Results for “becker”
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Is the Medicaid access crunch about to explode?

The impact will vary by state, but a study by the Urban Institute, a nonpartisan research organization, estimates that doctors who have been receiving the enhanced payments will see their fees for primary care cut by 43 percent, on average.

Stephen Zuckerman, a health economist at the Urban Institute and co-author of the report, said Medicaid payments for primary care services could drop by 50 percent or more in California, Florida, New York and Pennsylvania, among other states.

That is from Steven Lee Myers and Jo Becker, there is more here.

The Reversal of the Latitude-Income Correlation

It’s well known that GDP per capita increases with distance from the equator and it does so moving both North and South. (I discuss this correlation at MRU in Geography and Development, Disease (video)). Dietz Vollrathat at the Growth and Development Blog points us to a new paper by Holger Strulik and Carl-Johan Dalgaard that shows that development used to be greater nearer the equator. Here’s the big picture.

The top panel shows that as absolute latitude (distance from the equator) increases today so does development, here measured as the urbanization rate. The left panel shows the world. The right panel shows, rather remarkably, that the relationship continues to hold in Europe.  The bottom panel shows that as absolute latitude increased in 1500 development, here measured as population density, decreased both in the world and Europe.

LatitudeIncome

What can account for this relationship and its reversal? The authors have a let’s say highly speculative (but very interesting!) theory. It runs as follows. Animals and people get bigger in colder climates possibly because surface area to volume decreases with size so larger animals can retain heat more easily. All else the same, however, bigger people means fewer people and so in the pre-industrial era higher latitudes had smaller populations leading to less innovation (ala my TED talk on market size and innovation). But fewer children also meant more investment in human capital per child (a Beckerian quality-quantity tradeoff). Higher human capital per child leads to increases in technology which allow and encourage even more human capital accumulation and fewer but yet even higher quality children and thus you hit a takeoff point where the economies of the colder regions accelerate generating the modern relationship.

Phew! Now that’s a theory. I don’t say that I believe it but I applaud the ambition. Bravo!

What alternative theories do MR readers propose?

What is the welfare cost of Amazon supply restrictions on books?

Maybe that welfare cost is not very high at all.   After all, if Amazon does not carry a book you can sign up at the Barnes & Noble website and that takes a few minutes at most.

There is a tension in most criticisms of Amazon.  On one hand, the critic wishes to argue that a “not carry” decision by Amazon has a big impact on how a book does.  On the other hand, the critic wishes to argue that the loss of access to particular titles is a big deal.  You cannot easily have it both ways.  If readers won’t switch to B&N.com, they must not care very much about particular titles, in which case the Amazon refusal to carry (or delay in shipping) is small even relative to the size of the (small) trade in books.

Krugman’s column today, which covers Amazon vs. Hachette, appears terrible at first glance, but in fact he presents a new and original argument.  Get past the mood affiliation and you come to this:

…what Amazon possesses is the power to kill the buzz. It’s definitely possible, with some extra effort, to buy a book you’ve heard about even if Amazon doesn’t carry it — but if Amazon doesn’t carry that book, you’re much less likely to hear about it in the first place.

If I may fill in some blanks, one possible version of the hypothesis — to pull an idea from Gary Becker and Steve Erfle — is that readers consume both “books” and “buzz around books” as complements.  The marginal gains from books can be low but the marginal gains from the bundled package may be much higher and those higher gains will not be measured by the (high) price elasticity of book purchases.

In the early stages of this war, Amazon boycotts have often increased the buzz for a book, such as with Beth Macy’s Factory Man.  But if these practices continue, they will cease to be news stories and an Amazon refusal to carry or promote plausibly will damage how books will do, without much potential for upside.

How much of the value in a book/buzz package is due to the buzz?  65 percent?  That would explain the concentration of reading interest among bestsellers and books your peers are reading.  But if Amazon won’t carry or promote a book, does the total supply of buzz fall?  Or does the buzz simply transfer to other titles?  In the latter case we are again back to small welfare costs from an Amazon refusal to carry.  Krugman’s idea is fun, but I am still inclined to think the welfare cost of Amazon supply restrictions on individual books likely is small, again even relative to the size of the book sector, much less relative to gdp.

