Month: January 2016

Nudge plus vouchers = “Nanny state”?

Do you like or dislike this mix?:

The prime minister [of the UK] will call for a revolution in child rearing this weekend by suggesting that all parents should attend classes on how to discipline their children.

In a move likely to enrage those fearful of an encroaching “nanny state”,  David Cameron will say that it should be the norm for parents to receive instruction on how to behave around their offspring.

As part of a speech on the family, Cameron will announce plans for a parenting classes voucher scheme, claiming that all parents need help and that there is too little state-sponsored guidance on offer.

I believe most Americans at least do not find this an intuitively appealing combination of policies.  It seems to “insult” the poor at the same time that it brings the state into what for conservatives is the sacred realm of the family.

I wish I could say a policy which irritates so many people is likely to be a good thing, yet I can’t quite see this one working out for the better.  And yes I do know the RCT evidence that personal trainers and coaches can improve the lives of the poor in the developing world.

State-contingent markets in everything

Someone is betting $40,026 on the life of a 73-year-old lottery winner in Michigan.

That amount was the highest bid Thursday in an online auction for a lottery prize that pays $1,000 a month, before taxes. But here’s the hitch: The money is paid only as long as Donald Magett stays alive.

The Portage man won the “Cash for Life” game back in 1984, although the winnings lately have been going to bankruptcy trustee Tom Richardson to pay Magett’s debts.

Richardson auctioned the lottery prize — the last main asset — in an effort to close the bankruptcy case. The auction house,, said the top bid was $40,026. At that price, Magett would need to live a few more years for the winner to at least break even.

The winner soon will get the first annual payment of $12,000.

Richardson said he doesn’t know the details about Magett’s health.

“All I know is his lawyer tells me his health is good,” Richardson said.

According to the Social Security Administration, a 73-year-old man can be expected to live another 13 years.

The story is here, via Mohamed Rayman.

2016 Law and Literature reading list

The New English Bible, Oxford Study Edition

Guantanamo Diary, by Mohamedou Ould Slahi

Albert Camus, The Stranger

Kamel Daoud, The Meursault Investigation

Janet Malcolm, The Crime of Sheila McGough

Njal’s Saga (on-line version is fine)

Glaspell’s Trifles, available on-line

Year’s Best SF 9, edited by David G. Hartwell and Kathryn Cramer, used or Kindle edition is recommended

The Metamorphosis, In the Penal Colony, and Other Stories, by Franz Kafka, edited and translated by Joachim Neugroschel

In the Belly of the Beast, by Jack Henry Abbott

Sherlock Holmes, The Complete Novels and Stories, Sir Arthur Conan Doyle, volume 1, also on-line

I, Robot, by Isaac Asimov

Moby Dick, by Hermann Melville, excerpts, chapters 89 and 90, available on-line

Death and the Maiden, Ariel Dorfman

The Pledge, Friedrich Durrenmatt

Ian McEwan, The Children Act

We also will see some films and cover some very short on-line readings, as I will distribute at the appropriate times; your papers may draw on these as well.


Today’s Powerball lottery offers a prize of $800 million. Is the prize high enough to make it worth playing for an economist? In other words, is the prize high enough to be a net gain in expected value terms? Almost!

The odds of winning are 1 in 292.2 million. So the expected value of a ticket is $800*1/292.2=$2.73. A ticket only costs $2 so that’s a positive expected value purchase! We do have to make a few adjustments, however. The $800 million is paid out over 30 years while the $2 is paid out today. The instant payout is about $496 million so that makes the expected value 496*1/292.2=$1.70. We also have to adjust for the possibility that more than one person wins the prize. If you play variants of your birthday or “lucky” numbers that’s a strong possibility. If you let the computer choose your chances are better but with so many people playing it wouldn’t be surprising if two people had the same number–I give it at least 25%. So that knocks your winnings down to $372 million in expectation.

Finally the government will take at least 40% of your winnings, leaving you with $223 million in expectation. At a net $223 million the expected value of a $2 ticket is about 75 cents. Thus, a Powerball ticket doesn’t have positive net expected value but the net price of $1.25 is significantly less than the sticker price of $2. $1.25 is not much but to get your money’s worth buy early to extend the pleasure of anticipation.

Very good indeed awesome sentences about economic method

At the end of the day, the great benefit of field experiments to economics and political scientists is that it’s forced some of the best social scientists to try to get complicated things done in unfamiliar places, and deal with all the constraints, bureaucrats, logistics, and impediments to reform you can imagine.

