Month: September 2020
Reconstructing microeconomics as a kind of anthropology
Here is the closing part of my introduction to what will be a forthcoming Taiwanese, classical Chinese character edition of my earlier book Discover Your Inner Economist:
Finally, hidden in Discover Your Inner Economist is an implied revision of how economics should be done in the university. Most economic theory starts with the notion of market supply and demand, and then proceeds to analyze problems. In my vision, it is first more important to understand how people understand the incentives before them, noting again that not all of those incentives center around money.
Our perceptions of reality, in my view, are shaped by the intersection between “signals sent” on one hand, and our “chosen self-deceptions” on the other. Our worldviews are thus formed, and then in any given social interaction we acquire an understanding – not always accurate – of what is at stake. For instance, we frame what that bonus at work really means, what kind of marriage offer is on the table before us, or what a company is really offering in a long-term contract. In other words, our view of the world comes first, and our response to incentives comes second. We cannot understand incentives without a deep understanding of how worldviews are formed, processed, and revised.
In that sense psychology and anthropology are always prior to economics more narrowly construed, and I have tried to outline how to do good economics under those constraints.
I hope you enjoy this book!
Monday assorted links
1. Gottlieb and McClellan, both former FDA heads, call for accelerated vaccine approval for designated groups, without relaxation of broader standards (WSJ).
3. A time-lapse map of every nuclear explosion through 1998.
4. “We find no evidence of manipulation of Chinese COVID-19 data using Benford’s Law.”
6. Open-air winter schools in New England, in pre-complacency times.
7. Life on Venus? No one cares about that either…(NYT) As a kid I was convinced there was life on Venus, and was never persuaded by the impossibility arguments. So today (while this remains uncertain) I am feeling ever so slightly vindicated in one of my earlier specific beliefs.
How to make yourself happier during the pandemic
There is plenty of relevant psychological advice, here is some more narrowly economic advice from my latest Bloomberg column. Start with this key point:
…it is a common result in empirical economics that consumption habits are slow to adjust to changing circumstances, especially unprecedented circumstances. It is not enough for you to develop new spending habits — you should double down on them.
And this:
Savings have been so high in part because people are hoarding resources for an uncertain future. But a lot of the explanation, especially for those with higher incomes, is that planned expenditures became impossible, dangerous or inconvenient. Instead of flying to Paris and staying at a hotel on the Seine, they drove to a cabin in Maine or West Virginia. Or maybe they postponed that purchase of a new car or spent less time browsing in a bookstore. In any case, the end result is less spending and more savings, whether conscious or not.
Those may well have been prudent decisions. Still, many of us are not spending enough money having fun. We have been too slow to develop new, Covid-compatible interests.
Furthermore, likely you are underinvesting in driving to go see people, again due to the sluggishness of habit adjustment. In most parts of America, traffic remains somewhat lower than before, and your human contact is likely lower than before. Go and have lunch with them outside before the weather gets too cold!
Recommended.
The durability of violent revolution
…regimes founded in violent social revolution are especially durable. Revolutionary regimes, such as those in Russia, China, Cuba, and Vietnam, endured for more than half a century in the face of strong external pressure, poor economic performance, and large-scale policy failures. The authors develop and test a theory that accounts for such durability using a novel data set of revolutionary regimes since 1900. The authors contend that autocracies that emerge out of violent social revolution tend to confront extraordinary military threats, which lead to the development of cohesive ruling parties and powerful and loyal security apparatuses, as well as to the destruction of alternative power centers. These characteristics account for revolutionary regimes’ unusual longevity.
That is from a new paper by Jean Lachapelle, Steven Levitsky, Lucan A. Way, and Adam E. Casey. For the pointer I thank the excellent Kevin Lewis.
On-line education in Oklahoma, from my email box
I have not applied further indentation:
“…this is seemingly starting to be a big deal in OK, but flying under the radar.
- 10-15 years ago Oklahoma passed a law allowing online-only charter schools with a separate regulatory structure from physical charter schools.
- Critically, the unions did not think to push for an enrollment cap.
- There are 5-10 schools, all quite small, except for one named EPIC.
- Has enrollment (~38,000) that is larger than any district in the state. This enrollment is currently surging faster than its usual high growth because of COVID-19 and could reach 46,000 by the Oct 1 “Money Head Count” deadline.
- From Oct 1, 2018 to Oct 1, 2019, EPIC’s enrollment grew more than the enrollment growth for the entire state of OK.
