Landsberg's latest

Noah Smith points out a Steve Landsburg column that doesn't make a lot of sense.  I am going to try (although it is hard) to ingnore the moral dimension here (although I am very much on Sandra's Fluke's side) and focus on the inherent logic of the positions being staked out.  Consider Landsberg's comments:

To his credit, Rush stepped in to provide the requisite mockery. To his far greater credit, he did so with a spot-on analogy: If I can reasonably be required to pay for someone else’s sex life (absent any argument about externalities or other market failures), then I can reasonably demand to share in the benefits. His dense and humorless critics notwithstanding, I am 99% sure that Rush doesn’t actually advocate mandatory on-line sex videos. What he advocates is logical consistency and an appreciation for ethical symmetry. So do I. Color me jealous for not having thought of this analogy myself.

There’s one place where I part company with Rush, though: He wants to brand Ms. Fluke a “slut” because, he says, she’s demanding to be paid for sex. There are two things wrong here. First, the word “slut” connotes (to me at least) precisely the sort of joyous enthusiasm that would render payment superfluous. A far better word might have been “prostitute” (or a five-letter synonym therefor), but that’s still wrong because Ms. Fluke is not in fact demanding to be paid for sex. (Not that there’s anything wrong with that.) She will, as I understand it, be having sex whether she gets paid or not. Her demand is to be paid. The right word for that is something much closer to “extortionist”. Or better yet, “extortionist with an overweening sense of entitlement”. Is there a single word for that?

But whether or not he chose the right word, what I just don’t get is why the pro-respect crowd is aiming all its fire at Rush. Which is more disrespectful — his harsh language or Sandra Fluke’s attempt to pick your pocket? That seems like a pretty clear call to me.

 Noah Smith comments that:

First, from an economic efficiency standpoint, in-kind benefits are inferior to direct cash payments, as Ed Glaeser will tell you. Instead of giving Rush a sex tape, it would be more efficient to simply hand Rush some cash and let him buy whatever he wants with it. 

But I think that this critique also misses the point of the most relevant exmaple given.  In this case (a lesbian student who wanted to be prescribed these medications to prevent cyst growth on her ovaries -- which led to surgery to remove an ovary) -- the rationale for taking the drug had nothing to do with sex and everything to do with preventing unnecessary surgery.  From a strict cost perspective, Landsburg should be praising Fluke for trying to save the state money by improving medical efficiency.  From a utiliatarian perspective, it's probably worth a few thousand dollars to preserve a person's otherwise healthy organ.  So this policy (in this case, at least) is costing extra money for all parties involved. 

So I am mystified by Landsberg's clear call.  He wants to spend more money on unecessary medical procedures that could be avoided with inexpensive and commonly available drug therapies?  Is this because Landsberg thinks his personal tax rate is too low? 

Not only do I find the substance of the argument repugnant, it seems to fail on even on it's own terms.  So I am confused by what Landberg is trying to accomplish wit it.  Is he hoping that we will turn it around and support open access to oral contraceptives?  Is he advocating for higher tax rates to enable a greater degree of social engineering?  Or am I missing something here? 

STEM jobs

Derek Lowe:

But there's an even bigger problem with pushing STEM education: the jobs, in many cases, are not there. Now, this is a point of great argument, because the jobs may well be there in some fields. But not over the whole area. A lot of people with physics and chemistry degrees are having trouble finding work, and in my own degree field (synthetic organic chemistry), it's been a real feat not having your job evaporate out from under you. In many cases, these jobs are going off to lower-labor-cost areas like China or India, but some of them are just disappearing outright. In either case, cranking up the number of eager graduates will not help the situation.

I would go further and ask who benefits from a surplus of science PhDs?  After all, getting a PhD is a long investment in time (10-12 years after high school) and money (good luck doing it without $50K in student debts plus many years of living on $10-20K as an income).  But with schools increaisng raising tuition, all of the risk is borne by the student.

Potential employers, on the other hand, can drop wages arbitrarily low if there is a serious surplus of qualified people relative to positions.  After all, switching fields after spending a decade getting a PhD in physics is a huge loss of investment.  So long as there is some chance of this investment paying off, won't most people keep trying? 

So the issue I have is why is pushing STEM a priority?  If there is a richly rewarded set of jobh opportunities out there then market forces will fix this problem.  But if there are a shortage of positions then why would we encourage people to be trained just to reduce employer expenses? 

A brief diversion into Media

The problem with Fox News:

But, there’s a bigger problem, and it goes to the real reason that Republicans who actually care about the future of their party should be concerned. In many ways, the GOP’s incestuous relationship with the “shock political talk” media machine makes it incredibly difficult for it to do what political parties have done in the United States from the beginning, adapt its message for changing times and changing circumstances. By reinforcing the base’s insistence on ideological purity, the Limbaugh’s of the world push the GOP further to the right in a nation that is, at it’s core, a centrist one. That is not in the long term interests of the party, and one would think Republicans would recognize that.

