The health care polity that is Texas
The Texas Legislature just enacted landmark health care reforms by opening the state to telemedicine. This success shows that states have great power to improve health care without waiting on Washington. This is especially important as the Affordable Care Act (ACA, or “Obamacare”) grows more unstable and neither party in Congress seems capable of responding.
Telemedicine can improve health and lives—especially in a sprawling state with vast, thinly populated areas. As high-quality video conferencing and remote telemetry become more sophisticated and less expensive, telemedicine offers high-quality care without the need for face-to-face contact in many (not all) situations.
Since an episode of cardiac arrhythmia, I’ve carried a $99 device (AliveCor.com) that conducts clinical-quality electrocardiograms, analyzes them, and gives one-touch, low-cost access to professional help. My then-92-year-old mother’s life was probably saved by an iPad FaceTime conversation with her grandson (an M.D.), who sensed the onset of sepsis. Low-cost digital stethoscopes, blood pressure cuffs, and other devices can plug into smartphones or tablets, transmitting information directly to teledoctors.
…Senate Bill 1107 allows patients to receive prescriptions from doctors whom they meet for the first time via electronic means.
Here is more from Robert Graboyes.
Indian caste system bleg
What should I read to better understand the Indian caste system? I thank you all in advance for your assistance.
Saturday assorted links
1. Smart people usually look smart.
2. 1991 NYT profile of Krugman, Summers, and Sachs.
3. Is Yunnan cuisine about to sweep the U.S.?
4. There is a tendency toward excessive entry in homogeneous product markets (pdf). If that link doesn’t work for you, google “free entry mankiw whinston.” And Growth Econ blog on mark-ups.
5. NBA players and start-up equity. And the network behind Twitter.
That was then, this is now — churchyard burial edition
Although all church fees were wrong, argued Francis Sadler in a much-reprinted 1738 tract, “selling” one part of the churchyard for three times the price of another “to keep Rich and Poor asunder as if there were a difference in their dust” was especially ridiculous.
Within the courtyard, “the chancel was a better address than the center aisle, which was, in turn, preferred to the side aisles.” And lead coffins cost ten times more than coffins of wood.
That is from the excellent The Work of the Dead: A Cultural History of Mortal Remains, by Thomas Laqueur. Here is a truly splendid Marina Warner review of the book.
What I’ve been reading
1. Karl Ove Knausgaard, Autumn. While this volume of very short essays does reflect a literary sensibility, I didn’t find it fun or insightful to read. By the way, “Vomit is usually yellowish and can range from pale yellow to yellowish-brown, with certain areas of quite different colours, like red or green.” So I suppose the Knausgaard canon really is just the first two volumes of My Struggle.
2. Alex Millmow, A History of Australasian Economic Thought. A very good introduction, New Zealand too. There is no problem filling a book with substance on this topic, in fact it left me wanting more.
3. Robert B. Ekelund, Jr., John D. Jackson, and Robert D. Tollison, The Economics of American Art: Issues, Artists, and Market Institutions. A useful overview and survey of the role of economics in the development of art markets in American history.
4. Cynthia Estlund, A New Deal for China’s Workers? The best book I know on labor unions and labor policy in China: “It surprises many Westerners to learn that the labor standards established by Chinese law on the books, apart from actual wage levels, track modern Western (especially European) labor standards rather closely in many respects…Professor Gallagher has described China’s labor standards regime as one of “high standards-low enforcement.””
5. Beowulf, translated by Stephen Mitchell. I cannot judge veracity, but to read this is in the top tier of Beowulf renderings to date. The Old English is presented on the opposing page, this book I will keep.
6. Orhan Pamuk, The Red-Haired Woman. Eh. Contrived.
Arrived in my pile are:
Robert Wuthnow, American Misfits and the Making of Middle Class Respectability.
Jean Tirole, Economics for the Common Good, with nary an equation in sight.
Friday assorted links
1. CFOs don’t do well on a test of financial literacy.
2. More on why Haiti is so poor.
3. After 20 years and $4 billion, the new Tappan Zee Bridge is to open (NYT), first major bridge in the NYC area since 1964 (!).
4. Iceland will transport hamburger and beer by drones. And German autonomous vehicles: “The software may not decide on its course of action based on the age, sex or physical condition of any people involved.”
