Month: October 2013
Assorted links
1. The paperback version of Daniel Klein’s Knowledge and Coordination is out.
2. Profile of Samantha Power in Elle.
3. El Universal reviews *Average is Over* (in Spanish). Here is Yahoo Finance on the book, and here too. And a podcast with Jim Pethoukis.
4. Britain’s dysfunctional housing market, very good presentation.
5. 1:18 YouTube video on the future of statistics.
Henry Aaron says suck it up: health insurance cancellation update
Via Brad DeLong, here is Aaron:
Rather than apologizing for these cancellations, [the administration] should be bragging about them…. Imagine a new law enacted to promote food purity. As it is being debated, you are told ‘if you like what you eat, you can keep on eating it.’ The new law takes effect, and one day you find that the market no longer carries certain foods you have been buying… [which] included elements found to be bad for your health. The pure food act barred their use.
…People should be no more shocked when substandard insurance plans are removed from the market than they would be if food purity legislation caused some products to be removed from a grocer’s shelf….Obamacare is removing insurance products from the market that are bad for your health.
I am a big fan of Henry Aaron, but I see this response as representing a miscalculation and also showing a tin ear to the ongoing worries. I suppose I would not put Henry in charge of marketing. I have a few questions:
1. How many of the cancelled people are already receiving treatment from preferred specialists, doctors, hospitals, and so on? They are in any case the most important “subjects.”
2. How many of these people know that their new policies (if and when they can get them) will cover the same providers? How can these people find out that information — now — in an easily verified manner? And if they have to switch providers, how long will it take before their previous treatments are back up and running at an acceptable level? What kind of publicly available information is available on this question? Might their current providers start neglecting them, even before coverage is up, figuring they are “out the door” in any case?
3. How high is the anxiety level of these patients in the meantime? And must they feel they are getting a better deal from the new law, once they have shed their previous “substandard” treatments and providers? How confident should those patients feel about any promises being made to them right now? How should they feel about Aaron’s proposal for Obama administration boasting?
4. Why is Aaron so convinced that the new policies will involve no negative trade-offs?
5. We hear so much about behavioral economics, and rightly so. Doesn’t it teach us that endowment effects and status quo bias are very strong? Or are those always feelings we should be forcing people to overcome?
6. Are the best French unpasteurized cheeses — which do carry some health risk — “substandard”? Or is there an offsetting benefit? How about sushi? How about beans? They are delicious and good for your health. How about a more modest mandate for ACA? How about a stronger grandfather clause?
I thank Megan McArdle for a useful conversation related to this post.
Addendum: Via Wonkbook, here is one relevant report:
“Many new health exchanges don’t yet let shoppers see which doctors accept which insurance plans. Where exchanges do post the so-called provider lists, they often contain inaccurate or misleading information, some doctors say, including wrong specialties, addresses and language skills, and no indication whether providers are accepting new patients. Exchange officials blame the insurance industry, where inaccurate and out-of-date provider lists are nothing new. “I don’t think we realized that the underlying data had quite this number of problems. Now, it’s becoming more transparent,” said Joshua Sharfstein, Maryland’s secretary of health and the chairman of its exchange…[I]n addition to providing wrong information, the lists may give consumers a false impression of how big the networks are, some physicians say.” Melinda Beck in The Wall Street Journal.
*The Power of Glamour*, the forthcoming Virginia Postrel book
The subtitle is Longing and the Art of Visual Persuasion. I believe this is her best and most compelling book. It is wonderfully researched, very well written, the topic is understudied yet of universal import, and the accompanying visuals are striking.
Here is Virginia’s list of personas to help us distinguish glamour and charisma:
Glamour: Barack Obama, Che, Thomas Jefferson, Jackie Kennedy, Michael Jordan, John Lennon, Leonardo, Spock, Tupac Shakur, Joan of Arc dead, and Early Princess Diana.
Charisma: Bill Clinton, Castro, Andrew Jackson, Eleanor Roosevelt, Earvin “Magic” Johnson, Janice Joplin, Raphael, Kirk, Snoop Dogg, Joan of Arc alive, and Late Princess Diana.
Except she does it in a nice vertical table which I cannot replicate.
She lists Ronald Reagan, Nelson Mandela, and Steve Jobs as having had both qualities. The book is definitely recommended, and it is out in early November.
Here is her TED talk on the power of glamour.
