Month: June 2022

The marginal value of informal access to health care

by  Tyler Cowen in

To assess the importance of unequal access to medical expertise and services, we estimate the causal effects of having a child who is a doctor on parents’ mortality and health care use. We use data from parents of almost 22,000 participants in admission lotteries to medical school in the Netherlands. Our findings indicate that informal access to medical expertise and services is not an important cause of differences in health care use and mortality.

That is from “Do Doctors Improve the Health Care of Their Parents? Evidence from Admission Lotteries,” by Elisabeth Artmann, Hessel Oosterbeek, and Bas van der Klaauw, in the new American Economic Journal: Applied Economics.  Here are earlier, ungated versions.

What Caused the Murder Spike?

by  Alex Tabarrok in

I think there’s clear evidence that the current murder spike was caused primarily by the 2020 BLM protests. The timing matches the protests well, and the pandemic poorly. The spike is concentrated in black communities and not in any of the other communities affected by the pandemic. It matches homicide spikes corresponding to other anti-police protests, most notably in the cities where those protests happened but to a lesser degree around the country. And the spike seems limited to the US, while other countries had basically stable murder rates over the same period.

I agree with Scott Alexander, although I would emphasize a little more the mediating factor of the police pullback.

I would also add that each step in the mechanism–protests lead to police pullback which leads to an increase in murders–is well supported on its own in the academic literature. Step one, for example, is that protests lead to police pullback. In The effect of highly publicized police killings on policing: Evidence from large U.S. cities Cheng and Long document exactly this:

Our regression discontinuity and difference-in-differences estimates provide consistent and strong evidence that those high-profile killings reduced policing activities, including police self-initiated activities and arrests.

That’s step one. Step two is that police on the street reduce crime which you can find from my research using the terror alert level as well as that of many others. Step one plus step two leads to a spike in murders following the 2020 BLM protests.

As Alexander noted, we also have plenty of evidence on a micro level. For example, I showed clear evidence of police pullback–a “blue strike”–and consequent increase in crime in Baltimore after the Freddie Gray protests. Put it all together along with the timing and other evidence and the case is strong that the 2020 BLM protests led to police pullback which led to a spike in murders, especially in black communities.

Photo Credit.

My Conversation with Barkha Dutt

by  Tyler Cowen in

Here is the link, and here is part of the CWT summary:

Barkha joined Tyler to discuss how Westerners can gain a more complete picture of India, the misogyny still embedded in Indian society, why family law should be agnostic of religious belief, the causes of declining fertility in India, why relations between Hindus and Muslims seem to be worsening, how caste has persisted so strongly in India, the success of India’s subsidized institutes of higher education, the best city for Indian food, the power of Amar Chitra Katha’s comics, the influence of her English liberal arts education, the future of Anglo-American liberalism in India, the best ways to use Twitter, and more.

And from the conversation:

COWEN: Many outsiders have the impression that relations between Hindus and Muslims and the aggregate in India have become worse over the last 10 to 15 years. If you put aside particular actions of particular political personalities, and you try to think of a structural reason why that might be true — because normally the intuition is, people grow richer, they’re more tolerant, there’s more commercial interaction, there’s more intermingling — what would be your structural account of why, in some ways, that problem has become worse?

DUTT: You just spoke of intermingling, Tyler. I think that one of the biggest reasons for the worsening relations, or the othering, as it were, of communities that are not your own is the ghettoization of how people live. For example, if there were neighborhoods where people live cheek by jowl — that still happens, of course, in many cities, but it also happens less than it used to, and that is true. We are seeing a Muslim quarter, to give an example, or a Christian quarter in a way that we wouldn’t have before our cities were so ghettoized.

I think that kind of intermingling, of living in the same housing societies or neighborhoods, participating in each other’s festivals as opposed to just tolerating them — those are the structural changes or shifts that we are witnessing. It’s also true that it is tougher for a person from a religious minority — in particular, an Indian Muslim — to get a house as easily as a non-Muslim. I think I would be lying if I did not acknowledge that. Also, the last point is interfaith marriages or interfaith love. This is a deeply politicized issue as well.

While I’m talking to you, in the last 24 hours in the Southern city of Hyderabad, one of our big technology hubs, we’ve had reports of a Muslim family that attacked a Hindu man for marrying a Muslim woman. In reverse, we see Muslim women also targeted all the time if they choose to marry Hindus. This is not helped by the fact that you’ve had several states now talking about what they call love jihad. That’s the phrase they use for marriages that are across religious communities, in particular between Hindus and Muslims.

