Friday assorted links
1. Since the election, ETF of clean energy stocks up 11%, ETF of coal-related stocks down 2% — oh, how some of you bore me!
3. My Knowledge Wharton podcast on The Complacent Class.
4. Is some U.S. productivity being stashed overseas?
5. “The day China sees true deleveraging is the day a financial crisis begins.”
The show so far, a continuing series
In my view, the Republicans have had a very weak hand to play on health care (not enough good ideas!), but over the last week they have played it brilliantly (which is not the same thing as having good policies). Those House members who need to say “I voted to repeal Obamacare” can now do so. The Republicans also have an option on proceeding further with reform, with everyone knowing the Senate will write its own bill. The defects of what they voted for are not so significant for this reason, and the cavalier attitude of many House Republicans toward the contents of the bill makes perfect sense.
At the same time, the Republicans have the option of letting the bill die in the Senate, where it is far easier to blame the Democrats for inaction — how many American swing voters understand the fine points of the Byrd rule and filibuster anyway? If you are what I call a “fulminating Democrat,” you are actually playing into Republican hands on this one (it would have been better to have spent the week saying abortion should be legal but rare, and talking about white people).
The big victory celebration pleased Trump, but more importantly all Republicans involved learned there is a way forward on many other issues: let Congress lead the way and pull Trump out of the bully role. That lesson won’t soon be forgotten. And from Trump’s point of view, he hasn’t given up the option of later working with the Democrats to pass a more centrist version of health care reform.
I don’t see the broader American public as so impressed with the Democrats’ arguments against the bill, mostly because they are not paying attention. It doesn’t feel like it has the urgency of when Obamacare was passed, and in fact it doesn’t. No one succeeded in showing it did, because it didn’t.
I still see the Republican House majority as extremely fragile, but on this one I believe the Democrats got pwned.
How would an implosion of cable revenue affect the NBA?
That is the topic of my latest Bloomberg column, here is one bit:
The decline of TV revenue is not the same as a decline of interest in the sport. NBA basketball is alive and well; it’s just that more people are cutting the cord on cable. They still might follow the NBA through its website, or watch highlights on YouTube, or share gifs on Twitter.
That shift is likely to favor the stars and the most athletic players, because they are more likely to be featured in very short clips. As for the incentives, player salary will matter less, and the desire to become famous on the internet — and thus win lucrative endorsement contracts — will discourage team play. Expect more attempts to produce spectacular sequences, even if that doesn’t always translate into wins. “Boring” but fundamentally sound teams — which are better to watch for a 2.5 hour game — will be disfavored by this trend. Sorry, San Antonio!
Here is another:
Another possibility is that the NBA will consolidate with fantasy basketball and video gaming to augment their revenue. The NBA already has plans to introduce an e-sports product. More speculatively, if more states legalize sports gambling, the league could enter into a revenue-sharing agreement with casinos or bookmakers. Imagine redesigning the playoffs to maximize the number of decisive games and thus boost betting interest — that could mean more but shorter playoff series. At least the fantasy component of such a basketball conglomerate might redistribute some of the attention back to players who are not superstars. Gamblers also tend to be well-informed about the teams they bet on, so this direction could encourage a smarter NBA, better designed for the nerds and fanboys.
Do read the whole thing.
How much do people value health insurance?
There is a new and very good paper on that question by Amy Finkelstein, Nathaniel Hendren, and Mark Shepard (pdf). In reality, the price elasticity of demand for health insurance is quite high, at least among lower-income groups:
How much are low-income individuals willing to pay for health insurance, and what are the implications for insurance markets? Using administrative data from Massachusetts’ subsidized insurance exchange, we exploit discontinuities in the subsidy schedule to estimate willingness to pay and costs of insurance among low-income adults…For at least 70 percent of the low-income eligible population, we find that willingness to pay for insurance is far below the average cost curve – what it would cost insurers to provide coverage to all who would enroll if the premium were set equal to that WTP. Adverse selection exists, despite the presence of the coverage mandate, but is not the driving force behind low take up. We estimate that willingness to pay is only about one-third of own costs; thus even if insurers could offer actuarially fair, type-specific prices, at least 70 percent of the market would be uncovered.
