Month: March 2014

Rampage is on a rampage (the most expensive schools are art schools)

After a mere week or so at work, it can no longer be said that Catherine Rampell is the most underrated force in economics writing and journalism (or can it?).  Here is her post on which are the most expensive schools.  It is art and music schools, when you take all relevant costs and financial aid into account.  Excerpt:

Now here’s a list of the top 10 most expensive four-year private nonprofits, after subtracting the average amount of government and institutional grant/scholarship aid at each institution:

1. School of the Art Institute of Chicago

2. Ringling College of Art and Design

3. The Boston Conservatory

4. Berklee College of Music

5. California Institute of the Arts

Do see the earlier MR post “Artists grew up in households w/typically higher incomes than doctors did.”  What does this imply about the competitiveness of the sector?  About our models of child-rearing?

What happens when the unemployed retire?

They become much happier, or so it seems in a new paper by hetschko, Knabe, and Schoeb, “Changing Identity: Retiring from Unemployment.”  (Ungated versions here.)

Catherine Rampell reports on the research here.  Part of her summary is this:

The paper is based on German survey data and finds that self-reported “life-satisfaction” increases by around 0.3 points on a scale from 0 to 10 for people who transition from unemployment to retirement. That’s about twice the increase in happiness that newlyweds experience. The average person who transitions from employment to retirement, on the other hand, does not experience a bump in life satisfaction.

And:

Rather ironically, it is hope that keeps people unhappy while unemployed…

A simple theory of college, elites, parties, women, and fraternities

Harry from Crooked Timber writes:

The authors lived for a year in a “party” dorm in a large midwestern flagship public university (not mine) and kept up with the women in the dorm till after they had graduated college. The thesis of the book is that the university essentially facilitates (seemingly knowingly, and in some aspects strategically) a party pathway through college, which works reasonably well for students who come from very privileged backgrounds. The facilitatory methods include: reasonably scrupulous enforcement of alcohol bans in the dorms (thus enhancing the capacity of the fraternities to monopolize control of illegal drinking and, incidentally, forcing women to drink in environments where they are more vulnerable to sexual assault); providing easy majors which affluent students can take which won’t interfere with their partying, and which will lead to jobs for them, because they have connections in the media or the leisure industries that will enable them to get jobs without good credentials; and assigning students to dorms based on choice (my students confirm that dorms have reputations as party, or nerdy, or whatever, dorms that ensure that they retain their character over time, despite 100% turnover in residents every year).

The problem is that other students (all their subjects are women), who do not have the resources to get jobs in the industries to which the easy majors orient them, and who lack the wealth to keep up with the party scene, and who simply cannot afford to have the low gpas that would be barriers to their future employment, but which are fine for affluent women, get caught up in the scene. They are, in addition, more vulnerable to sexual assault, and less insulated (because they lack family money) against the serious risks associated with really screwing up. The authors tell stories of students seeking upward social mobility switching their majors from sensible professional majors to easy majors that lead to jobs available only through family contacts, not through credentials. Nobody is alerting these students to the risks they are taking. So the class inequalities at entry are exacerbated by the process. Furthermore, the non-party women on the party floor are, although reasonably numerous, individually isolated—they feel like losers, not being able to keep up with the heavy demands of the party scene. The authors document that the working class students who thrive are those who transfer to regional colleges near their birth homes.

The post is interesting throughout.  The book he is discussing is Paying for the Party: How College Maintains Inequality, by Elizabeth A. Armstrong and Laura T. Hamilton, which I have just ordered.

Did Bitcoins just become less fungible?

Adam Levitin writes:

The IRS ruled that Bitcoin and other virtual currencies are property, not currency.  This means that they are subject to capital gains taxation.  And that means that Bitcoins are not fungible.  The price at which a particular Bitcoin was acquired (and this is traceable) determines the capital gains on that particular Bitcoin when spent.  If I spend Bitcoin A, which I bought at $10, but is now worth $400, I’ve got a very different tax treatment than if I spend Bitcoin B, which I bought at $390. (Poor Satoshi–he’s got a lot more capital gains than most…)  This means Bitcoins are not fungible, and that makes it unworkable as a currency.  If I have to figure out which particular Bitcoin in my wallet I want to spend and what the tax treatment will be, Bitcoin just doesn’t work as a commercial medium of exchange.  Bitcoin still works as a speculative medium, but Bitcoin’s claim has always been to being more than the latest iteration of the trading sardines–it aspired to be a commercial medium.  I don’t see that happening now.

