Rational Expectations
I can report that the sugar high in children begins long before the sugar hits the bloodstream.
Borjas on Indoctrination
According to FIRE, The Foundation for Individual Rights in Education:
The University of Delaware subjects students in its residence halls to
a shocking program of ideological reeducation that is referred to in
the university’s own materials as a “treatment” for students’ incorrect
attitudes and beliefs….The university’s views are forced on students through a
comprehensive manipulation of the residence hall environment, from
mandatory training sessions to “sustainability” door decorations.
Students living in the university’s eight housing complexes are
required to attend training sessions, floor meetings, and one-on-one
meetings with their Resident Assistants (RAs). The RAs who facilitate
these meetings have received their own intensive training from the university, including a “diversity facilitation training” session at which RAs were taught, among other things,
that “[a] racist is one who is both privileged and socialized on the
basis of race by a white supremacist (racist) system. The term applies
to all white people (i.e., people of European descent) living in the
United States, regardless of class, gender, religion, culture or
sexuality.”
George Borjas writes:
Why am I super-sensitive to this? Because as a young boy I myself went through a one-year course in ideological reorientation. I attended an elite elementary Catholic school in Havana. Castro took over, the Catholic school was shut down, and I got transferred to a revolutionary school where the entire day was spent teaching Marxist-Leninist ideology. Luckily, this lasted only a year and I continued my education in Miami (where the entire school day was instead spent talking about the upcoming football game). I am certain that the blind zealotry that I saw in the young teacher’s eyes that year turned me off from that particular way of viewing the world for the rest of my life. One can only hope that many of the students forced to attend the re-education programs at Delaware and other universities react in the same way.
I’d be interested to hear from anyone with first hand experience of the University of Delaware program.
Assorted Links
- The
Impact of Milton Friedman on Modern Monetary Economics. A nice review by Edward Nelson and Anna Schwartz of Friedman’s thought and influence over monetary policy that also, in the author’s words, sets the record straight on Paul Krugman’s ‘Who was Milton Friedman.’
- The world may be getting smaller but big Americans are sinking the boats at Disney’s It’s a Small World.
- The Ayn Rand Lexicon is now online.
Using Incentives to Solve the Israeli-Palestinian Conflict
The very interesting Bruce Bueno de Mesquita has a good analysis of the Israeli-Palestinian conflict and a clever suggestion for moving forward:
“In my view, it is a mistake to look for strategies that build
mutual trust because it ain’t going to happen. Neither side has any
reason to trust the other, for good reason,” he says. “Land for peace
is an inherently flawed concept because it has a fundamental commitment
problem. If I give you land on your promise of peace in the future,
after you have the land, as the Israelis well know, it is very costly
to take it back if you renege. You have an incentive to say, ‘You made
a good step, it’s a gesture in the right direction, but I thought you
were giving me more than this. I can’t give you peace just for this,
it’s not enough.’ Conversely, if we have peace for land–you disarm, put
down your weapons, and get rid of the threats to me and I will then
give you the land–the reverse is true: I have no commitment to follow
through. Once you’ve laid down your weapons, you have no threat.”Bueno de Mesquita’s answer to this dilemma, which he discussed with
the former Israeli prime minister and recently elected Labor leader
Ehud Barak, is a formula that guarantees mutual incentives to
cooperate. “In a peaceful world, what do the Palestinians anticipate
will be their main source of economic viability? Tourism. This is what
their own documents say. And, of course, the Israelis make a lot of
money from tourism, and that revenue is very easy to track. As a
starting point requiring no trust, no mutual cooperation, I would
suggest that all tourist revenue be [divided by] a fixed formula based
on the current population of the region, which is roughly 40 percent
Palestinian, 60 percent Israeli. The money would go automatically to
each side. Now, when there is violence, tourists don’t come. So the
tourist revenue is automatically responsive to the level of violence on
either side for both sides. You have an accounting firm that both sides
agree to, you let the U.N. do it, whatever. It’s completely
self-enforcing, it requires no cooperation except the initial agreement
by the Israelis that they are going to turn this part of the revenue
over, on a fixed formula based on population, to some international
agency, and that’s that.”
The article cited has a lot more on Bueno de Mesquita and the remarkable series of accurate predictions that he has made using rational choice modeling. See also this piece from Science News, The Mathematical Fortune Teller.
Big news on pharmaceutical prizes
Senator Bernie Sanders, the first self-described socialist ever to be elected to the Senate, has introduced a bill that I might actually sign on to, The Medical Innovation Prize Fund Act of 2007. In essence, the prize fund would pay pharmaceutical companies to release their patent rights to the public domain.
The level of funding for medical innovation prizes would start at
$80 billion per year, and increase with the growth in GDP….Under the Sanders
proposal, the patent system would still be used, but the patent owners
would no longer be given monopoly rights to control the manufacturing
and sale of products. Instead, patents would be used to establish who
"owns" the right to the cash rewards given for new inventions. Drugs
developed without patents would also be eligible for the prizes.