The percentage of Indians marrying not just outside their religion but also outside their caste — which in Hinduism is a hierarchical system of traditional occupation that you’re born into — is woefully low. I don’t know if I remember my data correctly, but I think less than 5 percent of Indians actually marry outside of their own communities. I would need to go back to that number and check it, but that’s what I remember off the top of my head.

Those are the structural reasons: the fact that people don’t love or have relationships outside of their community, don’t live enough with people of diverse faiths, and don’t participate in each other’s lives.

We used to have this politically correct phrase called tolerance, which I actually just hate, and I keep nudging people towards the Indian military. The Indian military actually has a system of the commanding officer taking on the faith of his troops during religious prayers. The military has multireligious places of worship. It even has something called an MMG, which is not just a medium machine gun but a Mandir Masjid Gurdwara, which is all the different faiths praying together at the same place. We don’t see a lot of that kind of thing happening outside of the military.

Another survey done by Pew reinforced this when it spoke of Indians today being more like a thali than khichri. Let me just explain that. A thali is a silver tray where you get little balls of different food items. Pew found that Hindus and Muslims — when surveyed, both spoke of the need for religious diversity as being a cornerstone of India. They like the idea of India as a thali, where there were different little food items, but separate food items. The khichri is rice and lentils all mixed up and eaten with pickle. The khichri is that intermingling, the untidy overlapping.

We are just seeing less and less of that overlapping. In my opinion, that is tragic. Where there is social interdependence, where there is economic interdependence, where there is personal interdependence is when relationships thrive and flourish and get better. But when they remain ghettos, separations just tolerating each other — that, I think, remains in the realm of othering.

Recommended, interesting throughout.

Why have college completion rates increased?

by  Tyler Cowen in

Jeffrey T. Denning, Eric R. Eide, Kevin J. Mumford, Richard W. Patterson and Merrill Warnick tell us why: grade inflation:

We document that college completion rates have increased since the 1990s, after declining in the 1970s and 1980s. We find that most of the increase in graduation rates can be explained by grade inflation and that other factors, such as changing student characteristics and institutional resources, play little or no role. This is because GPA strongly predicts graduation, and GPAs have been rising since the 1990s. This finding holds in national survey data and in records from nine large public universities. We also find that at a public liberal arts college grades increased, holding performance on identical exams fixed.

That is from the new American Economic Journal: Applied Economics.  And here are earlier ungated versions.

George Washington Can Be Proud

by  Alex Tabarrok in

In recent years formerly proud universities such as Georgetown, Princeton, and MIT have cravenly failed to defend liberal principles.

Justice, however, is about more than punishing and condemning evil. It is even more important to defend and laud the good. So I want to laud the clear, concise, principled, and measured but forceful letter from George Washington University Provost Christopher Alan Bracey and Law School Dean Dayna Bowen Matthew responding to calls to condemn and fire one of their professors.

Dear Members of the George Washington University Community,

Since the recent U.S. Supreme Court ruling to overturn Roe v. Wade, we have heard from members of our community who have expressed feelings of deep disagreement with this decision.

We also have received requests from some members of the university and external communities that the university terminate its employment of Adjunct Professor and Supreme Court Justice Clarence Thomas and cancel the Constitutional Law Seminar that he teaches at the Law School. Many of the requests cite Justice Thomas’ concurring opinion in Dobbs v. Jackson Women’s Health Organization, in which he called the substantive due process doctrine a “legal fiction.” Justice Thomas has been a consistent critic of the Court’s legal philosophy on substantive due process for many years. Because we steadfastly support the robust exchange of ideas and deliberation, and because debate is an essential part of our university’s academic and educational mission to train future leaders who are prepared to address the world’s most urgent problems, the university will neither terminate Justice Thomas’ employment nor cancel his class in response to his legal opinions.

Justice Thomas’ views do not represent the views of either the George Washington University or its Law School. Additionally, like all faculty members at our university, Justice Thomas has academic freedom and freedom of expression and inquiry. Our university’s academic freedom guidelines state: “The ideas of different faculty members and of various other members of the University community will often and quite naturally conflict. But it is not the proper role of the University to attempt to shield individuals within or outside the University from ideas and opinions they find unwelcome, disagreeable, or even deeply offensive.

Just as we affirm our commitment to academic freedom, we affirm the right of all members of our community to voice their opinions and contribute to the critical discussions that are foundational to our academic mission.

Democracy for our Mars colony?

by  Tyler Cowen in

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

The Yale proposal is about how to make a Mars settlement democratic, as is an earlier proposal published in Space Legal Issues. But I fear a harsher question needs to be addressed first: Should a Mars settlement allow for contractual servitude?

