Things tagged economics:
Some high level mulling of a very smart person about the future of digital currency, as relates to the involvment of central banks:
Dave Birch in Consult Hyperion’s blog:
So: imagine something like M-PESA but run by the Bank of England. Everyone has an account and you can transfer money from one account to another by a mobile phone app (that uses the secure TEE in modern mobile phones) or by logging in with two factor authentication to any one of a number of service providers that use the Bank of England API to access the accounts or by phoning a voice recognition and authentication service. Drawing on our experiences from M-PESA, TAP and other population-scale mobile-centric system that we have advised on, I think that this API might actually the most important single thing that a Brit-PESA might deliver to the British economy.
Readers of Econlog who read co-blogger Bryan Caplan’s posts know that Bryan has posted a lot on a college degree as an expensive signal to potential employers. Here are 88 posts Bryan has written on signaling.
I find Bryan’s argument and evidence persuasive. Like some of his critics, though, I have often wondered why employers don’t figure out cheaper ways of getting information about potential employees. You might argue that the expense is not on the employer but on the employee. But if an employer can find a good employee who lacks a college degree, the employer can, all other things equal, pay less.
In Wednesday’s Wall Street Journal is an interesting news story by Rachel Feintzeg titled “Why Bosses Are Turning to ‘Blind Hiring’.” (WSJ, January 6, 2015, p. B4) [ed. note: see here for the article on archive.is to bypass the paywall].
Gina Kolata in the NYT:
Only in the world of medicine would Dr. Vivian Lee’s question have seemed radical. She wanted to know: What do the goods and services provided by the hospital system where she is chief executive actually cost?
Most businesses know the cost of everything that goes into producing what they sell — essential information for setting prices. Medicine is different. Hospitals know what they are paid by insurers, but it bears little relationship to their costs.
No one on Dr. Lee’s staff at the University of Utah Health Care could say what a minute in an M.R.I. machine or an hour in the operating room actually costs. They chuckled when she asked.
Emily Sohn in Aeon:
Single animals sometimes get care that costs hundreds of thousands of dollars – money that could be spent instead on protecting habitats and other conservation efforts that save far more animals at a time. Could wildlife rehab be a massive waste of time and money?
Jonathan Soble in the NYT:
The houses are a steal for the rare souls who will have them. But just one has been sold through the home bank so far, a 60-year-old single-story wooden home with a patch of garden that was listed for 660,000 yen, or $5,400. Places farther up the hill can be had for the equivalent of just a few hundred dollars. Four have been rented, including one to students in a nursing-care program at a nearby college who receive a discount in return for checking up on elderly people in the area.
Other towns have tried their own creative solutions, including offering cash payments to outsiders who move in and buy unoccupied homes. A few have succeeded in attracting pockets of artists and freelance workers, who stay tethered by the Internet to their urban clients.
Patricia Cohen in the NYT:
Chelsea Krumpler, a waitress at Manos Nouveau in San Francisco, said that many waiters she knows were skeptical of her $25-an-hour wage and no tips. But she says she is earning as much as before with no worries about slow nights.
“It’s a little more secure,” said Ms. Krumpler, who has worked as a waitress for seven years. The policy has also drawn the staff closer together. “It’s more of a family,” she said.
Brian Keyser, the owner of Casellula restaurant in Midtown Manhattan, would prefer to end tipping but does not think his staff members or his diners are ready to accept it.
Now he must contend with a minimum wage for tipped workers that is rising in New York. That means giving his servers a $2.50-an-hour raise — even if they are already pulling in about $25 an hour in tips. “I have a kitchen full of people making far, far less than that, and I would love to give them that money, but I can’t,” Mr. Keyser said.
Coi, Mr. Patterson’s two-Michelin-star restaurant, has had all-inclusive pricing since it opened in 2006. He tried the same strategy when he opened Aster in the Mission District a few months ago, and quickly realized it was not going to work.
“I really believe in that model, but our customers didn’t want it,” Mr. Patterson said, because they thought it was too expensive. “It’s about perception,” he said. “It’s not just about the dollars you’re spending, but what you think you’re spending.”
At the Walrus and the Carpenter, the owner Renee Erickson has been adjusting her no-tipping experiment. Although she originally wanted to adopt an all-inclusive menu, she “worried we weren’t going to have the opportunity to explain why our prices were so much higher than the restaurant right next door.”
Instead, she added an 18 percent service charge. But it did not generate enough money to cover the added labor costs. So she bumped the charge up to 20 percent and shrank the owners’ share.
