Month: November 2018

How is Obamacare doing?

Yes, it is more popular, but how is it doing?:

Obamacare has continued to devastate the individual health insurance market:

  • In March of 2016, there were 20.2 million people covered in the individual health insurance market according to a hard count of state insurance department filings done by Mark Farrah and Associates.
  • In March of 2017 that count was down to 17.7 million.
  • In March of 2018 the count was 15.7 million–a 22% drop in two years.

This means 4.5 million people lost their individual health insurance in just two years.

Hardest hit are the 40% of middle class individual market consumers who are not eligible for a subsidy.

  • In March of 2016 there were 7,520,939 people covered in the off-exchange individual health insurance market where subsidies are not available.

  • In March of 2017 5,361,451 were covered.

  • In March of 2018 4,004,522 were covered–a 47% drop in two years.

And, the Obamacare subsidies paid to consumers are hardly sustainable.

According to the CBO, the average Medicaid outlay for a non-disabled adult is $4,230–a program that virtually has no premiums and co-pays. But because the risk pool is so bad and therefore expensive in the Obamacare exchanges, the average subsidy cost for taxpayers is $6,300–and that doesn’t include what the consumer pays in premiums and out-of-pocket expenses for Obamacare coverage.

Why has the Obamacare individual market melted-down in these last two years? Because its premiums and deductibles are sky high–for all but the lowest income participants.

In Northern Virginia, for example, the cheapest 2019 Obamacare individual market Silver plan for a family of four (mom and dad age-40) making a subsidy eligible $65,000 a year costs $4,514. That plan has a $6,500 deductible meaning the family would have to spend $11,014 on eligible health care costs before collecting other than nominal first dollar benefits.

That same family, but making too much for a subsidy, as 40% of families do, and a typical family in the affluent Virginia 10th, would have to spend $19,484 in premiums plus a $6,500 deductible, for a total of $25,984 in eligible costs before they would collect any meaningful benefits.

That is from Robert Laszewski, with additional interesting points at the link.  Do see my earlier post on what does and does not make sense in Obamacare — the risk pool for the individual market simply isn’t big or robust enough.

Friday assorted links

Is the carbon tax idea dead?

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

And one striking result from Tuesday’s election is that voters in Washington state, a Democratic stronghold, soundly rejected a proposed carbon tax by a margin of 56 to 44 percent. This raises the prospect that the carbon tax may be dead as a policy for the time being, including at the state level. As my Bloomberg Opinion colleague Liam Denning writes: “We can debate the magnitude of the vaunted blue wave, but there was definitely no green wave.”

Like many economists, I have long supported the idea of a carbon tax, and still do. Government has to tax something. So why not tax those activities which generate social costs, in this case through disruptive climate change? It is a very intuitive argument that has persuaded many economists on both sides of the political spectrum.

But a carbon tax is just not a popular idea with American voters, of either party. It is hard to argue that the Republican Party or the conservative movement has a stranglehold over the politics of Washington state.

Furthermore, this defeat isn’t just a one-off. 2009’s American Clean Energy and Security Act — a cap-and-trade bill in Congress similar to a carbon tax in its essentials though not all of its exact mechanisms — failed even when Democrats controlled Congress and the presidency. The momentum in Canada, typically considered more left-wing than the U.S., also is running against carbon taxes. In 2014, Australia voted to repeal its carbon-pricing law. Washington state itself rejected an earlier carbon-tax proposal, coupled with a cut in the state sales tax, in 2016.

The broader data are striking. According to a World Bank estimate, 23 countries have carbon taxes of some kind, while 176 have targets or support for renewable energy alternatives. It’s hard to avoid the conclusion that the carbon tax just isn’t a big political winner.

There is much more at the link.

Is biology now in charge?

From the great Laura Deming:

One of my biggest personal fears is working in the wrong field to achieve the goal I care about. If you were around pre-1900s, and wanted to contribute to biology, you should have been a physicist (Robert Hooke, a physicist discovers the first cell, making a better microscope is a major driver of progress). In which field should you work to maximize progress in biology today?