That is from both the abstract and conclusion. I do understand the ideal of universal coverage, but note this:
For example, we estimate that subsidizing insurer prices by 90% would lead only about three-quarters of potential enrollees to buy insurance.
The somewhat depressing and underexplored implication is that the beneficiaries do not love Obamacare as much as some of you do. In fact you may remember a result from last year, from the research of Mark Pauly, indicating that “close to half” of households covered by the unsubsidized mandate, by the standards of their own preferences, would prefer not to purchase health insurance. And that was before some of the recent rounds of premium increases, and overall these new results seem to imply even lower demands for health insurance relative to cash.
Now, I think it is an open question how much “non-paternalism” is the correct moral stance here. Maybe we should force upon people more health insurance than they would purchase in an adverse selection-free market, because a) they are ill-informed, b) they have children, or c) ex post we still need to take care of them in some way, if indeed their gamble to not purchase insurance turns out badly.
Do, however, note the words of the authors: “We conclude that the size of uncompensated care for low-income populations provides a plausible explanation for their low WTP.” In other words, many of the poor do not value health insurance nearly as much as many planners feel they ought to, in large part because they are already getting some health care.
In any case, consider a political economy point if nothing else. If you institute a policy that forces on people more health insurance than they think they wish to buy, do not be shocked if a huckster comes along offering them a supposedly better deal, and gets away with it.
Along related lines, consider also this result:
From the perspective of social welfare, to justify connecting the 5% least dense areas of North Carolina would require each adopting household value high speed wired broadband access at more than $1519 per month.
For the pointers I thank Peter Metrinko and Kevin Lewis.
William Baumol has passed away
He was one of the greatest of living economists, with contributions in numerous areas, including productivity, economics of the arts, contestable markets, environmental economics, and entrepreneurship theory. Here are previous MR entries on Baumol and his ideas.
Claims about American smiles
It turns out that countries with lots of immigration have historically relied more on nonverbal communication—and thus, people there might smile more.
For a study published in 2015, an international group of researchers looked at the number of “source countries” that have fed into various nations since the year 1500. Places like Canada and the United States are very diverse, with 63 and 83 source countries, respectively, while countries like China and Zimbabwe are fairly homogenous, with just a few nationalities represented in their populations.
After polling people from 32 countries to learn how much they felt various feelings should be expressed openly, the authors found that emotional expressiveness was correlated with diversity. In other words, when there are a lot of immigrants around, you might have to smile more to build trust and cooperation, since you don’t all speak the same language.
People in the more diverse countries also smiled for a different reason than the people in the more homogeneous nations. In the countries with more immigrants, people smiled in order to bond socially. Compared to the less-diverse nations, they were more likely to say smiles were a sign someone “wants to be a close friend of yours.” But in the countries that are more uniform, people were more likely to smile to show they were superior to one another. That might be, the authors speculate, because countries without significant influxes of outsiders tend to be more hierarchical, and nonverbal communication helps maintain these delicate power structures.
That is from Olga Khazan, file under “speculative”! Via Conor Sen.
Thursday assorted links
1. Elida Almeida music video from Cape Verde.
2. Andrew Sullivan on neo-reaction:
Among many liberals, there is an understandable impulse to raise the drawbridge, to deny certain ideas access to respectable conversation, to prevent certain concepts from being “normalized.” But the normalization has already occurred — thanks, largely, to voters across the West — and willfully blinding ourselves to the most potent political movement of the moment will not make it go away.
Here is the longer piece, of interest throughout, here is good commentary from Rod Dreher. And here is Henry on Trump through the lens of Polanyi.
3. “Man pays tribute to friend by flushing remains down 17 MLB ballpark toilets…Tom McDonald says gesture is fitting for his friend, who was a plumber.” Link here.
4. School segregation is back.
5. Those new service sector jobs: “Facebook says it will hire another 3,000 people to review videos of crime and suicides following murders shown live.”
6. A Master’s degree for 7k? (NYT)
7. A new project from Russ Roberts: “My latest econ education project is It’s a Wonderful Loaf: http://wonderfulloaf.org. It’s about the emergent order that is the market for bread. It’s an animated and annotated poem plus resources to learn quite a bit about emergent order if you want to go deeper.”