When the New World was settled, it was common practice for workers to sign multiyear contracts, receiving passage across the ocean but giving up a share of their earnings and some of their freedom.

Contractual servitude is distinct from slavery in the sense that it is chosen voluntarily. But once the contract is signed, the worker is in an uncomfortable position, in both an economic and democratic sense. And once these individuals land in the New World — or, as the case may be, on Mars — their protection by mainstream legal institutions cannot be assumed.

It is easy to inveigh against contractual servitude, but it has one valuable function: It creates incentives for someone to finance the voyage in the first place. If I had to finance my own passage to Mars, and then sustain myself when I got there, and pay off the travel costs, I would never go. But if a company can send a few thousand people, keep half the profits, and remain in charge, the voyage might stand a chance, at least decades from now when the technology is further along…

The tension is that most people have well-developed moralities for wealthy, democratic societies in which most citizens can earn their keep or be provided for by a well-funded social welfare state. Neither of those assumptions holds for Mars, which at least at the beginning will be a kind of pre-subsistence economy.

The upshot is that feasible Mars constitutions will probably offend the educated classes dearly.

Recommended.

Rent seeking and the decline of the Florentine school

by  Tyler Cowen in

Economists have claimed that the invisible hand of competition is behind the historical episodes of outstanding artistic achievement, from Shakespearean theater to musical composition in Mozart’s Vienna. Competition, the argument goes, acts on producers of the arts just as it does on producers of mundane commodities. By pitting one artist against all others for the public’s purse and the critics’ praise, rivalry encourages them to supply more refined products. While often left unstated, the same argument implies that the absence of competition will be detrimental to the quality of artists’ output. We extend that insight to explain the decline of the Florentine school of painting in the Late Renaissance period. The rise of the Medici family as Florence’s ruling dynasty turned the previously competitive market for paintings into a monopsony. That development, we argue, strengthened the benefits to local painters of forming a cartel to reclaim the rents captured by the monopsonist. The result was the creation of a local painters’ guild that restricted competition, ultimately contributing to a decline in the quality and influence of Florentine painting.

That is from a new piece by Ennio E. Piano and Tanner Hardy in Public Choice.  Speculative, as they say, and declines in artistic quality are notoriously difficult to predict or to squish into standard models.  That said, the earlier model of competitive guild bidding for artists was, I think, better for quality than Medici patronage.

Via the excellent Kevin Lewis.

Blockchains: A Promise Enforcement Engine

by  Alex Tabarrok in

Anthony Lee Zhang on blockchains

How do blockchains change the state of things? Blockchains are an alternative system for promise enforcement, fundamentally different from any system human history has seen before. Promises in blockchain systems are enforced by miners, who — in reasonably competitive mining markets — have limited ability, and weak incentives, to do anything other than execute others’ promises roughly according to the gas fees they pay. In other words, the blockchain can be thought of as a universal, extremely low-discretion promise enforcement engine.

Consider, for example, automated market maker (AMM) protocols, such as Uniswap. An automated market maker allows anyone to become a liquidity provider, that is, to contribute capital, to make markets in a pair of tokens. Fees are collected from anyone trading with the market maker, and can be programmatically redistributed to liquidity providers. These “terms” are promises in the same way classic financial contracts are — but, rather than promises stated in English enforced in courts of law, they are written in Solidity and “enforced” by Ethereum miners.

Lending protocols, such as Aave, allow agents to borrow if they pledge their risky assets to the system as collateral. Aave values the collateral automatically using price oracles, and automatically seizes and liquidates collateral when the amount borrowed is worth too much compared to the collateral staked. MakerDAO similarly functions like a virtual “pawn shop”, taking risky assets and printing tokens whose value derives from the fact that they are overcollateralized by risky collateral, automatically valued using collateral price feeds. Aave and Maker function similarly to margin lending systems in traditional finance, except that the lenders are bots instead of banks. A nontrivially large fraction of the useful promises that are traded in financial systems, it seems, can be approximately as easily expressed in Solidity as they can in English, and thus can be enforced by miners rather than by courts.

The consequences of the existence of blockchains are thus that, for the first time in human history, we have a real alternative to governments and legal systems for the enforcement of promises. What are the effects this will have on the world?