…But something interesting happened around the 1950s. If you look at the most important techniques in biology, in the second half of the 1900s, they’re all driven by tools discovered in biology itself. Biologists aren’t just finding new things – they’re making their new tools from biological reagents. PCR (everything that drives PCR, apart from the heater/cooler which is 1600s thermodynamics, is either itself DNA or something made by DNA), DNA sequencing (sequencing by synthesis – we use cameras/electrical detection/CMOS chips as the output, but the hijacking the way the cell makes DNA proteins remains at the heart of the technique), cloning (we cut up DNA with proteins made from DNA, stick the DNA into bacteria so living organisms can make more copies of it for us), gene editing (CRISPR is obviously made from DNA and with RNA attached), ELISA (need the ability to detect fluorescence – optics – and process the signal, but antibodies lie at the heart of this principle), affinity chromatography (liquid chromatography arguably uses physical principles like steric hindrance, or charge, but those can be traced back to the 1800s – antibodies and cloning have revolutionized this technique), FACS uses the same charge principles that western blots do, but with the addition of antibodies…

Something special happens when a field becomes self-reinforcing. Previously, biology looked to physics and other disciplines for tools to break open new frontiers. But, empirically, since the 1950s, that has all changed.We don’t make mutant mice with x-rays and microscopes – we figure out the gene we want to go after, and we use high-precision biological tools to change it. Computer science has certainly played an important role in processing all of the information now streaming out of biological systems, but the major advances – the core things driving progress in biology forward – have come from biology itself. Biology is eating physics (and, some would jokingly suggest, based on the outperforming endurance of DNA compared to any modern hardware and plausibility of biological computation, possibly computation itself).

Naively, if we can expect n new discoveries / t tools we have, if the tools are static, maybe that’s a fixed number of discoveries per year. But if t tools increases, then we get more discoveries. What if it increases as a function of n?

This is important because it’s a self-reinforcing loop. The more things in biology we discover today, the faster we can discover things tomorrow. Biologists are the new engineers. But their tools look a lot different than any we’ve seen before. Sequencing is the microscope of tomorrow. And sequencing was built by biological tools.

The entire (short) essay is of interest.  Here is more on Laura Deming.

Depression and religion in adolescence

Depression is the leading cause of illness and disability in adolescence. Many studies show a correlation between religiosity and mental health, yet the question remains whether the relationship is causal. We exploit within-school variation in adolescents’ peers to deal with selection into religiosity. We find robust effects of religiosity on depression that are stronger for the most depressed. These effects are not driven by the school social context; depression spreads among close friends rather than through broader peer groups that affect religiosity. Exploration of mechanisms suggests that religiosity buffers against stressors in ways that school activities and friendships do not.

That is the abstract of a new paper by Jane Cooley Fruehwirth, Sriya Iyer, and Anwen Zhang, forthcoming in the JPE.  I find this to be one of the most underemphasized benefits of religion, perhaps because religious people themselves do not wish to come off as overly neurotic.  And the effect seems to be large:

…a one standard deviation increase in religiosity decreases the probability of being depressed by 11 percent.  By comparison, increasing mother’s education from no high school degree to a high school degree or more only decreases the probability of being depressed by about 5 percent.

And for the most depressed individuals, religiosity seems to be more effective than cognitive-based therapy “one of the most recommended forms of treatment.”

Spain Debates Whether Left Hand or Right Hand Should Pay Tax

Spain is currently embroiled in tremendous debate over who should pay the AJD tax, a tax on the creation of a mortgage. Should the buyers (consumers) or the sellers of the mortgage (the banks) pay the tax? The Supreme Court, the President, and the legislature have all stepped in.

At the beginning of this year,  the civil division of Supreme Court clearly ruled that the tax on mortgages should be paid by consumers and not banks. However, on the 18th of October the Contentious-Administrative division pronounced the other way, that banks should pay. So two divisions of different jurisdictions of the Supreme Court (civil and administrative) have issued conflicting sentences producing a legal mess…

that was the situation as of October 24. But then on Tuesday:

The Spanish Supreme Court has done a U-turn again: it is the clients who must pay for a controversial mortgage tax, and not the banks

…The decision was reached on Tuesday evening in the Administrative Division of the Supreme Court after two days of intense debate, and with just two votes of difference: 15 justices were in favor of making the client pay the levy, and 13 voted to confirm a groundbreaking decision reached by this same court in mid-October that it should be the banks who pick up the tab.

Leaders are up in arms and street protests are threatened:

Leaders of the anti-austerity Podemos party have already announced protests over a decision that “calls into question” the court’s independence and undermines democracy, in the words of party leader Pablo Iglesias. …Alberto Garzón, head of the United Left coalition, went even further: “Private banks are thieves, they are the main enemy of democracy and they are responsible for gutting our economies. A majority of the Supreme Court sides with them, ratifying that justice has a price and that the system is rotten and spent,” he tweeted.

