One hell of a multiplier

A small data point on the very big story of states using tax incentives to attract businesses. I was researching a post on an article on film and television in Georgia that mentioned the incentive package that convinced Disney to move the Miley Cyrus film The Last Song away from North Carolina.

Here's the relevant passage from Wikipedia:

The Last Song had originally been set in Wrightsville Beach and Wilmington in North Carolina. Though they wished to shoot on location, filmmakers also examined three other states and identified Georgia as the next best filming site. Georgia’s housing prices were higher, but the state’s filming incentive package refunded 30% of production costs such as gasoline, pencils, and salaries. ...

Though other movies have been filmed in Tybee Island, The Last Song is the first to actually be set in Tybee. With the city’s name plastered on everything from police cars to businesses, Georgia officials predict a lasting effect on the economy. In addition, The Last Song is estimated to have brought up to 500 summer jobs to Georgia, $8 million to local businesses, and $17.5 million to state businesses.

When you hear accounts of how much money a movie or a factory or a stadium brought to an area, you should maintain a healthy skepticism. According to that same Wikipedia article, the budget for the film was $20 million. Presumably almost all of the above-the-line costs and much of the rest of the budget (particularly post-production) went out of state.

If someone has a better number I'd be glad to revise this post, but until then, let's say eight to ten million was spent in Georgia by Disney and its employees in the summer of 2009. That's not a trivial amount of money. It certainly provided a big bump for the south Georgia economy; it may even have been worth the cost in state revenue, but to get to that 17.5, you have to assume that money is doing a lot of heavy lifting.

Of course, if you have a truly in state-production the story's quite different. For example, most of the money from Tyler Perry's next Madea film really will end up in Georgia.

But it's worth remembering, Perry started making movies in Georgia years before those incentives started.



Along related lines, check out James Kwak's thoughts on Rhode Island's $75 million loan to Curt Shilling's gaming company and Matt Yglesias's explanation of why the Kings stayed in Sacramento.

Oregon and Medicaid

The new Oregon Medicaid study is coming out at a very bad time for me to comment.  But I want to direct you to the Incidental Economist which is doing a banner job of clarifying why it was hard to get good evidence directly on health outcomes from the study.  Further comments are here. 

One thing to note on health outcomes (poached from the comments at TIE) is:

In the case of total cholesterol the rate was reduced by 17% (from 14.1% to 11.7%). If that kind of drop is not detectable by the study then I think it is a problem.

Or this one:

 HgbA1C drops from 5.1% to 4.2%.

I think that this is too harsh, but it does point out that many of the changes were clinically significant but that the study (for a lot of reasons due to enrollment and short follow-up) is not really able to give precise estimates.   Remember, only 25% of the people offered Medicaid took it, so the adherence rate is a lot lower than what we normally think of in an RCT and so the intention to treat estimate is a poor measure of the associations among those who enrolled. 

Kevin Drum discusses this more here. Pay special attention to the PDF at the bottom of the post.

It's too late for me to think of a sufficiently sarcastic title

I've always had a problem with Ken Rudin. I assume that, at some point he must have done some good work to get where he is, but I'm a regular NPR listener and I used to be a regular listener of Talk of the Nation and what I've heard has been consistently weak. More to the point, his weaknesses are completely consistent with the conventional Washington political world view.

The DC press corps has shown an extraordinary level of group-think and a truly stunning lack of self-awareness. Members have to constantly tune out contradictory facts and disturbing questions. Which takes us to last night's broadcast:

DONVAN: You have been noodling on the prospects of Hillary Clinton 2016.

(LAUGHTER)

RUDIN: Well, other people have, as well, and, of course, there's a new poll - and God forbid we could talk about politics without talking about 2016, because it's only, you know, a million years away from now. But WMUR and University of New Hampshire has a new poll out that shows that Hillary Clinton, if the New Hampshire poll - if the New Hampshire primary were held today and, of course, if it were, then we'd be talking about something else, but Hillary Clinton would have 61 percent, and Joe Biden will only have 7 percent among the Democrats.

And on the Republican side, Marco Rubio and Rand Paul would be tied at 15 percent each. I mean, of course, these are nonsensical numbers, but the point is, as of now, May 2013, Hillary Clinton remains - again, I know this is ridiculous to say - but a prohibitive favorite for...