It is fine to argue that Amazon is being unfair to some authors and to object on ethical grounds.  The economist also should add that readers don’t seem to mind very much.  Most of the objections I am seeing are coming from authors and publishers, who of course in this sector are much less diversified in their interests than are readers.

Should we hope to live to very ripe old ages?

I say yes.  A number of you have been asking me for comments on this now-famous Atlantic piece by Ezekiel Emanuel.  You should read his whole argument, but here is one bit:

…here is a simple truth that many of us seem to resist: living too long is also a loss. It renders many of us, if not disabled, then faltering and declining, a state that may not be worse than death but is nonetheless deprived. It robs us of our creativity and ability to contribute to work, society, the world. It transforms how people experience us, relate to us, and, most important, remember us. We are no longer remembered as vibrant and engaged but as feeble, ineffectual, even pathetic.

Ezekiel basically wishes not to live beyond age 75.  Not that he will do himself in, but he regards that as a limit past which it is probably not desirable to go.  Just to be clear, I don’t read Emanuel as wishing to impose or even “nudge” this view on others, he is stating a personal vision.  Still, it strikes me as a somewhat strange approach to understanding the value of a life or estimating when that value ends.  The value of an individual life is to be sure somewhat ineffable, but for that same reason it is difficult for a life to lose so much of its value.

It is easy for me to see how a person could be a valuable role model for others past the age of seventy-five.  I expect Ezekiel in particular to fulfill this function superbly.  I still think frequently of the late Marvin Becker, the Princeton (later UM) Renaissance historian, who for me was an important role model at the age of seventy-seven.  Marvin often used to say “Oh, to be seventy again!”  He had more than his share of aches and pains, but he was always a comfort and joy to his wife Betty, and most likely to his children and grandchildren as well.

Or visit the list of words in Emanuel’s paragraph, cited above.  Many people are “disabled” to begin with, and many other lives are “deprived” to begin with, for one thing most of the lives in the world’s poorer countries.   But they are still, on the whole, extremely valuable lives.  I don’t just mean that external parties should respect the rights and lives of those persons, but rather internally and individually those lives are of great value.

To pick another word from that paragraph, “creativity” is overrated and most of us do not have it in the first place.  And if one does have it, perhaps its passing is in some ways a liberation rather than a personal tragedy.

I would rather be remembered as “that really old guy who hung on forever because he loved life so much” than as vibrant.  At some points I felt this piece needed a…marginal revolution.

And to sound petty for a moment, I don’t want to pass away during the opening moments of a Carlsen-Caruana match, or before an NBA season has finished (well, it depends on the season), or before the final volumes of Knausgaard are translated into English.  And this is a never-ending supply.  The world is a fascinating place and I fully expect to appreciate it at the age of eighty, albeit with some faculties less sharp.  What if the Fermi Paradox is resolved, or a good theory of quantum gravity developed?  What else might be worth waiting for?

I cannot help but feel that Emanuel is overrating some key aspects of what are supposed to be making his current life valuable, and thus undervaluing his future life past age seventy-five.  (See David Henderson too on that point.)

It was Dan Quisenberry who once said: “The future is much like the present, only longer.”

More to the point, and coming from the marginalist camp, there is Art Buchwald, who noted: “Whether it’s the best of times or the worst of times, it’s the only time we’ve got.”

China punishment of the day (Biblical)

Drivers caught using high beams inappropriately will now be offered on-the-spot training about the dangers of such practices, according to a posting on the Shenzhen Traffic Police’s verified account with Weibo.

Specifically, headlight-happy drivers will be forced to stare straight ahead into the glaring headlights of a police van for a period of several minutes.

“You still dare to use your headlights carelessly?” the Traffic Police posting asks. “If so, then starting from now we’ll make you stare at our high beams for five minutes.”

There is also a 300 yuan ($49) fine.  The policy is popular in some quarters:

Still, most people reacted positively to the Shenzhen Traffic Police’s approach.

“An eye for an eye, and a tooth for a tooth! This punishment should be popularized. When can it be used to deal with red-light running or hit-and-run?” wrote another.

