Words of wisdom from Bryan Caplan
BC: Every economist who gives policy advise is implicitly relying on philosophy. Unfortunately, most economists want to rely on philosophy without really reflecting on it, so they’re usually just crude utilitarians (with a heavy bias toward the status quo and democratic fundamentalism).
And:
Assorted links
1. Doc shock comes to the masses. And health insurers banking on government $$.
2. Is there a secret German economic boom? (speculative)
3. Do social networks make us smarter?
4. FT piece on whether Norwegians have fallen out of love with work (yes).
The Economics of Online Education
The Economist covers the economics of online education:
Alex Tabarrok…reckons the most salient feature of the online course is its rock-bottom marginal cost: teaching additional students is virtually free.
..as prices converge towards marginal cost, there will be little scope for undercutting the competition. Instead MOOCs are likely to compete on quality…Higher production costs are a small price to pay to attract much greater numbers of students. Such markets often evolve into winner-take-all, “superstar” competitions. The best courses attract the most customers and profit handsomely as a result. In this respect online education may more closely resemble information industries such as film-making than service industries such as hair-cutting.
The market for textbooks already fits this description. New textbooks are costly to write and design but can be reproduced fairly cheaply. Not surprisingly, only four introductory economic texts account for half of the American market, according to Mr Tabarrok. Indeed, says Tyler Cowen, a co-founder of Marginal Revolution University, it is possible that textbook publishers are better equipped than universities to develop MOOCs profitably.
I agree also with a point made by Caroline Hoxby:
Less selective institutions are close substitutes for MOOCs. Course content is often standardised and interaction with professors is limited in order to keep costs down.
…Elite institutions face very different circumstances, Ms Hoxby reckons. They operate like venture-capital firms, offering subsidised, labour-intensive education to highly qualified students. They aim to cultivate a sense of belonging and gratitude in students in order to recoup their investment decades later in the form of donations from successful alumni…. For top schools, the best bet may simply be to preserve their exclusivity.
Do more popular people shy away from controversial Facebook discussions?
There is a new paper by Jang SM, Lee H, and Park YJ, here is the rather depressing abstract:
Abstract Although previous research has indicated that Facebook users, especially young adults, can cultivate their civic values by talking about public matters with their Facebook friends, little research has examined the predictors of political discussion on Facebook. Using survey data from 442 college students in the United States, this study finds that individual characteristics and network size influence college students’ expressive behavior on Facebook related to two controversial topics: gay rights issues and politics. In line with previous studies about offline political discussion, the results show that conflict avoidance and ambivalence about target issues are negatively associated with Facebook discussions. Perhaps the most interesting finding is that users who have a large number of Facebook friends are less likely to talk about politics and gay rights issues on Facebook despite having access to increasing human and information resources. Theoretical implications of these findings and future directions are addressed.
The link to the paper is here. Of course one possibility is that popular people do not want to endanger their popularity with controversial discussions. Another is that non-controversial people are simply more popular to begin with.
Hat tip goes to @Neuroskeptic.
The Private Rationality of Bottled Water Drinking?
That is a new paper by W. Kip Viscusi, Joel C. Huber, and Jason Bell, the abstract is here:
This article examines evidence for the private rationality of decisions to choose bottled water using a large, nationally representative sample. Consumers are more likely to believe that bottled water is safer or tastes better if they have had adverse experiences with tap water or live in states with more prevalent violations of EPA water quality standards. Perceptions of superior safety, taste, and convenience of bottled water boost consumption of bottled water. Blacks and Hispanics are more likely to drink bottled water due to their relatively greater exposure to unsafe water and greater risk beliefs. The coherent network of experiences, beliefs, and actions is consistent with rational consumer choice.
That is rationality at the margin, of course, as the entire practice of bottled water in developed countries strikes me as not rational for most people. Tap water is fine and to me even tastes better.
Hat tip goes to www.bookforum.com.
