Month: June 2015
Princeton University Press to the rescue
Thrive: How Better Mental Health Care Transforms Lives and Saves Money, by Richard Layard & David M. Clark.
Mental illness is a leading cause of suffering in the modern world. In sheer numbers, it afflicts at least 20 percent of people in developed countries. It reduces life expectancy as much as smoking does, accounts for nearly half of all disability claims, is behind half of all worker sick days, and affects educational achievement and income. There are effective tools for alleviating mental illness, but most sufferers remain untreated or undertreated. What should be done to change this? In Thrive, Richard Layard and David Clark argue for fresh policy approaches to how we think about and deal with mental illness, and they explore effective solutions to its miseries and injustices.
Layard and Clark show that modern psychological therapies are highly effective and could potentially turn around the lives of millions of people at little or no cost. This is because treating psychological problems generates huge savings on physical health care, as well as massive economic savings through more people working. So psychological therapies would effectively pay for themselves, generating potential savings for nations the world over. Layard and Clark describe how various successful psychological treatments have been developed and explain what works best for whom. They also discuss how mental illness can be prevented through better schools and a better society, and the urgency of doing so.
My earlier post on mental illness is here, and so I am not sure I will agree with this book — we will see. Here is a related recent publication by Layard.
Thursday assorted links
A tweet in the form of a blog post, with an addendum, #Paulson, #Harvard
Until “effective altruism” figures out what drives innovation, those recommendations simply aren’t that reliable.
Addendum: John Sterling just wrote this in the MR comments section:
I think Steven Landsburg made the definitive “pro-Paulson gift” argument in his classic Slate piece defending Ebenezer Scrooge. Paulson could have pulled a “Larry Ellison” and built himself a $200 mm yacht. He decided to forgo (some) of his conspicuous consumption and instead let the Harvard Management Company steward some additional capital.
I’ve sometimes wondered whether the Harvard endowment is the ultimate way to be an “effective altruist” for an Austrian-leaning type. If you believe, like Baldy Harper did, “that savings invested in privately owned economic tools of production amount to … the greatest economic charity of all.” then the Harvard endowment makes a pretty interesting beneficiary. I can’t think of another institution in the world today that is more likely to hold on to its capital in perpetuity than the folks in Cambridge.
I am not saying he is right, just don’t be so quick to conclude he is wrong. By the way, I do not in fact donate my own money to Harvard.
Did the Wisconsin state system just abolish tenure?
I don’t think so, not really. Here is one explanation:
The proposed changes would also remove tenure protections from state law. Darling and Harsdorf both said that Wisconsin is the only state that enshrines tenure in its statutes.
The GOP proposal puts the decision of whether to have tenure and how to define it in the hands of the Board of Regents.
“We believe in empowering the Board of Regents and the chancellors throughout the state of Wisconsin to be able to manage the System,” Nygren said. “I think this is a tool to enable them to do that.”
Cross and Board of Regents vice president Regina Miller pledged to uphold the tenets of shared governance and tenure in their policies.
For sure that is a decline in the relative status of tenure, but not an end to tenure itself.
By the way, I’ve seen so many criticisms of the $400 million Paulson gift to Harvard, almost making it sound worse than if he had kept the money for himself, as most people do with $400 million. Without a well-worked out theory of university endowments, and their importance and function (they do seem to matter), I don’t see a hard and shut case for condemning this gift. At the very least, it is likely to boost investment’ note that about 15% of Harvard’s endowment goes to private equity or venture capital. I do understand however that this gift sends an anti-egalitarian message about status relations and where investment should go.
Who is the best gun salesman in the whole world?
Emilio Depetris-Chauvin suggests a possible answer:
Using monthly data constructed from futures markets on presidential election outcomes and a novel proxy for firearm purchases, this paper analyzes the response of the demand for guns to the likelihood of Barack Obama being elected in 2008. Point estimate suggests the existence of a large Obama effect on the demand for guns. This political effect is larger than the effect associated with the worsening economic conditions. This paper presents robust empirical evidence supporting the hypothesis that the unprecedented increase in the demand for guns was partially driven by fears of a future Obama gun-control policy. Conversely, the evidence for a racial prejudice motivation is less conclusive. Furthermore, this paper argues that the Obama effect did not represent a short-lived intertemporal substitution effect, and that it permanently affected the stock of guns in circulation. Finally, states that had the largest increases in the demand for guns during the 2008 election race experienced significant changes in certain categories of crime relative to other states following Obama’s election. In particular, those states were 20% more likely to experience a shooting event where at least three people were killed.
