Month: November 2016

Why Is Turkey Cheaper When Demand Is Higher?

by  Alex Tabarrok in

When you do your Thanksgiving shopping this week, you will encounter two vastly different options for the centerpiece: an expensive heritage, organic, antibiotic-free, freshly killed turkey; or a relatively cheap, mass-produced, rock-solid-frozen bird. The frozen birds are a pretty attractive deal — especially because this time of year, they are unusually cheap. According to government data, frozen whole-turkey prices drop significantly every November; over the last decade, retail prices have fallen an average of 9 percent between October and November.

That trend seems to defy Econ 101. Think back to those simple supply-and-demand curves from introductory micro, and you’ll probably remember that when the demand curve shifts outward, prices should rise. That’s why Major League Baseball tickets get most expensive during the World Series — games that (theoretically, anyway) many more people want to see. Similarly, airline tickets spike around Christmas.

That’s Catherine Rampell but don’t read the whole thing. Argue about it! Happy Thanksgiving.

*The Great Convergence*

by  Tyler Cowen in

The author is Richard Baldwin and the subtitle is Information Technology and the New Globalization.  The new globalization is the vertical geographic spread of the supply chain, as enabled by information technology.  Think iPhone, the components of which are made in a number of different countries.  (By the way, here is a very good Adam Minter piece on why an American-made iPhone would be very difficult to pull off.)  The important form of trade today is data flows, which enable the export of “how to” knowledge to an unprecedented degree.  Here is one excerpt:

Since so much globalization policy was crafted with the Old Globalization in mind, much of the policy response is misshaped or at least suboptimal.  To take a couple of obvious examples, economic institutions like labor unions tend to be organized by sectors and skill groups since that was the level at which the Old Globalization affected economies.  And national education strategies typically seek to train children for promising jobs in promising sectors since the Old Globalization cut a predictable path that defined sunrise and sunset sectors.  Likewise, governments around the world seek to dampen the pain of structural adjustment with policies linked to declines in particular sectors of particular geographic areas (often those that had specialized in sunset sectors).  Most of these policies are inappropriate for today’s globalization, which is more sudden in its impact, more individual in its effects, more uncontrollable for governments, and more unpredictable overall.

Ultimately, there can be no magic solutions to the changed nature of globalization.  The New Globalization makes life harder for governments.  But the intrinsic difficulty is multiplied by the fact that many governments and analysts are using the Old Globalization’s mental model to understand the New Globalization’s effects.

For Baldwin, the case against TPP, from a U.S. point of view, rests on the possibility that it would ease knowledge transfer abroad and thus erode American competitive advantages.  This focus on data flows, by the way, means that most traditional trade statistics are misleading if not outright wrong.  There is much in this book to ponder.

Betsy DeVos, selected for Secretary of Education

by  Tyler Cowen in

DeVos, an advocate for school vouchers, has chaired the Michigan Republican party and played a key role in some major education policy decisions there in recent years. But unlike former D.C. schools chief Michelle Rhee and charter-school leader Eva Moskowitz, two others Trump considered for the education secretary position, DeVos has kept a relatively low national profile. She has neither worked in public education nor chosen public schools for her own children, who attended private Christian schools.

Earlier this week, Chalkbeat compiled a few things we could reasonably surmise from a DeVos pick:

1. Trump intends to go through with his sweeping voucher plan.

On the campaign trail, Trump vowed to use federal funds to encourage states to make school choice available to all poor students, including through vouchers that allow families to take public funding to private schools.

That’s exactly what DeVos has zealously worked to make happen on a state-by-state basis for decades. In 2000, she helped get a ballot measure before Michigan voters that would have enshrined a right to vouchers in the state’s Constitution. After the measure failed, she and her husband formed a political action committee to support pro-voucher candidates nationally. Less than a decade later, the group counted a 121-60 win-loss record.

One recipient of its support: former Indiana Gov. Mitch Daniels, who created the voucher program that Trump’s vice president-elect, Mike Pence, later expanded. Indeed, DeVos’s vision puts her more in line with Pence, who has supported private school vouchers for both low- and middle-income families, than with Trump, whose plan extends only to poor families.

Here is much more information.

Arguments to ponder for Thanksgiving

by  Tyler Cowen in

The population of wild koalas in the southeast portion of Australia’s Queensland state has plunged by 80% in less than two decades, but researchers are offering a simple plan to save them. They can sum it up in three words: daylight saving time.

Changing the clocks would help stem the koalapocalypse by reducing fatal encounters between koalas and the motorists who drive through their ever-shrinking territory, the researchers say. According to their calculations, the number of koala deaths could fall by 8% on weekdays and 11% on weekends.

“We hope that our study will encourage the Queensland government to consider the benefits of implementing DST,” they wrote in a study published Tuesday in the journal Biology Letters.

Queensland, the state in the northeastern corner of Australia, has a complicated relationship with daylight saving time. The practice has not been observed there since 3 a.m. on March 1, 1992, when a three-year trial period came to an end. The push to bring it back has spawned petitions, referendums and even a political party (Daylight Saving for South-East Queensland, or DS4SEQ).

There are too many noisy videos at the link.  And might abolishing the U.S. penny help the koalas too?  I am sure it will!

