Month: April 2011

Haiti fact of the day

At the time the United States intervened in Haiti in 1994, the U.S. defense budget of $288 billion was 20 times the entire gross domestic product of Haiti.

[TC: And yet we still did not quite achieve our war aims.]  That is from the new and interesting book by Sarah E. Kreps, Coalitions of Convenience: United States Military Interventions After the Cold War.

Here are music videos by Sweet Micky, the new President of Haiti.  I’ve seen him in concert three times and it was always enjoyable.

Words of wisdom

From Kenneth Rogoff, who understands how suddenly an attack can turn:

Unusually low interest rates currently keep the carrying costs of these debts modest, and make it seem as if the day of reckoning is far off. Sadly, debt can be worked off only slowly, while rates can rise suddenly. Such a rise, if sustained, would be extremely painful for the national budgets of many countries, including those struggling in Europe. Research on sovereign default shows that markets also seldom anticipate problems in advance. By the time they lose confidence, it is too late: the option to tighten from a position of strength has evaporated.

General principles for evaluating Medicare reforms

You’ll be hearing lots about the Paul Ryan entitlement reform proposals, but here are a few more general points to keep in mind:

1. As health care develops, it becomes impossible for Medicare (or Medicaid) to cover every treatment.

2. One reform option has government experts rule which treatments are eligible for coverage, with varying degrees of Congressional input.

3. Another option is to let individuals choose in advance which treatments they will be covered for, and which not.

4. #3 can but need not be bundled with voucher and privatization ideas.  Without privatization, the government offers people different Medicare packages and they choose one over the others.  Government may also recommend a Medicare benefits package for an individual, without requiring that it be chosen.

5. Most plausible policy reforms involve some mix of expert restrictions (#2 )and individual choices (#3) and the real question is to figure out the right mix of the two approaches. When evaluating #2, do keep in mind the potential input of Congress, if only as a background threat.

6. Does individual choice (#3) make more sense for nursing homes and dental care (preferences really matter?), but maybe expert judgment (#2) makes more sense for cancer treatments (expertise really matters?)?  I am not endorsing that comparison, it is simply an example to illustrate the issue at hand.

7. If #5 isn’t being addressed, you’re probably just getting polemics.  Obligatory citation of David Hume, commit it to the flames, etc.

What determined the playing length of an audio CD?

Here is one account:

Sony had initially preferred a smaller diameter, but soon after the beginning of the collaboration started to argue vehemently for a diameter of 120mm.  Sony’s argument was simple and compelling: to maximize the consumer appear of a switch to the new technology, any major piece of music needed to fit on a single CD…Beethoven’s Ninth Symphony was quickly identified as the point of reference — according to some accounts, it was the favorite piece of Sony vice-president Norio Ohga’s wife.  And thorough research identified the 1951 recording by the orchestra of the Bayreuther Festspiele under Wilhelm Furtwängler, at seventy-four minutes, as the slowest performance of the Ninth Symphony on record.  And so, according to the official history, Sony and Philips top executives agreed in their May 1980 meeting that “a diameter of 12 centimeters was required for this playing time.”

That is from the new and interesting book by Tim Büthe and Walter Mattli, The New Global Rulers: The Privatization of Regulation in the World Economy, the book’s home page, with free chapter one, is here.  Speaking of which, Garth Saloner is another very good South African economist and he is now Dean of Stanford Business School.

The Matchmaker

The Boston Globe’s Leon Neyfakh has a good piece on Alvin Roth:

Roth has always been interested in the idea that sophisticated theories can be used to solve practical problems. As a graduate student at Stanford University, he earned a doctorate in operations research, which uses math to help organizations run more smoothly. Roth was just 19 when he started at Stanford, having quit high school without graduating at the age of 16 and finished Columbia University in three years. At just 22, he got a job as an assistant professor at the University of Illinois, and in 1977, at just 25, he was granted tenure there….

