Alex Tabarrok

Our World in Data has an excellent writeup of earlier research by Eisensee and Strömberg. 

How many deaths does it take for a natural disaster to be newsworthy? This is a question researchers Thomas Eisensee and David Strömberg asked in a 2007 study. The two authors found that for every person killed by a volcano, nearly 40,000 people have to die of a food shortage to get the same probability of coverage in US televised news. In other words, the type of disaster matters to how newsworthy networks find it to be. The visualizations below show the extent of this observed “news effect”.

In other words, the famine you haven’t heard much about is more important than you think.

“We have this mythical belief that everyone will come out of it at the other end OK,” she said. “You don’t end up as a faculty member unless you did survive it. That doesn’t mean that there weren’t people in my generation who got so stressed out that they left. They did leave. We just never talked about them.”

So what is this terrible, stressful problem that not all faculty survive? Summer vacation. No really.

For nine months a year at research universities, instructors and students build communities from a transient group of academics unified by one thing: classes. Professors invest time in students, committees, and teaching; students invest time in their assignments.

…That changes in the summer. The fixed schedule disappears, the community disperses, and the work that has been building up over the school year can loom dangerously close to deadline.

…It’s in that solitude that professors and students say they experience what some call a “summer slump,” a period of isolation that can heighten symptoms of depression or anxiety for those susceptible to such disorders.

To cope with that slump, Ms. Hagen read personal testimonies and learned that the separation she feels is widespread, even normal. But her university never addressed it. “As wonderful as my adviser is, that’s not a conversation that was ever shared,” Ms. Hagen said. “We never talked about what’s important to your mental health.”

I think the conservative critique of higher education is overblown. But with articles like this in the Chronicle of Higher Education it’s no wonder that much of America is angry and dismissive of a coddled intellectual class that is utterly divorced from their own, normal life experiences. (I too am a coddled member of that class but I know how fortunate and privileged I am to have a job in academia.)

The correction only widens the gap:

Corrections (6/16/2017, 10:43 a.m.): A previous version of this article mistakenly referred to Dafina-Lazarus Stewart as “she.” Mx. Stewart uses the pronouns ze, zim, and zir.

When was the Golden Age of Conservative Intellectuals? It is easy to say when the Golden Age began; April 1947 at the first meeting of the Mont Pelerin society. Among those in attendance were:

  • Maurice Allais, Paris
  • Aaron Director, Chicago
  • Walter Eucken, Freiburg
  • Milton Friedman, Chicago
  • F. A. Harper, Irvington-on-Hudson, New York
  • F. A. Hayek, London
  • Henry Hazlitt, New York
  • Bertrand de Jouvenel, Chexbres, Vaud
  • F. H. Knight, Chicago
  • Fritz Machlup, Buffalo
  • Ludwig von Mises, New York
  • Felix Morley, Washington, D.C.
  • Michael Polanyi, Manchester]
  • Karl R. Popper, London
  • William E. Rappard, Geneva
  • Leonard E. Read, Irvington-on-Hudson, New York
  • Lionel Robbins, London
  • Wilhelm Ropke, Geneva
  • George J. Stigler, Providence, Rhode Island
  • C. V. Wedgwood, London

(Full list here). It’s more difficult to say when the Golden Age ended. If I had to pick a date I’d say at a moment of triumph, November 9, 1989.

DARE to Look at the Evidence!

by on July 12, 2017 at 11:40 am in Economics, Law | Permalink

We must have Drug Abuse Resistance Education…I am proud of your work. It has played a key role in saving thousands of lives and futures.

Speaking at the 30th DARE Training Conference, Attorney General Jeff Sessions was enthusiastic and strongly supportive of DARE, the program started in Los Angeles in 1983 that uses police officers to give young children messages about staying drug free and resisting peer pressure.

And what do our excellent colleagues at GMU’s Center for Evidence-Based Crime Policy say about DARE?

D.A.R.E. is listed under “What doesn’t work?” on our Review of the Research Evidence. 

Rosenbaum summarized the research evidence on D.A.R.E. by titling his 2007 Criminology and Public Policy article “Just say no to D.A.R.E.” As Rosenbaum describes, the program receives over $200 million in annual funding, despite little or no research evidence that D.A.R.E. has been successful in reducing adolescent drug or alcohol use. As Rosenbaum (2007: 815) concludes “In light of consistent evidence of ineffectiveness from multiple studies with high validity, public funding of the core D.A.R.E. program should be eliminated or greatly reduced. These monies should be used to fund drug prevention programs that, based on rigorous evaluations, are shown to be effective in preventing drug use.”

A systematic review by West and O’Neal (2004) examined 11 published studies of D.A.R.E. and reached similar conclusions. D.A.R.E. has little or no impact on drug use, alcohol use, or tobacco use. They concluded that ““Given the tremendous expenditures in time and money involved with D.A.R.E., it would appear that continued efforts should focus on other techniques and programs that might produce more substantial effects” (West & O’Neal, 2004: 1028).

Recent reformulations of the D.A.R.E. program have not shown successful results either. For example, the Take Charge of your Life program, delivered by D.A.R.E. officers was associated with significant increases in alcohol and cigarette use by program participants compared to a control group (Sloboda et al., 2009).

The Amazing Janet Yellen

by on July 12, 2017 at 7:37 am in Economics | Permalink

The latest video in our Principles of Macroeconomics class at MRUniversity introduces monetary policy and the amazing Janet Yellen. I do hope that she isn’t fired as we shall then have to change some heads.

This Buzzfeed article on unauthorized poop transplants has much of interest:

A spate of studies over the last decade have convinced microbiologists and doctors that “fecal microbiota transplantation,” or FMT, works for at least one disease: a deadly bacterial infection in the gut known as Clostridium difficile, or C. diff. No one knows whether the procedures work on other conditions, though dozens of clinical trials are testing them on people with irritable bowel syndromeCrohn’s diseaseobesitydiabetesepilepsyautism, and even HIV.

The science is advancing rapidly, with more and more scientists excited about the potential and potency of fecal matter and the microbes in it. The FDA regulations on these procedures, however, keep them out of reach for most patients: Since 2013, the agency has banned doctors from doing fecal transplants on anything except C. diff.

A rogue clinic in Tampa, however, provides the carefully sourced material and explains to patients how the procedure is done. Since the procedure is simple, lots of experimentation is going on which upsets some people.

Poop from an unscreened stranger could carry serious infections, like hepatitis or gonorrhea, or dormant viruses.

No doubt–this is why we also ban sex and french kissing.

I suspect that many of the so-called treatments are crazy but people do a lot of crazy things. It’s odd that we allow some crazy things and ban others—even more that the crazy things we allow are sometimes socially useless while the crazy things that we ban are sometimes socially valuable.

The case for banning extreme sports, for example, is much stronger than the case for banning extreme medicine. Extreme sports don’t provide much benefit to the rest of humanity, other than some entertainment of questionable social value. Extreme medicine, on the other hand, has the potential to improve all our lives and at the very least is a useful warning about what not to do. Yet, extreme sports are lauded, or at least treated as mostly your own business (we do put some regulations on boxing and race car driving), while extreme medicine is heavily regulated and socially frowned upon.

My attitude is the reverse. You want to risk your life climbing without ropes? Knock yourself out–but don’t expect any support from me. I won’t even watch Alex Honnold because I think that what he does is Russian roulette and I do not approve. But, you want to risk your life trying an unapproved medical treatment? Sir, I salute you. Give that man a Nobel prize.

Canadian bills and coins are better than US bills and coins. Canadian bills are colorful, waterproof, partially transparent and holographic. Awesome. Canadian coins are also better. Who wouldn’t want a sterling silver and niobium Wolf Moon? And as if that weren’t enough the Canadian mint just started producing a glow in the dark coin for Canada’s 150th (shown at link) although it doesn’t match the great 2012 glow in the dark skeleton dinosaur (shown below).

