Month: June 2017

Marginal tax rates under the Senate health care bill

To see the problem, consider Brian’s situation. He’s a single adult, age 45, earning $35,000 a year. BCRA (section 102(b)(2)) expects Brian to contribute a little more than 8.3% of that income to purchase a health insurance policy. That’s about $2,911. The federal government would chip in the amount needed to let Brian buy a “median benchmark” policy in his region. That policy won’t be lavish: on average it will pay for 58% of covered expenses, but it might well let Brian avoid bankruptcy if he gets extremely sick. It will also get Brian low, pre-negotiated rates for a lot of medical treatment instead of being subject to astronomical “Chargemaster” prices that hospitals often charge the uninsured. So, if that Bronze policy costs $4,500, Brian would pay $2,911 and the federal government would pay $1,089.

Suppose Brian succeeds at work and gets a $5,000 raise; or suppose Brian gets a part time job to help supplement his income and earns $5,000 more. Now, because his income is $40,000, section 102(b)(2) of BCRA expects Brian to contribute 11.3% of his income to healthcare. Since that’s $4,558, Brian in fact pays for the whole $4,500 policy; the federal government pays nothing. So, although Brian’s raise is $5,000, he pays an extra $1,589 in premiums. His effective marginal tax is almost 32% just from the BCRA alone. When one combines his loss of a subsidy with increased income taxes of $1,488 and an increased payroll tax of $382.50 (double that if Brian’s new job is deemed self-employment), Brian’s gets to keep at most $1,541 of his new $5,000. His effective marginal tax rate is at least 69%. It’s probably even higher if Brian faces state income tax or suffers a phase out of other government income-based benefits.

That is from Seth Chandler.  Ross Douthat has a good bottom-line take on the bill.

Saturday assorted links

1. Profile of jazz pianist Craig Taborn (NYT).

2. How to think about work-life balance.

3. Screen shot of less sex for American teenagers (safe for work, indeed too safe).

4. Burton Malkiel now believes in smart Beta.

5. Why don’t people buy electric guitars anymore?

6. Avik Roy defends the Senate health care bill.  I do recommend this piece.  It does not convince me to support the bill, but it does show how much of the other reporting on this debate is bad, highly selective, and also excessively mood-affiliated.

What is the proper penalty for scientific fraud the culture that is China what would Gary Becker say?

In the past few months, China has announced two new crackdowns on research misconduct — one of which could lead to executions for scientists who doctor their data.

Scientists have been sounding alarms for years about the integrity of research in China. One recent survey estimated that 40 percent of biomedical papers by Chinese scholars were tainted by misconduct. Funding bodies there have in the past announced efforts to crack down on fraud, including clawing back money from scientists who cheat on their grants.

This month, in the wake of a fake peer review scandal that claimed 107 papers by Chinese scholars, the country’s Ministry of Science and Technology proclaimed a “no tolerance” policy for research misconduct — although it’s not clear what that might look like. According to the Financial Times, the ministry said the mass retractions “seriously harmed the international reputation of our country’s scientific research and the dignity of Chinese scientists at large.”

But a prior court decision in the country threatened the equivalent of the nuclear option. In April courts approved a new policy calling for stiff prison sentences for researchers who fabricate data in studies that lead to drug approvals. If the misconduct ends up harming people, then the punishment on the table even includes the death penalty. The move, as Nature explained, groups clinical trial data fraud with counterfeiting so that “if the approved drug causes health problems, it can result in a 10-year prison term or the death penalty, in the case of severe or fatal consequences.”

Here is the story, via the excellent Mark Thorson.

Regulation of Charlatans in High-Skill Professions

That is a new paper by Jonathan Berk and Jules H. van Binsbergen, here is the abstract:

We study a market for a skill that is in short supply and high demand, where the presence of charlatans (professionals who sell a service that they do not deliver on) is an equilibrium outcome. We use this model to evaluate the belief that reducing the number of charlatans through regulation increases consumer surplus. We show that this belief is false: both information disclosure as well as setting standards reduces consumer surplus. Although both standards and disclosure drive charlatans out of the market, consumers are worse off because of the resulting reduction in competition amongst producers. Producers, on the other hand, strictly benefit from the regulation, implying that the regulation we observe in these markets likely derives from producer interests. The model provides insights into the parameters that drive the cross-sectional variation in charlatans across professions. Professions with weak trade groups, skills in larger supply, shorter training periods and less informative signals regarding the professional’s skill, are more likely to feature charlatans. We conclude that the number of charlatans in equilibrium is positively related to the value added of that profession to consumers.

How does financial advising fit into this schema?  Economic consulting?  Blogging?

For the pointer I thank the excellent Kevin Lewis.

