Which leaders make history?
Leaders who make history are often provincials: Provincials attempt what sophisticates consider naive. The two current candidates for world leadership [Reagan, Gorbachev] were both country boys, a state park lifeguard and a champion harvester, each an outsider to the inner elites of the government he headed, each in his own way an idealist determined to push beyond the status quo. Reagan had been tailored in Hollywood, but the sophistries of Washington’s nuclear mandarins had failed to complicate his apocalyptic Dixon, Illinois, worldview. Gorbachev’s southern Russian accent and hillbilly grammar offended the ears of the suave Moscow bureaucracy he outmanipulated a dozen times on any ordinary day.
That is from Richard Rhodes’s interesting Arsenals of Folly: the Making of the Nuclear Arms Race. I’ve never seen a good quantitative study of how leadership biography matters for policy outcomes, and I expect that solid results are as hard to find as in birth order studies. Does anyone know of a good, concrete stylized fact here?
Small World
The Nepali Times in Kathmandu recommends Marginal Revolution.
Why should a good economist blog?
Dani Rodrik asks why, Greg Mankiw gets frustrated at his now-banished comments section, Free Exchange defends non-famous econ bloggers, and Felix Salmon chimes in.
I don’t think comparative advantage will keep (inclined) top economists away from blogging:
1. Very good economists can better use blogs to attract an amazing audience; even Dani is seeing the light, and yes his new post does mean that for trade policy he can worry less about low-cost outsourcing! Opportunity cost may be higher but value-created is higher as well for the better economists.
2. A blog can be a loss leader; Greg’s blog promotes his textbook and Dani’s blog helps his new book. Prominent economists are more likely to have promotable ancillary products. Don’t the high productivity companies often spend the most on advertising?
3. Temporary blogging will become more popular. When Ed Glaeser writes for The New York Sun, he is writing for the blogosphere more than he is writing for Sun readers but at the end of the day he doesn’t have to come up with another post for tomorrow.
4. I predict there will arise a rotating blog, run by a consortium of top economists. Figures such as Justin Wolfers will blog their research for two or three weeks and then turn the reigns over to a buddy, moving on, and returning perhaps a year later for another brief stint.
5. If you are wondering about me, I face an especially low marginal cost of blogging and thus I am likely to continue for a long time. For both consumption and research reasons, I was already reading and absorbing lots of outside material (a key base for my blogging content, though I miss being able to read quite as much as I used to), so turning it into blog posts is relatively cheap. Dani and others will probably agree that coming up with the content is the problem, not the actual writing of the post.
Here is another good post on the benefits of econ blogging, stressing the concept of self-experimentation.
Conservatives vs. conservatism
Attacking conservatism, Greg Anrig writes:
I think it’s fair to equate Heritage with the conservative movement…the whole unitary executive concept about executive power began to be
formulated in the Reagan Justice Department. Those guys were pretty
much all conservatives, wouldn’t you say, Tyler?
I find the clarity here extraordinary, namely how much Anrig focuses upon labeled individuals and groups of individuals. Conservatism (yes, the concept, truly understood, includes some well-known liberals) stresses that institutions and ideas are what matter, not which group of people is in power. When institutions are bad, and the general tenor of public ideas is off base or depraved, it is not better to be governed by "conservatives," and arguably it is worse. Of course conservatives, once they achieve power, will view political matters in terms of people just as Anrig does ("we can’t let those guys back into Treasury"), if only because natural political selection eliminates those conservatives who do not.
That is one reason why conservatives so often act against conservative ideas, and why conservative politicians so often lie. In fact the better a conservative politician sounds to conservative listeners, the more inconsistent those ideas will be with the actual process of governing.
If you are a conservative looking to improve the world, one option is to improve the quality of religion in society. You should consider politics an inherently corrupting activity for conservative ideas; yet this fact, taken alone, does not prove it is better to follow left-wing ideas.
Addendum: Here is a link to Matt and Ezra on same.
Will any future book series approach the success of Harry Potter?