 Remarkably, it is a right wing web site that is writing this piece.  But the whole issue with needing to constantly push boundaries is that, sooner or later, you will start moving where most people don't want to go: see the recent issue with Rush Limbaugh.  I think that this leads to a media strategy that is a lot like naval cruiser construction.  It was always a benefit for your cruisers to be just a little bit tougher than everybody else's cruisers.  After all, if you get into a battle on the high seas, bigger guns and more armor are really helpful.

But cruisers need to be fast and agile.  The original purpose of these vessels was to catch enemy ships, scout the seas and do other activities that require a fast ship.  After a while of this arms race, a much smaller cruiser can evade the new, clunky heavy cruisers and perform the primary mission of the ship in a superior fashion.

So you will see a dramatic downsizing of the ships, followed by a slow creep upwards.  I wonder if Fox News will follow the same pattern in the near future?

Microfoundations

Via Paul Krugman:

A practical observation: the economists who get most bent out of shape at the notion that maybe we don’t always have to derive everything from optimizing individual agents also tend, with remarkable regularity, to be the economists who make simple, ludicrous conceptual errors when they discuss real-world macroeconomic issues. See many posts here and on Brad DeLong’s blog for examples. I don’t think this is an accident; it really helps your ability to think clearly to have those simplified, ad hoc models always in the back of your mind.

 One of the challenges of models is that they need to make predictions that are true.  If not, then they are (at best) descriptions of some previous time point.  But if we want to inform policy, then it is essential that models are a good description of reality.  So if the model makes a prediction that is obviously untrue then that should be a major red flag.

In my own view, the idea that people maximize "utility" as a decision making process is clearly wrong for any clear definition of utility (the idea that we maximize something that is an unobserved latent variable including social, financial, and cultural factors -- with arbitrary and time-varying weights -- is useful conceptually but unlikely to be a tractable variable for models).  So building models with this as a foundation may or may not improve predictive power.

On the other hand, Newton's laws of physics were successful long before quantum and statistical mechanics were developed.  So useful models may precede an understanding of the underlying microfoundations, at least in theory.

So, needless to say, I agree with Dr. Krugman.

Has anyone heard from Dr. Glaeser recently on this topic?

Here's Edward L. Glaeser back in June of 2009 discussing why the financial bailout was a better idea than the auto bailout:

Since the collapse of Lehman Brothers, the public sector has spent billions saving the banks. While these decisions are certainly debatable, they are understandable. The US financial industry misbehaved badly,... but it is still a sector with a future. ... After all, every other sector in the economy depends on banks for their financing.

But what about cars? ... Does anyone, other than GM's management, believe that this company can come back? The current treatment, cash infusion and a reduction in corporate liabilities, provides a solution for a company that is broke, not for one that is broken.

That passage originally caught my attention because of the rhetorical trick of shifting from an industry to a specific company. It came back to mind today when I saw the following graph in a post from Mike Konczal :

Added Sugars

From Aaron Carroll:

As we talk about how hard it is to combat obesity, it’s worth thinking about numbers like this once in a while. If we could get kids to give up half, not even all, of the added sugar in their diet, their overall calorie consumption would drop by 8%. They’d be dropping about 140-180 calories a day from their diet. And those calories are totally empty – they’re from added sugars they don’t need, and that won’t satiate them. When other research shows that reducing your caloric intake by 20 (yes, twenty) calories per day for three years could lead to an average weight loss of 2 pounds, making this small change could be a big deal.

Okay, there is a good point here and a really bad point here.  The good point is that added sugar seems to be a bad thing.  It promotes tooth decay (with 2 root canals, I can say that this is a big deal), it seems to be efficiently absorbed, it is associated with diabetes (a disease you really do not want), and it's nutrient value is null.

But the idea that a 20 calorie a day change will mechanically lead to a 2 pound weight loss in 3 years is kind of odd.  I mean it works, mathematically.  But it ignores all sorts of issues: like how does the body adapt to less intake, what foods are eaten (is it the same composition with portions shrunk by 1%?), and how this may alter activity levels.  The claim makes something that we know is hard sound very, very easy.

Programs like Weight Watchers seem to partially get good results by restriction, but they also seem to have incentives to change the composition of the diet.  Just look at how fruits and vegetables can be zero points in the current diet.

So, in an odd sort of way, the last point detracts from the main issue here: added sugars are bad and trying to expose your children to less of them is unlikely to be a bad thing.

Bleeding heart Randians

Once again, Joseph has left it to me to play bad cop on the McArdle beat.

As you can see from the previous post, Megan McArdle has a piece up at the Atlantic complaining about the lack of sympathy for the wealthy when they find themselves in financial trouble.

