Schumpeter, innovation, and growth

David Brooks mentions Brad DeLong's review of a new 2007 book on Joseph Schumpeter. Brooks doesn't write much about it, but it's a good, quick read for those interested in economic growth.

I don't teach anything about entrepreneurship and competition to undergraduates in my intermediate macroeconomics class at Queens. But as Schumpeter and many others after him pointed out, the process of innovation produces losers as well as winners.

As reviewed by DeLong, Schumpeter thought democracies were ill-equipped to manage innovation by compensating the losers while rewarding the winners, and he apparently made many predictions about politics that were flat-out wrong. From an aggregate perspective, it appears that the American political system is successful at either compensating losers or minimizing their numbers.

The Value of Life in Developing Countries

The recent Congressional hearings about the role of Blackwater security agents in Iraq revealed this tidbit, as written about by Maureen Dowd:

To compensate the family of an Iraqi guard accidentally shot to death by a Blackwater agent, an office in the State Department countenanced against awarding $250,000 lest other Iraqis decide to try and be accidentally killed. Rather, the department suggested a sum of $15,000.

Can the value of human life be measured in dollars? If so, is it a constant, or does it depend on other circumstances? If the latter, what do those circumstances include? Income? The level of background risk? Health economists seek to answer these difficult questions.

City-provided Health Insurance in San Francisco

San Francisco has passed legislation that provides for city-funded health care for uninsured residents, regardless of immigration status. The city is counting on successful preventive care being cheaper than the acute care it already dispenses for free to this population, which is surely something of a risk.

Saving from developing countries and the trade imbalance

Fed chairman Ben Bernanke expressed concern about the sustainability of the U.S. trade deficit and the imported foreign saving it represents. Why are developing countries supporting higher consumption in industrialized countries by exporting their saving?

One explanation is the Demographic Dividend: the resources freed up by the reduction in dependency owing to declining fertility and family size during the demographic transition. As development proceeds, mortality typically falls first. As babies and infants begin to survive in greater numbers, while labor market opportunities for women typically expand, fertility falls. Declining fertility and reduced family sizes allows households to save more resources, fueling investment either domestically or abroad.

For how long will investment opportunities in the U.S. continue to appeal to foreign savers? Presumably for as long as U.S. productivity remains the highest in the world (or among the highest, depending on how you measure it), and as long as political stability continues.

September 11 and economics

We seek to find meaning in everything, and it is tempting as a policymaker or economist to attribute the terrorist attacks of September 11, 2001, to some particular motivation. An obvious candidate is the economic status and opportunity of groups that produce terrorists, but economists believe any connection between poverty and terrorism is probably weak at best.

As summarized here, researchers at the National Bureau of Economic Research have examined this question, whether development and terrorism are inversely related, and they have determined that the evidence of such a connection is weak. As Alberto Abadie remarks, political freedom is more closely related to terrorism.

Immigration, Fertility, and Policy

Last Saturday the Times reported that a Chinese woman and her husband received asylum after a harrowing turn of events in 2006.

The couple had been residing illegally in the U.S., where she delivered two children, both U.S. citizens. Returning to China, she argued, would subject her to risk due to China's One Child Policy. When immigration officials tried to deport her in 2006, she miscarried twins, a personal tragedy and public relations disaster for the U.S.

Immigration and fertility policy are the two most overt types of population policies; countries can of course alter mortality as well. Seeing the two collide in an international setting like this reminds one of the fundamental questions of population science: what is the optimal population size?

Census reports poverty down, health insurance coverage down too

Yesterday the Census Bureau reported that the poverty rate fell for the first time this decade, while the number and percentage of individuals who report they have no health insurance rose in 2006.

Declines in self-reported insurance coverage among African Americans and Hispanics were responsible for the overall rise in the uninsured.

Health insurance is a funny thing in this country, because for many workers and companies, it's basically optional. One manual laborer I knew once said that she didn't need health insurance because she never got sick. She also may have had a larger family or extended family and thus a larger informal support network. But mostly, I think the reason she had no insurance was because she was an independent contractor and probably faced relatively high rates on her own.