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Rereading Greg Mankiw’s “The Macroeconomist as Scientist and Engineer” I came across this Bob Solow quote on why he doesn’t bother to seriously engage neoclassical economists:

Suppose someone sits down where you are sitting right now and announces to me that he is Napoleon Bonaparte. The last thing I want to do with him is to get involved in a technical discussion of cavalry tactics at the Battle of Austerlitz. If I do that, I’m getting tacitly drawn into the game that he is Napoleon Bonaparte.

In order to raise money and improve the city’s health the Mayor of Philadelphia is proposing what appears to be the country’s largest tax on sugary drinks. The tax will be 2 cents per ounce, which is double New York City’s soda tax, and over 32 times Pennsylvania’s beer tax. It will cover a wide range of sugary drinks including soda, iced tea, energy drinks and chocolate milk. Being careful not to leave any loopholes, the tax will also cover drink syrups and powders, but it does avoid taxing diet sodas and baby formula.

You’ve got to give the administration credit, they’ve dotted all their i’s and crossed all their t’s in designing this tax. If this were coming from our federal government it would include tons of distortionary loopholes, probably accidently apply to insulin, and also include an extension of the alternative minimum tax.

The below image, from the Philadelphia Inquirer, shows how this will translate into taxes for a handful of drinks:

This New York Times article on the intellectual about-face of a noted school reformer is getting a lot of attention. I have not read her book yet and it’s hard to glean from the article exactly what her alternative ideas are for fixing public schools, so it’s hard for me to really offer a substantive reaction to the story. But one statement of hers that I did find surprising was this:

Charter schools, she concluded, were proving to be no better on average than regular schools, but in many cities were bleeding resources from the public system…

All the research I’ve seen suggests that vouchers, charters, and other types of competition increase the performance of public schools. If they are “bleeding resources”, and yet increasing performance, then that seems like a positive thing to me. They are doing more with less, what is there to object to?

Given her level of expertise, I assume there is some research I have not seen on this issue supporting her claim, hopefully discussed in her book. Either way I found this claim surprising.

I was searching for a post at Marginal Revolution, and I entered “how to” into the search box. This provided an interesting sample of the eclectic advice giving of Tyler Cowen (sorry Alex, it appears you do not write about “how to” do things often enough”). Here are the top 20 search results:

  1. How to help Haiti
  2. How to fall six miles and survive
  3. How to avoid stale or sour milk
  4. How to improve basketball
  5. How to win in Afghanistan
  6. How to disappear
  7. How to capture an idea
  8. How to avoid being fooled by a menu
  9. How to limit filibusters
  10. Excellent blog on how to help poor countries
  11. How to boast without looking bad
  12. How to travel in the U.S.
  13. How to flip a coin
  14. How to sell a dollar for more than a dollar
  15. How to sign your emails
  16. How to learn everything
  17. How to praise your kids
  18. How to unemploy immigrants
  19. How to cite a blog
  20. How to save the New York Times

What should students be taught about unions? The California Teachers Association offers an anecdotal lesson in how they think it should be done. We begin in a 12th grade charter school classroom.”What is a labor union?” the teacher asks:

He calls on another student, who informs her classmates that unions protect the rights of workers. Her teacher beams his approval before talking about union benefits, contracts, negotiations, mediation and arbitration — and last but not least, strikes. Everyone, it seems, knows what a strike is….

“Do you know anybody in a union?” Wood asks. Most students shake their heads no and only a few raise their hands.

“… When you leave here, I want you to interview a family member or friend who belongs to an organized labor union. I want you to find out what union they belong to, what the union does for them, and why they joined a union.”…

“Find out how this union benefits the workers it represents,” says Wood. “How does it get information to workers? What techniques does it use to gain leverage on behalf of the workers it represents? Have these techniques proven to be effective”

Next, the teacher asked the students what happens when you set market prices above equilibrium, “Surplus!” they all yelled out. “That’s right,” he beamed, “and what do you call a labor surplus?”. Having been taught the important of looking at both costs and benefits in whatever class this was where there is enough time to spend a whole lesson on unions, the students did not hesitate with an answer: “Unemployment!”. He then asked the students to interview someone who was currently unemployed because unionization in their industry prevented them from working for companies who would gladly hire them at competitive wages.