Under pressure, the socialist Prime Minister announced “a Royal Decree would be approved ‘so that Spaniards will never pay this tax again’,” and the Prime Minister pledged that the new law would be in place by Friday!

What’s amazing is that the Spanish uproar is over a decision that Econ 101 says does not make a whit’s worth of difference to anything of importance. Whether the buyers send the check to the government or the sellers does not change the true incidence of the tax. As Tyler and I say in Modern Principles, “Who pays the tax does not depend on the laws of Congress but on the laws of supply and demand.” The tax simply drives a wedge between what the buyers pay and what the seller receives. Since sellers typically post prices, when the sellers must send the check the posted price will include the tax but the price the sellers receive will be the posted price minus the tax. If buyers must send the check to the government the posted price will not include the tax but the buyers will have to pay the posted price plus the tax. Either way, the seller, buyer, and government all end up net the same amount. It’s little different than debating whether the right or left hand must pay the tax. See Tyler in the video below for the diagram and further details.

Thus, the whole Spanish imbroglio has been caused by a failure to understand Econ 101.

Addendum: Bank shares fluctuated as the tax jumped back and forth which might suggest non-neutrality but that is because an earlier proposal would have had the banks pay consumers “back” for taxes the consumers paid years ago. A retroactive tax would indeed be bad for banks because while the tax would be retroactive the price would not. Going forward, however, the price adjusts with the placement of the tax so there is little beyond convenience and transaction cost to prefer one system to the other. In fact, once it was established that the tax would not be retroactive, bank share prices recovered.

Hat tip: Mauricio Drelichman.

Acquisition Talk: A daily blog on the theory and practice of weapons system acquisition

That is a new blog by Eric Lofgren, an Emergent Ventures recipient.  Here is an excerpt from one post:

The story was from 1938. It sounds astounding to modern ears. Congress did not earmark money for special projects. Pitcairn was a bit of a political entrepreneur by convincing his representative to get a project funded that funneled money back to his own district.

Back then, the Army and Navy were funded according to organization and object. Project earmarking only started becoming routine with the implementation of the program budget in 1949 (and really not until the rise of the PPBS in 1961).

I often say that the budget should be the most important aspect of defense reform, not the acquisition or requirements processes.

By the way, the French parliament doesn’t earmark defense funding. There’s actually quite a bit to learn from the French experience.

Here is his post on cost disease in weapons acquisition, and more on that here: “It’s clear that defense acquisition costs are growing at least as fast, and probably much faster, than education and healthcare costs. Defense platform unit costs grow nominally from 7-11% per year. Doing some adjustments, DOD production costs probably grow twice the rate of inflation.”

Here is his general post on acquisition reform and the limits of decentralization, maybe the best introduction to his overall point of view.

Forecasting tournaments, epistemic humility and attitude depolarization

People often express political opinions in starkly dichotomous terms, such as “Trump will either trigger a ruinous trade war or save U.S. factory workers from disaster.” This mode of communication promotes polarization into ideological in-groups and out-groups. We explore the power of an emerging methodology, forecasting tournaments, to encourage clashing factions to do something odd: to translate their beliefs into nuanced probability judgments and track accuracy over time and questions. In theory, tournaments advance the goals of “deliberative democracy” by incentivizing people to be flexible belief updaters whose views converge in response to facts, thus depolarizing unnecessarily polarized debates. We examine the hypothesis that, in the process of thinking critically about their beliefs, tournament participants become more moderate in their own political attitudes and those they attribute to the other side. We view tournaments as belonging to a broader class of psychological inductions that increase epistemic humility and that include asking people to explore alternative perspectives, probing the depth of their cause-effect understanding and holding them accountable to audiences with difficult-to-guess views.

That is a new paper from Barbara Mellers, Philip Tetlock, and Hal R. Arkes, via the excellent Kevin Lewis and Michelle Dawson.  One very general implication is that there are mental, writing, and practical exercises that really can improve your habits of thought.

My Conversation with Eric Schmidt

Self-recommending, here is the audio and video.  Here is the video, here is one excerpt from the dialogue:

COWEN: So you receive an offer to run Google. Why were you so skeptical about Google at first?

SCHMIDT: Well, I assumed that search wasn’t very important, and I assumed the ads didn’t work. I was so concerned about the ads that, after I accepted the offer — because it just seemed like it was interesting, and a lot of luck comes from doing things that are interesting, and sort of creating your own luck — I hauled the then–sales executive, whose name was Tim Armstrong, who you all know well, and I said, “Tim, prove to me that these ads work.”

