Getting stuck in the bad equilibrium in India

by  Alex Tabarrok in

The poor in India are victims of state indifference and corruption; somewhere between a quarter and a half of all subsidized food meant for them, for example, is stolen by corrupt government officials.  And yet if one asks the poor what jobs they would like their children to have the number one answer is to work for the government.  (See also my earlier post on Regulation and distrust for a model.)

In his magnificient, if poorly titled, In Spite of the Gods: The Strange Rise of Modern India, Edward Luce provides a sadly, poignant analogy: 

To the poor the state is both an enemy and a friend.  It tantalizes them with a ladder that promises to lift them out of poverty but it habitually kicks them in the teeth when they turn to it for help.  It inspires both fear and promise. To India's poor the state is like an abusive father whom you can never abandon.  It is through you that his sins are likely to live on.

Luce's book is the best of recent books on India, highly recommended.

*A Brain Wider than the Sky*

by  Tyler Cowen in

The author is Andrew G. Levy and the topic is migraine headaches:

Even more remarkably, triggers seem to be culturally particular.  French migraine researchers, testing a French population, found widespread complaints about white wine and chocolate.  British researchers, testing their own countrymen and women, found red wine and cheese to be the more potent triggers.  Such anomalies might point to flaws in the studies, but more likely, they point to something mysterious about the human temperament that migraine reveals.  It's not the chemical in the wine that triggers the migraine generator, but something else inside the wine entirely, something in what the wine means to the drinker — something that might change by region, by individual, by culture, that simply obliterates the border between the somatic and the psychosomatic.

The subtitle is A Migraine Diary and you can buy this very interesting book here.  Levy outlines his struggle with migraines, their possible roots, and what they reveal about the broader human condition.  According to Levy, Asians and African-Americans are less prone to migraines and the differences may be partly genetic in origin.

The trip so far

by  Tyler Cowen in

Not everyone liked it when I suggested that vouchers have the potential to be "TARP for the elementary schools."  With New York and Los Angeles in some disarray, Chicago is arguably North America's "coolest" city right now; the new contemporary wing of the Art Institute is the best "new U.S. museum" in many years.  The Austrian-language dialogue in Brüno is the funniest part of the movie and enough to make it, despite its flaws, a comedy classic.  I should not have told my Las Vegas cabbie (while he was driving) that the real estate market there will not recover for another twenty years.  Lotus of Siam, in Las Vegas, is one of the best Thai restaurants in the United States.  In case you had forgotten, here is how to order in a good ethnic restaurant.  I haven't arrived in Mobile yet.

*A Happy Marriage*

by  Tyler Cowen in

That is the title of the new novel by Rafael Yglesias.  Here is a tiny excerpt:

Although a credulous consumer, Enrique was a skeptical lover, and he demanded to know what was wrong.

I devoured this book eagerly on a plane flight and I recommend it highly to those who are married, have been married, will be married, should be married, and should not be married. 

The blogger son Matt, in the form of a fictional persona, makes numerous cameo appearances.  The economist Paul Joskow, in the form of a fictional persona, makes a cameo appearance.  In real life he is Matt's uncle.

How many other novels explain to you — tongue in cheek — the exact difference between microeconomics and macroeconomics?

In my view Rafael Yglesias is one of the best American novelists of the last twenty years and probably the most underappreciated.  Here is my earlier post on his earlier novel Dr. Neruda's Cure for Evil.

ATMs in casinos

by  Tyler Cowen in

Should the service fee by high or low?  It could cut either way.  A low service fee encourages withdrawals and thus gambling, which is profitable for the casino.  A high service fee takes in money from the desperate and those with high time preference.

It was $4.99.  (Of course that is n = 1.)

On the other hand, they let you take out up to $1000, well above the average.

Another user told me you are especially likely to get $100 bills from the machine.  Perhaps the hope is that you will buy $100 in chips rather than trying to break the bill.

When does libertarian paternalism work?

by  Tyler Cowen in

Not always.  Here is the abstract from a new paper:

We develop a theoretical model to study the effects of libertarian
paternalism on knowledge acquisition and social learning. Individuals
in our model are permitted to appreciate and use the information
content in the default options set by the government. We show that in
some settings libertarian paternalism may decrease welfare because
default options slow information aggregation in the market. We also
analyze what happens when the government acquires imprecise information
about individuals, and characterize its incentives to avoid full
disclosure of its information to the market, even when it has perfect
information. Finally, we consider a market in which individuals can
sell their information to others and show that the presence of default
options causes the quality of advice to decrease, which may lower
social welfare.

I do not yet see an ungated version.  Of course anyone interested in this topic should also pursue the papers of Mario Rizzo, Glen Whitman, and Daniel Klein.

