge seems to make a big difference. ... Their wage trajectory is almost identical to that of their male peers. 

• In other words, remove both motherhood and any decisions women might make while anticipating it, and the wage gap seems to vanish. 

Differences-in-Differences: Handwashing and Waterborne Transmission of Cholera

 From: Carlos Chavez, On Causality

Difference-in-differences has undergone a methodological renaissance. The method’s intellectual roots reach back further than most economists realize - to the 1840s and 1850s.

• In 1847, Ignaz Semmelweis used comparative clinic analysis to show that handwashing prevented childbed fever, comparing mortality between Vienna’s physician-staffed ward (where medical students performed autopsies) and its midwife-staffed ward, then tracking outcomes after implementing chlorine disinfection.

•  John Snow’s 1854 investigation of cholera in London is credited as the first recorded application of difference-in-differences proper. Snow compared mortality rates across households served by two water companies: the Lambeth Company, which had moved its intake upstream of the city’s sewage outflow in 1852, and the Southwark & Vauxhall Company, which continued drawing contaminated water. By comparing changes in cholera deaths before and after Lambeth’s relocation - while Southwark & Vauxhall served as the control - Snow produced a cleaner diff-in-diff design, with parallel pre-treatment trends giving way to dramatic divergence. His “Grand Experiment” found 315 deaths per 10,000 households among Southwark & Vauxhall customers versus only 37 per 10,000 among Lambeth customers, providing powerful evidence for the waterborne transmission of cholera decades before germ theory was established.

Where is it cheaper to rent vs. buy?

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The Economist:  In long-run equilibrium, buyers should be indifferent between renting and buying. If buying were cheaper, then some renters would buy, which would drive down rents and drive up prices, until consumers became indifferent between the two options.  

One of the signs of a housing bubble is when it is cheaper to rent.  

Calif. "Jock Tax" takes Half of Superbowl Players' Cut

Superbowl players earn $178,000 each if they win and $108,000 if they lose. But California taxes athletes based on the number of "Duty Days" spent in the state, eight for the Superbowl. Jeffrey Degner, of the American Institute for Economic Research (AIER),crunched the numbers to calculate that the average player will leave California with much less.

"What that means here is that the winning team, their take-home pay will be approximately $86,000. If you're on the losing side, the take-home would be about $49,800," Degner said. 

Because the tax is based on you salary, winning Seahawks QB Sam Darnold will actually pay more in taxes than his Superbowl compensation. I suspect the NFL Players Association will want to revisit holding future Superbowls in California.

Economies of scope between SpaceX and xAI

Link:

The merging of what is arguably Musk’s most successful company, SpaceX, with the more speculative xAI venture is a risk. Founded in 2023, xAI’s main products are the generative AI chatbot Grok and the social media site X, formerly known as Twitter. The company aims to compete with OpenAI and other artificial intelligence firms.

...

With this merger, he plans to use SpaceX’s deep expertise in rapid launch and satellite manufacturing and management to deploy a constellation of up to 1 million orbital data centers. This will provide the backbone of computing power needed to support xAI’s operations.

HT: MarginalRevolution

Natural Gas Markets When Under Stress

The January 2026 cold snap, "Winter Storm Fern,"was unprecedented in both its severity but also in its size. It that blanketed two-thirds of the US causing considerable stress on the market for natural gas. While the media often focuses on surging heating demand during these events, the historic price spike was equally driven by a leftward shift in the supply. Due to plummeting temperatures, the industry faced record-setting "freeze-offs" where water in the gas stream freezes and physically blocks wellheads. Even though demand increased, gas production fell from a pre-storm average of 108 Bcf/d to a of 95.8 Bcf/d. This 12% contraction in total output meant supply shifted leftward by more than demand shifted rightward. Just as the market required more fuel, less was being produced. Both shifts created a deficit that could not be reconciled through normal operational adjustments.

Market equilibrium would have to be achieved by moving up along a near vertical demand curve to an extreme price point to clear. While the American Gas Association (AGA) noted that demand hit an all-time 7-day high, the scarcity was compounded by the fact that roughly 18.1 Bcf/d of expected production simply vanished from the grid. The result was that the spot price surged in some locations by over 1,000%, with the national average more than doubling to over $7/MMBtu over the typical of around  $3/MMBtu. A total system collapse was prevented by the rapid withdrawal of 360 a record Bcf from storage. The price was not merely a reflection of high usage, but also included a scarcity premium.

Border Security Type I and Type II Errors

One way of looking at the a policy of increased ICE enforcement of US border security is as a debate over decision error costs. The expressed goal is to remove the worst of the worst criminals. Few would disagree with this goal. However, in this dragnet, immigrants without criminal backgrounds have also been detained. The administration may see this as representing a small cost to pay, while the protesters see this as an unacceptable consequence.