Arguably, the tacit knowledge these academics have developed about development and reform will be more influential to their long run work and world view than the experiments themselves.

That is from Chris Blattman.  He concludes:

We are all Albert Hirschman now.

The Declining Dominance of Lawyers in U.S. Federal Politics

From Nick Robinson at Harvard Law:

While the ubiquity of lawyers in U.S. electoral politics has frequently been noted, there has been almost no research on how their prevalence has changed over time, why these changes might have occurred, or the consequences of any such shift. This working paper helps fill this gap by using a unique data set that extends over two hundred years to chart the occupational background of members of the U.S. Congress. It finds that lawyers’ dominance in Congress is in slow, but steady, retreat. In the mid-19th century almost 80% of members of Congress were lawyers. By the 1960s this had dropped to a bit under 60%, and by 2015 it was slightly under 40%. The working paper also details variation of the prevalence of lawyers in Congress on the basis of geographic region, gender, race, and political party. It puts forward a set of arguments about why lawyers have traditionally had such success in U.S. federal electoral politics, including the politicization of the US justice system and the comparative advantage lawyers have over other occupations in terms of access to resources and career flexibility. It then claims that lawyers’ electoral decline may be the result of changes within the legal profession, as well as the emergence of a competing full-time professionalized political class, comprised of political aides and members of civil society, who have made politics a career. It ends by briefly exploring some of the potential ramifications of this decline on the legal profession.

File under…”division of labor is limited by the extent of the market.”

Hat tip goes to

Shout it from the rooftops

…the idea that China services, which are already a large share of output, can and will just take up the slack as industry shrinks overlooks that most services are directly tied to the weakening sectors of property and industry. As George Magnus notes, the tertiary sector is concentrated in finance, property, and wholesale and transport distribution, not in business, IT, professional, health and education services. Despite its large services sector, China is much less diversified than the
Bull-narrative surmises.

And this:

Furthermore, absent new forex controls, if the PBOC broadly holds the band and runs down reserves without sterilizing, any PBOC interest rate cuts would be China-demand-contractionary. So alongside interest rate cuts, the PBOC would have to fully sterilize just to maintain the demand status quo, let alone to stimulate. Alternatively, if it lets the Yuan really float (down), it will be disorderly for lack of a policy framework to back a float, and it will set off major global currency shocks.

That is from Peter Doyle (pdf), with further points of interest, via Dani Rodrik.

How much of the math gender gap is due to culture?

Natalia Nollenberger, Núria Rodríguez-Planas, and Almudena Sevilla have a paper on this topic (click on the AEAweb pdf), presented at this year’s AEA meetings, the core result is this:

This paper investigates the effect of gender-related culture on the math gender gap by analysing math test scores of second-generation immigrants, who are all exposed to a common set of host country laws and institutions. We find that immigrant girls whose parents come from more gender-equal countries perform better (relative to similar boys) than immigrant girls whose parents come from less gender-equal countries, suggesting an important role of cultural beliefs on the role of women in society on the math gender gap. The transmission of cultural beliefs accounts for at least two thirds of the overall contribution of gender-related factors [emphasis added by TC].

I believe we will learn more yet when women stop improving, relative to men, at chess.  But so far that has not yet happened.

Why did the British surpass China in matters military?

Here is an excerpt from the now published Tonio Andrade book, The Gunpowder Age: China, Military Innovation, and the Rise of the West in World History:

Part of the answer of course has to do with industrialization.  Steamships destroyed warjunks, towed long trains of traditional vessels into position, reconnoitered shallows and narrows, and, equally importantly, decreased communication times, allowing for minute, systematic coordination of the war effort.  Similarly, industrial ironworks made strong, supple metal for muskets and cannons, and steam power was used to bore cannons and mix, crumble, and sort gunpowder.

But industrialization isn’t the only answer.  Many of the innovations that most helped the British weren’t about steam power or the division of labor or mechanized factories.  They stemmed, rather, from the application of seventeenth- and eighteenth-century experimental science to warfare.  During the mid-1700s, new scientific discoveries enabled Europeans to measure the speed of projectiles, understand the effects of wind resistance, model trajectories, make better and more consistent gunpowder, develop deadly airborne missiles, and master the use of explosive shells.  These innovations as much as the use of steamship and industrial manufacturing techniques underlay the British edge in the Opium War.

Here is my previous coverage of the book.

For all the talk about recent advances in economics, you don’t hear much about one of the very biggest: how rapidly researchers are filling in the contours of Chinese economic history.