I’d long wanted to offer my thoughts on this topic, so when Today’s Machining World approached me, I thought they were an ideal outlet. I wrote:
Absolutely. Most of all, the Harry Potter series is a social phenomenon. It’s not mainly about the books. It’s about kids – and often adults – sharing a common reading experience. We crave this kind of social connection – that’s what Oprah’s Book Club is about too. We like to look forward to the same books, read them at the same time, and talk about them afterwards. If you took these same kids, put them on a desert island, and just gave them copies of Harry Potter, with no further information or explanation, most of them wouldn’t be so impressed.
With the current Potter series now over, we are looking for something else to latch on to. We may not find it right away, but when we do, the world will be wealthier and have more readers. Some other book series will trump the popularity of Harry Potter – it is simply a question of when.
For a differing point of view, scroll to p.50 to read Megan McArdle, and on p.51 is Kevin Hassett.
Single-payer systems aren’t so egalitarian, part II
…[compared to the United States] income plays a larger role in buffering children’s health from the
effects of chronic conditions in England. We find no evidence that the
British National Health Service, with its focus on free services and
equal access, prevents the association between health and income from
becoming more pronounced as children grow older.
Here is the paper. Of course equity is not the only argument for single payer systems. Here is part I of the series, concerning Canada and the (possible) continuation of the health-income gradient there. Many of you were skeptical about the reported result, but here is further evidence. Most of all, the determinants of health are not well understood; that is itself a sobering fact no matter what your policy point of view.
Do right-wing ideas keep on failing?
Chapter one: Politicizing the government, and lowering the quality of governance, should not be considered conservative ideas. The incompetence of Bush, a self-professed conservative, doesn’t make this so. The Founding Fathers cared about governance, and there have been plenty of bad Democrats. Furthermore when the Clinton administration improved FEMA, it was praised at George Mason and very vocally.
Chapter two: The Unitary Executive. No way is this a true conservative idea. No way. Checks and balances is a fundamental conservative idea.
Chapter three: Iraq. I’ll leave this aside for the sake of keeping the comments thread manageable. You’ll have a chance to comment on this soon, but not today.
Chapter four: Tax cuts for the rich. Even if you think these were a bad idea, don’t blame conservatism. The standard conservative idea is Milton Friedman’s nostrum that the real burden of government lies in the level of spending (and how it is spent), not the level of taxation per se.
Chapter five: State tax-and-spending limits. The Colorado plan for spending limits really didn’t work out so well and Anrig scores major points in this chapter. Major, major points. If you have a revisionist take on this, please do tell us in the comments.
Chapter six: "Smart" regulation. The regulatory burden has grown, for better or worse, with each administration. Anrig criticizes John Graham and his ilk, but his points boil down to disagreement with the conservative view rather than an indictment of what has been tried. We’d all like to have better regulation, and we can all admit it is very hard to get there procedurally.
Chapter seven: School choice and vouchers. The available evidence — see for instance Caroline Hoxby — suggests that vouchers are an improvement, albeit much overrated by conservatives and libertarians. However that hardly makes the idea bankrupt.
Chapter eight: Health savings accounts and malpractice reform. Health savings accounts are another tax break for savings and they won’t much improve U.S. health care. The malpractice crisis is overrated as a cause of high health care costs. Anrig scores points here, but mostly against wheel-spinning. It is worth stressing that "the right" doesn’t really have much of a health care plan at all, and that can count as an indictment.
Chapter nine: Social security privatization. I’ve argued that the Bush plan was just bad economics, even from a conservative or libertarian point of view. We already had private accounts in the form of Merrill Lynch, so why put a government-engineered, jerry-rigged structure on top of that?
The bottom line: Two strong points that can be scored against conservatism or market-oriented ideas, as opposed to the Bush Administration. First, state-level tax and spending limits haven’t worked out. Second, "the right" doesn’t (yet?) have a coherent health care plan. But the biggest problems faced by conservatism or libertarianism are along the lines of "won’t ever be tried," not "we just tried it and it failed."
Addendum: Anrig responds.
