Category: Equitablog

Should-Read: Back in the days when a Republican president would blame an economic depression on his own biggest contributors: Teddy Roosevelt (1907): Address on the occasion of the laying of the corner stone of the Pilgrim memorial monument: “It may well be that the determination of the Government (in which, gentlemen, it will not waver), to punish certain malefactors of great wealth…

…has been responsible for something of the trouble ; at least to the extent of having caused these men to combine to bring about as much financial stress as possible, in order to discredit the policy of the Government…

Should-Read: I never understand why people say things like “we’ve never managed to transform countries that thought of themselves as being monoethnic and monocultural into multiethnic ones”. An awful lot of America’s “white” people today look exactly like the people the Know-Nothings were trying to keep out. “White”—i.e., not Black—became the multiethnicity umbrella term (for everybody who wasn’t Black): Yascha Mounk: Why so many Westerners feel like democracy has failed them: “People no longer feel that the political system is actually delivering for them…

…The stagnation of living standards for ordinary people. From 1935 to 1960, the living standard of the average American doubled…. But living standards haven’t gone up in decades, and now they’re just saying, “Let’s throw some shit against the wall and see what sticks.” A lot of this discontent is driven by economic concerns, but the form it takes is cultural or racial. We have to recognize that we’re in the middle of a unique historical experiment: We’ve never managed to transform countries that thought of themselves as being monoethnic and monocultural into multiethnic ones, which is what’s happening in Europe and, to a lesser degree, in the United States. Some of these countries were always multiethnic, but they also had a clear racial hierarchy in which some people had advantages over others. Overturning all that is desirable, but it’s also politically difficult. We’re in the middle of a giant fight. A lot of people are rightly saying, “We need to live up our ideals,” but a bunch of people feel they have something lose because of it…

Should-Read: Ann Marie Marciarille: What older people should know about Medicare and Medicaid: “Not unlike both the 111th Congress that passed the Affordable Care Act and the 115th Congress that recently amended it with the new federal tax bill, we are often in the dark about our own health care and health insurance systems…

…Whether you think this is a matter of being in good company or a national embarrassment, I can think of no problem greater among our citizenry than health insurance illiteracy in general, and about Medicare and Medicaid, in particular. Many of us, for example, learn about the limits of our own individual health care coverage at the clinic check-in window or in the pharmacy check-out line. These are the wrong venues at which to ask questions and consider the implications of plan and coverage design…. The majority of Americans do not understand that Medicare offers only a limited long-term care benefit…. We generalize about health care and health insurance in ways that may be profoundly inaccurate as well as personally disadvantageous…. We bargain in the dark over both our own future and that of our fellow Americans. Older people are at a particular disadvantage in this “understanding your health insurance” game because older Medicare beneficiaries are often retired, remote from former employers’ human resource departments and they are often reluctant to burden adult children with the task of attempting to decipher coverage….

Traditional Medicare or Medicare Advantage? Medicare Part D coverage and, if so, what plan? Medicare Supplemental Insurance and, if so, at what level of coverage and cost? We have made Medicare and Medicaid so complex that the quality of our own understanding of the individual implications of enrollment, and also the debate over various reform proposals are degraded…. The UMKC Consortium for Aging in Community is hosting two public events on Medicare and Medicaid in March, in an effort to create a bridge between health care experts and the community’s need for information…. Ordinary intelligent people ought not be excluded from the current debates over the future of Medicare and Medicaid. Indeed, those very people ought to drive the debate…

Should-Read: Carmen M. Reinhart and M. Belen Sbrancia (2011): The Liquidation of Government Debt: “High public debt often produces the drama of default and restructuring…

…But debt is also reduced through financial repression, a tax on bondholders and savers via negative or below- market real interest rates. After WWII, capital controls and regulatory restrictions created a captive audience for government debt, limiting tax-base erosion. Financial repression is most successful in liquidating debt when accompanied by inflation. For the advanced economies, real interest rates were negative 1⁄2 of the time during 1945–1980. Average annual interest expense savings for a 12—country sample range from about 1 to 5 percent of GDP for the full 1945–1980 period. We suggest that, once again, financial repression may be part of the toolkit deployed to cope with the most recent surge in public debt in advanced economies…

Should-Read: Why I am starting to think that both statistics and economics are about to come under serious threat from data science: Frances Woolley: Why do beginner econometricians get worked up about the wrong things?: “People make elementary errors when they run a regression for the first time…

…They inadvertently drop large numbers of observations by including a variable, such as spouse’s hours of work, which is missing for over half their sample. They include every single observation in their data set, even when it makes no sense to do so. For example, individuals who are below the legal driving age might be included in a regression that is trying to predict who talks on the cell phone while driving. People create specification bias by failing to control for variables which are almost certainly going to matter in their analysis, like the presence of children or marital status.  But it is rare that I will have someone come to my office hours and ask “have I chosen my sample appropriately?” Instead, year after year, students are obsessed about learning how to use probit or logit models, as if their computer would explode, or the god of econometrics would smite them down, if they were to try to explain a 0-1 dependent variable by running an ordinary least squares regression….

