I'd like to propose that the main hubub about health care is about distribution of income, i.e. a shift in the burden of health care from a "benefits received" principle to a "ability to pay" principle. To make any sort of shift like this you have to accept the principle that health care has certain characteristics attributable to a public good (something whose provision is non-excludable and benefits us all) or a merit good (something worth making more universially accessible). These premises are debatable, but I won't deal with them. Let's just suppose that we shift from fully individual, private-paid to fully public-paid (this is, of course not the change that would really be taking place because our current system is not fully private-pay, and no proposal on the table is fully public-pay).
There's not much reason to believe that the financial costs will be too much higher in public-pay as they are in a private-pay system, at least not per-person. But a private, free-market system tells me that if I want 10,000 dollars of benefit, I pay 10,000 (actually, since these contracts are not usually "actuarially fair" it would be more like paying 10000 and getting 8 or 9 thousand). Same goes for everyone else. This is a very "fair" stystem in terms of "benefits received," i.e. what you put in is what you get out.
Unfortunately, there are a lot of people who don't have the dough for 10,000 of health insurance, and there might not be a lower-priced option they can afford. Besides, if there is, it might not cover a lot of things or have a really high deductible (in fact the deductible might be so high that if they ever got so sick that their costs ever required insurance, it might put those same folks into bankruptcy - 68 percent of all individual bankruptcies are heath care related - anyway, so why bother!). This adds to the dimensions of adverse selection and moral hazard typical to the insurance market. Another "fairness" metric is a person's "ability to pay." If a good has "merit" qualities, and some folks cannot afford even a minimal level of it then what you pay is could be indexed to what you earn. Everyone gets 10000 in benefits, but a rich person pays 15000 or more, and a poor person pays a 5-6000. But is it "fair?" Yes, in a manner of speaking, because if we agree that everyone "should" have 10000 in basic coverage, then we wouldn't expect a person earning just 15000 a year to pay 10000 of it to for health insurance. (N.B. At moments like this I almost wish I remembered the game-theory formal notational definitions of "fair" and "envy-free," as well as the proofs for why Walrasian (free-market) equilibria do not generally exhibit this property....almost.)
Here's where I think the income distribution question slips in. Basically, the fight is this: Republicans represent rich folks, and Democrats represent poor folks. Making health care universal will necessitate a higher burden on richer folksto provide a benefit for poorer folks who cannot afford it. The poorest already get medicaid. Median wages have fallen over the last 9 years. Private health care costs are rising. Households view health care as a necessity. Somthing's gotta give. I suspect that if the Bush economic record were more favorable to the middle quintile of the income distribution then the "get costs under control" rhetoric would have been more effective, but rising health costs coupled with falling middle-class incomes means most people are wise enough to know that cutting costs around the edges won't do much. So, let's look at a couple of the proposals:
1. Sort of the two-tiered "keep what you want if you like it" option. People happy with their stuff now get to keep it but you still pay a percentage of your income into the public system. Of course, they will have to help pay for the publicly funded option, so their costs will either go up, or their coverage will change (by moving into the public pool). Poor people could get covered even if they cannot pay for it themselves, or can only afford a small portion of the burden. This would be a little like the education system, which, of course, is not perfect either.
2. Fully public "single-payer" system. This abandons the private option, and everyone receives the same basic plan. However, payment is based on a percentage of your income, thus shifting the payment burden up the income distribution even farther.
3. "Tax Credits." Rich folks love this option. Being able to deduct health care from their taxable income is great for them for two reasons: one, they all purchase health care anyway; and two, they pay a higher marginal tax on the income they get to deduct. This option would actually be MORE regressive than the current system (and if you think the revenues to make up for the "credit" are growing on trees you're crazy!). Good God, if you believed the republicans you'd think that tax cuts are could discover a cure for AIDS and build moon colonies, but guess what? They won't insure more people.
4. Stay with what we have and try to curb costs. Either way cost-efficiency needs to be addressed. Pulling more people into the pool for normal coverage might cut some costs per-person, but might increase costs in the aggregate, so this might not be such a bad thing.
Unless you believe that health care is a merit good, there will probably continue to be 12-15% of the population uninsured, and a growing percentage who are underinsured.
Monday, June 22, 2009
Friday, June 19, 2009
Markets and Health Care
It's not at all clear what the "best" solution to the current health care problem is. Of course, if the market were competitive and well-functioning, the "most efficient" thing to do would be to just price it and let people choose whether or not they want it.
Sounds great, but that's problematic. People choosing whether or not to get health insurance might know somewhat more about their own health histories than the insurer does, and try to game the system. People who think they're healthy might try to go without health insurance, or maybe alternate their decision so that they get it one year and not the next and so on. (In fact, a lot of people do this with the optional vision or dental coverage in their current health plans.) This gaming of the system by "healthy" people would drive up the price of insurance for regular subscribers because the insurer would know that those people are less healthy on average (or have an informed guess to that effect). That's why as a compulsory subscriber to a group plan most folks "pay" (between themselves and the portion that their employers pay) about $10,000 for insurance, whereas the on the individual market prices run about 15,000. Also, when "healthy" non-subscribers get "unlucky" (which some inevitably will) their reliance on urgent care drives the costs up even more for everyone, including subscribers.Thus, since there is incomplete information, adverse selection, etc., markets don't do the job all that well.
The employer-based system we have now is pretty good, in the sense that it resolves most of the adverse-selection problem by pooling subscribers according to something roughly independent of the quality of their health (i.e. subscribing everyone according to where they work rather than whether they voluntarily enter the insurance market). This does reduce costs, but this system is flawed, too. It distorts labor markets (giving some firms an incentive to move operations to Canada, Mexico, or Asia) because health benefits can comprise up to 30% of the labor cost for some lower-skill occupations. Not only that, but if you can only find part-time work or lose your job, you become uninsured, too (or face the higher prices of the private insurance market discussed above). Mandates might resolve this (we do this for auto insurance, by the way), but people are afraid of this option because some folks are likely to not be able to afford the cost.
That sort of brings us to the current debate, which is more about income distribution than anything else. It represents the classic trade-off between equity and efficiency in drawing up economic policy. It also brings the issue of "public goods" and "merit goods" into the debate. While there is little argument that health care is really a "public good," it may be a "merit good." I'll think about the distributional effects of "reform" tomorrow.
Sounds great, but that's problematic. People choosing whether or not to get health insurance might know somewhat more about their own health histories than the insurer does, and try to game the system. People who think they're healthy might try to go without health insurance, or maybe alternate their decision so that they get it one year and not the next and so on. (In fact, a lot of people do this with the optional vision or dental coverage in their current health plans.) This gaming of the system by "healthy" people would drive up the price of insurance for regular subscribers because the insurer would know that those people are less healthy on average (or have an informed guess to that effect). That's why as a compulsory subscriber to a group plan most folks "pay" (between themselves and the portion that their employers pay) about $10,000 for insurance, whereas the on the individual market prices run about 15,000. Also, when "healthy" non-subscribers get "unlucky" (which some inevitably will) their reliance on urgent care drives the costs up even more for everyone, including subscribers.Thus, since there is incomplete information, adverse selection, etc., markets don't do the job all that well.
The employer-based system we have now is pretty good, in the sense that it resolves most of the adverse-selection problem by pooling subscribers according to something roughly independent of the quality of their health (i.e. subscribing everyone according to where they work rather than whether they voluntarily enter the insurance market). This does reduce costs, but this system is flawed, too. It distorts labor markets (giving some firms an incentive to move operations to Canada, Mexico, or Asia) because health benefits can comprise up to 30% of the labor cost for some lower-skill occupations. Not only that, but if you can only find part-time work or lose your job, you become uninsured, too (or face the higher prices of the private insurance market discussed above). Mandates might resolve this (we do this for auto insurance, by the way), but people are afraid of this option because some folks are likely to not be able to afford the cost.