The published paper is here, via Kevin Lewis.
Prediction markets in Jules Verne
From Around the World in Eighty Days:
Everybody knows that England is the world of betting men, who are of a higher class than mere gamblers; to bet is in the English temperament. Not only the members of the Reform, but the general public, made heavy wagers for or against Phileas Fogg, who was set down in the betting books as if he were a race-horse. Bonds were issued, and made their appearance on ‘Change; Phileas Fogg bonds” were offered at par or at a premium, and a great business was done in them. But five days after the article in the bulletin of the Geographical Society appeared, the demand began to subside: “Phileas Fogg” declined. They were offered by packages, at first of five, then of ten, until at last nobody would take less than twenty, fifty, a hundred!
Lord Albemarle, an elderly paralytic gentleman, was now the only advocate of Phileas Fogg left.
I should add that it is quite easy to read this novel as a critique of the “death of distance” view, and other forms of hyperbole about globalization.
Wednesday assorted links
1. Life under Estonia’s digital government.
2. The Gish Gallop.
3. What it’s like to be blind on the internet.
4. Sign up for The Replication Network, to encourage replication.
5. Russian trolls and what they do, an Orwellian army.
6. New concepts in autonomous mobility.
7. Milanovic updates his FIFA argument, my view is closer to Silver’s.
Should we care if the human race goes extinct?
Stephen Hawking fears that “the development of full artificial intelligence could spell the end of the human race.” Elon Musk and Bill Gates offer similar warnings. Many researchers in artificial intelligence are less concerned primarily because they think that the technology is not advancing as quickly as doom scenarios imagine, as Ramez Naam discussed. I have a different objection.
Why should we be worried about the end of the human race? Oh sure, there are some Terminator like scenarios in which many future-people die in horrible ways and I’d feel good if we avoided those scenarios. The more likely scenario, however, is a glide path to extinction in which most people adopt a variety of bionic and germ-line modifications that over-time evolve them into post-human cyborgs. A few holdouts to the old ways would remain but birth rates would be low and the non-adapted would be regarded as quaint, as we regard the Amish today. Eventually the last humans would go extinct and 46andMe customers would kid each other over how much of their DNA was of the primitive kind while holo-commercials advertised products “so easy a homo sapiens could do it”. I see nothing objectionable in this scenario.
Aside from greater plausibility, a glide path means that dealing with the Terminator scenario is easier. In the Terminator scenario, humans must continually be on guard. In the glide path scenario we only have to avoid the Terminator until we become them and then the problem is resolved with little fuss. No human race but no mass murder either.
More generally, what’s so great about the human race? I agree, there are lots of great things to point to such as the works of Shakespeare, Mozart, and Grothendieck. We should revere the greatness of the works, however, not the substrate on which the works were created. If what is great about humanity is the great things that we have done then the future may hold greater things yet. If we work to pass on our best values and aspirations to our technological progeny then we can be proud of future generations even if they differ from us in some ways. I delight to think of the marvels that future generations may produce. But I see no reason to hope that such marvels will be produced by beings indistinguishable from myself, indeed that would seem rather disappointing.
Greece fact of the day
By contrast, Greek households own more foreign assets than they owe in liabilities to foreigners. Exiting the euro area would immediately make them wealthier, although, perversely, the stimulus would be most potent the longer the government waits for citizens to pull their savings out of the banks.
That is from Matthew C. Klein at the FT.
Tyrone says the Chinese stock market is not a bubble
James Surowiecki writes:
Of seventeen hundred stocks on the Shenzhen Exchange, only four have fallen this year, and more than a hundred have seen their shares rise more than five hundred per cent. The Shenzhen Index as a whole has doubled since January, and is up more than two hundred per cent in the past year. The action on China’s other major stock exchanges—in Shanghai and Hong Kong—hasn’t been quite as torrid, but they’ve had their share of extraordinary winners. The Shanghai Composite Index has risen a hundred and forty per cent since this time last year. In Hong Kong, Jicheng Umbrella Holdings (which makes, yes, umbrellas) went public in February: its shares are up almost seventeen hundred per cent.