If only. This teacher seems concerned with only benefits and not costs, only winners and not losers. This saddest part is that the teacher believes his discussion actually unbiased:

“When I teach about unions, I’m honest and keep my own personal bias out of it,” says Wood. “But when they ask questions, I explain about the good things my union does for me.”

The American Association of Family Practitioners has revised it’s position on retail health clinics from mildly concerned to oppositional. This is in response to what the association sees as expanding scope of services offered by the clinics, which are small health care outlets typically located in pharmacies, grocery stores, and other retail locations that have historically focused on treating a handful of very standard illnesses like strep throat, bronchitis, ear infections, and pink eye.

These clinics have always represented a threat to the AAFP, since they primarily staff physicians assistants and nurse practitioners and are an obvious substitute for their members. This is not the first organization of health professionals to object to the retail clinic model. The American Academy of Pediatrics has previously issued a policy statement listing their concerns about quality of care and safety and officially opposing the use of retail health clinics for infants, children, and adolescents. The AMA, and the American Academy of Family Physicians have called for increased regulation.

A symposium last year in Health Affairs on retail clinics included articles showing that 90.3% of visits to retail clinics were for clinics typically served 10 common and simple illnesses. Furthermore, clinics treated these patients at lower cost than traditional health providers, specifically, $50-$60 cheaper per treatment, and they serve a population that is currently underserved by primary care providers. Other studies, which I can’t find right now, have shown no difference in treatment quality between retail clinics and traditional caregivers. So if retail clinics are treating common illnesses, at lower cost, with the same quality, what is the problem?

The AAFP is worried that clinics are expanding the scope of services they offer. According to a 2008 interview with an industry expert by the AAFP, clinics have the following expansion of scope in mind:

You can see the expansion with things like camp physicals, screenings and preventive care. Consumers need a health care provider; they want something done quickly, simply and conveniently. That core brand promise is now being applied to a whole new range of services, including injections, vaccinations and weight loss counseling….

This is supported by a recent study from Health-Leaders InterStudy, which confirms that in some markets retail clinics are expanding the services they offer. The more services these clinics provide the more they are competing with the AAFP’s members, so this move represents an increasing threat to them.

The expansion of scope is not surprising either, while retail clinics are popular and growing in numbers, there have long been concerns about clinics profitability. In recent years have been several incidents where large retailers, including Wal-Mart and CVS, will close several clinics at once. The issue appears to be that clinics have to serve a lot of customers a day in order to be profitable, and one easy way to overcome this would be to expand the scope of services.

Entrenched industry groups have been successful in the past in getting states to impose burdensome regulations on retail clinics, and this increasingly oppositional stance by the AAFP may add to that.

obese.jpg obese image by abinidab

Readers of this blog know that I am skeptical of both of traditional anti-obesity methods and indeed, feel that prevention in general is oversold. Much of life expectancy is effectively luck, the genes you happen to be born with, the mutations you happen to acquire, the particular cerebral artery that clot happens to get stuck in, etc.

You might think that I side with those who say that obesity is not a big deal. Nothing could be further from the truth.

Obesity seems to related to life expectancy, though perhaps not as strongly as commonly suspected. Our most aggressive estimates put it at a little less than half as bad as smoking.

However, this is not not the reason to that obesity is major concern,  a far greater concern than smoking in my opinion. Its a concern because people don’t want to be fat. Being fat makes them unhappy. Being fat changes the way that society relates to them. Being fat makes them less likely to find love and to make friends. Obesity produces a lower quality of life even if it has no health effects whatsoever. This matters. Indeed, it matters way more than health.

If you think Aubrey de Gray might actually succeed in breaking Actuarial Escape Velocity then making it past 70 might be one of the most important goals in your life. If Aubrey’s right then making it past 70 could mean you get to see the technologies that will extend your life to 1000. That’s a pretty big deal.

Ignoring that remote possibility, however, its much more important that one lead a non-miserable life than a long one. Many obese people report that being fat makes them miserable and that’s what matters.

This post may contain some Avatar Spoilers

Like most people I was impressed with the special effects in the smash hit movie Avatar. I was also impressed with the degree to which they closed more scientific holes than typical in a blockbuster.

