The Democratic caucus in the Colorado state legislature wanted to get their member’s feedback on the bills most important to them. That’s hard to do because each member has an incentive to claim that their pet bill is by far the most important bill to them. Thus, Chris Hansen, the chair of the House Appropriations Committee, who also happens to have a PhD in economics, decided to use a modified form of quadratic voting. Each voter was given 100 tokens to vote and the price of x votes for a policy was x^2 so you could buy 10 votes on your favorite policy for 100 but you could also buy 5 votes on each of your four favorite policies (5^2+5^2+5^2+5^2=100).
Wired: So in mid-April, the representatives voted. Sure, each one could have put ten tokens on their pet project. But consider the or: Nine votes on one (cost: 81 tokens) but then three votes on another (cost: nine tokens). Or five votes each (25 tokens) on four different bills!
In Colorado at least, it worked, kind of. “There was a pretty clear signal on which items, which bills, were the most important for the caucus to fund,” Hansen says. The winner was Senate Bill 85, the Equal Pay for Equal Work Act, with 60 votes. “And then there’s kind of a long tail,” Hansen says. “The difference was much more clear with quadratic voting.”
In Poor Sleep Makes People Poor I discussed an important paper by Maulik Jagnani showing how India’s single time zone creates a big disconnect between biological time as given by light cues and clock time. The disconnects impedes sleep patterns and reduces human capital for those most effected.
In a new paper in the Journal of Health Economics, Sunset Time and the Economic Effects of Social Jetlag Giuntella and Mazzonna show that the same types of effects can be observed in the United States.
The rapid evolution into a 24h society challenges individuals’ ability to conciliate work schedules and biological needs. Epidemiological research suggests that social and biological time are increasingly drifting apart (“social jetlag”). This study uses a spatial regression discontinuity design to estimate the economic cost of the misalignment between social and biological rhythms arising at the border of a time-zone in the presence of relatively rigid social schedules (e.g., work and school schedules). Exploiting the discontinuity in the timing of natural light at a time-zone boundary, we find that an extra hour of natural light in the evening reduces sleep duration by an average of 19 minutes and increases the likelihood of reporting insufficient sleep. Using data drawn from the Centers for Disease Control and Prevention and the US Census, we find that the discontinuity in the timing of natural light has significant effects on health outcomes typically associated with circadian rhythms disruptions (e.g., obesity, diabetes, cardiovascular diseases, and breast cancer) and economic performance (per capita income). We provide a lower bound estimate of the health care costs and productivity losses associated with these effects.
Hat tip: Kevin Lewis.
Here’s a good interview by the Richmond Fed of Preston McAfee. McAfee was one of the designers of the FCC’s spectrum auctions and used that experience to move from academia to technology firms. He has held top positions at Yahoo, Google and Microsoft. Here’s one issue that I have discussed before, tacit collusion among AIs..
EF: What are the implications of machine learning, if any, for regulators?
McAfee: It is likely to get a lot harder to say why a firm made a particular decision when that decision was driven by machine learning. As companies come more and more to be run by what amount to black box mechanisms, the government needs more capability to deconstruct what those black box mechanisms are doing. Are they illegally colluding? Are they engaging in predatory pricing? Are they committing illegal discrimination and redlining?
So the government’s going to have to develop the capability to take some of those black box mechanisms and simulate them. This, by the way, is a nontrivial thing. It’s not like a flight recorder; it’s distributed among potentially thousands of machines, it could be hundreds of interacting algorithms, and there might be hidden places where thumbs can be put on the scale.
I think another interesting issue now is that price-fixing historically has been the making of an agreement. In fact, what’s specifically illegal is the agreement. You don’t have to actually succeed in rigging the prices, you just have to agree to rig the prices.
The courts have recognized that a wink and a nod is an agreement. That is, we can agree without writing out a contract. So what’s the wink and a nod equivalent for machines? I think this is going somewhat into uncharted territory.
One of the goals of the Swachh Bharat or Clean India mission was to achieve an “open-defecation free” (ODF) India by 2 October 2019 (the 150th anniversary of Gandhi’s birth). OD is a big problem in India contributing to child sickness, stunting and a host of permanent problems including lower IQs. As of 2011, half of Indian households didn’t have access to a latrine but since that time millions of latrines have been built and the government has encouraged (sometimes “vigorously”) latrine use.
