Friday, October 26, 2007

Wealth or Health?

Check out this 20 minute presentation by a gentleman named Hans Rosling on "TED Talks." Dr. Rosling is a doctor does research in the medical profession on public health in the "Developing Wolrd" and maintains an analysis tool known as "Gapminder." One interesting contribution he makes is his ability to express trends in data in a very intuitive, visual way.

The econometrician inside of me has about a thousand "buts" for the presentation, but it represents a great start- it does the essential surface "strip mining" that helps us see what things need better testing, and which things can be used as controls. It reminds me of something I learned from Roger Koenker: "If you torture the data enough, it will confess." In Dr. Rosling's case, he sheds quite a lot of light on the nature of health and wealth with very little of the usual waterboarding that economists usually do.

The most intersting part of it is that growth does not seem to "trickle down" to aspects of welfare such as life expectancy, infant and child mortality, etc. on average. Conversely, it seems to be the case that things like public health, evolution in institutions and society, etc. act as a precursor to growth, something about which Daron Acemoglu has been on the economics profession's case for some time now. And, it shouldn't be surprising-- the industrial revolution in Britain followed a similar pattern, as I've mentioned here before.

Yet, Dr. Roslings conclusions are similar to those that economists, even the most neoclassically trained among us, would readily agree with. First, that things like trade and markets are helping a number of countries pull themselves out of despair and poverty; second, that political institutions and good government play a critical role in ensuring that the benefits of growth are distributed in a way that respects the median citizen; third, that these factors HAVE contributed to a considerable normalization and flattening in the distribution of world income over the last half-century.

Monday, October 22, 2007

Negative Loss = Positive Gain?

Check out this article from Popular Science's Brilliant 10 for '07. Basically it's about some of the cognitive similarities between monkeys and humans, and whether we seem to "miscalcuate" expectation in the same way. First, let me say that my only experience with the brains of monkeys is in the first person-- i.e. my own relatively unevolved mind. But, the article is interesting because the monkeys are put in 2 scenarios: In scenario 1 they "pay" 1 token for 1 slices of apple, but are given 2 with probability 0.5; In scenario 2 they "pay" 1 token for 2 slices of apple, but are only given 1 with probability 0.5. In both scenarios they can expect 1.5 slices. It is unclear to what extent the monkeys understand the "rules" before hand, or what group is used as a control, but scenario 1 seemed to be much preferred by the monkeys, and it seems it is more preferred by the more evolved primates that have opposable thumbs. I would guess that playing the game many many times with the monkeys would converge to a more uniform reaction in terms of "monkey mood."

But, people are the same way, at times, especially when uncertainty is involved. I'm not sure what the appropriate economic explanation, but there seems to be some argument here for a more integrated role of psychology in explaining economic behavior, and may explain some of the puzzles in economics. Small deviations from "full rationality" at the micro level can easily perpetuate persistent deviations from the rational equilibria that are used in neoclassecal macro/finance mondels. Mostly, I'm looking for comments and/or discussion.