The Paradox of India’s Vacant Houses
Walking around Mumbai I see many vacant houses and apartments and the statistics verify what I see on the ground, an astounding 15% of Mumbai’s housing stock lies vacant. In Mumbai, the slums are full but thousands of homes lie vacant. The share of vacant housing in Mumbai is only slightly higher than the national average of 12% (In comparison, the United States has a vacant homeowner rate of less than 2%.) Sahil Gandhi and Meenaz Munshi, two of my colleagues at the IDFC Institute, examine the paradox of India’s vacant housing:
Urban India has a severe shortage of housing, yet Indian cities have many vacant houses. According to the census of India 2011, out of the 90 million residential census units, 11 million units are vacant; that is about 12% of the total urban housing stock consists of vacant houses.
Gandhi and Munshi focus on two issues. First, government built housing is shockingly underused. In one centrally sponsored housing project in Delhi, for example, the government built 27,344 units and 26,288 lie vacant! Government housing has often been built far from jobs and public transport and in some cases the houses have been of low quality and lacking basic infrastructure. As the government acknowledged:
“In spite of the continuous efforts by the government, slum dwellers are reluctant to move to the houses built by the government due to lack of proper infrastructure and means of livelihood,” the statement to Parliament said, explaining further that the new houses often lack electricity and water, cheaply available–often through illegal connections–in slums. The new houses are usually not close to workplaces, the ministry acknowledged.
People living in India’s urban slums have often preferred to stay living in the slums rather than move to government built housing–which is really saying something.
Government built housing, however, is only a small part of the housing stock. The bigger problem is that owners of private housing would prefer to see their housing capital lie vacant than to rent.
Renting out a property is a risky affair in India due to perceived (often, correctly) difficulties of evicting tenants, particularly under the onerous regulatory framework of the various rent control laws that are still applicable across states in India.
….These laws fix rent for properties at much below the prevailing market rates and make eviction of tenants difficult. As a result, they increase perception of risk and distort incentives for renting. To get around this, leave and licence agreements are being used as an alternate legal mechanism to rent properties. Despite this, the legacy of rent control and policy uncertainty creates reluctance to rent. To provide an example of policy uncertainty, in 1973 the Maharashtra government brought the then existing leave and licensees contracts under rent control (Gandhi et al 2014). Instances like this have had an adverse impact on the confidence of investors and landlords.
As I pointed out in A Twisted Tale of Rent Control in the Maximum City it can take courts decades to resolve legal disputes, especially those involving land and tenancy so this further disincentives rental housing.
As Gandhi and Munshi note, the problems in the housing market exacerbate probems in the labor market (just as in the United States):
Without a vibrant rental housing market labour markets cannot function efficiently (see Shah 2013). Bringing the private vacant housing stock into the rental market and understanding and resolving the reasons for vacancy in the government provided stock could significantly improve efficiency in utilising available stock of housing.
See Gandhi and Munshi’s blog post and a forthcoming IDFC report on housing for more details.
What should I ask Atul Gawande?
I will be doing a Conversations with Tyler with him, though podcast only, not a public event. What should I ask him?
I thank you in advance for your suggestions.
Should a state government decide marginal increments of health care?
That is one of the debates swirling around the resuscitated Republican health care plan (NYT summary), which now seems to have some chance of passing. Sarah Kliff writes:
The Republican solution to sick people who need health insurance in a post-Obamacare world is increasingly coming to center on three words: high-risk pools.
The White House has reportedly secured the support of Rep. Fred Upton (R-MI), a longtime legislator, by promising an additional $8 billion to fund these programs. That would mean the Republican plan has nearly $115 billion that states could use, if they wanted to, for high-risk pools.
…There were 35 state high-risk pools before the Affordable Care Act passed. To control costs, they would often do things like charge higher premiums than the individual market. Most had waiting periods before they would pay claims on members’ preexisting conditions, meaning a cancer patient would need to pay premiums for six months or a year before the high-risk pool would cover her chemotherapy treatments.