More people in The Middle Kingdom need to read Gary Becker.  The full story is here.

Global inequality is down all the more if we count lifespan

From Becker, Philipson, and Soares (pdf):

GDP per capita is usually used to proxy for the quality of life of individuals living in different countries. Welfare is also affected by quantity of life, however, as represented by longevity. This paper incorporates longevity into an overall assessment of the evolution of cross-country inequality and shows that it is quantitatively important. The absence of reduction in cross-country inequality up to the 1990s documented in previous work is in stark contrast to the reduction in inequality after incorporating gains in longevity. Throughout the post–World War II period, health contributed to reduce significantly welfare inequality across countries. This paper derives valuation formulas for infra-marginal changes in longevity and computes a “full” growth rate that incorporates the gains in health experienced by 96 countries for the period between 1960 and 2000. Incorporating longevity gains changes traditional results; countries starting with lower income tended to grow faster than countries starting with higher income. We estimate an average yearly growth in “full income” of 4.1 percent for the poorest 50 percent of countries in 1960, of which 1.7 percentage points are due to health, as opposed to a growth of 2.6 percent for the richest 50 percent of countries, of which only 0.4 percentage points are due to health. Additionally, we decompose changes in life expectancy into changes attributable to 13 broad groups of causes of death and three age groups. We show that mortality from infectious, respiratory, and digestive diseases, congenital, perinatal, and “ill-defined” conditions, mostly concentrated before age 20 and between ages 20 and 50, is responsible for most of the reduction in life expectancy inequality. At the same time, the recent effect of AIDS, together with reductions in mortality after age 50—due to nervous system, senses organs, heart and circulatory diseases—contributed to increase health inequality across countries.

That reminder is from Aaron Schwartz.  And of course that is the Becker, yet another contribution from Gary Becker.

Do note, by the way, that medical progress is usually egalitarian per se.  A common metric is something like “health outcomes of the poor” vs. “health outcomes of the rich,” and that may or may not be moving in an egalitarian direction.  But very often the more incisive metric is “health outcomes of the sick” vs. “health outcomes of the healthy,” and of course most medical treatments are going to the sick.  The more desperate is the lot of the sick, the more likely that medical progress is egalitarian per se.

Assorted links

1. The French economy continues to stagnate.

2. Good math textbook cover (recursive).

3. Cochrane on Summers on stagnation.

4. The polity that is San Francisco, parking app ruled illegal.

5. When will deleveraging be over?  And are morning people less ethical at night?

6. Russian pizza claims delivery by drone and not just publicity stunt, speculative, some might even say BS.

7. Russ Roberts with Ed Lazear on Gary Becker.

8. Why you should root for Nigeria.

Two Surefire Solutions to Inequality

Here is a surefire solution to inequality–Increase fertility among the rich. If the rich had more children, capital would grow more slowly across the generations and perhaps not at all.  If r=4 and g=2 then capital doubles as a share of the economy in 35 years (using the rule of 70). That figure is actually too low as it assumes that the wealthy save all of their capital income but let’s stick with 35 years and call that a generation. Wealth per rich person, however, only doubles if every wealthy family has just 2 children. If every wealthy family has 4 children, wealth per person doesn’t increase and so inequality does not increase even when r>g. If the wealthy consume about 20% of their capital income (still a very high savings rate) and have just 3 children then again we have approximate balance and no increase in inequality over the generations. With a more reasonable figure on r-g or with more children, wealth per person actually declines.

Thus, Piketty’s “patrimonial capital” contains its own internal contradiction. The more patrimony the less capital.

ROMNEY-CARD-1So how can we increase fertility among the rich? Mormon fertility is higher than average so capital inequality could decline if more rich people will be or become Mormons. Had we elected a President Romney (5 children and some 22 grandchildren! Or is it 23? Romney has lost count), perhaps that would have encouraged greater fertility among the rich.

It’s an evolutionary puzzle why the rich don’t have more children as the costs to them are low and at very high levels of wealth there is no quantity-quality tradeoff. Perhaps this is a temporary response to the shock of birth control. If so, the effect of the shock is likely to fade over time as evolution works its logic.

