Results for “kremer”
77 found

First debug the child, then the computer

The idea of computers as liberators appealed to Silicon Valley philanthropists and Nicholas Negroponte could certainly tell a compelling story but, as Timothy Ogden explains, today the one laptop per child project seems to be in technical and financial trouble, the evidence that computers increase learning either in the classroom or at home is weak and the demand for the computers (as opposed to say cell phones (pdf)) in the developing world is low.  Meanwhile, simpler, cheaper approaches with proven evidence are not being fully exploited.  Here's Ogden.

The simplest and least costly of these programs is deworming. Nearly 2 billion people around the world are affected by parasitic worm infections, with children disproportionately affected. While each variety of parasitic worm affects a person differently, they all take a substantial toll on growth, energy and attention, with entirely predictable impacts on school attendance and learning. Harvard economist Michael Kremer has studied the impact of mass deworming in Kenya and India. Delivering deworming medication costs 50 cents per child per year in Kenya but yielded a 25 percent increase in school attendance; a similar program in India cost $4 per student per year and yielded a 20 percent attendance gain. "This is a simple, cost-effective and yet tragically not-done program. It's a scandal that [deworming] hasn't been addressed," Kremer says. There are spillover effects as well. "The most surprising thing about the study in Kenya was the widespread impact," Kremer says. The program drove down infection rates for several kilometers around the schools, he says, and there were significant improvements in attendance for untreated students, in the treatment schools as well as in nearby schools not in the program.

Read the whole thing.  Help to deworm the world.

Hat tip to Alanna Shaikh via Chris Blattman and also to Dan in the comments.

A Biological Model of Unions

That’s the title of a paper by Michael Kremer and Benjamin Olken.  The bottom line is:

…a union that implements workers’ preferences will not be evolutionarily stable.

The union that survives must either extract fewer rents for the workers (thus lowering anti-union expenditures from the employer, or helping keep the employer in business) or spend excess funds on organizing and bolstering union membership in the broader economy.  A union that spends on membership and organizing drives tends to spread from one firm to the next.  If a union were truly controlled by its members it would take lots of current rents with little concern for the longer-term future of the firm or for the longer-term future of the union.

Here’s a neat paragraph:

The dynamics of unionization levels also bear a similarity to those under the Susceptible-Infected (SI) model of epidemiological dynamics…In that model, new potential hosts are born uninfected; the chance that they become infected increases with the number of hosts already infected; and once hosts are infected, they stay infected until they die.  Note that this comparison is purely positive, not normative.

Yes the paper does offer some evidence but it is more interesting as a theory piece.  Here is an earlier ungated version, there is also 2001 version listed at NBER and here is the current version.

More Sex is Safer Sex

In More Sex is Safer Sex Steven Landsburg famously argued (based on work by Michael Kremer) that if more people, especially more sexually conservative people, had sex the AIDS epidemic could be reduced.  Landsburg wrote:

Imagine a country where almost all women are monogamous, while all men
demand two female partners per year. Under those circumstances, a few
prostitutes end up servicing all the men. Before long, the prostitutes
are infected; they pass the disease on to the men; the men bring it
home to their monogamous wives. But if each of those monogamous wives
were willing to take on one extramarital partner, the market for
prostitution would die out, and the virus, unable to spread fast enough
to maintain itself, might well die out along with it.

In The Wisdom of Whores (see also my earlier post) Elizabeth Pisani says that such a country exists, it’s Thailand, and the results of more sex was safer sex – exactly as Landsburg argued. Here’s Pisani’s story:

Thailand used to fit the the classic ‘virtuous girls, philandering boys’ model.  At the start of the 1990s, 57 percent of twenty-one-year-old men in Northern Thailand trooped off to the brothel to do their philandering.  More than half the sex workers who soaked up their excess energy were HIV-infected….

Then…the Thai economy boomed.  Girls were getting better educations than ever before…Educated girls were waiting longer before getting married, but not before having sex.  By the end of the 1990s, 45 percent of girls aged 15-21 in northern Thailand admitted to having sex with boyfriends before marriage, compared to less than a tenth of that in a nationwide survey in 1993.

…So at the end of the decade, we have a lot more premarital sex and not all that much condom use with girlfriends.  But now that these young, cash-strapped guys can have sex without paying, they’ve stopped handing over cash for sex.  By the end of the 1990s, only 7 percent of young men were paying for sex, and HIV prevalence in sex workers had come down too.