Likewise, when middle class people take out a mortgage that's perfectly affordable on the income they've been enjoying for years, and then lose the house because they suddenly saw that income cut in half, we don't feel a delicious sense of joy because they finally got what was coming to them.

I keep getting the feeling that McArdle's default approach to complexity is to look at one dimension at a time until she finds a view she likes.

In this case the complexity lies in the way we see financial hardship. We generally react to news of other people's money troubles with a combination of sympathy and disapproval (read Charles Murray for an example of the latter). The level of sympathy is largely determined by where the fall leaves the victim while the level of disapproval depends on how avoidable the crisis seems to be. Both these factors tend to make us react somewhat more harshly to financial problems of the well-to-do.

And in the cases in question here, the avoidability level is up there. The Bloomberg story that McArdle was talking about concerned highly paid executives who are facing hardships because of smaller-than-expected bonuses. This is a very different situation than a drop in salary. Even for the very well paid a completely unexpected reduction in salary can cause problems. The possibility of a smaller bonus should always be expected.

These were financially literate professionals who failed to take into account the potential variability of their income stream and as a result made reckless decisions then failed to own up. This isn't to say that some of these families aren't facing painful disruptions. Of course we feel sympathy for them, particularly the children, but the adults in these situations got there because of bad decisions and now they have to take responsibility for their actions.

At least that's what McArdle used to believe.

Income stability

This post has been questioned.  But I think some of the mockery is unwarranted as there is a pretty real point buried in this post: namely that lack of financial stability is bad for everyone.  Consider:

Likewise, when middle class people take out a mortgage that's perfectly affordable on the income they've been enjoying for years, and then lose the house because they suddenly saw that income cut in half, we don't feel a delicious sense of joy because they finally got what was coming to them. We recognize that this it is really terrible to be forced out of a home where you've built loads of happy memories and dreams--and not incidentally, to possibly be forced to yank your kids out of the aforementioned schools.

These disasters can hit people at any point on the income spectrum.  A lot of landlord policies are designed to minimize tenant flexibility, and houses can be difficult to sell on short notice.  I applaud the idea of trying to live well below one's means (an option that should be more realistic for the well off) but the real issue is the disconnect between the time frame of obligations (tuition, housing, transportation) and that of income streams.

The long run impact of this lack of basic security isn't pleasant.  It's true that the well off should be able to plan better and be more careful about things.  But it would also be reasonable to be able to make medium term plans with some assurance that the carpet will not be yanked out from under you.

EDIT: Mark makes the excellent point that I am talking about salary and the original article was talking about executives who committed to fixed expenses that could only be met with a bonus.  Clearly, it is possible to fail to get a bonus at a bank and counting on it to cover basic expenses (as opposed to saving it and using it for one time costs like a car or house downpayment) is begging for disaster.

Jones sings Nilsson

It's easy to get distracted by the bad pop culture associations and forget that Davy Jones was a very talented man. (He'd earned a Tony nomination while still in his teens for playing the Artful Dodger in Oliver.)

As for the role he's best known for, some of his best moments came performing the songs of Lennon and McCartney's favorite songwriter, Harry Nilsson. The contrast between Jones' boyish innocence and Nilsson's dark and troubled lyrics gave the performances an extra resonance.

Pay particular attention to Cuddly Toy. If you listen to the lyrics you'll notice a certain creepiness. When you learn what inspired it, you'll realise you didn't know the half of it.





Also posted at MippyvilleTV

To understand the health care debate...

You have to understand the beliefs and assumptions held by various segments of the population. This is what one politically influential segment believes.

Via Brad DeLong:

Dutch Puzzled by Santorum's False Claim of Forced Euthanasia: The Dutch Embassy in Washington declined to comment on Wednesday on recent remarks by Rick Santorum, the Republican presidential candidate, in which he claimed, falsely, that forced euthanasia accounts for 5 percent of all deaths in the Netherlands. An embassy spokeswoman, Carla Bundy, explained that the Dutch government preferred not to intervene in an American political campaign. But Ms. Bundy did provide The Lede with documents and official statistics showing that there are no provisions of Dutch law that permit forced euthanasia. Voluntary euthanasia, which has been legal since 2002, accounted for about 2 percent of deaths in the Netherlands in 2010.

