Month: June 2008

Why oh why can’t we have a better press corp?

A May 31 Metro article about the Scripps National Spelling Bee misspelled last year’s winning word. The correct spelling is serrefine.

The paper, The Washington Post, had chosen the obviously incorrect "serrifine."  Here is my source.

Addendum: Whoops!  I have corrected my spelling error.  At least I wrote the mistaken spelling of the newspaper correctly rather than vice versa, force of habit took over I suppose.

“What’s Wrong With You?”

Don’t get sick anywhere but at home:

…doctors in Tanzania complete less than a quarter of the essential checklist for patients with classic symptoms of malaria, a disease that kills 63,000-96,000 Tanzanians each year.  The public-sector doctor in India asks one (and only one) question in the average interaction: "What’s wrong with you?".  In Paraguay, the amount of time a doctor spends with a patient has nothing to do with the severity of the patient’s illness…these isolated facts represent common patterns…three years of medical school in Tanzania result in only a 1 percentage point increase in the probability of a correct diagnosis…One concern with measuring doctor effort through direct observation is that the doctor may work harder in the presence of the research team.

That is from "The Quality of Medical Advice in Low-Income Countries," by Jishnu Das, Jeffrey Hammer, and Kenneth Leonard, in the Spring 2008 issue of the Journal of Economic Perspectives.  The editor is now Andrei Shleifer and this issue is one of the best in a long time.

Time travel back to 1000 A.D.: Survival tips

Londenio, a loyal MR reader, asks:

I wanted to ask for
survival tips in case I am unexpectedly transported to a random
location in Europe (say for instance current France/Benelux/Germany) in
the year 1000 AD (plus or minus 200 years). I assume that such
transportation would leave me with what I am wearing, what I know, and
nothing else. Any advice would help.

I hope you have an expensive gold wedding band but otherwise start off by keeping your mouth shut.  Find someone who will take care of you for a few days or weeks and then look for employment in the local church.  Your marginal product is quite low, even once you have learned the local language.  You might think that knowing economics, or perhaps quantum mechanics, will do you some good but in reality people won’t even think your jokes are funny.  Even if you can prove Euler’s Theorem from memory no one will understand your notation.  I hope you have a strong back and an up to date smallpox vaccination.

Readers, do you have any other tips?  Is there any way that Londenio can leverage his knowledge of modernity (he is, by the way, a marketing professor) into socially valuable outputs?  Would prattling on about sanitation and communicable diseases do him any good?

The incentives for violence in hockey

Here is my source.  Here is the paper.  Here is the abstract:

The level of violence in the National Hockey League (NHL) reached its highest point in 1987 and has reduced somewhat since then, although to levels much larger than before the first team expansions in 1967. Using publicly available information from several databases 1996–2007, the incentives for violence in North American ice hockey are analyzed. We examine the role of penalty minutes and more specifically, fighting, during the regular season in determining wages for professional hockey players and team-level success indicators. There are substantial returns paid not only to goal scoring skills but also to fighting ability, helping teams move higher in the playoffs and showing up as positive wage premia for otherwise observed low-skill wing players. These estimated per-fight premia, depending on fight success ($10,000 to $18,000), are even higher than those for an additional point made. By introducing a “fight fine” of twice the maximum potential gain ($36,000) and adding this amount to salaries paid for the team salary cap (fines would be 6.7% of the team salary cap or the average wage of 2 players), then all involved would have either little or no incentives to allow fighting to continue.

In other words, there are substantial incentives for violence in hockey.

NotSneaky on remittances

Will Wilkinson has the scoop.  NotSneaky writes:

Bottom line is that most of the so called “gains from remittances” are
straight up gains from IMMIGRATION. Or in other words, they are gains
from the fact that some person from a poor household in a poor county
has managed to make their way to a rich country and now has a richer
income. Strictly speaking the gain from remittances is just the gain
from INTER-HOUSEHOLD reallocation of income between the migrant and
those who stay behind, not the overall increase in household income due
to migration.

This is oh so tricky and of course we must refer back to the 1920s debates on the "transfer problem," involving Keynes, Ohlin, and others, so ably surveyed by Jacob Viner’s Studies in the Theory of International Trade.

Let’s say a Mexican in Texas sends pesos in his pocket back home.  His family benefits and he gets the warm glow but for the nation as a whole that’s just inflation and a redistribution of wealth.  How about if he sends dollars back home?  Well, he converts through pesos, the real Mexican exchange rate appreciates, and Mexican exporters are penalized, to some extent offsetting the family gains.

How different are the two cases?  Ha!  That would make a nice exam question. 

Does it matter if the receiving family plans to spend the money on imports or does that not matter?  Does it matter if the big hotels in Cancun — tourism is Mexico’s largest export sector — are foreign-owned?  The clock is ticking…

Ultimately NotSneaky has the correct intuition that the gains are to be found in the immigration itself, not the subsequent transfer.  Beware double counting.  Here is my previous post on remittances but please note the comments on this post are for remittance talk, not a general discussion of immigration.

