Beliefs about welfare
Why does Western Europe spend so much more on welfare payments than does the United States?
Why is the latter system (45% of GDP) bigger than the former system (30% of GDP)?
While 29% of Americans believe that poor people are trapped in poverty, 60% of Europeans share this belief.
While 30% of Americans believe that luck determines income, 54% of Europeans share this belief.
While 60% of Americans believe that poor people are lazy, 24% of Europeans share this belief.
Robert Tagorda continues with the following:
These statistics come from the Economist, which has a fascinating review of Fighting Poverty in the US and Europe: A World of Difference. Authored by Harvard scholars Alberto Alesina and Edward Glaeser, this forthcoming book argues that institutional and political differences lead to contrasting American and European approaches.
More provocatively [we now move to Tagorda citing The Economist]:
The other half of the explanation lies in America’s racial diversity. In spite of 20 years of unprecedented immigration, European countries, particularly smaller ones like Portugal and those of Scandinavia, are still highly racially homogenous. America, by contrast, has great diversity, which is especially wide in some states. In addition, the poor in America are disproportionately non-white. Non-Hispanic whites are 71% of America’s population but only 46% of the poor.
Racial diversity in individual states is correlated with the generosity of welfare. For instance, the authors find that in 1990 Aid to Families with Dependent Children ranged from over $800 per family per month in mainly white Alaska to less than $150 in Alabama and Mississippi, where almost one-third of the population is black. Even after adjustment for inter-state differences in average incomes, the correlation with race remained strong. Across countries, too, racial diversity goes with low government spending on poverty relief.
The reason, argue the authors, is that “race matters”, and they marshal statistical evidence, much of it from opinion surveys, to back this up. People are likely to support welfare if they live close to recipients of their own race; but are antipathetic if they live near recipients from another race. The divergent attitudes of Europeans and Americans to the poor are underwritten by the fact that the poor in Europe tend to be ethnically the same as most other folk. In America, their skin is often a different colour. [Emphasis added by Tagorda.]
My take: I buy the basic results. The sorry truth is that a fully cosmopolitan society is an impossible ideal. Furthermore the proffered questions don’t fully get at the real beliefs of many Americans, which is that most poor people deserve their status. (I think some of the poor are lazy, but being a determinist I don’t assign fault.) That being said, it is such false beliefs that keep American welfare spending at reasonable, non-European levels. By the way, here is a related paper by the authors.
Ebay vigilantes
Imagine spending your spare time perusing ebay for fraudulent listings and stopping them. A fair number of people do exactly that. Read Cronaca.com for the full story.
How does sadness affect market behavior?
Sadness makes you more eager to both buy and sell. It lowers the reservation price of sellers. Not surprisingly, feelings of disgust make you more eager to sell, but less eager to buy. Here is the home page of the one of the researchers. Here is some press coverage.
Randall Parker suggests: “Avoid shopping or selling things when you are sad.”
An alternative interpretation is that retail therapy is exactly what you need. That being said, I suspect that consummating a transaction is what makes you happy, not buying something expensive per se. Your vulnerability may suck you into spending more money than you ought to, but just sitting at home is a mistake as well. And contrary to what anti-market critics might suggest, loft insulation is unlikely to cheer you up. So what is the real lesson? When you are sad, go visit your local public library. They are almost sure to have something you want, and at the right price.
Thanks to Paul Barriere for the pointer.
Senators tell their favorite jokes
Imagine writing all the senators and asking them to relate their favorite jokes.
Here is one of the least funny responses, though the competition is stiff for this honor.
Here is the worst pun, don’t miss the accompanying photo.
Here is John Kerry’s joke.
Olympia Snowe won the vote for funniest joke.
I found Rick Santorum to have the funniest response, this is a PG-13 blog but for extra perspective read Dan Savage on the Senator, and no I won’t give you the link.
Thanks to Geekpress.com for the pointer.
Punkers for capitalism
With his mohawk, ratty fatigues, assorted chains and his menagerie of tattoos – swallows on each shoulder, a nautical star on his back and the logo of the Bouncing Souls, a New York City punk band, on his right leg – 22-year-old Nick Rizzuto is the very picture of counterculture alienation. But it’s when he talks politics that Mr. Rizzuto sounds like a real radical, for a punk anyway. Mr. Rizzuto is adamantly in favor of lowering taxes and for school vouchers, and against campaign finance laws; his favorite Supreme Court justice is Clarence Thomas; he plans to vote for President Bush in November; and he’s hard-core into capitalism.