That sort of brings us to the current debate, which is more about income distribution than anything else. It represents the classic trade-off between equity and efficiency in drawing up economic policy. It also brings the issue of "public goods" and "merit goods" into the debate. While there is little argument that health care is really a "public good," it may be a "merit good." I'll think about the distributional effects of "reform" tomorrow.
Thursday, June 18, 2009
Trust the Producer?
Even in well-functioning, reasonably competitive markets, I cannot think of an economist who would simply say "trust the producer to tell you how much should be consumed and at what price." I don't walk into Walmart and say "tell me what I need this week and we'll pay for it," and neither do most people. But that is exactly the argument some people make about health care. With this propaganda coming out, no wonder prices are so high!
Point 1: The market for health care is one that is inherently prone to imperfect information. In some ways, patients know more about their health and their habits, but doctors know more about their diagnosis and treatment. In fact, doctors specialize in knowing more about things that are wrong with you, so we really don't wand to correct the problem by making patients 100% informed (that would be prohibitively costly). There needs to be some sort of external regulator here.
Point 2: Health care is already rationed by bureaucrats, and we wouldn't have it any other way. Private insurance has armies of bureaucrats that determine what types of procedures and what costs will be approved for your care, not your doctor. If they didn't do this, you wouldn't be able to afford health care.
Point 3: Lots of people have public insurance already, and actually prefer it to being thrown out on the market for private insurance. Most people who are eligible for Medicare, VA benefits, or TriCare (and do not have any employer-provided benefits) happily take these benefits. Even the bureaucracy doesn't seem to bother them that much. In fact a lot of the most expensive patients in the system are already paid for using tax dollars.
Point 4: Private insurance is much more costly per person than being part of a group plan because insurees in the private individual market are adversely selected. Mostly sick people choose to be insured in this corner of the market. Healthy people in this part of the market who don't have insurance sometimes get very unlucky all of a sudden, and their urgent-care costs drive up costs for others.
Point 5: Private insurance premiums are not "actuarially fair" in economic terms. In other words, the premium i pay them exceeds the total expected cost of providing care over the entire pool of insurees. In other words, insurance companies make "economic profit," which should be distinguished from "accounting profit," or "proprietors' income."
I'm not sure if single-payer is the way to go, but the total net cost probably won't go up too much. If you think of the labor cost your employer pays in health insurance as wages you're not getting, it's outrageous! Between my employer and myself, I already pay about $10,000 per year! If that money simply shifted from my BC/BS to the government, and I got a comparable level of care, what does it matter? Bottom line: it's not patients and doctors who decide things now. Bureaucrats already decide and will continue to do so regardless.
Point 1: The market for health care is one that is inherently prone to imperfect information. In some ways, patients know more about their health and their habits, but doctors know more about their diagnosis and treatment. In fact, doctors specialize in knowing more about things that are wrong with you, so we really don't wand to correct the problem by making patients 100% informed (that would be prohibitively costly). There needs to be some sort of external regulator here.
Point 2: Health care is already rationed by bureaucrats, and we wouldn't have it any other way. Private insurance has armies of bureaucrats that determine what types of procedures and what costs will be approved for your care, not your doctor. If they didn't do this, you wouldn't be able to afford health care.
Point 3: Lots of people have public insurance already, and actually prefer it to being thrown out on the market for private insurance. Most people who are eligible for Medicare, VA benefits, or TriCare (and do not have any employer-provided benefits) happily take these benefits. Even the bureaucracy doesn't seem to bother them that much. In fact a lot of the most expensive patients in the system are already paid for using tax dollars.
Point 4: Private insurance is much more costly per person than being part of a group plan because insurees in the private individual market are adversely selected. Mostly sick people choose to be insured in this corner of the market. Healthy people in this part of the market who don't have insurance sometimes get very unlucky all of a sudden, and their urgent-care costs drive up costs for others.
Point 5: Private insurance premiums are not "actuarially fair" in economic terms. In other words, the premium i pay them exceeds the total expected cost of providing care over the entire pool of insurees. In other words, insurance companies make "economic profit," which should be distinguished from "accounting profit," or "proprietors' income."
I'm not sure if single-payer is the way to go, but the total net cost probably won't go up too much. If you think of the labor cost your employer pays in health insurance as wages you're not getting, it's outrageous! Between my employer and myself, I already pay about $10,000 per year! If that money simply shifted from my BC/BS to the government, and I got a comparable level of care, what does it matter? Bottom line: it's not patients and doctors who decide things now. Bureaucrats already decide and will continue to do so regardless.
Saturday, June 13, 2009
Thursday, June 11, 2009
Wednesday, June 10, 2009
This Ain't True, Neither!
The other way of saying "a near-doubling of the U.S. price level over the next decade" is "The value of your savings will be cut in half over the next 10 years."
Uh, no. That would only happen if you stuffed your entire savings under a mattress in cash. And his "hyperinflation" of 7% was actually meant to be a scare compared to what he calls an "uncomfortable 5-6%. What a stooge.
Uh, no. That would only happen if you stuffed your entire savings under a mattress in cash. And his "hyperinflation" of 7% was actually meant to be a scare compared to what he calls an "uncomfortable 5-6%. What a stooge.
Blodget-Flation
Starting over, he's been worried about "hyperinflation," but he doesn't know what hyperinflation is. That, or he can't do math. By "math" I mean the simple arithmetic involved with the finance "rule of seventy." I'm worried about hype. Anyone with an undergrad B-school degree should know the Rule of 70, which approximates an asset's doubling time (here goods prices). Blodget fears high-end estimates of inflation meaning prices doubling in 10 years. Specifically, Years to double = 70/rate of change. Since exponential growth is not linear (hey, it's exponential in fact!) it's only an approximation, but it's a decent one as they go. So, some very elementary algebra tells us that prices doubling in 10 years means 7% inflation annually. Uncomfortable, but not "hyper." By contrast, hyperinflation is usually reserved for situations like Argentina in the mid-80s (about 650%, or doubling every 39 days) or Weimar Germany (3,000,000%, or doubling every 5 days or so).
To say doubling in 10 years is hyperinflation is simply false. Prices in the US more than doubled between 1973 and 1982, and while it was uncomfortable, it was not "hyper."
Tuesday, June 9, 2009
Summer Thoughts
Interesting, but not really answering the more relevant question, which is, "why has a long summer vacation persisted?"
Monday, June 8, 2009
A greener middle class
Like any new thing, green is not something that people are going to care much about until it is economical and practical for the middle class on the demand side (that, in large part is why the industrial revolution took off in UK, some have argued). So, this is a neat little piece.
Water, Property, and Conflict
Since water is the driving force behind Darfur, it's interesting to see how water rights get defined. This is sort of an interesting legal change. Is rainwater a public good that should be regulated or is what falls on your own property your own? How far can you go to keep it for yourself instead of letting it feed streams and riverbeds?
Multiple equilibria
Check this out.
Equilibrium One: No Dancing
Equilibrium Two: (Almost) Everyone Dancing
Purturbation: One person dancing
Result: Cascade
Equilibrium One: No Dancing
Equilibrium Two: (Almost) Everyone Dancing
Purturbation: One person dancing
Result: Cascade
Talk is Cheap
China puffed its chest out with a call for a "new reserve currency." Never minding the fact that China was never forced to buy dollar-denominated assets with its surpluses, and a collapse of the dollar appearing to be most harmful to US creditors, there is some interesting analysis from Free Exchange. Developing countries' actions belie the notion that they are not willing to finance our debt. It's even less clear that our total net external debt is increasing (public debt is increasing but private debt is decreasing). If emerging markets do have "a greater incentive ... to move to a new system," the question I ask is: move to what, and how?
Thursday, June 4, 2009
Not In My Back Yard!
I don't want seniors coming to my community, driving up real estate prices, inflating health care costs, and driving 18 miles per hour in a 35 zone (for the love of god, it's the skinny pedal on the right, granny!). Go to India! It's low-rent, good care, and apparently 'In India they really like older people.'