*The Sabermetric Revolution*
That is the new book by Benjamin Baumer and Andrew Zimbalist and the subtitle is Assessing the Growth of Analytics in Baseball. It is an excellent and well-written look at where sabermetric knowledge stands today, here is one excerpt:
…once the ball has been put into play, it doesn’t seem to matter all that much whether it was put into play against Roger Clemens or Roger Craig.
And:
…an extra win will bring more revenue to a team in New York City than in Kansas City.
This is a very useful book on its chosen topic.
Assorted links
2. Why are helicopters so loud?
3. Yolkfish there is no great stagnation.
4. How many days after a tragedy does it take until people find the jokes about that tragedy funny?
5. Do hunter-gatherers show weaker endowment effects?
6. The changing economics of financial journalism. And true (?) facts that sound false.
More on the possible benefits of Ethereum
Robert Sams points me to this New Scientist article, here is one bit:
Ethereum allows for the creation of complex, yet decentralised, economic tools like financial derivatives, in which two parties can bet on the rise and fall of an asset, or crop insurance that pays out to a farmer according to a weather data feed. Creating decentralised versions of Dropbox or eBay should be possible too, claims Buterin.
Other developers are attempting to copy Buterin’s success by overlaying new code on the existing Bitcoin block chain. One example is the concept of “coloured” coins: with bitcoins labelled to represent other assets such as gold, cars or even houses, you transfer ownership when you trade the labelled coin.
Buterin says Ethereum is much more flexible. “Bitcoin is great as a form of digital money, but its scripting language is too weak for any kind of serious advanced applications to be built on top.”
One of the more advanced concepts being touted for a next-generation Bitcoin is the idea of decentralised autonomous corporations (DAC) – companies with no directors. These would follow a pre-programmed business model and are managed entirely by the block chain. In this case the block chain acts as a way for the DAC to store financial accounts and record shareholder votes.
In a way, Bitcoin is actually the first DAC, says Daniel Larimer, a developer in Blacksburg, Virginia. People who own bitcoins are shareholders in the company, which offers financial services, earns revenue through transaction fees and pays a salary to its employees, the miners. But no one is in charge.
Here is my previous post on Ethereum.
Altruistic Kidney Donors Favoring Financial Compensation
Dmitri Linde joins Alexander Berger and Virginia Postrel as altruistic kidney donors who advocate for lifting the ban on financial incentives. Here is Linde:
Two policies would address the shortfall of kidneys in the U.S.: instituting a priority-scoring system for donors and their kin and paying donors.
Israel pioneered the former in 2012. Prioritizing organ allocation by donor status—a system that economist Alex Tabarrok termed “no give, no take”—incentivized people to register as organ donors. It also removed a hurdle to living donation: The incentive to abstain because of a hypothetical (What if my son needs a kidney?) went away since the policy guarantees that a donor’s kin will be prioritized in the event that they need a transplant. The results? Both living and deceased donations have gone up, and the number of people who have died on the waitlist fell by 30% between 2010 and 2013.
To obviate the kidney shortage, we should heed the recommendation of Nobel Prize-winning economist Gary Becker and others by making it legal to compensate donors.
Linde donated a kidney with the aid of the excellent National Kidney Registry. The registry matched him to a recipient whose own willing but incompatible donor donated to another patient in need. Bravo Dmitri.
Here are previous MR posts on organ donation.
The economic problems of Puerto Rico
Puerto Rico is now shrinking at a 6% annual pace, and that number is probably going to get worse before it gets better. The chances of the island’s economy actually growing at any point in the foreseeable future seem remote: indeed, the country has essentially been in one long and nasty continuous recession since 2006.
Puerto Rico has $70 billion in debt outstanding, all of it needing to be repaid with interest — and the simple fact is that there’s no way it’s going to be able to do that, if its economy continues to shrink and its most talented nationals continue to decamp for the mainland, where their prospects are much brighter. Labor mobility from Puerto Rico to the rest of the US, and particularly to Florida, has never been higher, while most of the migration in the other direction comes in the form of retirees, who are not exactly going to kick-start the economy. In fact, in terms of the labor force participation rate, they’re just going to make matters worse, on an island where only 1.2 million of the 3.4 million inhabitants are employed.
