Month: January 2008

What have economists learned in the last year?

Here is my latest New York Times column, on four things that we have learned over the last year.  Here is the opening:

Harry S. Truman once said he wanted to talk to a one-armed economist, “so that the guy
could never make a statement and then say: ‘on the other hand.’ ” Yet
economic knowledge continues to progress in unexpected ways. Here are a
few of the things we learned in the last 12 months…

But to continue the lunchtime debate with some of my colleagues, the piece ends as follows:

Knowledge is a wonderful thing, but sometimes simply knowing what we
don’t know is a form of understanding. So beware the one-armed
economist; sometimes a good economist could use two or even three arms
or more.

I would make one modification to the tone of the piece: A number of days elapsed between the final draft and publication; I now estimate the probability of a recession higher than the rhetoric of this piece might to some people indicate.

If I were Ezra Klein

Just to define our terms, I take Ezra Klein to be a guy who believes that a single-payer system is clearly a good idea and that in the meantime government-provided universal health care coverage is far better than the status quo, albeit highly imperfect compared to single-payer systems. 

If I were Ezra Klein, I would love Barack Obama and his willingness to drop the forced mandate idea.  But Ezra doesn’t seem to love Barack Obama for that.

I would think that Americans are a fairly libertarian people in some (selective) regards, and that we need to frame progress as "new and concession-laden, choice-friendly version of national health care."  I would know full well that lack of a mandate has efficiency problems, because otherwise people don’t sign up until they get sick and adverse selection makes it unprofitable to sell insurance.

But then, if I were Ezra Klein, I would think: "Ah, at that point there is no turning back.  Private health insurance companies will have to look to government for further financial aid.  This might even evolve into single payer someday, and that is probably the only way we would ever get there, given American Exceptionalism."  I also would think: "I [President Obama] can change my mind on the mandate later, if need be.  Only policy wonks follow the flip flops on such details.  And perhaps the mandate could be implemented indirectly — maybe at the state level, or framed in some other way — so that my hands are clean of apparent contradiction."  I also would think: "The mandate can’t force everyone to buy health insurance anyway — forced auto insurance mandates don’t always work — so the mandate by no means eliminates the adverse selection problem anyway."

Most of all, I would think that Democrats should not waste their energy fighting — prematurely I might add — intra-party battles over issues of mostly symbolic importance.

If I were Ezra Klein, I would think that only Barack Obama has the calm, reassuring manner required to lead America down a difficult and controversial path.  Only Barack Obama (and not Hillary Clinton) would enjoy a true honeymoon period as President, and maybe that is what is required to push through major health care reform.  Only Barack Obama would be seen as approaching this issue from a fresh start and without biases.

If I were Ezra Klein, I would worship at the shrine of Barack Obama.  I would send Barack Obama random postcards of love, affection, and yes money.

But I am not Ezra Klein, and I am not sending postcards to anybody.  Instead, I am sending you this blog post on "If I were Ezra Klein."

Addendum: If Ezra Klein were Ezra Klein.

Why isn’t legalized prostitution more popular?

Some of this was new to me:

An in-depth look at the legal brothel regime reveals
that while the system is preferable, it is stunted by unequal
bargaining power between the prostitutes and brothel owners owing to
collusive arrangements with local sheriffs. But since a regulated
brothel system, with all its faults, provides a safer environment for
prostitutes and their customers than prohibition while maintaining a
sufficient barrier between the prostitution activity and the community
to ameliorate citizen complaints, I ask why this system is not in use
in other jurisdictions, specifically Las Vegas, Nevada. Using
public-choice analysis, the paper concludes that lower employment costs
for casino and hotel owners due to kick backs received by hotel
employees from prostitutes and their customers, the interests of rural
governments to maximize revenues from tourism generated by brothels,
and the interest of Las Vegas legislators to portray the town as
family-friendly maintains the status quo of illegality.

Here is much more, hat tip to  The author is Ashlie Warnick, to whom I once taught macroeconomics.

Addendum: Here’s something else on the same general topic, call it a new installment in Markets for Everything, hat tip to Freakonomics blog.

Markets in everything, food fight edition

Juniors Rachel Whitcomb, Elizabeth Soergel and Taylor Procida are among those who protested an offer last month by the principal of Wilde Lake High School to pay students to identify participants in a cafeteria food fight.