“Punks will tell me, `Punk and capitalism don’t go together,’ ” Mr. Rizzuto said. “I don’t understand where they’re coming from. The biggest punk scenes are in capitalist countries like the U.S., Canada and Japan. I haven’t heard of any new North Korean punk bands coming out. There’s no scene in Iran.”
Here is a New York Times article, don’t forget to check out the pictures (password required). Here is a website for GOP punkers, they seem to approve of Reagan’s famous threat to bomb the Soviet Union. Or perhaps it is just irony. They stress that they are not libertarians because America is “at war” with the left, and the libertarian philosophy is not well-suited to fighting a war. Here is their cited critique of the Canadian health care model. Good economics, but these punkers, oppositional by nature, feel a kneejerk need to defend every action of the Bush administration. Here is the ConservativePunk.com website, which offers an interview with right-wing punker Johnny Ramone. Here is yet another site, which cites right-thinking punk bloggers. And will National Review be pleased that MyEvilMinion.com links to them approvingly?
My take: Punk music needs an idea of evil and an oppositional stance. So punkers will adopt every position of defiance they can find, including in-your-face right-wing politics. But in the long run? Remember what The Clash sung: “You grow up, you calm down, working for the clampdown…”
Is Microsoft the new language arbiter?
Microsoft has decided to write Windows for Welsh.
Microsoft programmes already run in 40 languages including English, Spanish, Arabic and Chinese variants.
A Welsh start menu and some commands will be available in about six months.
Microsoft said it has received complaints from places such as Catalonia, Malaysia and the Arctic regions of Canada.
They claim the switch from native languages online is also affecting everyday speech, said BBC North America Business Correspondent Stephen Evans.
Some argue the fewer languages the better for global trade and understanding, but Microsoft is siding with “linguistic diversity”, he said.
The other big linguistic groups to benefit from the expansion will be speakers of Gujarati and Tamil in India, of Catalan in Spain, and of Bahasa in Malaysia.
Native languages from Northern Canada and Ethiopia will also be added.
My take: Whether or not a language is focal will be determined with increasing rapidity.
Thanks to Cronaca.com for the link.
Small families can decrease social mobility
…it is among larger families that the household or kin effects on the success of children are the weakest. Not only do children from larger families do worse on average than those from smaller families, but they also experience more randomness. In other words, parents’ class status affects their offspring more weakly in large families than in small ones. Likewise, siblings resemble one another less in larger families. For example, sibling similarity in income levels is approximately 24 percent stronger in families with three siblings or fewer than in families with four or more children. For net worth levels…the degree of sibling similarity is 59 percent greater in smaller families.
Those are significant effects, what will they mean?
What all this means for the class structure of American society is that as families get smaller, there may be less socioeconomic mobility, not more. Parents will be able to more carefully control the environments of their offspring and thereby reproduce their own class status.
There is a caveat:
Of course, this depends not just on the overall average number of kids that families are having, but also on the distribution. If the most dramatic declines in family size occur among the economically disadvantages segments of American society then we could have more equality of opportunity.
In other words, having larger families, across the board, will mean that subsequent income is less correlated with family history. But on average it will not raise the prospects of people from poor families.
From Dalton Conley’s excellent The Pecking Order: Which Siblings Succeed and Why. Follow this link and here for my earlier writings on Conley.
Income inequality over time
How great a share has the top ten percent of the American income distribution earned over time?
Ben Muse tells us (based on, Income Inequality in the United States, 1913-1998, by Thomas Piketty and Emmanuel Saez):
In 1917, the top 10% of “tax units” had about 40% of national income. The percent of the income earned by this group rose until about 1929, ranged from about 44% to about 46% until 1940, then plummeted to the area of 32% during the war, and sat there until about 1972. From 1972 to 1998, the share of income received by this group rose almost continuously, ending the period in the area of 42%.
Here is the graph (click to expand):
Breaking the top 10% into even finer gradations we see that:
Percentiles 90-99 appear to rise gradually from 1917 to 1940, do the 1940 WWII drop, then, following the war, begin a long sustained increase through 1998.
But the top percentile is all over the place. The authors had enough data to start this series up in 1913, before the start of WWI. It plummets on U.S. entry into the war and during a post-war depression, rises through the boom of the 1920s, peaking in 1929, plummets with the onset of the Great Depression, and again with the onset of WWII, then continues to fall following the war, bottoming out about 1972, and then rising over the period 1972-1998. A large part of this last rise takes place in 1987 and 1988, following the Tax Reform Act of 1986….