 

Supreme Court Justice John Roberts gave the commencement speech at his son’s 9th grade graduation. This section was striking:

Now the commencement speakers will typically also wish you good luck and extend good wishes to you. I will not do that, and I’ll tell you why. From time to time in the years to come, I hope you will be treated unfairly, so that you will come to know the value of justice. I hope that you will suffer betrayal because that will teach you the importance of loyalty. Sorry to say, but I hope you will be lonely from time to time so that you don’t take friends for granted. I wish you bad luck, again, from time to time so that you will be conscious of the role of chance in life and understand that your success is not completely deserved and that the failure of others is not completely deserved either. And when you lose, as you will from time to time, I hope every now and then, your opponent will gloat over your failure. It is a way for you to understand the importance of sportsmanship. I hope you’ll be ignored so you know the importance of listening to others, and I hope you will have just enough pain to learn compassion.

Whether I wish these things or not, they’re going to happen. And whether you benefit from them or not will depend upon your ability to see the message in your misfortunes.

Medicaid isn’t worth its cost–that’s not my evaluation that’s what people who use the program think, at least as far as we can tell from their actions. Joshua D. Gottlieb and Mark Shepard review the evidence at Econofact, which aims to be a dispassionate and non-partisan review of the evidence on a variety of issues. We have also covered these issues before but seeing it all together is valuable.

The cost is large:

The Medicaid program cost about $532 billion in 2015 to cover 74 million people, or almost one in four Americans. The average full-benefit enrollee cost about $6,400 per year to cover in 2014.

People with access to the program use a lot more healthcare than other similar people

The Oregon Experiment found that gaining Medicaid uniformly increased health care use: including hospitalizations (by 30 percent), emergency room use (by 40 percent), physician office visits (by 50 percent), and prescription drugs (by 15 percent). This evidence stands in contrast to the conventional wisdom that providing health insurance could reduce costs by eliminating ER visits. Of course, understanding whether this additional care is worth it requires a comparison of these real costs to the benefits provided.

The health benefits appear to be real but modest:

The evidence is mixed on whether having Medicaid improves beneficiaries’ health. The Oregon Experiment did not find statistically significant evidence of improvements in physical health measures, such as blood pressure and blood sugar after two years of coverage. But it did find large improvements in mental health and self-reported health. Other studies examining the introduction of Medicaid or its expansion over time have found that Medicaid reduces mortality (of infants during the expansion of Medicaid eligibility for low-income children between 1984-1992; of adults during the expansion of Medicaid coverage for childless adults in Arizona, Maine and New York between 2000-2005; of teenagers who benefited from expansions of Medicaid to children during the early 1980s; and of infants and children in the 1960s and 1970s following the introduction of Medicaid) and improves health later in life (for instance among teenagers who benefited from the expansion of coverage as children). But these studies lack the gold-standard randomized design of the Oregon Experiment so should be interpreted with greater caution.

Health benefits may not be the most important benefits:

One important role for Medicaid is to provide risk protection, shielding enrollees from the financial impact of particularly adverse health events, which is the most fundamental role of an insurance product. Researchers seem to agree that access to Medicaid does improve financial security.

So how does one evaluate the tradeoffs? One way is to look at how users value the program.

Recent evidence indicates that beneficiaries value Medicaid at less than its full cost. One source of evidence comes from Massachusetts’ low-income health insurance exchange, where researchers could observe how much charging higher premiums for Medicaid-like coverage led enrollees to drop out: at least 70 percent of enrollees valued insurance at less than their own cost of coverage. A second source of evidence used economic models to quantify how much beneficiaries valued the benefits of Medicaid in the Oregon Experiment. In this case, the researchers found that beneficiaries valued Medicaid at about one-fifth of its cost.

Benefits are valued at only one-fifth the cost!  Why so low?

The literature suggests two explanations. First, Medicaid provides less complete choice of doctors and hospitals than other insurance, partly because of its low reimbursement rates (see this article for instance). Second, many of the benefits of Medicaid go to medical providers who would otherwise provide uncompensated or unpaid care to the same people.

The authors don’t mention this but if users don’t value the program highly because they would have gotten similar care for free in some other way, then the cost of Medicaid isn’t as high as it appears, because much of it is a transfer from taxpayers to medical providers or others who might otherwise foot the bill. Nevertheless we would probably design Medicaid very differently if we thought about it as (another) subsidy to medical providers rather than as a subsidy to the poor and sick.