The article is here.

Assorted links

How do Olympic gold medals influence longevity?

I was intrigued by the new paper by Adam Leive, called “Dying to Win? Olympic Gold Medals and Longevity.”  The main results are these:

This paper investigates how status affects health by comparing mortality between Gold medalists in Olympic Track and Field and other finalists. Due to the nature of Olympic competition, analyzing performance on a single day provides a way to cut through potential endogeneity between status and health. I first document that an athlete’s longevity is affected by whether he wins or loses and then detail mechanisms driving the results. Winning on a team confers a survival advantage, with evidence that higher mortality among losers may be due to poor performance relative to one’s teammates. However, winning an individual event is associated with an earlier death. By analyzing the best performances of each athlete before the Olympics, I demonstrate that an athlete’s performance relative to his expectations partly explains the earlier death of winners in individual events: on average, Olympic Gold medalists expected to win, but losers exceeded their expectations. Conversely, athletes considered “favorites” but who fail to win die earlier than other athletes who also lost. My results are robust to estimating a range of parametric and semi-parametric survival models that make different assumptions about unobserved heterogeneity. My central estimates imply lifespan differentials of a year or more between winners and losers. The findings point to the importance of expectations, relative performance, surprise, and disappointment in affecting health, which are not highlighted by standard models of health capital, but are consistent with reference-dependent utility. I also discuss potential implications for employment contracts in terms of a trade-off between ex post health and ex ante incentives for productivity.

The paper is here, and for the pointer I thank the excellent Kevin Lewis.

Gunshot Victims to be Put into Suspended Animation

A hospital in Pennsylvania will soon begin clinical trials to put gunshot or other accident victims into a state of suspended animation while their organs are repaired. By all measures the people suspended will be dead for hours but with luck many will be brought back to life.

The first step is to flush cold saline through the heart and up to the brain – the areas most vulnerable to low oxygen. To do this, the lower region of their heart must be clamped and a catheter placed into the aorta – the largest artery in the body – to carry the saline. The clamp is later removed so the saline can be artificially pumped around the whole body. It takes about 15 minutes for the patient’s temperature to drop to 10 °C. At this point they will have no blood in their body, no breathing, and no brain activity. They will be clinically dead.

In this state, almost no metabolic reactions happen in the body, so cells can survive without oxygen. Instead, they may be producing energy through what’s called anaerobic glycolysis. At normal body temperatures this can sustain cells for about 2 minutes. At low temperatures, however, glycolysis rates are so low that cells can survive for hours. The patient will be disconnected from all machinery and taken to an operating room where surgeons have up to 2 hours to fix the injury. The saline is then replaced with blood. If the heart does not restart by itself, as it did in the pig trial, the patient is resuscitated. The new blood will heat the body slowly, which should help prevent any reperfusion injuries.

The technique will be tested on 10 people, and the outcome compared with another 10 who met the criteria but who weren’t treated this way because the team wasn’t on hand. The technique will be refined then tested on another 10, says Tisherman, until there are enough results to analyse.

No one knows how long people can be maintained in suspended animation before revival is impossible. We know from accidents where people drown in icy lakes that suspended animation can work for at least half an hour and experiments on pigs suggest no cognitive defects from revived animals suspended for up to an hour, mice have been suspended for up to six hours and roundworms for up to 24 hours.  If the initial trials are successful, further experiments will likely discover ways to lengthen the period of suspended animation in humans and perhaps suggest improvements to current cryonic techniques.

Hat tip: Noah Smith.

Average is Over

New technologies are transforming the structure of the US economy but creating only modest numbers of jobs, according to the biggest official survey of businesses, conducted only once every five years.

The 2012 economic census shows how technology is creating a boom in output for new industries – such as shale gas and internet retail – but only a modest increase in their payrolls.