Learning to Compete and Cooperate
What drives individualism and competitiveness as opposed to collectivism and cooperation? Leibbrandt, Gneezy and List have a great paper studying this question with an ingenious 
experiment. LGL study two types of fishermen in Northeastern Brazil. The two types live within ~50km of one another but one type are lake fishermen and the other sea fishermen. Lake fishing favors individual fisherman in small boats while sea fishing favors team production on larger boats.
LGL ask the fisherman to participate in a simple experiment, throw 10 tennis balls into a bucket. The participants choose how they are paid, 1 monetary unit per successful attempt or 3 units per successful attempt if they have more successes than an unknown competitor (chosen randomly and without their knowledge to avoid social effects; in case of a tie they are paid 1 unit per success). Fishermen could earn 1-2 days of income for less than an hour of work depending on how successful they were and the payment scheme chosen.
Perhaps you won’t be too surprised to learn that 45.6% of the lake fishermen chose to compete compared with just 27.6% of the sea fishermen. What makes the paper great is all the secondary tests the authors do to understand this result at a deep level. The result, for example, is not due to differences in throwing ability or risk preferences.
You might suspect that the different choices about whether to compete or not are driven by cultural differences. But that too is incorrect. The authors, for example, show that women–who do not fish in either the sea or lake villages–do not show differences in the choices to compete (both chose to compete less than the men but at the same rates in lake or sea villages).
Instead, what the authors demonstrate is that differences in the choice to compete or not appear to be learned differences. First, the lake villagers who chose to compete are among the most successful lake fishermen–that is, they have learned that competition increases income. In the sea villages there is no correlation between choosing to compete and fishing income.
Finally, and most tellingly, there is a dose-response relationship between competition and learning. In particular, the choice to compete or not increases with fishing experience with the experienced lake fisherman choosing to compete more and the experienced sea fishermen choosing to compete less (as shown at left).
The paper appears on the surface to be affirming the importance of cultural differences and to be agreeing with the kind of literature that stresses the idea of self-interest and individualism as western and contingent. Yet, in fact, the paper is suggesting that at a deeper level so-called cultural differences may not be transmitted down through the generations but instead are learned responses to very particular production techniques. Note that such learned responses may change rapidly as production techniques change and that the sea and lake villages are both unusual in the modern world in relying on just one dominant production technique with few other options for learning.
More generally, learning needs to be added to incentives, genetics, and culture as an independent yet entangled determinant of choice.
Japan markets in everything
While you’re probably aware of Tokyo’s cat cafes that let visitors cuddle up with a kitty while sipping some coffee, you’re unlikely to have heard of owl cafes, the latest craze to take hold in the Japanese capitol. Known locally as a “fukurou cafe,” some of the establishments offer owl-themed food and drink, and some even let you pet the owls in residence.
Some of the stores that garnered online attention late last year include Fukurou no Mise (“Owl Shop”) and Tori no Iru Cafe (“The Cafe with Birds”). Since then, more of the owl cafes have opened around Tokyo and Osaka including Fukurou Sabou (“Owl Teahouse”), Owl Family, and Crew.
There are photos at the link, hat tip goes to Ian Leslie.
The NSA, Google, and Yahoo: more than you thought
Via Kevin Drum, here is a new report:
According to a top secret accounting dated Jan. 9, 2013, NSA’s acquisitions directorate sends millions of records every day from Yahoo and Google internal networks to data warehouses at the agency’s Fort Meade headquarters. In the preceding 30 days, the report said, field collectors had processed and sent back 181,280,466 new records — ranging from “metadata,” which would indicate who sent or received e-mails and when, to content such as text, audio and video.
….The MUSCULAR project appears to be an unusually aggressive use of NSA tradecraft against flagship American companies. The agency is built for high-tech spying, with a wide range of digital tools, but it has not been known to use them routinely against U.S. companies.
Kevin adds:
This is apparently all done overseas in order to evade rules that govern domestic data collection. According to the story, “Two engineers with close ties to Google exploded in profanity when they saw the drawing.”
The full WaPo story is here. The program hacks into internal networks and collects documents before they are encrypted. At least on the surface, it appears Google and Yahoo were unaware of this snooping.
Update: Here are 65 things we have learned about the NSA.
