Results for “age of em” 16717 found
Homeownership should not be subsidized
Home ownership policy of the Bush and Clinton administrations was, in
essence, an attempt to pay low-income people to make a risky investment
that they would otherwise rationally avoid. I cannot understand why
anyone would think that such a policy would be sensible. In some cases,
these people will do well and enjoy the upside of their investment, but
in other cases they will do poorly, with the result that they will be
worse off than ever.
That's Eric Posner. You'll note that Henry Paulson has been calling for the mortgage agencies to be resurrected as "public utilities" of some sort. I don't understand this path. There is a very good (modern) liberal case against more home ownership: behavioral economics is true, people overestimate their prospects, poor people shouldn't take too much risk, and the natural market tendency is too much home ownership, not too little. That's without taking environmental issues into account.
Here is a recent Richmond Fed article, skeptical of the idea of homeownership subsidies.
What I’ve been reading
1. The Aztec World, by Elizabeth Brumfiel and Gary Feinman. Long-time MR readers will know Aztec history is a special interest of mine. This book, a companion volume to the Aztec exhibit from Chicago’s Field Museum, is perhaps the best introduction to the Aztecs to date.
2. The Suspicions of Mr. Whicher: A Shocking Murder and the Undoing of a Great Victorian Detective. This achieved (justified) rave reviews in the UK but it has hardly made a dent in the U.S. market. It is non-fiction but written in a hybrid form and often feels more like a novel.
3. The Overflowing Brain: Information Overload and the Limits of Working Memory, by Torkel Klingberg. When push comes to shove, the author fails to establish his major thesis. Still, this book is way above average for how seriously it treats the actual science behind its argument. I learned a great deal from it.
4. Somewhere Towards the End, by Diana Athill. A scary and effective memoir about how Athill, a famous editor, dealt with aging and the end of her sex life.
5. Not John Steinbeck.
Here are predicted hot reads for 2009.
Chris Blattman on randomized control trials
As usual, he is wise:
Yes, the randomized evaluation remains the "gold standard" for
important (albeit narrow) questions. Social science, however, has a
much bigger toolbox for a much broader (and often more interesting)
realm of inquiry. If you want to know the effects of small binary
treatments, you are in business. If you find any other question in the
world interesting, you have some more work to do. Dani Rodrik has made
a similar point here.Don’t
get me wrong: a large number of my projects are randomized control
trials. They are eminently worth pursuing. But to be honest, uncovering
the causes of effects excites me more than measuring the effects of
causes. An evaluation masters the second, but only hints at the first.
The hardest and most rewarding work is the theoretical and
investigative work that comes with uncovering the underlying rhythms
and rules of human behavior.…If your goal is to improve the delivery of aid, and truly advance
development, many more skills and knowledge are involved than the
randomized evaluation. See here for
more. But in short: a well-identified causal impact that arrives two
years after the program does not performance management make.
Chris also points us toward a new and excellent blog, Obama in Kenya.
The Smart Grid and the Fiscal Stimulus
Earlier I pointed out that a) regulatory problems have prevented investment in the smart grid and b) subsidies to wind power in some states have driven prices to negative levels (yes, people are being paid to consume power). These two problems are closely related.
The states control whether transmission lines get built but states with a lot of wind energy don’t have an incentive to build transmission lines to move the power out. In effect, states with a lot of wind energy are preventing exports which lowers their own internal price of electricity but raises everyone else’s price and reduces the use of wind power.
A new article in Technology Review makes the point.
One effect of these regulatory moves was that companies had less incentive to invest in the grid than in new power plants, and no one had a clear responsibility for expanding the transmission infrastructure. At the same time, the more open market meant that producers began trying to sell power to regions farther away, placing new burdens on existing connections between networks. The result has been a national transmission shortage….
[Many states have a lot of wind potential]…But the existing transmission system doesn’t have the capacity to get that much electricity to the parts of the country that need it. In many of the states in the [wind] region, there’s no particular urgency to move things along, since each has all the power it needs. So most of the applications for grid connections are simply waiting in line, some stymied by the lack of infrastructure and others by bureaucratic and regulatory delays.
Hat tip to Andrew Samwick who writes:
The federal government is the entity that can resolve that failure, by taking the lead and making those expansions itself. It can recoup its costs by levying a fee on subsequent power consumed through the grid. I hope the fact that we need this investment isn’t a reason for it to be excluded from plans for fiscal stimulus.
