Archive for the ‘economics’ Category

New Teaching Blog!

I have decided to start a new teaching blog called On Learning Curves.  Don’t worry.  I’ll still post for the Crockett because Cody Brown is too awesome.  But this isn’t the right forum for my thoughts on the day to day life of a new teacher.  subscribe and enjoy!

Modern Macro

A really good paper from the president of the Minneapolis Fed.

The elasticity of labor supply in boxing

Was really high in the 1960’s with 90 percent marginal tax rates:

The 1950s was the era of the 90 percent top marginal tax rate, and by the end of that decade live gate receipts for top championship fights were supplemented by the proceeds from closed circuit telecasts to movie theaters. A second fight in one tax year would yield very little additional income, hardly worth the risk of losing the title. And so, the three fights between Floyd Patterson and Ingemar Johansson stretched over three years (1959-1961); the two between Patterson and Sonny Liston over two years (1962-1963), as was also true for the two bouts between Liston and Cassius Clay (Muhammad Ali) (1964-1965). Then, the Tax Reform Act of 1964 cut the top marginal tax rate to 70 percent effective in 1965. The result: two heavyweight title fights in 1965, and five in 1966. You can look it up.

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?

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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.

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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.

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.

It’s just paper!

The Onion versus South Carolina.

Background on the South Carolina bill here.

Health economics and statistics

In the context of responding to an article in The Atlantic by Megan McArdle, J. Michael McWilliams does a good job of laying out some of the statistical problems that underlie attempts to measure things such as the effectiveness of insurance in health outcomes.  For example:

From the quasi-experimental literature, McArdle cites evidence of a lack of immediate survival gains with near-universal Medicare coverage after age 65 in the general population (Card et al. 2004; Levy, and Meltzer 2008).  From a clinical perspective, however, we should not expect immediate survival gains for most previously uninsured adults because mortality is such a distal outcome.  Survival gains may not manifest for years after improved chronic disease control and cancer screening are established, suggesting much more complex improvements in mortality trends are likely to evolve after age 65 in response to universal coverage.  Quasi-experiments that rely on abrupt discontinuities occurring with age are not well suited to capturing these complex but potentially large effects.  Consequently, the absence of evidence suggested by these studies is not evidence of absence.  In contrast to the general population, immediate mortality effects might be expected for acutely ill patients for whom coverage may improve access to life-saving procedures and therapies.

Climate change and labor supply

The topic of a new working paper at the National Bureau of Economic Research.