Assorted links
Three provocative and interesting health care links
1. Josh Barro on health insurance as fiscal policy. The private market may be more statist than you think.
2. Arnold Kling on when the ACA exchanges will be working. Maybe never, or possibly very soon.
3. Chris Conover on how many people will have to change their health insurance plans? There is some exaggeration in the definitions there, but still the author makes some useful points.
Hi future
In the past three weeks, Georgia Tech received nearly twice as many applications for a new low-cost online master’s program as its comparable residential program receives in a year. The degree—which uses Massive Open Online Course technology—is the first of its kind, and its popularity suggests a growing demand for online learning.
There is more here, by Douglas Belkin at The Wall Street Journal.
Candidate selection in an “only Nixon can go to China” world
Do you know the saying “only Nixon can go to China”? Dan Sutter and I once wrote a paper about the phenomenon. The point is that politicians with a previous record of opposing a policy shift are often the only ones who can bring it about, because their policy support provides a credible signal of policy quality to the relevant interest groups who would otherwise oppose the policy. Another example would be Schroeder of Germany — from the left-leaning SPD — being the one to do real labor market reform.
Of course this effect does not always operate, for instance Chairman Mao was not the one to deregulate the Chinese economy. But Deng Xaoping was an old-time hardliner from way back when.
In any case, let’s say we have entered a new era of American political gridlock, in which usually nothing gets done. When might that gridlock be broken?
Well, gridlock could be broken — at least possibly — by a leading politician supporting a proposal against ideological type. What does this mean?
1. You might be very nervous if your party elects a President the next time around.
2. You might think twice before supporting ideologues within your party. They offer the greatest chance of “betrayal,” and if they “stay true” they can’t push through your agenda in any case.
3. You might prefer to support very weak candidates, who have no strong base of support in the ideological wing of their party. They will find it hardest to betray the ideologues.
4. There are “knowledge issues” and “stubborn self-interest” issues. At the time, it was possible to persuade many foreign policy hawks that an opening to China might better achieve their preferred ends, such as defeating communism. In contrast, I suspect no signal can persuade the elderly that “reallocating funds from Medicare to Head Start” can serve their interests, not even if Lawrence Welk swore as such on a stack of Bibles. If knowledge issues tend to get solved, over time politics may become more and more about stubborn self-interest issues, which diminishes the potential import of the “Nixon phenomenon.”
Whether we are at this final end stage yet is not clear to me, though I suspect not. I still see plenty of room for “great betrayals,” whether it is Obama on entitlements or the next Republican President on…just about anything.
Ross Douthat on the burden and incidence of ACA
As Angus has pointed out, Ross has been on a real roll lately, here is yet another good bit:
Now an effective levy of several thousand dollars on the small fraction of middle class Americans who buy on the individual market is not history’s great injustice. But neither does it seem like the soundest or most politically stable public policy arrangement. And to dig back into the position where I do strong disagree with Cohn’s perspective, what makes this setup potentially more perverse is that it raises rates most sharply on precisely those Americans who up until now were doing roughly what we should want more health insurance purchasers to do: Economizing, comparison shopping, avoiding paying for coverage they don’t need, and buying a level of insurance that covers them in the event of a true disaster while giving them a reason not to overspend on everyday health expenses.
If we want health inflation to stay low and health care costs to be less of an anchor on advancement, we should want more Americans making $50,000 or $60,000 or $70,000 to spend less upfront on health insurance, rather than using regulatory pressure to induce them to spend more. And seen in that light, the potential problem with Obamacare’s regulation-driven “rate shock” isn’t that it doesn’t let everyone keep their pre-existing plans. It’s that it cancels plans, and raises rates, for people who were doing their part to keep all of our costs low.
The full post is here.
Assorted links
1. Six signs you are reading good criticisms of economics.
2. John McDermott at the FT has a new blog.
3. More strange results from quantum mechanics.
4. I don’t usually enjoy political books, but Peter Baker’s Days of Fire, on the Bush-Cheney relationship, is excellent.
5. Further signs that Indian agricultural productivity is improving. This radically under-covered story is one of the most important of our time.
What is the most likely path forward for the ACA exchanges?
I had lunch yesterday with a friend and I was asked that question (and I asked it in turn). My answer, with some ex post editing, was this:
1. The chance of “no smooth resolution” for the health care exchanges crisis is now 60-40. Not long ago I thought it was 20-80.
2. The Obama administration is claiming the exchanges might be ready soon to stem Democratic defections and to keep the policy locked in, but in reality they now know there is no chance for timeliness (NB: this sentence is true with 60-40 probability, not unconditionally true).
