The economics of newspapers

by  Tyler Cowen in

The soon-to-be-working for the Center for American Progress Matt Yglesias writes:

The New York Times is known for its hard news coverage, but
he observes that from a business perspective it’s primarily a fashion
and food publication that runs a small political news operation on the
side. One issue of T Magazine, he says, pays for an entire NYT

And, of course, I would add that the broader logic of the internet
is toward disaggregation of content — the fact that newspapers cover
such a wide array of content has to do with the economics of printing
and distributing bundles of newsprint. In the future, fashion ads
probably won’t be able to cross-subsidize any bureaux anywhere. On the
other hand, there may be a corrupting impact of some of this
cross-subsidization — I can’t help but suspect that the importance of
real estate advertising to papers may have distorted their coverage of
the housing bubble on the way up. 

The best two sentences I read this morning

by  Tyler Cowen in

In this paper, we present a simple model of housing bubbles that
predicts that places with more elastic housing supply have fewer and
shorter bubbles, with smaller price increases. However, the welfare
consequences of bubbles may actually be higher in more elastic places
because those places will overbuild more in response to a bubble.

That’s from Ed Glaeser, Joseph Gyourko, and Albert Saiz.  Here is the paper, ungated here, here is Mark Thoma’s commentary.

Move on — this isn’t true here

by  Tyler Cowen in

I have a simple model of how some people — but by no means all — process political issues.  Occasionally the real force behind a political ideology is the subconsciously held desire that a certain group of people should not be allowed to rise in relative status.

Take the so-called "right wing."  I believe that some people on the right do not like those they perceive as "whiners."  They do not want these whiners to rise in relative status.  That means they must argue against the whining and also they must argue against the presuppositions behind the whining.

If the whiners say that times are bad, the rebuttal is that times are pretty good or times will become better again.  But if the whiners want to increase government benefits (perhaps there is a victim to whine about), we hear about the need to tighten our belts and all the talk about good times is, at least temporarily, muted.  Fiscal discipline is now in order.

Take the so-called "left wing."  Some of these people favor a kind of meritocracy.  They feel it is unfair that money so determines access in capitalist society and they do not want the monied class to rise in relative status, certainly not above the status of the smart people and the virtuous people.  It is important to fight for the principle that the desires of this monied class have a relatively low priority in the social ranking.  Egalitarianism is the rhetoric of the day, and readjusting the status of other Americans to the status of this monied class often receives more attention than elevating the very poorest in the world to a higher absolute level.

So when happiness research indicates that money brings more happiness only up to a point, this is a popular result.  That perspective lowers the status of this monied class by showing they really aren’t that happy.  When happiness research indicates that conservatives are relatively happy, however, or that many redistributions don’t make the beneficiaries much happier (in some accounts the money-happiness relationships flattens out at a pretty low level), suddenly happiness research isn’t talked up so much.  Inequalities which do not raise the status of this monied class, such as inequalities in the sphere of beauty or teenage sex, don’t come under so much criticism.

Some on the right wing will stress "individual responsibility" as a value when it lowers the status of the whiners (why whine when it was the victim’s own fault?).  Some on the left wing will stress "individual responsibility" when it is time to punish corporate wrongdoers and thus lower their status.  Not everyone applies (or rejects) this value consistently.

Given this difference in rhetoric, the right wing will be identified with the monied class, even when the left often has more money.  And the left wing will be identified as the whiners, even though the right at times whines as much or more.  You might say that both sides are monied, high human capital whiners, on the whole.  And if you compare them to Burmese rice farmers, the two sides seem somewhat alike.

For the people caught up in these intellectual traps, it all boils down to which groups of whiners they find most objectionable.  And once they choose sides, the wisdom of that choice becomes increasingly clear with time.

Fortunately not everyone has these subconscious motivations.  But even if more people did, it’s not something I would want to whine about.

Assorted links

by  Tyler Cowen in

1. Leopard vs. crocodile

2. How easy is it to disappear?

3. "Lifestreaming"

4. The real Panopticon?: "Subjects tested in a room with a mirror have been found to work harder,
to be more helpful and to be less inclined to cheat, compared with
control groups performing the same exercises in nonmirrored settings.
Reporting in the Journal of Personality and Social Psychology, C. Neil
Macrae, Galen V. Bodenhausen and Alan B. Milne found that people in a
room with a mirror were comparatively less likely to judge others based
on social stereotypes about, for example, sex, race or religion."

Which disciplines are the most and least politically correct?

by  Tyler Cowen in

Here are the data, based on one study; I am surprised that psychology is "tops," with a 58.7% rate of political correctness.  The other "winners" are not hard to predict, though "art" comes in at a surprisingly low 14.6%.  Economics is rated at 4.7%, noting that beneath us lie Marketing, Accounting, Computer Science, Biology, and now into the zero percent category, Finance, Management Information, and Mechanical and Electrical Engineering.  OK, wise guys, give the best single sentence (you are allowed one comma) account of these numbers that you can.

Should we pay doctors to ignore patients?

by  Tyler Cowen in

Here is one interesting proposal for reforming Medicare:

Each fee is meant to reimburse the doctor for the time and skill he
or she devotes to the patient. But it is also supposed to pay for
overhead, and this is where the problem begins. To Medicare, a doctor’s
overhead (or “practice expense”) includes such items as rent, staff
salaries and the cost of high-tech medical equipment. When the agency
pays a fee to a doctor who has performed a CT scan, it is meant to
cover some of the cost of buying or leasing the scanner itself.
Services using more expensive equipment generate higher fees.

…The cost of a CT scanner is fixed, but a doctor earns fees each time it
is used…a scanner becomes highly profitable as soon as
it’s paid for.