It highlights concerns that recent innovations in information technology tend to raise productivity by replacing existing workers, rather than creating new products that demand more labour to produce.

The FT link is interesting throughout and I believe these numbers vindicate what many of us have been arguing.  It also stresses the oft-neglected point that mining and drilling are relatively capital-intensive sectors:

Drilling is capital intensive, however, so even though the industry’s sales rose by $142bn, its annual payroll was up only $20bn to $61bn in total.

It also turns out that online retail is not very labor intensive at current margins.

What should you talk about?

Robin Hanson reports:

If your main reason for talking is to socialize, you’ll want to talk about whatever everyone else is talking about. Like say the missing Malaysia Airlines plane. But if instead your purpose is to gain and spread useful insight, so that we can all understand more about things that matter, you’ll want to look for relatively neglected topics. You’ll seek topics that are important and yet little discussed, where more discussion seems likely to result in progress, and where you and your fellow discussants have a comparative advantage of expertise.

You can use this clue to help infer the conversation motives of the people you talk with, and of yourself. I expect you’ll find that almost everyone mainly cares more about talking to socialize, relative to gaining insight.

I would be curious to hear what other people think of this…

Assorted links

Is age-adjusted divorce actually way up?

Kay Hymnowitz reports:

According to new research, far from declining since 1980 as researchers thought, age-adjusted divorce rates have actually risen 40%.

She cites this new paper from Demography, by Sheela Kennedy and Steven Ruggles. The abstract is this:

This article critically evaluates the available data on trends in divorce in the United States. We find that both vital statistics and retrospective survey data on divorce after 1990 underestimate recent marital instability. These flawed data have led some analysts to conclude that divorce has been stable or declining for the past three decades. Using new data from the American Community Survey and controlling for changes in the age composition of the married population, we conclude that there was actually a substantial increase in age-standardized divorce rates between 1990 and 2008. Divorce rates have doubled over the past two decades among persons over age 35. Among the youngest couples, however, divorce rates are stable or declining. If current trends continue, overall age-standardized divorce rates could level off or even decline over the next few decades. We argue that the leveling of divorce among persons born since 1980 probably reflects the increasing selectivity of marriage.

You will find ungated versions here.  I haven’t had a chance to paw through the argument, but it seemed worth passing along.  Hat tip goes to Charles Murray on Twitter.

*Asia’s Cauldron*

That is the new book by Robert D. Kaplan, and the subtitle is The South China Sea and the End of a Stable Pacific.  Since this is possibly the most important topic in the world right now, you should read this book.  Here is one interesting excerpt of many:

According to Yale professor of management and political science Paul Bracken, China isn’t so much building a conventional navy as an “anti-navy” navy, designed to push U.S. sea and air forces away from the East Asian coastline.  Chinese drones putting lasers on U.S. warships, sonar pings from Chinese submarines, the noisy activation of Chinese smart mines, and so on are all designed to signal to American warships that Beijing knows about their movements and the United States risks a crisis if such warships get closer to Chinese waters.  Because “relations with China are too important to jeopardize with a military confrontation,” this anti-access strategy has a significant political effect on Washington.  “The strategic impact of China’s agility is not so much to tilt the military balance in its direction and away from the United States.  Rather,” bracken goes on, “it introduces new risks into the American decision-making calculus.”

Some chapters of this book are deeper and better thought out than others, but still it is definitely worth reading.

How is the biomarker ID aid plan going in India?

One of the most important positive developments of our time – both underpublicized and underappreciated — is our growing ability to send and receive money securely across space.  It’s not just Paypal or Bitcoin in the West, as the truly significant gains from payment systems are coming in the developing world.  In particular, the efforts of the Indian government to set up a biometrically-based payments system are improving the lives of many millions and may go down as one of the most impressive achievements of contemporary times.

In 2009, the government of India set out to create unique, biometric-linked IDs for all 1.2 billion Indian citizens, based on fingerprints and a digital photograph.  Once the identities of these persons are tagged, the government will use the new system to deliver direct cash payments as a form of welfare aid.  To the extent the system works, programs with waste and leakage rates of 40% to 80% will become much more efficient.  Imagine instituting a direct cash transfer in lieu of a low productivity make-work job or sending welfare payments directly to beneficiaries rather than channeling them through corrupt local village officials, who take a cut off the top.