…an intense debate erupted within the Columbia
school community over whether administrators should reward students for
informing on misbehaving peers. Last month, the student newspaper, the
Wilde Lake Paw Print, published three columns by students critical of
the principal’s offer.

"I find the administration’s recent use of monetary incentives
considerably more frightening than a food fight," wrote editor
Katherine Driessen, a senior.

Have you wondered how corporate scandals can go on for so long?:

Philip Soergel, a parent who complained to Howard schools
administrators about the principal’s offer, said: "We were aghast. I
had never heard of this. Kids are getting these kinds of lessons in how
to tattle on one another."

Here is the story.  It seems no one has turned in the perpetrators, I guess the price isn’t very high.

The health care graph


Here is Ezra Klein, here is Paul Krugman on the same.  If we put the partisanship aside, and view this as raw statistics, what lessons can be drawn?  The biggest surprise is Japan — a country whose health care institutions are not generally popular — at number two.  Spain and Italy and #4 and #5 are less extreme examples of the same point.  Do the Germans and Danes really kill so many extra people through their health care systems?  Would you really rather get sick in Greece?

Nothing in this post is intended as apology for the United States health care system, but if we are going to look at the numbers let’s consider all of them.  If there is any lesson about the French  — who are a clear first — it is that they do something right for health care apart from having so much government involvement.  What might that be?  What do we learn about what makes for a good health care system?  Is there a correlation between health care performance and policy?  I don’t see it, maybe there is one, but I’m wondering if people are willing to draw lessons from this diagram consistently or not.

I might add I find it easy to believe that American health care institutions make a disproportionate share of stupid errors, or are responsible for lots of patient mistreatments, so I am not trying to undo our presence on the right hand side of this graph.  I do, however, walk away suspicious of the concept of "amenable" mortality.

Addendum: It’s much worse than I thought, read this, which includes a free link to the supposedly gated study.

Second addendum: Out there on the mea culpa watch, or not, here is DSquared.

Book Forum reminder — The Logic of Life

Don’t forget to pre-order your copy of Tim Harford’s The Logic of Life: The Rational Economics of an Irrational World.  Alex and I will be starting our Book Forum soon, along with some prestigious guest reviewers, and Tim’s book will start appearing in book stores this Tuesday.  Tim is one of the world’s best popular writers on economics, and we only select those books that we feel will yield maximally interesting book forums.

The Division of Personality is Limited by the Division of Labor

Here is the abstract to Why can’t a
man be more like a woman? Sex differences in Big Five personality traits
across 55 cultures

Previous research suggested that sex differences in personality traits
are larger in prosperous, healthy, and egalitarian cultures in which
women have more opportunities equal with those of men. In this article,
the authors report cross-cultural findings in which this unintuitive
result was replicated across samples from 55 nations (N = 17,637). On
responses to the Big Five Inventory, women reported higher levels of
neuroticism, extraversion, agreeableness, and conscientiousness than did
men across most nations. These findings converge with previous studies in
which different Big Five measures and more limited samples of nations
were used. Overall, higher levels of human development–including long
and healthy life, equal access to knowledge and education, and economic
wealth–were the main nation-level predictors of larger sex differences
in personality. Changes in men’s personality traits appeared to be the
primary cause of sex difference variation across cultures. It is proposed
that heightened levels of sexual dimorphism result from personality
traits of men and women being less constrained and more able to naturally
diverge in developed nations. In less fortunate social and economic
conditions, innate personality differences between men and women may be

Unlike the authors, I don’t find it unintuitive that personality differences between men and women increase in developed economies.  All personality differences increase in developed economies.  If Robin Williams Chris Rock (see comments) were a Bangladeshi rice farmer he might still be funny but he’d also have to be a hard-working, diligent rice farmer and that would push his personality closer to the mean of all rice farmers.  The division of labor both opens up the possibility of becoming who you truly are and it magnifies and extends who you can be.

Hat tip to Robin Hanson.

Another way to limit draws in chess

A compromise is that a draw offer should remain valid for some fixed period,
  say ten moves. This will allow the person who has been offered a draw to test
  whether the offer was truly justified, e.g. by trying a daring line which may
  or may not be refuted by the opponent. If it is he can claim the draw on his tenth move, even if his position is losing. The limitation to ten moves avoids the potential problem of people playing on interminably after a draw offer, waiting for their opponents to blunder or overstep the time.