*Regulation and Economic Growth*

The author is James Broughel and the subtitle is Applying Economic Theory to Public Policy.  I am biased, as James was my doctoral student and this is an adaptation of his thesis, but I think this is a great work and also well-written and fun to read.  It’s the single best piece written on how to think about how regulation impacts economic growth — in particular once-and-for-all effects vs. growth rate changes — and that is one of the most neglected economic policy questions today.

Friday assorted links

1. Sommers, Gawande, and Baicker survey the recent literature on health insurance coverage and health outcomes.

2. Human beings haven’t actually domesticated cats very much.

3. Camels defeat the camel nationalism of the Qatar blockade.

4. The economics of pan-handling, long, recommended (pdf).

5. How long was China communist?

6. In defense of Paul Zukovsky (do not speak ill of the dead).

The Senate health care bill

Here is a good summary and analysis from Megan McArdle, here is one key part:

But while there are a few things to like in this bill, overall, it’s a mess.  All of the problems created by Obamacare’s architecture remain, and some of the problems will get worse, because lower subsidies, higher deductibles and no mandate penalty probably means that a lot of people will exit the exchanges.  Those people are likely to be the folks we most need to stabilize those exchanges: healthy youngsters who don’t use much health care.  Which means that the exchanges will be at further risk from the death spirals we’ve already seen in some states.

I agree the bill is a bad idea.  That said, I do hope you keep in perspective some of the more, um, lurid critiques running around, including from health care economists (the Great Firewall won’t let me link to Twitter, and right now VPN is down).  You can read them as sociology, however, with a rather chilling effect.

The orca wars escalate, with special reference to the economics of fisheries

The orcas will wait all day for a fisher to accumulate a catch of halibut, and then deftly rob them blind. They will relentlessly stalk individual fishing boats, sometimes forcing them back into port.

Most chilling of all, this is new: After decades of relatively peaceful coexistence with cod and halibut fishers off the coast of Alaska, the region’s orcas appear to be turning on them in greater numbers.

“We’ve been chased out of the Bering Sea,” said Paul Clampitt, Washington State-based co-owner of the F/V Augustine.

Like many boats, the Augustine has tried electronic noisemakers to ward off the animals, but the orcas simply got used to them.

“It became a dinner bell,” said Clampitt.

John McHenry, owner of the F/V Seymour, described orca pods near Alaska’s Aleutian Islands as being like a “motorcycle gang.”

“You’d see two of them show up, and that’s the end of the trip. Pretty soon all 40 of them would be around you,” he said.

A report this week in the Alaska Dispatch News outlined instances of aggressive orcas harassing boats relentlessly — even refusing to leave after a desperate skipper cut the engine and drifted silently for 18 hours.

These are not Coasean orcas, or are they?  And sperm whales are now in on the act:

Fishing lines are also being pillaged by sperm whales, the large square-headed whale best known as the white whale in Moby Dick.

“Since 1997, reports of depredation have increased dramatically,” noted a report by the Southeast Alaska Sperm Whale Avoidance Project.

A remarkable 2006 video by the Avoidance Project captured one of the 50,000 kg whales delicately shaking fish loose from a line. After a particularly heavy assault by sperm whales, fishers are known to pull up lines in which up to 90 per cent of the catch has disappeared or been mangled.

Here is the full story, with video, and further points of interest.  For the pointer I thank the excellent Mark Thorson.

The commerce that is Chinese

As organized, multiplayer video game competitions — also known as esports, or electronic sports — continue to gain recognition in China, entertainment giant Tencent Holdings Ltd. has accelerated its esports expansion with the unveiling of a new five-year plan.

The plan, which involves setting up esports leagues, tournaments and associations, nurturing players and constructing esports-themed industrial parks, was published by Tencent E-Sports, a subsidiary established in early December.

Tencent is the world’s largest mobile gaming company by revenue, according to research firm Newzoo. With the new plan, it aims to create a 100-billion-yuan esports industry in China within five years, the company announced on Friday at a press conference.

The plan was based on Tencent’s expectations that China is set to become the world’s largest esports market. Tencent predicted there will be 220 million esports players in China and 335 million globally by the end of this year.

Here is the story.  And:

The number of Chinese “red tourists” who visit Russia to retrace a shared communist history has been soaring in recent years, contributing to the wave of Chinese visitors to Russia that has grown with the help of closer bilateral relations between the countries, according to industry insiders on Tuesday.

“There definitely is growing interest among Chinese tourists for Russia, especially the older generations, who are nostalgic about the history of Russia,” Zeng Qingan, general manager of Beijing Global Travel Ltd, told the Global Times.

Zeng said that since his company started tour groups to Russia nine years ago, the number of participants has increased fast, especially after the company redesigned its tour routes in 2014 to cover historical Soviet Union era sites, including the Red Square and Victory Square in Moscow, the Lenin Memorial Museum in Ulyanovsk and Moscow State University. The travel firm called it the “Red Tourism” package.

Link here.  The revolution not only will be televised, but they will make an e-sports version of it, marketed on WeChat.