5. A London family is offering their future nanny $129,000 and access to a Maserati.
We should do more to privatize bus systems
Local governments spend roughly $1.6 trillion per year to provide a variety of public services ranging from police and fire protection to public schools and public transit. However, we know little about public sector’s productivity in delivering key services. Public bus service represents a standardized output for benchmarking the cost of local government service provision. Among the top twenty largest cities, there exists significant dispersion in the operating cost per bus mile with the highest being more than three times as high as the lowest. Using a regression discontinuity design, we estimate the cost savings from privatization and explore the political economy of why privatization rates are lower in high cost unionized areas. Our analysis suggests that fully privatizing all bus transit would generate cost savings of approximately $5.7 billion, or 30% of total U.S. bus transit operating expenses. The corresponding increased use of public transit from this cost reduction would lead to a gain in social welfare of $524 million, at minimum, and at least 26,000 additional transit jobs.
That is from Rhiannon Jerch, Matthew E. Kahn, and Shanjun Li, forthcoming in the Journal of Public Economics.
Productivity and market power in general equilibrium
Let’s assume away cyclical factors, so full employment always holds.
If every sector of an economy becomes monopolistic, output will contract in each sector, and it might appear that productivity will decline. But for the most part this output reduction will not be achieved by burning crops in the fields. Rather, less will be produced and factors of production will be freed up for elsewhere. New sectors will arise, and offer goods and services too, perhaps with monopolies as well. In any case, the consumer surplus gains from those new sectors might be especially high, because they will be selling to the highest points on demand curves that previously were unsatisfied altogether.
You can cite the deadweight loss of monopoly all you want, but we’re getting more outputs of other stuff. Value-added could be either higher or lower, productivity too.
The Schumpeterian tradition, of course, suggested that market power would boost innovation. There are at least two first-order effects pushing in this direction. First, the monopoly has more “free cash” for R&D, and second there is a lower chance of the innovation benefiting competing firms too. I don’t view the “monopoly boosts innovation” hypothesis as confirmed, but it probably has commanded slightly more sympathy from researchers than the opposite point of view. Bell Labs did pretty well. In any case, partial equilibrium output restrictions won’t get you to any kind of smooth conclusion about monopoly causing low productivity growth.
Let’s say instead that every sector is ruled by monopolistic competition, a’la Chamberlin. In the model, that puts firm production at points on the AC curves above minimum AC for each firm or sector. You might consider that to be a productivity problem, though of course you must compare it to the rise in product diversity that follows from monopolistic competition.
But under those same conditions, profits are zero and so the mark-up arguments from the DeLoeker and Eeckhout paper do not apply and indeed cannot hold.
I find most of what is written on monopoly and productivity these days to be under-theorized.
Robin Hanson’s take on the rising margins debate, Karl Smith too
He has a long post, with many points of interest, here is the concluding section:
If, like me, you buy the standard “free entry” argument for zero expected economic profits of early entrants, then the only remaining explanation left is an increase in fixed costs relative to variable costs. Now as the paper notes, the fall in tangible capital spending and the rise in accounting profits suggests that this isn’t so much about short-term tangible fixed costs, like the cost to buy machines. But that still leaves a lot of other possible fixed costs, including real estate, innovation, advertising, firm culture, brand loyalty and prestige, regulatory compliance, and context specific training. These all require long term investments, and most of them aren’t tracked well by standard accounting systems.
I can’t tell well which of these fixed costs have risen more, though hopefully folks will collect enough data on these to see which ones correlate strongest with the industries and firms where markups have most risen. But I will invoke a simple hypothesis that I’ve discussed many times, which predicts a general rise of fixed costs: increasing wealth leading to stronger tastes for product variety. Simple models of product differentiation say that as customers care more about getting products nearer to their ideal point, more products are created and fixed costs become a larger fraction of total costs.
As always, I am very pleased to have Robin as my colleague and friend. And from Karl an excellent post, his conclusion:
The sweeping away of the small generalized firm made room for the rise of increasingly specialized local businesses, offering what might think of as a more artisanal experience. These firms have increased markups, but those markups don’t represent a lack of competition. Instead, they represent a return to the particular skills or vision necessary to make a specialized product. Economists refer to this market pattern as monopolistic competition, and it is the source of variety that consumers in a wealthy developed economies desire.
If my story is correct, then the trend towards higher markups is indeed linked to the major changes sweeping the American economy. However, it isn’t the cause of them. Its another consequence of the massive changes introduced by globalism and the radical changes in retailing.
There are additional points of interest at the link.
Should we welcome genetic engineering?
