Archive for March, 2010|Monthly archive page

Economists in the Classroom

As a future teacher, and a fan of the dismal science, I love the recent Freakanomics post about the BASIS charter school is n Arizona.

The BASIS Educational Group, run by two economists, requires every 8th-grade student to take a year’s worth of economics.  Many BASIS students, who are all required to take at least six AP exams before graduation, go on to take AP Economics in 9th grade, and average a 4 (out of 5) on their AP exams.  ”Our students learn to love economics early on, and we hope that passion will continue long into life.”

And my favorite part:

BASIS also offers incentive-heavy contracts to teachers; and all staff members are on one-year contracts.

You do not have to be an economist to recognize the benefit of school competition.  I believe that a firm command of economic reasoning greatly improves human capital.  I find it encouraging seeing a school does too.  But the beauty of school competition is that I could be wrong.  Perhaps when everything is said and done an Art History heavy curriculum from some other charter school beats out BASIS.  Perhaps studying economics early does little good for students when they enter the work force.  So what? These kids have gotten a fair amount of college credit, and policymakers learn more about what curricula create the most human capital.  Doesn’t the world just feel better when we find Pareto efficient outcomes?

Seguin

Snoop Dogg and imperfect competition

Snoop Dogg will get you where you need go.  TomTom, the GPS makers, have recruited Snoop to lend his voice to their Dash board GPS devices.  A preview here. Yes, it is as awesome as I hoped. To me this is a perfect example of imperfect competition.  While TomTom faces competition from other GPS devices, it also has to fight off competition from Google maps and smart phones.   TomTom likely realizes it cannot compete with Google by price, but it can significantly differentiate its product by introducing a little G-funk.  TomTom gets to retain some price making capability and we all get to here Snoop tell us when to bare right.  Horray for innovation.

Seguin

Microinsurance

Sorry about Seguin’s long absence.  Thesis writing takes up a big chunk of my time now.  Anywho.

The Economist writes about micro insurance.  Via mobile phones, Kenyan farmers are able to insure the value of seeds and fertilizers in case of drought. In a world of CDS gone wild financial innovation can be a 4 letter word. It is good to see that financial innovation can still add value.  The idea of micro insurance is so simple it is amazing that no one has thought of it before.  Extending risk management strategies to the poor just makes so much sense, especially when it can be the difference between starvation and survival.

-Seguin

Aliens!

Tyler Cowen responds to the question “If you were offered a true statistic about an alien civilization, but only one, what would it be?”  His answer is below.  Many of the comments are interesting as well.

How about the real rate of return on capital?  The risk premium?  The percentage of the population which dies in war each year?  Those are what come to mind right away.  What else?  Ideally you might want a cognitive measure, but their performance on human IQ tests probably would not be useful information.  How about “what percentage of our knowledge of mathematics do they also have?”  Furthermore, I would not assume they “look like the aliens you see on TV” and would consider a biological statistic (which one?) which expressed what kind of life forms they would count as.

Economic costs of climate change

One problem with climate change is that there are many feedback effects that can increase the rate at which warming occurs.  Via Public Goods, a new paper by Eba Goodstein tries to estimate the economic costs of increased warming due to the feedback effects associated with the melting of ice in the Arctic.  Goodstein predicts an increased cost of between $2.4 and $24 trillion by 2050.  This is a pretty wide band, but it is further evidence that when people talk about reluctance to curb emissions because of the high economic costs involved, they are really arguing for a transfer of wealth from the people who will be effected by the warming to those emitting the pollution.  The economic costs will be large either way.

The difficulty of teaching math

From an article by Elizabeth Green:

Mathematicians need to understand a problem only for themselves; math teachers need both to know the math and to know how 30 different minds might understand (or misunderstand) it. Then they need to take each mind from not getting it to mastery. And they need to do this in 45 minutes or less. This was neither pure content knowledge nor what educators call pedagogical knowledge, a set of facts independent of subject matter, like Lemov’s techniques. It was a different animal altogether. Ball named it Mathematical Knowledge for Teaching, or M.K.T. She theorized that it included everything from the “common” math understood by most adults to math that only teachers need to know, like which visual tools to use to represent fractions (sticks? blocks? a picture of a pizza?) or a sense of the everyday errors students tend to make when they start learning about negative numbers. At the heart of M.K.T., she thought, was an ability to step outside of your own head. “Teaching depends on what other people think,” Ball told me, “not what you think.”

Some statistics

First, a physicist gives a statistical explanation for why he strongly believes that global warming is happening.

An interesting critique of p-values.

And last, does the Navy discriminate when deciding who to promote?

Update: Also, Andrew Gelman doesn’t seem to be a fan of regression analysis.

Insurance markets and competition

A couple of weeks ago I authored a post here explaining why increased competition in insurance markets is unlikely to bring down premiums.  Now here’s Austin Frakt and Ian Crosby (authors of The Incidental Economist blog) making similar points in a column for Kaiser Health News.

While there is some evidence that insurers’ market concentration plays a role in premium increases, that role is small. For example, a National Bureau of Economic Research paper found that only 2.1 percent of employer-sponsored health insurance premium increases between 1998 and 2006 were due to insurer concentration.

It is far more plausible that a high proportion of premium increases are due to a combination of concentration in the provider market and adverse selection, especially in the nongroup market. After all, most premium dollars are not kept by insurers and go toward payment of health care services. Insurers take a little off the top, but not enough to be blamed for anything like the perennially large rate increases.

A recent Health Affairs paper describes the upward pressure on costs driven by provider organization and concentration. Based on hundreds of interviews with representatives of hospitals, physician organizations, health plans and other stakeholders in six California health care markets, the authors conclude that “[t]he shift in who holds the upper hand in negotiating payments—once held by health insurance plans but now resting with health care providers—has had a major impact on California premium trends.” And we all know what those trends have looked like lately.

Perhaps counter-intuitively, large insurers can be bulwarks against high costs driven by provider consolidation. Two papers by health economists in the International Journal of Health Care Finance and Economics indicate that the high degree of market power held by insurers acts as a counterweight to that held by hospitals. Therefore, diluting the insurance market may have small downward effects on insurer profit and administrative costs, but it could have large upward effects on prices of health care services. Those higher prices would be passed on to consumers.