DONVAN: Yeah. But when you say it's ridiculous to say, why are those - why discuss those numbers at all right now? What relevance actually do they have?

RUDIN: Well, none. I guess, you know...

DONVAN: Oh, too bad.

RUDIN: No. I mean, it really has none. Look, the day of the New Hampshire primary in 2008, a lot of people predicted Barack Obama - who had won the Iowa caucuses - who was going to win the New Hampshire, and Hillary Clinton won New Hampshire. So if on the day of the primary we can't - you know, the polling doesn't show it to be accurate. The fact that we're talking about it two-and-a-half years later is just mind-boggling to me - three-and-a-half years later, two-and-a-half years later. It's mind-boggling. But what it does say is that, at least as of now, the Republican race is wide, wide open. And, of course, you know, it's very rare for a vice president to be denied the nomination if he or she would want it. And, of course, Joe Biden has a tough battle if Hillary Clinton runs.

If there was ever a moment that called for an epiphany, this is it. The man is asked straight out "why are you talking about this?" He admits that he doesn't know, that there's no reason for us to listen to him. Does he then take the next logical step and admit that he should spend less time talking about meaningless numbers? No. There is not a flicker of awareness. He just blithely goes back to drawing conclusions from the numbers he has just called nonsensical.

Two education posts of note

From Dana Goldstein: An Activist Teacher, a Struggling School, and the School Closure Movement: A Story from L.A.

From Dean Dad: No Pell for Remediation?

The 401(k) world

There has been some real tough reflection on tax expenditures recently.  I have always seen 401(k) and IRA savings vehicles as being a better than average idea for using this approach.  It's sure better than tax advantaging investment income, which is very interesting in the abstract but in the real world seems to flow to the best off. 

But people are making some solid points about whether this is really a good idea or not.  If they don't work to incentivize the right behavior on the part of either consumers or vendors than maybe they are not an ideal retirement savings approach.

James Kwak:

The first is that they go overwhelmingly to people who don't need them -- like my wife and me. As two university professors living in Western Massachusetts, where the cost of living is low, we make more than we need to support our lifestyle. We max out our defined contribution plans every year, and because we're in a relatively high tax bracket (28%, I think), we save thousands of dollars a year on our taxes. This is the problem with most subsidies that are delivered as tax deductions. Their cash value depends on the amount you can deduct and on your marginal tax rate. In this case, fully 80 percent of retirement savings tax subsidies goes to households in the top income quintile. (See Toder, Harris, and Lim, Table 5.)

The second problem is that these tax incentives don't work. They don't cause people to save more. In my case, the amount we save is just our income minus our consumption, and our consumption isn't affected by the tax code. If there were no tax subsidy, we would save the same amount and just pay more in taxes. And it's not just us. A recent and widely discussed paper by Raj Chetty, John Friedman, Soren Leth-Petersen, Torben Heien Nielsen, and Tore Olsen looked at what happened when the Danish government reduced tax subsidies for retirement savings by rich people. The short answer is that decreases in retirement savings were almost perfectly matched by increases in non-retirement savings. The overall effect, they estimate, is that for every dollar in tax subsidies, total savings go up by one cent. The other ninety-nine cents is just a handout to people who would have saved anyway.

Matt Yglesias

Middle class retirement savings isn't like that. We know roughly how much people need to put away in order to retire with a standard of living they'll be comfortable with. And we definitely know what kind of investment vehicles are most appropriate for middle class savers. And we have abundant evidence that, left to their own devices, a very large share of middle class savers will make the wrong choices. What's more, because of the nature of the right choices it's obvious that the dominant business strategy for vendors of middle class investment products is to dedicate your time and energy to developing and marketing inferior products, since the essence of superior products in this field is that they're less remunerative.
 

The most convincing part is the whole question of how 401(k) plans are designed to reduce consumer choice and the resulting incentive to offer inferior products.  After all, the employer setting up the 401(k) has little incentive to make sure that difficult to spot fees don't eat up other people's money. 

The alternative, at this point, is social security.  I am very sympathetic to arguments that assets are just claims and that providing for the elderly ultimately turns into a resource sharing problem.  The difference appears to be that social security would divide the resources we put towards older adults more equitably than tax-advantaged savings plans do. 

