How bad is it to be uninsured today?
Ezra Klein raised a big stir by suggesting that the possible failure of the health care bill will cost a large number of lives; he cited a figure of 20,000 per year. (You'll find pushback from Michael Cannon on the number.)
Rather than disputing the number, my question is a simpler one. Let's say the figure were a correct one. How would you fill in the following blank?:
"Being uninsured in 2009 is, in terms of life expectancy, as bad as being insured in the earlier year ????"
What is the correct year for this comparison to hold?
Simply knowing the correct year is my main concern in this post, but there is an additional angle. Twenty years from now there will also be some uninsured Americans, even if the current bill passes. There will be pleas to help them. If you wish to help them, does that mean that the insured today also deserve additional health care subsidies? Or is the whole comparison just about equality? How about caring about inequality across time? If you favor additional subsidies for the uninsured today, are you also committed to wishing there had been additional subsidies for the insured back in year ????
I thank Bryan Caplan for a useful conversation related to this blog post.
More Krugman on the minimum wage
Krugman offers a response to a few critics, including I believe myself. His latter two points are on the macro model, his first point is trying to establish the relevance of the macro model for the minimum wage analysis:
1. Why did I go from minimum wages to overall wages? Clearly, a cut in minimum wages –which only apply to some workers – can raise the employment of those workers at the expense of other workers. But the advocates of a cut are claiming that they can raise overall employment. The only way that can happen is if a reduction in average wages raises employment.
There is a simple story here. Lower the minimum wage and firms with market power will in general hire more labor. (Sethi's critique refuses to consider that mechanism but simply shift the MC curve and watch it happen.) In the most straightforward setting the total wage bill increases, even if the average wage falls. With a higher total wage bill, there is no downward deflationary spiral. This general equilibrium point was emphasized by Jacob Viner in his very careful 1937 review of Keynes but it remains a neglected insight.
The negative scenario, namely the total lower wage bill, can possibly occur if employers use the lower legal minimum wage to lower wages for currently employed workers who were at the previous minimum. A few observations here:
1. Even then the net effect is indeterminate and not necessarily in the Keynesian direction. The total wage bill still could go up or even if the total wage bill goes down the total flow of purchasing power need not decline, given that employers just don't sit on their extra money. (This same point applies to all other second-best scenarios.)
2. The model already has assumed short-run wage stickiness, so it would be odd to suddenly relax that assumption as a way to get the total wage bill to fall.
3. Given that minimum wages don't cover so many workers, the AD effects are likely quite small in any case.
4. The new workers may well be collecting EITC, which will strengthen any aggregate demand effect from their employment.
5. The increase in aggregate supply — more work goes on! — itself has a positive effect on aggregate demand through subsequent Hutt-like, supply-side multipliers. It would be unusual if velocity shifts were completely neutralizing with respect to this increase in production.
6. The "then why don't we raise the minimum wage to $30 an hour" meme is an overrated "right-wing talking point" in a lot of policy debates. Still, in this context, it remains a good question from a purely analytical point of view. Such a change would not boost aggregate demand in most plausible models and from that admission you can work backwards.
Mixing up average wages and the wage bill is a common Keynesian confusion; they're not always moving in the same way, though they may seem to in some very simple models. Krugman's #1 is assuming a link between the micro and macro change that simply doesn't have to be there.
That all said, it's a fair enough point to note that changes in the minimum wage will likely bring only small positive effects in any case.
Should we cut the minimum wage?
Yes. Bryan Caplan has the answers:
Paul [Krugman] does address the real balance effect, but he still ignores the main arguments I've made before:
1. Cutting wages increases the quantity of labor demanded. If labor demand is elastic, total labor income rises as a result of wage cuts.
2. Even if labor demand is inelastic, moreover, wage cuts reduce labor income by raising employers' income. So unless employers are unusually likely to put cash under their mattresses, wage cuts still boost aggregate demand.
An even simpler way to explain it: Imagine every firm divided its existing payroll between a larger number of workers. How is that bad for aggregate demand – or anything but good for employment?
P.S. If you prefer specific facts to textbook arguments, see Scott Sumner's legendary Table 12.2 on wages and the Great Depression.