What I’ve Been Reading

1. Henning Mankel, Depths.  I loved this story.  Have I mentioned that Mankell is one of my favorite contemporary writers?

2. Nick Lane, Power, Sex, Suicide: Mitochondria and the Meaning of Life.  One of the best popular science books I’ve read in the last few years.  Among other matters he explains why curing aging isn’t so easy, why eukaryotes seem to have evolved only once, and why it often should be "The Selfish Cell" and not always "The Selfish Gene."  His book Oxygen is excellent as well.

Ross Douthat defines conservatism

…A commitment to the defense of the particular habits, mores and
institutions of the United States against those socioeconomic trends
that threaten to undermine them, and those political movements
(generally on the left, but sometimes on the right) that seek to change
them radically in the pursuit of particular ideological goals.

Here is the post, which is interesting throughout.  I should not speak for Ross but having read his blog for a while I believe he would prefer a modified definition to allow some of those habits and mores to be judged.  Ross circa 1958 for instance need not defend segregation.  But it is hard to invoke a standard of judgment without moving away from conservatism in the philosophical sense and becoming a rationalist.

Insofar as I am conservative (debatable) I would rewrite the definition:

A realization that we will do best by building on the strengths of the particular habits, mores and
institutions of the United States (and other successful nations) rather than trying to reshape the nation radically in the pursuit of particular ideological goals.

You can then pick a rationalist standard of judgment (e.g., utilitarianism, virtue ethics, Rawls, whatever) while keeping this vision intact.  Conservatism is then an empirical claim about the resilience and power of national and cultural strengths.  There is no "pro status quo" trap lurking in the background here and no reason why you can’t be both a conservative and a rationalist at the same time.

Markets in Everything: Pay to Stay

A small number of California jails have begun to offer pay to stay programs.  These programs allow inmates in for minor crimes to "upgrade" to a private or public jail with better facilities.  Evidently the fees are profitable to the jails.  Take a look at how Santa Ana county advertises it’s hotel jail.

The Santa Ana Jail is pleased to host a full range of alternatives to
traditional incarceration.  Our offerings include weekends in jail,
non-linear jail sentences, and a variety of work release options.  Our
philosophy is designed to allow our clients (!, AT) to serve their obligations
to the court in a manner that respects them as human beings and permits
them to continue to provide for themselves and their families….

  • Programs that include 2-day or 3-day weekends with minimal impact on
    the client’s professional life.  Work on Saturday and Sunday?  No
  • Programs that permit jail sentences to be served in multiple parts.
    Perfect for clients that live out of the area or clients with frequent
    business travel.
  • Programs that permit the client to leave jail for work everyday.  We
    have helped everyone from 9 to 5 business people to oil-rig workers, so
    no work schedule is out of the question.

The Santa Ana Jail is the
most modern and comfortable facility in the region.  Our housing areas
are a world away from cement and steel bars….

Most clients can be approved immediately, over the phone.  We can also provide same-day acceptance letters for the court.

I have mixed feelings about these programs.  On the one hand, someone has to pay for the jails and who better than the inmates?  And note that to make an inmate-pays program effective you have to give them an incentive to pay.

But on the other hand the profit-maximizing strategy for a monopolist with different quality levels of service is pretty scary in this context.  A profit maximizer will reduce the quality level of the lowest class service – perhaps even spending money (!) to make the quality level lower – in order to push people to pay for the higher quality.  (For more on the theory, see Hal Varian’s elegant explanation.)

On the other hand (I know, I know, three hands) California’s prison system is already so overcrowded, violent and dysfunctional that one federal judge referred to medical care in the CA system as "outright depravity," thus we may already be close to the lowest quality level.  See this classic MR post for an expert’s take on the incentives of private and public prisons.

More on pay-to-stay at a Michigan Law Review Symposium.  Hat tip to Timothy Taylor at the Journal of Economic Perspectives.

Should Harvard continue to accumulate an endowment?

Matt writes:

A university that rich [Harvard] ought to either embark on some kind of ambitious
expansion program and start educating substantially more students, or
else decide that it would unduly alter the character of the place to
expand that much and just close up the development department and enjoy
the luxury of being able to focus single-mindedly on the university’s
core teaching and research functions.

Taking this as personal advice, I agree: don’t donate your money to Harvard.  But as a matter of public policy I would not disturb the current arrangement.  First, a donation to Harvard is an act of conspicuous consumption by the rich, a bit like buying the watch that doesn’t tell time.  In other words, the donors benefit, either through a warm glow or perhaps they receive networking opportunities.  Like Bob Frank, you might think we need a new consumption tax on the rich (not my view) but even if so we shouldn’t single out Harvard as a starting target.