For example, the Na’vi (a humanoid species) were too tall and lanky to have evolved on earth, but they mentioned that the gravity was lower on Pandora, which makes tall, small jointed creatures physically practicable.

The economics, however, left quite a bit to be desired. I don’t want to go all David Henderson here, but there were just some digs at the market too blatant not to mention. Pop fiction is pop fiction but when its starts to get too vicious we should probably speak up. Here are a few of my issues:

Issue 1: No one mentioned what unobtanium was used for. I jokingly posted to my facebook status (I just haven’t gotten with twitter yet) that unobtainium is used in the treatment of childhood cancers and that millions of children throughout the galaxy were going to die because the Na’vi wouldn’t move to a new tree.

If we take a truly galactic perspective then we have to consider the health and wellbeing of all people, Na’vi and human. There are obvious moral costs to making the Na’vi move but there may have been unobvious moral benefits. Unobtainium may not have been used to treat cancer but it reportedly sold for $20 Million a KG which means it was used for something that humans valued greatly.

Now, it could be that the wealth difference between the humans and the Na’vi was so great that marginal utility of income issues trump willingness to pay. That is, the humans are so rich that $20 million a KG is cheap for them. However, if you consider that the value of human life rises as people get wealthier and that the humans were willing to risk their lives to get unobtanium then we can deduce that it was probably pretty valuable in terms of utility, not just money.

Now consider that in theory Na’Vi only had to move – not die – in order for the humans to get what was so important to them. Which brings me to

Issue 2: The Na’Vi’s prime motivation was blatant nationalism and ethnocentrism. Our way of life is good and great and we are not giving it up – no matter what the costs to anyone, anywhere. They didn’t ask why the humans wanted unobtainum. They weren’t interested in any compromise that got them what they wanted and what the humans wanted. They were going to maintain their way of life no matter the costs.

How is this different from someone who says “I am going to pollute as much carbon as possible no matter the costs. My lifestyle is, my lifestyle and I am not giving it up.”

Perhaps, one could argue that the Na’Vi were there first. Just as the US and Europe hit industrialization first and therefore shouldn’t have to give up to make room for India and China?

Issue 3: Granting that the Na’vi claim was justifiable from their point of view, even if not from a galactic perspective, war should have been the correct solution. If the Na’Vi would rather die than forge any compromise whatsoever with the humans. And, if the humans would rather die than give up unobtainium then war is the dominant strategy and the optimum solution

That is, no matter the outcome you are better off going to war. If you loose you are dead, which is by assumption better than compromise. If you win you win, which is better than compromise. Moreover, even the case where everyone dies, is better than the case where everyone compromises, since they all prefer death to compromise.

In short, the Na’Vi position is romantic. It appeals to a lot of our basic nature. It makes us feel good to side with the Na’Vi. But, it makes us feel good because it triggers precisely the primitive, nationalistic, ethnocentric, culturally non-relativist emotions that we deplore in members of our own society.

The Na’Vi weren’t interested in the human’s way of life. They weren’t interested in the human’s needs or motivations. They claimed dominion over natural resources by virtue of having gotten there first. They were willing to fight rather than pursue compromises. They saw their way of life as more important than the lives of the “other.” These are not traits to admire.

Is there a name for when consumers are willing to pay less for something because they falsely perceive that costs have gone down? This is apparently the conundrum facing publishers, who have found that many consumers believe that a significant portion of the cost of a book is the price of the physical book, and thus expect that without printing costs, e-books should be significantly cheaper. It seems that the cost illusion that publishers have benefitted from for so long is finally coming back to bite them.

I say that the cost illusion has benefited them because I suspect that this perception of prices being largely driven by printing costs is what makes people willing to pay more for a newly released hardcover book than for the paperback version that comes out a few months later. People mistake the hardcover/paperback price difference as simply cost driven, but really there is price discrimination occurring as well. Publishers know people who want the book now will pay more for it, while people who are willing to wait will pay less, and so they charge more for new releases. The fancy packaging of the book is a way for consumers to not feel ripped off by being price discriminated against, and I suspect many, if not most, are completely fooled by this illusion of cost.

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