Don’t apply positive discount rates to human lives

by  Tyler Cowen in

Ben Trachtenberg writes:

This Article presents two new arguments against “discounting” future human lives during cost-benefit analysis, arguing that even absent ethical objections to the disparate treatment of present and future humanity, the economic calculations of cost-benefit analysis itself – if properly calculated – counsel against discounting lives at anything close to current rates. In other words, even if society sets aside all concerns with the discounting of future generations in principle, current discounting of future human lives cannot be justified even on the discounters’ own terms. First, because cost-benefit analysis has thus far ignored evidence of rising health care expenditures, it underestimates the “willingness to pay” for health and safety that future citizens will likely exhibit, thereby undervaluing their lives. Second, cost-benefit analysis ignores the trend of improved material conditions in developed countries. As time advances, residents of rich countries tend to live better and spend more, meaning that a strict economic monetization of future persons values the lives of our expected descendents above those of present citizens. These two factors justify “inflation” of future lives that would offset, perhaps completely, the discount rate used for human life. Until regulators correct their method of discounting the benefits of saving human lives in the future, the United States will continue to suffer the fatal costs of underregulation, and agencies will remain in violation of legal requirements to maximize net benefits.

I don’t agree with the “underregulation” argument (growth matters too, especially with a low discount rate), but there is much to be said for Ben’s argument.  Do note that there are numerous complications in any correct analysis of this problem.

The unwrapped saltine cracker

by  Tyler Cowen in

Every now and then I give informal talks on how the economics job market operates.  I tell the listeners that they are like an “unwrapped saltine cracker.”  They are wasting assets, to borrow a phrase from options pricing theory.  If a day goes by and they did not accomplish something important, they decline in value.  For most candidates, holding steady is not a viable strategy.  You need either publications or some stellar letters from credible writers, preferably both.  (At the very top level, publications at the job market stage are less important because it is expected they will come and the recommendations are trusted more.)

Unwrap a saltine cracker, let it sit for months, and then try to eat it.  Will you even try?

*Unnatural Selection*

by  Tyler Cowen in

The author is Mara Hvistendahl, and the subtitle is Choosing Boys over Girls, and the Consequences of a World Full of Men.  It will make my best books of 2011 list, excerpt:

A recent paper in the journal Reproductive Health Matters states, “For women attempting to have a son and experiencing pressure to fulfill their ‘womanly duty’ by having a male child, sex-selective abortion can be extremely empowering.”  The other, more tragic factor…is that women know best just how difficult it is to be female.

…Liao Li also tells me she prefers daughters.  “Girls are very good,” she says.  “They’re soft.  And they take care of you when you’re older.”  But she aborted two female fetuses, she intimates, because having a son is crucial to keeping up appearances: “If you don’t have a boy, you lose face.”

Women have become, in a sense, their own worst enemies.  Development, remember, was supposed to improve the lot of women — and in many areas it does.  But when it comes to reproduction, the opposite happens: women use their increased autonomy to select for sons.

Here is one good review.  I also learned from this book how prevalent the sex imbalance problem is becoming in some parts of the Balkans.

Who is impressed by a British accent?

by  Tyler Cowen

From Christopher Shea:

The main significant effect found in this study was that people who’d lived at least three months outside the US rated the English accent significantly lower than people who’d only lived in the US. In fact, Americans who had not lived abroad considered the English-accented person to be much more intelligent than themselves, but the people who had lived abroad rated the standard American accent more intelligent than the standard English one.  My preferred way of interpreting this (a bit tongue-in-cheek) is that Americans are happy to rate the English as more intelligent than themselves up until they actually start meeting and talking to the English.

There is more here.

 

Sentences to ponder

by  Tyler Cowen in

A coming study by Mr. Krueger, using historical data on time use between 1991 and 2006, finds that unemployed Americans tend to sleep an hour longer than the employed, he said. In the U.S. T.V.-watching tends to consume almost a quarter of unemployed peoples’ waking hours.

There is more here, interesting throughout, and for the pointer I thank Brent Depperschmidt.

In praise of travel in middle-income countries

by  Tyler Cowen in

Mexico, Turkey, and Brazil stand between “the developed world” and “the underdeveloped world.”  They are all diverse regionally.  They are different enough to be exotic, and wealthy enough to be comfortable.  On your trip you can move between worlds with ease.  They all have superb food and world-class sights.  They are not finished works, but rather they are in the process of creating themselves.  The journey is full of suspense.  Two of the three (not Brazil) are cheap to travel in.  Two of the three are safe.

Ankara is splendid, yet it receives few words of praise.  Imagine that by visiting the current city you would be witnessing a world from centuries away.  How you would swoon!  The markets, the intact buildings, the exotic foodstuffs, the political monuments, the dynamism of the human spirit there, fill in the desired travel cliche.  Suddenly you wake up and realize that you are viewing the Ankara of your own time.  Why should all of that swoon go away?

Drop your bias against the temporally proximate; ruins are ruined, Ankara is not.

Garett Jones on The Hive Mind

by  Tyler Cowen in

A recent line of research demonstrates that cognitive skills—IQ scores, math skills, and the like—have only a modest influence on individual wages, but are strongly correlated with national outcomes. Is this largely due to human capital spillovers? This paper argues that the answer is yes. It presents four different channels through which intelligence may matter more for nations than for individuals: 1. Intelligence is associated with patience and hence higher savings rates; 2. Intelligence causes cooperation; 3. Higher group intelligence opens the door to using fragile, high-value production technologies, and 4. Intelligence is associated with supporting market-oriented policies. Abundant evidence from across the ADB region demonstrating that environmental improvements can raise cognitive skills is reviewed.

The paper is here and the slides are here.

Assorted links

by  Tyler Cowen

1. The last few times Brad DeLong has criticized me, he has simply imagined I hold positions which I do not.  Again.  And here is the time before that.  Perhaps he too quickly slots my views into debates he has with other people, when he sees some overlapping of claims.  On the first link, my point was to raise a certain “tension” in when market prices are considered sufficient statistics for “trouble” or not; I did not claim the two borrowing situations were the same or that currency denomination of debt is irrelevant.  On the second link, I’ve long argued we are seeing a mix of interacting AD and structural problems; Brad tries to refute me by showing — correctly — that there must be an AD problem in the mix.  It might be a valid criticism to note that in both cases I was not explicit enough, but a) that is not a “simple error,” and b) I’ve been plenty explicit in past posts and I don’t feel like repeating myself all the time.  I feel no guilt in putting some burden on the reader.

There is nothing wrong with the economics in Brad’s two posts, but in both cases he has failed The Tyler Cowen Turing Test.  Admittedly, it may be a difficult test to pass, but actually I should hope that is the case.

2. Retail politics, Argentina style.

3. Pizza discipline.

4. The economics of payroll tax relief.

5. Former GMU econ Ph.d. student now is Prime Minister of Somalia.

6. Here is one of my old attempts at an ideological Turing test.