When the biomarker idea was proposed, it was far from obvious it would succeed.  The Indian government has failed at many basic tasks of infrastructure, such as good roads or clean water, and in general the quality of governance is not reliable.  Furthermore conditions in India seemed less than ideal for such an endeavor, as for instance about half of India does not have even a bank account.

There is now a major formal study of how well this new program is going and the results are strongly positive, as shown in “Payments Infrastructure and the Performance of Public Programs: Evidence from Biometric Smartcards in India,” a new NBER Working Paper by Karthik Muralidharan, Paul Niehaus, and Sandip Sukhtankar (ungated copies here).

The authors look at one Indian state, Andhra Pradesh, and rely on a large-scale experiment which gave some people the new service and others not, on a randomized basis.  The results are impressive.  The average household was able to receive 23% more in aid, and more quickly, while the government’s rate of “leakage” – lost or misdirected aid – declined by over 12%.  Overall the new method cost no more than the old, and there were no additional problems of access.  The authors estimate that the benefits in time savings to beneficiaries, taken alone, are larger than the costs of creating the new payments system.  For poor people, those gains represent major life improvements.

No less importantly, the beneficiaries strongly favored the new method of aid by margins of eighty to ninety percent.  That means a recent Indian Supreme Court decision, ruling against making the new system mandatory for privacy-related reasons, is unlikely to stop its ultimate success.

Despite many obstacles and imperfections, the logistics of the system seem to be coming together.  After two years of roll out, the share of Smartcard-enabled payments in the relevant studied districts is running at about fifty percent.  It now seems plausible to imagine that most eligible Indian citizens are in some way connected to the system within the next ten years.  Liberals may prefer to think of this as a boost in “state capacity,” whereas conservatives can see it as a paring back of government programs which were not working and as replacing corrupt and paternalistic in-kind aid with direct cash transfer, as had been suggested by Milton Friedman.

The nature of this Indian innovation has been the combination of modern (but not cutting edge) information technology with the use of labor on a very large scale for implementation.  The process of registering so many Indians, and recording their biodata, has required the mobilization of an immense army of labor in a manner which is only possible in a low-wage country, albeit one with a fairly active bureaucracy.

One broader lesson here is that developing nations are not merely copying and applying the inventions of the West, but innovating on their own.  But a lot of their innovations take labor-intensive rather than capital-intensive forms, and thus they do not always look like innovations to our sometimes ethnocentric eyes.

China too may be a more innovative nation than it at first appears.  Sometimes the Chinese contribution to a production process is dismissed as merely adding to a single stage of production, such as finishing off an iPhone to be shipped out.  The deeper truth is that China offers not only cheaper wages but also a very large pool of skilled workers, including engineers, which can be mobilized in large numbers with extreme rapidity.  To create such a talented labor pool on such a scale is an unprecedented innovation and it is one which the West has not managed to match.

The bottom line is that today I have good news to report.

Are drunk drivers (instrumentally) rational?

Via Kevin Lewis, here is a new paper on that question:

The Behavioral Economics of Drunk Driving

Frank Sloan, Lindsey Eldred & Yanzhi Xu
Journal of Health Economics, May 2014, Pages 64–81

Abstract:
This study investigates whether drinker-drivers attributes are associated with imperfect rationality or irrationality. Using data from eight U.S. cities, we determine whether drinker-drivers differ from other drinkers in cognitive ability, ignorance of driving while intoxicated (DWI) laws, have higher rates of time preference, are time inconsistent, and lack self-control on other measures. We find that drinker-drivers are relatively knowledgeable about DWI laws and do not differ on two of three study measures of cognitive ability from other drinkers. Drinker-drivers are less prone to plan events involving drinking, e.g., selecting a designated driver in advance of drinking, and are more impulsive. Furthermore, we find evidence in support of hyperbolic discounting. In particular, relative to non-drinker-drivers, the difference between short- and long-term discount rates is much higher for drinker-drivers than for other drinkers. Implications of our findings for public policy, including incapacitation, treatment, and educational interventions, are discussed.

Here is an ungated version of the paper.