Month: August 2016

The nudge that is toast

by  Tyler Cowen in

Or should it be the toast that is nudge?

The creators of a new gadget on Kickstarter called the Toasteroid want people to make the most of their morning toast time. Yes, toast is one of life’s simple pleasures, but it serves no functional purpose in our lives beyond satisfying hunger. We’re busy people; we have things to do, and we need to optimize our time. The Toasteroid lets users design images to go on their toast through a companion iOS / Android app. More crucially, they can program it to print the day’s weather or a reminder.

toast

File under: There is no Great Stagnation, Markets in Everything, Who Needs SMS? Be a Good Host, Will it Cut Down on My Carbs?

For the pointer I thank the excellent Samir Varma.

Early results from the Seattle minimum wage experiment

by  Tyler Cowen in

I would stress that it is the very long run results that matter, once all lock-in and morale effects are gone or redrawn and the eventually-old legislated minimum wage is simply a relative price like any other.  But what about the short run?  Timothy Taylor has a good survey of a recent study (pdf), and here is his concluding paragraph:

I’m willing to let the evidence tell me the story, and on many economic issues, it takes time for the evidence to accumulate. As more cities raise minimum wage, the picture will clarify. But the early evidence from Seattle is that a higher minimum wage at the city level doesn’t raise total earnings by much, because low-skilled workers end up with fewer hours on the job.

There are many other points at the link.

*The Socialism of Fools*

by  Tyler Cowen in

There are two new and interesting books with that same title.  The first is by William I. Brustein and Louisa Roberts, and it has the subtitle Leftist Origins of Modern Anti-Semitism.  Think of it as a short overview of what the subtitle promises, with chapters on the Enlightenment, France, Germany, and Great Britain.  The second, by Michele Battini, has the subtitle Capitalism and Modern Anti-Semitism, and is longer and perhaps more exotic.  Here is one summary sentence: “My hypothesis is that this anti-Semitic anticapitalist literature arose in the context of the intransigent Catholic reaction against the revolution in political rights, the free market, and secularization.  Both are of interest.  Both main titles of course come from the classic quotation by August Bebel: “Antisemitism is the socialism of fools.”

The wit and wisdom of Eugene Fama

by  Tyler Cowen in

…in hindsight, every price is wrong.

That’s Eugene Fama, from Fama vs. Thaler.  I enjoyed this part too:

Twenty years ago my criticism of behavioral finance was that it is really just a branch of efficient markets, because all they do is complain about the efficient-markets model. I’m probably the most important behavioral-finance person, because without me and the efficient-markets model, there is no behavioral finance. I still think there is no full-blown testable behavioral asset-pricing model.

I have more sympathies for behavioral finance than that, still the dialogue is worth reading in its entirety.  Judged as a debate, Thaler loses.

Hat tip goes to Allison Schrager.

Is there negative rent in Puerto Rico?

by  Tyler Cowen in

Welcome to public housing in Puerto Rico, a realm of high intentions and low outcomes. The island has America’s second-largest public housing system, after New York’s. Roughly 125,000 people inhabit 54,000 apartments, paying rent according to a federal formula: Rent, plus utilities, must be no more than 30 percent of a household’s adjusted income.

Paychecks here are small, and the tenants’ rents are never enough to cover the system’s costs. So Washington subsidizes the rest, currently to the tune of $254 million a year.

It isn’t the housing that’s making Ms. Ramos want to leave. It’s the crime and a culture of cheating.

“Negative rent!” she exclaims. “It doesn’t exist in other parts of the world, but in Puerto Rico, sí!”

Public housing experts say “negative rent” is theoretically possible; Ms. Ramos says she sees it all around her. She pays to live in the projects, but other people have found ways to be paid.

That is from Mary Williams Walsh at the NYT.  And here is some more detail on negative rent:

Federal Housing and Urban Development records say that 36 percent of the families in Puerto Rico’s housing projects have incomes of zero. By law, tenants with no income must pay $25 a month. This turns into “negative rent” when their electric bills are factored in.

That’s because Washington gives public housing tenants a “utility allowance,” which is normally deducted from their rent. But if someone is paying just $25 a month, for example, and gets a utility allowance of $65 a month, they’ll end up with a “negative rent” of $40. It’s paid in cash.

Some people pocket the money and stiff the Electric Power Authority, a government monopoly with a bad track record for bill collections. The Power Authority is responsible for $9 billion of the government’s $72 billion debt. It could use the money.

Ms. Ramos suspects that if rates go up, Washington will send bigger utility allowances — and people living on “negative rent” will get more money.

Solve for the equilibrium, as they say…

Sunday assorted links

by  Tyler Cowen

1. Jill Stein, speaking to you from Moscow’s Red Square.

2. “Nebraska has a higher average income than California after adjusting for purchasing power.”

