Must-Read: Richard Mayhew: Medicare Reimbursement, Public Options and Medicare Buy-In

Posted on by Brad DeLong

Must-Read: Richard Mayhew: Medicare Reimbursement, Public Options and Medicare Buy-In: “There has been a flurry of liberal health wonk reform proposals this week…

…@HuffPostPol: Clinton formally endorses public option and Medicare for under-55s by @citizencohn http://huff.to/29vZ1Td

…I want to see details just exactly what is meant by the Clinton proposal as it can range from aggressive administrative action small ball (as we talked about in February) to another whack at the legislative pinata…. But before I do a long wonk dive, I just want to re-iterate a very simple point. Most liberal health policy goals have a very simple summary: get more people on insurance that pays providers rates that are closer to Medicare rates than commercial large group rates. Large group rates pay providers between 40% and 100% more than Medicare for physical health service. Moving the entire employer sponsored coverage universe to paying Medicare like rates would knock 30% off of the current bill. We see this in Exchange…. Plans that are profitable tend to be paying providers Medicare plus a little bit while offering narrow networks. We see this in the proposal to move the Medicare buy-in age to 55. We see this in the proposal to have a public option…. All of these efforts are just different ways to achieve an underlying goal of reducing provider compensation by lowering the average payment per service by having more people move from high payment to provider coverage to Medicare based pricing. Everything else is details. Those details matter a lot, but the core policy thrust is fairly simple.

Must-Watch: Robert Skidelsky et al.: Too Much Maths, Too Little History: The Problem of Economics

Posted on by Brad DeLong

Must-Watch: Robert Skidelsky et al.: Too Much Maths, Too Little History: The Problem of Economics: “The debate hosted by the LSE Economic History Department…

…in collaboration with the LSESU Economic History Society and the LSESU Economics Society. . Speakers: Lord Robert Skidelsky & Dr. Ha-Joon Chang; Prof. Steve Pisckhe & Prof. Francesco Caselli. Chair – Professor James Foreman-Peck:

The LSE is currently the only institution to have a separate EH department. We want to encourage students and academics alike to rethink the methodologies used to explain how our world works.

Do we use the theoretical and econometrical method to create models with assumptions to distil the complexities of human nature and produce measurable results? Or do we use the historical process of considering all factors to provide a more holistic explanation? More importantly, which method should be adopted to better understand increasingly complex economic phenomena in the future?

We are striving to provide our students breadth that exceeds their current theoretical studies. Hence, whilst we recognise the importance of economic history in allowing us to become closer to the truth and produce more intricate portrayal of events, the significance of models and mathematics remains to be emphasised.

Indeed, we wish to have this controversially named debate in order to both highlight the tension between the two disciplines and to produce a more nuanced overview in defence of the future of Economics.

Must-Reads: July 15, 2016

Posted on by Brad DeLong

Should Reads:

Must-Watch: Barry Ritholtz: Ha-Joon Chang: Economics Is For Everyone!

Posted on by Brad DeLong

Must-Watch: Barry Ritholtz: Ha-Joon Chang: Economics Is For Everyone!: “Really interesting stuff…

…legendary economist Ha-Joon Chang in a mind-blowing RSA Animate…. explains why every single person can and SHOULD get their head around basic economics. He pulls back the curtain on the often mystifying language of derivatives and quantitive easing, and explains how easily economic myths and assumptions become gospel. Arm yourself with some facts, and get involved in discussions about the fundamentals that underpin our day-to-day lives:

Weekend reading: “Slipping on rungs of the income ladder” edition

Posted on by Nick Bunker

This is a weekly post we publish on Fridays with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is the work we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.

Equitable Growth round-up

You’ve probably heard of concerns about “short-termism” among companies which prioritize hitting earnings targets over investing in research and development. A new paper details the phenomenon and its potential costs to U.S. productivity and economic growth.

Will the robots unleash amazing amounts of economic growth and throw us all out of our jobs? Well, it depends a lot on how increased mechanization of the economy affects labor demand.

The latest data from Job Openings and Labor Turnover Survey—known as JOLTS—was released on Tuesday morning. A look at a few important relationships between JOLTS data show any structural changes in the labor market seem more likely to be on the employer side.

An investment in a college degree lasts a lifetime, yet the time to repay student loans in the United States is usually only 10 years. Other countries allow a much longer time frame and there would likely be benefits to moving to such a system here.