What else do we learn? War and other disruptions appear to damage capital income more than labor income. If that is the case, a healthy and peaceful society might have increasing income inequality. In other words, if we are lucky, income inequality will increase even more.
How to market culture, Italian style
When all else fails, offer a discount:
The cover of the current issue of Poesia, an Italian poetry magazine, shows a caricature of Eugenio Montale, a Nobel laureate in literature, standing on a cloud next to a tall stack of books. The headline reads, “One million volumes.”
It is a reference to the special edition of Montale’s poetry distributed during February with some copies of the Milan newspaper Corriere della Sera, which has a daily circulation of 686,000. Though the book reached that number in part because it was a giveaway, experts were nonetheless impressed, as well as by the book offered as an option along with the newspaper the following Monday: poems by Pablo Neruda. That book cost readers 5.90 euros, or about $7.20, and it sold more than 250,000 copies. There’s more poetry where that came from. Corriere della Sera plans a series of 30 books featuring the works of great poets, one each Monday, and at a relatively low price…
The strategy has been so successful that today nearly every Italian paper on the newsstand sells at least one discounted product – a book, DVD, CD or videotape – at least one day a week. The sales have helped raise circulation modestly and have given an unexpected infusion of cash to newspapers.
In other words, give newspapers a high prestige gloss, to mobilize eyeballs for advertisers. Note that cheap advertising than subsidizes quality poetry. Here is some more on the economics:
Gruppo Editoriale L’Espresso, which publishes La Repubblica and the weekly L’Espresso, last month cited the editorial initiatives as a reason that its net profit rose 47 percent last year, to 67.8 million euros, or about $82.9 million. In 2003, the two newspapers sold 34 million books, 2 million DVD’s and 1.6 million compact disks at prices ranging from 4.90 to 12.90 euros. La Repubblica itself costs 1.20 euros at the newsstand; L’Espresso costs 2.80 euros. Cost-cutting and improvements in online operations also helped raise profit, the company said.
“We thought we were going to appeal to a niche market because Italians aren’t known as being great readers,” said a spokesman for Gruppo Editoriale L’Espresso, who said company policy required anonymity.
He said the publisher expected to break even by selling 50,000 copies in the first series, but that around 500,000 copies of each of 50 volumes of 20th-century masterpieces were sold.
“It was instead an incredible success,” he said, “and created a new phenomenon for the Italian market.”
La Repubblica is now selling a six-volume set of Italian poetry from the 13th century to the present. The paper has sold about 120,000 copies of each volume at 7.90 euros a book.
If the numbers are good for newspapers’ bottom lines, they have book publishers worried. Almost half of the 100 million books sold in Italy in both 2002 and 2003 were sold with newspapers and magazines at newspaper kiosks, according to the Italian Publishers Association.
“Newspapers are no longer just vehicles for information – they’ve become a distribution system,” said Federico Motta, president of the publishers association.
Newspapers have several advantages over traditional book publishers, he said, starting with a distribution network of around 40,000 newsstands throughout Italy.
Click here for the full story. Americans, in contrast, sell books at discount superstores, such as Wal-Mart. Or now you can buy digital music at Starbucks. Not to mention those Picassos
The bottom line: The sale of culture is increasingly about the best way to mobilize notice and attention. Over the next century, expect traditional cultural intermediaries to disappear or be radically transformed. When you buy art from a traditional gallery, sales and certification are bundled together in the same institution. As the division of labor increases, we should expect sales and certification to become separate functions, performed by separate groups of people. The reality is that coffee shops, newspaper stands, Wal-Marts, or whatever are now the institutions that hold our attention. They will become our new cultural suppliers.
Off-label drugs
Alex has written much about the importance of off-label uses for drugs, which are not generally restricted by the FDA. I came across the following in the 17 March 2004 Wall Street Journal, Marketplace section:
A high-price biotech drug, developed in the 1980s to treat a rare form of hemophilia, is fast becoming a blockbuster, with physicians around the world using it to stanch severe bleeding from car accidents, gunshot wounds and postsurgery hemorrhaging.
But here’s the rub: The drug, a human bloodclotting protein called NovoSeven that costs $5,000 a dose, hasn’t been approved by the Food and Drug Administration for such uses…Some doctors are hailing NovoSeven as a lifesaver, with word spreading about near-miraculous cures of dying patients. It’s the new wonder drug,” says Thomas Scalea, director of the shock trauma center at the University of Maryland Medical Center. He says the center has used the drug 80 times in three years, saving about 35 lives.