It doesn’t follow from anything that has been said that Medicaid should be eliminated or even cut back (let alone that current efforts are the best way to do this). Nevertheless, if I told you that Program X costs $5 for every $1 in value transferred to recipients you would probably agree that Program X was in need of reform.

Addendum: Aaron Carroll and Austin Frakt offer a more optimistic review of the health evidence.

Independence Day

by on July 4, 2017 at 10:34 am in Uncategorized | Permalink

All the advances in human rights that we’ve seen in American history—abolitionism, feminism, civil rights, gay rights—stem from our founding ideas of life, liberty, and the pursuit of happiness. The emphasis on the individual mind in the Enlightenment, the individualist nature of market capitalism, and the demand for individual rights that inspired the American Revolution naturally led people to think more carefully about the nature of the individual and gradually to recognize that the dignity of individual rights should be extended to all people.

David Boaz.

Nobel prize winner Vernon Smith (our emeritus colleague at GMU) is a bold thinker. I have long proposed selling “government” land in the West but Vernon takes it a step further, privatize the highway network to create a permanent income fund. Essentially what Vernon is proposing is a libertarian method to fund a universal basic income. Can’t we all agree on that?

Even more than in the United States, there are many countries in the world today where the government holds trillions of dollars assets that are underutilized. Selling those assets to create a permanent income fund would be good for efficiency, liberty and equality.

…[T]he richly interconnected highway network really could be auctioned. Between major highway intersections there are alternative routes that could be auctioned to different bidders, assuring drivers of a choice of toll roads, along with state and local freeway alternatives. That competition would keep tolls affordable.

 Perhaps most important, surface transportation rights of way would be opened to new mass-transit innovations at a time when driverless vehicles are making their entrance. A few autobahns might also compete more effectively with short- to medium-haul airline routes, but you will need to resist airline opposition.

You should also consider auctioning off the Bureau of Land Management’s extensive grazing lands. Better incentives through ownership, or long-term leases, mean better stewardship and innovation. But neighboring farmers and ranchers won’t like the impact on their land prices.

How could you use the money from highway and land sales to benefit all Americans—and improve your own popularity? By creating a new Permanent Citizens Fund, invested in stocks, bonds and real estate world-wide. Every citizen would hold an equal share, with annual dividends paid in cash.

Better highways, more land for productive development plus a permanent fund sending checks to every citizen. A guaranteed basic income financed from public assets waiting to be monetized and put to work. You might even get the progressives’ vote. Have you ever made such a great deal?

If you think it’s pie in the sky, ask an Alaskan. The Alaska Permanent Fund, initiated in 1976 to distribute oil revenue, has a market value I estimate at $72,000 for each Alaskan citizen. Annual dividends began in 1982, when the public corporation that administers the fund cut the first checks for $1,000. Little wonder that Alaska is second among all the states in income equality.

The Rule of 70

by on June 29, 2017 at 7:25 am in Uncategorized | Permalink

One of our new projects at MRUniversity will be to produce a video Dictionary of Economics. The first video in that series, The Rule of 70 is below.

No textbook has better supplementary material than Modern Principles of Economics. Get it for your students!

In addition to the Seattle study, another minimum wage paper crossed my path this week and it takes a very different approach than much of the literature. In Denmark the minimum wage jumps up by 40% when a worker turns 18. Thus the authors, Kreiner, Reck and Skov, ask what happens to the employment of young people when they hit their 18th birthday? Answer: employment drops dramatically, by one-third.

A picture tells the story. On the left is measured wages by age, the jump up due to the minimum wage law is evident at age 18. On the right is the employment rate–the jump down at age 18 is also evident as is a bit of pre-loss as workers approach their 18th birthday.

The authors have administrative data covering wages, employment and hours worked for the entire workforce of Denmark so their estimates are precise.

Denmark has laws making age discrimination illegal but these do not apply when a young person turns 18 and firms may legally search for under or over-18 age workers.

A variety of restrictions mean that under-18 age workers can do less than adults (e.g. they can’t legally lift more than 25 kilos or have a driver’s license.) Thus, productivity increases at age 18, making the employment loss at this age even more dramatic.