Ryan McCarthy adds more.
If your parents died early, will you die early too?
But in fact the correlation of longevity between individual parents and children is very low. For the people dying in England in the period 1858-2012 with the rare surnames used in chapter 4, we can measure the correlation of longevity between fathers and sons for more than four thousand sons surviving until at least age 21. That correlation is only 0.13. If we take the average of both parents’ ages at death, that correlation increases to 0.26. But it is still low. In reality, your age at death is not strongly predictable from your parents’ age at death. All those saving more for retirement simply because both parents are fit, healthy, and in their nineties should stop immediately. Your expected additional longevity relative to the average is only three years.
That is from Greg Clark’s new and noteworthy The Son Also Rises: Surnames and the History of Social Mobility. Here is Kevin Drum on the book.
Assorted links
1. Quora forum on unusual names and surnames. I recently spent time with a very interesting man, a philosopher in fact, named Johnny Anomaly. And a Quora thread on the future of education.
2. Chinese fiscal policy, Buddha style. And tractor square dancing. And more Johnny-come-latelys come to Borgen.
4. Causal effect or difference in type?
5. And questions that are rarely asked (can I tickle myself if I swap bodies with another person?).
6. Solow and Mankiw go back and forth about inequality.
7. The Medical Actor (markets in everything).
How happy should we be about ACA supply-side responses to work less?
Following the CBO report that Obamacare will induce many people to leave the workforce or cut back on their hours, I have read numerous blog posts suggesting this is benign or possibly even favorable. After all, why should people be forced to work just to keep their health insurance? Imagine a 57-year-old man, freed from the necessity to grub for pay at a second-class retail job, which he had to take just to get insurance to cover the bills for his periodic back treatments.
Alternatively, when I read about demand-side shocks which induce unemployment, I am reminded of the work of Alan Krueger. In two papers, one of which is quite recent, and does not stem from the Heritage Foundation, Krueger shows rather convincingly that the unemployed maintain reservation wages which are simply too high. They would be better off lowering those wages, being more realistic, accepting work, and getting back on their feet again. In other settings (not considered by Krueger), other workers seem to be too slow to move to new areas for new jobs, given the costs of being unemployed long-term.
A lot of Keynesians try to maintain the communication of the feeling (if not the outright statement) that demand-driven employment shocks have very little to do with the choices of workers but that is closer to wrong than right. (By the way, sarcastic comments about soup kitchens causing the Great Depression belie an understanding of both this argument and of contemporary search models for the labor market.)
OK, given all that, when those workers, hit by negative shocks, do not rush to go back to work at lower reservation wages, we then read a portrait of hysteresis, despair, and soul-crushing joblessness, a psychic swamp so difficult to escape that even summoning up the strength to go back to work may be difficult.
In other words, would-be workers irrationally undervalue the benefits of having a job and they also underestimate the costs of remaining unemployed.
Now let’s switch settings. A benefit shock comes along, positive for many people, and it induces many of them to work less or not work at all. How happy should we be? And here I mean happy at the margin, due to their change in employment decision.
People, it is rather difficult to have it here both ways. I guess it is possible that workers are irrational in changing their employment decisions in response to changes in relative dollar wage opportunities, but rational when changing their employment decisions in response to changes in relative benefit opportunities. It really is possible. But are any of you actually arguing that or holding some deep-seated reason for believing in that difference, other than perhaps the reason this post might have induced you to come up with? No, I see one assumption about a destructive choice in one context and the opposing assumption about a beneficial choice in the other context, without much regard for the tension or contradiction between those two assumptions. A lot of you may be subbing in general feelings — “unemployment is terrible,” and “ACA is good,” and simply transferring those general feelings to feelings about the respective marginal changes in employment in each case. That is a fallacy and dare I say it is a “mood affiliation” fallacy?