Not all doctors agree about the merits of the drug, and insurance companies will not reimburse drug usage for this purpose.
Question: Should the FDA have regulatory power over the off-label use of this drug to stop traumatic bleeding? If it had had such power, would any of these lives have been saved at all? In his paper, Alex asks the requisite follow-up question. If it is bad idea to give the FDA regulatory power over off-label uses why give it so much power over initial uses?
As things stand now, the FDA will not allow “human trials” of the drug in the laboratory, although real life trials occur in hospitals on a regular basis. Furthermore the company’s sales force cannot promote the drug for non-hemophilia uses and must wait for doctors to ask, noting that it employs 25 full-time people simply to handle the flood of inquiries.
Further comment by Alex is welcome. This is his bailiwick not mine, I just thought the example was especially striking. Here is some basic information about the drug, here is the company’s web site.
Trade and child labor
Ben Muse’s economics blog continues to rise in my estimation. He reports on a recent study showing that child labor and trade are negatively correlated. The statistical result is the following: as a country’s measure of openness to trade increases by 1%, a measure of child labor is decreasing by 0.7%. Here is an earlier MR post on child labor.
Markets even in things you can’t imagine anyone would want
Read about restaurants where you do your own cooking, and no this is not just Korean barbecue. In some places you cook your own steak, at least they still wash the dishes for you.
The same article offers us some sad news:
Last fall, when almost 100,000 of the “surveyors” who contribute to the Zagat dining guides nationwide were asked what “irritates” them the most about dining out, 74% said service; only 6% said food.
And no, it’s not because they’re all dining at Matsuhisa.
That being said, I don’t think poor taste is the only culprit here. Often we blame the person we can see — the waiter — more than the person we can’t see, namely the chef. Economists have long understood the distinction between the seen and the unseen, let us not forget that the fallacy applies to other contexts as well.
Why has Russian health collapsed?
The health care collapse in the former Soviet Union is old news, less well known is the contrast between Russia and Poland:
…another Slavic nation with a traditional affection for vodka — Poland — is experiencing one of the greatest improvements in health ever known. The difference tells a story of how democracy has transformed the center of Europe in the past 15 years — and how it has failed in Russia.
Start with the figures. In the early 1980s life expectancies in Soviet Russia and Communist Poland were roughly similar, and both were starting to get worse. Cancer and cardiovascular disease were beginning a rapid rise, in lock step with their prime causes: smoking and alcoholism.
Two decades later, Poland’s life expectancy for men, at 70, has risen by four years since the collapse of communism and now is more than 10 years longer than that of Russian men. In Poland, cardiovascular disease has fallen by 20 percent in a decade, while in Russia, it has risen by 25 percent. Sudden deaths from accidents and other external causes have fallen 19 percent in Poland, while in Russia the rate has soared to an unprecedented level. Poland’s rate of HIV infection is one of the lowest in Europe; Russia has one of the world’s highest rates of new infection.
Polish researcher Witold Zatonski has an explanation for this difference:
…he has boiled his answer down to a simple slogan: “Democracy is healthier.” “It’s the only way to explain what has happened,” he said during a recent visit to Washington. “It turns out that the free-market economy and a free political debate correlate directly with good health in Eastern and Central Europe.”
I was incredulous when I first read this, apparently I was not the only one:
That conclusion used to be doubted by some of Zatonski’s colleagues, both in Poland and in the West. After all, democracy brought Poland freedom for cigarette and alcohol advertising, Western brands, and a parliament presumably susceptible to special interests. Tobacco companies spent $100 million a year on marketing to Poles in the 1990s.
Remarkably, though, all that money and influence have been outweighed by the other products of a free society, especially independent civic organizations and media that promote knowledge and open debate about health issues.
It is well known from happiness surveys (see the work of Bruno Frey) that people are happier in democracies, so maybe there is a link to health as well, even after adjusting for income.
What about the comparative statics?
In addition to Poland, the Czech Republic, Hungary and other newly democratic states have recorded dramatic gains in health. But Ukraine and Belarus, which have followed Russia’s political course of far more restricted freedom, have seen their health measures decline. The Baltic states of Latvia, Lithuania and Estonia, which were once republics of the Soviet Union, at first shared Russia’s downward spiral; but since 1995, as they have built Western-style democracy, they have reversed the trend and now follow Poland’s path.
Here is a comprehensive paper with data and cross-country comparisons. From this excellent piece I learned the following:
1. Health in Belarus has continued to decline. Since Belarus has stayed largely communist, the country may serve as a possible control for where Soviet health was headed before communism fell.