- Like all public charters in OK, the school is free to attend. Parents get paid $1000 per student per year for school supplies and activities.
- They have 100% online and blended learning options. Teachers in the online-only are paid by how many students they take on and can earn over $100,000. The state average pay for teachers is just over $50,000/yr.
- They are a non-profit but they are run by a closely related for-profit management company that is paid 10% of gross revenue. (Incentives!)
- Everyone in OK education that isn’t EPIC, hates EPIC. The state has multiple lawsuits and audits alleging that they have been committing fraud. These go back as far as 2012 but none have yet been resolved, even with open investigations by the Oklahoma State Bureau of Investigation. The alleged amounts are less than 1% of cumulative revenue.
- An Oklahoma Watch survey from several years ago found that parents were choosing EPIC primarily because they felt their students were falling behind at their districted school, were escaping bullying, or had a desire to pursue other activities i.e. competitive gymnastics.
- On the Oklahoma State Dept. of Education A-F scorecard, EPIC scores better than every traditional Oklahoma City Public Schools and Tulsa Public Schools middle school or high school. It performs roughly near the state average.
- 4-year high school graduation rates are SIGNIFICANTLY lower than traditional schools.
- It seems likely this is because with the online format you cannot graduate without completing assignments on time. There are OKCPS schools that have 1% of students performing at grade level and 95% graduation rates.
- Total Oklahoma K-12 enrollment for 2019-2020 was ~700,000. So EPIC is now over 5% of total state enrollment. They have been growing roughly 50%/year, but that was starting to slow some before the pandemic.
Enrollment Article:
And they are trying to scale gamification of learning:
https://oklahoman.com/article/
Like most online education providers, retention has been their weakest point.
Oklahoma schools are required to have each school facility staffed with a certain number of non-teaching positions (librarian, counselor, etc.) so fixed costs are very high. Teacher salaries are usually 35-40% of the budget and are one of the only variable cost centers. Most money is allocated by the state, following the student. EPIC is not far from doing real damage to traditional school finances. This does not seem to be on most people’s radar. It could get more interesting, yet.
Austin Vernon”
Sunday assorted links
1. The culture that is Singapore golf club script theft punishment.
2. Very good thread on some Matt Rognlie results, paper here. The whole “market power lowering the returns to labor” bit really doesn’t seem to be holding up.
3. The Viewer (recommended videos, affiliated with The Browser).
Against digitalized subscription services for the movies
Quality public taste is a public good, and right now we are taxing it:
Another response to my whining might be to tell me that I live in a world of cinematic plenty, especially considering my various subscriptions and DVD collection. That is also entirely fair, but do keep in mind the original worry: that the future flow of movies is being broken up and that Hollywood is not regenerating the notion of a cinema with cultural centrality and import. “Star Wars,” “The Godfather,” and “Annie Hall” had real meaning to generations of Americans. Movies might now be in danger of becoming like board games: Many Americans love and play Scrabble, chess and Clue, but they are not a strong part of our common culture…
Now consider the landscape for movies: Streaming services include Disney+, Apple TV+, Netflix, HBO Max, Hulu, Amazon Prime, Sling TV and Fubo TV. (I’m not even counting services such as the Criterion Channel, which are not large in terms of revenue but crucial to anyone, like me, who loves foreign films.) I’m not yearning for monopoly, but I do miss the good old days of paying $13.50 to walk into any theater and see the latest release. And I could watch without being constantly nagged to join their popcorn subscription service.
That is an excerpt from my latest Bloomberg column. If instead everyone watches Rear Window or 2001 on a large screen, over time they help make each other’s tastes better, and to the benefit of broader society.
And no, I am not a huge fan of musical streaming either. It makes the lower quality taste too easy to cultivate and preserve.
This is Not Fine
Why is California burning? The experts all know the answer–CA was made to burn and if you don’t do controlled burns, CA will burn uncontrolled. Here’s ProPublica in an article titled They Know How to Prevent Megafires. Why Won’t Anybody Listen?
Academics believe that between 4.4 million and 11.8 million acres burned each year in prehistoric California. Between 1982 and 1998, California’s agency land managers burned, on average, about 30,000 acres a year. Between 1999 and 2017, that number dropped to an annual 13,000 acres. The state passed a few new laws in 2018 designed to facilitate more intentional burning. But few are optimistic this, alone, will lead to significant change. We live with a deathly backlog. In February 2020, Nature Sustainability published this terrifying conclusion: California would need to burn 20 million acres — an area about the size of Maine — to restabilize in terms of fire.