What if Donald Trump wanted *more* illegal immigration?

by  Tyler Cowen in

That is the topic of my latest Bloomberg column, here is the premise:

Imagine that a new U.S. president, different from the one we just elected, set out to maximize the number of illegal Mexican immigrants. Maybe he or she saw electoral advantage in this, or maybe just thought it was the right thing to do. But how to achieve that end? Imagine also that I was called into the Oval Office to give advice.

So what would I suggest?

I would start by recommending an enormous new program of fiscal stimulus and construction…

Don’t forget this:

By the way, infrastructure programs will help illegals in other ways, more than would citizen-focused Social Security or Medicare benefits, for example. Illegal immigrants use roads and mass transit and electricity and other forms of infrastructure all the time. And they won’t suffer much if subsidies for health insurance under Obamacare are reallocated to construction because it was so hard for them to get those subsidies in the first place.

There is much more at the link.  My conclusion is this:

The president-elect we have, whether he knows it or not, already has figured out how to maximize the number of illegal Mexican immigrants.

Who ever said Donald Trump can’t solve a problem?

Clinton Won The Economy

by  Alex Tabarrok in

Here’s a interesting breakdown of the Trump-Clinton vote from Jim Tankersley at the Washington Post.

According to the Brookings analysis, the less-than-500 counties that Clinton won nationwide combined to generate 64 percent of America’s economic activity in 2015. The more-than-2,600 counties that Trump won combined to generate 36 percent of the country’s economic activity last year.

Clinton, in other words, carried nearly two-thirds of the American economy.

That’s another way of saying city versus rural, more educated versus less educated and so forth but it’s an interesting way of thinking about cities, geography and the division in US politics.

Medical Spending Variation: 1/2 Patients, 1/2 Places

by  Alex Tabarrok in

In Miami, health care providers spent about $14,423 per Medicare patient in 2010. But in Minneapolis, average spending on Medicare enrollees that year was $7,819, just over half as much. In fact, the U.S. is filled with regional disparities in medical spending. Why is this?

One explanation focuses on providers: In some regions, they may be more likely to use expensive tests or procedures. Another account focuses on patients: If the underlying health or the care preferences of regional populations varies enough, that may cause differences in spending. In recent years, public discussion of this issue has largely highlighted providers, with the implication that reducing apparently excessive treatments could trim overall health care costs.

But now a unique study co-authored by MIT economists provides a new answer to the medical cost mystery: By scrutinizing millions of Medicare patients who have moved from one place to another, the researchers have found that patients and providers account for virtually equal shares of the differences in regional spending.

“We find it is about 50/50, half due to patients and half due to places,” says Heidi Williams, the Class of 1957 Career Development Associate Professor in MIT’s Department of Economics, and a co-author of a new paper detailing the study’s findings.

That’s MIT News ably summarizing the new Finkelstein, Gentzkow, and Williams paper, Sources of Geographic Variation in Health Care: Evidence From Patient Migration (ungated).

If the half of the variation that is due to place is inefficient (which could mean too low or too high but probably means too high given that the medical care curve is flat) then this puts an upper limit on the gains from standardization but still a quite high limit.

By the way, Finkelstein and Gentzkow are both recent John Bates Clark Medal awardees and Williams is a MacArthur “genius award” winner. Perhaps I should have titled this post, assortative co-authoring.

Tuesday assorted links

by  Tyler Cowen

1. “…carbon pricing might need to be combined with policies to reduce capital costs of low-carbon options in order to decarbonize power systems.”

2. In defense of publish or perish?

3. Will Trump label China a “currency manipulator”?  And what do the Chinese elite think of Trump?  And might the “trade war” with China work out OK?

4. We’ve already built a wall.

5. Reddit thread on whether you should be excited about EW.

6. Old urine samples show massive Olympic cheating.

7. Five ways Facebook could help make us better.

The rate of dementia is falling

by  Tyler Cowen in

Is it a kind of Flynn effect for the elderly?:

Dementia is actually on the wane. And when people do get dementia, they get it at older and older ages.

Previous studies found the same trend but involved much smaller and less diverse populations like the mostly white population of Framingham, Mass., and residents of a few areas in England and Wales.

The new study found that the dementia rate in Americans 65 and older fell by 24 percent over 12 years, to 8.8 percent in 2012 from 11.6 percent in 2000. That trend that is “statistically significant and impressive,” said Samuel Preston, a demographer at the University of Pennsylvania who was not associated with the study.

In 2000, people received a diagnosis of dementia at an average age of 80.7; in 2012, the average age was 82.

“The dementia rate is not immutable,” said Dr. Richard Hodes, director of the National Institute on Aging. “It can change.”

And that “is very good news,” said John Haaga, director of the institute’s division of behavioral and social research. It means, he said, that “roughly a million and a half people aged 65 and older who do not have dementia now would have had it if the rate in 2000 had been in place.”

That is from Gina Kolata from the NYT.  The piece has many other points of interest.

Renaissance Technologies

by  Alex Tabarrok in

Renaissance is unique, even among hedge funds, for the genius—and eccentricities—of its people. Peter Brown, who co-heads the firm, usually sleeps on a Murphy bed in his office. His counterpart, Robert Mercer, rarely speaks; you’re more likely to catch him whistling Yankee Doodle Dandy in meetings than to hear his voice. Screaming battles seem to help a pair of identical twins, both of them Ph.D. string theorists, produce some of their best work.

Excellent piece that raises many questions such as, Is finance really the best use for two string theorists? And if you think the answer to that question is obvious you may need to learn more string theory.