Food Stamps

I was reading this piece by Ed Glaeser (the danger of following links posted at Noahpinion) and came across this rather interesting sentance:

The childhood obesity problem should also make us wonder whether food stamps are really good for kids.

My question is rather simple: how do we know that these two factors are causally related?  Chuldhood obesity is a complicated problem, but one possible driver is low quality food (such as potato chips) that is cheap, easily stored and (per calorie) relatively inexpensive.  Is it not plausible that reducing food budgets could increase obesity by focusing food intake even more on these foods? 

I worry when we attribute a complex phenomonon (seen at all sorts of socio-economic levels) with a single government program.  I am not saying that this statement is incorrect (and it is phrased as speculative), but it seems like too important of a proposition to be confinded to a single sentance.  In particular, I would be interested in the counter-factuals:

1. Food Stamps
2. Cash Transfers
3. No Assistence

And a comparison of childhood outcomes (obesity but also starvation) under these three different scenarios. Or am I missing the relevant research and we already know the answer? 

This round just might go to Eminem

Edward L. Glaeser has been tough on Detroit and the auto industry. Here's how he opened a column last week:

During the Super Bowl, Chrysler and Eminem gave us a chest-thumping, soul-lifting vision of Detroit as a city of character, competence and style. But the Census tells us that per-capita incomes in Detroit are barely half the national average and that one-third of the city lives in poverty.

Michigan was the only state that lost people from 2000 to 2010, and the state’s unemployment rate remains near 12 percent. Is it possible that Detroit will turn the corner despite decades of decline?

It's safe to assume that the answer Glaeser had in mind for his rhetorical question didn't rely too much on the Big Three. Back in June, 2009, here's what he had to say about the bailouts:

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.

Given that analysis, it might be interesting to get his take on this item from the New York Times:

General Motors, which nearly collapsed from the weight of its debts two years ago before reorganizing in a government-sponsored bankruptcy, said Thursday that it earned $4.7 billion in 2010, the most in more than a decade.

It was the first profitable year since 2004 for G.M., which became publicly traded in November, ending a streak of losses totaling about $90 billion.

In addition, G.M. said 45,000 union workers would receive profit-sharing checks averaging $4,300, the most in the company’s history. ...

Globally, G.M.’s sales rose 12.2 percent in 2010, to 8.39 million, coming within about 30,000 vehicles of retaking the title of world’s largest automaker from Toyota. For the first time, it sold more cars and trucks in China, where its sales rose 28.8 percent from 2009, than in the United States, where sales were up 6.3 percent.

Or to see what he had to say about Jonathan Cohn's reaction to the news:

Seriously, though, this is another important milestone for GM. Profits for the final quarter were actually lower than initial expectations. But the company attributed that, in part, to heavy investment in the development of new products, which is a sign of company health. “Their recovery has been fueled by significant cost-cutting, arrival of new products that consumers were seeking along with better management of incentives and supply,” Jesse Toprak, vice president of industry trends and insight at TrueCar.com, told the Times. “The sky is the limit for G.M. after becoming profitable at this low of a sales pace.”

Of course, the usual caveats apply: The two companies could still stumble and Chrysler, in particular, still needs to prove they can cars as good as their television commercials. And it's not as if workers in the auto industry didn't take a huge hit anyway: Many did lose their jobs and new employees are making a lot less money than old ones do.

Still, it looks increasingly like the rescue of the auto industry was an overall success, saving hundreds of thousands (if not millions) of jobs and bolstering the country's manufacturing base for years (if not decades) to come. Maybe it's time to start giving President Obama some credit for it--and recognizing that, when properly managed, the federal government can do a lot of good.

The curious case of Dr. Glaeser

Edward L. Glaeser is smart guy. Despite being in his mid-forties, Glaeser has already made a number of important contributions to economics. He has been a fixture in the Boston Globe and has recently joined the lie-up of the New York Times' Economix blog (slogan: "explaining the science of everyday life."). All of which makes this recent column on population shifts all the more inexplicable.

The article is classic "ice cream causes murder" analysis. In order to get the desired conclusion, you have to ignore numerous confounding factors and discard a number of alternative hypotheses that better explain the data and even then you have to be selective with your metrics and graphs (or at least the labeling) to maintain even the appearance of credibility.

Joseph has already discussed this at some length but just to review, percent change can be tricky to work with, particularly when dealing with state populations which can vary by well over an order of magnitude. Add to this the matter of population density -- certainly a concern when talking about home prices but notably absent from Prof. Glaeser's post.