I like that the funding amounts are serious and would be available to non-patented products (innovations without property rights are underfunded). I worry about corruption and funding directed according to political pressure. I would be reassured if the system were clearly voluntary – that is, pharmaceutical manufacturers should have the option of the patent or the prize. Clearly an option will increase profits for the pharmaceutical firms but medical innovation has many beneficial returns not captured by the pharmaceutical companies so I am not worried about bigger transfers.
Most importantly, a prize fund would make clear the tradeoff between pharmaceutical revenues and R&D and it would reduce the pressure for price controls which I think are a serious threat to future medical innovation.
Thanks to Ben Krohmal for the pointer.
Satanists Unite!
Here’s a mini-review of my brother’s movie Weirdsville.
Weirdsville – a
dark and devilishly funny comedy about a pair of junkie crooks who
can’t seem to catch a break to save their lives. Throw in a couple
Satan worshipers, a band of vigilante little people and a pair of
curling stone wielding drug dealers and things get, well – considerably
weirder. The film is littered with fantastic offbeat and unexpected
moments that keep the laughs rolling. Moyle meanwhile, adds his
signature rock n’ roll flare and gives the film a cold, gritty feel
that keeps you on just enough of an edge. Definitely a trip worth
taking.
So who is complaining? The Satanists! Here is one email:
I would just like to voice my opinion and state that I do NOT appreciate the way you portray Satanism in the least. Using the same-old watered down mass-media version or not, it still tends to give us a bad name. I am not asking you to remove this movie or change anything on it, just think about it.
By the way, long-time readers of Marginal Revolution may be wondering whether the Satan worshipers in Weirdsville are a commentary on my brother’s previous blockbuster.
RAND Hits Back
Joseph Newhouse and the other RAND researchers have responded to Nyman’s paper arguing that attrition bias biased their results. The RAND researchers were aware of these issues and in fact designed the experiment to avoid incentives for non-random attrition. Most importantly, the basic RAND findings have now been replicated in many other studies (smaller and not always experiments but the results are solid). I call it a knockout for RAND.
It’s a credit to the many insightful commentators on Marginal Revolution that many of these points were made already in the comments on my original post.
Thanks to Jason Furman for the pointer.
Uh oh
George Mason is updating to a new network system. We are told, "MESA was designed specifically for George Mason University."
In other words, MESA has not been thoroughly tested, no other universities have found it worthwhile to adopt the same system and we will be utterly dependent on the designers. Ahhhrghhh! Run for the hills!
Tradeoffs
The boys were tossed out of the ball pit for rough-housing. The wife began to sternly lecture them "Why are you so wild? Don’t you know you could get hurt?!" The 5-year old retorted, "Mom! No risk, no fun."
Naturally I burst out laughing. Need I explain why this was not wise? I should have kept quiet, but I learned another tradeoff; no fun, no risk.
Perceptions of Corruption
Transparency International produces a much cited index of corruption, the Corruption Perceptions Index (CPI). But here is something, shall we say… interesting.
"Transparency International commissions the CPI from Johann Graf Lambsdorff." Lambsdorff, who likes to be called the "father" of the CPI, has another kid on the side, a firm called Anti-Corruption Training and Consulting. And what does this firm do? Well I will let them speak for themselves:
Following an invitation of the Chinese Ministry of Supervsion Prof.
Graf Lambsdorff and Mathias Nell went to China from July 22 to July 29
2007. The trip encompassed anti-corruption consultations in Beijing,
Nanjing and Chengdu as well as the release ceremony at Tsinghua
University of the Chinese version of Prof. Graf Lambsdorff’s new book
“The Institutional Economics of Corruption and Reform: Theory, Evidence
and Policy”.
China, let us recall, scores a 3.5 out of 10 on TI’s Corruption Index where the most corrupt country in the world, Somalia, has a score of 1.4. Pretty corrupt, eh? Here is a picture, from the ACTC website illustrating some of ACTC’s consulting:
Hat tip to CPI-Watch.
Weirdsville
Here’s a cool idea from a new Hollywood movie producer, a money back guarantee!
Nicholas Tabarrok is putting his money where his mouth is. The
producer from Toronto-based Darius Films is certain that audiences will
crack up during the screening of his oddball comedy Weirdsville, opening Friday, or he will refund their movie-ticket money come Monday morning.Tabarrok tells Playback Daily it was a "spur of the moment" idea.
"It occurred to me that this is a common thing… If you buy a
product and you’re not satisfied, you get your money back… The same
principle [should apply] to film," he says.
Brilliant, innovative, incentive-compatible! You’d think this guy had an economist for a brother or something.
Krugman Badly Reviewed
It will not surprise readers to know that I’d enjoy a good smash of Paul Krugman’s book Conscience of a Liberal but historian David Kennedy’s negative review in the NYtimes is more trash than smash. First, there is a bizarre attempt to argue that Krugman is not an economist because he is not laissez-faire!
