"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%.

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.

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.”

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?

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.

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.