Results for “Tests”
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Vouchers in Chile and Colombia

Tyler mentioned, following a depressed Brad DeLong, a new paper on education vouchers in Chile that does not find large achievement gains. I have some criticisms of the paper (see below) but I was surprised that neither mentioned the most important recent paper on vouchers, Vouchers for Private Schooling in Colombia by Angrist, Bettinger, Bloom, King and Kremer in the Dec. 2002 AER.

Using data from a randomized experiment, Angrist et al. estimate that attending private school increased the probability of finishing eighth grade by 13-15 percentage points or 25 percent. Test scores increased by .29 standard deviations which is equivalent to about an extra year’s worth of schooling which has been estimated to increase yearly wages by 10 percent. Other markers such as teen cohabitation also improved.

Is this just a case of dueling papers? No, first, unlike Hsieh and Urquiola (HU), the Angrist et al. results are consistent with results found elsewhere. See in particular those found for Catholic schooling in the United States . Second, Hsieh and Urquiola (HU) are good researchers, judging by their paper, but Angrist et al. have a much more convincing research design – results from a randomized trial beat econometric identification any day. Cheer up Brad!

I shouldn’t give the impression that the results are directly comparable, however, as HU are trying to get at the general equilibrium effect of a voucher experiment and Angrist et al. are after the partial equilibrium effect of private schooling. Given the large gains found in the partial equilibrium literature, however, the GE results from HU are not plausible in my view.

Now regarding the HU paper some information is in order. First, there were no vouchers in Chile. Instead, there was public funding of some private schools on a per-student basis. Parents could not apply their voucher to the tuition at a private school of their choice.

Second, HU do not test whether students who transferred to private schools did better than other students – they tested whether aggregate scores (public and private) increased over time as more students attended private schools. Their evidence seems consistent with a nationwide decline in public school quality over time. More generally, I would have liked to have seen some information in their paper on the power of their tests. Given the size of the private sector what sort of gains could would we have expected to see in the aggregate scores and is their technique powerful enough to pick up such gains?

Third, HU claim that “cream skimming” was extensive but I find this difficult to believe because there is no price difference between public and private (voucher-accepting) schools since each was paid the same per-student amount. There are some non-pecuniary barriers but no limits on entry that HU mention.

Fourth, why did private enrollment increase if parents did not perceive a quality improvement? HU mention “freshly painted walls” which I thought was a bit flip – we ought to take revealed preference more seriously.

I do think that the HU study of Chile provides useful information about designing a good voucher program and my priors would have been that the program instituted in Chile, even though not a true voucher program, would have produced a larger effect – thus I learned something from the paper.

Dollars for Donors

The shortage of human organs for transplant grows worse every year. Better immuno-suppressive drugs and surgical techniques have raised the demand at the same time that better emergency medicine, reduced crime and safer roads have reduced organ supply. As a result, the waiting list for organ transplants is now 82,000 and rising and more than 6000 people will die this year while waiting for a transplant.

The economics of the shortage are so obvious that one popular textbook, Pindyck and Rubinfeld’s Microeconomics, uses the organ shortage to explain the effect of price controls more generally!

Perhaps because the shortage is growing, opposition to financial compensation for cadaveric donation (compensation for live donors is a distinct issue) appears to be lessening. The AMA, the American Society of Transplant Surgeons and the United Network for Organ Sharing have agreed that tests of the idea would be desirable. (A group of clerics, doctors, economists (I am a member) and others has formed to lobby for the idea – see our letter to Congress.) Currently, even tests are illegal but Representative James Greenwood (R, Pa.) has introduced a bill (H.R. 2856) that would create an exception.

Aside from the obvious benefits of saving lives, financial compensation for organ donation would likely save money. Here is a back-of-the-envelope calculation. There are some 285,000 people on dialysis in the US. Transplants are cheaper than dialysis by something like $10-$25,000 per year. About a quarter of those on dialysis are on the waiting list but perhaps as many as half could benefit from a transplant (fewer people are put on the list because of the shortage.) Let’s take the lower numbers. Assume that a quarter of the patients on dialysis could benefit from a transplant and that cost savings are $10,000 a year for five years. Then ending the shortage would save 3.5 billion dollars. Note again that this is a lower estimate. How much would it cost to end the shortage? No one knows for certain but I think a $5000 gift to the estates of organ donors would increase supply enough to greatly alleviate the shortage – that would involve doubling the supply to 12,000 for a paltry cost of $60 million. If this is not enough – raise the gift – anyway you cut it, the savings from dialysis exceed the costs of compensating donors by a large margin.

We should in fact count the value of the lives saved. If we can save 6000 lives and value each life at 3 million dollars (a lower value than what the US government typically uses in its calculations) then that is a further gain of 18 billion dollars.

A Tragedy of the Commons?
Economics provides another way of looking at the crisis. Currently we have organ socialism – anyone who needs an organ is allowed access to the organ pool regardless of whether or not they contributed to the upkeep. As with other resources owned in common we get over-exploitation and under-investment. Consider, instead a “no-give, no-take policy” – only those who have previously signed their organ donor cards are allowed access to the pool. Not only is this more moral than the current policy it creates an incentive to sign your organ donor card. Signing your card becomes the ticket to joining a club – the club of people who have agreed to share their organs should they no longer need them. Equivalently signing your organ donor card becomes analogous to buying insurance. I discuss the idea further in Entrepreneurial Economics.

An organ club has in fact been started – I am not just an adviser, I’m also a member! You can join too at www.lifesharers.com.

Doctors are very ignorant of statistics

Here is a bit from Gerd Gigerenzer:

The science fiction writer H G Wells predicted that in modern technological societies statistical thinking will one day be as necessary for efficient citizenship as the ability to read and write. How far have we got, a hundred or so years later? A glance at the literature shows a shocking lack of statistical understanding of the outcomes of modern technologies, from standard screening tests for HIV infection to DNA evidence. For instance, doctors with an average of 14 years of professional experience were asked to imagine using the Haemoccult test to screen for colorectal cancer. The prevalence of cancer was 0.3%, the sensitivity of the test was 50%, and the false positive rate was 3%. The doctors were asked: what is the probability that someone who tests positive actually has colorectal cancer? The correct answer is about 5%. However, the doctors’ answers ranged from 1% to 99%, with about half of them estimating the probability as 50% (the sensitivity) or 47% (sensitivity minus false positive rate). If patients knew about this degree of variability and statistical innumeracy they would be justly alarmed.

The lead is from Crooked Timber, through BlackTriangle.org.

Cannabis Emptor

When goods are prohibited, quality tends to fall because of lack of competition and legal recourse. Quality in illegal markets, however, may still beat that available from government production. Health Canada spends millions of dollars growing marijuana for distribution to patients with medical need. The government grown pot is so awful, however, that patients are returning their 30 gram bags and asking for refunds! The government certifies and advertises that their product contains 10.2% THC but independent labs report only 3% THC. Furthermore, the government pot is contaminated with lead and arsenic. “This particular product wouldn’t hold a candle to street-level cannabis,” said Philippe Lucas of Canadians for Safe Access, the group that sponsored the tests. Thanks to Eric Crampton for alerting us to this story.