Grading Modi

There have been a number of articles recently reviewing economic reform under India’s Prime Minister Narendra Modi. The best is this excellent report from the Economist:

FEW countries would see a tax requiring some businesses to file over 1,000 returns a year as an improvement. But India might. A nationwide Goods and Services Tax (GST) is set to come into force on July 1st. It will replace such a tangle of national and local levies and duties that even the prospect of 37 annual filings (three a month plus an annual return) for each of India’s 29 states in which a business operates is a relief by comparison.

By replacing domestic tariffs, the new tax should rid India of checkposts at internal borders, where lorries carrying goods typically languish for hours. Less red tape, however, comes with complications. Most countries with a value-added tax settle on a single rate for many goods and services. India has opted for six, ranging from zero to 28%. Officialdom decrees, for example, that shampoo, wallpaper and fizzy water are luxuries to be taxed at 28%; eyeliner, curry paste and plain water will attract an 18% levy. Restaurants will pay 12%, unless they are small (5%) or air-conditioned (18%).

Hopes that liberalising reforms would breathe new life into India’s economy have permeated the air since Narendra Modi swept to power as prime minister in May 2014. But the GST is perhaps the most obvious example of an opportunity wasted. Economists think a simple GST, which would have ensured businesses focus on goods and services that consumers want rather than those favoured by the tax code, might have added two percentage points to GDP growth. The complicated version will probably yield less than half that and only after a painful transition.

Read the whole thing.

Temporarily postponed markets in everything, Gilligan’s Island edition

There is a restaurant in New Jersey called Tina Louise.

It’s serves “a taste of Asia.” We were thinking tropical island fare. According to the website, it is temporarily closed due to a fire. But if you someday find yourself in Carlstadt, New Jersey…

Link here, the restaurant’s home page is here, menu here (pdf, yum), here are the Yelp reviews.

I thank an anonymous MR reader for the pointer.

To what extent is current alt right populism an Anglo-American phenomenon?

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

More generally, the U.S. is an environment where new products — and here I mean of the non-political sort — get started relatively easily. People are willing to take more chances with their consumption, and so this is a fertile environment for startups, which then spread to the broader world.

As for Britain, the traditional aristocracy is remarkably weakened, voting along class lines has disappeared and, most observers agree, if it were really up to the House of Lords, Brexit wouldn’t be happening.

On top of these factors is English, by far the world’s leading language for scientific and philosophic and political discourse, for blogs, for Twitter, and for many other kinds of dialogue. We shouldn’t be surprised if new ideas are more likely to surface and take hold in the English-speaking world.

Here is another bit:

To be sure, some evidence suggests the influence of President Trump is actually causing Western Europe to become more liberal. But don’t confuse style and substance. Another five to 10 years of deindustrialization, terrorist attacks and migrant crises might lead to a “home brew” version of Trumpian ideas in continental Europe, albeit cloaked in a more intellectual and more aristocratic garb. There is a running joke going around along the lines of “If fascist ideas come to [Country X], they will come in the form of anti-fascism.” Once the properly European version of the product comes to the fore, it might do very well indeed.

There is much more at the link.

How and why did economic history blossom?

C. inquires:

Why do we live in the golden age of economic history? Was there something identifiable that caused the subfield to grow in esteem? Some new technology that changed the costs of research (not that I can see)? Something else?

Mark Koyama should write a Medium essay on this, but in the meantime here are my thoughts:

1. We now know much, much more about the earlier economic histories of China, India, and some other locales.  The rise of more and better graduate students from the emerging economies, or for that matter from Europe, has been essential here.

2. Some of the turn toward economic history came with the financial crisis, and the search for longer-term parallels, which meant looking back in history, most of all to the Great Depression.

3. Although the advance of cliometrics started a long time ago, we are now finally at intergenerational margins where economic historians are as quantitatively well-equipped as most parts of the applied micro spectrum.

4. The stranger the time period, the more people will have to look to broader stretches of history for understanding.  Yes, this one is an uh-oh.

5. Some applied micro fields have become a little more boring, so that has helped a partial shift of status to economic history.  Public data sets have been exhausted, and a lot of economic history data sets are “weird or idiosyncratic” data sets, which now are “in” and I predict will stay “in” for a long while to come because they offer the possibilities of both new discoveries and moats.

6. An academic trend that hasn’t yet been exploited usually ends up exploited, sooner or later, once the right nudge comes along.

5b, 6b. In chess, the top players are opting for the Giuoco Piano once again.

7. Competing economic models are more “allowed” in the subfield — not everything must be neoclassical — which has opened economic historians to more wide-ranging questions.  Economic history remains a good place to pursue the questions about economics that initially interested many people as undergraduates.

8. Academic attention is more media-driven these days, and good economic history papers usually have a story of some kind, and perhaps also a historical personage, event, or institution of broader interest.