Fly by the minute
Taking a cue from the cellphone industry, an upstart South African
airline is selling flights by the minute and allowing customers to buy
tickets and book flights via text message.Airtime Airlines takes to
the sky later this month, offering three flights a day from its base in
Durban to Johannesburg, Cape Town and Port Elizabeth. Passengers
purchase minutes much like they would for a prepaid cell phone and
redeem them for a ticket. Fees are assessed according to the length of
the flight – say, 75 minutes for the run from Durban to Johannesburg –
and could save as much as half of what competing airlines charge.
Here is the article. It’s not yet clear whether they have managed to lease planes, but here is another part of the business plan:
The cost for Airtime minutes can fluctuate, presumably according to
promotions and market factors, so topping off
becomes an exercise comparable to fuel hedging. Buy a big block of
minutes when you think they’re at their cheapest and you look smart,
unless the price drops again the next day. Then again, it might go up.
The price recently rose from 3 Rand to 5 Rand, meaning the cost of a
round-trip flight from Durban to Cape Town climbed from about 750 Rand
($81) to 1,250 Rand (about $134). Still that’s cheaper than the $200 it
would cost on South African Airlines.
But can you sell minutes short? I thank Christopher Balding for the pointer.
Cancer and Statistical Illusion
The cover of this month’s Wired promises "The Truth About Cancer" but the article inside is a tissue of misleading statistics and faulty logic. The article begins with fancy graphics telling us "If we find cancer early, 90 percent survive" but "If we find cancer late, 10 percent survive." And this:
Find the disease early "and the odds of survival approach 90 percent…This reality would seem to make a plain case for shifting resources toward patients with a 90 percent, rather than a 10 or 20 percent, chance of survival."
Thus, the opening block of text commands, "Scientists should stop trying to cure cancer and start focusing on finding it early. It’s the smart way to cheat death."
The fallacy in all of this is painfully easy to spot. If we measure survival, which these studies do, with a 5 or 10 year survival rate then obviously people whose cancers are detected early will survival longer than people whose cancers are detected late.
The key question is whether people who are treated early survive longer than people whose cancers are detected early but who are not treated. In Thomas Goetz’s long article there is not a single piece of evidence which demonstrates that this is true. Indeed, quite the opposite. About 9 pages into the article, after the jump, we find this about CT scans for lung cancer:
As with the Action Project, these studies found that, yes, CT scans detected a huge number of early cancers–10 times as many as they would expect to find without scanning. In that regard, the scans did their job as a screening test. And as expected, the number of surgeries based on those diagnoses jumped. But when Bach looked at the resulting mortality rates, he found essentially no difference between those who received a CT scan and those who had not. Despite the additional surgeries, just as many people were dying as before.
Nowhere does the author mentions that this finding invalidates just about everything he has told us in the first eight pages.
Addendum 1 : Do note that I have nothing against early detection and I am not claiming that it never works. My problem is with misleading statistical analysis.
Addendum 2: Careful readers will note that this is an almost perfect example of the economicitis fallacy that I blogged about late last year.
Where is the geographic center of Johnny Cash’s moral and musical universe?
I was listening to the new and excellent Vince Mira CD of Johnny Cash covers (some of them in an elegant Spanish), when Yana asked me to explain Johnny Cash to her. "Does he sing about the South?" was a tough question to answer. I place the center of his moral and musical universe somewhere between Little Rock, Arkansas and Oklahoma City. (How about Fort Smith?) That locale rules out neither trains nor cattle. That allows him to straddle the South, West, Midwest, and Texas, while retaining the option of a rail connection to the North. The town even has a prison. (For the underinformed, here is a list of Johnny Cash songs.) Is there a more appropriate center?
Addendum: I now discover that Vince is only fifteen years old!
Here is Vince performing "That’s All Right"; phenomenal. Here is the overall YouTube listing.
How did the tax cut get so big?
Yes, 40 percent of the Obama stimulus package will be a tax cut. It’s already a talking point that "the Democrats have lost their nerve" but the reality is not so devious. Obama wishes to deliver on his pledge to cut taxes (always electorally popular) and upon close inspection the economic team probably hasn’t found a lot of first-year stimulus spending it likes. That leads to this obvious policy conclusion and of course it is very good news. No, I do not think these tax cuts will drive recovery but a) less money will be wasted, and b) it shows that the Obama team is willing to flinch and be realistic, not just as a final compromise but indeed as an opening gambit.