As the weeks went by, she and her partner kept adjusting the percentage that went to the kitchen workers. To get the staff on board, she decided to let everyone see the payroll spreadsheets, so they could understand how the money was being allocated.
A cultural problem that really needs to be fixed. The people in the back of house are working just as hard, but they get paid minimum wage, where the servers are making good money. It is illegal for owners to pool tips and share with back of house, so looks like service charges and no tipping allowed is the only way out.
Activist and fundraiser Dan Pallotta calls out the double standard that drives our broken relationship to charities. Too many nonprofits, he says, are rewarded for how little they spend – not for what they get done. Instead of equating frugality with morality, he asks us to start rewarding charities for their big goals and big accomplishments (even if that comes with big expenses).
The problem however is that if the extra spending just takes money away from other charities, then it is a net loss in the whole picture. The only way this wins is if the 2% of GDP grows, and the money is taken away from the for profit sector. I think this is unlikely to happen, charitable giving is probably pretty firmly stuck there. without societal change (which is why he is spending the money, to create this, but, risky).
Eduardo Porter in The New York Times:
As negotiations between Greece and its creditors stumbled toward breakdown, culminating in a sound rejection on Sunday by Greek voters of the conditions demanded in exchange for a financial lifeline, a vintage photo resurfaced on the Internet.
It shows Hermann Josef Abs, head of the Federal Republic of Germany’s delegation in London on Feb. 27, 1953, signing the agreement that effectively cut the country’s debts to its foreign creditors in half.
Open course by Robert Shiller. Link is to the fourth lecture which impressed me by explaining Efficient Portfolio Frontier in a way I actually grokked.
In this lecture, Professor Shiller introduces mean-variance portfolio analysis, as originally outlined by Harry Markowitz, and the capital asset pricing model (CAPM) that has been the cornerstone of modern financial theory. Professor Shiller commences with the history of the first publicly traded company, the United East India Company, founded in 1602. Incorporating also the more recent history of stock markets all over the world, he elaborates on the puzzling size of the equity premium and the very high historical return of stock market investments. After introducing the notion of an Efficient Portfolio Frontier, he covers the concept of the Tangency Portfolio, which leads him to the Mutual Fund Theorem. Finally, the consideration of equilibrium in the stock market leads him to the Capital Asset Pricing Model, which emphasizes market risk as the determinant of a stock’s return.
J. B. MacKinnon in The New Yorker:
Earlier this month, a peculiar vehicle appeared on the streets of Manhattan and Brooklyn: a biodiesel-fuelled, reclaimed-wood camper that could have been a food truck selling vegan “ish” and chips. But instead of a meal, the truck was made to sell a message on behalf of Patagonia, the outdoor-clothing company.
The camper, dubbed Delia, was on a six-week cross-country road trip, repairing outdoor gear and selling used Patagonia products along the way. The amount of fixing that went on was humble in scale: ninety-three garments in New York City and about twenty-one hundred nationwide. The tour, which ended May 12th in Boston, is better thought of as the latest embodiment of the company’s ongoing campaign to encourage a national conversation about the threat posed to the planet by a global economy that depends on relentless growth and consumerism.
Ben Austen in the NYT Magazine:
The Anti-Eviction Campaign always canvassed a neighborhood before acting, J. R. explained to the young parents. He asked if they would support a takeover of either of the empty houses that sandwiched theirs or of any of the abandoned homes on their block. A family that moved in, he said, most likely wouldn’t pay rent or a mortgage, but wasn’t that preferable to a vacant property further deteriorating, becoming a haven for gangbangers or drug users?
“Hell, yeah,” the woman said, without hesitation, from her lawn chair.
“That’s what we need, uh-huh, exactly,” the man added.
Over the last few years, J. R. has been inside more than a hundred abandoned properties, each one a variation on the same theme of despair. He has stumbled upon drugs and whatever paraphernalia people needed to use or make them, along with the gathered sheets and worn-down mattresses of so-called trick houses. He has seen the carcasses of dogs and cats and rats and possums and raccoons. And yet J. R. proves surprisingly upbeat when talking about the efforts of the Anti-Eviction Campaign. At a Y.M.C.A. in Bronzeville, on the South Side, as people crowded into the basement for a screening of “Inside Job” — the 2010 documentary that essentially detailed the depressing back story of their own foreclosure plight — J .R. told them that he had seen the film 19 times and hoped to see it 150 more. It inspired him. “The government failed us. The market failed us. Harvard, Yale and the University of Chicago failed us. Our government — the government — doesn’t belong to us. Forget them; they forgot us. We need to solve our problems ourselves.”