Unfortunately, the close connection between the Swachh Bharat mission and Prime Minister Modi has made achieving the mission, or claiming to have achieved the mission, not just a political goal but a test of patriotism and support for Modi. The Swachh Bharat website, for example, proclaims that India is now 99% open defecation free, including 100% coverage in Rajasthan, Madhya Pradesh, Utter Pradesh and Bihar.
In Rajasthan and Madhya Pradesh, states that had been declared ODF by the time of the survey, we found rural open defecation rates of about 50% and about 25%, respectively. The vast majority of villages in Uttar Pradesh and Bihar have also been declared ODF; the quantitative survey found open defecation rates of approximately 40% and 60%, respectively, in these states (Gupta et al 2019).
How do villages, and eventually blocks, districts, and states get declared ODF despite high levels of open defecation? One reason is that ODF status is often declared where latrine coverage is, in fact, incomplete: about 30% of households in the four states we studied did not own a latrine. Another reason is that many people who own a latrine still defecate in the open. In fact, latrine use among latrine owners has not changed since 2014: one in four people who own a latrine in the 2018 survey do not use it (Gupta et al 2019).
Ambitious program need not reach their goals to be successful–progress has been made and Modi can take credit–but it’s dangerous when problems are declared solved in order to meet political timelines and narratives. Work remains to be done.
I found this email from the GMU Police about GMU and terrorism surprising and somewhat disturbing:
On Wednesday, March 20, 2019, Mason Police informed the Mason community about an individual who had threatened harm to the University in a video posted on social media. At the time of the threats, the suspect was located in Morocco and was not an immediate or credible threat to the Mason community. However, because the suspect’s actions violated Virginia criminal law, Mason Police secured five felony warrants of arrest related to bomb threats against the University. Additionally, Mason Police worked with Interpol and several federal law enforcement agencies to track the suspect through several countries in the Middle East before he was ultimately arrested on the Virginia warrants while trying to enter Israel.
The suspect, Nassim Darwich, was extradited back to the US through JFK International Airport in New York City. Yesterday, Mason Police were in New York to take custody of Mr. Darwich and return him to Virginia. He is currently in the Fairfax County Adult Detention Center where he is being held on $100,000.00 secured bond.
Mason Police would like to thank Interpol, the US Customs Service, Homeland Security Investigations, and the FBI/NY for assisting Mason Police with monitoring and arresting the suspect. We also appreciate the Mason community members who saw Darwich’s internet-based threats and acted to alert Mason Police. If anyone has any additional information about this case, please give the Mason Police Department a call at (703) 993-2810.
The email was from April 5 so a university police department was able to reach out to the Middle East, arrest and extradite an individual to the United States in about two weeks. Impressive. As a potential target, I guess I am pleased. But it’s somewhat frightening to see how long the arm of the law has become, at least for terrorism related crimes.
Camden NJ has thrice been named the most dangerous city in America. Camden suffered not only from high crime but from poor policing under a rigid union contract. Jim Epstein described the situation in 2014:
Camden’s old city-run police force abused its power and abrogated its duties. It took Camden cops one hour on average to respond to 911 calls, or more than six times the national average. They didn’t show up for work 30 percent of the time, and an inordinate number of Camden police were working desk jobs. A union contract required the city to entice officers with extra pay to get them to accept crime-fighting shifts outside regular business hours. Last year, the city paid $3.5 million in damages to 88 citizens who saw their convictions overturned because of planted evidence, fabricated reports, and other forms of police misconduct.
In 2012, the murder rate in Camden was about five times that of neighboring Philadelphia—and about 18 times the murder rate in New York City.
In May of 2013, however, the entire police department was disbanded nullifying the union contract and an entirely new county police department was put into place.
The old city-run force was rife with cops working desk jobs, which Cordero saw as a waste of money and manpower. He and Thomson hired civilians to replace them and put all uniformed officers on crime fighting duty. Boogaard says she didn’t see a single cop during the first year she lived in the city. “Now I see them all the time and they make friendly conversation.” Pastor Merrill says the old city-run force gave off a “disgruntled” air, and the morale of Metro police is noticeably better. “I want my police to be happy,” he says.
