Assorted links

1. Summary of the new Robert Gordon paper on stagnation, with good charts and graphs, and further coverage by Annie Lowrey here.  Paul Krugman also comments.

2. Groupon coupon for “The Anger Room,” markets in everything.

3. Andrew Gelman on different ways of plotting income data.

4. Michael Blowhard seems to be blogging again, here, under “Paleo Retiree.”

5. Sumner on Balding, Sumner on Wang, and Caplan responds to Dickens.

6. The Medicaid wars come to dentistry.

Comments

Even simply talking about what is "covered" under Medicaid can be tricky. The states with the broadest coverage of different procedures tend to pay for that by having reimbursement levels lower relative to Medicare and private insurance. Lower reimbursement levels are then correlated with doctors (and dentists) being less likely to accept Medicaid patients. The article certainly touches on the access issue, but doesn't make the connection about the tradeoff.

The article does mention the important issue of allowing mid level providers to provide simple dental services.

So what drives differences among states in per enrollee expenditures? There are some states that are in the $8K to $9K range (Conn., Mass., Minn., NY, Alaska, RI) and some that are below $5K (Ala., Miss., La., Illinois, Nevada, OK, Texas and Tenn.). If the system is somewhat self-balancing with more coverage corresponding with a lower reimbursement rate, I would expect to see less variation among states. Am I missing something?

The Gordon paper overlooks how important cheap steel from the Bessemer process and subsequent developments was to railways, internal combustion engines and most of the rest of the progress from 1860 to 1970. The industrial production of steel was the great technological leap forward.

Love the Stagnation article.

Think about the final paragraph which asks us to consider whether (to summarize) we'd exchange indoor plumbing for the ipad. (Indeed, would half of us exchange the feminine pad for the ipad!)

My thought is this -- much of the developing and undeveloped world still doesn't have outdoor plumbing but cell phones are widely available. Is that inversion of sequence supply or demand driven? Does it show they prefer cell phones to outdoor plumbing cost considerations aside? Does it (this seems likely) have to do with infrastructure and poor institutions. I would hazard the guess that there are institutional failures that get in the way of indoor plumbing and safe water and that sorts of barriers aren't as high for cell phone networks.

In the discussion of the three industrial revolutions a fourth revolution has been omitted: private property and free markets.

Yes and analogous institutional barriers operate in frontier countries like the U.S. to incentivize investment and innovation in cell phones and tablets and not technologies in industries like aeronautics, nuclear energy, biotech, nanotech, transportation, construction etc.

"A sophisticated drainage system was even incorporated into the village's design, one that included a primitive form of toilet in each dwelling."

Skara Brae, Orkney, five thousand years ago.

No, no, institutions!, climate!, steel!. Don't you know that it is rational to have plumbing in the Orkneys, because up there the pathogen load is so much higher than in Central Africa?

John

This is exactly what I have been harping on at to the stagnation crowd. Revealed preference in the developing world is that more recent inventions, such as cell phones and satellite TVs are clearly more "useful" than older inventions such as indoor toilets, clean water supply or modern kitchen equipment. I don't think institutional failures are the reason for this - a satellite TV infrastructure is clearly requiring more complex infrastructure than would be needed for an indoor toilet connected to a local septic tank. Almost anyone can arrange for an artesian well to be drilled, you don't need any institution to do that.

It's not a revealed preference because consumers don't get to choose between purchasing a cell phone and purchasing a working water/sewer system. You can't have a waste system based around septic tanks in the massive urban environments that a lot of poor 3rd world people crowd into. In rural environments, the people are probably to poor to have either. I assume that many rural poor in the 3rd world already get their water from a well.

The problem is supply-side -- the very high fixed costs of building and maintaining a working water infrastructure -- rather than demand-side. If you're curious about how expensive and complicated it is to build water infrastructure, take the example of Washington, D.C. (or many major American cities), where some of the pipes have not been replaced since the Civil War.