Macroeconomists' dirty secret
The first six or seven paragraphs and the last 2 or 3 are pretty interesting. I don't think I buy the crap in the middle about racism and chauvinism holding together the era of shared prosperity. But, it is the cato institute, so what do you expect them to do? Blame Reago-Bush-onomics?
Macroeconomists' dirty secret
How bout this. Interesting how Levitt talks about a dearth of macro data for testing current macro models. But here's a dirty little secret: most current macro models cannot be tested empirically because they are founded on Walrasian equilibrium concepts, which, at least as of the time I was in grad school just a few years ago, could not be identified econometrically.
Anyone want to put my name on their AER paper?
Saw this today. If anyone out there has bonuses for getting your papers in top fivers like the ones here, and wants to put my name on their submissions to AER, I'd probably willing to pay the $7,000 shadow price of a deadbeat co-author implied here.
Wednesday, June 3, 2009
Friday, May 29, 2009
For Mancow, Being on Olberman only Seemed like Torture
Mancow (the self-named conservative/libertarian shock jock, not Mankiw, who I sometimes poke fun at as "Mancow") wanted to show that waterboarding wasn't so bad, so he had a a marine do it to him. He lasted 5 seconds. He had actually nearly drowned once in childhood, and said that waterboarding is worse than drowning. Needless to say, he's converted. See his interview on Countdown here:
Visit msnbc.com for Breaking News, World News, and News about the Economy
Thursday, May 28, 2009
New blog to watch
Here's a new one for watching - for me it will be more and more useful beginning about 08-27-2009 (plus or minus random error).
Tuesday, May 26, 2009
Nice Non-technical Discussion of the "Resource Curse"
Three reasons resources are more curse than blessing. Part of the third, which she leaves out, is that the rent seeking behavior, paired with poor governance and the boom-bust volatility in the second, can often mean armed conflict.
Mancow Back on Track (for Now)
Greg Mankiw has started taking a fair, levelheaded assessment of things again. I'm glad to see it and hope it continues without reverting to being a full-time puppet of the Republicanist Party.
Monday, May 25, 2009
This was interesting. Google may be getting a little out of hand. On the other hand, if you just want information about something, this is an interesting new question-answering tool from Wolfram.
Why do Southern States have a Low HDI?
This was an interesting post on Andrew Gelman's stats blog. Basically, it talks about a new way of thinking about "human development" in the US by state, and compares it to an old way - the inverse of the distance to the Canadian border. What's about as interesting was this comment to a Catherine Campbell post at Economix:
Hmmm.
Tom Friedman has often observed that poorly educated, unemployed youth in
Arab countries turned to fundamentalism. He blames the inefficient kleptocracies
that run these countries for these backward attitudes.
Is something like this
happening in the solid Republican states?
Hmmm.
Friday, May 15, 2009
Wednesday, May 13, 2009
Milton Friedman and Richard Nixon: World Renowned Socialists
Why hasn't anyone mentioned the fact that Friedman and Nixon advocated a Family Assistance Prgram Negative Income Tax system to supplement and reform welfare and create incentives for poor families to work.
Norway, Dutch Disease, and Saving
Saw this article about Norway today. It seems obviousl that countries with resource wealth can use savings to keep their economy stable during a global recession like the one we're in. But this very saving can also have impacts on that country's exchange rate, as well as on wages and returns to capital that stymie investment in manufacturing sectors during normal times. It's known as dutch disease.
Wednesday, May 6, 2009
Trucks and Trade
Anyone know that there is a 25% tariff on "motor vehicles for the transport of goods" and the tariff on regular autos is just 2.5%? Check this out. Maybe that's also keeping us from showing much real innovation in the auto industry generally. Can't make a better hybrid? Make more gas-guzzling trucks with the complements of tariff protection.
It also makes me more frustrated about trucks. I've always wanted some sort of fuel-inefficiency tax (instead of binding restrictions) on gas-guzzlers, especially trucks. The response I get is that well, we can't tax commercial trucks more than passenger cars because farmers and other workin folks use them - it's not "fair!" Well, now it turns out we ALREADY have a higher tax on pickemup trucks than cars, so all we'd really have to do to apply the appropriate "incentives" (in this case sticks) to nudge production is: (1) make the tax nondiscriminating (apply equally to foreign and domestic producers instead of a tariff); (2) progressively tax inefficient cars at higher rates up in reverse proportion to their mpg rating and emissions.
It also makes me more frustrated about trucks. I've always wanted some sort of fuel-inefficiency tax (instead of binding restrictions) on gas-guzzlers, especially trucks. The response I get is that well, we can't tax commercial trucks more than passenger cars because farmers and other workin folks use them - it's not "fair!" Well, now it turns out we ALREADY have a higher tax on pickemup trucks than cars, so all we'd really have to do to apply the appropriate "incentives" (in this case sticks) to nudge production is: (1) make the tax nondiscriminating (apply equally to foreign and domestic producers instead of a tariff); (2) progressively tax inefficient cars at higher rates up in reverse proportion to their mpg rating and emissions.
Tuesday, April 28, 2009
Most Economists
Some people get the idea that economists are somehow "liberal" or "conservative." Most are really neither. Instead of being ideologues on any particular issue, economists are nerds who think about technical models and behavioural assumptions. And we usually see the world in shades of gray. That's why there's really less political polarization than most people think, as this by the Free Exchange and this by David Colander point out. For the most part economists see the world as one big trade-off. One policy prescripting is appropriate if the conditions support assumptions A, B, and C, but the exact opposite is appropriate if A', B', and C' are true. Hence, Harry Truman's quip about wanting a one-handed economist.
If you do happen to be an ideologue, on either side, you probably won't like what an economist has to tell you about it, because the support you get will be equivocal, at best.
If you do happen to be an ideologue, on either side, you probably won't like what an economist has to tell you about it, because the support you get will be equivocal, at best.