Chic Ironic Bitterness
The ironists of frequent lament, then, far from being the evidentiary beings that willfully corrode society, in fact withhold their trust from a politics and culture undeserving of it. In doing so they hold dearly and implicitly the ultimately Protestant values of sincerity and authenticity that civic trust needs but has forgotten. In a world that seems to value the opposite, they must express those values ironically. Through this move they take temporary inward recourse, leaving the world to realize just how upside down it has become. And as they lean inward, they take their trust with them.
That is from the new and sometimes intriguing Chic Ironic Bitterness, by R. Jay Magill. The focus is on how America didn’t much change after 9-11, how the supply and demand for irony stayed pretty much the same, and how Stephen Colbert refutes or at least counters Kierkegaard’s critique of Schlegel. (Not everyone liked the book.) Every now and then there is an author’s cartoon (e.g., "Immanuel Kant Bobble-Head Doll"), and on p.5 he stops and writes a stand-alone paragraph:
I’ll be citing the Pew Research Center in a few pages to back this up.
Recommended, ironically of course.
Was RAND wrong?
No, not Ayn Rand, the RAND experiment on health care. The RAND experiment randomly assigned people to different health plans and one of the big findings was that cost sharing reduced use of health care but had little effect on health outcomes. My colleague, Robin Hanson, likes to use this as a club to argue that we should cut medical spending in half.
Even randomized experiments have problems, however, and it turns out that there was a lot of attrition in the RAND experiment. A Healthy Blog quotes from a new paper in the October 2007 issue of the Journal of Health Politics, Policy
and Law, by Dr. John Nyman of the University of Minnesota (alas not online).
Of the various responses to cost sharing that were observed in the
participants of the RAND HIE, by far the strongest and most dramatic was in the
relative number of RAND participants who voluntarily dropped out of the study
over the course of the experiment. Of the 1,294 adult participants who were
randomly assigned to the free plan, 5 participants (0.4 percent) left the
experiment voluntarily during the observation period, while of the 2,664 who
were assigned to any of the cost-sharing plans, 179 participants (6.7 percent)
voluntarily left the experiment. This represented a greater than sixteenfold
increase in the percentage of dropouts, a difference that was highly significant
and a magnitude of response that was nowhere else duplicated in the experiment.What explains this? The explanation that makes the most sense is that the
dropouts were participants who had just been diagnosed with an illness that
would require a costly hospital procedure. … If they dropped out, their coverage
would automatically revert to their original insurance policies, which were
likely to cover major medical expenses (such as hospitalizations) with no
copayments … As a result of dropping out, these participants’ inpatient stays
(and associated health care spending) did not register in the experiment, and it
appeared as if participants in the cost-sharing group had a lower rate of
inpatient use. … the cost-sharing participants who remained exhibited a lower
rate of inpatient use than free FFS participants, not because they were
responding to the higher coinsurance rate by forgoing frivolous hospital care
but instead because they did not need as much hospital care, since many of those
who became ill and needed hospital care had already dropped out of the
experiment before their hospitalization occurred. …
Hat tip to The HealthCare Economist.
Passing down temptation to the next generation
We find that the elasticity between mothers’ and children’s BMI has
increased since the 1970s, suggesting that shared genetic-environmental
factors have become more important in determining obesity.
Here is more.
Tim Harford is now blogging
Here, on the FT site, but not gated. Read the backlog now, before it grows too large…
Medicare benefits for prescription drugs
The Medicare prescription drug benefit was, from the beginning, flawed in the details of its execution. But in general terms it is turning out to be one of the best health care investments our government is making:
Rewarding inventors with inefficient monopoly power has long been
regarded as the price of encouraging innovation. Public prescription
drug insurance escapes that trade-off and achieves an elusive goal:
lowering static deadweight loss, while simultaneously encouraging
dynamic investments in innovation. As a result of this feature, the
public provision of drug insurance can be welfare-improving, even for
risk-neutral and purely self-interested consumers. In spite of its
relatively low benefit levels, the Medicare Part D benefit generate
$3.5 billion of annual static deadweight loss reduction, and at least
$2.8 billion of annual value from extra innovation. These two
components alone cover 87% of the social cost of publicly financing the
benefit. The analysis of static and dynamic efficiency also has
implications for policies complementary to a drug benefit: in the
context of public monopsony power, some degree of price-negotiation by
the government is always strictly welfare-improving, but this should
often be coupled with extensions in patent length.
