Monday, November 23, 2009

Brooks on health care and institutions

There are at least two things to appreciate about David Brooks's column today. One is that it discusses the efficiency/equity tradeoff implicit in social safety nets. Nothing's for free, but that's not to say that costly things have no value.

The second point is that he argues that "over the years, Americans decided they wanted a little more safety and security. This is what happens as nations grow wealthier; they use money to buy civilization."

Political scientists and economists see this connection between economic growth and institutions in completely opposite ways. Economists think institutions precede and create growth; political scientists believe the reverse. As Gary King once said, what you think is exogenous curiously tends to depend on your discipline. In fact it should depend on inherent statistical properties!

Gail Collins on the details

For an academic perspective on the changing roles of women in U.S. Society, check out Claudia Goldin's work. As reviewed in the Times, the new book from Gail Collins, When Everything Changed: The Amazing Journey of American Women From 1960 to the Present, presents many of the details to the story that scholarly works are sure to leave out. Collins "aims to tell social history 'by combining the public drama of the era with the memories of regular women who lived through it all.'” (How's that for a quotation of a quotation!)

Acemoglu on institutions in Esquire

Daron Acemoglu outlines the case for institutions in determined economic well-being. To me, the biggest revelation is his call for U.S. foreign policy to punish kleptocracies and repressive dictatorships in order to foster growth.

New work on fiscal adjustments

Alberto Alesina and Silvia Ardagna offer a new look at fiscal adjustment --- namely, raising taxes or cutting spending in order to achieve it --- and GDP effects among OECD countries. This is related to the question about the size of fiscal multipliers, but the samples are likely to be quite different. You'd never in your right mind conduct fiscal adjustment to lower a deficit during a contraction ... or would you?

In the paper, which is forthcoming in Tax Policy and the Economy, Alesina and Ardagna find that cutting spending is less harmful than raising taxes, and reflexively, tax cuts are better for GDP than spending increases. I don't think they are able to measure the (perceived) degree of permanence of these policies, which presumably would matter for life-cycle consumers.

Wednesday, November 18, 2009

Top college professor

A few days ago the Journal reported on the Cherry Teaching Award, which has nothing to do with fruit and everything to do with teaching. The article discusses the tension between teaching and research or other service at the collegiate level.

It also profiles 3 candidates for the Cherry award this year. Elliott West is 64, Edward Burger is 45, and Roger Rosenblatt is 69. See a pattern?

Tuesday, November 17, 2009

Way to go!

CBO Director Doug Elmendorf is profiled in the Times. "A good CBO director is respected but not loved by Congress."

Monday, November 16, 2009

Sahm et al. on the 2008 tax rebate

Claudia Sahm, Matthew Shapiro, and Joel Slemrod argue that micro-level survey results suggest people spent a third of their tax rebate checks. Their bottom line: "Absent the rebate, the sharp decline in spending that is evident in aggregate data beginning in the third quarter of 2008 would have started in the second quarter, prior to the financial crisis of the fall."

This stands in stark contrast to the perspective offered a year ago by John Taylor, who pointed out the complete lack of evidence in aggregate data of any consumption effect.

This reminds me of the back-and-forth over the Administration's "jobs created or saved" measure derived from surveys, criticized recently by Ed Lazear. If something doesn't show up in macroeconomic data, maybe it isn't there and maybe it is. What's the counterfactual? If it's a survey of intentions or actual outcomes, are the data good?

Thursday, November 12, 2009

Unemployment and family economics

The Times and the Wall St. Journal have one article each on how higher unemployment is affecting family economics.

The Times article discusses the psychological stress felt by families with unemployed fathers especially, with mothers who may also be unemployed. But the thinking is that it's harder on dads to be unemployed, while moms seem to have an easier time dealing with the fluidity.

The Journal article discusses evidence of more moms going back to work now that dads' employment is considerably lower.