…When I reached Malcolm North, a research ecologist with the U.S. Forest Service who is based in Mammoth, California, and asked if there was any meaningful scientific dissent to the idea that we need to do more controlled burning, he said, “None that I know of.”
So why doesn’t it happen? Liability law, risk-aversion, rent seeking and vetocracy. Here’s Pro-Publica on excess risk aversion in the fire service (driven by a risk averse public.) (Compare with my analysis of why the FDA is too risk averse.)
Burn bosses in California can more easily be held liable than their peers in some other states if the wind comes up and their burn goes awry. At the same time, California burn bosses typically suffer no consequences for deciding not to light. No promotion will be missed, no red flags rise. “There’s always extra political risk to a fire going bad,” Beasley said. “So whenever anything comes up, people say, OK, that’s it. We’re gonna put all the fires out.”
The ProPublica piece is actually remarkably radical as it offers as one solution, privatized burning!
Fire is not just for professionals, not just for government employees and their contractors. Intentional fire, as she sees it, is “a tool and anyone who’s managing land is going to have prescribed fire in their toolbox.” That is not the world we’ve been inhabiting in the West. “That’s been the hard part in California,” Quinn-Davidson said. “In trying to increase the pace and scale of prescribed fire, we’re actually fighting some really, some really deep cultural attitudes around who gets to use it and where it belongs in society.”
Here’s a bit on vetocracy:
Planned burns are human-made events and as such need to follow all environmental compliance rules. That includes the Clean Air Act, which limits the emission of PM 2.5, or fine particulate matter, from human-caused events. In California, those rules are enforced by CARB, the state’s mighty air resources board, and its local affiliates. “I’ve talked to many prescribed fire managers, particularly in the Sierra Nevada over the years, who’ve told me, ‘Yeah, we’ve spent thousands and thousands of dollars to get all geared up to do a prescribed burn,’ and then they get shut down.”
…“One thing to keep in mind is that air-quality impacts from prescribed burning are minuscule compared to what you’re experiencing right now,”
Francis Fukuyama also pointed to liability law, risk-aversion, rent seeking and vetocracy as factors driving dysfunction at the forest service in a 2014 article in Foreign Affairs but the forest service was only the jumping off point for his pieced titled, America in Decay The Sources of Political Dysfunction (jstor). I don’t agree with everything in that piece but it’s well worth reading to drive home the point that pandemics, forest fires, electrical shortages and more are deeply connected.
Hat tip: Garett Jones.
Singapore markets in some things not everything
Singapore Airlines (SIA) is looking to launch no-destination flights that will depart from and land in Changi Airport next month, in a bid to give its ailing business a lift.
Sources told The Straits Times that the national carrier is working towards launching this option for domestic passengers – dubbed “flights to nowhere” – by end-October.
They said SIA also plans to explore a partnership with the Singapore Tourism Board to allow interested passengers to partially pay for such flights with tourism credits that will be given out by the Government.
Each flight is expected to take about three hours…
He is confident that there will be demand for such flights in Singapore should they eventually be launched.
A survey of 308 people that his firm conducted found 75 per cent were willing to pay for flights to nowhere.
It is to be bundled with airport shopping and limo transfers. Here is the full story. In my neck of the woods, here is a story about Fairfax County bus drivers being paid to push around empty buses, although no one wishes to ride along.
Toots Hibbert, RIP
Possibly a Covid death (NYT), he was leader of Toots and the Maytals, and along with Desmond Dekker a favorite figure from the earlier period of reggae music. “Sweet and Dandy” and “Pressure Drop” and “Monkey Man” I still listen to frequently, among others. I was lucky to see him in concert twice, once as recently as two years ago, the other time in the late 1990s…
China fact of the day
A Chinese pharmaceutical company has injected hundreds of thousands of people with experimental Covid-19 vaccines, as its Western counterparts warn against administering mass vaccinations before rigorous scientific studies are complete.
China National Biotec Group Co., a subsidiary of state-owned Sinopharm, has given two experimental vaccine candidates to hundreds of thousands of people under an emergency-use condition approved by Beijing in July, the company said this week. Separately, Chinese drugmaker Sinovac Biotech Ltd. said it has inoculated around 3,000 of its employees and their family members, including the firm’s chief executive, with its experimental coronavirus vaccine.
The three vaccine candidates are still undergoing Phase 3 clinical trials, which involve testing a vaccine’s safety and effectiveness on thousands of people. Six other leading Covid-19 vaccine candidates are also in this final phase, according to the World Health Organization.