On the bright side, all those elderly shut-ins won't have to worry about having their flights delayed

I won't belabor the point right now but one of the recurring underlying themes in the posts from both authors of this blog is the increasing difficulty with which information passes up the economic ladder and the extraordinary disconnect in perceptions that difficulty has caused.

This is not just a case of not knowing how the other half lives; it's not knowing how the other deciles live (or at least, how the deciles below you live). Thus a problem involving products and services used disproportionately by the upper and upper-middle class is given a high level of coverage and is addressed almost immediately while on the other end of the economic spectrum, important (sometimes vital) products and services are curtailed or even eliminated with little reaction from those unaffected.

Arthur Delaney writing for the Huffington Post:

Now McCormick is 70 years old and living alone in a one-bedroom apartment in a six-story building. Only about 40 of the building's 144 units are occupied. The parking lots are barren and the hallways are dingy with torn carpets. McCormick considers the building "spooky."

He's lived here since 2005, and for most of that time he has benefited from food charity every week day ... brought to him by Meals On Wheels volunteers. Since 1972 the Administration on Aging has provided federal funding for senior nutrition, and today volunteers from some 5,000 Meals On Wheels affiliates across the country distribute a million meals a day.

But federal funding for senior nutrition has been reduced by budget cuts known as sequestration, meaning less food for old people here and elsewhere. The White House has said the cuts would mean 4 million fewer meals for seniors this year, while the Meals On Wheels Association of America put the loss at 19 million meals. In general, the federal government subsidizes only a portion of the cost of every meal, so whether individual seniors will stop receiving food really depends on the circumstances of whatever local agency serves them.

Michele Daley, director of nutrition services at the Local Office on Aging, which serves Roanoke, Alleghany, Botetourt and Craig counties in Virginia, said the agency expects to receive $95,000 less in federal funds this year (it has an operating budget of $1 million). They're gradually reducing the number of people receiving daily meals from 650 to 600 as a result of the budget cuts. Already, the office has planned to stop handing out most emergency meals -- bags of shelf-stable items like canned beans distributed in advance of snowstorms and holidays. And they've instituted a waiting list.

"We've never had a waiting list," Daley said. "This is the first time ever and it's a direct result of sequestration."

After he learned about the cuts on the news, McCormick thought long and hard about whether he really needed the meals. He's got no car, and can't walk long distances, but sometimes he can get a ride to the grocery store and the food pantry, and he's got a small stockpile of canned goods sitting on a wooden desk in his living room.

"I've run into people who've been a whole lot worse off than I was," he said.
...
Many seniors would prefer to live independently in an apartment than dwindle away in a nursing home, and that's partly the point of bringing them food at home. It's also fiscally prudent: A Brown University study found the more states spend on meals, which are not expensive, the less they spend housing seniors in nursing homes, which costs much more.
...
Field did not drive to William McCormick's lonely apartment tower, and neither did any of Roanoke's other Meals On Wheels volunteers, at least not to visit McCormick. Last month, after taking stock of his own access to food and considering people less fortunate, he decided to drop out of the program.

"I thought about it for two or three days and I said, 'Right now my health's pretty good,' and so I just gave it up," he said. "I just couldn't bear the thought of me having something to eat and maybe somebody else needing it and they couldn't apply for it so I just voluntarily gave it up."

Portion sizes

It has been a busy month but I want to go back to one of Mark's posts.  Mark states:

There are certainly things here that would seem strange here (make sure to get two pats of butter every day), but much of advice -- not overeating, watching salt, sugar and fat, satisfying cravings in moderation -- still seems fairly sound.
 

Even today, dietary guidelines suggest getting some fat in your diet.  So how much butter is in a pat of butter? 

20 calories in 1 small pat of salted/unsalted butter (0.1 oz or 3g)
 

For a 2000 calories diet, that is 2% of your daily energy intake.  Now if you consider what was easy to preserve and likely to be widely available in 1950, this makes sense.  Today we'd probably substitute nuts for the butter.  But it would be challenging to find a nutritionist who had trouble with a garnish that was about 4-6 grams of fat/day. 