So they showed me a set of ads, and they looked pretty foolish to me. So I said, “Well, let’s go find the finance person,” of which there was one, and the accounting system was done on QuickBooks. I said, “Prove to me that people are paying for these ads,” and they did.

We then did an ads conversion in the first year, which was called Project Drano, where we basically took three different ads databases, which were simple compared to today’s databases, and merged them into one. And I was terrified, absolutely terrified that the ruse that we had — because we had fixed pricing on our ads — that people would discover that our ads were not worth anything.

So I organized what I called the cash restriction period, where the only thing you could do if you wanted to spend money, is you could only spend money on Friday at 10 AM, and you had to come to me to justify it, which very much shuts down spending.

So we get to this conversion, we turn the thing over, and of course, we didn’t bother to build into the tools. We had no metrics. We didn’t know what was going on. I’m going, “Oh my God, the company is bankrupt. My first year, I’ve done a terrible job. What will the board think?” I did my best to notify everybody we were going to go kaput.

The auction produced a price that was three times higher than the previous prices. Very interesting. So much for the cash restriction period, and the rest is history.

And from Eric:

We did all sorts of things. My favorite example is that we would interview people to death. We interviewed this one gentleman sixteen times, and we couldn’t decide. So I picked a random number, which was half, and I said, “We should have a max of eight, and if we can’t decide after eight . . .” We’ve since done a statistical analysis, and the answer today is four to five interviews.

And here is my bit on Eric:

COWEN: Now early on, you were an intern at Bell Labs, and also PARC, which belonged to Xerox, and I think of those two institutions as stemming from earlier glory years of American science.

Is it fair to think of your career as in some sense, you’re the person who spans those two eras, the Bell Labs-PARC era of doing things, and then the tech era of manipulating information, and that your ability to bring expertise from those two areas together is what has made you a unique figure? Is that a fair assessment of how you fit into the picture?

And there is this bit:

COWEN: How did it influence you having a father who was a famous economist? He wrote on balance of payments crises. What did you draw from him? Did that have a role in using so much economics in Google?

SCHMIDT: Well, what’s interesting is, I asked my father, “If you’re such a good economist, why are we not rich?”

I very much enjoyed doing this event, which was for Village Global, a new venture capital firm.  Here is a Village Global post on lessons from the event.

The elections

From Matt Yglesias on Twitter:

Very normal Democrats won all kinds of House races without reviving “blue dog” antics but also a bunch of reality checks for the capital-l Left in these results.

Not just a couple of House races where insurgent candidates fizzled, but the California rent control initiative the Washington “green new deal” initiative and the MD-Gov race all show limited appetite for ambitious left policy in even blue states.

Conversely, the more modest economic progressive agenda of Medicaid expansion and minimum wage increases continues to triumph even in very conservative states.

From Angus:

“over the past 21 midterm elections, the President’s party has lost an average 30 seats in the House, and an average 4 seats in the Senate” NY Times sez it’s R – 26 in House and + 2-5 in Senate. Yet they call it “A rebuke to Trump”. That’s kind of just wishful thinking.

Somehow — miraculously — democracy did not die, I am still writing blog posts for tomorrow morning, fascism has yet to arrive, and life goes on!

p.s. the youth vote was not up much.  And at least one Kremlin mole has been ousted.

The Mobbing Game

Klaus Abbink and Gönül Dogan have a horrific new paper. Horrific because despite being in a safe, experimental setting the results are all too realistic:

We introduce the experimental mobbing game. Each player in a group has the option to nominate one of the other players or to nominate no one. If the same person is nominated by all other players, he loses his payoff and the mob gains. We conduct three sets of experiments to study the effects of monetary gains, fear of being mobbed, and different types of focality. In the repeated mobbing game, we find that subjects frequently coordinate on selecting a victim, even for modest gains. Higher gains make mobbing more likely. We find no evidence that fear of becoming the victim explains mobbing. Richer and poorer players are equally focal. Pity plays no role in mobbing decisions. Ingroup members – introduced by colours – are less likely to be victims, and both payoff difference and colour difference serve as strong coordination devices. Commonly employed social preference theories do not explain our findings.