….In short, more women having premarital sex equals less HIV.

Pisani cites neither Landsburg nor Kremer so I believe her account is independent.  Note that Pisani also credits Thailand’s successful condom program.

Assorted links, revised

1. Monkey wars?

2. Bolivian decentralization

3. A new Amazon feature: who writes short and long sentences?

4. Farewell to Alms MP4: Tyler Cowen, Brad DeLong, and Greg Clark.
It was much fun, as Brad and I realized we hadn’t seen each other since
graduate school.  Greg goes first, we each speak for about fifteen
minutes, Brad presents Michael Kremer, I talk about institutions, then
there are questions from the audience.

5. "After losing embassy employees to attacks, he advised staffers to keep a six-sided die in their glove compartments; to thwart ambushes, they should assign a different route to work to each number, he said, and toss the die as they left home each morning."  More here.

A prize for the Edwards plan?

I am awaiting details but this proposal from John Edwards is not entirely crazy.

Mr. Edwards said he wanted to discourage pharmaceutical companies from
obtaining long-term patents on medicines for specific ailments like
Alzheimer’s and cancer. Instead, an upfront cash prize would be made
available to serve as an incentive for research on such drugs.

I worry, however, that the prizes will be far too small.  Since the social value of breakthrough medicines greatly exceeds the private profit, prizes of tens of billions of dollars would not be unreasonable.  In fact, optimal prizes must increase the profits of US drug companies.  Can a Democrat like Edwards sell that?  And who will decide how the prizes are handed out?  Can the US government award billions of dollars in prizes without significant rent seeking?

Partly for these reasons, I would much prefer a patent buyout as suggested by Michael Kremer (Kremer’s paper can also be found in Entrepreneurial Economics.)  Let’s at least have a few experiments to buyout say 5 years of the time remaining on some important patents.

Do keep in mind that the problem of expensive drugs is overblown – a typical new drug will go off patent in 12 years anyway.  The real issue is how best to increase the incentive to develop new and important pharmaceuticals.

Should endangered antiquities be leased out?

Michael Kremer has another neat idea:

Most countries prohibit the export of certain antiquities.  This practice often leads to illegal excavation and looting for the black market, which damages the items and destroys important aspects of the archaeological record.  We argue that long-term leases of antiquities would raise revenue for the country of origin while preserving its long-term ownership rights.  By putting the object into the hands of the highest value consumer in each period, allowing leases would generate incentives for protection of objects.

I’m all for trying this, as I see no major downside.  But I don’t think it would have a large positive effect.  Collectors, being irrational creatures and "completists," wish to own rather than lease, even if the lease extends past their expected lifetimes.  Museum donors wish to fund museum acquisitions more than museum borrowings.  Similarly, it is much easier for a non-profit to raise money for buying a building than leasing one long-term.  So the demand for leased antiquities won’t be all that huge.

Does eliminating disease spur economic growth?

A loyal MR reader asks:

…is the flow of research against malaria and other targeted diseases
good or bad (or mixed) for the recipients?  I have been a believer that
eliminating diseases would have a big impact on economic growth, but
Foreign Affairs recently had an article attacking the concentration of
charity dollars in a few diseases as tending to distort funding
allocations away from the most important local needs.

The fight against disease, taken alone, won’t improve matters much.  There are, let’s say, thirty different major problems in sub-Saharan Africa.  Eliminating any one of these problems will hardly matter, even if there is no Malthusian trap.  Economic growth is all about complementary factors, and more generally it is hard to produce outputs of real economic value.

I favor Michael Kremer’s plan to offer prizes for vaccines against diseases in poor countries.  It doesn’t cost a fortune, and its successes are as likely to boost other forms of aid as take away from them.  The lives are worth saving for their own sake, and perhaps it will herald a larger push out of misery.  But, taken alone, such an initiative won’t much improve measured economic growth.

On the other side of the debate, this Jeff Sachs paper argues that disease kills the young, thereby requiring excessively large families as a form of insurance, and underinvestment in the human capital of each child.  Limiting disease might reverse this negative dynamic, though I am less inclined to see any unique lever in this kind of vicious cycle.