I am happy to concede to Dave Giles that, all else being equal, it is better to use probit than ordinary least squares, and that Stata’s margins command is not that difficult for an undergraduate to use. But all else is not equal. Using probit will not save a regression that combines men and women together into one sample when estimating the impact of having young children on the probability of being employed, and fails to include a gender*children interaction term. (The problem here is that children are associated with a higher probability of being employed for men, and a lower probability of being employed for women. These two effects cancel out in a sample that includes both men and women.) Once students know how to appropriately define a sample, deal with missing values, spot an obviously endogenous regressor, and figure out which explanatory variables to include in their model, then it might be worth having a conversation about the relative merits of probit and linear probability models. Until then, I’m telling my students to use the regress command and, if it makes them feel better, stick “robust” at the end of it. They don’t listen.

It all comes down to the way that they have been taught econometrics…. Econometrics is taught that way for a simple, practical reason: it’s easy. When every student downloads his own data, works on his own unique problem, and specifies a novel and original model, each student will need a lot of individual help and attention. The marking cannot be delegated to a TA, because each research question, and each data set, is different, so it is impossible to write down a simple answer key. But spending hours upon hours reading students’ first struggling steps at regression analysis is a huge amount of work. It’s so much easier to mark a final exam consisting of calculations, short answer questions, and replication of theorems…

Should-Read: Supply and demand works for housing markets: add more housing while keeping the desirability of the metropolitan area in the eyes of the well-off constant, and housing prices fall. Of course, more housing and the resulting density can raise the desirability of the metropolitan area in the eyes of the well-off: Mark Belko: As new apartments are built around Pittsburgh, older stock is feeling the pressure: “Pittsburgh is in the midst of a supply surge, with about 4,600 units being built within the last three years…

…more than in the previous 15 years combined. Another 3,479 units are set to be completed in the next two years…. The biggest impact could be on older apartment buildings, which may have a hard time competing, according to the report…. CBRE cited the 2004-built Flats at Southside Works. Occupancy hit 99 percent in 2010 and the average rent peaked at $1.80 a square foot in 2014. Faced with competition from the newer Hot Metal Flats and Southside Works City Apartments, the complex is now 71 percent occupied with rents of $1.73 a square foot, according to the report…. While Walnut Capital hasn’t experience a significant drop in occupancy, it has become an issue among landlords, Mr. Reidbord noted. “Unless you have something better to offer in the older apartments, you’re going to be subject to competition from new apartments,” he said…

Should-Read: Ann Marie Marciarille: The Amazon Threat to Kill the Hungry Tapeworm: “Health industry stock analysts and observers have been wondering for some time about Amazon’s potential to enter the marketplace for health care goods and services…

…obtained wholesale pharmaceutical distribution licenses in twelve states…. Now… Amazon, Berkshire Hathaway, and JP Morgan have announced their intention to create a multi-employer not for profit health insurance plan/health care provider, it is not only the pharmaceutical sector that is speculating on what all this could mean…. Health care delivery as well as employer sponsored health insurance is contemplated…. We do have a significant historic example of a business person inexperienced in health care delivery and health insurance taking these industries by storm. That is what Henry Kaiser did, beginning in the Richmond Kaiser shipyards of the 1930’s on site and opened for public enrollment in the 1940’s. Henry Kaiser had clear goals: bind his employees to his shipyards with an attractive plan at a time when war time frozen wages could not perform this function and offer better workplace injury care in order to keep wartime production moving… a better workers comp system… moved to employer sponsored health insurance… had an interest in redeeming his mother Mary Kaiser’s death at the age of 52 from untreated kidney disease… chronic nephritis…. untreated because she could not afford the care required and Henry, a teenager at the time, could not afford it for her….

One collaborative press release does not an integrated health care delivery/health insurance company make. Even a collaborative press release as wonderful as today’s quoting Warren Buffet vowing to help attack the health care costs that are a hungry tapeworm on American business and the American economy raises more questions than it answers…

Should-Read: An oldy now, but a very goody: The treatment of human capital in this paper is inadequate: the benefits of human capital are private to the learner, which I think is wrong, and teachers in rich countries are 50 times as good at getting human capital into the brains of learners as are teachers in poor countries, which I think is wrong. Human capital largely acts as a force multiplier for physical capital. But the underlying lesson is very good: the Solow model can fit quite well if you assume capital production function parameters of a half or more: N. Gregory Mankiw, David Romer, and David Weil (1992): A CONTRIBUTION TO THE EMPIRICS OF ECONOMIC GROWTH: “This paper examines whether the Solow growth model is consistent with the international variation in the standard of living…

…It shows that an augmented Solow model that includes accumulation of human as well as physical capital provides an excellent description of the cross-country data. The paper also examines the implications of the Solow model for convergence in standards of living, that is, for whether poor countries tend to grow faster than rich countries. The evidence indicates that, holding population growth and capital accumulation constant, countries converge at about the rate the augmented Solow model predicts…