In short, the authors give experimental participants an opportunity to nominate a victim and redistribute towards themselves. Willingness to do this is common even in cases where the victims lose a lot and the bullies gain only a little. In some cases, the redistribution increases social welfare but these are also the cases where the bullies get a lot. Overall, it’s pretty clear that motivation is greed rather than increased social welfare but it would have been good to have an experiment that distinguished better the greed and social welfare cases. Importantly, distinguishing one of the players by making them poorer/richer/yellow also increased mobbing of that player.

I loved this footnote:

The labels [M,T, G, P] are also a hidden homage to the inmates Mather, Travers, Greenhill and Pearce, who escaped from a Tasmanian prison camp in a group of eight in 1822, only to get lost in the forest. When food ran out, the four conspired to apply the Custom of the Sea to the others. When no-one else was left, they turned to killing and eating one another, until only Pearce survived. All victims were chosen in decidedly non-random ways. This story is one of the great Australian foundation myths, and it was an inspiration for this study (for a dramatic reconstruction, see Van Diemen’s Land (2009)). We are confident that none of our Northern European subjects made that connection.

Hat tip: Rolf Degen.

China sentences of the day

With the Internet, too much information leaks out about the failings of governments. Thus, they are unable to “rule by persuasion” and are increasingly reduced to relying on sheer force. As a provocative example, Gurri believes that the Chinese government now is more dependent on force than it would be without the Internet.

That is from Arnold Kling reviewing Martin Gurri’s forthcoming The Revolt of the Public and the Crisis of Authority in the New Millennium.

Emergent Ventures grant recipients, the first cohort

Here is the first round of winners of the new Emergent Ventures initiative at Mercatus, led by me.  The list is ordered roughly in the order grants were made, and reflects no other prioritization.  All project descriptions are mine alone and should not be considered literal attributions of intent to the project applicants.  Here goes:

Anonymous grant for writing in Eastern Europe.

Pledged grant to San Francisco’s Topos House, conditional on finding a “social science prodigy” to live in the house for a while and interact with the other Topos fellows.  Topos is a San Francisco house where several tech prodigies live and periodically seminars and larger group interactions are held there or connected to the house.

Travel grant made to 18-year-old economics prodigy, to travel to San Francisco to meet with members of the “rationality community.”  The hope is to boost her career trajectory.

Grant to support the work of Mark Lutter and his Center for Innovative Governance Research, on charter cities and also an attempt to create a new charter city.

Grant to Harshita Aurora to help her pursue work in brain science, including brain-computer interfaces to help disabled people manipulate and move objects.  Harshita is a 17-year-old Indian prodigy, who first received attention for her programming work in the app space.  Harshita made her bio and proposal public: https://drive.google.com/file/d/1j5Zf2RIiKVUUZzJb6qGQdx2WmG7q4NS9/view

Leonard Bogdonoff has a project to scrape Instagram and create a searchable concordance of street art around the world.  His website is here and his blog is medium.com/@rememberlenny.  One use of this project is to amplify the voice of “protest art” against the constraints of censorship from autocratic governments, but it is also a new way to glean usable information from Instagram.

Travel and conference grant to Juan Pablo Villarino, from Argentina, sometimes called “the world’s greatest hitchhiker.”

Ben Southwood, public intellectual from England, support for his writing and research on why progress in science has slowed down.

Eric Lofgren has worked at the Pentagon for seven years and now will spend a year at Mercatus/George Mason to develop the skills, including blogging and podcasting, to become the nation’s leading public intellectual on defense procurement.

A two-year pledge to Gaurav Venkataraman, at University College of London, to support his doctoral work on the idea of RNA-based memory.  This research also has exciting implications for the design of artificial intelligence.

Joy Buchanan, economist, a grant to conduct research on why people become entrepreneurs and initiate start-ups, using the methods of experimental economics.

Michael Sonnenschein, Masters student at MIT in development economics (and a television screenwriter) a grant for research to reform and improve the Haitian lottery system, and turn it into a means to combat poverty.

Stefan Roots is writing and editing an on-line and also paper newspaper to cover local news in Chester, Pennsylvania, aimed at the African-American community.

Jeffrey Clemens, professor at UC San Diego, a grant to help him develop his on-line writing in economics.

Kelly Smith has a project to further extend and organize a parent-run charter school system in Arizona, Prenda, using Uber-like coordinating apps and “minimalist” educational methods.

David Perell, to encourage and support his work in podcasting and social media.

We are in the midst of processing several other awards as well, so do not worry if you are not yet mentioned.

I am delighted to welcome this very prestigious and accomplished “entering class” of Emergent Ventures fellows.  If you are considering applying, please note that we are interested in other topics and methods as well.