Non Papa, your comment on the need for a central infrastructure before you can access water or sewage system reveals your limited experience outside of the developed world. I live in a developing-world city in Asia - a very crowded one on a very crowded island. There is practically no city water supply and no sewage system. If you look across the wealth continuum here from the very poor, to the very rich, the very poor live on the streets and have nothing. In the same city the very rich live in houses with all the modern comforts including indoor plumbing, wells, septic tanks etc (actually more so as they have servants as well). Somewhere in between people start to get wealthy enough to be able to buy stuff. What do they buy first after basic housing? It is usually a cell phone (actually sometimes that comes before housing). The cell phone makes them significantly more productive. Then they might get a DVD with pirated discs. Then they might consider getting satellite TV, then a bike. If they continue to do well, a motor bike comes next. Running water and indoor plumbing are only considered when they have all these things. This is what I mean by revealed preference. If indoor plumbing were so great, why don't they get it before the cell phone? It definitely can be obtained (I have it), the costs are comparable to the other items (labour is cheap).

The point is, the most recent invention, the cell phone, is the one that is obtained first. Which really negates the stagnation thesis, which is that we invented all the useful stuff a long time ago.

NB: There are public goods associated with centralized sewage collection and treatment, but the private benefits are actually quite small. This is why they are usually built by governments, not because of the need to have a central infrastructure to make them work. Even then they are not difficult or expensive to build, compared with other infrastructure (a lot of low pressure dumb pipes). The Romans managed to do it. Probably the reason that the pipes in Washington DC have not been replaced is that they don't need to be. Brick build sewage pipes can last a very long time.

Interesting. I defer to your experience.

It's nice that you don't find Michael Blowhard to be beyond the pale.
Is the name Uncouth Offerings is a nod toward Mencius Moldbug, who actually spun off from the old 2blowhards? Tyler would never dream of linking to Moldbug, btw.

plausible deniability. The last thing I want is MR or Tyler or even Alex to be ostracized. Mentioning blogs such as moldbug is enough for seekers to find knowledge. It is our job to help Tyler and Alex keep MR exciting and not too controversial.

Re. Krugman's "plumbing or wifi" I have actually seen rentals for Alaskan "dry cabins" with wifi. A minority choice, but markets in everything.

Over at the NYT, a number of folks pointed out that electricity is far more essential than indoor plumbing assuming that the water is safe to drink. No doubt true. Try to imagine a day without electricity. Makes using an outhouse seem like a modest hardship.

Krugmann had some fun about focusing on indoor plumbing but it took decades for the majority of people to have access to what we now call decent plumbing. (Long term it would be 1880's - 1940ish) That is one problem with history is that we simplify and forget how relatively long things take. In terms of the IT revolutions let us go back several decades (let us say 1980) and then think about how the information age has changed our lives. Then bring up Bryan's point how many former third world people are no longer substinence farming and that the American stagnation of wages is mostly a function of increased global labor supply. Frankly, I don't see this doom or gloom over twenty years. (Next ten yes as coming commodity crash in Africa and South America and China does not end well.)

CR

"that the American stagnation of wages is mostly a function of increased global labor supply"

That has always seemed to be the most likely cause. And it won't continue forever or even for very many more years. It's dependent on cheap transportation energy and low wages in other countries. If those are rising faster than American wages, then there will be increasingly upward pressure on American wages.

Caplan is full of it -- his analysis of poverty of over-simplified and mean-spirited to boot

I would say that it's more lacking in empathy than that it's mean-spirited, maybe they're the same thing, though.

No, mean spirited is correct.

"Would I ever concede that a poor woman who repeatedly has unprotected sex with her drug-dealing boyfriend is "trying to make her life work"? You know me too well. I wouldn't denounce anyone to his face. But once you and I were alone, you can imagine my sarcasm: "Oh they're trying sooooo hard.""

Caplan is a self-satisfied, patronizing asshole, no bones about it.