And yet maybe Krugman is not really an economist – at least not
according to the definition offered more than a century ago by Francis
Amasa Walker, the first president of the American Economic Association,
who wrote that laissez-faire “was not made the test of economic
orthodoxy, merely. It was used to decide whether a man were an
economist at all.”Most modern economists continue to celebrate
Walker’s orthodoxy, and behind it, the classical doctrines of Adam
Smith, whose fabled “invisible hand” regularly works wonders of
production, distribution, innovation and efficiency, provided it is
kept free of the meddlesome “nanny state.” Against the constant threat
of encroachment from that benighted quarter the free-market faithful
are ever vigilant.
Admittedly, even though this view is nonsense it’s nonsense that is repeated often enough so that an outsider could be forgiven for drinking the heterodox cool-aid. At this point I was willing to forgive.
Unfortunately, the rest of Kennedy’s review has very little meat. If the best that historian Kennedy can say against Krugman’s "factually shaky" history is that "Kansas, whatever its other crimes and misdemeanors, is not customarily
regarded as the birthplace of Prohibition; the Voting Rights Act passed
in 1965, not 1964." then maybe Krugman is on to something. (For the record, the first point is arguable the second point is a trivial error.)
Worse yet, Kennedy agrees with Krugman when Krugman is wrong. It’s not true, for example, that Americans "have become markedly less [secure] in
recent decades." Nor is it true that "A tidal wave of risk-shifting – from defined-benefit to
defined-contribution retirement plans, and from employer-financed to
individually-paid health care insurance, to cite but two examples – has
set millions of American families anxiously adrift on a sea of
uncertainty." (See e.g. Tyler here and here).
I don’t understand the divisions within the liberal fold which explain Kennedy’s review (he is no right-winger) but I know something is up when Tyler says "The Conscience of a Liberal is um…not that polemic. It’s not that shrill." While liberal Kennedy says "Like the rants of Rush Limbaugh or the films of Michael Moore,
Krugman’s shrill polemic may hearten the faithful, but it will do
little to persuade the unconvinced or to advance the national
discussion of the important issues it addresses."
My ultimate response to Kennedy’s review? I bought the book.
Addendum: Brad DeLong points out that Kennedy blows the Walker quote as well. Walker, in 1889!, was pointing out that economists were not doctrinaire proponents of laissez-faire.
Small World
The Nepali Times in Kathmandu recommends Marginal Revolution.
Was RAND wrong?
No, not Ayn Rand, the RAND experiment on health care. The RAND experiment randomly assigned people to different health plans and one of the big findings was that cost sharing reduced use of health care but had little effect on health outcomes. My colleague, Robin Hanson, likes to use this as a club to argue that we should cut medical spending in half.
Even randomized experiments have problems, however, and it turns out that there was a lot of attrition in the RAND experiment. A Healthy Blog quotes from a new paper in the October 2007 issue of the Journal of Health Politics, Policy
and Law, by Dr. John Nyman of the University of Minnesota (alas not online).
Of the various responses to cost sharing that were observed in the
participants of the RAND HIE, by far the strongest and most dramatic was in the
relative number of RAND participants who voluntarily dropped out of the study
over the course of the experiment. Of the 1,294 adult participants who were
randomly assigned to the free plan, 5 participants (0.4 percent) left the
experiment voluntarily during the observation period, while of the 2,664 who
were assigned to any of the cost-sharing plans, 179 participants (6.7 percent)
voluntarily left the experiment. This represented a greater than sixteenfold
increase in the percentage of dropouts, a difference that was highly significant
and a magnitude of response that was nowhere else duplicated in the experiment.What explains this? The explanation that makes the most sense is that the
dropouts were participants who had just been diagnosed with an illness that
would require a costly hospital procedure. … If they dropped out, their coverage
would automatically revert to their original insurance policies, which were
likely to cover major medical expenses (such as hospitalizations) with no
copayments … As a result of dropping out, these participants’ inpatient stays
(and associated health care spending) did not register in the experiment, and it
appeared as if participants in the cost-sharing group had a lower rate of
inpatient use. … the cost-sharing participants who remained exhibited a lower
rate of inpatient use than free FFS participants, not because they were
responding to the higher coinsurance rate by forgoing frivolous hospital care
but instead because they did not need as much hospital care, since many of those
who became ill and needed hospital care had already dropped out of the
experiment before their hospitalization occurred. …
Hat tip to The HealthCare Economist.
Amazon One-Click Patent Struck Down
The US patent office has ruled that enough prior art anticipated the one-click patent to rule a number of the major claims invalid. Perhaps we should chalk up another win to Eric Maskin!
I’m pleased that the Amazon patent was ruled invalid but insufficient attention to prior art is not the main problem with current patent law. Patent law needs to change so that patents would be ruled invalid or given much shorter lengths if they do not involve large, sunk costs.