U.S. saving rates on the rise

Today's paper discusses rising household saving rates in response to the recession and financial crisis. How high will it go? What are the implications for GDP growth, if any?

Solow/Ramsey model, anyone?

NYT on the Credit Crisis

Thanks to Greg Mankiw for posting the link to the New York Times's overview of the 2008 credit crisis.

David Brooks raises awareness, maybe so do charter schools

David Brooks writes about a study by Harvard economists Will Dobbie and Roland Fryer on the effectiveness of Harlem Children's Zone schools. Harsh as it may sound, the fact that some charter schools were filled by random lottery assignment makes assessing the effect of the schools much more plausible.

The authors compare educational outcomes among lottery winners to lottery losers, which means they're conditioning on having wanted to enter the school to begin with. They also pursue an instrumental variables strategy on a broader set of kids, with a geographic instrument that's meant to measure outreach or "pitching" of the school, which is an interesting notion.

Can motivation be instilled or does it have to be home-grown within kids? I think they're saying it can be the former.

The origins of creative innovation

Today David Brooks writes about "the modern view of genius," or rather his view of it, which is that creativity can derive from hard work and dedication rather than from an inherent gift.

The implications are frankly rather reassuring in a way: if you work hard, you will "get it." I doubt this is exactly what he meant, but it's a fair reading of the piece. To be sure, Brooks also writes about patience and delayed gratification, things that economists would call preferences, and perhaps what's really going on is that some people are naturally gifted with patience. But like a good social conservative, Brooks also points out the roles of parents in fostering the hard work.

It would be a mistake to argue that because inherent gifts are so important, we shouldn't care about interventions that increase hard work and patience. But I find this "modern view" unconvincing. There are many routes to creative productivity, and not all of them are 99% perspiration. The work of David Galenson and others in identifying different creative processes of great artists and thinkers is instructive here.

Orszag on health cost containment

It's an issue that from the outside has appeared to have practically been buried amid other event, but this week's New Yorker gets OMB director Peter Orszag to talk about health insurance reform.

His chief perspective appears to be that the lack of much cross-sectional correlation between health spending and health outcomes in the U.S., as reported by the Dartmouth Atlas of Health Care, is evidence of suboptimal decision making or waste. In other words, if the more bucks you spend doesn't get you more of a bang, it's evidence you shouldn't have spent them. Not an unreasonable assertion to be sure, but also not one that is likely to go over easily with folks unaccustomed to the relatively raw logic of economic thinking.

Moms, infants, choices, and our knowledge

Judith Warner writes about breast feeding today in the Times, and she makes the important point that much of our knowledge about what matters for infant outcomes is circumscribed.

Informed consent from infants to participate in a scientific study, in which there are control and treatment groups, is inconceivable. We'll often never really know what a particular treatment in isolation really does to kids, because it would be unethical to find out.

I remember when the question of breast feeding came up among a group of health economists some time ago. While the prevailing wisdom seems to be that it's good, none of us knew of any science that could really sell anybody on it.

In terms of social welfare, a troubling aspect indeed is that breast feeding is much more costly for low-income moms. It would be nice to know the benefits with some degree of certainty.

Feel like moving for tax reasons?

It's only updated with state tax data through 2006, but the NBER's TAXSIM can still give you some insight about income tax rates you'll pay in different states. Gotta love that 3%+ New York City income tax!