Monday, April 27, 2009
Some Banks Do Fail
Here's a list since Feb. 2007:
| Bank Name | Closing Date | |
| 1 | First Bank of Idaho, Ketchum, ID | 24-Apr-09 |
| 2 | First Bank of Beverly Hills, Calabasas, CA | 24-Apr-09 |
| 3 | Heritage Bank, Farmington Hills, MI | 24-Apr-09 |
| 4 | American Southern Bank, Kennesaw, GA | 24-Apr-09 |
| 5 | Great Basin Bank of Nevada, Elko, NV | 17-Apr-09 |
| 6 | American Sterling Bank, Sugar Creek, MO | 17-Apr-09 |
| 7 | New Frontier Bank, Greeley, CO | 10-Apr-09 |
| 8 | Cape Fear Bank, Wilmington, NC | 10-Apr-09 |
| 9 | Omni National Bank, Atlanta, GA | 27-Mar-09 |
| 10 | TeamBank, National Association, Paola, KS | 20-Mar-09 |
| 11 | Colorado National Bank, Colorado Springs, CO | 20-Mar-09 |
| 12 | FirstCity Bank, Stockbridge, GA | 20-Mar-09 |
| 13 | Freedom Bank of Georgia, Commerce, GA | 6-Mar-09 |
| 14 | Security Savings Bank, Henderson, NV | 27-Feb-09 |
| 15 | Heritage Community Bank, Glenwood, IL | 27-Feb-09 |
| 16 | Silver Falls Bank, Silverton, OR | 20-Feb-09 |
| 17 | Pinnacle Bank of Oregon, Beaverton, OR | 13-Feb-09 |
| 18 | Corn Belt Bank and Trust Company, Pittsfield, IL | 13-Feb-09 |
| 19 | Riverside Bank of the Gulf Coast, Cape Coral, FL | 13-Feb-09 |
| 20 | Sherman County Bank, Loup City, NE | 13-Feb-09 |
| 21 | County Bank, Merced, CA | 6-Feb-09 |
| 22 | Alliance Bank, Culver City, CA | 6-Feb-09 |
| 23 | FirstBank Financial Services, McDonough, GA | 6-Feb-09 |
| 24 | Ocala National Bank, Ocala, FL | 30-Jan-09 |
| 25 | Suburban Federal Savings Bank, Crofton, MD | 30-Jan-09 |
| 26 | MagnetBank, Salt Lake City, UT | 30-Jan-09 |
| 27 | 1st Centennial Bank, Redlands, CA | 23-Jan-09 |
| 28 | Bank of Clark County, Vancouver, WA | 16-Jan-09 |
| 29 | National Bank of Commerce, Berkeley, IL | 16-Jan-09 |
| 30 | Sanderson State Bank, Sanderson, TX | 12-Dec-08 |
| 31 | Haven Trust Bank, Duluth, GA | 12-Dec-08 |
| 32 | First Georgia Community Bank, Jackson, GA | 5-Dec-08 |
| 33 | PFF Bank and Trust, Pomona, CA | 21-Nov-08 |
| 34 | Downey Savings and Loan, Newport Beach, CA | 21-Nov-08 |
| 35 | The Community Bank, Loganville, GA | 21-Nov-08 |
| 36 | Security Pacific Bank, Los Angeles, CA | 7-Nov-08 |
| 37 | Franklin Bank, SSB, Houston, TX | 7-Nov-08 |
| 38 | Freedom Bank, Bradenton, FL | 31-Oct-08 |
| 39 | Alpha Bank & Trust, Alpharetta, GA | 24-Oct-08 |
| 40 | Meridian Bank, Eldred, IL | 10-Oct-08 |
| 41 | Main Street Bank, Northville, MI | 10-Oct-08 |
| 42 | Washington Mutual Bank, Henderson, NV and Washington Mutual Bank FSB, Park City, UT | 25-Sep-08 |
| 43 | Ameribank, Northfork, WV | 19-Sep-08 |
| 44 | Silver State Bank, Henderson, NV | 5-Sep-08 |
| 45 | Integrity Bank, Alpharetta, GA | 29-Aug-08 |
| 46 | The Columbian Bank and Trust, Topeka, KS | 22-Aug-08 |
| 47 | First Priority Bank, Bradenton, FL | 1-Aug-08 |
| 48 | First Heritage Bank, NA, Newport Beach, CA | 25-Jul-08 |
| 49 | First National Bank of Nevada, Reno, NV | 25-Jul-08 |
| 50 | IndyMac Bank, Pasadena, CA | 11-Jul-08 |
| 51 | First Integrity Bank, NA, Staples, MN | 30-May-08 |
| 52 | ANB Financial, NA, Bentonville, AR | 9-May-08 |
| 53 | Hume Bank, Hume, MO | 7-Mar-08 |
| 54 | Douglass National Bank, Kansas City, MO | 25-Jan-08 |
| 55 | Miami Valley Bank, Lakeview, OH | 4-Oct-07 |
| 56 | NetBank, Alpharetta, GA | 28-Sep-07 |
| 57 | Metropolitan Savings Bank, Pittsburgh, PA | 2-Feb-07 |
Wednesday, April 22, 2009
Tea and Tyrrany
Maybe we should have less indignation over taxes and tea and save some of it to torture (over the actual doing of it not the audacity of those who inform the on it), warrentless wiretaps, and strip searching schoolchildren. Just a thought.
Well, duh
Social networkers in college do worse. The only question I have is whether Facebook is adding to the crowding out effect from outside distracting activities in general, or if it is just a substitution effect (trading facebook for phone, or TV, or other internet time). Endogeneity?
More Moonshine Parties (and Fewer Tea Parties)!
As a symbolic gesture I'd like to suggest we have Moonshine Parties to balance out the tea parties. The purpose: to protest deadbeats who don't pay their taxes (much like bootleggers in the Virginia backwoods do).
Tuesday, April 21, 2009
Better Living through Torture, Tax Evasion and Antidepressants
I don't know what Peggy Noonan was on last Sunday to take a cavalier attitude towards torture, but it must be good stuff. SHARE! I respect the fact that she's trying to be civil about opposing the release of the memos, but you can at least make a logical argument, still be civil, and not play fear politics.
And George will knows darn good and well this tea party crap was about taxes, but he can't say with any credibility that taxes are less fair now than they were last year, because they really aren't. In fact, he's probably rich enough that even though his taxes would be a tad higher, he'd never know it if he didn't ask his tax accountant.
Linked here, FWD to about 3/4 through.
And George will knows darn good and well this tea party crap was about taxes, but he can't say with any credibility that taxes are less fair now than they were last year, because they really aren't. In fact, he's probably rich enough that even though his taxes would be a tad higher, he'd never know it if he didn't ask his tax accountant.
Linked here, FWD to about 3/4 through.
Thursday, April 16, 2009
Food for thought, Teabaggers
Ever wonder what life would be like if deadbeats shut their mouths, joined the rest of us in civilized society, and paid their taxes? We'd probably have a lot lower taxes or a lot less federal debt, if this article is any indication.
Monday, April 13, 2009
Cui Bono
The Collective Action problem (Mancur Olson) tells us that large diffuse groups might have large incentives to influence policy in the aggregate, but have small individual incentives to act because the gains are so spread out. Smaller interests have a larger incentive to organize and wield influence because they are able to exact gains from policymakers that earn them high returns relative to their costs of organizing and lobbying. Here is a summary of a case study in this phenomenonl.
Friday, April 10, 2009
Darfur as a harbinger
Jeffrey Sachs has already illustrated the fact that the conflict and genocide in Darfur is largely a conflict over control of a single strategic natural resource. Not diamonds, not oil - water. Well, expect more crises of like kind. Just take this story in this week's Economist. Over 50 years our population has increased by a factor of 2.25. Water use has increased by a factor of 3. Diets have become more protein-intensive; therfore more water-intensive. Climate change has made weather patterns more extreme and less predictable while melting the icecaps. When you think about how much fighting is done over luxuries like diamonds and oil, just imagine what happens when folks need run short on water, which we have treated as free. The diamond-water paradox may play itself out not to be a paradox one day after all.
Wednesday, April 8, 2009
Socialism for the Wealthy?
The lazy misuse of the term "socialism" is something I have railed against, and I will do it here when it has been done in the other direction. This week The Economist characterized the implicit subsidies of loose monetary policy, deregulation, tax loopholes, and explicit subsidization of credit markets "socialism for the wealthy." This is a false, and irresponsible, characterization of what amounts to simple redistributive politics.
It does, however, point out a key point about the biases about Republicans and Democrats as "conservatives" and "liberals" or "pro-market" and "pro-government," respectively. The reality is that the "pro-market" label for Republicans has not been earned, just asserted. A market has two parts: Households and firms. Republicans tend to favor the firm side of the market by subsidizing investment through the tax structure and other policies. Democrats tend to favor households through transfer programs and consumption subsidies.
Income redistribution is income redistribution and both parties' approach to it distorts markets. Republican initiatives for "incentives" are nothing more than subsidies to firms. Hence the term "Corporate Welfare," which is an apt analogy. Calling it "socialism for the wealthy" is inaccurate, incendiary, counter-productive.
It does, however, point out a key point about the biases about Republicans and Democrats as "conservatives" and "liberals" or "pro-market" and "pro-government," respectively. The reality is that the "pro-market" label for Republicans has not been earned, just asserted. A market has two parts: Households and firms. Republicans tend to favor the firm side of the market by subsidizing investment through the tax structure and other policies. Democrats tend to favor households through transfer programs and consumption subsidies.
Income redistribution is income redistribution and both parties' approach to it distorts markets. Republican initiatives for "incentives" are nothing more than subsidies to firms. Hence the term "Corporate Welfare," which is an apt analogy. Calling it "socialism for the wealthy" is inaccurate, incendiary, counter-productive.