The best way to think about fiscal policy is to judge, in advance, what is actually likely to come out of the process. The alternative approach is to recommend policy based on one’s personal sense of what should be done and then to blame all the forces which stop that from happening. (Rarely do these people stop to ask whether their political views are robust to the presence of significant opposition.) A lot of people on the left are disappointed, but in my view what is coming out of the process is, so far, above average.
Why being President-elect is a difficult job
But evidence is mounting that Obama is already losing ground among
key Arab and Muslim audiences that cannot understand why, given his
promise of change, he has not spoken out. Arab commentators and
editorialists say there is growing disappointment at Obama’s detachment
– and that his failure to distance himself from George Bush’s strongly
pro-Israeli stance is encouraging the belief that he either shares
Bush’s bias or simply does not care.The Al-Jazeera satellite
television station recently broadcast footage of Obama on holiday in
Hawaii, wearing shorts and playing golf, juxtaposed with scenes of
bloodshed and mayhem in Gaza. Its report criticising "the deafening
silence from the Obama team" suggested Obama is losing a battle of
perceptions among Muslims that he may not realise has even begun.
Here is more. Under one interpretation of the signaling game, these observers might have inferred that the very timing of the Israeli attack implies Obama’s disapproval or at least an uncertain reaction; the Israelis could have waited for the Obama Presidency but they did not. Under another interpretation, signals aren’t just about information but signals also show caring and solidarity as valued for reasons not directly related to the initial information. Message recipients care about who sends the signal, and how the signal is sent, not just the revelation of the underlying information. Under this second interpretation (relatively neglected by economic theory, I might add, though not by Robin Hanson), it is much harder for things to go well.
Ed Glaeser’s words of wisdom
While the mechanics of a payroll tax cut are simple, spending hundreds
of billions wisely on infrastructure is hard. Currently, the federal
government spends about $40 billion a year in transportation, and
another $20 billion on other forms of infrastructure. There is a case
for significantly increasing this amount. Our roads do need repairing,
and it makes sense to invest more in a downturn when unemployment is
high. But even doubling the current federal infrastructure expenditure,
a vast increase, would represent only 8 percent of a $750 billion
package.
Here is much more, on the mark throughout. Here is related material by Mark Thoma and Paul Krugman. Here is a related post by Alex.
Addendum: Obama now is calling for $300 billion in tax cuts as part of the stimulus plan, roughly forty percent of the total.
John Taylor on the Fed’s “industrial policy”
"What you are looking at now is really being determined by other
considerations. How much should we buy of mortgage-backed securities?
How much should we loan to foreign central banks? This is really more
like an industrial policy," he said…"If you have a situation where the Fed is borrowing to invest in all
these sectors it seems to me you have a huge governance issue…that
demands a lot of thought," Taylor said.Taylor said the U.S. Congress has a legitimate right to demand a say
in who the Fed lends money to. The outcome would be "radical reform"
that would risk monetary policy independence, he said.
Here is the full article.
New Media Innovations
The Kauffman Foundation hosted a number of econ bloggers, including myself, at the AEAs to discuss blogging, communication and new media. Tim Kane at Growthology summarizes the stimulating discussion:
Some of things I learned include (1) the process of collaborative filtering is increasingly useful for discovery and evaluation, and a pioneer to watch is Slashdot, (2) commenting on blogs is arguably more valuable than posting for evaluating ideas … look for weighted commenting/evaluation systems to supplant formalized referee systems over time, (3) blogs are just part of the spectrum of idea sharing, as is journal publishing, and simply having a web page is now essential to be part of a research community, (4) good ideas can filter up much faster through the academic community thanks to blogs, (5) it is very difficult to determine what revenue models will sustain the print news media, but one possible trend to watch for is the return of ideological patronage (e.g. think tank magazines) — it’s not just advertising and subscriptions that will sustain the sector, (6) it’s still probably not advisable for graduate students or junior faculty to blog instead of focus on tenurable research … for now, and (7) if blogging is representative, then risk-taking entrepreneurship will thrive, even in a recession.
You will be happy to know that it was brought up in the discussion that the MR comment section is especially good so take it away readers.
Hospitals as Hotels
Is it that people love a good movie selection, or do they take the movies to be the best available signal of hospital quality?