As Jonathan Turley, a legal blogger, explained on Monday, the Dutch law permitting euthanasia is unambiguous about the requirement that it be voluntary, and lawmakers mandated that each case be carefully reviewed by an expert panel…. As the Web site Buzzfeed reported, Mr. Santorum’s erroneous comments, made at a public forum hosted by the conservative leader James Dobson on Feb. 3, failed to attract much notice until they were fact-checked, and mocked, in the Dutch press last weekend…. [A] video showed Mr. Santorum claiming that elderly Dutch people wear a bracelet reading “Do not euthanize me.” Over audible gasps from the audience, he continued:

Because they have voluntary euthanasia in the Netherlands, but half the people who are euthanized every year — and it’s 10 percent of all deaths for the Netherlands — half of those people are euthanized involuntarily, at hospitals, because they are older and sick. And so elderly people in the Netherlands don’t go to the hospital, they go to another country, because they’re afraid because of budget purposes that they will not come out of that hospital if they go into it with sickness.

As Buzzfeed noted, Dutch journalists found it easy to refute Mr. Santorum’s statistics, and made fun of his “fact-free” claim that euthanasia was forced on anyone, but they had no idea where he got the idea that the nation’s elderly wear “Do not euthanize me” bracelets…. Mr. Santorum’s campaign did not respond to a request to explain who or what the candidate’s sources were.

I think we are a long way from this scenario

This seems a little extreme:

The government has men with guns and dungeons. The armed men will throw you in the dungeon unless you pay taxes. So if the government chooses to accept random pieces of paper as payment, the pieces of paper become valuable. The point of collecting taxes isn't that the government needs money (it can print money) it's that if the quantity of taxes is too low relative to the stock of money, then the money loses its value and the price level rises.

But, at it's heart it points out something that is often forgotten about government.  We have lived under a benign and strong government for so long that we (as a culture) seem to have forgotten that somebody is likely to have people with guns.  When the people with guns are members of a republic with an obligation to protect the citizenry, things are rather good.  But if you make the government "small enough to be drowned in the bathtub", there will still be people with guns but they might have a different view of what constitutes a code of conduct.

This is not to say government cannot be improved (in a thousand ways), but it is worth keeping in mind that there are no scenarios where the "people with guns" issue goes away completely (even if we got rid of all guns, feel free to substitute "people with clubs").

Travel Update

I am about to do another multi-city work trip. So blogging might be extremely light for the next week or so from my end, at least. Apologies for the light posting this month . . .

MedicAid

MedicAid is extremely cost-effective (at least by the standards of US medicine) and protects some of the most vulnerable citizens of the republic. Aaron Caroll goes into just how difficult it would be to make further cuts in MedicAid. But I wonder if the real direction of the debate shouldn't be about expanding coverage for more citizens. After all, the low rate of reimbursements mean that getting treatment under the program will be difficult. This means that people will seek better forms of coverage if they have any options at all. Would it really be terrible to have a public/private hybrid system? Needless to say, I find the idea of MedicAid cuts to be pushing the discussion in the wrong direction.

Odd Criterion

Via Diane Ravitch:

But one sentence in the agreement shows what matters most: “Teachers rated ineffective on student performance based on objective assessments must be rated ineffective overall.” What this means is that a teacher who does not raise test scores will be found ineffective overall, no matter how well he or she does with the remaining sixty percent. In other words, the 40 percent allocated to student performance actually counts for 100 percent. Two years of ineffective ratings and the teacher is fired.

So why not be transparent and make the student performance count for 100%? Unless the goal is to allow teachers who are effective at improving standardized test scores be removed for other reasons. I love the idea of trying to ensure that education is of high quality. But high stakes evaluations of complex behavior based on a simple metric seems . . . unwise. I am sure Mark will have a lot more to say about this newest entry in the Education Reform debate.

Laffer Curves

Matt Yglesias:

This is a reminder that while the "Laffer Curve" does not characterize taxation in the United States as a whole, it probably does apply to cigarette taxes in the highest tax jurisdictions. The combination of success in pushing people to quit smoking and success in pushing smokers to come up with ways to avoid paying the taxes has pushed revenues below what could be gained. In public health terms, that's all fine, but for a while higher cigarette taxes were a rare form of politically palatable revenue-raiser and that's increasingly difficult to make work.

I think that this is a point that does not get enough attention.  Just because we are on the high tax side of the Laffer curve does not mean that we are not at a socially desirable point.  There is a tendency to demonize tax rates beyond the inflection point on the Laffer curve, but it is quite possible that these tax rates could have socially desirable consequences that make the lower revenue worthwhile.  And these benefits may not be symmetric: lowering cigarette taxes in New York could be made revenue neutral in a way that increases the total amount of smoking. 

Now I have tended to be laissez-faire in terms of people's right to smoke (odd for a public health person).  But I am not at all opposed to making the habit expensive, to make the deicison to stop or start be nudged towards a lower volume of smoking equilibrium.

So I think this suggests that we should think carefully about a particular piece of policy rather than simply disqualify it due to simple tests (like the Laffer curve).  In particular, this sort of reasoning might very well make sense applied to things like the gas tax.  Believing in people's right to use an SUV does not mean we shouldn't discourage the behavior, where possible.