2. In Russia, many of the biggest negative health changes have come for the 18-34 group, not for the elderly.
3. In the CIS countries, injuries and violence account for a quarter of all deaths about men aged 25-64; this is six times higher than the death rate from Western Europe.
4. Homicide and suicide rates in CIS countries exceed those for the West by about 20 times.
5. In Russia, deaths from all external causes correlate closely with deaths from alcohol poisoning.
6. Men of low educational background have been to most vulnerable to bad health.
7. Russian life expectancy has declined but it actually improved during the 1994-8 period and has moved with economic crises.
Here is some additional information on mortality trends in Eastern Europe, here is another related link. Zatonski has a longer essay, which I do not currently have access to.
The bottom line: Here is what I used to think: “I blamed the Russian health collapse on the loss of relative status for the elderly. While market reforms have increased aggregate wealth, this has been mostly for the young. Older people have lost their grip on power, and suffered psychologically through their loss of international relative status as well. They lost the will to live and died early.”
Here is what I now think: “Russian young and middle-aged men have found few useful institutional supports during the transition. They’ve gone crazy with drinking and violence.” That being said, I don’t think we have sorted out the relative importance of economic and political factors.
Is Congress becoming worse?
In fundamental ways that have gone largely unrecognized, Congress has become less vigilant, less proud and protective of its own prerogatives, and less important to the conduct of American government than at any time in decades. “Congress has abdicated much of its responsibility,” Nebraska Sen. Chuck Hagel said in a recent conversation. “It could become an adjunct to the executive branch.”
Hagel is no disaffected Democrat frustrated by the imperious GOP leadership. He is a conservative Republican admired by colleagues in both parties for his thoughtfulness and independence. He admits that he is atypical in his concern for Congress’s constitutional role as a check on, and a balance to, the presidency and the judiciary. “Congress is the only thing that stands in the way between essentially a modern-day democratic dictator and a president who is accountable to the people,” he says.
Throughout American history, the status and influence of the three branches of government, and particularly of the executive branch and Congress, have risen and fallen like great historical tides. For long periods, most dramatically in the last third of the 19th century, Congress was dominant. Arguably this was also true in the last quarter of the 20th century, after Congress brought an end to the Vietnam War and forced Richard M. Nixon from office. Even in the ’90s, Congress played a key role in replacing Reagan-era budget deficits with the large surpluses George W. Bush inherited when he became president in 2001.
But Congress’s influence has waned in the past few years, perhaps since the unpopular and unsuccessful effort to remove Bill Clinton from office in 1998-99. Though it occasionally resists an executive-branch proposal, Congress today rarely initiates its own policies. Few members speak up for the institutional interests of Congress. “The idea that they have an independent institutional responsibility, that the institution itself is bigger than the individuals or the parties, doesn’t occur to the bulk of [members] for a nanosecond,” said an exasperated Norman Ornstein of the American Enterprise Institute, a longtime student of Congress.
It occurs to Rep. David Obey of Wisconsin, the ranking Democrat on the House Appropriations Committee. He said that the House has given up the meaningful exercise of its powers by largely forfeiting its oversight role and abandoning all discipline on the federal budget. “Which means that this administration is essentially walking around with a free hand . . . . If the Congress is turned into a jellyfish, there are no checks and there are no balances.” Jellyfish isn’t a bad image for the backbone Congress has shown in recent times.
Read the whole story, which is instructive and stimulating throughout.
My take: The blogosphere reflects an obsession with “the Bush administration,” but the failings of Congress are essential to understanding the last few years.
Markets in everything, the ongoing saga
St. Francis Episcopal Church in Stamford, Conn., in a bid to fill empty pews, has introduced a monthly Sunday service for pet owners who wish to take their dogs and cats (and presumably birds, ferrets, and boa constrictors) to the altar to receive the host or a special benediction. Other houses of worship around the country, the paper noted, are also offering everything from pet-friendly services and prayers for the animals to pet funerals and “bark mitzvahs.”
Here is Kasha’s Bark Mitzvah. By the way, “All of Beth Shir Shalom’s Bark Mitzvahs are held in the parking lot, to avoid any “accidents” in the sanctuary.”
Here is a photo of the Episcopal version of a pet-friendly service (no fear of accidents, apparently; see also the attached comments, such as “It looks like that black dog in the picture has some sort of mind control over that old lady. It gives me the creeps.”). Here is the full story, add your own commentary, you don’t want to hear “My Take” on this one.