Caplan's views seem over-simplified to me too, but not mean. I think he's missing the importance of dynamics and initial conditions. I wonder if any of his ethnographies are panel studies or compare "twins" born into different social settings. I still believe where we land (even holding IQ constant) is huge...and something we cannot claim credit or be blamed for. When you start so close to the bottom, you are sunk on missteps that would be minor setback to a more affluent person. And what I've seen is that once you make that mistake it's nearly impossible to recover...like you'd need a Caplan IQ to figure your way out of the hole. To me, the tight circle of poverty we see suggests that the safety net is likely too low rather than too high (or maybe not properly targeted).

It feels like Bryan Caplan woke up one morning and was all like "You know who had a great career plan? Charles Murray. Give me some of that."

There are some points not worth making. I tire as much as the next guy of incoherent arguments about one being deserving of a transfer payment, but the very last thing in the world I'd want to do is die on the hill of "poor people deserve their fate now watch me invoke IQ". Zoiks.

"but the very last thing in the world I’d want to do is die on the hill of “poor people deserve their fate now watch me invoke IQ”."

deservin's got nothing to do with it. but IQ does.

john cochrane also has a nice response on his blog to the gordon paper.

Umm? IR #2 did not include the "INVENTION" of electricity! If it did, then the "invention" of water should also rank high.

Thanks very much for the link, Tyler. I hope a few people will drop by the new blog and say hi. I'm in a mellow and playful mood these days, but my co-bloggers are a rowdy, brainy, dynamic and freethinking lot. I think you'll enjoy catching up with them.

#1, Gordon article. Love Gordon, but it's good to keep in mind that optimism/pessimism on growth moves in 30-year cycles.

#4: Nice but is there a way to subscribe only to his stuff and not his myriad co-bloggers?

Re: plumbing vs. iPad, the way it's written I'd choose option B. I know many people who have chosen to live in rural primitive cabins without running water but with mobile phones, occasionally hopping on Facebook and using internet resources but then using outhouses and such - it's a great lifestyle when it's a choice. The problem is when it isn't a choice, particularly if you have children - as the great Ted Talk on the subject made very clear, the washing machine was the great liberator especially for women and children, the magic machine that produced books. Also missing is the consideration of medicines and cures for diseases...

Does the placing of infrastructure have an impact on Gordon's stagnation theory? When indoor plumbing came about it took a lot of labor to put in the infrastructure. While the internet's infrastructure seemed was already in place with phone lines or cable lines. I am still amazed that my Dad (born 1955) and Mom (1959) grew up without indoor plumbing and did not ever see indoor plumbing until they were near the ages of 5 and 6.

Re plumbing and infrastructure necessary to support it:

As our President would say:

"You didn't build that toilet."

How accurate are economic growth estimates prior to the computer age? Prior to 1934 when the measure was developed we don't have enough data points to accurately calculate GDP. In the decades following the development of the measure I doubt the accuracy of data collection and aggregation methods to calculate a GDP, especially with the lack of computers. In the end there are only a couple decades where an argument can be made that GDP represents an accurate depiction of a country's economic activity, which is a rather small data set to be drawing conclusions from. Given that how can we determine what an acceptable and sustainable GDP growth figure is?

Caplan would win his debate with Bill Dickens despite his lack of first-hand experience by outsourcing the impressions formed through first hand experience to Theodore Dalrymple.

Dalrymple makes the point, again and again, that squalor is not poverty, and what first -world nations have is squalor, not poverty. That completely changes the Overton window of the debate.

If Dickens has a point, it's about children, who cannot have the autonomy that is essential to the Caplan critique. Dickens dilutes his argument by talking about all the people who felt they were sorry about their choices. If Dickens can prove that decisions and life events that happen when a person does not have autonomy overwhelmingly determine life outcomes, he'd have a sufficient argument against Caplan/Dalrymple. It's not just about IQ.

Good point.

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