That is John Nunn, here is more.  A draw, of course, is a form of trade, albeit one with some negative social externalities (a quick draw makes chess more boring for the spectators).  If you want to limit trades in some markets, a similar rule could be contemplated.  If you offer to buy a currency at a particular price, you have to keep a similar offer open for one week to some number of other market participants.  Solve for the resulting equilibrium, and see how it matters.

The Diving Bell and the Butterfly

This movie, with its hints of Metamorphosis and Maya Deren, probably will stand as one of the best of the last ten years.  Of course it has a deeply economic theme: how much of the value of life stems from our ability to trade, and how much from our ability to play games of pure coordination?  Plus the French health care system is so good that all the nurses are beautiful and pay infinite attention to a single patient, or maybe that is just how French movies are made.

No Immunity for the Telecoms

The telecoms happily collaborate with the NSA to run roughshod over the constitution with warrantless phone and email taps but of course they cut off covert surveillance immediately when the government forgets to pay the bill.  Bastards.  Not that I am surprised.  Incentives matter; so of course the telecoms need to be prosecuted.

Thanks to Lee Spector for the link.

Updated numbers on violent deaths in Iraq

I’ve cited the Lancet numbers myself (in qualified fashion), but maybe the estimate of a million Iraqi deaths is far too high:

A new survey estimates that 151,000 Iraqis died from violence in the three years following the U.S.-led invasion of the country…For the new study, however, surveyors visited 23 times as many places
and interviewed five times as many households. Surveyors also got more
outside supervision in the recent study; that wasn’t possible in the
spring of 2006 when the Johns Hopkins survey was conducted…"Overall, this is a very good study," said Paul Spiegel, a medical
epidemiologist at the United Nations High Commission on Refugees in Geneva.
"What they have done that other studies have not is try to compensate
for the inaccuracies and difficulties of these surveys, triangulating
to get information from other sources."

Here is more, here is the study itself.  This new estimate is probably not the final word, but you will recall that anyone who questioned the older Lancet estimate was pilloried at length; there is a lesson here  – Thy Shall Not Use Thy Blog to Squelch Heretics — and I am curious to see who will offer mea culpa and who will not.  "The two estimates aren’t as different as they look" is one way of spinning it; "I was wrong" is another.

Update: Here, and here.

The most cited economics articles in the last five years

The source is REPEC, here is the list.  I believe if I were starting out today, I would end up as a law professor, not an economist, though perhaps I would do economics in a legal guise.

I might add that number of citations and influence are, in my view, diverging.  Steve Levitt has had a huge influence on economics, an influence which is underrepresented in his number of citations.  You won’t cite him just because you’ve been inspired by the kind of paper he writes, and how many other economics papers are there on girls’ names or soccer kicks?  Furthermore the more that economic research fragments, and becomes less theoretical, the more that the most cited papers are likely to be macroeconomics, as this list illustrates.  At least macro papers will still share a common topic.

Hat tip to Economic Logic.

What I’ve Been Reading

1. India, by Michael Wood.  This book looks ordinary but it is a wonderful (selective) history which captures the magic of India.  Recommended to both the beginner and the expert.

2. Las Benévolas, by Jonathan Littell, the Spanish-language edition of this famous French novel just came out (I don’t read French).  Here is the French edition.  Here are some of the raves.  Here is a critical review.  I loved the first twenty pages and was bored by the next thirty.  We’ll see how far I get in this Spanish-language edition of almost 1000 pages.  My current best guess is that a WWII-themed novel of this kind simply can’t be that original.  The French love it, perhaps, because an American-born writer wrote it in the French language.

3. Angus Maddison, Contours of the World Economy, 1-2030 AD.  This is a good summary of knowledge about economic growth, by a premier empirical economist.  But, as I am already familiar with the basic literature, I couldn’t find any reason to keep on reading.

4. The Geography of Bliss: One Grump’s Search for the Happiest Places in the World, by Eric Weiner.  This book is well-written, witty, and deserving of its current bestseller status.  At first I thought it was just fluff, but its applied, anecdotal, and travel-based approach gives one of the better windows on happiness across cultures.  His particular observations are astute, especially on Switzerland and Thailand; in the latter case, referring to sex, he writes that something which cannot be shoved under the rug is now regarded as a piece of furniture.

5. Virginia Postrel on Ron Paul, no spam bots please.