Monday, April 6, 2009
Krugman Sticking To His Comparative Advantage
When Krugman stays on international linkages in the economy, his columns are very impressive, and highly educational to the layman. It also illustrates why folks should consider carefully the comparative advantage of someone like Michelle Bachmann (or Maxine Waters, if we have to give equal time) before taking her to seriously. Consider this article by Krugman. We start with an old joke about trade with China:
I've explained it to my principles students in the past, and here's Krugman's version of the same story:
trade with China had turned out to be fair and balanced after all: They sold us poison toys and tainted seafood; we sold them fraudulent securities.So, how does that relate to the inane gum-flapping on the matter China's pipe dreams of an international currency? Basically, that would be an international bailout of China's myopic (and bad) decision to finance its trade surplusses with purchases of dollar-denominated bonds. That won't happen.
I've explained it to my principles students in the past, and here's Krugman's version of the same story:
China chose instead to keep the value of the yuan in terms of the dollar more or less fixed. To do this, it had to buy up dollars as they came flooding in. As the years went by, those trade surpluses just kept growing — and so did China’s hoard of foreign assets.So, love him or hate him when he goes of on wonkish liberal rants, he knows his stuff when it comes down to the subject for which he won his Nobel - international economics. And he's a darn good writer (for an economist - an acedimic at that): This is the best elucidation of the double-bluff of China's surplusses and bond holdings I've seen in the mainstream. Basically, China cannot "call in" its holdings of US public debt, and if it tries to sell those bondholdings on the open market, they drive their prices (cumulatively with the value of the dollar) down. The result would be a depreciation of the dollar that allows the US to buy back debt with internationally-cheaper dollars without the consequences of inflation domestically, and potentially boost our trade balance and boom the macroeconomy in the process.
...
They are, apparently, worried about the fact that around 70 percent of those assets are dollar-denominated, so any future fall in the dollar would mean a big capital loss for China. Hence Mr. Zhou’s proposal to move to a new reserve currency along the lines of the S.D.R.’s, or special drawing rights, in which the International Monetary Fund keeps its accounts.But there’s both less and more here than meets the eye. S.D.R.’s aren’t real money. They’re accounting units whose value is set by a basket of dollars, euros, Japanese yen and British pounds.And there’s nothing to keep China from diversifying its reserves away from the dollar, indeed from holding a reserve basket matching the composition of the S.D.R.’s — nothing, that is, except for the fact that China now owns so many dollars that it can’t sell them off without driving the dollar down and triggering the very capital loss its leaders fear.
So what Mr. Zhou’s proposal actually amounts to is a plea that someone rescue China from the consequences of its own investment mistakes. That’s not going to happen.
Friday, March 27, 2009
Tax Season Special
If you still don't quite get the progressive marginal tax system or if you think I've been pulling a fast one, here is a good website to play with, to see how your income tax is affected by a small change in income that "bumps" you into a new bracket (hint: not much).
Wednesday, March 25, 2009
Market Failures and the Banks
Economists agree that markets work, except when they don't. The philosophical debate starts when markets don't work and people wonder what should be done about it. One side says the government can intervene constructively, and the other says that the government will probably only make things worse. But the debate at this point is not over whether markets have worked well in the financial sector, it's about what to do about it now that they have not. Larry Summers was on the News Hour (audio: HERE, and video: HERE), and explains it much better (his interview starts at 4min, 55sec):
The point, though, is to create enough liquidity (and, by putting well-trained econ geeks like Summers and Romer out there, confidence) so that scared banks can both retain the higher levels of excess reserves they feel they need, and still keep credit flowing to private businesses. The alternative would be nationalization of the banking sector, which, in a more fundamental way than simple income redistribution or even public health care, would truly be a step in the direction of "socialization" of the private sector. Nobody, (even this administration, contrary to what some folks believe) wants that.
GWEN IFILL: At the heart of this plan that Secretary Geithner introduced today is the idea that somehow these assets, which some people call "toxic assets," but which I notice you all call "legacy assets," that they're somehow worth saving. How do you value that? How do you know that it's worth a government investment?
LARRY SUMMERS: Well, our approach is premised on the recognition of a market failure that we have right now. Traditionally and usually these assets trade all the time between people who borrow money in order to finance their purchase.
That market, where they're able to borrow money, what people call "get leverage," has broken down. And as a consequence, the assets have lost a significant part of their value, just as if, all of a sudden there was no mortgage value, houses would lose a substantial part of their value.
And so, by providing the financing that enables that market to work, we enable more realistic valuations of these assets. We enable these assets to trade again. That means that people are in a position to originate loans and sell them into the market, and that gets the flow of credit going.
The point, though, is to create enough liquidity (and, by putting well-trained econ geeks like Summers and Romer out there, confidence) so that scared banks can both retain the higher levels of excess reserves they feel they need, and still keep credit flowing to private businesses. The alternative would be nationalization of the banking sector, which, in a more fundamental way than simple income redistribution or even public health care, would truly be a step in the direction of "socialization" of the private sector. Nobody, (even this administration, contrary to what some folks believe) wants that.
Monday, March 9, 2009
The Economic Definition of "Government Expenditures"
The debate over the various government "bailouts" and "stimulus packages" really glosses over the difference between a "subsidy" (negative tax) versus true "direct expenditures" by the government. The definition is important because the impact of these components of the current legislation have different "multiplier effects." Some of them behave similar to "tax cuts" (even if they are negative taxes) and some of them behave like "government expenditures" in the Keynesian framework. Here is a brief taxonomy:
Tax cuts/Negative taxes:
1. reductions in the tax rates;
2. subsidies to struggling private firms ("bailouts");
3. transfer payments (welfare).
Government expenditures:
1. direct government production (e.g. building/repairing roads);
2. government purchases of final goods and services;
So, in terms of the economic impact (multiplier effects) TARP, the auto bailout, unemployment insurance, subsidies to private clean-energy firms, and explicit reductions in tax rates are in the "TAX CUT" category, and tend to have less impact in the short run, because firms (perhaps rationally, and to the long-run benefit of the economy) might hold back some of that form of "stimulus." The other category only includes things that directly inject expenditures into the economy, such as building a tank, repairing a road, or a direct public investment into the building of new infrastructure, such as a new energy grid. These direct expenditures MIGHT have a larger short-run impact IF AND ONLY IF they occur when the economy has substantial unemployment, and if they are enacted before the recovery. If they are enacted after the recovery begins, they will tend to be inflationary.
Tax cuts/Negative taxes:
1. reductions in the tax rates;
2. subsidies to struggling private firms ("bailouts");
3. transfer payments (welfare).
Government expenditures:
1. direct government production (e.g. building/repairing roads);
2. government purchases of final goods and services;
So, in terms of the economic impact (multiplier effects) TARP, the auto bailout, unemployment insurance, subsidies to private clean-energy firms, and explicit reductions in tax rates are in the "TAX CUT" category, and tend to have less impact in the short run, because firms (perhaps rationally, and to the long-run benefit of the economy) might hold back some of that form of "stimulus." The other category only includes things that directly inject expenditures into the economy, such as building a tank, repairing a road, or a direct public investment into the building of new infrastructure, such as a new energy grid. These direct expenditures MIGHT have a larger short-run impact IF AND ONLY IF they occur when the economy has substantial unemployment, and if they are enacted before the recovery. If they are enacted after the recovery begins, they will tend to be inflationary.
The Editors of the Economist should be Flogged
Printing anything that uses the terms "Calculus" or "Second derivative" should be punishable with public beatings, as exemplified by this article in the Economist.
Friday, March 6, 2009
A civil debate over policy
I do not personally advocate Socialism one bit. In fact, I would say that it is a system that is both morally defunct and internally flawed because of the extreme lack of individual incentives it implies. I also believe in markets, and in the idea of capitalism. However, there are a lot of folks out there making wild assertions about what constitutes "socialism" that are just flat wrong. When a politician or other "pundit" says "income redistribution (or public health care) is socialism" they may be trying to somehow voice an opinion that these things are bad and ill-advised, and that is a sufficiently valid point on its merits. Socialism need not be brought into it for two reasons: First, it is poor logic to conclude that because something contains some of the elements of a particular idea, that it creates sufficient evidence to conclude that the broad generalization of that idea is contained wherever those elements are present. Secondly, it brings no progress to the debate over the proper role of government because it is disrespectful to those who might agree, and is, therefore, ultimately unpersuasive.
The key feature of a socialist system of economic organization is shared, collective, or public ownership of the means of production on a national (and international according to Marx) scale. Then, workers are compensated according to the Labor Theory of Value, or their average productivity (not their marginal productivity as market theories suggest). An egalitarian distribution of income is an indirect consequence of that compensation mechanism.
Public provision of certain "public" or "merit" goods does not constitute the breadth or depth of public or shared ownership to constitute "socialism." In the field of comparative economics these systems are characterized as "mixed" economies, which generally includes every democratic industrialized country in the world these days. Public provision of one narrow sector of the economy is no more "socialism" than another. Take defense, or education. It would be false to claim that government-provided defense or a publicly-funded educational system is (by itself) socialism.
With regard to income redistribution, socialism is not the only economic system in which advocates egalitarianism, and economic thinkers (including the fiercely laissez-faire french thinker Frederic Bastiat) showed concern over income distribution well before Marx. As an example, fascism also advocates for equitable redistribution of income as a means toward building a society in which interest groups of all stripes are united by a sense of duty and obligation and a triumph over the individual. Economic organization in Fascism involved a cooperation between the State and corporate interest groups, which, in theory, could avoid the wasteful competition of market capitalism. As in Socialism, an indirect consequence of this cooperation is an egalitarian distribution of income. The key point here is that welfare programs and negative taxes do negatively impact efficiency by weakening incentives, but are not sufficient conditions for socialism.
In an interesting tangent to the role of democracy Joseph Shumpeter predicted that the ultimate demise of individual capitalism was that it led to democracies that were doomed to implementing huge welfare states and collapsing. Market economists also express concern over the tendencey for democracies to foster radical swings to the left whenever people become dissatisfied with harsh economic conditions (e.g. Venezuela).
Whether income redistribution or universal health care evolves from a socialist, fascist, democratic, or other form of political or economic system its ideological origin is not really important. What is important is that we, as a society, are able to have a civil debate over the merits of various policies. Labels and name-calling are ultimately counter-productive. Yet markets, directed by the interaction of many independently-acting agents on both sides seem to be the best starting point in terms of efficient allocation. To quote Adam Smith: "By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good."
The key feature of a socialist system of economic organization is shared, collective, or public ownership of the means of production on a national (and international according to Marx) scale. Then, workers are compensated according to the Labor Theory of Value, or their average productivity (not their marginal productivity as market theories suggest). An egalitarian distribution of income is an indirect consequence of that compensation mechanism.
Public provision of certain "public" or "merit" goods does not constitute the breadth or depth of public or shared ownership to constitute "socialism." In the field of comparative economics these systems are characterized as "mixed" economies, which generally includes every democratic industrialized country in the world these days. Public provision of one narrow sector of the economy is no more "socialism" than another. Take defense, or education. It would be false to claim that government-provided defense or a publicly-funded educational system is (by itself) socialism.
With regard to income redistribution, socialism is not the only economic system in which advocates egalitarianism, and economic thinkers (including the fiercely laissez-faire french thinker Frederic Bastiat) showed concern over income distribution well before Marx. As an example, fascism also advocates for equitable redistribution of income as a means toward building a society in which interest groups of all stripes are united by a sense of duty and obligation and a triumph over the individual. Economic organization in Fascism involved a cooperation between the State and corporate interest groups, which, in theory, could avoid the wasteful competition of market capitalism. As in Socialism, an indirect consequence of this cooperation is an egalitarian distribution of income. The key point here is that welfare programs and negative taxes do negatively impact efficiency by weakening incentives, but are not sufficient conditions for socialism.
In an interesting tangent to the role of democracy Joseph Shumpeter predicted that the ultimate demise of individual capitalism was that it led to democracies that were doomed to implementing huge welfare states and collapsing. Market economists also express concern over the tendencey for democracies to foster radical swings to the left whenever people become dissatisfied with harsh economic conditions (e.g. Venezuela).
Whether income redistribution or universal health care evolves from a socialist, fascist, democratic, or other form of political or economic system its ideological origin is not really important. What is important is that we, as a society, are able to have a civil debate over the merits of various policies. Labels and name-calling are ultimately counter-productive. Yet markets, directed by the interaction of many independently-acting agents on both sides seem to be the best starting point in terms of efficient allocation. To quote Adam Smith: "By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good."
Thursday, March 5, 2009
Interesting Lecture
I got this lecture on Class Theory and Marx from Division of Labor. It's not pro-Marx, but it's open minded enough to knock the nonsense about "redistribution = Marxist = bad" on its patoot at both "=" links of the chain.
Poking fun at people smarter than me
Paul Krugman and Greg Mankiw are both brilliant. Therefore, I find some of their intellectual sparring over the stimulus and macroeconomy amusing. Anyway, a recent post by Mancow says:
I find this hilarious for two very, very nerdy reasons:
1. When was the last time Paul Krugman did International Trade theory?
2. While in grad school I was given the impression by Stephen Parente (who is, himself, a macroeconomist) that "empirical macroeconomist" an oxymoron.
After all, he is an international trade theorist rather than an empirical macroeconomist
I find this hilarious for two very, very nerdy reasons:
1. When was the last time Paul Krugman did International Trade theory?
2. While in grad school I was given the impression by Stephen Parente (who is, himself, a macroeconomist) that "empirical macroeconomist" an oxymoron.
Wednesday, March 4, 2009
Monetary Base versus Money Supply
Craig Depken, a great guy and former colleague when I was in Arlington, TX, is worried. I was too the first time I saw the chart he posted:
Then, I did some legwork and hopefully we can keep CADII from fleeing to Canada. The monetary base is heavily biased towards bank reserves, and if banks just are not lending, then this would be expected. Try the actual money supply on for size:
Or, try looking at non-borrowed reserves, and you might see why Bernanke went ooooohhh [expletive] around late 2008 (not the big spike into the negative):
Then, I did some legwork and hopefully we can keep CADII from fleeing to Canada. The monetary base is heavily biased towards bank reserves, and if banks just are not lending, then this would be expected. Try the actual money supply on for size:
Or, try looking at non-borrowed reserves, and you might see why Bernanke went ooooohhh [expletive] around late 2008 (not the big spike into the negative):
Thursday, February 5, 2009
Monday, February 2, 2009
Making more Ethanol from Less Corn
Another example of technological innovation around the margins (and the institutions that support it) working to keep us from falling into the Malthusian trap. I'm not a big ethanol fan, but things that can be done to make waste byproducts more useful (e.g. the building of the first cellulose ethanol plant) to help in the short run, might just help us get closer to a long-run solution with wind, solar, geothermal, etc.
Market Imperfections & Policy Specificity
Two things I'll never understand about the debate over the current intervention package. One, why are conservatives parroting for nothing more than blanket tax cuts? Two, why are liberals doing little more than ranting about income distribution?
Financial markets are rife with potential market imperfections: asymmetric information, moral hazard, etc. When the whole crisis was getting revved up, I never understood why there wasn't more effort, not to bail out folks who were now sinking, but to secure traditionally-available lines of credit for individuals and businesses who have always been able to get loans. We did amazingly little to target the core problem then, and we're paying for it now.
So now the problem has spread. People are losing their jobs because of the same problem, and it seems to me, the most direct way to deal with that particular problem is to take this opportunity to increase investment in certain types of "public goods" - infrastructure, etc. - that will at least be there for us when we come out of this mess. It doesn't seem like 1-2 percent in business tax cuts are going to keep the private sector in business when they can't secure the tens of thousands, hundreds of thousands, or millions of dollars in short term credit they're used to taking out for day-to-day operations (the timeline for revenue streams seldom match one-to-one with costs).