3. More parts of the thing will be working by late November, but not enough for it to serve as a functioning enrollment system, much less encourage “the invincibles” to sign up. They will figure, correctly, they don’t have to bother with the whole thing until they hear from peers, and from the media, that the process is as smooth and as easy as Orbitz. (Oddly, Tea Party attempts to get young people to resist the mandate have the counterintuitive property of increasing awareness of the sign up requirement. Disengagement, not fiery opposition, is the real enemy of the law.)
4. Come January 1, hundreds of thousands of Americans will lose their individual coverage packages for not meeting ACA standards. Most of them won’t have ready replacements. This will be a big mainstream media story, not just a FoxNews story. There will be easily identifiable victims, expressing sorrow or rage or both in front of the camera. Left-wing bloggers will express outrage that Republicans express outrage over the existence of individuals with no insurance coverage. Republicans will express outrage that left-wing bloggers express outrage, etc.
5. Democrats will propose various ACA fixes, and Republicans will reject them, claiming that the law requires a more fundamental restructuring. That standoff will not be readily resolved and it will become the “new debt-ceiling crisis.” Democratic defections will be a problem for Obama.
6. The exchanges will be mostly working by March 2014, but by then the risk pool will be dysfunctional. In the meantime, real net prices will creep up, if only through implicit rationing and restrictions on provider networks. The Obama administration will attempt to address this problem — unsuccessfully — through additional regulation.
7. By October 2014, no one will think the exchanges are a satisfactory solution, except for 17 state exchanges which will be running reasonably well. Some of the state-level exchanges, by the way, will have more serious problems than is currently evident, mostly on the back end.
8. Chris Christie will campaign against ACA and beat Hillary Clinton in the general election. Upon assuming office he will place price controls on the insurance plans in the individual market, repeal much but not all of the federal financial support for the Medicaid expansion, and keep many other parts of ACA, while claiming to have repealed the whole thing. Enough Democrats will go along with this, as public opinion will have shifted toward the Republican side on this issue. The individual market still won’t be working very well. The exchanges will be working fine in the technical sense, but skittishness, political risk, and the adverse selection death spiral will have led the insurance companies to withhold high quality policies from that side of the market.
The Travel Arbitrage Challenge
Chris, a loyal reader (natch), poses the following challenge. He is planning to travel, perhaps to Venezuela, but other countries are open. He’d like to profit from an arbitrage opportunity which could be due to official and un-official exchange rates or it could be a goods-based arbitrage. At one point, for example, you could do quite well bringing condoms to Russia but no longer. Nothing illegal especially on the import side or nothing too illegal. I get the feeling he would go for bringing in Cuban cigars if that were his best bet.
Thus, MR readers, the challenge. What country and what arbitrage?
As for me, I always eat well and get a haircut when I’m in a poor country (thanks Bela Balassa) but that arbitrage won’t pay for the trip. Can you do better?
The new Israeli export: water technology
The Israeli water industry took over the convention center here this week to show the world its bacterial sewage scrubbers and computerized shower heads, its low-flow nipples to grow high-yield tomatoes, and its early-warning mathematical algorithms to detect dribbles, leaks and bursts.
It might not have been the sexiest business conference in a country that refers to itself as “start-up nation,” but there’s a lot of money in water.
Israel wants to be seen in the water world the same admiring way it is viewed in the realm of high-tech. The country’s exports of water products have tripled in the past five years and now total $2 billion, according to Israel’s economic ministry. Its biggest customer is the United States, but new markets are opening in countries with an emerging middle class, such as Mexico, Turkey, China and India.
Because of Israel’s history of scarcity, isolation and resourcefulness, it has the jump in water management and conservation.
Here is more, and it is time to have a good long read article on Israeli water policy and technology. Here are three bits:
Israel recycles more than 80 percent of its effluents, compared with about 1 percent in the United States, the governor said.
And:
Israel is a world leader in desalination of seawater. By next year, more than a third of Israel’s tap water will come from the Mediterranean Sea and a few briny wells. Israel’s total water consumption remains nearly at 1964 levels — even though its population has quadrupled to 8 million people, according to the economic ministry.
And:
There are 280 water technology companies in Israel.
Here is further background on Israeli water policy. One obvious element here, of course, is that water policy for Israel is a matter of national security.