Without the expensive union contracts the new force added officers and also introduced more technology such as Shotspotter. So what has been the result? Violent crime is down and clearances are up (charts from Daniel Bier, who also notes that the fall in violent crime and increase in convictions far exceed that in comparison to New Jersey more generally or Philadelphia.)
As I have long argued, we need more police and better policing in America.
An excellent new working paper uses genetic markers for educational attainment to track students through the high school math curriculum to better understand the role of nature, nurture and their interaction in math attainment. The paper begins with an earlier genome wide association study (GWAS) of 1.1 million people that found that a polygenic score could be used to (modestly) predict college completion rates. Panel (a) in the figure at right shows how college completion is five times higher in individuals with an education polygenic score (ed-PGS) in the highest quintile compared to individuals with scores in the lowest quintile; panel b shows that ed-PGS is at least as good as household income at predicting college attainment but not quite as good as knowing the educational level of the parents.
Of the million plus individuals with ed-PGS, some 3,635 came from European-heritage individuals who were entering US high school students in 1994-1995 (the Add Health sample). Harden, Domingue et al. take the ed-PGS of these individuals and match them up with data from their high school curricula and their student transcripts.
What they find is math attainment is a combination of nature and nurture. First, students with higher ed-PGS are more likely to be tracked into advanced math classes beginning in grade 9. (Higher ed-PGS scores are also associated with higher socio-economic status families and schools but these differences persist even after controlling for family and school SES or looking only at variation within schools.) Higher ed-PGS also predicts math persistence in the following years. The following diagram tracks high ed-PGS (blue) with lower ed-PGS (brown) over high school curricula/years and post high-school. Note that by grade 9 there is substantial tracking and some cross-over but mostly (it appears to me) in high-PGS students who fall off-track (note in particular the big drop off of blue students from Pre-Calculus to None in Grade 12).
Nature, however, is modified by nurture. “Students had higher returns to their genetic propensities for educational attainment in higher-status schools.” Higher ed-PGS students in lower SES schools were less likely to be tracked into higher-math classes and lower-SES students were less likely to persist in such classes.
It would be a mistake, however, to conclude that higher-SES schools are uniformly better without understanding the tradoffs. Lower SES schools have fewer high-ability students which makes it difficult to run advanced math classes. Perhaps the lesson here is that bigger schools are better, particularly bigger schools in poorer SES districts. A big school in a low SES district can still afford an advanced math curriculum.
The authors also suggest that more students could take advanced math classes. Even among the top 2% of students as measured by ed-PGS only 31% took Calculus in the high-SES schools and only 24% in the low SES schools.It’s not clear to me, however, that high-PGS necessitates high math achievement. Notice that many high-PGS students take pre-calc in Grade 11 but then no math in Grade 12 but they still go on to college and masters degrees. Lots of highly educated people are not highly-educated in math. Still it wouldn’t be a surprise if there were more math talent in the pool.
There is plenty to criticize in the paper. The measure of SES status by school (average mother’s educational attainment) leaves something to be desired. Moreover, there are indirect genetic effects, which the authors understand and discuss but don’t have the data to test. An indirect genetic effect occurs when a gene shared by parent and child has no direct effect on educational capacity (i.e. it’s not a gene for say neuronal development) but has an indirect “effect” because it is correlated with something that parent’s with that gene do to modify the environment of their children. Nevertheless, genes do have direct effects and this paper forces us to acknowledge that behavioral genetics has implications for policy.
Should every student be genotyped and tracked? On the one hand, that sounds horrible. On the other hand, it would identify more students of high ability, especially from low SES backgrounds. Genetics tells us something about a student’s potential and shouldn’t we try to maximize potential?
For homework, work out the equilibrium for inequality, rewatch the criminally underrated GATTACA and for an even more horrifying picture of the future, pay careful attention to the Mirrlees model of optimal income taxation.
The Endangered Species Act endangered some species and announcing that a fishing area will be protected in the future increases fishing now.