In the years since, Roth has emerged as a rare figure in the academic world: a theorist willing to dive into real-world problems and fix them. After helping the med students, he designed a better way to assign children to public schools — the system now used by both Boston and New York. He also helped invent a system for matching kidney donors with patients, dramatically increasing the number of donations that take place each year. More recently, he and one of his students have been talking with Teach for America about improving the system it uses to deploy volunteers around the country.

… Inspired by Roth’s work, these rising economists are also setting their sights on real-world problems. Some are looking at dating websites; others are interested in how universities could do better at scheduling their students’ classes. Like Roth, all of them envision a world in which economists, as unlikely as it may seem, are recognized as society’s mechanics.

One minor note, kidney exchanges are great but I wouldn’t describe the increases as “dramatic.” We will need, in addition, other ideas to alleviate the shortage of transplant organs.

Healthy living vouchers: will they work?

Matt Ridley writes:

Drawing a direct analogy with the effect of vouchers in the education system, Messrs. Seeman and Luciani suggest “healthy-living vouchers” [TC: book is here] that could be redeemed from different (certified) places—gyms, diet classes, vegetable sellers and more. Education vouchers, they point out, are generally disliked by rich whites as being bad for poor blacks—and generally liked by poor blacks. A bottom-up solution empowers people better than top-down government fiat.

So instead of spending large sums on ads to shame us into better eating habits, spend the money on vouchers handed out to the overweight and let them find whatever provider of goods or services best meets their particular dieting needs. After all, the root causes of obesity are multifarious and new ones are being added all the time—such as diet sodas, gut bacteria, genes, sleep apnea, leptin levels, medication, depression, poverty and peer pressure. So the solutions need to be multipronged, too. What works for you may not work for me.

A few points:

1. How exactly does one identify who deserves the voucher?  Or does everyone get them?  (Do we at this point need another middleclass entitlement?)  How much does the price of the good stuff go up?

2. The vouchers can be resold on secondary markets, as food stamps often are.

3. Portfolio effects: the unhealthy person might go to the gym with a voucher and then “make it up” by performing more of the unhealthy behaviors as recompense.

4. Income effects: if the voucher boosts the real income of the unhealthy person, they may well end up buying more stuff which is bad for them.  I don’t see that the proposal calls for a simultaneous, income-neutral scheme of taxation.  Buying more bad stuff and also more good stuff is not a wash, which brings us to:

5. It is easier to destroy than to preserve health, which suggests limiting the bad, or persuading individuals to limit the bad, will create more health benefits than encouraging the good.

I’m all for creative thinking here, but it’s hard to see this proposal working.  If nothing else, though, it shows why this problem is so hard to solve.

China price request of the day

Unilever, the Anglo-Dutch consumer goods group, has bowed to pressure from Beijing to delay planned price increases, highlighting a new regulatory risk in an inflationary climate.

…Chinese consumers, increasingly alarmed at the rising cost of living, cleared supermarket shelves this week of shampoos, soaps and detergents after state media said four consumer goods companies – including Unilever and Guangzhou Liby Enterprise Group – would raise prices by between 5 per cent and 15 per cent.

The full story is here.

Seminal books for each decade

Andrew asks a tough question:

what do you think is more or less the equivalent of the great gatsby in every decade after the 20s?

Here are my picks:

1930s: The Grapes of Wrath, John Steinbeck.

1940s: Farewell, My Lovely, by Raymond Chandler.

1950s: Invisible Man, by Ralph Ellison, with Kerouac’s On the Road as a runner-up.

1960s: Catch-22, by Joseph Heller, with The Bell Jar and Herzog as runners-up.

1970s: This is tough.  There is Vonnegut’s Breakfast of Champions, Stephen King, and even Peter Benchley’s Jaws.  I’ll opt for Benchley as a dark horse pick, note that these aren’t my favorites but rather they must be culturally central.  Jonathan Livingston Seagull is another option, as this truly is an era of popular literature.

1980s: Tom Wolfe, The Bonfire of the Vanities.

1990s: The Firm, by John Grisham, or Barbara Kingsolver, The Poisonwood Bible.  Maybe Brokeback Mountain.

2000s: Malcolm Gladwell, The Tipping Point.