The authors can’t tell for certain if workers are quitting or getting fired but there are few other obvious discontinuities around exactly age 18. Students are eligible for certain benefits at age 18 but the authors are able to look at sub-samples where this objection doesn’t apply and the results are robust.

In a section of the paper that adds important new evidence to the debate, the authors look at the consequence of losing a job at age 18. One year after separation only 40% of the separated workers are employed but 75% of the non-separated workers are employed. Different interpretations of this are possible. The separated workers will tend to be of lower quality than the non-separated and maybe this is correlated with less desire to have a job. Without discounting that story entirely, however, the straightforward explanation seems to me to be the most likely. Namely, the minimum wage knocks low-skill workers off the job ladder and it’s difficult to get back on until their skills improve.

Hat tip: Ben Southwood.

The Seattle Minimum Wage Study, a study supported and funded in part by the Seattle city government, is out with a new NBER paper evaluating Seattle’s minimum wage increase to $13 an hour and it finds significant dis-employment effects that on net reduce the incomes of minimum wage workers. I farm this one out to Jonathan Meer on FB.

This is the official study that was commissioned several years ago by the city of Seattle to study the impacts of raising the minimum wage, in a move that I applauded at the time as an honest and transparent attempt towards self-examination of a bold policy. It is the first study of a very high city-level minimum wage, with administrative data that has much more detail than is usually available. The first wave (examining the increase to $11/hr) last year was a mixed bag, with fairly imprecise estimates.

These findings, examining another year of data and including the increase to $13/hr, are unequivocal: the policy is an unmitigated disaster. The main findings:

– The numbers of hours worked by low-wage workers fell by *3.5 million hours per quarter*. This was reflected both in thousands of job losses and reductions in hours worked by those who retained their jobs.

– The losses were so dramatic that this increase “reduced income paid to low-wage employees of single-location Seattle businesses by roughly $120 million on an annual basis.” On average, low-wage workers *lost* $125 per month. The minimum wage has always been a lousy income transfer program, but at this level you’d come out ahead just setting a hundred million dollars a year on fire. And that’s before we get into who kept vs lost their jobs.

– Estimates of the response of labor demand are substantially higher than much of the previous research, which may have been expected given how much higher (and how localized) this minimum wage is relative to previously-studied ones.

– The impacts took some time to be reflected in the level of employment, as predicted by Meer and West (2016).

– The authors are able to replicate the results of other papers that find no impact on the restaurant industry with their own data by imposing the same limitations that other researchers have faced. This shows that those papers’ findings were likely driven by their data limitations. This is an important thing to remember as you see knee-jerk responses coming from the usual corners.

– You may also hear that the construction of the comparison group was flawed somehow, and that’s driving the results. I believe that the research team did as good of a job as possible, trying several approaches and presenting all of their findings extensively. There is no cherry-picking here. But more importantly, without getting too deep into the econometric weeds, my sense is that, given the evolution of the Seattle economy over the past two years, these results – if anything – *understate* the extent of the job losses.

This paper not only makes numerous valuable contributions to the economics literature, but should give serious pause to minimum wage advocates. Of course, that’s not what’s happening, to the extent that the mayor of Seattle commissioned *another* study, by an advocacy group at Berkeley whose previous work on the minimum wage is so consistently one-sided that you can set your watch by it, that unsurprisingly finds no effect. They deliberately timed its release for several days before this paper came out, and I find that whole affair abhorrent. Seattle politicians are so unwilling to accept reality that they’ll undermine their own researchers and waste taxpayer dollars on what is barely a cut above propaganda.

I don’t envy the backlash this team is going to face for daring to present results that will be seen as heresy. I know that so many people just desperately want to believe that the minimum wage is a free lunch. It’s not. These job losses will only get worse as the minimum wage climbs higher, and this team is working on linking to demographic data to examine who the losers from this policy are. I fully expect that these losses are borne most heavily by low-income and minority households.

In honor of Prime Minister Narendra Modi’s visit to the United States here are four Indian movies, not movies about India, but Indian movies, that are well worth watching. Most are available on Netflix.