In contrast, the doctor-patient visit, which
involves no expensive equipment, offers no significant profit
opportunity. So the best way for a doctor to make money in his practice
is not to spend time with patients but to use equipment as much as
possible.

Get this:

Doctors who do their own CT scanning and other imaging order roughly
two to eight times as many imaging tests as those who do not have their
own equipment, a 2002 study by researchers at the University of North
Carolina found. Altogether, doctors are ordering roughly $40 billion
worth of unnecessary imaging each year…

So what’s the solution? 

For their time, doctors should be given a stipend for each of their
patients. It should be larger for patients with complicated medical
conditions and smaller for those who are healthy, and it should not be
influenced by the number of services or tests a doctor orders.

For
overhead, doctors should be paid an amount that covers the typical cost
of tests and treatments needed to address a patient’s condition. This
strategy – known as “case rate” or “prospective” payment – is standard
in American hospitals. The hospital receives a payment for dealing with
a patient’s underlying condition rather than individual payments for
each test and treatment. This approach offers no incentive to run
unneeded tests, and it has been credited with substantially slowing the
growth in Medicare payments to hospitals.

Of course this penalizes patients with chronic conditions, namely those which show more complications over time than average for the specified class of ailment (e.g., Bill Walton’s foot).  At some margin of unexpected complicatedness, the money runs out and people find it very hard to get their doctor on the phone or for an appointment.  If the relevant alternative is death, this policy is relatively egalitarian; if the relevant alternative is a smooth recovery, this policy is relatively inegalitarian.

I believe this idea deserves serious consideration.

Addendum: Via Mark Thoma, here are other ideas.

Markets in everything China fact of the day

by  Tyler Cowen in

Mr. Yu’s daughter had died in a cascade of concrete and bricks, one
of at least 240 students at a high school here who lost their lives in
the May 12 earthquake.
Mr. Yu became a leader of grieving parents demanding to know if the
school, like so many others, had crumbled because of poor construction.

The
contract had been thrust in Mr. Yu’s face during a long police
interrogation the day before. In exchange for his silence and for
affirming that the ruling Communist Party “mobilized society to help
us,” he would get a cash payment and a pension.

…Officials have come knocking on parents’ doors day and night. They
are so intent on getting parents to comply that in one case, a mayor
offered to pay the airfare of a mother who left the province so she
could return to sign the contract, the mother said.

The payment
amounts vary by school but are roughly the same. Parents in Hanwang, a
river town at the foot of mist-shrouded mountains, said they were being
offered the equivalent of $8,800 in cash and a per-parent pension of
nearly $5,600.

Here is the full story.

Immigration and wages: the latest

by  Tyler Cowen in

From Ottaviano and Peri:

This paper estimates the effects of immigration on wages of native
workers at the national U.S. level. Following Borjas (2003) we focus on
national labor markets for workers of different skills and we enrich
his methodology and refine previous estimates. We emphasize that a
production function framework is needed to combine workers of different
skills in order to evaluate the competition as well as cross-skill
complementary effects of immigrants on wages. We also emphasize the
importance (and estimate the value) of the elasticity of substitution
between workers with at most a high school degree and those without
one. Since the two groups turn out to be close substitutes, this
strongly dilutes the effects of competition between immigrants and
workers with no degree. We then estimate the substitutability between
natives and immigrants and we find a small but significant degree of
imperfect substitution which further decreases the competitive effect
of immigrants. Finally, we account for the short run and long run
adjustment of capital in response to immigration. Using our estimates
and Census data we find that immigration (1990-2006) had small negative
effects in the short run on native workers with no high school degree
(-0.7%) and on average wages (-0.4%) while it had small positive
effects on native workers with no high school degree (+0.3%) and on
average native wages (+0.6%) in the long run. These results are
perfectly in line with the estimated aggregate elasticities in the
labor literature since Katz and Murphy (1992). We also find a wage
effect of new immigrants on previous immigrants in the order of
negative 6%.

I have yet to read the paper.  Here is an ungated version.

New constitutional amendments?

by  Tyler Cowen in

Travis, a loyal MR reader, writes to me:

Given our culture and the political environment, both now and in the foreseeable future, what do you predict will be the next constitutional amendment and in what year do you think it will be passed (plus or minus five years)?…If forced to make a prediction, I would argue that between the years 2020 to 2025 there is a p=.25 that there will be some sort of constitutional amendment liberalizing same-sex marriage — at least giving same-sex couples equal rights and benefits that married couples currently receive but not necessarily allowing them to be officially "married". 

I do not expect further amendments anytime soon but please tell me why I am wrong.  Due to greater political competitiveness, it is harder to overcome the relevant hurdles than before, as there is always someone to fight on the other side or ask for a different version of the amendment.  And the so-called "low-hanging fruit," such as repeal of Prohibition, seems to be gone.  If I had to pick, I’ll predict some version of a recast Equal Rights Amendment but "nothing anytime soon" still remains a better prediction in my eyes.

Group Theory in the Bedroom

by  Tyler Cowen in

I had never thought of this:

In a sense, base 3 is the best of the integer bases because 3 is the integer closest to e…Suppose you are creating one of those dreaded telephone menu systems — press 1 to be inconvenienced, press 2 to be condescended to, and so forth.  If there are many choices, what is the best way to organize them?  Should you build a deep hierarchy with lots of little menus that each offer just a few options?  Or is it better to flatten teh structure into a few long menus?  In this situation a reasonable goal is to minimize the number of options that the wretched caller must listen to before finally reaching his or her destination.  The problem is analogous to that of representing an integer in positional notation: the number of items per menu corresponds to the radix r, and the number of menus is analogous to the width w.  The average number of choices to be endured is minimized when there are three items per menu.

I have no idea if it is correct.  It is from the often quite interesting Group Theory in the Bedroom, and Other Mathematical Diversions, by Brian Hayes.