Bookforum update

You may recall that we are having the first MarginalRevolution BookForum on Greg Clark’s A Farewell to Alms: A Brief Economic History of the World.  Here is my previous post on the book and how the forum will work.  It’s a great book and I recommend it highly.

Orders from loyal MR readers have been very strong, and many (all?) of you are receiving emails from Amazon.com about publication delays for the book.  The publisher assures me that they are working hard to fill all orders in a timely fashion and the final delay is likely to be a slight one rather than a long one into October.  Early September is looking like the time we will start discussing the book.  But I’ll keep you posted as we hear more…

Are economists just dirty, stinkin’ liars?

I loved this post.  Excerpt:

AAARGH!!! Foreign Policy, the People magazine of international affairs has produced a column entitled "5 Lies my Economist Told me". The problem is, they are either not really lies or else not really what a professional economist would say!!

The dissection then proceeds.  How about this line?

I think there are a lot of countries in
the world who’d be thrilled to have a financial crisis because it would
mean they had experienced some foreign investment.

Get my book for free

Yes my book is out today (B&N here) but you don’t need to buy it.  You can get it here for free.

How?

It is simple.  Just write in the comments section some reason why you should get my book for free.  I will mail free copies to the first fifteen commenters to meet the following conditions:

1. Your comment must offer a reason why you should get the book for free.

2. You must explain that reason in a moderately-sized paragraph or more.  "Just cuz" does not qualify.

3. Your paragraph must address why you should get the book and why you should get it for free.

4. You must believe your reason.

Then email me with your mailing address (to my normal gmu email, and so I know you are you please put your real name on your posted reason as well) and I will send you a copy, through Amazon, at my own expense.  You know, at first I thought I would get the publisher to put up copies for this but then I realized no, I ought to be paying for the books myself.  I’m not even using an author’s discount.

I wish I were a wealthier man, but I am offering only fifteen copies right now.  Any future copies will be offered abroad, not in the U.S.

I am very interested in the idea of what it means to have a reason.

Sadly, no matter how good your reason, I cannot send more than one copy to you.

Addendum: This offer is restricted to the United States and Canada.  I am worried that the first copies to go out otherwise would end up in the hands of a single Nigerian spammer, plus Amazon does not ship worldwide.  Nonetheless I hope to make a similar offer to the broader world in the future, with appropriate safeguards.

Second addendum: The first fifteen slots have now been awarded…

Can you judge a book by its cover?

I read Darfur: The Ambiguous Genocide, by Gerard Prunier, and was quite impressed.  I thought "what a smart and unbiased introduction to such a difficult topic."  But why was I impressed?  I don’t know nearly enough about the topic to judge the material.

I was impressed because the author sounded so reasonable and so intelligent.  But I can’t cite any really good reason to believe this was more than a trick.  Prunier sure didn’t seem as if he were trying to talk me into a hidden agenda.

Bryan Caplan offers his heuristics for trusting a source or not; here’s Arnold Kling on the same.  Here’s David Henderson’s podcast on disagreement.

I tend to trust sources who use their intelligence to point out flaws in their own positions.  But is this more than an aesthetic preference on my part?  What’s so trustworthy about that?  Maybe I’m just looking for people who remind me of myself, and what’s so good about me anyway?

If my trust standard works, it is only because not so many people use it.  If more readers trusted on the basis of "using intelligence to publicly question one’s foundations," that standard might be too easily to manipulate.

In other words, it is the stupidity of much of the audience (they can be fooled by simple tricks, complex tricks are not needed) which makes it possible for the more sophisticated readers to read signs of intellectual dishonesty and get closer to the truth.

Let’s say you have a medium — call it a blog — which is read only by very smart people.  Simple, relatively discernible tricks won’t be used.  Should those readers then have a special distrust of the authors? 

The Bottom Billion

Paul Collier’s The Bottom Billion is the best economics book not written by a dear friend that I have read this year, it’s full of serious, important ideas and the writing sparkles.

You won’t find a better explanation of the time consistency problem, for example, than this brief bit on the Chad-Cameron pipeline.  As you may recall, the World Bank lent Chad money for the pipeline on condition that the money would be controlled not by the government but by an independent panel, the "College," with members drawn from civil society. 

The deal was that the government of Chad would pass a law establishing the College, and in return the oil companies would sink $4.2 billion of investment into oil extraction.  Now ask yourself which of these is easier to reverse, the law or the investment.  Once you have answered that, you have understood the time consistency problem…

Brilliant.  Collier then goes on to make the important point that the idea of giving control of resources to independent service organizations rather than to governments is in many cases a good one but the idea applies better to aid than to oil because…

With aid you do not have to sink $4.2 billion in order to get started.  It is just a flow of money that can be switched off, unlike the flow of oil.  Knowing this, the government has no incentive to tear up the deal.

Here is Tyler on the Bottom Billion.

Insurance markets in everything, getting caught edition

"My favourite ticketing system was in Mumbai, India," Kim enthuses. "No one actually buys a ticket, but you can buy ‘ticket insurance’ from private entrepreneurs who work at the entrance of the station.  The ‘ticket insurance’ is about half the price of a regular rail ticket.  It gives you a guarantee that, in the extraordinary event that you are booked by a railways inspector for taking a free ride, your fine will be paid.  A relative was once booked and the ticket insurer paid the fine exactly as promised."

Here is the link, and thanks to Brendan Leary for the pointer.

The bill to raise the value of the yuan might pass

So reports The Washington Post.  It is worth reviewing (my interpretation of) Milton Friedman:

1. Attempts to stabilize nominal exchange rates, as the Chinese are doing, can in fact be destabilizing, since the eventual adjustment will often come suddenly rather than gradually.

2. Accelerating that adjustment by passing laws aimed at foreign countries is unlikely to be a good idea.  The laws encourage a sudden adjustment now, become a focus on rampant speculation, and the target of the laws is unlikely to react with good grace or feel gratitude. 

3. In the long run a country can peg its nominal exchange rate but not its real exchange rate.  In other words, if the Chinese lower the value of the yuan sooner or later Chinese prices will rise to restore the appropriate terms of trade.  Sterilization of flows (e.g., soaking up Chinese money supply by selling bonds) can succeed for only so long and eventually the problem will cure itself.

4. We might have to actually apply the punitive tariffs.

In other words, this development is really bad news.

Medicare for everyone, part II

Here is an excellent NYT column on health care, by Alex Berenson.  The bottom line is this: U.S. medical care costs are so high for (at least) two key reasons: a) personnel costs are much higher than in Europe, and b) U.S. doctors usually are paid fee for service, rather than fixed salaries.  That leads to much more spending, for obvious reasons.

Keep this in mind next time someone tells you that America can cover everyone through a single payer system at lower expense.  Berenson continues:

Medicare, especially, does not like to second-guess doctors’
clinical decisions, said Dr. Stephen Zuckerman, a health economist at
the Urban Institute. “There’s not a lot of utilization review or prior
authorization in Medicare,” he said. “If you’re doing the work, you can
expect to get paid.”

As a result, doctors have steadily increased
the number of procedures they perform on Medicare beneficiaries – and
thus have increased their income from Medicare, Dr. Zuckerman said. But
the extra procedures have not helped patients’ health much, he said. “I
don’t think there’s any real strong evidence of improvements in health
status.”

This same incentive is weaker when doctors are paid fixed salaries.  One key question for single payer advocates is the following:

Through what mechanism will you replace doctors’ fee for service with fixed salaries?

In closing, let me quote the always-worth-reading Matt Yglesias:

…when it comes to defending the interests of powerful, entrenched local groups, Democrats are usually about as bad as Republicans.