Kidney Donor Chains

by  Alex Tabarrok in

Virginia Postrel has an excellent piece in the online Atlantic on the shortage of transplant organs, it includes a very good discussion of both the promise and limitations of kidney swaps and donor chains.  Imagine that Mrs. Smith and Mr. Jones each need a kidney transplant.  Mr. Smith is willing but due to an incompatible blood type unable to donate a kidney to his wife.  Similarly, Mrs Jones is willing but unable to donate a kidney to her husband.  In a kidney swap, Mr. Smith donates to Mr. Jones and Mrs. Jones donates to Mrs. Smith.  Everyone is happy.

Donor chains extend this idea.  We start with an altruistic donor willing to give to anyone – by careful arrangement it's then possible to produce many transplants.  Recently, a single donor led to a chain of ten transplants!

Despite the promise of these techniques they are being underutilized.  Amazingly, the National Kidney Registry, which coordinates swaps and chains, has donors who are waiting to give.  A clear reminder that $500 bills aren't always picked up as quickly as we would like. 

Even the maximal use of swaps and chains won't solve the crisis, however. For that we are going to need better incentives to encourage more donors.

“Markets” in everything

by  Tyler Cowen in

The deal with doctors could come at a steep price: a $250 billion
fix to a 12-year-old provision in federal law intended to limit the
growth of Medicare reimbursements. The American Medical Association
and other doctors’ groups have sought to change or repeal the
provision, and they are likely to try to extract that as their price
for boarding the Obama train, people tracking the negotiations said.

Wal-Mart, the nation’s largest private-sector employer, agreed recently
to support requiring all big companies to insure their workers. In
exchange, Wal-Mart said it wanted a guarantee that the bill would not
“create barriers to hiring entry-level employees” – in effect, code
words to insist that lawmakers abandon the idea of requiring employers
to pay part of the cost for workers covered by Medicaid, the government
insurance plan for the poor.

“It’s kind of a give-and-take, quid pro quo kind of environment,” said Tom Daschle, President Obama‘s
first choice for health secretary, who remains in touch with the White
House on health care issues. “I think that the stakeholders wouldn’t do
this if they didn’t think there was something in it for them.”

…Over the past year, Mr. Baucus, Democrat of Montana, has
strong-armed industry groups, warning them not to publicly criticize
the process if they want to stay in negotiations.

Mr. Baucus, in
turn, has said little about his talks with industry players. On
Tuesday, he said only that he was “heartened” by how many groups were
supporting the health care overhaul.

That's the NYT reporting, not The Weekly Standard.  Here is much more. 

How should I feel if Obama, or maybe Congress, threatened to re-zone my neighborhood — unfavorably — unless I support an active Afghanistan plan on my blog?  (Should it matter if I've incorporated the blog as a business?  As an association?  Even if there is no corporate right to freedom of speech, should there be "forced speech"?)  Should it help much if the intimidation against freedom of speech is for a benevolent end?  If Republican Presidents had done something similar?

Might it be correct to call this "evil"?  I have seen "evil" defined as "morally bad or wrong." 

Of course these deals are not unrelated to why health care reform — if we get it — won't in fact solve most of the major problems the sector faces.

Oil price speculation

by  Tyler Cowen in

There's lot of talk about curbing speculation in energy markets.  Simon Johnson has an excellent post on this topic:  He writes:

1) They are trying hard to talk up the market, with regard to global growth.  At the same time, the hard data continue to disappoint.  Naturally, this causes volatility in oil prices.

2) They claim to see no link between their failure to converge on
climate change/environmental policies and what happens to energy
prices.  The extent to which industrialized countries’ effectively
control carbon emissions will have a big impact on the longer-run
demand for oil.  Flip-flopping on this issue discourages investment in
the energy sector (regular and alternative), and thus directly and
indirectly contributes to oil price volatility.

3) The very cheap money policies of leading central banks, including
the Fed, the Bank of England and arguably also the European Central
Bank, lower the funding costs for big players who want to take large
positions in commodities markets.  Essentially, we are providing the
credit that makes big speculative positions possible.  Add to this mix
a “too big to fail” attitude and a “yes we can, recapitalize through
trading profits” deal with policymakers, and you see why major
financial firms are likely to place huge commodity bets in the months
ahead.

…The true speculators here are your elected representatives.

Thanks for bearing with me

by  Tyler Cowen in

I have many, many hundreds of emails to go through.  I will get you the freedom chapter and my apologies for the delay, it will still take me some days.  I prefer to respond personally to each email rather than farming this out to an assistant.  Your patience is appreciated.  I am pleased that they will be doing a third printing of the book this Monday.