Things to Read on the Evening of May 22, 2014

Should-Reads:

1. Ben Casselman: Cutting Off Emergency Unemployment Benefits Hasn’t Pushed People Back to Work: “In 2013, people who likely qualified for emergency benefits had a monthly job-finding rate of 12 percent. In the four months since the program ended, the job-finding rate for likely cutoff victims… was slightly higher, at 14 percent. But the difference isn’t statistically significant. Even if it holds up as more data comes in, it could be the result of the improving economy rather than the direct impact of the end of the emergency program. The end of the program might have had another effect, however: It may have made people less likely to keep trying to find jobs. Unemployment programs usually require recipients to show that they’re actively applying for jobs…. About 19 percent of cutoff victims have dropped out of the labor force each month this year, meaning they stopped actively looking for work. That’s a bit higher than the 16 percent who dropped out each month last year; that difference, too, is at most marginally statistically significant. We don’t yet have enough evidence to draw a firm conclusion about what impact the end of emergency benefits has or hasn’t had…. This much is clear, however: There has been no sudden surge of former benefits recipients into jobs. Nor have they abandoned the labor force in droves. Most have done what Laurusevage has done: continued looking for work, but without the lifeline that benefits provided…”

2. Sarah Kliff: America is fat because we exercise a little more and eat a lot more: “Southern states, for example, tend to have higher obesity rates than those in the Northeast… lower-incomes than high earners… also higher in minority populations. But… Roland Sturm argues… across different geographies, ethnic groups and income-levels, obesity rates are growing just as quickly…. Sturm argues there are important policy implications from seeing the obesity crisis as something that’s happening all over the country…. It’s not… food deserts that are driving the obesity epidemic, if rates are going up just as quickly in places where there are ample food options…. Americans pretty much everywhere consume more calories than they did a few decades ago…. Exercise doesn’t actually appear to be the problem: Americans are exercising slightly more than they did in late 1990s…”

Should Be Aware of:

• Hans-Joachim Voth: Nazi pork and popularity: How Hitler’s roads won German hearts and minds
• Narayana Kocherlakota: Monetary Policy Report to the Economic Club of Minnesota
• Mike Konczal: How Timothy Geithner failed his stress test
• Bryce Covert: No, Taking Away Unemployment Benefits Doesn’t Make People Get Jobs
• Ta-Nehisi Coates: The Case for Reparations
• Nicholas Bagley: The Legality of Delaying Key Elements of the ACA
• Jeffrey Burgan: Behind the scenes with Google Fiber: Working with content providers to minimize buffering

And:

1. Cameron Murray: The Unique economics of Health Care: “‘freakonomic’ Chicago-boy Steven Levitt… apparently made some rather absurd remarks about health care….. This nonsense reminds me that what constitutes economic debate in the US is often laughable at best…. Medical services are credence goods–goods which we don’t know whether we need, and even once we’ve consumed them, still don’t know if they were good value… these goods suffer from the worse of possible information failures…. For these goods the demand curve may slope any which way, and people are often left to use price as the only signal of quality (or quantity for that matter). This means that a socially optimal level of medical service provision cannot be determined using basic marginal economic analysis. Not only that, but there are substantial positive externalities to most health care services…. One way to assess any health system is in terms of the two main sets of incentives…. We often hear about the patients, with the archetypal case of the lonely hypochondriac…. Sure they exist, but as I’ve said before, pricing these visits deters both the time-wasters and those with genuine medical needs… in general no one wants major medical services even at a zero price…. On the other side of the ledger we have the incentives of doctors and other businesses…. As a final point, we rarely hear about the monopsony buying power of the single medical provider…”