Monday, November 9, 2009

Feldstein on incentives in health insurance reform

Martin Feldstein weighs in on the potential for shenanigans by profit-maximizing individuals faced with the proposed new health insurance system. He thinks they're likely, because the penalties are so low relative to the gains of not purchasing health insurance, which presumably would no longer be penalized by denied coverage (for pre-existing conditions).

Economists are paranoid, aren't we? But you can't argue with the numbers.

Friday, November 6, 2009

High infant mortality and premature births in the U.S.

The headline to this Times story from Tuesday concerning a recent CDC report on U.S. infant mortality in comparative perspective summarizes the main finding: because 1 in 8 U.S. births were preterm, compared to 1 in 18 in Ireland or Finland, and preterm babies have higher mortality rates, the excess rate of premature births accounts for a third of the U.S. infant mortality rate.

The report points out that preterm babies in the U.S. actually have lower mortality rates than they do elsewhere. But the problem is that preterm mortality is enough higher than full-term mortality for the difference in the carrying-to-term propensity to more than offset this advantage.

The Times article discusses some reasons why rates of being born premature are higher in the U.S., which is apparently the crucial issue. The lead author of the CDC study was quoted as saying, “Fifteen or 20 years ago, if a woman had high blood pressure or diabetes, she would be put in the hospital, and they would try to wait it out. It was called expectant management. Now I think there’s more of a tendency to take the baby out early if there’s any question at all.”

This sounds like poor adult (mother's) health driving poor child health. There were other potential reasons cited too, however.

Tuesday, November 3, 2009

Implicit marginal tax rates in new health insurance coverage

Greg Mankiw points out high implicit marginal tax rates associated with health insurance reform as currently proposed. Insurance subsidies for low-income families phase out with income, meaning that as income rises, it is taxed away either implicitly through a reduction in health insurance subsidies or explicitly through payroll and income taxes.

The income levels he cites are not low: $54,000 for a family of four. The Earned Income Tax Credit also has a phaseout, but at a somewhat lower level of income, something like $35K - $40K or so.

Brooks on the mating market

David Brooks writes about the New York Mag sex diaries, technology, and behavioral reactions of young singles today to the lack of courtship structure. Things like texting a "backup" when on a date with somebody else. My favorite quote: "Social life comes to resemble economics, with people enmeshed in blizzards of supply and demand signals amidst a universe of potential partners."

I wonder what Gary Becker would have to say about this. Economists typically believe more information is better, but then you toss in the part about atrophying social mores and constraints, and it's not clear what the result is.

Monday, November 2, 2009

Roundtable on stimulus effects

Here's another article containing several perspectives on whether the fiscal stimulus plan is functioning. To elaborate on one of Simon Johnson's points, the U.S. has automatic fiscal stabilizers in place --- taxes fall with the economy, and some spending rises --- but typically only at the federal rather than state and local level. I wonder how much bang-for-the-buck from stimulus spending has come from "saving" educational jobs and spending programs. It would seem that's one of the most vulnerable elements during downturns, given states' balanced budget amendments.

Many are talking about the tenuousness of consumer demand, given that Cash for Clunkers appears to have shifted demand in addition possibly to increasing it above what it would have been. This is based on Friday's personal income release.

Lazear on stimulus accounting

CEA alum Ed Lazear points out the problems with the government's "jobs created" measure derived from the survey of funds recipients, available on First, it's self-reported. But we also measure unemployment using self-reports, from individual workers in the Current Population Survey.

A second point is that the self-reported measure is a gross rather than net measure. If a job was "created" by poaching an employee from another firm or agency, the net effect is zero even when its gross effect, as would be reported by the poaching agency, is positive.

Lazear also cites the lagging nature of employment, which is certainly true. But he doesn't present a solution to the difficult problem of trying to assess the marginal effects of the stimulus package, a task that requires a counterfactual. Wouldn't it be nice if we'd had two economies rather than one, and to compare one with the stimulus to one without? Pre-stimulus forecasts are not a valid baseline because they are of poor quality. (Nobody knows how to forecast the length of a recession, let alone an impending one.)