3. Is premature deindustrialization a problem for India?

4. Rooting against markets in everything will there be a Star Wars TV show?

5. Mark Koyama on Charles Maier and modern statehood.

6. Against plates — a Twitter feed.

7. Five minutes with Einstein’s leather jacket.  It still smells of pipe smoke.

The Right to Try

by  Alex Tabarrok in

Right to Try legislation permits patients fighting a terminal illness to get access to not-yet-FDA-approved drugs. Thirty-one states have passed Right to Try legislation with massive shows of support but so far these laws are untested by the courts so it’s not clear whether they are anything but expressive. The massive support for Right to Try laws, however, suggests that there is demand for a better FDA as Bartley Madden writes:

Freedom is a powerful rallying call and 31 states have now passed Right To Try legislation with sky-high approval ratings by citizens.

…[But] the states do not have the legal authority to circumvent the FDA. Moreover, drug developers have a major disincentive to participate because, to survive, drug developers need to secure FDA approvals for their new drugs. And circumventing the FDA by providing not-yet-approved drugs to terminally-ill patients could easily slow or prevent FDA approvals.

…A better solution is Free To Choose Medicine (FTCM). It would solve the dilemma facing politicians who are pulled in one direction by citizens’ demands for more freedom and in the opposite direction by FDA proponents with demands for a highly-controlled process. A clear, brief explanation of FTCM is available on the Internet in the PowerPoint presentation, “Free To Choose Medicine and Right To Try.” It explains how we will all benefit from more freedom of choice.

First, the Free To Choose track (separate from the FDA’s conventional clinical testing track) enables patients and their doctors to make informed decisions about the use of FDA-approved drugs or not-yet-FDA-approved drugs. Patients, under the guidance of their doctors, would learn about initial safety results and up-to-date treatment results of FTCM drugs. FTCM drugs for a wide range of illnesses (not just terminal illnesses addressed by Right To Try) would be available up to seven years before conventional FDA approval.

Second, FTCM legislation would provide for government oversight of an open-access, Internet-accessible database. It provides up-to-date information for patients and doctors about a FTCM’s drug’s potential benefits and risks before they choose to use it. This is a self-adjusting system wherein more patients use FTCM drugs that work well and vice versa.

The open-access database would contain treatment results of FTCM patients including their genetic makeup and relevant biomarkers. This database (not part of Right To Try legislation) would reveal subpopulations of patients who do extremely well or poorly with the new drug. Pinpointing such groups of patients is a huge benefit to, not only patients, but to biopharmaceutical researchers working on new breakthroughs in medicine.

Third, FTCM federal legislation needs to provide a new type of drug approval – Observational Approval – based on treatment results for real-world patients who receive the FTCM drugs. This would motivate drug developers to participate as well as expedite insurance reimbursement for patients.

Naturally, I agree with Bart on the need for FDA reform.

Which part of the world is most underrated in literary terms?

by  Tyler Cowen in

I asked that question of Michael Orthofer, and his answer was this:

Underrated, I would absolutely think the regional language and literature of India. I think surprisingly, even though, perhaps, English is the main literary language of India and a great deal is locally translated, even there much of the vernacular literature still isn’t available in English.

What one can see of it and also in part hear about it — we’re missing an awful lot. There is a literary culture there, especially, for example, in Bengali, but we’ve had that since Tagore. One of the remarkable things is Tagore won his Nobel prize over a hundred years ago, and there are still novels by him which haven’t been translated into English. He is really a very good novelist.

It’s truly worthwhile, and this goes for many regions. The southern region of Kerala where they write in Malayalam — there’s remarkable literary production there, and we just see so little of it.

My inclination was to suggest Chile.  Here’s why this country of below 18 million people is nonetheless a fierce literary contender:

1. Pablo Neruda was one of the two or three best poets of the latter part of the twentieth century.   His Canto general is not his best poetic work but as a general statement of the history and underlying unity of the New World it is unparalleled.  Gabriela Mistral is noteworthy too.

2. José Donoso’s The Obscene Bird of the Night is one of the very best Latin novels, yet it is hardly read these days, I am not sure why.  I think it is clearly better than say One Hundred Years of Solitude.

3. Roberto Bolaño is probably the most important Latin author post-García Márquez, and he is from Chile, though he wrote much more about Mexico.

4. Antonio Skármeta isn’t even a top figure in this lineage yet he is still quite good, the same holds for Ariel Dorfman (born in Argentina, moved to Chile shortly afterwards), Alejandro Zambra, and yes Isabel Allende, who is the Chilean author most in the public eye in the United States.  She is usually too sentimental for my taste but some of it I enjoy nonetheless.