It's called policy specificity. Credit markets don't work right? Direct policy towards those (not just bailing out the firms that broke those markets either). High unemployment? Direct policy towards that, and don't just give a payout to firms who may or may not need it and may or may not use it to expand production and employment.
Financial markets are rife with potential market imperfections: asymmetric information, moral hazard, etc. When the whole crisis was getting revved up, I never understood why there wasn't more effort, not to bail out folks who were now sinking, but to secure traditionally-available lines of credit for individuals and businesses who have always been able to get loans. We did amazingly little to target the core problem then, and we're paying for it now.
So now the problem has spread. People are losing their jobs because of the same problem, and it seems to me, the most direct way to deal with that particular problem is to take this opportunity to increase investment in certain types of "public goods" - infrastructure, etc. - that will at least be there for us when we come out of this mess. It doesn't seem like 1-2 percent in business tax cuts are going to keep the private sector in business when they can't secure the tens of thousands, hundreds of thousands, or millions of dollars in short term credit they're used to taking out for day-to-day operations (the timeline for revenue streams seldom match one-to-one with costs).
It's called policy specificity. Credit markets don't work right? Direct policy towards those (not just bailing out the firms that broke those markets either). High unemployment? Direct policy towards that, and don't just give a payout to firms who may or may not need it and may or may not use it to expand production and employment.
Two Stupid Letters
There's this one by a liberal interest group, and this one by a conservative one.
Neither one really does much to add to a constructive debate over the appropriate role for government, because one is just blindly endorsing a (bad) political solution, and one is using a non-sequitor to argue against it.
I did not endorse either one.
Neither one really does much to add to a constructive debate over the appropriate role for government, because one is just blindly endorsing a (bad) political solution, and one is using a non-sequitor to argue against it.
I did not endorse either one.
Tuesday, January 13, 2009
Freakout-onomics
I've said several times that as far as "downturns" or "recessions" go, this one actually isn't as bad as it's made out to be so far. It may well get much MUCH worse, but so far it has been relatively mild in terms of changes in actual output and employment and that this particular financial crisis is not all that different or unique in comparison to past episodes in the postwar era, but don't take my word for it: Take theirs, or theirs (cross-posted via Economix). Basic idea: Times are indeed tough, but we've been through worse, and made it out. Hang in there as best you can, folks.
Small Transaction Costs and the Marginal Utility of Cafeteria Food
Trays are making college students fat. University cafeterias (all you can eat) waste about 30% less food when trays are eliminated, which essentially requires students to go through the line getting ONE plate and ONE drink instead of loading up. I like the comments on this one, especially Michael:
As someone who goes to a college that just eliminated trays, it reallyYeah, that's basically the point, Michael. That relatively small hassle, or cost, is what we call a transaction cost, and its keeping you from eating enough for a small African village for lunch.
isn’t a win-win situation. It might make people eat less food and waste
less, but it substantially increases the hassle when you have to carry
a plate or two plus a drink and silverware. All that isn’t easy to
carry without a tray.
Class Size, Practice, and Learning
Universities are starting to work harder to supply a better product to the market. Instead of cramming butts into several-hundred-seat lectures, MIT and others are reducing class sizes to try to improve their product. But the move is not just for class size: the size reduction is geared towards getting students to have a more hands-on experience - to learn by doing and create a peer-collaborative learning environment.
I certainly can't say that I'm not guilty of falling into a lecture trap of the old school, but we need to think innovatively to capture students with different strengths and learning styles, and do a better job of creating a open line of communication between students and instructors as well as among the students so that they can unlock the material for themselves.
I certainly can't say that I'm not guilty of falling into a lecture trap of the old school, but we need to think innovatively to capture students with different strengths and learning styles, and do a better job of creating a open line of communication between students and instructors as well as among the students so that they can unlock the material for themselves.
Monday, January 12, 2009
Lessons in Opportunity Cost: Immigration
This is an important lesson in opportunity cost, focusing on the allocation of resources to immigration enforcement. As we expend more budgeted resources towards deportation, and quota enforcement, the more difficult it becomes to control the smuggling of drugs, weapons, and criminal activities across the border. Maybe a more sensible policy on quotas and their enforcement will come, say, in the next decade or so.
Saturday, January 10, 2009
This is Interesting
I ran into this via the Green, Inc. blog. Basic idea: which states offer tax breaks for housholds that get renewable energy fixtures for their own use? Find your state and see what's out there.
Economic Humor
At some point it had to be done at the AEA meetings. Maybe better to save economic humor for the recovery, though?
Thursday, January 8, 2009
International Education
I didn't actually know that the proportion of international students at US universities were fewer in proportion to the total enrollment than it is in other developed countries. But why should universities pay intermediaries to recruit more students, as the article suggests? It seems like many students are being turned away from the best schools, and the students already in the schools (especially foreign-born students) are reasonably well-qualified. It seems that if there is a greater number of applications from qualified students the thing to do would be to price things better, especially for out-of-state and international students, with generous subsidies for highly-qualified in-state students who do not benefit from a mountain of trust-fund wealth. Let the international students come, but also let them pay full price for the high level of enrollment demand.
Monday, January 5, 2009
Taxes and Spending
Note to Hardball: In this segment your Republican and Democratic guests are arguing over an economic point that is theoretically moot. Maybe that's the beauty of it. In terms of economic impact of a tax cut (in both the "liberal" Keynesian and "conservative" neoclassical schools of thought) is the same as an increase in transfer payments (consumption subsidies). Similarly, an increase in transfer payments is the same as a tax cut. Spending is only "spending" (in terms of having different multiplier effects) if it involves a direct government purchase of goods and services, which transfers/tax cuts/negative taxes do not. Even better if those goods and services have some theoretical possibility of being "public goods" or generating "externalities" or "network effects" as investments in education, infrastructure, or even the military and health care, might.
Visit msnbc.com for Breaking News, World News, and News about the Economy
Today's Reason the Fence won't work.
If Japan's restrictions on immigration are leading to rising illegal entries, what makes Lou think his border fence will work (hint: Japan is an island nation for the geography-impaired)?
Economists in the Economist
Summary of the Economists list of rising stars in the field (sorry, my name won't be found):
Jesse Shapiro: Some information is bad.
Roland Fryer: Cultural roots of black underachievment.
Esther Duflo: Test projects (with treatments and controls) for empirical studies of development.
Amy Finkelstein: Annuities and private information of life expectancy.
Raj Chetty: Longer unemployment benefits are optimal because people find better job matches.
Ivan Werning: Progressive subsidies for inheritances ("death subsidy," higher for small bequests).
Xavier Gabaix: Explaining "Rank-Size" and "Power Rules."
Marc Melitz: New-new trade theory on international business networks.
Jesse Shapiro: Some information is bad.
Roland Fryer: Cultural roots of black underachievment.
Esther Duflo: Test projects (with treatments and controls) for empirical studies of development.
Amy Finkelstein: Annuities and private information of life expectancy.
Raj Chetty: Longer unemployment benefits are optimal because people find better job matches.
Ivan Werning: Progressive subsidies for inheritances ("death subsidy," higher for small bequests).
Xavier Gabaix: Explaining "Rank-Size" and "Power Rules."
Marc Melitz: New-new trade theory on international business networks.
Madoff
Here's Madoff's indictment:
http://clusterstock.alleyinsider.com/2008/12/bernie-madoff-the-indictment
http://clusterstock.alleyinsider.com/2008/12/bernie-madoff-the-indictment
Governor Bag-o-Tricks
The downstate Illinois nickname for Blago. Thought I'd post a link to the text of the complaint. Most of what they actually might get him for isn't even the alleged "Senate for Sale " scheme. Those of us from Illinois know he was dirty shortly after he took office. Trouble is, when he was elected, then-governor George Ryan (a Republican) was also on trial for corruption. His deeds lead to the illegal licensing of criminals for commercial truck licenses, which ultimately (allegedly) lead to fatal accidents involving those criminals who proved to be inept and irresponsible about their driving.
