African poverty is falling

by  Tyler Cowen in

Xavier Sala-i-Martin and Maxim Pinkovskiy report:

The conventional wisdom that Africa is not reducing poverty is wrong. Using the methodology of Pinkovskiy and Sala-i-Martin (2009), we estimate income distributions, poverty rates, and inequality and welfare indices for African countries for the period 1970-2006. We show that: (1) African poverty is falling and is falling rapidly; (2) if present trends continue, the poverty Millennium Development Goal of halving the proportion of people with incomes less than one dollar a day will be achieved on time; (3) the growth spurt that began in 1995 decreased African income inequality instead of increasing it; (4) African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic. All classes of countries, including those with disadvantageous geography and history, experience reductions in poverty. In particular, poverty fell for both landlocked as well as coastal countries; for mineral-rich as well as mineral-poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below- or above-median slave exports per capita during the African slave trade.
Here is an ungated version.  This part is especially interesting:
Not only has poverty fallen in Africa as a whole, but this decline has been remarkably general across types of countries that the literature suggests should have different growth performances. In particular, poverty fell for both landlocked as well as coastal countries; for mineral rich as well as mineral poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below or above median slave exports per capita during the African slave trade. Hence, the substantial decline in poverty is not driven by any particular country or set of countries.

Sentences to ponder

by  Tyler Cowen in

This note shows that the aggregate fiscal expenditure stimulus in the United States, properly adjusted for the declining fiscal expenditure of the fifty states, was close to zero in 2009. While the Federal government stimulus prevented a net decline in aggregate fiscal expenditure, it did not stimulate the aggregate expenditure above its predicted mean.

That's from Joshua Aizanman and Gurnain Kaur Pasricha.  I don't currently see an ungated copy.

The pre-existing conditions of Nicole Kidman

by  Tyler Cowen in

Kidman injured her knee during the filming of Moulin Rouge in Australia in 2000, resulting in a $3 million insurance loss, and then quit Panic Room in 2001, leading to the insurer having to pay some $7 million for the replacement actress (Jodie Foster).  As a result, her public and critical acclaim notwithstanding, Miramax was initially unable to get insurance on her for its film Cold Mountain, which had a budget approaching $100 million.  From the perspective of the insurer, Fireman's Fund, she was a definite risk.  As an insurance executive noted in an email, "…the fact remains that the doctor we sent her to for her examination noted swelling in the knee."  The executive goes on: "The other major fact that can't be changed is our paying three claims for this actress's knees over the years."

To get the necessary policy from Fireman's Fund, Kidman agreed to put $1 million of her own salary in an escrow account that would be forfeited if she failed to maintain the production schedule, and she agreed to use a stunt double for all scenes that the insurer considered potentially threatening to her knee.  In addition, the co-producer, Lakeshore Entertainment, added another $500,000 to the escrow account…Having made the all-important move from borderline uninsurable to borderline insurable, she could make movies again.  No matter how great their acting skills and box office drawing power, stars cannot get lead roles if they are uninsurable.  Great acting skills and box office drawing may make the star, but insurance is what it takes to make the movie.

That's from the new and noteworthy The Hollywood Economist: The Hidden Financial Reality Behind the Movies, by Edward Jay Epstein.  You can buy it new, in paperback, for only $11.

Claims that some people find very interesting

by  Tyler Cowen in

Here is a new result which Yoram Bauman has pointed my attention to.  The title is "Markets are efficient if and only if P = NP" and the author is Philip Maymin.  Here is the abstract:

I prove that if markets are weak-form efficient, meaning current prices fully reflect all information available in past prices, then P = NP, meaning every computational problem whose solution can be verified in polynomial time can also be solved in polynomial time. I also prove the converse by showing how we can "program" the market to solve NP-complete problems. Since P probably does not equal NP, markets are probably not efficient. Specifically, markets become increasingly inefficient as the time series lengthens or becomes more frequent. An illustration by way of partitioning the excess returns to momentum strategies based on data availability confirms this prediction.

Points like this seem to be rediscovered every ten years or so; I am never sure what to make of them.  What ever happened to Alain Lewis?

Jonathan Rauch on the Ryan plan

by  Tyler Cowen in

Someone who at least tried [to cut spending] is Rep. Paul Ryan of Wisconsin, the ranking Republican on the House Budget Committee, who recently unveiled a new edition of what he calls a "Road Map for America's Future." Its willingness to reform entitlement programs is laudable. But it keeps taxes at 19 percent of gross domestic product while raising (repeat: raising) federal spending from 21.6 percent of GDP in 2012 to more than 24 percent in the 2030s. It balances the budget, all right — in 2063.

Here is the article, interesting throughout, it mostly focuses on George Wallace.