2. Jonathan Portes Simon Wren-Lewis: Issues in the Design of Fiscal Policy Rules: “Theory suggests that government should as far as possible smooth taxes and its recurrent consumption spending, which means that government debt should act as a shock absorber, and any planned adjustments in debt should be gradual. This suggests that operational targets for governments (e.g. for 5 years ahead) should involve deficits rather than debt, because such rules will be more robust to shocks. Beyond that, fiscal rules need to reflect the constraints on monetary policy, and the extent to which governments are subject to deficit bias. Fiscal rules for countries in a monetary union or fixed exchange rate regime need to include a strong countercyclical element. Fiscal rules should also contain a ‘knock out’ if interest rates hit the zero lower bound: in that case the fiscal and monetary authorities should cooperate to formulate a fiscal expansion package that allows interest rates to rise above this bound. In more normal times, the design of fiscal policy rules is likely to depend on the extent to which governments are subject to deficit bias, and the effectiveness of any national fiscal council. For example, governments that had not shown a history of deficit bias could aim to target deficits five years ahead (rolling targets), and these would not require cyclical adjustment. In contrast, governments that were more prone to bias could target a cyclically adjusted deficit at the end of their expected period of office. In both cases fiscal councils would have an important role to play, in ensuring plans were implemented in the first case and allowing for departures from target when external shocks occurred in the second.”

3. Aaron Carroll: People With Chronic Illness Fare Worse Under Cost-Sharing: “Cost-sharing works for most people, because most people are healthy. Healthy people who use health care are often doing so inefficiently…. A study just published in JAMA Pediatrics looked at how children with asthma obtained care under different levels of cost-sharing, and how much stress their families were under financially because of their child’s illness…. Children with asthma… require care. We want them to use the health care system. With respect to asthma, prevention and maintenance are far better than trying to treat a child already suffering from an attack…. Families with higher levels of cost-sharing were significantly more likely to delay or avoid going to the office or emergency room for their child’s asthma. They were more likely to have to borrow or cut back on necessities to afford care. They were more likely to avoid care. This isn’t a good outcome. We’re talking about children with a completely manageable chronic condition who are being hampered by cost-sharing. That’s not what cost-sharing is supposed to do…. Families covered by Medicaid or the Children’s Health Insurance Program (CHIP) were able to get care for their children’s asthma more easily than many of those with private insurance. That’s because Medicaid and CHIP have very low levels of cost-sharing…. In France, co-pays are set by levels of sickness. Those who have chronic conditions have all of their co-pays waived. Even Singapore, beloved among conservative health care wonks because of its reliance on cost-sharing, makes exceptions for many with chronic illnesses…. cost-sharing isn’t about fairness. It’s about reducing health care spending without negatively affecting health outcomes. It should be a scalpel. We’re using it like a club.”

Already-Noted Must-Reads:

1. Mark Thoma sends us to Larry Summers at Michael Tomasky’s Democracy Journal: Lawrence H. Summers: The Inequality Puzzle: “Piketty’s treatment of inequality is perfectly matched to its moment…. His work richly deserves all the attention…. Painstaking empirical research… transformed political discourse… a Nobel Prize-worthy contribution… elegant framework for making sense of a complex reality… theorizing is bold and simple and hugely important if correct…. Piketty makes a major contribution by putting forth a theory of natural economic evolution under capitalism…. Books that represent the last word on a topic are important. Books that represent one of the first words are even more important. By focusing attention on what has happened to a fortunate few among us, and by opening up for debate issues around the long-run functioning of our market system, Capital in the Twenty-First Century has made a profoundly important contribution…”