Kliff then notes those pools have proved quite expensive. And:
The Republican bill doesn’t require states to build high-risk pools — it just gives them the option. And it has little to say about how states should build them if they decide to do so. It is possible they would also have lifetime limits and preexisting condition waiting periods. Those details are hugely important, but are unlikely to get sorted out until after the bill passes and the Trump administration begins to write regulations.
I don’t favor ACHA, which I see as bringing no benefit and also as involving a cynical desire to repeal Obamacare simply to fulfill a campaign promise (and it needs a CBO score). Still, I see many people fulminating about this change toward high risk pools, yet without defending their position much beyond a hand wave. Should all requests for emergency medical care receive additional government funding? Obamacare itself does not embody anything remotely like that principle, for instance consider all the medical conditions not covered under the mandate, or covered only imperfectly. Not to mention the rare diseases that receive only limited R&D dollars. And we’re about to run out of yellow fever vaccine — nasty! The list goes on and on. How are those pandemic preparations coming?
If the federal government is asked to pick up the tab for high-risk pools or some rough equivalent, it probably visualizes the cost in terms of either additional borrowing or as a common pool problem. It is close to a free lunch in political terms, arguably even a political benefit, now that Obamacare is more popular.
If balanced-budget state governments are asked to pick up the tab, they will wonder whether that money should better be spent on schools, roads, and prisons. Many of them will be reluctant. Maybe that is right or wrong, but is “let’s have a democratically elected state government decide how much to subsidize medical care for those with preexisting conditions” such a morally outrageous view? I guess it is these days. The simple but underemphasized truth is that under the new bill state governments can spend as much as they want on high-risk pools.
(Is it not sobering to think that if the high-risk patients are put into a separate pool, and have to ask for state-level but taxpayer-sourced money in a direct and transparent manner, the political support for that funding is not so strong? That is perhaps the real lesson here. In this debate, both sides are the enemies of transparency.)
Which is the better perspective? Federal or local? The answer is obvious if you believe all requests for emergency medical care should receive additional government funding. But, as I’ve mentioned, no one believes that. I do see people who cite that principle when it is convenient in one part of a debate, and who forget about the same principle for other policy choices.
And please, don’t compare these marginal health care expenditures to “tax cuts for the rich” — instead advocate for where you most want to see the money spent! Don’t let the silly Republicans bail out your analytical apparatus once again; any program is easy to justify in your own mind if you put it up against what you consider to be a very weak alternative use of the funds. It is fine to say “bigger subsidies for high-risk pools are better than tax cuts for the rich, but they are still only my 17th most preferred use for the funds.”
Along related lines, while I favor taking in many more refugees, I also understand that any feasible migration policy involves leaving many refugees and potential migrants to their possible deaths, and with a relatively high probability in some cases. So if your moral argument is “we should let in person x, or person x will die,” you need to provide a limiting principle once again.
Most generally, beware of moral arguments that a) lower the status of some other group of people, and b) do not state and justify their limiting principles. They are ways of substituting in pleasurable moralizing in lieu of dealing with the really tough questions.
Addendum: Here are some new and relevant results cited by David Leonhardt, I haven’t had time yet to read through them.
China installs speed bumps for pedestrians (who’s non-complacent?)
They are usually reserved for impatient drivers in built-up, urban areas.
But a picturesque beauty spot in eastern China has nicked a trick from road safety campaigners worldwide – by installing speed bumps for pedestrians.
Local officials in the town of Taierzhuang have installed 50 so-called ‘calming devices’ to slow human traffic at one particular point.
…It’s believed the speed bumps, which are located at the historic site’s pedestrian entrance, are designed to encourage greater appreciation of its beauty and heritage.
Previously, there were concerns that increased footfall was becoming too frenetic – and thus compromising the experience.
Here is the story, via the excellent Mark Thorson.
Wednesday assorted links
1. Heartlessness as a female intellectual strategy? (The article seems like odd framing to me, still the content is interesting.)
2. Do even misanthropes believe that human beings are good deep down? And the stock price of United airlines has recovered.