What is more remarkable, to me, is how much things like meat serving sizes fit with modern dietary approaches.  But I would be surprised if this advice was not very effective at weight control even today. 

Reasons we value a college degree (aside from the obvious)

One of the things I find concerning about the MOOC debate is how simplistic many of the views are, both of college classes in particular and of college education in general. (Here is another one of my concerns.)

Over at Stumbling and Mumbling, Chris Dillow does a good job helping with the latter, discussing the less obvious ways that degrees can pay dividends (not sure about the last one though).

Nevertheless,we should ask: what function would universities serve in an economy where demand for higher cognitive skills is declining? There are many possibilities:

- A signaling device. A degree tells prospective employers that its holder is intelligent, hard-working and moderately conventional - all attractive qualities.

- Network effects. University teaches you to associate with the sort of people who might have good jobs in future, and might give you the contacts to get such jobs later.

- A lottery ticket.A degree doesn't guarantee getting a good job. But without one, you have no chance.

- Flexibility. A graduate can stack shelves, and might be more attractive as a shelf-stacker than a non-graduate. Beaudry and colleagues decribe how the falling demand for graduates has caused graduates to displace non-graduates in less skilled jobs.

- Maturation & hidden unemployment. 21-year-olds are more employable than 18-year-olds, simply because they are three years less foolish. In this sense, university lets people pass time without showing up in the unemployment data.

- Consumption benefits. University is a less unpleasant way of spending three years than work. And it can provide a stock of consumption capital which improves the quality of our future leisure. By far the most important thing I learnt at Oxford was a love of Hank Williams and Leonard Cohen.

I suspect that signaling is the main reason why increasingly many jobs require college degrees though they don't seem to involve any skills we would normally associate with college. HR departments spend a great deal of their time and energy narrowing applicant pools down to a manageable size. Degree requirements are a simple and easy to implement filter.

A break from the Felix-bashing

I realize I've been hard on him lately, but it's worth taking a moment to remember that Felix Salmon is one of the best financial journalists out there, especially on the philanthropy beat:

While the Cooper Union ethos never left the students or the faculty, however, it did seem to desert a significant chunk of the Board of Trustees and the administration. Starting as long ago as the early 1970s, the board started selling off the land bequeathed by Cooper, not to invest the proceeds in higher-yielding assets, but rather just to cover accumulated deficits. Cooper hated debt and deficits, but that hatred was not shared by later administrators, who would allow debts to accumulate — bad enough — until the only solution was to sell off the college’s patrimony, thereby reducing the resources available for future generations of students. If you visit Astor Place today, the intersection once dominated by the handsome Cooper Union building, the main thing you notice are two gleaming new glass-curtain-walled luxury buildings, one residential and one commercial, both constructed on land bought from Cooper Union.

Then, when you turn the corner and look at what hulks across the street from the main Cooper Union building, you can see where a huge amount of the money went: into a gratuitously glamorous and expensive New Academic Building, built at vast expense, with the aid of a $175 million mortgage which Cooper Union has no ability to repay.

I started to quote more, but as startling and depressing as the details are, you really need to read the whole thing to get the full impact. It's an extraordinary story with particular significance to those following the tuition debates. While it would be a mistake to assume Cooper Union is completely representative, it is an enormously instructive example that seems to give us one more reason to question the cost disease theory.

A word of warning, I would not advise reading past the phrase "vision process" on a full stomach.

Free TV blogging -- collateral damage

For those of you who tuned in late to the TV debate, so far we've talked about how well over-the-air television compares to cable (for some people), how new and apparently successful businesses are springing up around OTA, and how the number of viewers getting their television through antennas appears to have been growing substantially since the introduction of digital. What we haven't covered so far is the potential social impact of killing broadcast television.

It is almost axiomatic that, if you have a resource that is used in one way by people at the top of the economic ladder and in another way by people on the bottom and you "let the market decide" what to do with the resource, it will go with the people who have the money. I'm sure many if not most of the readers here could explain it better than I can (econ is not my field), but the problem comes from the fact we're talking about absolute rather than relative money. People at the bottom may be willing to spend a larger portion off their income on the resource but it's a larger portion of a much smaller total.