In other words, the optimal ex post incentive scheme involves some market power for drug makers. To some extent the subsidy counteracts the deadweight loss resulting from that monopoly by lowering real prices to consumers.
Here is my previous post on the topic, also indicating that the Medicare prescription drug benefit is not nearly as costly as has been charged. Of course subsidizing the pharmaceutical companies does not always sit so well with the left, so I am curious whether progressives will accept this result. And I am curious whether they envision single-payer programs as continuing this subsidy, or confiscating pharmaceutical company rents instead.
As a side remark, Martin Feldstein was the one who saw, way back when, that health care economics would become such a major field; kudos to him.
Addendum: Sorry for the omission, here is the paper itself.
How special is American inequality?
Will Wilkinson writes:
I was surprised to discover that U.S. market income (i.e., pre-tax) inequality is lower than the U.K.’s, the same as Germany’s, and only slightly higher than Sweden’s…
Check the graph at the link. Will continues:
This is from Brandolini and Smeeding’s 2007 “Inequality Patterns in Western-Type Democracies: Cross-Country Differences and Time Changes” [pdf]. While the U.S. pre-tax Gini is still on the high side of the median of these 16 OECD countries, it is remarkable how much differences in tax and transfer policies push the U.S. to the top in inequality in disposable income. This is striking to me because, at a glance, it suggests that the U.S. is not all that distinctive in the way the basic structure of the economy affects the distribution of market income. Unions in Germany and the U.K. are rather more powerful than in the U.S., but (again, at a glance) appear to do nothing to reduce inequality relative to the U.S. Of course, eyeball empiricism isn’t dispositive. But it seems to me to fit pretty well with the weak effect of the relationship between declining unions and rising inequality found in other research, and suggests that the structure of basic American political-economic institutions is not especially conducive to inegalitarian outcomes.
My take: This is all well worth knowing, and it does help counter the view that growing inequality of income is a poliical conspiracy. But oddly both the critics and the defenders here are missing one major inequality-related difference between Germany and the United States, namely social norms. We have weaker families, weaker social pressures to conform, deeper bayous, and as a result more flat out lunatics, losers, and violent psychopaths. (Did I mention we also have more innovation?) That’s inequality too, though the usual political recipes aren’t likely to provide the cure.
Addendum: One very eminent source emailed me and he wishes to stress that the (relatively) high level of the European Gini stems from higher levels of unemployment, whereas the relatively high level of the American Gini stems from the rich being very rich. He points out that although the final Ginis may be similar, the underlying patterns are very different and it would be misleading to conclude that America and Germany have ended up at the same pre-tax point. This is absolutely correct, my apologies if the post created a misleading impression.
Angola fact of the day
The International Monetary Fund projects a 24 percent economic growth this year – one of the fastest rates in the world.
Wow. Here is fact number two:
…the Catholic University of Angola’s research center say two in three
Angolans still live on $2 or less a day, the same percentage as in
2002…no one disputes that most Angolans face appalling living
conditions, sky-high infant mortality rates, dirty water, illiteracy
and a host of other ills.
If you hadn’t guessed: it’s oil money: "The government is taking in two and a half times as much money as it did three years ago."
Amazon One-Click Patent Struck Down
The US patent office has ruled that enough prior art anticipated the one-click patent to rule a number of the major claims invalid. Perhaps we should chalk up another win to Eric Maskin!
I’m pleased that the Amazon patent was ruled invalid but insufficient attention to prior art is not the main problem with current patent law. Patent law needs to change so that patents would be ruled invalid or given much shorter lengths if they do not involve large, sunk costs.