That is the topic of my latest column from Bloomberg, here is one excerpt:
If you could directly alter your kids’ genetic profile, what would you want? It’s hard to know how the social debate would turn out after years of back and forth, but I was dismayed to read one recent research paper by psychologists Rachel M. Latham and Sophie von Stumm. The descriptive title of that work, based on survey evidence, is “Mothers want extraversion over conscientiousness or intelligence for their children.” Upon reflection, maybe that isn’t so surprising, because parents presumably want children who are fun to spend time with.
Would a more extroverted human race be desirable, all things considered? I genuinely don’t know, but at the very least I am concerned. The current mix of human personalities and institutions is a delicate balance which, for all of its flaws, has allowed society to survive and progress. I’m not looking to make a big roll of the dice on this one.
It’s also not difficult to imagine parents wanting children who are relatively well-behaved. The same research paper found that mothers, after extroversion, preferred the trait of “agreeableness” in their children, again over both intelligence and conscientiousness.
I was struck by a recent Chinese report that some parents are asking for children who are able to drink socially, for business purposes, and thus trying to avoid some genes that make it difficult to process alcohol. Caveat emptor.
Best sentence: “I don’t trust people to take so much control over the future of human nature.”
Ghana-Gandhi sentences of the day
Ghana has said it will remove a statue of Mahatma Gandhi from a university campus in the nation’s capital where it had sparked protests over the leader’s allegedly racist attitudes.
The statue, which was unveiled by Indian President Pranab Mukherjee during his visit to Ghana in June, was meant to symbolize friendship between the two countries, according to Ghana’s Ministry of Foreign Affairs. But professors and students at the University of Ghana called the statue “a slap in the face” because of Gandhi’s “racist identity.” They started an online petition calling for the statue’s removal.
The petition, which had more than 1,700 supporters on Thursday, cited letters Gandhi wrote during his time in South Africa as evidence that he advocated for the superiority of Indians over black Africans. It also took issue with his use of the derogatory term kaffir to refer to native Africans and criticized the lack of statues of African heroes and heroines on campus.
Here is the full story, noisy video at the link, via the excellent Samir Varma.
Headlines of 2017
Robo-Adviser Tries to Reach Muslim Investors (WSJ, on-line header differs)
And just to remind you this truly is 2017, here is another of today’s headlines (NYT):
France’s Macron Looks to Confront Eastern Europe Over Cheap Labor
Macron: overrated, as I’ve said from the beginning. As for the robo-advisers, we’ll have to see.
Thursday assorted links
1. Noah Smith responds on market power. I say concentration alone doesn’t mean much; that’s been accepted since the 1970s, and I still see no evidence for market power showing up as retail output restrictions at a higher pace, and that is the most direct and welfare-relevant prediction of the theory. Without that evidence, the story doesn’t have support, and the burden of proof is on that side of the argument. (Furthermore I am worried that they don’t even mention this test, much less perform it.) And if intermediate input market power doesn’t “trickle down” into consumer goods output restrictions…it’s like that proverbial tree falling the forest.
And here is a Matt Yglesias dialogue with the authors, I haven’t heard it yet.
3. Robin Hanson’s Age of Em TED talk.
4. Andrew Batson on Chekhov’s Sakhalin Island.
5. Julia Galef lists (but does not endorse) unpopular ideas. I agree with very few of them, by the way, but they are intrinsically interesting to ponder. What also strikes me is the implicit terms of debate, mostly moves toward greater social liberalism. How about Christian or extremely non-egalitarian ideas?
The Endowment Effect
A good video on the endowment effect–these people are crazy!
Political sentences to ponder what is really going on in the world and in Texas
Veterans’ issues — something that almost never make the national conversation unless the Veteran’s Administration has a juicy scandal for us to gape at — loomed much larger in the questioning than health-care reform, which has obsessed the national media for the past nine months. That shouldn’t really be surprising. The number of veterans in the country is roughly equal to the widely touted figure of 20 million people who gained insurance because of Obamacare.
And:
Veterans’ issues were the most notable way that the local conversation differed from the national one, but far from the only one. I heard more about school policy than climate change, and a great deal about very local issues indeed — problems with asbestos in the water table, a local community college that someone said was doing a poor job of preparing kids for work. In the El Paso leg of the trip, which I didn’t cover, Hurd says that the conversation was dominated by flooding, as heavy rains had recently filled normally dry arroyos, damaging property and displacing families.
That is from Megan McArdle, who is touring the politics of Texas, national level politics I might add, a House race.