#42 out of 50.

The economic effects of immigration

and Watt argue that as more immigrant women serve in household
positions, more high-skilled native women are therefore available to
join the labor market, driving down relative wages among high-skilled
workers and reducing the disparity in wages between low- and
high-skilled workers.

Here is the paper, and that is via Greg Mankiw.  I’ll say it again: it is not frequently enough recognized that the gender of immigrants is a major policy issue.  Female immigrants bring fewer problems than do male immigrants, and they encourage the male immigrants to behave better, but of course they also, in the longer run, mean a greater demographic shift in favor of the immigrants and their culture.

Use foreign aid to prevent catastrophe?

Our research find that a 5% drop in per capita income due to drought increases the likelihod of a civil conflict [in African countries] in the following year by nearly one half.  That’s a very large effect.

…Currently, most foreign aid focuses on long-term investments in infrastructure of education but does little to deal with such short-term triggers of violence as drought or falling export commodity prices.  But our research suggests a larger share of aid should aim to dampen the sharp falls in income that actually generate recruits for rebel movements.

That is from Edward Miguel, p.14 of Business Week, edition of 18 September.  My main worry is that these are the societies where foreign aid is least likely to find its way into the hands of the poor.  In fact the distribution of the aid might, at the margin, make the plum of political power all the more appealing to would-be rebels.  Keep in mind that many of these civil wars are led by elites, not the starving poor.  (So what is the mechanism linking drought and conflict?  Focality?)  Nonetheless I am sympathetic with the basic idea that simply preventing catastrophe is often the best that aid can do.

Here are links to the guy’s working papers and the data set for this paper.

Here is Bill Easterly on what the World Bank should be doing, namely focusing on modest and measurable projects, in the name of accountability.  Michael Kremer argues the World Bank should support global public goods.  Here are other views, courtesy of New Economist blog.

The best idea I heard today

…in a wonderful but still unpublished paper titled "Should Taxes Be Independent of Age?" my Harvard colleague Michael Kremer suggests that younger workers should face lower income tax rates than older workers.

Quite simply the elasticities of the young are larger; Greg Mankiw has more.  Get this:

Kremer estimates that young workers are about four times more responsive to work incentives than the middle aged.

Tyler Cowen pretends he is a Democrat

If I were a Democrat…

First, I would not cite evidence about how Western European countries spend less on health and are healthier than U.S. citizens.  This data set, if you take it seriously, also implies that the marginal product of more health care, adjusting for income and a few other variables, is zero.  Expanding health care would not be important.  Now I believe this is an incorrect conclusion, but that is what shows up in this data.  We should not invoke this data selectively.

Second, I would recognize that American policy generally works (or doesn’t work) by building upon existing institutions.  The most likely form of national health care — for better or worse — would extend a version of Medicare to more people.  This would not lower health care costs, whether in gross or quality-adjusted terms.  Keep in mind that negotiating price reductions does not per se lower real resource costs at all. 

I would disaggregate health care systems and see where we could do the most good:

1. Step up R&D subsidies through the NIH and our university system, both high quality institutions.  Their autonomy and micro-fiefdoms provide a good framework for risk-taking and innovation.  The returns to medical R&D are extremely high.  Furthermore the case for market failure, based on the inability to capture the full social gains from a new idea, is simple. 

2. Redo the Medicare drug bill so that people can understand it (even I can’t, nor does my mother), and so more people benefit.  If need be, we can do this in budget-neutral fashion.  The Bush plan is a mess.

3. Invest in local public health systems.  Preventive care is important, especially for the poor.  Price can be an obstacle but often the relevant constraints are behavioral in nature.  Public health care systems should be easy and inviting, and they have to become part of life routines.  Government can be part of the solution.  Strong local public health care also will improve surveillance and later surge capacity if a pandemic comes along; this added benefit is significant.

4. Borrow a page from the libertarian litany about the FDA.

5. Institute prizes for successful vaccines.  We have been discouraging vaccine production when we should be encouraging it; Michael Kremer has some intriguing proposals.

All those options are doable.  All would save lives.  None are fiscal disasters.  They offer something for both rich and poor.  They lay out a positive and constructive role for government, while keeping room for the private sector.  None raise the prospect of excess bureaucracy or discourage innovation.  None rest on the questionable belief that government as single supplier or payer would improve efficiency.  And they are all areas where the Republicans are dropping the ball.