I am agnostic on this! Of course we will see how it goes, and you should note that if the Chinese vaccines turn out to be “good enough,” they will spread to poorer countries rather quickly.
I see so much not so high quality moralizing from public health figures on Twitter, backed only by adjectives or appeals to authority. Until they “show their work” with actual numbers and probabilities, my current view is to think this Chinese policy stands a reasonable (but by no means certain) chance of passing the Benthamite test.
Please note: this does not mean America should do the same! In fact, China rushing may well lower the benefits from an American rush, because the major gains at stake here are the easing of non-Covid deaths and deprivations in South Asia and other poor parts of the world. Maybe the optimal portfolio is indeed a “China + Russia rush,” followed by some good’ ol American patience. (Is that what we do? Who said that!?)
Here is the underlying WSJ piece.
Saturday assorted links
1. Jane St. now has a podcast.
2. Is there a modest bitcoin boom in Africa?
3. Why is Pakistan doing better than India with respect to Covid-19? (speculative)
4. Has Taiwan lost the will to defend itself?
6. Heart disease in Covid athletes: the basic claims are still falling apart.
Who is my favorite public intellectual?
Over the weekend I sat in on Anna Gát’s Interintellect Salon, which I enjoyed. Many of the participants were asked who is their favorite public intellectual. My answer was something like:
Alex Tabarrok, he’d better be, I’ve been working with him for thirty years! There would be something wrong if he wasn’t. And I always look forward to reading what he writes.
So there you go. None of the other answers, worthy though they were, had equivalent support in demonstrated preference.
The fragility of herd immunity
Trouble in the Madrid region is brewing again, even though earlier seroprevalance had clocked in at about 20 percent:
Good for New York of course, here is a thread discussing the comparison, to me the conclusions seem premature. The important point in any case is that Covid-protected time periods need not last forever, and you can end up in multiple rounds of “let it rip.” As far as I know, this is the first established case of a major “second wave” in a previously hard-hit area.
The good news is that Madrid cases seem to have peaked, and furthermore the death rate is much lower the second time around, the latter being one good reason for postponing cases into later time periods rather than taking them all up front.
Note also that England has had months of open pubs, and a very quiet situation, but now cases there are doubling every six to seven days (FT). Don’t switch back to talk of deaths! The “simple” theory of herd immunity is surprised to see that new trend in cases. What I call semi-herd immunity suggests a high degree of protection for the current configuration of social relations, after some point. As those social relations change, some of that temporary herd immunity dissolves, as new infecting connections are being created and new superspreaders arise and do their thing. But that takes a while, possibly months.
The herd immunity theorists downplay the possible temporariness of the equilibrium they pinpoint. They instead prefer to focus on the (correct) point that most of the mainstream approaches did not forecast the collapse in deaths and hospitalizations found in England, Sweden, New York, and now parts of the American South. In reality, you need to put both sides of the picture together, and grasp both the insights and limitations of the herd immunity theorists.
So herd immunity does seem to be fragile, and if other developments (treatment, antivirals, steroids, masks and thus lower dosage) lower death rates, bravo, but case behavior still moves against the simple herd immunity theory, at least in Madrid. How fragile we still do not know, and I readily grant and indeed would emphasize that Madrid is the only major counterexample to date. Appreciate the limits of knowledge!
If you listen to Ivor Cummins, a darling of the herd immunity theorists, he doesn’t seem to grasp these problems of possible temporariness (he loves to switch to talk of deaths at just the wrong time), but rather treats herd immunity as “it’s over,” with a few vague qualifiers tossed in at the very end. We will see.
Markets in everything
Swedish label Kön has produced a range of gender-neutral underwear to demonstrate that products “don’t have to be categorised” as just for men or women.
The underwear is made from plant-based textiles and comes in recycled paper packaging.
Wanting to create an inclusive brand suitable for everyone, Bill Heinonen founded Kön – a fashion company offering unisex underwear in a bid to give consumers the ability to “define some products themselves”…
Kön – pronounced “shaun” – takes its name from a Swedish word that stands for both gender and sex.
“I don’t want everything to be gender-neutral,” Heinonen explained, “but I think it’s important to give consumers that ability to define some products themselves.”
“Everything doesn’t have to be categorised as ‘men or women’ – a sweater can be just a sweater, a shower gel can be just a shower gel, and so on.”
Here is the full story, via a loyal MR reader. The photos are safe enough for work, though they are of…gender-neutral underwear.