PNAS: Most large-scale conservation policies are anticipated or announced in advance. This risks the possibility of preemptive resource extraction before the conservation intervention goes into force. We use a high-resolution dataset of satellite-based fishing activity to show that anticipation of an impending no-take marine reserve undermines the policy by triggering an unintended race-to-fish. We study one of the world’s largest marine reserves, the Phoenix Islands Protected Area (PIPA), and find that fishers more than doubled their fishing effort once this area was earmarked for eventual protected status. The additional fishing effort resulted in an impoverished starting point for PIPA equivalent to 1.5 y of banned fishing. Extrapolating this behavior globally, we estimate that if other marine reserve announcements were to trigger similar preemptive fishing, this could temporarily increase the share of overextracted fisheries from 65% to 72%. Our findings have implications for general conservation efforts as well as the methods that scientists use to monitor and evaluate policy efficacy.
One puzzle is why there should be an increase in over-fishing? Shouldn’t a commons already be overfished to the point of zero return? One possibility is that previous steps to limit overfishing were working.
The possibility of preemptive overfishing suggests the utility of surprise protections, but that’s not always possible and the authors don’t suggest that preemptive overfishing makes protection unwise only that it has a short term cost.
Hat tip: Paul Kedrosky.
In our principles textbook, Tyler and I open our chapter on price discrimination with the following:
After months of investigation, police from Interpol swooped down on an international drug syndicate operating out of Antwerp, Belgium. The syndicate had been smuggling drugs from Kenya, Uganda and Tanzania into the port of Antwerp for distribution throughout Europe. Smuggling had netted the syndicate millions of dollars in profit. The drug being smuggled? Heroin? Cocaine? No, something more valuable, Combivir. Why was Combivir, an anti-AIDS drug, being illegally smuggled from Africa to Europe when Combivir was manufactured in Europe and could be bought there legally?
The answer is that Combivir was priced at $12.50 per pill in Europe and, much closer to cost, about 50 cents per pill in Africa. Smugglers who bought Combivir in Africa and sold it in Europe could make approximately $12 per pill, and they were smuggling millions of pills.
Instead of smuggling the drugs to Europe, it’s also possible to send the European and American patients abroad. Gilead’s Solvadi, for example, is a very effective drug used to treat hepatitis C. In the United States a course of treatment costs about about $85,000 but due to an agreement between Gilead and generic manufactures in developing countries, in Egypt, India and much of the developed world it can be had for less than $1000. In an excellent piece, Four Reasons Drugs are Expensive, of Which Two are False, Jack Scannell illustrates the battle between arbitrageurs and pharmaceutical companies:
[The price difference] raises dreams of pharmaceutical tourism: “Enjoy a 12 week Grand Tour, where you can gaze at the awesome pyramids and the inscrutable Sphinx of Giza, explore the treasures of Tutankhamen, gasp at the wonders of Luxor, while basking in the sustained virologic response you can only dream of buying in the US.” Some may dream, but Gilead got there already and put its corporate towels on the sun loungers. Egyptians must prove residency to get Sovaldi. Tourists need not apply.
To prevent resale Gilead requires ID and it labels and tracks every bottle sold abroad:
[Patient IDs] will be used to put an identifying barcode on the bottles they receive with their name and other info. Not only can the code be used to guarantee only residents of the country get the drugs…the provisions require that patients then return a bottle to get a new bottle and allows them to get only one bottle of their prescription at a time, even though allowing them to get multiple bottles could “ease the burden on patients and health providers,” MSF says.
Médecins Sans Frontières are outraged by these restrictions but, as Tyler and I explain, the alternative is no sales in developing countries or one world-price and you can be sure that if there’s one world-price that price will be the US price and not the Egyptian price.
The Day the Dinosaurs Died is an amazing tale of scientific discovery. You should read the whole thing. One sub-point, however, is a vivid description of the asteroid that wiped out the dinosaurs.
The asteroid was vaporized on impact. Its substance, mingling with vaporized Earth rock, formed a fiery plume, which reached halfway to the moon before collapsing in a pillar of incandescent dust. Computer models suggest that the atmosphere within fifteen hundred miles of ground zero became red hot from the debris storm, triggering gigantic forest fires. As the Earth rotated, the airborne material converged at the opposite side of the planet, where it fell and set fire to the entire Indian subcontinent. Measurements of the layer of ash and soot that eventually coated the Earth indicate that fires consumed about seventy per cent of the world’s forests. Meanwhile, giant tsunamis resulting from the impact churned across the Gulf of Mexico, tearing up coastlines, sometimes peeling up hundreds of feet of rock, pushing debris inland and then sucking it back out into deep water, leaving jumbled deposits that oilmen sometimes encounter in the course of deep-sea drilling.
…The dust and soot from the impact and the conflagrations prevented all sunlight from reaching the planet’s surface for months. Photosynthesis all but stopped, killing most of the plant life, extinguishing the phytoplankton in the oceans, and causing the amount of oxygen in the atmosphere to plummet. After the fires died down, Earth plunged into a period of cold, perhaps even a deep freeze. Earth’s two essential food chains, in the sea and on land, collapsed. About seventy-five per cent of all species went extinct. More than 99.9999 per cent of all living organisms on Earth died, and the carbon cycle came to a halt.
…One of the authors of the 1991 paper, David Kring, was so frightened by what he learned of the impact’s destructive nature that he became a leading voice in calling for a system to identify and neutralize threatening asteroids. “There’s no uncertainty to this statement: the Earth will be hit by a Chicxulub-size asteroid again, unless we deflect it,” he told me. “Even a three-hundred-metre rock would end world agriculture.”
When the asteroid hit it unleashed the energy of a billion Hiroshimas, that’s one reason I support foundations like the B612 Foundation who are working to map asteroids and develop systems to protect our world. As Tyler and I point out in textbook, protection from asteroids is a true public good which is one reason why we aren’t spending enough on this project.
Hat tip: Kevin Lewis.
Should we pay people not to commit crime? Could we? Murat Mungan from GMU Law shows that it could pay in principle:
This article considers the possibility of simultaneously reducing crime, prison sentences, and the tax burden of financing the criminal justice system by introducing positive sanctions, which are benefits conferred to individuals who refrain from committing crime. Specifically, it proposes a procedure wherein a part of the imprisonment budget is re-directed towards financing positive sanctions. The feasibility of reducing crime, sentences, and taxes through such reallocations depends on how effectively the marginal imprisonment sentence reduces crime, the crime rate, the effectiveness of positive sanctions, and how accurately the government can direct positive sanctions towards individuals who are most responsive to such policies. The article then highlights an advantage of positive sanctions over imprisonment in deterring criminal behavior: positive sanctions operate by transferring or creating wealth, whereas imprisonment operates by destroying wealth. Thus, the conditions under which positive sanctions are optimal are broader than those under which they can be used to jointly reduce crime, sentences, and taxes. The analysis reveals that when the budget for the criminal justice system is exogenously given, it is optimal to use positive sanctions when the imprisonment elasticity of deterrence is small, which is a condition that is consistent with the empirical literature. When the budget for the criminal justice system is endogenously determined, it is optimal to use positive sanctions as long as the marginal cost of public funds is not high.
Hat tip: Kevin Lewis.
I spoke recently at Brookings on the movement to eliminate cash bail. I think we hold too many people pre-trial and the use of judicial aids such as algorithms could safely increase the number of people released prior to trial as well as reduce the variance and disparity of treatment. Nevertheless, I think eliminating cash bail is a poorly thought out idea that may very well backfire. The proponents of eliminating cash bail also present a misleading picture of who is held on bail, the focus of my remarks at Brookings.
I was the only one at the event to oppose eliminating cash bail and I think the audience was a bit shell-shocked. Certainly, not everyone on the panel agreed with my comments. The American Bail Coalition posted the clip from CSPAN but otherwise had nothing to do with my remarks which begin around 35 seconds in.
It’s time to get your applications in for the 2019 Public Choice Outreach conference, a crash course in public choice for students from all fields and walks of life! Professors, please encourage your students to apply!
When is the Public Choice Outreach Conference?
The 2019 Outreach Conference will be held June 14-16th at the Hyatt Centric Arlington in Rosslyn, VA.
What is the Public Choice Outreach Conference?
The Public Choice Outreach Conference is a compact lecture series designed as a “crash course” in Public Choice for students planning careers in academia, journalism, law, or public policy. Graduate students and advanced undergraduates are eligible to apply. Many past participants of the Outreach seminar have gone on to notable careers in academia, law and business.
What will I learn?
Students are introduced to the history and basic tools of public choice analysis, such as models of voting and elections, and models of government and legislative organization. Students also learn to apply public choice theory to a wide range of relevant issues. Finally, students will be introduced to “constitutional economics” and the economics of rule making.
This is a chance to hear talks from Robin Hanson, Alex Tabarrok, Shruti Rajagopolan, Tyler Cowen and more.
Who can apply?
Graduate students and advanced undergraduates are eligible to apply. Students majoring in economics, history, international studies, law, philosophy political science, psychology, public administration, religious studies, and sociology have attended past conferences. Advanced degree students with a demonstrated interest in political economy or demonstrated interest in political economy are invited to apply. Applicants unfamiliar with Public Choice and students from outside of George Mason University are especially encouraged.
What are the fees involved?
Outreach has no conference fee – it is free to attend. Room and meals are included for all participants. However, ALL travel costs are the responsibility of the participants.
Click here for the 2019 Outreach Application
Instituting a codified approval paradigm based on four tiered levels of clinical effectiveness (biomarkers, clinical signs and symptoms, disease modification and clinical outcomes) — with evidence regarding clinical utility progressively increasing — would greatly reduce the regulatory uncertainty and subjectivity, as well as the time to approval of innovative medicines.
Moreover, the four tiers, coupled with a commitment to apply state-of-the-art technologies (Apple Watch, telemetry and other health monitoring systems) to obtain clinical evidence would allow for additional learnings from use of drugs by practicing doctors treating real world patients. This knowledge would unearth additional uses, information that can be added to the product label to allow safer and more effective use of drugs and the identification of drug combinations that lead to even greater health benefits.
See also Bartley Madden’s work on Free to Choose Medicine which would similarly create dual tracks, one the standard FDA process and a second observational track that would bring drugs to market more quickly with the tradeoff being fewer clinical trials. As clinical trials rise in expense and more treatments are targeted towards smaller patients groups (i.e. personalized medicine) and as statistical techniques improve, we will need and can benefit from reforms to the FDA process along these lines.
In a 2017 post Asher Schechter correctly noted:
Of the various ills that currently plague the American economy, one that has economists particularly worried is the decline in the labor share—that is, the part of national income that’s allocated to wages.
Lots of theories have been proposed to explain the decline in labor share including automation, globalization and increased markups. In a big if true paper, Koh, Santaeulalia-Llopis and Zheng argue that all of these theories are wrong because there has been no decline in labor share once we take into account that the BEA changed how intellectual property was treated in the national accounts.
The lack of attention to measurement can severely misguide economic theory. We demonstrated that the change in the accounting treatment of IPP—from expensed to capitalized—gradually implemented by the BEA since 1999 is the sole driver of the decline of the accounting LS. Furthermore, our examination of the accounting assumptions behind the capitalization of IPP—mainly that all IPP investment rents are attributed to capital—indicates that less arbitrary and extreme assumptions on the factor distribution of IPP rents yield a trendless accounting LS. In other words, the LS decline is an artifact of the change in the accounting treatment of IPP in national accounts, and this is at odds with current macroeconomic theory that considers the accounting decline as an economic phenomenon at face value.
Labor share appears to have declined globally. Have most countries changed their accounting practices? Quite possibly, but more investigation is needed. Many of the theories are also quite plausible which perhaps explains the reluctance of theorists to give up on the “fact”. The Koh et al. paper has been circulating for a few years but most seem to brush it off. Autor, Dorn, Katz, Patterson and Van Reenen, for example, say:
Although there is controversy over the degree to which the fall in the labor share of GDP is due to measurement issues such as the treatment of capital depreciation (Bridgman, 2014), housing (Rognlie, 2015), self-employment and proprietor’s income (Elsby, Hobjin, and Sahin, 2013; Gollin, 2002) and intangible capital (Koh, Santaeulalia-Lopis and Zheng, 2016), there is a general consensus that the fall is real and significant.
Wait and see is probably rational at this stage. If the paper makes it through peer-review at the JPE, it will be more difficult to ignore.
It is arresting how many facts are in fact open to question. Maybe.
Hat tip: David Andalfatto somewhere on twitter.