The graphic below from the Financial Times indicates how many more criminal and non-criminal detainees the policy change has resulted in. Your position in this debate likely comes down to whether you think the benefit of detaining ~6,000 more criminals outweighs the cost of detaining ~25,000 more with no criminal background. Reasonable people can disagree over what would be acceptable, but few have stated what value they consider to be acceptable.

(I understand there is also debate over what are acceptable detention tactics.)

What caused the jump in US residential energy prices?

The opportunity cost of US natural gas rose.    

Andy Masley Substack:

...Russia invaded Ukraine, Europe stopped buying Russian gas, America was suddenly competing with European countries more for natural gas from other places, and natural gas prices spiked for a bit. Here’s a graph of natural gas prices:

A functional organization helps Apple innovate

 HBR: 

SUMMARY:

• THE CHALLENGE: Major companies competing in many industries struggle to stay abreast of rapidly changing technologies.  
• ONE MAJOR CAUSE: They are typically organized into business units, each with its own set of functions.  Thus the key decision makers—the unit leaders—lack a deep understanding of all  the domains that answer to them.
• THE APPLE MODEL: The company is organized around functions, and expertise aligns with decision rights. Leaders are cross-functionally collaborative and deeply knowledgeable about details.

As companies grow, they often switch from a functional organization to a divisional one:

Business history and organizational theory make the case that as entrepreneurial firms grow large and complex, they must shift from a functional to a multidivisional structure to align accountability and control and prevent the congestion that occurs when countless decisions flow up the org chart to the very top.

But, you end up with general managers who lack technical expertise making decisions.  Instead:

...Apple relies on a structure that centers on functional expertise. Its fundamental belief is that those with the most expertise and experience in a domain should have decision rights for that domain. This is based on two views: First, Apple competes in markets where the rates of technological change and disruption are high, so it must rely on the judgment and intuition of people with deep knowledge of the technologies responsible for disruption. Long before it can get market feedback and solid market forecasts, the company must make bets about which technologies and designs are likely to succeed in smartphones, computers, and so on. Relying on technical experts rather than general managers increases the odds that those bets will pay off. 

Example:  Apple puts cameras in iPhones, computers, laptops, and iPads.  

...Apple’s more than 600 experts on camera hardware technology work in a group led by Graham Townsend, a camera expert. Because iPhones, iPads, laptops, and desktop computers all include cameras, these experts would be scattered across product lines if Apple were organized in business units. That would dilute their collective expertise, reducing their power to solve problems and generate and refine innovations.

What happens when functional areas disagree?

The answer is collaborative debate. Because no function is responsible for a product or a service on its own, cross-functional collaboration is crucial. When debates reach an impasse, as some inevitably do, higher-level managers weigh in as tiebreakers, including at times the CEO and the senior VPs. To do this at speed with sufficient attention to detail is challenging for even the best of leaders, making it all the more important that the company fill many senior positions from within the ranks of its VPs, who have experience in Apple’s way of operating. 

BOTTOM LINE:

APPLE’S FUNCTIONAL ORGANIZATION is rare, if not unique, among very large companies. It flies in the face of prevailing management theory that companies should be reorganized into divisions and business units as they become large. But something vital gets lost in a shift to business units: the alignment of decision rights with expertise. 

Why do companies so often cling to having general managers in charge of business units? One reason, we believe, is that making the change is difficult. It entails overcoming inertia, reallocating power among managers, changing an individual-oriented incentive system, and learning new ways of collaborating. That is daunting when a company already faces huge external challenges. An intermediate step may be to cultivate the experts-leading-experts model even within a business unit structure. For example, when filling the next senior management role, pick someone with deep expertise in that area as opposed to someone who might make the best general manager. But a full-fledged transformation requires that leaders also transition to a functional organization. Apple’s track record proves that the rewards may justify the risks. Its approach can produce extraordinary results.  

Supply and Demand for Data Centers

A recent Visual Capitalist Info-graphic displays a fair amount of agglomeration of data centers. Not only does Virginia (!) lead, but many other states (IL, OH, TX, OR) have more data centers than their population or level of economic activity would suggest. The general pattern aligns with Fan and Greenstein's analysis that proximity to customers is important, even if it raises costs due to higher land prices in urban areas. Additionally, data centers' demand for electricity will tend to lead them to states with lower energy prices. The ability to achieve economies of scale also appear to be important, which also would be more expensive in urban areas. Different suppliers locating near to each other suggests that the advantages scale fall on the industry, not just the larger firm. This could be due to a more robust labor market for data center talent.