Amenities such as good food, attentive staff, and pleasant surroundings may play an important role in hospital demand. We use a marketing survey to measure amenities at hospitals in greater Los Angeles and analyze the choice behavior of Medicare pneumonia patients in this market. We find that the mean valuation of amenities is positive and substantial. From the patient perspective, hospital quality therefore embodies amenities as well as clinical quality. We also find that a one-standard-deviation increase in amenities raises a hospital’s demand by 38.4% on average, whereas demand is substantially less responsive to clinical quality as measured by pneumonia mortality. These findings imply that hospitals may have an incentive to compete in amenities, with potentially important implications for welfare.
Here is the paper. The ungated copy is here. Here is a recent article of relevance:
When the Sacred Heart Medical Center at RiverBend opens in Springfield, Ore., in August 2008, patients and their families will enter a hospital surrounded by wetlands and Douglas firs. Inside, they’ll encounter multiple fireplaces, coffee shops and visitors’ lounges.
"As you come to the hospital, you’ll be greeted warmly as you enter, much as you would by a concierge at a hotel," says Adam Kerner, an executive architect with Anshen + Allen, who partnered on RiverBend with an outside architect whose previous experience had been in designing resorts…
Gerard van Grinsven, president of the Henry Ford West Bloomfield Hospital now under construction in suburban Detroit, says area hospital executives were surprised when he was hired away from hotelier Ritz-Carlton in 2006. Up to then, his two-decade career had been exclusively in hotels and resorts.
But skepticism soon gave way to curiosity and competitiveness, van Grinsven says. In fact, Beaumont Hospitals in nearby Royal Oak, Mich., hired a Ritz-Carlton executive as their director of hospitality a short while later.
Van Grinsven is introducing a bit of the Ritz-Carlton flair to the new hospital, adding touches like mini-hotel rooms for visitors as well as healthy cooking classes for the surrounding community. The facility, which opens in July 2008, will include larger-than-normal emergency patient rooms–roughly 150 square feet–to create more space for visitors, a result of design sessions that included input from patients, nurses and doctors.
How to keep away inflation in the future
Larry, a loyal MR reader, asks:
When the US government borrows and prints so much money in the coming
few years, how is the country going to keep massive inflation away?
Borrows and prints are different here. The borrowed money is no inflationary threat, if the U.S. government is willing to raise taxes to pay it off.
As for the newly created reserves, in theory the Fed can suck them out of the banking system at will (and/or change the rate of interest paid on reserves, to influence demand to hold). But will it hit the right timing in practice? Let’s say the economy miraculously recovered tomorrow. Banks would be very eager to make more loans than they are doing now and the broader monetary aggregates would go up rapidly. However the broader aggregates take many months to influence the price level, so in the meantime the Fed would sell assets from its balance sheet and take reserves out of the economy. These are uncharted waters and the trial and error factor likely will be significant.
It is the lags which give the Fed some chance to react but the lags also mean that the Fed will never quite know if it is proceeding at the right pace. And will the contractionary open market operations be conducted with all the non-standard assets currently on the Fed’s balance sheet?
As I said, uncharted waters.
I give it a reasonable chance that we, in due time, have a secondary recession, resulting mainly from the Fed deflating at too rapid a pace as the economy recovers.
Why haven’t I been to Portugal yet?
Nick, a loyal MR reader, asks:
Well, Portugal is one place I’ve never visited – and I
believe you’ve never been there; why is that? As a gormand &
traveller it appears to have everything – influencing the world’s
cuisine (from Japan to Brazil & back) & with a beautiful,
unique (if rather mournful) musical cannon… Is there a reason you’ve
never been to Portugal?
The first reason is intertemporal substitution, namely that I often wait for people to pay me to go places. In general this factor leads small countries, especially with Romance languages, or in geographic corners, to be visited late. The small country has a bigger place in your mind’s eye than it does on the conference and lecture circuit. The American Midwest ends up being overvisited, as does New Orleans, and Nova Scotia ends up being undervisited (I want very much to go there).
If you are invited to a lot of talks and conferences, your non-work travel should avoid centrally located hub cities and focus on poor corners, such as Albania and Yemen. You’ll get to Paris and London anyway.
That said, I have an invitation to Portugal for this April and I will be going. Since I’m not sure I need to go twice, I am glad I waited.