3. Some U. Chicago professors list their favorite books.
4. The great cat and dog massacre.
5. Tyrone makes a guest appearance in this new MRU video on sticky wages.
Reviving productivity
That is a new series on Bloomberg View, here are the beginnings of the symposium. Here is Clive Crook on productivity as a moral imperative. Here is Noah Smith on the easy ways to boost productivity. Here is my piece on the human constraints behind the productivity problem, here is one excerpt:
The logic of the usefulness of face-to-face contact also shapes the geographic distribution of economic activity…
Given all this, at least three answers to the productivity problem suggest themselves. First, we can make online communities more vivid. E-sports, a diverse set of online competitions, have hundreds of millions of viewers. Through the development of internet fandoms and communities, many people now find these activities more exciting to watch than the World Series. Even chess on the internet has proved popular, as commentary and chat rooms make it more exciting for the viewers. The community-building tactics used by e-sports could be applied elsewhere.
Second, we can make face-to-face communities more effective. I am struck by the occasional scorn shown to ex-President Barack Obama for his past as a community organizer. Yet building communities is a critical skill for boosting business productivity in a service economy.
Third, individuals should read and cultivate Stoic philosophy in themselves, whether explicitly or as they might pick up from a best-seller. More self-reliance and less dependence on social cues for doing the right thing will increase economic performance.
There are more installments coming in the series.
Is rising consumer confidence coming from the elderly and the less educated?
Americans with degrees have been getting steadily less optimistic since mid-2015…
Americans without degrees are as optimistic now as they’ve ever been since the survey began nearly four decades ago. Only the peak of the tech bubble compares. By contrast, Americans with degrees are about as confident in the future as they were in September 2007, when the credit crisis had already begun…
Since the start of 2015, the outlook among the young has deteriorated sharply, albeit from a high base. Meanwhile, the expectations of Americans ages 55 and older have soared in the wake of the election to their highest level in more than fifteen years…
And this in sum:
The groups responsible for the aggregate change in sentiment are the least likely to experience big real wage increases and therefore the least likely to boost their spending. Moreover, they appear unwilling to translate their vague optimism about the future into specific expectations about behaviour.
So even if those expectations were reliable guides to the actual choices people make — something strongly debated among forecasters — there is little reason to believe the “Trump bump” in consumer sentiment is a harbinger for sharply rising real spending.
That is all from Matthew C. Klein. I would stress the broader point that in a polarized time such survey results may not be very reliable at all, and perhaps we should dismiss the pessimistic responses of the young as well.
What is the relevant uncertainty for climate change policy?
A number of people have climbed onto Twitter and outlined (correctly) how increased uncertainty about the impact of climate change increases the value of doing something about it. There is downside risk, and of course we wish to buy insurance against that in the form of a more active climate change policy. Still, that is not looking deeply enough. I see some of the relevant uncertainties as embodied in the following scenario, which is more about policy means than climate change science:
Following a Trump debacle, finally the Democrats win all branches of government and pass a climate change bill. There is a carbon tax, and further anti-coal measures, but it isn’t enough to shift energy regimes in a transformational sense (besides, truly transformational technologies require luck and “the right time” far more than price incentives). Instead the United States becomes more like Western Europe, with higher levels of conservation but no ground-breaking new energy source. Solar goes up by ten percentage points, and wind by two or three, given NIMBY opposition. Fracking becomes more efficient yet, which nudges fossil fuels back a bit onto center stage. Nuclear is closed down altogether, and hydroelectric also goes in reverse or stagnates. China is as China does, and they slowly move away from their installed coal base, in the meantime taking steps to control their particulate matter but not so much their carbon, copying America in this regard. India starts a shift from coal to natural gas but still has rising carbon emissions. Africa and Vietnam exceed growth expectations, with a lot of solar power to be sure, but not enough to counteract their growing industrialization. The carbon tax causes a mild recession in America, and environmentalism becomes less popular. The global boost in temperature continues, unchecked. The people who die each year from regular air pollution — six to seven million at last count — diminish in number with economic growth, but we react largely with indifference to that problem, because it doesn’t fit into domestic political struggles very neatly.
Now, to me something like that is the single most likely scenario, albeit with a lot of uncertainty. I am still happy to try remedial policy measures, and to try them now, if only out of non-complacency or perhaps just desperation. But come on, let’s be honest. If all you are doing is trying to combat uncertainty about the science, you are unwilling to look the actual problem square in the eye, just like the climate deniers, the very people you so much decry.