Tyrone, Tyler’s evil twin, says buy, buy buy! Borrow to buy, and then borrow to borrow! Tyrone has read so many people in the last week calling the Chinese stock market a bubble, so the contrarian in him thinks you simply need to take the plunge as soon as possible.
Direct foreign investment has been allowed only as of late 2014:
The Shanghai-Hong Kong Stock Connect program will allow all investors to buy shares on the Shanghai Stock Exchange, while also permitting wealthy investors in mainland China to buy stocks listed in Hong Kong. The move allows investors access to companies with an overall market value of roughly $2 trillion.
“We think it is very significant. We plan to participate,” said Gary Greenberg, head of emerging markets at Hermes Investment Management in London, which managed $46.9 billion in assets as of June 30.
That’s a lot of foreign capital to push up the value of Ma and Pa Tofu, and indeed that flood of capital will validate your early investment. And who amongst us is not tempted to diversify just a wee bit into the world’s second largest economy, indeed the very largest by PPP measures? Surely the coming tidal wave of foreign liquidity will push aside all present minor worries.
On the domestic front, Chinese savings are currently real-estate intensive, and over time those funds be shifting into equities, especially as Chinese graduate students carry the lessons of Mehra and Prescott back home. As prices fluctuate, the market is assessing how significant these effects will be, just as it once did with subprime.
Besides, the market went up 4.6% on Monday alone, and that is at a time when Chinese manufacturing seems to be slowing. The Chinese government itself proclaimed the stock market to be “healthy,” and indeed many different parts of the government, including the media, have seconded this verdict. Why bet against all of them?
Did you not know that the Chinese debt-equity ratio is too high? Well, higher equity prices will help lower that ratio, as the government intends; new stock issues are being used to buy back corporate debt, some of it dollar-denominated.
If nothing else, return back to some patriotic context. Was it not a good idea to buy American stocks when our country had a per capita gdp of 6-7k, and headed up? With a 20-30 year time horizon, was it not a good idea to buy American stocks even in 1929?
To be sure, the forthcoming liquidity-based, foreign investor-driven price movements imply a non-horizontal demand curve for those stocks, and thus violate the stricter forms of EMH. But who said a demand curve should be perfectly flat anyway? Weren’t the Marxists referring to perfectly flat demand curves when they said competitive capitalism is the absolute loss of freedom? And hasn’t China been moving away from Marxism? Q.E.D. So Tyrone says it is time to borrow to buy. Someone out there — maybe even you — won’t regret it.
Sound bites for silent laser systems (life imitates art)
Thanks to computerized aiming, HEL MD can operate in wholly autonomous mode, which Boeing tested successfully in May 2014 – although the trials uncovered an unexpected challenge. The weapon’s laser beam is silent and invisible, and not all targets explode as they are destroyed, so an automated battle can be over before operators have noticed anything. ‘The engagements happen quickly, and unless you’re staring at a screen 24-7 you’ll never see them,’ Blount says. ‘So we’ve built sound in for whenever we fire the laser. We plan on taking advantage of lots of Star Trek and Star Wars sound bites.’
More generally, fibre-laser weapons may be on their way:
Despite their modest capabilities, Scharre claims that fibre-laser weapons could find a niche in US military defence in 5–10 years. “They may not be as grand and strategic as the Star Wars concept,” he says, “but they could save lives, protect US bases, ships and service members.”
The full article is here, via the excellent Kevin Lewis.
Tuesday assorted links
*From the Earth to the Moon*
I read this 1865 Jules Verne book lately and very much enjoyed it. It’s a poke at scientific rationalists and project-happy obsessives, and humorous throughout. It mocks those who wish to bet on ideas, compares the American and French versions of excess grandiosity, and asks in subtle ways what are the limits of progress. It reminded me of John Gray far more than I had been expecting. And it’s about an America with no NIMBY, where everyone wants the projects right in their backyard. The space program in fact sets off a rivalry between Texas and Florida to house the first moon shot…and it is to be done with a very large gun.