Second, the Harvard endowment earns a high rate of return, relative to the cost of raising the funds.  Let’s say the fund nets 10 percent a year.  There is some trickle down and furthermore even if you wish to confiscate those resources it is always better to do so later rather than sooner.  The wise guy point here is to suggest that everyone give all their money to Harvard and arrange for some ex post compensating transfer.  (I’ve heard by the way that Yale faculty sometimes demand that Yale money managers take care of their personal portfolios.)  Obviously that’s not realistic but the point remains that ten percent is a very good return on investment.  Let’s say Harvard earned forty percent a year: should this make us more or less likely to leave the current arrangement in place?

Public vs. private schools

No, this is not a policy question.  Rather Jenny, a loyal MR reader, asks for advice:

As an economist, I was wondering if you could provide any insights to us parents evaluating public versus private elementary schools for our kids…By comparison [with the good private school], my public school education seems shoddy. But at $21,000 for kindergarten and a younger sister that would be joining him, this is a huge financial commitment, and takes away our flexibility to do anything but grind away for the next 15  years. My son is bright and curious – how do I know that he will get that much of an incremental improvement being in private school? And despite my very non-inspiring, and at times dreadful, public education, I can’t say that I’m any worse off for it today…I’ve been really struggling with how to evaluate this. Can economics shed any light?

I faced this same choice myself as a kid and I ended up telling my mother I was happy to remain in the public school.  If nothing else I feared the commuting costs and not having friends’ homes be nearby.  Furthermore at public school I met Randall Kroszner and Daniel Klein, among other notables.  Natasha and I faced this choice again with Yana and she ended up in public high school.  I can’t really cite economics here but if your public school is halfway decent that is the side I come down on.


Reader request for recent jazz CDs

Out here in Japan I am going through some of the old requests; here is one:

Recommendations re new jazz recordings

I have a few:

1. Anything by Brad Mehldau; he is a very subtle pianist, broadly in the mold of Bill Evans.  Start with his CD with Pat Metheny.

2. Saudades, by Trio Beyond.  Excellent guitar work on every cut; bluesy, lots of organ.

3. Pakistani Pomade, by Alexander von Schlippenbach; the sort of jazz that hurts most people’s ears.

4. Ramasuri, by Max Nagl.  An exhilarating blast, with strong overtones of Klezmer.

Those are my favorites from the last two years or so.  What do you all recommend?

Cap and trade vs. carbon taxes

Brad DeLong sums up:

I would say that to first order cap-and-trade and carbon taxes are the same, that there are five first-order differences:

  • Cap-and-trade involves less redistribution because the losses of
    the losers are partially offset by their initial awards of tradeable
  • Cap-and-trade runs the risk that the cap will be set at the wrong
    place and so the price will go damagingly above its social optimum
  • Carbon taxes run the risk that the tax will be set too low and so
    the quantity emitted will go damagingly above its social optimum value.
  • Carbon taxes have the advantage that the government gets money that
    it can use for good–either to cut existing taxes that have large
    deadweight losses or to expand underfunded programs that have large
    social benefits.
  • Carbon taxes have the disadvantage that the government gets money
    that it can use for ill, and that the recipients and beneficiaries of
    that ill-used money will then dig in and defend their rent-seeking
    gains beyond death itself.

and that there are two third-order differences:

  • It’s easier to get not-too-bright Republicans to vote against
    something that is actually in their long-run interest if you can
    demagogue it by calling it a tax.
  • It’s easier to get not-too-bright Democrats to vote for something
    that actually is not in their long-run interest if you can demagogue it
    by claiming that it’s just a restriction on the behavior of corporations and not something that directly impacts people.

The fourth-order considerations would, of course, look at time consistency problems and irreversibility problems.

Where Pretty Lies Perish

Roissy promotes an aggressively instrumentalist view of the sexes; imagine Larry David as a scoreman plus make the language of the monologues ruder and more offensive.  He also thinks like an economist and uses marginalism:
"Smells bad. (when a shower isn’t going to help your cause, why bother?)"

My question is which parameter value he
incorrectly estimates; after all, he is not just evil he is also imprudent in missing the joys of monogamy and matrimony.  I believe that most of all, he underestimates his transparency to his observers in
real life.  I sometimes call this
the endogeneity of face to thought and thus his face must be somewhat evil too.  Since his strategies cause him to spend time only with women he can fool, he doesn’t correctly perceive how he is wrecking his broader reputation; the same is probably true for the rest of us as well.    

(But IS he evil?  Is there not a theorem which suggests that
rule-governed sweet young things will in fact overinvest in the rule
and, if you could selectively induce "rule disengagement," human
welfare might rise?  But no…that theorem was refuted some time ago.)

Can he still be saved by a good woman?  Indeed there are so many good women out there and yet not one has saved him to date.  If only he would read Henry James’s "Beast in the Jungle."

Poor Roissy.  Poor, poor Roissy.  Here’s his advice for much older men who wish to attract 25-year-old women:

Bear in mind that younger women (barring a few notable golddigger
exceptions) are not as practical as older women. They are more
whimsical, flirty, passionate, and romantic, and this means you will
get more mileage having a youthful outlook, being recklessly
spontaneous, maintaining a high level of energy, and focusing on the
emotional connections, than you would tempting them with the allure of
financial stability and security.