The High Cost of Free TV

by  Alex Tabarrok in

Despite the fact that 91 percent of American households get their television via cable or satellite huge chunks of radio-spectrum are locked up in the dead technology of over-the-air television.  In his Economic View column today Richard Thaler features the work of our GMU colleague Tom Hazlett who argues that auctioning off the spectrum to the high value users would generate at least $100 billion for the government and generate a trillion dollars of value to consumers.  Thaler writes:

I KNOW that this proposal sounds too good to be true, but I think the opportunity is real. And unlike some gimmicks from state and local governments, like selling off proceeds from the state lottery to a private company, this doesn’t solve current problems simply by borrowing from future generations. Instead, by allowing scarce resources to be devoted to more productive uses, we can create real value for the economy.

Hypotheses about durable unemployment: just-in-time hiring

by  Tyler Cowen in

This is from The Economist:

Recruiters are clearly becoming far more sophisticated, thanks to the new search tools that are available, says Aberdeen’s Mr Saba: “You’d think with 10% unemployment, jobs would be filled more quickly, but the focus on sourcing the right people, screening them and so on means that the time to fill has not fallen.” Mr Joerres believes that the increasing sophistication of recruiters means that firms will do less “anticipatory hiring” than in previous recoveries. Instead, firms will wait to get exactly the staff they need, when they need them.

Concepción, Chile

by  Tyler Cowen in

I haven't been to Concepción since December 1989, yet I will never forget my trip there.  It was the first time I learned what was for me to become an important truth.  If you set off to a mid-sized city in South America — especially in the Southern Cone — your chance of finding an idyllic spot are high.  There may be, in a way, nothing to do there, at least not in the sense that your guidebook can report.  But it will feel so fresh, so undiscovered, so representative of the vitality of everyday life, that you will at times think you have stumbled upon paradise.  Everyone there will seem so apart from the world you know and there is a sudden (and quite silly) shock at seeing how seriously they take the world they know.  Plus they have superb vanilla ice cream and strawberries for dessert.

Here is the Cathedral, which was destroyed in 1939 by an earthquake.

The elasticity of natural disaster deaths with respect to income

by  Tyler Cowen in

Matt Kahn has a good paper (and here) on this topic:

Using a new data set on annual deaths from disasters in 57 nations from 1980 to 2002, this paper tests several hypotheses concerning natural disaster mitigation. While richer nations do not experience fewer natural disaster events than poorer nations, richer nations do suffer less death from disaster. Economic development provides implicit insurance against nature’s shocks. Democracies and nations with higher quality institutions suffer less death from natural disaster. The results are relevant for judging the incidence of a Global Warming induced increase in the count of natural disaster shocks.

Pre-existing conditions

by  Tyler Cowen in

I've read that the Democrats are stressing this idea more in their arguments for the health bill.  Oddly, even from intellectuals, you rarely hear what is one of the strongest arguments for the bill, namely that personal genome sequencing might mean — how many years from now? — that many more people have pre-existing conditions than we currently are aware of.  Alternative equilibria are that the sequencing technology won't give us much health information, that the information will stay private (don't accept that cup of coffee!), or that we should in the meantime simply wait.  There's plenty to debate there but I'd like to see more discussion on the long-term future of the health insurance sector or possible lack thereof.

On related issues, Ross Douthat wants a smaller bill:

But even as a hypothetical, the more modest plan is instructive. Per the Journal, it would insure half as many people as the House and Senate bills – 15 million, all told – at a quarter of the cost. 15 million happens to be roughly the number of American citizens who don’t have insurance, aren’t already eligible for Medicaid or S-CHIP, and make less than 300 percent of the poverty line. Which suggests that you can do some of the most morally urgent work of health care reform without a mandate or price controls, and at a fraction of the current legislation’s price tag.

Jon Chait has an exasperated response.  First, the importance of that extra coverage, as would result from the mini-plan, he is suddenly downgrading in the grand scheme of things.  Second, and more fundamentally, I'd like to repeat, and modify, an earlier question.  I understand that the mini-bill does relatively well by "almost Medicaid" patients and relatively poorly by those with pre-existing conditions.

Compare the full bill to the mini-bill.  For the extra insurance coverage granted by the full bill, some of which goes to individuals with pre-existing conditions, how much are we paying per person for that coverage?

Much better (but harder) would be to see how much extra we would be paying for the coverage each additional person, conditional on that person wanting the insurance at the price he or she would have to pay for it. 

A third and related approach is to assume that consumer surplus, from the mandate/subsidy mix, is small for those individuals without pre-existing conditions.  Take the extra expenditure and divide by the number of people with pre-existing conditions who now fail to get coverage.  What is the cost per uninsured person with a pre-existing condition?

If you, as a supporter of the full bill, want to change people's minds, those are some critical numbers.  For all the work that has been put into this legislation, it doesn't seem unjust to be asking for that hitherto unprovided information.  The "it's too late to turn back now" argument doesn't much sway me.  Nor does Chait's claim that by passing the mini-bill we would be foregoing a "transformative" moment.  If the core of the full bill doesn't make sense, the entire structure won't hold up on its own.

The numbers, please.