Here's G-Rod's Complaint and affidavit:
http://www.scribd.com/doc/8759869/Blagojevich-Complaint
Here's G-Rod's Complaint and affidavit:
http://www.scribd.com/doc/8759869/Blagojevich-Complaint
Cyclical Migration
More good news for Lou Dobbs. Not only are fewer illegals coming, more are returning. Hooray for a bad economy?
Monday, December 22, 2008
De Facto or Dejure?
Trade's shrinking. But it's unclear whether the shrinkage is because of rising protection, or because of overall declining economic activity. In particular, China is exporting less, but at the same time there are stories of increased availability of consumer goods within China, partly due to a natural decrease in demand. The Economist warns of possible increases in protectionism. They can cite for evidence is an increase in antidumping cases, but in this economic environment it may be more likely that firms will engage in actual dumping, so I'm not sure that's a good measure. I'd like to see them tell me of specific cases of actual increases in direct protection before I get too worried. Hopefully, economies will recover from the downturn before resorting to new tariff increases.
Thursday, December 18, 2008
Wednesday, December 17, 2008
The Democracy Tax
Democracy is expensive, and the Economist reminds us of it in last week's special report on India. Administering the necessary bureaucratic and legislative apparatuses that make the thing go costs a lot of and usually leads to a certain amount of disappointment. In this sense, many note that an iron-fisted despot, if "benevolent" so to speak, is a more "efficient" form of government because what gets done gets done quickly and without too much hemming or hawing. Unfortunately for these regimes, the principle applies equally to good and bad ideas.
But if you were beginning to think that our own system was hopelessly corrupt, it could be worse. Even though, "every five years, over a period of a few weeks, India holds a
reasonably orderly and fair election," the article goes on to state that:
But if you were beginning to think that our own system was hopelessly corrupt, it could be worse. Even though, "every five years, over a period of a few weeks, India holds a
reasonably orderly and fair election," the article goes on to state that:
[India's] politicians are mostly an unsavourySo, mere "pay to play" schemes and cash in a freezer is actually pretty tame!
lot. Of the 522 members of India’s current parliament, 120 are facing
criminal charges; around 40 of these are accused of serious crimes,
including murder and rape. Most Indian politicians are presumed to be
corrupt...
Thursday, December 11, 2008
Bad things that Came out of the Seventies (other than Disco)
I heard this on "All things considered" yesterday.
We used to have this urban-planning idea that we'd have these pockets of pure-residential areas that had a buffer from almost purely commercial areas known as "drivable suburbia" or "edge cities." In the seventies,people wanted to live in little cul-de-sacs of living and concrete jungles of shopping, commerce, and bigass parking lots somewhere else. I remember in the late eighties our neighborhood had huge opposition to the building of a new commercial area near our housing development because it would bring noise and crime and (gasp!) more people.
I wish I could say this is the way the market had things turn out, but that would be hooey. (I like to say hooey now because the word I really want to say makes the little green men cry.) It was carried about using subsidies and political lobbies that worked to have things zoned the way they thought best suited their views. Some might call that democracy or "majority rule" but that would be of equal portion of hooey, since most people who thought it to be a bad idea probably didn't care as much to organize and petition the local government as the "nimby"-ites (Not In My Back Yard, "nimby").
Now, some folks are having buyers remorse. Now, we want shorter commutes, closer access to jobs, groceries, routine shopping, and even public transportation (?) and people aren't so sure that driving 20-30 minutes is the best way to go about it. Maybe in fifty years when we have flying cars that run on banana peels and composted garbage we'll want to go back to our edge cities.
We used to have this urban-planning idea that we'd have these pockets of pure-residential areas that had a buffer from almost purely commercial areas known as "drivable suburbia" or "edge cities." In the seventies,people wanted to live in little cul-de-sacs of living and concrete jungles of shopping, commerce, and bigass parking lots somewhere else. I remember in the late eighties our neighborhood had huge opposition to the building of a new commercial area near our housing development because it would bring noise and crime and (gasp!) more people.
I wish I could say this is the way the market had things turn out, but that would be hooey. (I like to say hooey now because the word I really want to say makes the little green men cry.) It was carried about using subsidies and political lobbies that worked to have things zoned the way they thought best suited their views. Some might call that democracy or "majority rule" but that would be of equal portion of hooey, since most people who thought it to be a bad idea probably didn't care as much to organize and petition the local government as the "nimby"-ites (Not In My Back Yard, "nimby").
Now, some folks are having buyers remorse. Now, we want shorter commutes, closer access to jobs, groceries, routine shopping, and even public transportation (?) and people aren't so sure that driving 20-30 minutes is the best way to go about it. Maybe in fifty years when we have flying cars that run on banana peels and composted garbage we'll want to go back to our edge cities.
Tuesday, December 9, 2008
Thursday, December 4, 2008
Michelle Malkin, Ahead of the Learning Curve
Usually it takes a family of immigrants a few generations before they really adopt the slam-the-door-shut xenophobe-nationalist-conservative ideology of the Pat Buchanans and Lou Dobbses of the world. Michelle Malkin, Conservative columnist, TV commentator and blogger is there as just a first-generation daughter of Filipino parents who came here on student visas.
...and she blames the entire financial meltdown on Mexican immigrants, mostly the illegals. In a September 24 column, she opines,
...and she blames the entire financial meltdown on Mexican immigrants, mostly the illegals. In a September 24 column, she opines,
It’s no coincidence that most of the areas hardest hit by theI don't even know where to go with this! Who'd like to point out the logical fallacies with me? Composition, post-hoc-ergo-proptor-hoc? This is completely off the deep end, and hypocritical toboot! Yes! It's illegal-alien mango pickers buying million-dollar McMansions! What? Someone get me off the deep end, and Ani, remind me to smack you next time I see you for elevating my blood pressure with this.
foreclosure wave — Loudoun County, Va., California’s Inland Empire,
Stockton and San Joaquin Valley, and Las Vegas and Phoenix, for
starters — also happen to be some of the nation’s largest illegal-alien
sanctuaries. Half of the mortgages to Hispanics are subprime (the
accursed species of loan to borrowers with the shadiest credit
histories). A quarter of all those subprime loans are in default and
foreclosure.
Regional reports across the country have decried
the subprime meltdown’s impact on illegal-immigrant “victims.” A July
report showed that in seven of the ten metro areas with the highest
foreclosure rates, Hispanics represented at least one third of the
population; in two of those areas — Merced and Salinas-Monterey, Calif.
— Hispanics comprised half the population.
Tuesday, December 2, 2008
Immigrant quotas as a tax equivalent
This story on Morning Edition (NPR) got me thinking. Some folks are opposed to "selling" work visas (economists among them). Well, I'll tell you this: A quota (which is how we work it now) ain't much different. Just ask the illegal immigrants. Only difference is this: The people who get the hypothetical "tax revenues" aren't the US treasury - they're the people who are lucky enough to get visas (after about a 15 year wait for some source countries), and the coyotes who smuggle illegals over for a fee (which can run in the thousands of dollars per immigrant smuggled). That doesn't even touch on the laundry list of other externalities that quantity restrictions bring, and the fact that we spend billions of scarce treasury dollars enforcing the quota instead of collecting revenues from the auction/tax/fee.
Friday, November 28, 2008
The Auto Bailout, Trade, and Policy Specificity
As a trade economist, there is exactly one thing that could convince me that a subsidy to the auto industry is worthwhile, and it's this: Give them a direct subsidy and tear down all of the trade restrictions on foreign-made autos. That way, we could increase the competitiveness of the MARKET, and increase the chances that the monies will be used productively, rather than squandered on short-sighted SUV promotions that would keep us in the energy use gluttony of the last 20 years.
Societal Collapse
This is a relevant idea from TED Talks that I think relates somewhat to some research by my colleague Atin Basu. Really Atin's research focuses on the speaker's 5th point, the ability to recognize and react to environmental changes, i.e. take a long sight of it's continuation. I think that the issues before that, related to cooperation vs. Anyway, it's an interesting little topic.
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