Governments in developed economies are imperfect but they are adequate promise enforcers and they have reasons to suppress their competitor, blockchains. Hence Zhang argues:

…The future of finance will not be built on Wall Street, by a handful of privileged graduates from a handful of top colleges in a handful of high-income countries. The future of finance will be built on blockchains, in Africa, South America, Southeast Asia, through the combined efforts of many billions of people, who for the first time in human history will be able to participate on an equal footing in the market for promises.

This is similar to what Tyler and I write in cryptoeconomics:

Traditional finance relies on legal documents like contracts, titles, and personal identification and thus it ultimately relies on a legal system that can enforce those contracts quickly, reliably, and at low cost. Relatively few countries in the world have all the required abilities, which is why traditional finance clusters in a handful of places like New York, London, Singapore, and Zurich.

Decentralized finance, in contrast, relies on smart contracts and cryptographic identification that work exactly the same way everywhere. Decentralized finance, therefore, could be broader based and more open than traditional finance. Indeed, decentralized finance could prosper in precisely those regions of the world that do not have reliable legal systems or governments with the power to regulate heavily.

The glories of Irish economics

by  Tyler Cowen in

Yesterday I mentioned the underrated Irish Enlightenment (don’t forget Toland!), today I will briefly lay out how many top early economists came from Ireland.  Here is a partial list of those economists and their contributions:

1. Richard Cantillon, 1680s-1734.  Perhaps the second greatest economist of his century after Adam Smith, he developed the ideas of entrepreneurship and opportunity cost and in general embraced common sense.  Jevons called his Essay on the Nature of Commerce in General the “cradle of political economy.”  He was a major influence on Smith.

2. Edmund Burke, 1729-1797.  Burke has been underrated as an economist, see the recent book by Greg Collins on Burke’s economic thought.  Here is a short essay on Burke’s conservative case for markets.

3. Robert Torrens, 1780-1864.  A major thinker on international trade, he developed the theory of comparative advantage before Ricardo did, and was a sophisticated analyst on a broad range of questions, including terms of trade and currency policy.  He also promoted a version of the charter city idea for southern Australia, and to this day some things in Adelaide bear his name.

4. Richard Whately, 1787-1863.  Mostly an archbishop, theologian, and philosopher, his writings on economics developed the notion of “catallactics,” namely economics as the science of exchange.

3. Mountifort Longfield, 1802-1884.  A first-rate common sense economist, and arguably the first writer to clearly state the laws of supply and demand.  He also developed a marginal productivity theory for the value of labor and capital.  The first professor of political economy at Trinity College.

5. John Elliott Cairnes, 1823-1875.  An important thinker on the methodology of the social sciences, an all-around excellent economist, and his diagnosis of the economics and sociology of slavery (it ruined and infected all parts of Southern society) was spot on.  He is sometimes considered “the last of the classical economists.”

6. Isaac Butt, 1813-1879.  Best-known for his role in Irish political history and the Home Rule movement, he produced what is arguably the first coherent account of the marginal product theory of distribution and factor prices.  He also analyzed the Irish system in terms of the economics of misallocated land, and he promoted welfare state ideas.

7. Francis Ysidro Edgeworth, 1845-1926.  One of the founders and leading lights of mathematical economics, he produced an early version of the Coase Theorem, the notion that market price converges on a competitive equilibrium as the number of buyers and sellers grows, explained the importance of tangency conditions for economic equilibrium, developed the economics of progressive taxation, fleshed out the economics of monopoly pricing, and he initiated the use of offer curves for international trade theory.

And please, none of your b.s. about Anglo-Irish, Norman, Spanish, etc. — they were Irish!  I think of these individuals as continuing the earlier Irish Enlightenment of the eighteenth century.

More guns, more crime?

by  Tyler Cowen in

The full title of the paper is “More Guns, More Unintended Consequences: The Effects of Right-to-Carry on Criminal Behavior and Policing in US Cities” and the authors are John J. Donohue, Samuel V. Cai, Matthew V. Bondy, and Philip J. Cook (does Cook get enough credit for his trajectory of ongoing productivity?) and here is the abstract:

We analyze a sample of 47 major US cities to illuminate the mechanisms that lead Right-to-Carry concealed handgun laws to increase crime. The altered behavior of permit holders, career criminals, and the police combine to generate 29 and 32 percent increases in firearm violent crime and firearm robbery respectively. The increasing firearm violence is facilitated by a massive 35 percent increase in gun theft (p=0.06), with further crime stimulus flowing from diminished police effectiveness, as reflected in a 13 percent decline in violent crime clearance rates (p=0.03). Any crime-inhibiting benefits from increased gun carrying are swamped by the crime-stimulating impacts.

Here is the link to the NBER working paper.