This becomes particularly troubling when we're talking about a publicly held resource. When we consider selling off a piece of public property, we can't just assume that whoever is willing to pay the most will put it to the best use. By that standard, there would be no roads, parks or libraries in poor neighborhoods. Things used by the wealthy will always come out ahead.

Instead we need to think about who uses the resource now and how their lives will change if that resource is sold off. What groups rely heavily on broadcast television? What groups would have the most difficulty finding alternatives?

People in the bottom one or two deciles are going to be in trouble. Even the lowest tier of cable would represent a significant monthly expense.

People with limited residential security will be even worse off.

People with limited income security will face a difficult choice: sign up for exorbitant no-contract plans or commit to a financial obligation they may not be able to fulfill.

People with poor credit histories will have to come up with large deposits every time they move.

I have no idea what the unbanked would go about getting cable.

Keep in mind, all of these groups will have comparable or greater difficulty getting access to high speed internet service.

Weekend blogging -- if you were getting your fitness advice from a 1950 comic book...

The following ran in an issue of Harvey's Black Cat* in 1950. I doubt it was based on cutting edge science but it's probably a good read on the conventional wisdom of the time. 

What's interesting is how much and how little things change. There are certainly things here that would seem strange here (make sure to get two pats of butter every day), but much of advice -- not overeating, watching salt, sugar and fat, satisfying cravings in moderation -- still seems fairly sound.

One of my big concerns with health issues is that the media (and sometimes the researchers) create an exaggerated sense of volatility, the impression that, when it comes to a healthy lifestyle, doctors are constantly changing their mind on everything. Under these circumstances, it's easy to see why so many people fall prey to fad diets or simply give up.  

Joseph could give a more nuanced version of this point, but I'm sure that public heath would be better if we stopped presenting a distorted view of health research to the public.

*This one, not this one.

Weekend blogging -- TV themes by the otherwise famous

When I get around to a post discussing the different branding strategies of the various terrestrial superstations, one of the practices I'll be singling out is METV's policy of playing opening and closing credits uninterrupted. It costs little but goes a long way to build brand both by showing respect for the product and addressing a long standing complaint of hard core fans.

This got me thinking about TV themes, specifically those by musicians known for other things.For example, Flatt and Scruggs were bluegrass legends long before the the Beverly Hillbillies.






Here are some other TV themes known for things other than TV themes like collaborating with Dizzy Gillespie or scoring 500+ movies.

I'll post credits in the comments later.




















And bonus points if you can recognize the time signature...

Dangerous synergies

Taking a break from the free-TV blogging rant to go back to the decline-of-journalism rant...

Jonathan Chait has a great post up at New York:

The gigantic ethics violation that was once called the White House Correspondents’ Association Dinner, and is now known as White House Correspondents’ Association Dinner Weekend, is fast upon us. The event originally served as a relatively harmless scaled-up version of the routine source-greasing that is traditionally performed at bars and restaurants. It has become a powerful metaphor for the incestuous relationship between the news media and the power elite.

The WHCD has evolved into a profitable leverage opportunity for media companies. They use the cachet of their brand name, and the access it gives them to the event, to lure celebrities and sell that access to corporations. The biggest media personalities are needed to lure in both the celebrity flesh and the corporate johns, but the rest of the reporters are completely superfluous to the exercise.

Needless to say, the whole thing is lousy (in very close to the original sense) with conflicts of interest, but with the exception of Chait and a few other malcontents, no one seems all that bothered. (True, Tom Brokaw complained, but he seemed to be troubled by the tackiness of the low grade of celebrities, not by the flagrant influence peddling.)

A major aspect of our other ongoing thread (OK, just a little free TV blogging) is the way deep pocketed interests like Verizon and ATT can so control narratives that even our best journalists end up buying a factually questionable stories. When you get into the details (like the Atlantic's elaborate party and its list of corporate underwriters), you start to understand how this can happen.

But what really bothers me about journalism isn't the tolerance of conflicts of interest.

It isn't the devaluing of accuracy.

It isn't the increasing tendency toward group think.

It isn't the practice of uncritically passing on press releases as news stories.

It isn't the inability or unwillingness of press watchdogs to honestly address serious problems.

All of these things are bad, but it's when you combine them that you start looking at catastrophic failure.