Let's take Glaeser's comparison of California and Texas. If we look at percent population change as he does, Texas does much better but Texas has more land and fewer people. If we look at absolute change, the results are much closer and if we take density into account with something like change by area, California may actually come out ahead. (Glaeser's use of California is also interesting in other unintended ways, but more on that later.)

If you look at this table from Wikipedia, the role of population density becomes harder to ignore and Glaeser's case becomes harder to buy. Consider these two paragraphs:

"More generally, population isn’t moving to high-income areas. The four fastest-growth states were Nevada, Arizona, Utah and Idaho (in order of growth), all of which have earnings below the national average.

"Our richest states, Connecticut, New Jersey and Massachusetts, grew by 4.9, 4.5 and 3.1 percent, respectively, far below the national average. People are not following the money."

Could available land be playing a role here? Probably. Nevada, Utah and Idaho are among the ten least densely populated states in the union. Arizona is is in the next ten. By comparison, Connecticut, New Jersey and Massachusetts make up three of four most densely populated.

Glaeser's response to this point (in a related post) doesn't really help his case:

"Why is housing supply so generous in Georgia and Texas? It isn’t land. Harris County, Tex., which surrounds Houston, has a higher population density than Westchester County, N.Y."

To people with even a passing familiarity with these two areas, the fact that Harris County is more dense than Westchester County is hardly surprising. What is surprising is that someone would say that Harris 'surrounds Houston.' For most purposes, Harris IS Greater Houston. The city does include two other counties but Harris contains all but a fraction of the metropolitan area's population.

In other words, the county that includes Houston is more dense than a suburb of New York.

But perhaps the most damning rebuttal comes from Glaeser's prime example:

"My interpretation of Red State growth is that Republican states have grown more quickly because building is easier in those states, primarily because of housing regulations. Republican states are less prone to restrict construction than places like California and Massachusetts, and as a result, high-quality housing is much cheaper.

"There is a strange irony in this: more conservative places do a much better job in providing affordable housing for ordinary Americans than progressive states that are believed to care about affordable housing.

"Progressive states, of course, have other objectives beyond affordable housing, and some involve blocking building. California environmentalists have been fighting construction for more than 40 years, and regulations in Massachusetts are barely less intrusive."

According to Glaeser's hypothesis, California should be scraping the bottom, particularly given that, as mentioned before, the metric being used tends to understate the growth of highly populous states. And keep in mind that he previously used Oklahoma as one of his examples of Red State growth. Oklahoma's growth rate was 8.7%. California's was 10%. That puts California slightly above the national average. (You'll notice that, unlike the other states discussed, California's actual growth rate does not appear in the article, nor is it labeled in any of the graphs.) California also beat a number of McCain states in the region of Oklahoma and, being a good ol' Arkansas boy myself, I can tell you that if a lack of building codes and environmental regulations were driving immigration, the whole area would be packed.

[To get a good picture of what's going on here, take a few minutes to look at this helpful interactive map. Pay close attention to the red states in the center of the country like Missouri.]

Population density alone does a good job explaining population shift patterns (considerably better than Glaeser's hypothesis). Add in the growth of the Hispanic population (something any competent demographic analysis should include) and it does an excellent job. And when you lay on top of that the expected impact of Katrina (how much of Texas' growth was diverted from the anemic Louisiana?) and the Nevada real estate bubble, the map we see looks almost exactly like the map we would expect.

If you don't want to use population density and the growth of the Hispanic population, how about the graying of America? Traditional retirement migration patterns look a lot like what we're seeing here and I'll bet we can come up with a few more explanations that outperform Glaeser's hypothesis.

George Polya once observed* that, when given a theory, scientists and mathematicians tended to look for cases that contradicted the theory while almost everyone else looked for cases that confirmed it (others had made similar points before he did, but I'm a Polya fan). Glaeser's approach here falls into the 'everybody else' category. He went looking for confirmation and he found it, but his theory maintains the appearance of validity only as long no one looks for contradictory evidence.

Perhaps Economix needs a new slogan.



*Quoting from memory so I may have to revise this later.

While we're doing "then and now"

Back in June, 2009, this is how Edward L. Glaeser felt about the bailouts:

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.

The future of the financial sector is looking pretty scary these days. How about the auto industry and GM in particular?

Although the transformation has been a long time coming, Ford and the rest of the domestic auto industry appear to be finally giving up their addiction to gas-guzzling trucks and sport utility vehicles. Prodded first by rising federal fuel economy standards, then shocked in 2008 by $145-a-barrel oil and a global credit crisis that forced General Motors and Chrysler to seek federal bailouts, Detroit is making a fundamental shift toward lighter, more fuel-conscious cars — and turning a profit doing so.