Kahaani is a Hindi mystery-thriller starring Vidya Balan as Vidya Bagchi (there is a funny scene involving the pronunciation of Vidya, I wonder if she gets that a lot?) a pregnant software engineer who arrives in Calcutta from London in search of her missing husband. A police officer offers to help her and they start following the clues. It soon appears that her husband was not the man she thought he was. The further they explore the more mysterious and dangerous the situation becomes. Calcutta is featured in a lovely way–many of the scenes were shot guerilla style on the street, during the festival for Durga. There are allusions to the films of Satyajit Ray. The tension between Vidya and the police officer, who grows to like and become attracted to her, even as they search for her husband, is nicely handled. The ending brings plot, theme and location together in a way that is cleverly foreshadowed. The director knew what he was doing.

Drishyam is a Hindi film starring Ajay Devgn as Vijay Salgaonkar, a successful family man and businessperson who runs a small cable TV service in Pondolem, Goa. Vijay hasn’t had more than a 4th grade education but he’s smart and he picks up things by watching people and movies. He’s respected in his town but he butts heads with Gaitonde, a corrupt police officer. At this point Drishyam seems like it is going to be a straightforward morality tale about a good man caught in a corrupt system but the story goes in a very different direction when his wife (the beautiful Shriya Saran) and daughter kill a young man. The young man is the son of the police inspector general, a tough as nails woman, played by the stunning Tabu. How is Vijay going to extricate his family from this awful situation? His love of movies will come in useful. Devgn drives the film forward with an excellent performance that reminds me of Gary Cooper. Tabu is superb as the police inspector who must be stronger than the men in her life but who is also the mother of the victim.

Drishyam has been remade four times, this is the fourth. I hope to convince my brother to make it a fifth time!

Court is a Marathi-language courtroom drama. It won the Best Film award in the Horizons category at the 2014 Venice International film festival and the Luigi De Laurentiis (Lion Of The Future) award for it’s first-time director Chaitanya Tamhane. It has won many other awards since, including a 100% positive tomatometer. But can I recommend it? Courtroom drama brings to mind Henry Fonda as the one person who turns around the jury of 12 Angry Men or Tom Cruise as the lawyer who pushes Jack “you can’t handle the truth” Nicholson to confess.

Court is not that. There are no great speeches, no climax, no triumph of justice. The great virtue of Court is that it shows you how ordinary people participate in the boring, tedious, and mundane production of injustice.  But that is also its vice. How do you show such a system? By being boring, tedious and mundane. Indeed, Court not only shows the mundane production of injustice it structures itself around that theme. Scenes drift on for longer than expected. The movie builds tension like a conversation with uncomfortable pauses. The audience begins to fidget and think “when will this be over.” That’s intentional. In a two-hour movie Tamhane makes you feel a little like what the people in Indian court must feel, trapped.

The nominal plot is about a people’s poet who is charged with encouraging, through one of his performances, a suicide by a sewer worker. I enjoyed the poetry slams performed by the defendant (the way these lively performances contrast with the other scenes is part of the message). This long piece on India’s sewer workers is good background that underlines the absurdity of the charges.

At the end of the day, I’m glad I watched Court, it has a lot to say about the Indian courts, caste discrimination, the strange carryover of British law (it’s notable that much of the movie is in English because courts operate in English, even when defendants do not) and the mundane production of injustice, the latter of which applies well beyond India. But I confess that I watched it on Youtube at 1.5 speed.

What makes Court interesting is not what happens when you watch it but how you think about it later.

Ok, Lion isn’t Indian cinema, it’s actually an Australian movie starring Dev Patel and Nicole Kidman but much of it takes places in India and it’s excellent. The movie is based on the true story of Saroo Brierley who as a five year old got separated from his brother and accidentally ended up on train that transported him from his small village to Calcutta, nearly 1000 miles away. Unable to find his way back home, Saroo ends up on the streets fending for himself until he is adopted by an Australian couple. Twenty-five years later and using every scrap of memory he has left, Saroo manages to deduce the location of his hometown using Google Earth.

With Nicole Kidman’s star power, Lion could easily have fallen into the trap of the white woman saving the brown boy but it rises above that and keeps its attention on Saroo and real emotion. It’s hard not to tear up more than once.