Why are so many people so bad with money? Because we treat money as a taboo topic in the home, worse then sex. Here is a good column exploring this:
Ron Lieber in the NYT:
Money is a source of mystery to children. They sense its power, so they ask questions, lots of them, over many years. Why isn’t our house as big as my cousin’s? Why can’t I have a carnivorous plant terrarium? Why should I respect my teachers if they earn only $60,000 per year? (Real question!) Are we poor? Why didn’t you give money to the man who asked you for some? If my sister can have Hello-Kitty-themed Beats by Dre headphones, why won’t you get me the Bluetooth-enabled Lego Mindstorms set? (It’s only $349, and it’s educational, Mom!)
We adults, however, tend to do a miserable job of answering. We push our children’s money questions aside, sometimes telling them that their queries are impolite, or perhaps worrying that they will call out our own financial hypocrisy and errors. Sometimes we respond defensively and viscerally, barking back, “None of your business,” unintentionally teaching our children that the topic is off limits despite its obvious importance. Others want to protect their children from a topic many of us find stressful or baffling: Can’t we keep them innocent of all of this money stuff for just a little bit longer?
Olga Khazan in The Alantic:
At a drab community center on Chicago’s West side, there’s a room where families sit around idly. Unemployment is high here, and so is crime: Last month, East Garfield Park was ranked the seventh most violent out of 77 Chicago neighborhoods. The center offers everything from domestic-violence help, to financial assistance, to warmth during the long winter.
It also offers salads, which visitors can purchase from a futuristic-looking vending machine. The salads are made from high-end ingredients like blueberries, kale, fennel, and pineapple. Each one comes out in a plastic mason jar, its elements all glistening in neat layers, the way fossils might look if the Earth had been created by meticulous vegans.
She finally gets there: “It’s not the money, it’s the time.” I’m sick of rich people wondering why poor people eat shit food. Duh.
John Timmer at Ars:
The hypothesis focused on the motivation for continuation of the conflict. Individuals on any side of it will believe that their own group is driven to work together by love of each other. They’ll refuse to recognize that same love in their opponents, instead assuming that the opposition is driven by hatred. That hatred, naturally, is directed at your own group. By assuming your opponents have an intractable negative bias against you, you end up with no desire to work with the opposition and pessimism about the prospects for any compromise. “If adversaries believe inflexibility on the other side renders mutual compromise impossible, they will be unlikely to adopt seemingly rational strategies for conciliation,” as the authors put it.
To test this, the authors surveyed both US citizens about the Democrat-Republican divide, and Israelis and Palestinians about their conflict. In general, their hypothesis held up well. Most groups felt that their own members were motivated by love of each other, while the opposition was united in their hatred of the survey subjects.
To quantify the negativity, the authors measured the relative bias between how much individuals ascribed mutual love to their opponents and how much they ascribed hatred to them. The strength of this bias correlated with a reduced willingness to negotiate, reduced perception that a favorable compromise could be reached, and other measures of optimism. In short, once you’re convinced your opponents hate you, then future prospects start to look bleak.
Is there a way out of this morass? Since money makes the world go around, the authors decided to try a small payment. They told a group of US participants that they’d give them $12 if their evaluation of their opponents’ motivations matched the value their opponents gave for themselves. In other words, if a Democrat gave Republicans a self-love/opponent-hate rating that matched the one Republicans gave themselves, they’d get $12.
The goal wasn’t really to harness greed; rather, it was simply to get people to stop and think of their opponents more carefully—to view them as humans, rather than some generic “other.” To an extent, it worked. Simply offering the payment reversed the general trend, with people ascribing more self-love than other-hate to their opponents.
It would be easy to dismiss this as participants simply matching what they’d expect their opponents to say in order to get some money. But this change had the effect of reducing the bias score the authors calculated above. And they again showed that bias correlated with pessimism about compromise, a sense that a win-win agreement wasn’t possible, and a tendency to assume that the opposition’s opinions were an essential part of their nature. By reducing this bias, the small payment made people more open to the idea of compromise.
Paper is here.
Pam Belluck in the NYT:
“We think it’s really important to incentivize this kind of care,” said Dr. Barbara Levy, chairwoman of the A.M.A. committee that submits reimbursement recommendations to Medicare. “The idea is to make sure patients and their families understand the consequences, the pros and cons and options so they can make the best decision for them.”
Now, some doctors conduct such conversations for free or shoehorn them into other medical visits. Dr. Joseph Hinterberger, a family physician here in Dundee, wants to avoid situations in which he has had to decide for incapacitated patients who had no family or stated preferences.
