Wednesday, October 30, 2013

"Italy: The Nation That Crushes Its Young"

Nothing like a snappy op-ed title! Italian columnist Beppe Severgnini covers a lot of ground in a 10/30 op-ed in the NY Times, which is at least dually focused on the costs of old-age support (pensions) and young unemployment and out-migration faced by modern Italy. He also cites Haiti and Zimbabwe as being the only two economies that had grown less rapidly than Italy's between 2001 and 2011.

The weirdest part to me was how at the end he seems to be calling for older workers to retire, presumably in order to open up job vacancies for younger workers to fill, while at the beginning he motivated the concerns by citing how "old-age pensions swallow 14 percent of country’s gross domestic product and 57 percent of all social spending." Surely a concern, but it would not be helped by more retirement.

I was surprised by his growth statistics, but it looks like his point is basically right, if perhaps oversold. The Penn World Table v.8 places Cote d'Ivoire, the Bahamas, Zimbabwe, Barbados, and Guinea below Italy, which averaged 0.2% annual growth between 2001 and 2011.  (Haiti didn't make the cut presumably because of data quality or availability issues.)  But the very next country is Japan, at 0.3%, and 13th lowest out of the 167 countries in the database was the United Kingdom, at 0.9%. The U.S. was 23rd on the list at 1.4%.

Sunday, October 27, 2013

Shiller's eyes on the prize

Yesterday co-Nobelist Robert Shiller writes in the Times about interpreting efficient-markets theory, and to me it read like more backhand than compliment to fellow Nobelist Eugene Fama, who admittedly said some rather interesting things about the financial crisis in his 2010 New Yorker interview.

Friday, October 25, 2013

Drug costs and the value of a life year

How much is life extension worth? This week's New York Magazine includes an article on new cancer drugs whose gist is pugnaciously summarized on its cover as investigating "The Cancer Drug Racket." Inside, the clever title of the story is "The Cost of Living," and on the first page, the author reports a back-of-the-envelope scaling up of a new cancer drug's cost to $303,000 per year of life saved (not including the services required to administer the drug). Although this is a large number, I didn't find it that unreasonably large relative to estimates derived from the willingness to pay to avoid mortality risks.

Surely the big issue is who pays this or not, and how do they choose? Another great quote is had later in the article with this gem:  To a health-care-policy analyst like Peter Bach, it is the story of a market so jerry-rigged with regulations that, as a graduate-school professor once told him, “the beautiful thing about health care is that it has every market failure you’ve ever heard of—plus two or three more.”

Thursday, October 24, 2013

Another quirk and birth timing

A recent NBER working paper revisits the question of whether parents shift births from January into December for tax purposes, and today the Well Blog reports about deductibles resetting between calendar years and higher out-of-pocket costs for childbearing across the new year. It would be nice not to have any calendar-related changes in the price of childbearing, wouldn't it?

Wednesday, October 23, 2013

China's repaying of the demographic dividend

Today the Wall St. Journal relays a report by Citigroup analysts claiming that population aging brought on by the one child policy in China could reduce annual growth by 3.25 percentage points between now and 2030. I haven't had time to verify this, but that seems like an enormous effect. But then again, fertility in China has indeed fallen a lot, from a TFR of 2.5 births per woman in 1990 to 1.7 in 2011 according to the World Bank's WDI database.

Monday, October 21, 2013

Interview with Robert Shiller

Over the weekend, the Times published this fun interview with Robert Shiller, co-winner of the 2013 Prize in economic sciences. Great quote about co-winner Eugene Fama at the end, and the philosophy of scientific disagreement.

Chetty on economics as a science

Today Harvard's Raj Chetty defends economics as a science in the NYT with specific references to modern study design and data-driven findings. The parallel he draws to population health sciences is a good one; in neither case do we have full rein to conduct randomized controlled experiments to figure out how things work. I'm not sure Janet Yellen or Nobel Laureate Paul Krugman would fully agree with Chetty that they are "theorists," which sounds as though their work is uninformed by data, but maybe his point is that things like monetary policy are a lot more like something you can't run clear tests with than topics like unemployment insurance duration or health insurance.

Contrast Chetty's summary of the literature comparing states that expanded UI duration with those that didn't, which he describes as showing what sounds like a small 1-week increase in average unemployment duration for every 10-week increase in UI limits, with Casey Mulligan's recent work on marginal tax rates. Mulligan doesn't connect his marginal tax rate series to employment effects, but the CBO uses a Frisch elasticity of 0.4 as its central value. An increase in the marginal tax rate of around 4 percentage points, which is what Mulligan finds during the Recovery Act and then again under the Affordable Care Act, might then produce a reduction in hours by about 1.6 percent, which seems large.

Thursday, October 17, 2013

Statistical releases post-shutdown

I was wondering about when we'd see the September unemployment report, and the answer is next Tuesday. Blinders ... being removed!

Wednesday, October 16, 2013

"Generational Theft"

Well, that's a strong way of putting it, but maybe sometimes it pays to be flashy. Today in the NYT, Tom Friedman discusses his friend Stanley Druckenmiller and his recent rather strongly entitled presentation at NYU about U.S. entitlement spending and intergenerational transfers. It's good to see a blunt discussion of this, especially with the added focus on poverty among the young compared to that among the elderly, although that focus is not new. Sam Preston pointed it out in the early 1980s.