I would cut talk of national health insurance.  I would cease obsessing over the number of "40 million uninsured," however good a debating point it may be.  Many of these people are either linked to immigration or get decent medical coverage in any case.  I would admit that we cannot take care of everyone and that we face tough trade-offs.

Hmmm…these counterfactuals are fun.  What should I try next?  Pretending I am a Republican?  But for now, it is back to normal life…and so we return to your regularly scheduled programming.  But comments are open, in case Kevin Drum’s readers wish to pretend they are libertarians…

Can we cure world poverty for $150 billion a year?

Jeff Sachs says yes.  Daniel Drezner offers excellent links, background, and context.  Here is one summary of Sachs’s view:

through no fault of its own, is trapped. Held back by geographical
impediments like climate, disease and isolation, it cannot lift itself
out of poverty. What Africa needs, then, is not more scolding from the
West. It needs a ”big push” — a flood of foreign aid — to boost its
prospects and carry it into the developed world.

Sachs’s article in this week’s Time is maddeningly vague — "Commit to the Task" and "Adopt a Plan of Action" count among the policy recommendations.  But how far will $150 billion go?  By Sachs’s own count, over one billion people live in extreme poverty; the next billion up would count as very poor under any Western standard.  Round down grossly to a billion and you have about $150 per head per year to play with.

My take: No way.

I’ll start with two admissions.  I have been an admirer of Sachs, and I don’t think all foreign aid fails.  But $150 billion a year won’t get us very far.

Let’s say you had ten years’ worth of contributions upfront, and invested the whole $1500.  You would be very very lucky to reap 10% a year.  That is a flow of $150 in yearly living standards.  It will buy some fertilizer and mosquito nets but it probably won’t up returns above the ten percent level. When the East Asian countries made beneficial social investments they grew at about ten percent per annum and that is a best case scenario. 

Then come the traditional problems of foreign aid.  Not only is there wastage in aid administration and poor spending patterns, but many essential services simply are not there to be purchased.  Infrastructure requires complementary goods — tractors need roads, and vice versa — which means that the early stages of growth are slow and cumbersome.  Furthermore very poor communities often try to convert their aid into consumption by refusing to perform maintenance on the new capital stock.

I’ll count per capita income of $1000 a year (roughly Guatemala or Morocco) as "no longer very poor."   Given this number, I’ll guesstimate that Sachs’s plan would eliminate severe poverty for about five to ten percent of the one billion very poor, provided the money is spent in concentrated fashion. 

Should I be reminded of James Glassman’s Dow 36,000?  Sooner or later the claim will likely be true.  With (or without?) an extra $150 per capita per year, most poverty will someday end.  But when?

OK, you can’t judge a whole book by a Time magazine summary, especially not when it is by a thinker of Sachs’s caliber.  So I’ve ordered The End of Poverty, and I will pass along any further impressions once it arrives.  In the meantime, it looks as if Sachs is overselling on behalf of a noble cause. 

Whatever we are going to spend fighting international poverty, I would spend on freer immigration, keeping in mind that ongoing remittances will kick in over time.  We also could send a small military mission to Darfur, and focus our aid on one "doable" country or region.  I am a believer in demonstration effects; get it right once, and the world will beat a path to your door.

Addendum: Matt Yglesias offers his views, and William Easterly’s review is very critical of Sach’s policy suggestions.

Prizes for vaccines for the poor

One way to structure a vaccine comitment would be to guarantee a price of, say, $15-20 per person for the first 200-250 million people immunized, in exchange for a commitment from the developer to subsequently drop the price in the poorest countries to a modest markup over manufacturing cost.  A commitment of this size would offer firms an opportunity for sales comparable to those available in commercial markets.  It would be extremely cost-effective, saving more lives than virtually any imaginable health expenditure.

That is from Strong Medicine, by Michael Kremer and Rachel Glennerster.  The authors have an excellent book and a noteworthy idea, but I have some worries.

Some poor countries, such as Ghana, have quasi-functional government.  But other governments won’t allow this to proceed unhindered.  Remember when some Nigerian states banned the polio vaccine for (supposedly) spreading sterility and AIDS?  That is an extreme example, but how about this?

In Africa, for example, it is estimated that only between 2-15% of children slept under bed-nets in 2001-a simple, effective and proven method to prevent malaria.   

If the cure for AIDS were a single glass of clean water, millions of the infected still would die.

This is why economic development is so hard and so resists formulaic treatment.  Correcting any single screwed up incentive won’t bring as big a payoff as you might think, given how many other things are screwed up.  We have to go one step at a time, but every step brings both short-term costs and political opposition, while not showing much in the way of immediate benefits.

Prizes work best when the prize-giver is aiming at a well-defined end, where success is easy to measure.  This fits "inventing a malaria vaccine" better than "distributing a malaria vaccine."  I would be willing to try this scheme, given the high upside returns.  But it is quite possible we could go ten years or more without seeing much in the way of tangible results, even once something is invented.

More on Vaccines

Though Alex has already blogged about the Kremer/Snyder paper on vaccines versus cures, there are, I think, a couple of comments worth adding.

According to Kremer and Snyder, monopoly sellers would rather sell cures than vaccines. To get this result, they need some heterogeneity: we all have different probabilities of getting sick (though we all find it equally costly to get sick).

But what if you introduce the opposite kind of heterogeneity? (That is, we all have different costs of getting sick, even though we all face the same probability of getting sick.) Then it’s a nice little exercise for your students to show that the cure and the vaccine are equally lucrative monopolies (ignoring the positive externalities of the vaccine).

A more important observation: In the Kremer/Snyder setup (still ignoring positive externalities), it’s a good thing for sellers to invest in cures rather than vaccines. The reason cures are more profitable is that they in essence allow perfect price discrimination. So with cures, there’s no deadweight loss due to monopoly; with vaccines there is.

The analysis changes if you assume, say, that a vaccine prevents a four-day illness, but a cure only cuts two days off your illness. Then vaccines might or might not be socially preferable to cures—but in that case, willingness-to-pay for vaccines versus cures would double. This gives sellers an incentive to produce vaccines. The incentive isn’t perfect, but it goes in the right direction.

Vaccines: The Long Run

Yesterday I discussed some of the reasons for the current shortage. Today, I will discuss an important paper by Michael Kremer and Christopher Snyder. Kremer and Snyder argue that for the same cost and effectiveness drugs are more profitable to produce than vaccines. As a result, private incentives bias the market against vaccines.

A well known reason is that some people free rider on vaccine provision. When you are vaccinated, I benefit from one less possible transmitter. As a result, some who benefit do not pay. Drugs, in contrast, offer more excludable benefits thereby increasing demand and profits.

Drugs also provide a very natural method for firms to, in effect, price discriminate.

A simple example suffices to illustrate this point. Suppose there are 100 total consumers, ninety of whom have a ten percent chance of contracting the disease and ten of whom have a 100 percent chance. Suppose consumers are risk neutral and are willing to pay 100,000 to be cured of the disease if they contract it. A monopolist selling a vaccine could either charge 100,000 and sell to the ten high-risk consumers or charge 10,000 and sell to all 100 of them. Either way, the monopolist’s revenue is 1,000,000. A monopolist selling a treatment would, in expectation, sell to the nineteen consumers contracting the disease (all ten of the high risk consumers as well as an average of nine consumers from the low-risk group) at a price of 100,000 for a total revenue of 1,900,000, almost twice the revenue from a vaccine.

Damn, that’s clever. I wish I had thought of that.

Having praised Kremer and Snyder I now must say that I am not convinced that the forces they discuss matter very much. First, if the pharmaceutical market is competitive and vaccines pay then they will be produced even when drugs would be more profitable to a monopolist. K&S underestimate the competitiveness of the pharmaceutical market.

Second, my suspicion is that nature and science combine to make it the case that some diseases at some times are better treated by vaccines and other diseases by drugs. K and S’s model works best if there are many cases where drugs and vaccines are close cost-substitutes. Firms then choose drugs even when vaccines would have been more desirable. I think, in contrast, that cost differences will usually exceed the profit differences. On the margin, K and S are correct but suppose vaccines had been subsidized would we today have an AIDS vaccine? I doubt it.

I’m not necessarily against their conclusion, however, that vaccines should be subsidized relative to drugs. It’s sad to say, therefore, that as discussed yesterday we currently do precisely the opposite.