Recently, he spent an unreimbursed hour with Mary Pat Pennell, a retired community college dean, walking through advance directive forms. Ms. Pennell, 80, who sold her blueberry farm and lives with a roommate and four cats, quickly said she would not want to be resuscitated if her heart or lungs stopped. But she took longer to weigh options if she was breathing but otherwise unresponsive.
“I’d like to be as comfortable as I can possibly be,” she said at first. “I don’t want to choke, and I don’t want to throw up.”
With reimbursement, “I’d do one of these a day,” said Dr. Hinterberger
There are two things I care passionately about, and believe american culture (western culture generally) have wrong; education, and death. Here is a great piece on the latter. This is not something we can fix through legislation. (see: Death councils). It will have to be a cultural shift.
Atul Gawande in The New Yorker:
A few days before Thanksgiving, she had another CT scan, which showed that the pemetrexed—her third drug regimen—wasn’t working, either. The lung cancer had spread: from the left chest to the right; to the liver; to the lining of her abdomen; and to her spine. Time was running out.
This is the moment in Sara’s story that poses a fundamental question for everyone living in the era of modern medicine: What do we want Sara and her doctors to do now? Or, to put it another way, if you were the one who had metastatic cancer—or, for that matter, a similarly advanced case of emphysema or congestive heart failure—what would you want your doctors to do?
The issue has become pressing, in recent years, for reasons of expense. The soaring cost of health care is the greatest threat to the country’s long-term solvency, and the terminally ill account for a lot of it. Twenty-five per cent of all Medicare spending is for the five per cent of patients who are in their final year of life, and most of that money goes for care in their last couple of months which is of little apparent benefit.
And the hour long documentry on Frontline is here. Trailer for that:
It’s a standard assumption in the West: As a society progresses, it eventually becomes a capitalist, multi-party democracy. Right? Eric X. Li, a Chinese investor and political scientist, begs to differ. In this provocative, boundary-pushing talk, he asks his audience to consider that there’s more than one way to run a succesful modern nation.
Sandeep Jauhar in the NYT:
Of all the ways to limit health care costs, perhaps none is as popular as cutting payments to doctors. In recent years payment cuts have resulted in a sharp downturn in revenue for many hospitals and private practices. What this has meant for most physicians is that in order to maintain their income, they’ve had to see more patients. When you reduce the volume of air per breath, the only way to maintain ventilation is to breathe faster.
As our workdays have gotten busier, we doctors have had less time to devote to individual patients. An internist I know in private practice used to see 15 patients a day. “Now reimbursement is so low I have to see at least 30,” he told me. “If I stay in the room more than 10 minutes, my assistant will call me and tell me to hurry up.”
Racing through patient encounters, we practice with an ever-present fear that we will miss something, hurt someone and open ourselves up to legal (not to mention moral) liability. To cope with the anxiety, we start to call in experts for problems that perhaps we could handle ourselves if we had more time to think through a case. The specialists, in turn, order more tests, scans and the like.
And therein lies the sad irony of the health cost containment paradigm in this country. There is no more wasteful entity in medicine than a rushed doctor.
In the southeast corner of Belgium, there is a town of about 20,000 that is known, to the extent it is known at all, as a key battleground during the Battle of the Bulge and, more recently, as the center of the tiny slice of this country that speaks German instead of French.
Time moves slowly here. There is a quaint stretch of shops and a small train station and a hotel, the Ambassador, which has 28 rooms. The biggest commotion on any given day is when the children at the school in town go outside for recess.
Except on soccer days. Then, much of the town treks up a steep hill to a modest soccer stadium, the Kehrweg-Stadion, home to K.A.S. Eupen, the local professional team that has spent most of its 69-year existence in the lower divisions of Belgium’s national league. The stadium is unremarkable, with its squat, steel stands and patchy grass, and yet it was the site, on a March morning two years ago, of one of the strangest couplings in professional sports.
On that day, a group of about 20 men toured the 8,000-seat stadium, examining its sparse amenities and looking out at the drab surrounding areas. They then moved on to K.A.S. Eupen’s small offices, where a candid meeting between club officials and executives from Qatar’s Aspire Academy, based in Doha some 3,000 miles away, began promptly at 10 a.m.
Those in the room would later describe this meeting between the officials of a mostly anonymous Belgian soccer team and representatives of a Middle Eastern royal family as surreal. As they negotiated the details of an acquisition, four languages were spoken — English, French, German and Arabic — and while the club had a multilingual staff member on hand to help translate, there were still moments of inevitable confusion.