Monday, October 14, 2013

Child behavior, bedtimes, and study design

The NY Times reports on a Pediatrics article on regular bedtimes and child behavior. As you might expect, parents' self-reports of regular bedtimes is associated with better children's behavioral scores, but who knows whether it's having a regular bedtime that causes better scores, or better behavior causing the scores and the regular bedtime. Not revealed in the Times article is that the study looks at differences-in-differences or changes in these variables over time in the panel, which will remove any unchanging sources of variation. But without a clearer source of identifying variation, it's hard to accept such results reveal a causal lever.

Now there's a return on an asset

Today the Nobel Committee awarded the 2013 prize in economics to Eugene Fama, Lars Peter Hansen, and Robert Shiller, for theories of asset pricing and the generalized method of moments (GMM) estimator, which has become a standard element of the econometrics toolkit. I remember when I arrived at UC Berkeley in the late 1990s, Roger Craine, now emeritus, was interested in the finance side of macroeconomics and introduced some of these topics to our Ph.D. cohort.  Some of it made its way into my dissertation.

More recent memories are of the New Yorker's John Cassidy interviewing Eugene Fama for a piece entitled "After the Blowup" that appeared in early 2010.

Update: Over at the WSJ, Michael Casey quotes from Cassidy's piece on the topic of credit bubbles and feels Shiller's "Animal Spirits" approach seems to better capture at least recent events. In the interview, Fama explains what he means about bubbles, that in a way the term only applies in hindsight.

Wednesday, October 9, 2013

Here's a fun graph of Major League Baseball team victories (vertical axis) plotted as a function of opening day payrolls (horizontal). I was surprised to find an upward sloping relationship with as much statistical significance as there is, although here not enough to pass the standard test of a 95% confidence bound. There are plenty of reasons to quibble with this graph, not least of which being that opening day payrolls change a lot as the season play out, but I thought it was fun. No wonder the Yankees would like to get under the luxury tax threshold!

Janet Yellen to be nominated for Fed chair

Here's a fun timeline of Janet Yellen's life and career in the New York Times today. The high school yearbook photo is fun! I was fortunate enough to work at the CEA in 1998 and 1999 when she headed it, which is about a third of the way down the page. But I think by the time I got there, President Clinton had white hair!

Tuesday, October 8, 2013

Wilentz on the 14th Amendment

The eminent Sean Wilentz of Princeton wrote an op-ed in defense of presidential power to pay U.S. debts under the 14th Amendment. It's hard to quibble with his interpretation of historical events and the intent of Section 4 about the "validity" of the public debt. But his description of the 1860s controversy over paying debts in "depreciated paper money, or 'greenbacks'" was striking in light of the history of financial crises and defaults recently popularized by Reinhart and Rogoff. I think they would say that the U.S. has indeed "defaulted" on debts by repaying in inflation-debased currency, probably most notably by going off the gold standard during the Great Depression. One would have to agree that simply not paying debts is a lot more like unconstitutionally "questioning" them than inflating them away, but it seems there is some leeway in interpretation.

Monday, October 7, 2013

Two NYT pieces on immigration

Today one article covers Turkish and other immigrant groups in Dayton, OH, that community's efforts to attract immigrants in order to restore economic vitality, and some of the controversies. Also today, an editorial recounts California Gov. Jerry Brown's signing a bill to grant driver licenses to undocumented immigrants and describes it as a grassroots fix to challenges posed by immigration.

It certainly is striking how, as the editorial points out, the California Republican Party (i.e., consisting of the state office holders) appears either to have no Tea Party contingent or one that is differently focused than the national group. Left unsaid here is how another arguably grassroots immigration reform in neighboring Arizona led to a very different kind of legislation there, one that was partially struck down by the Supreme Court.

Thursday, October 3, 2013

Mulligan on trends in implicit tax rates

Here's an op-ed by Casey Mulligan in the Wall St. Journal with a startling graphic (thank to Greg Mankiw's blog for the cite). It also appears as Figure 2 in Mulligan's recent NBER working paper. It shows increases of about 8 percentage points in the marginal tax rate on earnings by median earners associated with the Recovery and Reinvestment Act policies, and increases of about 4.5 percentage points associated with the Affordable Care Act, around a base rate of 40% before the recession.

It would appear the marginal tax rate is strongly affected by unemployment insurance.

(geo)Graphical look at the uninsured in America

Today the NY Times reports about Americans without health insurance, and they've provided a very helpful set of graphics showing where they live and who they are, which is here. The failure to convince states with large poor populations to acquiesce to the Medicaid expansion in Obamacare looms large.

Wednesday, October 2, 2013

New book on NFL and concussions

ESPN's Outside the Lines reports on a new book relaying the sad history of brain trauma studies and the NFL and mentions stuff that sounds like pretty clear conflicts of interest in publishing, along with some patterns of complete denial by league officials, in 20/20 hindsight. Notable also was a brief recounting of a meeting attended by NFL officials and a representative from the Defense and Veterans Brain Injury Center.

The book, League of Denial, appears to be associated (or is the same as) the PBS Frontline project that originally was a collaboration with ESPN.