Definitely recommended, here is the book’s Wikipedia page.
Optimal policy toward mental illness
I was asked about this recently, so I thought I would put down some basic thoughts. Note that mental illness is a major underlying issue behind both crime and unemployment. Federal, state, and local policies toward the mentally ill are highly complex, but here are a few points:
1. As is often the case in health care policy, my inclination is to fund research and development, in this case through the NIH and NSF, before worrying about improving coverage in extant programs. The long-term dynamic gains have the potential to outweigh the one-time static gains.
2. Medicaid offers a highly imperfect coverage of mental illness. Fine-tuning the coverage may well be a good idea, but perhaps first Medicaid needs to be put on a sounder footing. If you are a liberal this may mean federalizing Medicaid, and if you are a conservative this may mean block grants to the states for Medicaid experimentation. If we are simply asking which policy is better for the mentally ill, federalization is likely the answer, although that does not settle the broader debate as to which alternative would be better overall.
3. We could retool Obamacare mandates, and other health insurance default settings, to have more coverage for mental illness and less coverage for other health conditions. Both practical and “individual responsibility” arguments might point in that direction.
4. The deinstitutionalization of the 1980s has come in for a lot of criticism, but I remain a fan of that policy. I’m well aware of its connection to homelessness, and also how many mentally ill people have ended up in jail. Still, that change ended a kind of slavery for many, and if you oppose slavery you should oppose the previous policies, even if the transition brought some very large practical problems. Of course some of these people were lobotomized or otherwise treated coercively in addition to their involuntary confinement. In 1955 the institutionalized population peaked at about 500,000 and many of those were not voluntary admissions; a 2003 measure put that same population at only 50,000. I recommend this Samuel R. Bagenstos piece on the topic.
5. Further deregulation could boost telemedicine and also telepsychiatry; this would lower cost and is especially important for rural areas.
6. When the family of a mentally ill adult should be notified, given individual privacy rights, is worth further discussion. I don’t have a simple answer, here is some background.
7. The future debate will be all about wearables, including those that monitor the excited or violent states of mentally ill people. I am skeptical about this development, mostly for slippery slope reasons, but this will become a major policy issue, for criminals and high risk individuals too.
8. Crime rates have been falling since the 1980s. That suggests some very large gains are coming through peer effects. There is plenty of evidence that mentally ill people, to some extent, slot into their culture’s conception of what mental illness should consist of (mentally ill Malaysians for instance are more likely to “run amok,” because that is a salient concept there.) It seems that our culture is communicating an increasingly peaceful notion of what mental illness should consist of. This development should be studied further, as perhaps those gains can be extended or accelerated in some way.
Overall this is one of the most important topics which is most understudied by economists.
The education myth?
Ricardo Hausmann has an excellent and provocative column, here is part of it:
In the 50 years from 1960 to 2010, the global labor force’s average time in school essentially tripled, from 2.8 years to 8.3 years. This means that the average worker in a median country went from less than half a primary education to more than half a high school education.
How much richer should these countries have expected to become? In 1965, France had a labor force that averaged less than five years of schooling and a per capita income of $14,000 (at 2005 prices). In 2010, countries with a similar level of education had a per capita income of less than $1,000.
In 1960, countries with an education level of 8.3 years of schooling were 5.5 times richer than those with 2.8 year of schooling. By contrast, countries that had increased their education from 2.8 years of schooling in 1960 to 8.3 years of schooling in 2010 were only 167% richer. Moreover, much of this increase cannot possibly be attributed to education, as workers in 2010 had the advantage of technologies that were 50 years more advanced than those in 1960. Clearly, something other than education is needed to generate prosperity.
As is often the case, the experience of individual countries is more revealing than the averages. China started with less education than Tunisia, Mexico, Kenya, or Iran in 1960, and had made less progress than them by 2010. And yet, in terms of economic growth, China blew all of them out of the water. The same can be said of Thailand and Indonesia vis-à-vis the Philippines, Cameroon, Ghana, or Panama. Again, the fast growers must be doing something in addition to providing education.
The piece is interesting throughout.