I need to be very careful when I base an argument on NBC's competence

I argued earlier that the OTA television audience had to be healthier than Felix Salmon implied for NBC to go ahead with COZI. I was assuming that the company was capable of a basic feasibility study, not that they were good at actually running a channel. That requires programming skills such as putting complimentary shows together.

I'm not making this up:

1:00 p.m. Jan 28 Munster Go Home

 3:00 p.m. Jan 28 Agnes of God

 5:00 p.m. Jan 28 Highway to Heaven

Apparently the ghost of Zucker still roams the halls.

Update: Just to be certain that those unfamiliar with the material get the full disparity here, Munster is a light farce about lovable monsters, Highway is a feel-good Eighties show about an angel who helps people, and Agnes is a drama about a nun and probable rape victim who killed her newborn baby.

Free TV blogging -- betting against Felix Salmon

[Update: Andrew Gelman joins the conversation and, as usual, brings with him a fantastic comment section. Felix Salmon sites this Nielsen study to support his case. Rajiv Sethi (who was possibly the first major blogger on this beat) joins in. I'm still the only one talking about terrestrial superstations, but the night's still young so you never know.]

If you've been reading the last few posts, you know that Felix Salmon has weighed in on the free TV debate and that I find myself in the very unusual position of disputing pretty much everything he says (it is far more common for me to be completely in agreement). I'll be addressing the cost of Salmon's policy recommendations (born disproportionately by minorities and the poor) and questioning the economic implications later. Right now I want to focus on some disputed facts and assumptions.

In the post Salmon is dismissive of the claim that there are fifty million over-the-air television viewers:

The 50 million number, by the way, should not be considered particularly reliable: it’s Aereo’s guess as to the number of people who ever watch free-to-air TV, even if they mainly watch cable or satellite. (Maybe they have a hut somewhere with an old rabbit-ear TV in it.)

And he strongly suggests the number is not only smaller but shrinking. By comparison, here's a story from the broadcasting news site TV News Check from June of last year (if anyone has more recent numbers please let me know):

According to new research by GfK Media, the number of Americans now relying solely on over-the-air (OTA) television reception increased to almost 54 million, up from 46 million just a year ago. The recently completed survey also found that the demographics of broadcast-only households skew towards younger adults, minorities and lower-income families.

OTA can be tricky to measure -- unlike cable, there's no way of telling who has an old set of rabbit ears -- but we can look at other indicators and see which set of assumptions they are consistent with. Specifically consider the recent decisions of NBC and Fox to launch dedicated OTA channels this year

Let's assume Salmon's right and put ourselves in the position of a Fox or NBC executive who has to decide whether or not to create a new broadcast network. We can be reasonably confident that the executives have access to reliable data (particularly the Fox executive if the deal with Weigel included a look at some numbers from ThisTV and METV).

You find, given our premise, that the total over-the-air audience is, say, forty million, the technology is obsolete and entire medium will probably be gone in a few years. At this point, it's hard to imagine you'd proceed with an expensive, time-consuming project that is likely to be an embarrassing failure but the situation actually gets worse.

You are looking at launching an advertiser-driven, English-language station but the OTA market is disproportionately poor and immigrant (I get programming in over a half dozen languages); the maxim relevant audience for your station now drops to maybe thirty million and there's more bad news. You're going to have to share that thirty million with a crowded field of competitors. A major market will have dozens of OTA channels including multiple PBS channels, This, ME, Antenna, Bounce, RTV, three ION channels and various independents.

Given Salmon's assumptions about the size and trajectory of this market, there is simply no way NBC or Fox would have gone ahead with these channels. They couldn't possibly recoup their start-up costs before OTA is phased out. Put bluntly, both NBC and Fox are betting against Salmon's position.

Obviously this is not conclusive, but it's a strong piece of evidence and it's consistent with what we've seen elsewhere. It's also consistent with GfK's numbers.

There's more to come on this. There are many aspects to this story and I'll try to get to as many as I can but I've been looking at this for a long time from a lot of different angles and from every angle it looks to me like OTA is a promising technology supporting an innovative and growing industry, serving important economic and social roles.

The technology is doing fine in the marketplace. It's lobbyists who are likely to kill it.