As Bryan titles his post: "Cutting the Minimum Wage Really is Good for Aggregate Demand." The actual arguments in Krugman's blog post concern an overall downward spiral in wages and prices, not minimum wage cuts at all. The chance that minimum wage cuts set off such a spiral is very, very small. Krugman's third paragraph makes perfect sense but the fourth paragraph and onwards is simply discussing a different topic.
I would add two points. On Bryan's #1, workers at the current minimum wage are unlikely to receive nominal wage cuts if the minimum wage were lowered, for the usual morale and efficiency wage and lock-in reasons. So the chance that total labor income rises is very high. Second, no I don't believe in an upward-sloping AD curve, but in any case multipliers from production increases plus wage bill increases are likely to be more potent than multipliers from aggregate demand increases alone.
Addendum: Will Wilkinson offers relevant comment.
Markets in everything the culture that is Japan
Buy your own android double:
They will be built by Japanese robotics firm Kokoro, which is best known for its line of attractive Actroid receptionist humanoids.
The company will create the sitting robot out of silicone with the same face, body shape, hair and eyes of the recipient. Their speech will be based on recordings of the owner's voice.
The android's facial expressions and upper body will be modeled on the movements of the buyer.
Do check out the photos of the female models and the video is a must. They're not cheap:
The mechanical doppelgangers will be on offer at Sogo, Seibu, and Robinson retailers for the princely sum of 20.1million yen or £139,000.
But they are pretty good, here is one (male) example:
For the pointer I thank Bob Cottrell at The Browser.
Assorted links
1. Gelman criticizes Levitt on drunk driving; Jeff Ely chimes in here.
2. A new method for measuring earthquakes, tweets per minute.
3. Political souvenirs, from Italy.
4. Wavvves is my favorite popular music album this year, except it isn't popular.
5. Germans are happier if they earn less than their neighbors.
6. Peter Thiel's favorite thinker is Rene Girard.
Not in a liquidity trap
Hyperinflation in Zimbabwe, the former Rhodesia, was a quadrillion times worse than it was in Weimar Germany.
That's via Jason Kottke (source here). There's also this bit:
The cumulative devaluation of the Zimbabwe dollar was such that a stack of 100,000,000,000,000,000,000,000,000 (26 zeros) two dollar bills (if they were printed) in the peak hyperinflation would have be needed to equal in value what a single original Zimbabwe two-dollar bill of 1978 had been worth. Such a pile of bills literally would be light years high, stretching from the Earth to the Andromeda Galaxy.
The division of labor is limited by the extent of the market
Brian Eno writes:
…go into a record shop and look at the dividers used to separate music into different categories. There used to be about a dozen: rock, jazz, ethnic, and so on. Now there are almost as many dividers as there are records, and they keep proliferating. The category I had a hand in starting–ambient music–has split into a host of subcategories called things like “black ambient,” “ambient dub,” “ambient industrial,” “organic ambient” and 20 others last time I looked. A similar bifurcation has been happening in every other living musical genre (except for “classical” which remains, so far, simply “classical”), and it’s going on in painting, sculpture, cinema and dance.
Recently an MR reader sent along a link to this new genre:
Shava are probably the only representatives so far of the genre of Suomibhangra, a Finnish take on the South Asian diaspora dance genre, bhangra. One one level there's a lot to be critical of here, perhaps – the wilful exoticism, the fake Indian dancers, the almost-brownface of someone like the "Finnjabi bad boy" in the video.
Nonetheless most South Asians seem to approve of their Finnish mimics. Elsewhere, here is yet another essay on the fragmentation of music.
Going back to Eno, I liked this point:
The idea that something is uncool because it’s old or foreign has left the collective consciousness.
Nie pozwalam!
Liberum veto (Latin for I freely forbid) was a parliamentary device in the Polish-Lithuanian Commonwealth. It allowed any member of the Sejm to force an immediate end to the current session and nullify all legislation already passed at it by shouting Nie pozwalam! (Polish: I do not allow!).
Here is more.
China fact of the day
A Chinese policeman who died after drinking too much at a banquet he was made to attend has been deemed a martyr who died in the line of duty, in an apparent attempt to meet his family's demands for compensation, a state-run newspaper said.
The story is here, via Daniel Lippman. If you're looking for China estimate of the day, it is this:
Chinese academics have estimated that government officials spend about 500 billion yuan ($73 billion) in public funds each year on official banquets, nearly one-third of the nation's expenses on dining out.