2. Heather Boushey: It Wasn’t Household Debt That Caused the Great Recession: “Given the troubling rise in economic inequality over the past four decades, this research could not be more timely…. Mian and Sufi are part of a new generation of economists who examine detailed microeconomic data and analysis to understand the macroeconomy, giving us a deeper understanding of how inequality affects economic growth and stability…. Mian and Sufi’s research shows that the marginal propensity to consume… depends not just on the value of the asset but also the debt burden…. Mian and Sufi provide a definite ‘yes’ to the question of whether we could have prevented the Great Recession…. Policymakers could have seriously mitigated the damage, pointing out that debt forgiveness would have been much more effective that the policies implemented because it would have targeted households with the largest marginal propensity to consume. This is a failure on a massive scale, and more economists need to follow the lead of Mian and Sufi and look deep into the data to understand what we got wrong. Mian and Sufi’s argument hinges on the conclusion that it was the supply of credit that drove the bubble and the heightened debt burdens… people were just acting irrationally—given that the massive increase in borrows during the credit boom was among borrowers with declining incomes…. As families sought to cope with the slow-job growth economy in the 2000s and a labor market that still does not provide the kinds of supports and protections working parents need, many turned to increasingly-readily-available credit as a way to cope…. The story that emerged in the early days of the Great Recession was that too many people borrowed too much to afford fancy houses. That’s not what Mian and Sufi’s data show…. Subsequent reforms to our financial system give policymakers more tools to police housing finance, yet the continuing over-reliance on debt and a lack of good jobs leaves families at risk and exposes our economy to the whipsaw of another debt-fueled credit bubble…”

3. Erik Loomis: Histories of the Gilded Age, Written by Hacks of the New Gilded Age: “National Review troll Amity Shlaes… in lamely attempting to write the “humanitarian case” for repealing the minimum wage, writes her own history of the Gilded Age…. ‘Employers and employees believed that their relationship, the two-party one, was key. Outsiders… were intruders…. The two-party dynamic often succeeded. Because the employee-employer pair set their terms together, they trusted each other…. Andrew Carnegie and Henry Frick… shot at the workers…. What is mostly forgotten is that the workers also shot at the detectives. What is entirely forgotten is that Carnegie and Frick did much for workers, precisely because they felt responsible…. In 1905, the Supreme Court supported this old view when it held that New York State might not regulate the hours worked at a bakery because doing so interfered with the sanctity of the contract between worker and employer.’… Equality of contract between the billionaire employer and unemployed worker, now that’s bringing the first Gilded Age into the second Gilded Age! It’s also amazing how workers’ desires for a minimum wage are never taken into consideration…”

4. Matthew Yglesias: Facebook product director furious at Facebook’s effect on news: “Mike Hudak — who, importantly, is Director of Product at Facebook, has a little rant about the state of the media and his view that we at http://vox.com have failed to cure what ails it: ‘And we come to Ezra Klein. The great Ezra Klein of Wapo and msnbc. The man who, while a partisan, does not try to keep his own set of facts…. They write stupid stories about how you should wash your jeans instead of freezing them. To be fair their top headline right now is “How a bill made it through the worst Congress ever.” Which is better than “you can’t clean your jeans by freezing them.”… It’s hard to tell who’s to blame. But someone should fix this shit.’ Here’s where I disagree–it is not hard to tell who is to blame for the fact that the jeans story (which is a great, interesting, informative story) got more readers than Andrew Prokop’s excellent feature on the DATA Act. Facebook is to blame…. The jeans story has been shared 1,062 times on Facebook while the DATA Act story has been shared just 242 times. That’s why the jeans story has been read by more people. We featured the DATA Act story much more prominently on our home page, but these days the bulk of web traffic is driven by social media and the bulk of social traffic is driven by Facebook…. Traffic on the internet right now is all about Facebook sharing behavior…. On Twitter if you share something, your followers see it. On Facebook, what is seen is driven by algorithm that Facebook controls–if they wanted to promote more hard news they could do it…. The Facebook Gods smiled upon my sharing of ‘Buzzfeed’s founder used to write Marxist theory and it explains Buzzfeed perfectly’ and I hope the Gods will be as friendly to my share of Max Fisher’s brilliant 4,000 word explanation of the endless political crisis in Thailand. But, frankly, my experience as a veteran professional in this field is that the Facebook Gods will not smile on Max’s Thailand piece…. If Facebook executives don’t like a world in which those are the kind of stories people read, they should do something about it…”