In Selfish Reasons to Have More Kids Bryan Caplan notes that we overestimate the effect of parental investment on children and we underestimate the pleasures of grandchildren, in both cases choosing too few children. The rich should read Bryan’s book.

In these calculations I have assumed that primogeniture won’t make a comeback, that seems solid. Assortative mating, however, will slow wealth dispersion. I have also assumed that savings and fertility are independent which is unlikely to be the case. Becker and Barro (1988) suggest that more children will increase savings but less than proportionally so the logic continues to hold. Note also that this works both ways, wealthy people with fewer children will save less. Bill Gates has three children but has already given away a substantial fraction of his fortune and he has pledged to give away much more. Even parental altruism has its limits and Bill Gates has decided that on the margin he would rather give money to poor children in Africa than to his own children. Bill Gates’s shadow will not eat our future.

So what is the second surefire method to reduce capital inequality? Reduce fertility among the rich! If the rich as a class have fewer than 2 children then it follows inexorably that their time is numbered, albeit without first creating a small number of very rich people.

The logic of r-g turns out to be highly dependent on savings behavior, fertility decisions and the nature of altruistic bequests.

Altruistic Kidney Donors Favoring Financial Compensation

Dmitri Linde joins Alexander Berger and Virginia Postrel as altruistic kidney donors who advocate for lifting the ban on financial incentives. Here is Linde:

Two policies would address the shortfall of kidneys in the U.S.: instituting a priority-scoring system for donors and their kin and paying donors.

Israel pioneered the former in 2012. Prioritizing organ allocation by donor status—a system that economist Alex Tabarrok termed “no give, no take”—incentivized people to register as organ donors. It also removed a hurdle to living donation: The incentive to abstain because of a hypothetical (What if my son needs a kidney?) went away since the policy guarantees that a donor’s kin will be prioritized in the event that they need a transplant. The results? Both living and deceased donations have gone up, and the number of people who have died on the waitlist fell by 30% between 2010 and 2013.

To obviate the kidney shortage, we should heed the recommendation of Nobel Prize-winning economist Gary Becker and others by making it legal to compensate donors.

Linde donated a kidney with the aid of the excellent National Kidney Registry. The registry matched him to a recipient whose own willing but incompatible donor donated to another patient in need. Bravo Dmitri.

Here are previous MR posts on organ donation.

Tyler Cowen talks to Emily Moore

Here I am interviewed in Tank magazine about my article “An Economic Theory of Avant-Garde and Popular Art, or High and Low Culture,” co-authored with Alex.  Excerpt:

EM: Your essay contains one of the most interesting footnotes I’ve ever read: “The interactions between the quantity and subjective quality of art are similar to the interactions analysed by Becker and Lewis (1973) between the quantity and quality 
of children.”

TC: Becker’s work considered how families might regard “more investment in each child” as a replacement for “having lots of children”, and that is indeed a common substitution as economic development proceeds. Analytically, we can think of artworks as similar to children in this regard. Quality, in the sense of an artist pleasing himself or herself, can substitute for quantity. Syd Barrett perhaps knew he had nowhere left to go, aesthetically. Proust and Cervantes didn’t need to write so many other works, perhaps because they felt satisfied with how thoroughly they expressed their visions through what they did. Balzac took a different course and achieved a different kind of creative satisfaction, yet precisely for that reason he may resonate less with people today than the more idiosyncratic visions of Proust or Cervantes.

The original article you will find here.

What is the most philosophical thing that you have ever heard a child under the age of 5 say?

That is a new Reddit thread (apologies, I have forgotten who directed my attention to it).  My favorite answer was this Stigler-Becker approach to the matter:

My little sister handed me a juice box as I was packing to move out and said “No one is really a grown up. They just act old because they have to”

The full thread is here.

Will California’s electoral reforms improve the quality of their government?

Adam Nagourney reports:

Lawmakers came into office this year representing districts whose lines were drawn by a nonpartisan commission, rather than under the more calculating eye of political leaders. This is the first Legislature chosen under an election system where the top two finishers in a nonpartisan primary run against each other, regardless of party affiliations, an effort to prod candidates to appeal to a wider ideological swath of the electorate.

If you read the article, you will see some early reports that this is working out well, and allowing for less partisan decisions.  Focusing on the primaries question alone, I have a few points:

1. If the median voter theorem holds, the nonpartisan primary shouldn’t matter much.  That said, the median voter theorem in this context probably does not hold.

2. Imagine you have an expressive voting model, where a big chunk of the electorate will vote for a Democrat no matter what and will not vote for a Republican in a nonpartisan primary.  In essence that is like allowing Republicans to vote in the (decisive) Democratic primary.  If Republicans vote expressively, they will vote for their own and we are back to this change not mattering.  If some Republicans vote strategically, to pull the Democrats closer to the center, they may succeed in doing so.  That said, if Democrats observe Republicans voting strategically, the Democrats may respond by voting more strategically themselves, to pull their candidates closer to the Left.  Alternatively, Republican candidates may respond by moving to the center, hoping to appeal to the strategic Republican voters.  If the more moderate Republicans become “too acceptable,” they may prevent the strategic Republican voters from voting for Democrats and thus influencing the final outcome.

Multiple equilibria, etc., but it is not obvious that, after a few iterations, you end up with a better or a less partisan outcome.

3. Many electoral changes have short-run effects which differ from their long-run effects.  In the longer run, there is a Beckerian equilibrium of pressure groups and those groups may manage to master the new procedures and reimpose their will on the proceedings, albeit with a lag.  Changes in electoral systems should never be judged too rapidly.

4.  #3 is especially true when an electoral system change alters “what happens within parties” vs. “what happens outside parties.”  It takes a few iterations for parties to adjust to the new rules and change their nature, to adapt to the new equilibrium.

The bottom line: One virtue of federalism is that such experiments can be tried.  I’m all for it.  But it is far too soon to think this is a big deal.

Wilson.cat and the movement for independence for Catalonia

The Catalonian “human chain” was yesterday, and it drew hundreds of thousands of people, a large number for a single region.  According to the Washington Post, it was more than one million people.

If you would like to read more on this — by economists and other social scientists — Wilson.cat is one intellectual resource for independence.  The site represents writings of prominent scholars favoring independence — or at least an informed referendum — for Catalonia.

I am surprised this initiative is not receiving more attention.  If you were to ask in which ways economists today are having the most influence on the world, this movement would be close to the top of the list.  Among the economists involved are Andreu Mas-Colell, Pol Antràs, Jordi Galí, and Xavier Sala-i-Martin, all of whom are extremely well known in the profession.

Personally, I am still waiting to hear why Catalonian independence would not bring the fiscal death knell of current Spain, and thus also the collapse of current eurozone arrangements and perhaps also a eurozone-wide depression.  Otherwise I would gladly entertain Catalonia as an independent nation, or perhaps after the crisis has passed a referendum can be held.  When referenda are held during tough times, it is often too easy to get a “no” vote against anything connected with the status quo.

Is the view simply that “now is the time to strike” and “it is worth it”?  Obviously, an independence movement will not wish to speak too loudly about transition costs, but I would wish for more transparency.  Or is the view that Spain could fiscally survive the shock of losing about twenty percent of its economy, with all the uncertainties and transition costs along the way?  That could be argued, but frankly I doubt it, OMT or not, furthermore other regions would claim more autonomy too.  An alternative, more moralizing view is that the fiscal problems are “Spain’s fault in the first place” and need not be discussed too much by the pro-independence side, but I am more consequentialist and marginal product-oriented than that.

This piece, in Catalan, does cover the fiscal implications of debt assumption for an independent Catalonia.  The site also links to this somewhat spare piece by Gary Becker, but I still want more of a discussion of the issues raised above.

Keep in mind that two clocks are ticking.  The first is that education in Catalonia is becoming increasingly “hispanicized,” the second is that as economic conditions in Spain improve, or maybe just become seen as a new normal, getting a pro-secession vote in a referendum may become harder.  It doesn’t quite seem like “do or die” right now, but overall time probably is not on the side of Catalonian independence.

If anyone connected with the independence movement could point me to source materials addressing my questions, I would gladly cover it more on MR.

Here is Edward Hugh on the Catalan Way explained.  And here is more from Hugh.