And why is Chile underrated?  Well, when you are there it feels fairly provincial — just ask a Porteño.  Bolaño didn’t stick around and more generally exile from Pinochet prevented the creation of any well-defined group or movement.  The Pinochet years also gave Chile a…shall we say…non-artistic reputation, and finally both Neruda and Doñoso don’t translate so well out of the Spanish.

Do you have an alternative choice?

Saturday assorted links

by  Tyler Cowen

1. “There are dozens of us!  Dozens!”  Recommended.

2. Xavier University to get North America’s first pizza ATM.  And I didn’t even know what a “Keurig” was, much less a “Keurig for cocktails.”

3. Lovers of trashy films are highly educated cultural omnivores.

4. I say blame the voters but still there is a grain of truth to this.  Still, the ethic of individual responsibility should be paramount here, and that leads us back to the voters.

5. “The committee set up to investigate lack of transparency in Panama’s financial system itself lacks transparency, Nobel Prize-winning economist Joseph Stiglitz told Reuters on Friday after resigning from the “Panama Papers” commission.”  Link here.

Does Pretrial Detention Reduce or Increase Crime?

by  Alex Tabarrok in

Two interesting papers came across my desk. First, The Economics of Rights: Does the Right to Counsel Increase Crime? by Ater, Givati and Rigbi:

We examine the broad consequences of the right to counsel by exploiting a legal reform in Israel that extended the right to publicly provided legal counsel to suspects in arrest proceedings. Using the staggered regional rollout of the reform, we find that the reform reduced arrest duration and the likelihood of arrestees being charged. We also find that the reform reduced the number of arrests made by the police. Lastly, we find that the reform increased crime. These findings indicate that the right to counsel improves suspects’ situation, but discourages the police from making arrests, which results in higher crime.

In other words, the right to counsel makes it easier for criminals to escape justice and since the price of crime falls the quantity of crime increases. Makes sense!

The second paper The Downstream Consequences of Misdemeanor Pretrial Detention is by Heaton, Mayson and Stevenson:

This Article uses detailed data on hundreds of thousands of misdemeanor cases resolved in Harris County, Texas — the third largest county in the U.S. — to measure the effects of pretrial detention on case outcomes and future crime. We find that detained defendants are 25% more likely than similarly situated releases to plead guilty, 43% more likely to be sentenced to jail, and receive jail sentences that are more than twice as long on average. Furthermore, those detained pretrial are more likely to commit future crime, suggesting that detention may have a criminogenic effect. These differences persist even after fully controlling for the initial bail amount as well as detailed offense, demographic, and criminal history characteristics. Use of more limited sets of controls, as in prior research, overstates the adverse impacts of detention. A quasi-experimental analysis based upon case timing confirms that these differences likely reflect the casual effect of detention. These results raise important constitutional questions, and suggest that Harris County could save millions of dollars a year, increase public safety, and reduce wrongful convictions with better pretrial release policy.

In other words, when you lock people up before trial they lose their jobs and are more likely to get a record so pretrial detention severs attachments to civil life and increases attachments to criminal life with the end result being increased crime. Makes sense!

What’s frustrating is that both of these papers are good–they have a plausible theory and sound research design–yet they reach opposite conclusions! To be sure, the time periods, places, people and exact experiment are different so both papers could be true. From the policy maker’s perspective, however, the fact that both papers could be true only adds to the difficulty of using academic evidence to make policy.

Nuclear sentences to ponder

by  Tyler Cowen in

…there were at least two instances in which top officials tried to slow, or undermine, the president’s nuclear authority.

The first came in October 1969, when the president ordered Melvin R. Laird, his secretary of defense, to put American nuclear forces on high alert to scare Moscow into thinking the United States might use nuclear arms against the North Vietnamese.

Scott D. Sagan, a nuclear expert at Stanford University and the author of “The Limits of Safety,” a study of nuclear accidents, said Mr. Laird tried to ignore the order by giving excuses about exercises and readiness, hoping that the president who sometimes embraced the “madman theory” — let the world think that you are willing to use a weapon — would forget about his order.

But Nixon persisted. Dr. Sagan reports that during the operation, code-named Giant Lance, one of the B-52 bombers carrying thermonuclear arms came dangerously close to having an accident.

Then, in 1974, in the last days of the Watergate scandal, Mr. Nixon was drinking heavily and his aides saw what they feared was a growing emotional instability. His new secretary of defense, James R. Schlesinger, himself a hawkish Cold Warrior, instructed the military to divert any emergency orders — especially one involving nuclear weapons — to him or the secretary of state, Henry A. Kissinger.

It was a completely extralegal order, perhaps mutinous. But no one questioned it.

That is from William Broad and David Sanger at the NYT.

Addendum: Here is a 2008 Alex post on the same.