Assorted links
1. Steve Levitt on driving drunk.
2. What English sounds like to foreigners.
3. What works in development? Links to excellent essays.
4. In a world of micro-credit, moneylenders flourish.
Tie CO2 Tax to Temperature
John Tierney relays today what seems like a very sensible idea from economist Ross McKitrick, tie a carbon tax to the temperature. If the temperature rises the tax goes up, if the temperature does not rise (as McKitrick, a climate change skeptic thinks) the tax will stay at a low level. Temperature of the troposphere would be measured by satellite at the equator and averaged over a period of time. (More here and a more detailed version here).
In theory, both climate change proponents and skeptics ought to agree to this proposal, but I predict the proponents will object.
Addendum: As predicted most of the objections (in the comments) are from climate change proponents. In essence, they argue that the problem is so serious that we must act before the evidence is in. Aside from the obvious epistemic problems with such a position do note that a) this is a way of getting agreement where otherwise there might be none b) the tax can be non-linear so it rises (in Bayesian fashion) with the strength of the evidence, i.e. the tax need not always lag.
Very good sentences
There was usually one rational expectations man at each meeting, but it was rarely the same one twice.
That is from this excellent interview with Paul Samuelson. Hat tip goes to The Browser.
Distilling famous thinkers
Following up on a discussion, Arnold Kling asks:
Should we approach famous thinkers by digesting distilled versions, or should we study them in the original?
I'm for distilling, for reasons Arnold offers, but I'm also for reading the originals. Here are a few reasons why, drawn from a number of longer sources I have read and digested:
1. Secondary sources are unreliable and they do not capture or understand many of the original insights. To remove it from the distant past, what I get from John Rawls or Robert Nozick is quite distinct from what I get from their distillers.
2. Truly great thinkers require numerous distillers. Can you read just one book on Keynes? No. So you have to read a few. Shouldn't one of these then be Keynes himself? Yes.
3. The errors of top thinkers are often more interesting and instructive than their successes. Distillers have a hard time capturing these errors and their fruitfulness.
4. We often read great thinkers not to learn what they understood but also to set our minds racing and to find interesting new questions. Great thinkers are usually better at supplying this service than are their distillers.
5. Sometimes the value is in having read common sources and benefiting from the commonality per se. Great thinkers are usually more focal than any of their distillers and thus reading them is a good input for discussions with others.
6. Original sources often help you challenge or reexamine your world view or intellectual ethos. Distillers very often pander to that world view, while pretending to challenge you.
7. Consider a simple comparison. You can read either Adam Smith's two major books or any ten or even twenty books on him, toss in articles if you wish. It's a no-brainer which you should choose.
8. The best distillers often are original sources in their own right (and in part unreliable expositors), such as in Charles Taylor's excellent book on Hegel.
9. Distillation works best in very exact sciences, such as physics and mathematics. If you rely on distillation for an inexact science, you will do best at capturing its exact parts. You will be left with a systematic bias, and knowledge gap, regarding its inexact parts.
I could say more, but I fear this post is already too long.
Bad Design Within Reach
Warning: this post is about furniture. Fast Company has an article on the decline of the furniture company Design Within Reach. The article focuses on how in an effort to cut costs DWR "copied" designs it had earlier sold as a distributor. A look at the before and after, however, shows that the real problem is that the copies are nowhere near as aesthetically pleasing as the originals.
Take a look at these credenzas. In the DWR version where is your eye first drawn?
Is the eye not drawn first to the stodgy feet? The thick and heavy feet of the DWR version combined with the shorter width give it a weighted down, stolid feel. The original in contrast is light and airy, it almost floats above the floor, an effect which is aided by the shading with its subtle look of fluffy clouds.
Now take a look at the bookshelfs.
The DWR version has a clean look but it's boring–you see it once and you are done. Now look at the original. Does it not draw your attention? In the original the middle shelves do not align vertically with the side shelves and the top and bottom middle shelves are open, not closed. I think the result is a much more interesting and entertaining piece of furniture.
We now return you to your regularly scheduled dose of economics.
Arthur Goldberger passes away at 79
On December, 11, I have not been able to find an obituary. One reader wrote me the news, plus it appears on a blog, in Gary King's tweet, and on Wikipedia.