“In general, a worker’s starting position has become more predictive of their final position across the income spectrum.” Austin Clemens shows with two interactive graphs how income mobility during a lifetime is on the decline in the US., according to new research by a pair of 2015 Equitable Growth grantees Michael D. Carr and Emily E. Wiemers at the University of Massachusetts-Boston.

Links from around the web

Does a universal basic income make sense in today’s economy? Greg Ip argues that in an era of declining labor force participation, an untargeted policy that would likely further depress the amount of workers in the labor force doesn’t make sense. [wsj]

“If countries want to carry international surpluses indefinitely the suggestion here is they need also to reinvest those “savings” into capacity expanding investments abroad. If not, those savings will eventually end up constraining global growth by turning everything into a simple zero sum game.” Izabella Kaminska writes on global imbalances. [ft alphaville]

Why some people so concerned about inflation? Noah Smith argues that fears of slightly higher inflation—say 4 percent annually—are overwrought and that central banks would shoot for higher inflation and boost real growth. [bloomberg view]

The decline of competition in the United States “is a decline that stunts entrepreneurship, hinders workers’ mobility and slows productivity growth.” And potentially, Eduardo Porter writes, decreased corporate competition could be a reason for high levels of inequality. [nyt]

Estimates of potential economic growth in the United States have been revised downward for years. But what’s behind these declines? J.W. Mason argues that a large chunk of these downward revisions are due to the continuing effects of the Great Recession. [slackwire]

Friday figure

Figure from “A graphical update on the latest data on the U.S. jobs market” by Nick Bunker

Must-Read: Aaron Carroll: So What Did the Medicaid Expansion Actually Do?

Posted on by Brad DeLong

Must-Read: Aaron Carroll: So What Did the Medicaid Expansion Actually Do?: “In 2014, only 26 states and the District of Columbia chose to implement the Patient Protection and Affordable Care Act (ACA) Medicaid expansions for low-income adults…

…Laura Wherry and Sarah Miller…. By the second half of 2014, adults in the expansion states had seen their health insurance coverage increase 7.4%; Medicaid coverage increased 10.5%. This isn’t surprising, as increased coverage was the main intent of the Affordable Care Act. Coverage was found to have ‘improved’ as well (7.1%)…. In Medicaid expansion states, there were increased in physician visits (6.6%), hospital stays (2.4%), rates of diagnoses of diabetes (5.2%) and high cholesterol (5.7%). Of course, this is an observational study…. Insurance coverage is just the first step in improving access. What this study adds are some data showing that expanding Medicaid through the ACA resulted in increased coverage, improved coverage, more physician visits, and more disease diagnosed…

Must-Read: Izabella Kaminska: Why the World Needs Investment

Posted on by Brad DeLong

Must-Read: Nick Bunker sends us to:

Izabella Kaminska: Why the World Needs Investment: “The liquidity trap, when monetary policy becomes ineffective at very low or zero interest rates…

…may be old news but the global dimension of the problem is a new and worrying phenomenon…. So engrained is the notion saving is always thrifty and good that it’s become extremely hard to articulate why this state of affairs is so disastrous for the global economy.On Monday, however, Citi’s rates team does an excellent job of summing up the problem…. In their opinion liquidity traps–symptomatic of the secular stagnation phenomenon more broadly–are exported abroad by way of four different channels:

  1. Capital markets transmit secular stagnation and can transmit recessions in a world with low interest rates.
  2. Policies that trigger current account surpluses are beggar-thy-neighbor.
  3. Reserve currencies bear a disproportionate share of the global liquidity trap, because of a shortage of safe assets. This works by leaving real rates too low in the face of a negative shock (e.g. Brexit) to give confidence in the ability to stimulate demand.
  4. Large fiscal expansions can eliminate secular stagnation (= bearish bonds).

In that regard, it’s worth paying attention to the growing euroglut phenomenon. As the analysts note, the Euro area in 2015 contributed to the glut phenomenon with a large surplus of 3.2% of GDP, adding to the more traditional surpluses from Japan (3.3%) and China (3%). This, in short, isn’t funny anymore. If countries want to carry international surpluses indefinitely the suggestion here is they need also to reinvest those ‘savings’ into capacity expanding investments abroad. If not, those savings will eventually end up constraining global growth by turning everything into a simple zero sum game. We’ve not seen it spelled out that simply before. But it’s an elegant and logical explanation.

