China kiln fact of the day

by  Tyler Cowen in

At around the time of the Industrial Revolution:

Pottery, for instance, was manufactured in both England and China. The
design of the kilns differed greatly, however. English kilns were cheap
to build but very fuel inefficient; much of the energy from the burning
fuel was lost through the vent hole on the top (Figure 4). The typical
Chinese kiln, on the other hand, was more expensive to construct and,
indeed, required more labour to operate. Figure 5 shows how heat was
drawn into the chamber on the left and then forced out a hole at floor
level into a second chamber. The process continued through many
chambers until the air, by then denuded of most of its heat, finally
exited up a chimney. In England, it was not worth spending a lot of
money to build a thermally efficient kiln since energy was so cheap. In
China, however, where energy was expensive, it was cost effective to
build thermally efficient kilns. The technologies that were used
reflected the relative prices of capital, labour, and energy. Since it
was costly to invent technology, invention also responded to the same
incentives.

Check out the accompanying sketch, from a short essay by Robert C. Allen, drawn from his new book The British Industrial Revolution in Global Perspective.  The bottom line seems to be this:

Success in international trade created Britain’s high wage, cheap
energy economy, and it was the spring board for the Industrial
Revolution.

Here is what WolframAlpha gives you for "Industrial Revolution."

Markets in everything: non-simultaneous trades

by  Tyler Cowen in

Via Al Roth, here is an NBA example which makes my head spin:

"Here is a more complicated example of a legal non-simultaneous trade:
a team has a $4 million Traded Player exception from an earlier trade,
and a $10 million player it currently wants to trade. Another team has
three players making $4 million, $5 million and $7 million, and the
teams want to do a three-for-one trade with these players. This is
legal — the $5 million and $7 million players together make less than
the 125% plus $100,000 allowed for the $10 million player
($12,600,000), and the $4 million player exactly fits within the $4
million Traded Player exception. So the $4 million player actually
completes the previous trade, leaving the two teams trading a $10
million player for a $5 million and a $7 million player. From the other
team's perspective it's all just one big simultaneous trade: their $4
million, $5 million and $7 million players for the $10 million player. "

Should we put a carbon tax on China?

by  Tyler Cowen in

Paul Krugman seems to say yes:

As the United States and other advanced countries finally move to
confront climate change, they will also be morally empowered to
confront those nations that refuse to act. Sooner than most people
think, countries that refuse to limit their greenhouse gas emissions
will face sanctions, probably in the form of taxes on their exports.
They will complain bitterly that this is protectionism, but so what?
Globalization doesn’t do much good if the globe itself becomes
unlivable.

I cannot agree with what I think is his recommendation.  I am not a global warming denialist but:

1. The Chinese are often paranoid (arguably for good reason) and we will get further being nice to them than by being confrontational.  Krugman himself admits that they don't seem themselves as culpable on this issue.  Chinese citizens wanting clean air at home are possibly our biggest ally so let's not alienate them.

2. Last I checked China was funding a big chunk of our government's debt.  Confronting them would have to be bundled with a regime of extreme fiscal conservatism and unilateral foreign policy.

3. It can be very hard to identify and isolate the energy inputs into an exported product, especially if the host government is uncooperative and a lot of money is at stake.

4. We cannot credibly penalize the Chinese until we solve our own pollution problem.  Even under Obama's proposed policies, in their purer forms, that is at best decades away.  In the meantime, what is it that is really being advocated?  Non-credible threats?

5. Once the political process gets its hand on such tariffs they will be directed against, say, Chinese cars, including maybe relatively clean ones, rather than the dirtiest Chinese exports.

6. Last I checked there was something called the United Nations and China sat on its Security Council.  The UN is the (supposed) forum for handling problems of this nature.  Yes, we could construct an alternative "League of Democracies" as John McCain (!) had suggested, in part to deal with global warming and other multilateral problems where the non-democracies won't cooperate.  I don't favor this change but if we are going to do it we need to realize how radical a foreign policy step it would be and how Russia would respond as well. 

One lesson I take from Krugman's piece is just how thin support for multilateralism really is.

I do understand the basic instinct of "this problem is really bad so we must do something…and now!"  I would suggest that we keep in mind the less obvious, but no less important intuition: "this problem is really bad and that means a lot of what we are tempted to do could make it even worse."

Medical care and comparative effectiveness

by  Tyler Cowen in

The idea is to have a commission examine which procedures should not receive full Medicare reimbursement.  I favor spending cuts for Medicare so for me it's a go.  Megan McArdle considers some basic issues.  I'll add or second a few points:

1. When it comes to health care, it's very hard to tell what works.  That's one reason why we don't pay doctors for results in the first place but rather we pay them for procedures.  Having a commission look at statistics only partially remedies this problem. Sometimes looking at outcome statistics from the broader population pool makes the estimate of treatment efficacy clearer and other times it makes the estimate of treatment efficacy fuzzier (you have more data points, but not everyone responds to a treatment in the same way). 

2. Where will the burden of proof be put?  Will the common procedures be the only ones to receive the funding axe (they're expected to prove themselves in the statistical court, so if they can't the funds dry up?)  Will "small numbers" medicine receive the benefit of the doubt or be required to prove itself?  The answer to this question will make a big difference.  

3. Let's
say a treatment for 1000 people helps only 20 of them and so the
aggregate statistics for that treatment are not so impressive.  If you
take those same results and define the population pool ex post as the
20 people who respond positively, suddenly the same treatment has a
success rate of one hundred percent.  Again, framing will matter a
great deal for the results.

4. This commission, if it sticks to its statistical mandate, will be able to recommend many more possible cuts than any vote-maximizing administration will be likely to make.  Some other principle will be used to determine cuts.  Many defenders of the Obama administration are overestimating how scientific this process will be.

5. What does the public choice equilibrium look like?  Should Medicare "strand" some chronic ailments, with large numbers of people suffering only moderately, or should the occasional person be allowed to "die in the street"?  Any spending cuts policy will generate news stories of one kind or another; which will have greater political resonance?

6. The fairly arbitrary cuts we get will in some ways resemble means-testing.  The discretionary procedures are mostly enjoyed by higher-income and higher-education groups.

7. Imagine an analogy from broader life.  Imagine a government that would cut (some) subsidies for any input which could not be shown, statisically, to causally produce better outcomes in life.  You can see how open-ended this would be.  What if you applied this same metric for your personal spending?  Would there be much left to spend your money on?

Addendum: Read the highly intelligent Arnold Kling.

TED Talks: Search, Translate, Subtitle

by  Alex Tabarrok in

TED has developed a cool new technology that makes it possible to search, caption and translate TED talks.  Each talk will now come with an transcript.  What's cool is that you can click on any phrase in the transcript and you will jump to that point in the video.  If you go to my talk, for example, and click on "open interactive transcript" you can see this in action.  What this means is that videos will now be Google searchable.

In addition, by linking a translation to the English transcript it's possible to have talks searchable in multiple languages.  Thus, TED is now seeking volunteer translators to convert TED talks into some 40 other languages.  Here, for example, is Bonnie Bassler's great talk on quorum sensing in bacteria (how bacteria talk to one another)  which is translated into Swedish and Spanish.  My talk is still in English only but if anyone translates it they will get a shout out from me!  With a click, translations and transcripts can be shown as subtitles so not only will TED talks be available in other languages they will also be available to the hearing impaired.

Stuff they don’t teach in graduate school

by  Alex Tabarrok in

Chris Blattman has a problem to do with his research that they just don't teach about in graduate school.  Which type of anti-malarial drugs should he provide for his research assistants?

I have more and more research assistants in the field these days, and it would
be really fantastic if none of them fell deathly ill because of, well, my
research papers.

Here's the question. We have at least two perfectly
common anti-malarial options–doxycycline and mefloquine–each of which cost a
few cents each. They've been around a while, so we know what to expect. Doxy:
sun sensitivity in the occasional case, and no milk in your coffee that morning
(which is a tragedy). Mefloquine: crazy dreams among a few (including
me).

Along comes a fancy-pants new drug, Malarone. It costs $6 a pill,
with insurance, and has to be taken every day. Why would I pay 120 times more
than the generic? Is it 10 times as effective? 1.2 times? Just as effective? As
far as I can tell, there aren't studies on the matter.

Amazon as book publisher

by  Tyler Cowen in

Here is the latest:

In its most significant foray into publishing, Amazon has acquired world English rights to a self-published novel by a midwestern teenager called Legacy. The acquisition is the first for the e-tailer's newly launched publishing banner, AmazonEncore. Amazon is re-releasing the fantasy title, in hardcover, in August. The book, by Cayla Kluver, is part of a planned a trilogy–it was published under the banner Forsooth Books, founded by Kluver and her mother–and, according to Amazon, is the first in a currently unknown number of titles from AmazonEncore.

Economic theory predicts that if Amazon were to start publishing, it would publish nobodies rather than established star writers.  Can you explain why?

The third health care cost fallacy

by  Tyler Cowen in

Let's start with a correct claim:

The fiscal outlook is grimmer than before, therefore we should spend less on health care reform than I used to think.

I'm willing to make a comparable admission when it comes to tax cuts, so will you sign on to this claim about health care and revise your policy prescriptions accordingly?  (Unless of course your previous estimate had forecast the current revenue situation; Nouriel Roubini could claim this.)

If you do not sign on to this claim, you are committing the third health care cost fallacy.  Note also that your support for non-revenue-intensive means of health care reform might well go up, for related reasons.

You will find fallacies one and two here and here.  Might there be TANSTAAFL deniers who commit all three?

Addendum: Megan McArdle offers some related sentences to ponder:

Conversely, if there is some political or institutional barrier which is preventing you from controlling Medicare cost inflation, than that barrier probably is not going away merely because the program covers more people.  Indeed, to the extent that seniors themselves are the people blocking change (as they often are), adding more users makes it harder, not easier, to get things done.

Seasteading

by  Tyler Cowen in

First, I agree with Will Wilkinson that a seasteading community would likely evolve back to non-libertarian political visions. 

Second and more fundamentally, I am for the seasteading idea.  There are today many oil derricks, owned and run by energyl companies.  There are many cruise ships, with more or less autonomous legal governance.  More and bigger cruise ships would be better and if some of them moved more slowly that would be fine too.  But when I step on to a cruise ship (well, actually that's the sort of thing I don't do; personally I hate cruise ships), I don't feel I am moving from an inferior political order to a superior political order.

I've wondered whether I should retire on to a cruise ship of the future, but I'm not attracted per se by the "politics" I would get there.  I would expect more freedom in the Lockean sense but less of the positive freedom that comes from living in a larger, more diverse, and yes also a more stupid society.  I wouldn't live on the Mensa cruise ship either.  I'll take some of the stupidity of modern society (the landlubbing version) to get the diversity and the greater number of open niche spaces and free possibilities. 

On a smaller scale, I live under different kinds of corporate, non-profit and university governance all the time.  That's great, but I don't view their totalized extension as my preferred utopian path.

I'd like people to be smarter, more thoughtful, more tolerant, and more loving of liberty, yet in ways which do not drain away the diversity of the United States, which I feel is the best available foundation to build upon.  No matter how good a seasteading charter may sound, any given venture just can't be that credible until it has succeeded for a very long time.  History and precedent matter and by the way have you checked in on Estonia lately? 

Addendum: Here is Alex on seasteading.

Robin Goldstein is excellent

by  Tyler Cowen in

He writes to me:

Also wanted to let you know that I've just started a new blog, "Blind Taste" (http://blindtaste.com),
which covers the food and wine worlds from an edgy, unusual
 perspective that draws from neuroscience, economics, and, of course,
gonzo journalism.

If you will recall, he is one of the guys who wrote the paper about pâté and dog food.  Robin Goldstein and I once sat down over pescado saltado to compare notes on D.C. (and global) food and, while you cannot take me as speaking for him in any formal sense, we agreed to an astonishing degree.  Here is his critique of molecular gastronomy.

More health care cost fallacies

by  Tyler Cowen in

This comes from Robert Reich but you will find it all over the place:

Social Security is a tiny problem. Medicare is a terrible one, but the
problem is not really Medicare; it's quickly rising health-care costs.

You would think it is hard to resist the fiscal conservatives' core argument — X is slated to grow a lot in cost, therefore we have at least one reason to spend less on X — but such resistance is becoming a growth industry.

There are two simple points in response.  First, it matters whether a given expenditure shows up on the balance sheet of the government or not.  It matters for the incentives of our government, for its credit rating, for future marginal rates of taxation, and ultimately for the future of the health care (or other) sector.

Second, if Medicare were less generous, much less would be spent on health care.  Now you might think that would be a bad result and that of course a debate worth having.  But the mere fact that you favor some amount of Medicare does not lower the cost burden of the amount you favor.  If your preferred policy induces say "40 percent more of health care costs," you can't put all the blame on the preexisting level or path of health care costs.  You also have to accept responsibility for the 40 percent boost or whatever the increment is.