And by the way, the distinction between a substitution effect and an income effect is a little tricky in this context. But providing ACA-subsidized health insurance for non-workers is in general a substitution effect which switches them out of working in a way that, if pro-ACA stories about adverse selection and uninsurability are true, a simple equivalent cash grant would not.
A simpler possibility is that people undervalue the long-term benefits of having a job and thus in both settings the contraction in employment is a quite negative outcome. That is then very bad news for ACA, if only in expected value terms.
I am reading what people write on this topic and seeing massive fog through my spectacles, a bit on both sides of the debate in fact.
Addendum: Ross Douthat made a good point:
At 500,000-800,000, I wasn’t *that* troubled: http://nyti.ms/1exzxlm At 2-2.5 million, I am. Is there a # that would trouble
@CitizenCohn?
Ross has additional comments here.
Private Schooling In India: Results from a Randomized Trial
Karthik Muralidharan runs very large, randomized controlled trials on education in India. His previous work showed that performance pay for teachers in India has large and significant improvements on student learning. In his latest paper (with Venkatesh Sundararaman) he reports on the results of The Andhra Pradesh School Choice Project, a long-term randomized controlled trial covering over 6,000 students in 180 villages for four years (2008-2012). The study offered students a lottery for a private school scholarships and lottery winners were compared with non-winners. The results show modest improvements in learning for private school students and big increases in school productivity.
We find that private school teachers have lower levels of formal education and training than public-school teachers, and
are paid much lower salaries. On the other hand, private schools have a longer school day, a longer
school year, smaller class sizes, lower teacher absence, higher teaching activity, and better school
hygiene. After two and four years of the program, we find no difference between the test scores of
lottery winners and losers on math and Telugu (native language). However, private schools spend
significantly less instructional time on these subjects, and use the extra time to teach more English,
Science, Social Studies, and Hindi. Averaged across all subjects, lottery winners score 0.13 σhigher,
and students who attend private schools score 0.23 σhigher. We find no evidence of spillovers on
public-school students who do not apply for the voucher, or on students who start out in private schools
to begin with, suggesting that the program had no adverse effects on these groups. Finally, the mean
cost per student in the private schools in our sample is less than a third of the cost in public schools.
Our results suggest that private schools in this setting deliver (slightly) better test score gains than
their public counterparts, and do so at substantially lower costs per student.
As Karthik notes in a Ideas for India short article that summarizes:
Since private schools achieved equal or better outcomes at one-third the cost, the fundamental question that needs to be asked is “How much better could private management do if they had three times their current level of per-child spending?”
Is any economist doing more important work with greater potential for real improvement in the lives of millions than Karthik Muralidharan?
The certainty of the “New Atheists”
From the excellent Jonathan Haidt:
…I took the full text of the three most important New Atheist books—Richard Dawkins’ The God Delusion, Sam Harris’s The End of Faith, and Daniel Dennett’s Breaking the Spell and I ran the files through a widely used text analysis program that counts words that have been shown to indicate certainty, including “always,” “never,” “certainly,” “every,” and “undeniable.” To provide a close standard of comparison, I also analyzed three recent books by other scientists who write about religion but are not considered New Atheists: Jesse Bering’s The Belief Instinct, Ara Norenzayan’s Big Gods, and my own book The Righteous Mind. (More details about the analysis can be found here.)
To provide an additional standard of comparison, I also analyzed books by three right wing radio and television stars whose reasoning style is not generally regarded as scientific. I analyzed Glenn Beck’s Common Sense, Sean Hannity’s Deliver Us from Evil, and Anne Coulter’s Treason. (I chose the book for each author that had received the most comments on Amazon.) As you can see in the graph, the New Atheists win the “certainty” competition. Of the 75,000 words in The End of Faith, 2.24% of them connote or are associated with certainty. (I also analyzed The Moral Landscape—it came out at 2.34%.)
There is more here, and for the pointer I thank Eric Auld.