Screen Shot 2016 07 11 at 11 20 28 png 762×436 pixels

Cf.: Ricardo J. Caballero, Emmanuel Farhi, and Pierre-Olivier Gourinchas (2015): Global Imbalances and Currency Wars at the ZLB: “The consequences of extremely low equilibrium real interest rates in a world with integrated but heterogenous capital markets and nominal rigidities…

…(i) Economies experiencing liquidity traps pull others into a similar situation by running current account surpluses; (ii) Reserve currencies have a tendency to bear a disproportionate share of the global liquidity trap|a phenomenon we dub the ‘reserve currency paradox’; (iii) While more price and wage flexibility exacerbates the risk of a deflationary global liquidity trap, it is the more rigid economies that bear the brunt of the recession; (iv) Beggar-thy-neighbor exchange rate devaluations provide stimulus to the undertaking country at the expense of other countries (zero-sum); and (v) Safe public debt issuances, helicopter drops of money, and increases in government spending in any country are expansionary for all countries (positive-sum). We use these results to shed light on the evolution of global imbalances, interest rates, and exchange rates since the beginning of the global financial crisis.

New analysis shows it is more difficult for workers to move up the income ladder

Posted on by Austin Clemens

Against a rising chorus of concern about increasing income inequality, some economists are pushing back, suggesting that it is not income inequality we should be concerned with but rather income mobility. Income mobility describes the ability of individuals to move up and down the income ladder over some period of time. As long as mobility is healthy, they argue, society can remain egalitarian in the face of inequality, because the poor can move up and the rich down.

Intuitively, some observers assume that higher income inequality should be correlated with decreased income mobility as the rich build a bigger lead on the rest of society. But there is little consensus about whether and how income mobility has changed. What little research does exist is inconsistent with regards to findings, methods, and data sources. Equitable Growth grantees Michael D. Carr and Emily E. Wiemers at the University of Massachusetts-Boston used a new dataset to revisit the measurement of earnings mobility, the part of income that comes from work. Their results suggest that lifetime earnings mobility has declined in recent years.

The authors construct a snapshot of earnings mobility in two time periods: 1981 to 1996 as well as 1993 to 2008. In each one, workers are observed at the beginning and end of the time period to capture mobility over a 15-year span. Workers are divided into ten income deciles (each representing 10 percent of workers, ordered from lowest to highest paid) and categorized at the beginning and end of the 15-year span. Use the interactive below to explore their results in each of these two time periods.

 

To see how mobility changed over these two time periods, Carr and Wiemers look at how the probability of moving up or down rungs on the earnings ladder has changed between the two periods. As the interactive below shows, they find that most workers are less likely to move up the income ladder now (1993-2008), and a bit more likely to fall down the income ladder than they were in the past (1981-1996). The exception is earners at the very top of the income distribution. By definition, these workers at the top rung cannot rise up any farther, but in recent years, members of the top group are less likely to slip down than they used to be.

Use the dropdown menu to look at different slices of the population. A particularly notable finding from the paper is that the largest declines in upward mobility are among workers with college degrees who start in the middle of the earnings distribution. It has become increasingly difficult for these college-educated, middle-class workers to ascend into high income jobs. In general, a worker’s starting position has become more predictive of their final position across the income spectrum.

 

Carr and Wiemers use a new data source that they contend has some advantages over data used in previous research. They use the Survey of Income and Program Participation, or SIPP, to obtain demographics on a large number of workers over a long period of time. The Census Bureau merged this survey with administrative records from the Internal Revenue Service and the Social Security Administration and has made the product available to researchers. This gives Carr and Wiemers accurate information on earnings and benefits for each worker. This approach yields a large, nationally representative sample with demographic information on each individual in the data set. Better still, the researchers are able to follow individuals for a long period of time.

Economics is undergoing a kind of data revolution as administrative datasets become more common. Studies like this one may shed new light on areas of research that were previously marked by inconsistent findings. It may be some time before we can say with certainty what is happening to economic mobility in America, but this research makes an important new contribution to the existing literature.

Must-Reads: July 14, 2016

Posted on by Brad DeLong

Should Reads: