Archive for March, 2012

Two excellent fora

First, a forum on Afghanistan in The New Republic. One depressing view comes from Amitai Etzioni:

I long argued that before we promote the full slew of human rights, we should attend to the most basic of them all: to protect life. Not because other rights are unimportant but because they are contingent on keeping people alive. We are failing this test in Afghanistan as we are about to leave after the elections, and leave a country in which killing will be rampant. We should try to work with the ISI, which has some leverage over the Taliban, to see if, in exchange for our support, they would try to avoid a civil war in Afghanistan and ensure that it will not serve again as a haven for terrorists. If not, we better have the drones ready.

I am not surprised that we shall not leave behind a stable democratic country; I never believed we could engage in nation building in this part of the world. And I am not surprised that we shall leave behind a country even more corrupt and subject to drug lords that we found. I am distressed about the size of the cemeteries Afghanistan will need.

Second, on inequality in the US and what can be done, in the Boston Review. Topics covered include taxes on the rich, education, labor markets, and much more.


03 2012

Monday Miscellany

  • Erin Fletcher reviews Matt Yglesias’ new book, The Rent is Too Damn High, and summarizes it nicely along the way.
  • What does transportation legislation have to do with public health? More than you might think: which systems our government chooses to subsidize have a huge though indirect impact on decisions we make on where to live and how to get around, which in turn impact exercise and obesity. The Pump Handle – a public health blog – talks about the current transportation bill here.
  • A fascinating controversy is unfolding in experimental psychology (specifically on priming effects) after researchers attempted to replicate a seminal finding and came up short. Discussion here.
  • Andrew Gelman’s blog is read by social scientists of many stripes — from statisticians to political scientists and economists — so when he titles a post “Economics now = Freudian psychology in the 1950s…” you know the comments will be good.
  • “How sure are you that your models are correct?” asks Observational Epidemiology: “This is not to say that we should be reckless. But policies like austerity in a time of high unemployment have immediate and real costs.” Read the rest here.


03 2012

Fluoride in New Jersey

I saw this poster at a bus stop on campus a couple weeks ago:

If you can’t read it, the title reads: “Stop the New Jersey Public Water Supply Fluoridation Act” and it goes on to say “Fluoride is a toxic chemical even in the smallest doses and when pumped into our water supply it is impossible to control the level of consumption.” (emphasis added)

I took a picture but didn’t think about it again until I saw this article on Friday: “In New Jersey, a Battle Over a Fluoridation Bill, and the Facts” (NYT) by Kate Zernike. I appreciate that she calls the fearmongering what it is — a conspiracy theory:

While 72 percent of Americans get their water from public systems that add fluoride, just 14 percent of New Jersey residents do, placing the state next to last… A bill in the Legislature would change that, requiring all public water systems in New Jersey to add fluoride to the supply. But while the proposal has won support from a host of medical groups, it has proved unusually politically charged.

Similar bills have failed in the state since 2005, under pressure from the public utilities lobby and municipalities that argue that fluoridation costs too much, environmentalists who say it pollutes the water supply, and antifluoride activists who argue that it causes cancer, lowers I.Q. and amounts to government-forced medicine.

Public health officials argue that the evidence does not support any of those arguments — and to the contrary, that fluoridating the water is the single best weapon in fighting tooth decay, the most prevalent disease among children.

But they also say they are fighting a proliferation of misleading information. While conspiracy theories about fluoride in public water supplies have circulated since the early days of the John Birch Society, they now thrive online, where anyone, with a little help from Google, can suddenly become a medical authority.

The whole article is worth a read. I think it’s a pretty good journalistic take on a charged issue that is a political controversy but not a scientific one. It gives some context as to why people are against it — a few misleading studies amplified by word of mouth and the Internet — but also emphasizes which side the evidence base (overwhelmingly) backs up.

Further, there are some echoes here of the anti-vaccine movement,  in that a move to reduce the threshold of acceptable fluoride levels  by HHS was taken to be an acknowledgment that the worst fears of the fluoridation foes were vindicated. That parallels how any mention of efforts to improve vaccine safety (a good thing) is misshapen by antivaccine activists into an acknowledgment that their theories have been vindicated. In short, I’m looking forward to Seth Mnookin‘s take on all this.


03 2012

Monday Miscellany

Read Harold Pollack on the National Longitudinal Surveys and why they’re at risk. In short, these surveys are the sort of public good information function that are extremely valuable but require consistent investments over many years for maximum benefit:

These surveys aren’t cheap. They cost several million dollars every year to do right. They are also a bargain. By spending $6 million per year for high-quality national surveys, we increase the chances that we will do a better job as we spend maybe 2,000 times that figure for preschool services to low-income children, not to mention even greater amounts for public assistance benefits, community colleges, and more.

Christina Paxson, our Dean at the Woodrow Wilson School, will be the next president of Brown University. Paxson is an economist whose research focuses on poverty and health over the lifespan, has really built up the health offerings at the Woo — she started the Center for Health and Wellbeing, for one. A sampling of her research:

  • “Economic Status and Health in Childhood: The Origins of the Gradient” (link)
  • “The lasting impact of childhood health and circumstance” (link)
  • “Stature and Status: Height, Ability, and Labor Market Outcomes” (link)

Based on a great review by Daniel Altman (see ET’s Guide to the Global Economy) I bought — for just $3 — a new ebook by Alan Beattie: Who’s in Charge Here? How Governments Are Failing the World Economy? It’s a quick read and is a great little political economy narrative of what’s been going on for the last few years.

This great headline comes from my classmate Jesse Singal: “Drug-Testing Welfare Recipients: Expensive and Pointless, But Otherwise A Great Idea

Finally, Alan Jacobs describes how academic search user interfaces clash with Google-trained minds.


03 2012

Intertemporal choice Calvin and Hobbes

After reading some papers on microsavings and behavioral economics, my classmate Ezra shared this highly relevant Calvin and Hobbes strip on time travel:

(Comic source)

For background see “Behavioral economics and marketing in aid of decision making among the poor” by Marianne Bertrand, Sendhil Mullainathan, and Eldar Shafir (Google Scholar)


03 2012

Up to speed: microfoundations

[Admin note: this is the first of a new series of “Up to speed” posts which will draw together information on a subject that’s either new to me or has been getting a lot of play lately in the press or in some corner of the blogosphere. The idea here is that folks who are experts on this particular subject might not find anything new; I’m synthesizing things for those who want to get up to speed.]

Microfoundations (Wikipedia) are quite important in modern macroeconomics. Modern macroeconomics really started with Keynes. His landmark General Theory of Employment, Interest and Money (published in 1936) set the stage for pretty much everything that has come since. Basically everything that came before Keynes couldn’t explain the Great Depression — or worse yet how the world might get out of it — and Keynes’ theories (rightly or wrongly) became popular because they addressed that central failing.

One major criticism was that modern macroeconomic models like Keynes’ were top-down, only looking at aggregate totals of measures like output and investment. That may not seem too bad, but when you tried to break things down to the underlying individual behaviors that would add up to those aggregates, wacky stuff happens. At that point microeconomic models were much better fleshed out, and the micro models all started with individual rational actors maximizing their utility, assumptions that macroeconomists just couldn’t get from breaking down their aggregate models.

The most influential criticism came from Robert Lucas, in what became known as the Lucas Critique (here’s a PDF of his 1976 paper). Lucas basically argued that aggregate models weren’t that helpful because they were only looking at surface-level parameters without understanding the underlying mechanisms. If something — like the policy environment — changes drastically then the old relationships that were observed in the aggregate data may no longer apply. An example from Wikipedia:

One important application of the critique is its implication that the historical negative correlation between inflation and unemployment, known as the Phillips Curve, could break down if the monetary authorities attempted to exploit it. Permanently raising inflation in hopes that this would permanently lower unemployment would eventually cause firms’ inflation forecasts to rise, altering their employment decisions.

Economists responded by developing “micro-founded” macroeconomic models, ones that built up from the sum of microeconomic models. The most commonly used of these models is called, awkwardly, dynamic stochastic general equilibirum (DGSE). Much of my study time this semester involves learning the math behind this. What’s the next step forward from DGSE? Are these models better than the old Keynesian models? How do we even define “better”? These are all hot topics in macro at the moment. There’s been a recent spat in the economics blogosphere that illustrates this — what follows are a few highlights.

Back in 2009 Paul Krugman (NYT columnist, Nobel winner, and Woodrow Wilson School professor) wrote an article titled “How Did Economists Get It So Wrong?” that included this paragraph:

As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.

Last month Stephen Williamson wrote this:

[Because of the financial crisis] There was now a convenient excuse to wage war, but in this case a war on mainstream macroeconomics. But how can this make any sense? The George W era produced a political epiphany for Krugman, but how did that ever translate into a war on macroeconomists? You’re right, it does not make any sense. The tools of modern macroeconomics are no more the tools of right-wingers than of left-wingers. These are not Republican tools, Libertarian tools, Democratic tools, or whatever.

A bit of a sidetrack, but this prompted Noah Smith to write a long post (that is generally more technical than I want to get in to here) defending the idea that modern macro models (like DSGE) are in fact ideologically biased, even if that’s not their intent. Near the end:

So what this illustrates is that it’s really hard to make a DSGE model with even a few sort-of semi-realistic features. As a result, it’s really hard to make a DSGE model in which government policy plays a useful role in stabilizing the business cycle. By contrast, it’s pretty easy to make a DSGE model in which government plays no useful role, and can only mess things up. So what ends up happening? You guessed it: a macro literature where most papers have only a very limited role for government.

In other words, a macro literature whose policy advice is heavily tilted toward the political preferences of conservatives.

Back on the main track, Simon Wren-Lewis, writing at Mainly Macro, comes to Krugman’s defense, sort of, by saying that its conceivable that an aggregate model might actually be more defensible than a micro-founded one in certain circumstances.

This view [Krugman’s view that aggregate models may still be useful] appears controversial. If the accepted way of doing macroeconomics in academic journals is to almost always use a ‘fancier optimisation’ model, how can something more ad hoc be more useful? Coupled with remarks like ‘the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth’ (from the 2009 piece) this has got a lot of others, like Stephen Williamson, upset. [skipping several paragraphs]

But suppose there is in fact more than one valid microfoundation for a particular aggregate model. In other words, there is not just one, but perhaps a variety of particular worlds which would lead to this set of aggregate macro relationships….Furthermore, suppose that more than one of these particular worlds was a reasonable representation of reality… It would seem to me that in this case the aggregate model derived from these different worlds has some utility beyond just one of these microfounded models. It is robust to alternative microfoundations.

Back on the main track, Krugman followed up with an argument for why its OK to use both aggregate and microfounded models.

And here’s Noah Smith writing again, “Why bother with microfoundations?”

Using wrong descriptions of how people behave may or may not yield aggregate relationships that really do describe the economy. But the presence of the incorrect microfoundations will not give the aggregate results a leg up over models that simply started with the aggregates….

When I look at the macro models that have been constructed since Lucas first published his critique in the 1970s, I see a whole bunch of microfoundations that would be rejected by any sort of empirical or experimental evidence (on the RBC side as well as the Neo-Keynesian side). In other words, I see a bunch of crappy models of individual human behavior being tossed into macro models. This has basically convinced me that the “microfounded” DSGE models we now use are only occasionally superior to aggregate-only models. Macroeconomists seem to have basically nodded in the direction of the Lucas critique and in the direction of microeconomics as a whole, and then done one of two things: either A) gone right on using aggregate models, while writing down some “microfoundations” to please journal editors, or B) drawn policy recommendations directly from incorrect models of individual behavior.

The most recent is from Krugman, wherein he says (basically) that models that make both small and big predictions should be judged more on the big than the small.

This is just a sampling, and likely a biased one as there are many who dismiss the criticism of microfoundations out of hand and thus aren’t writing detailed responses. Either way, the microfoundations models are dominant in the macro literature now, and the macro-for-policy-folks class I’m taking at the moment focuses on micro-founded models (because they’re “how modern macro is done”).

So what to conclude? My general impression is that microeconomics is more heavily ‘evolved’ than macroeconomics. (You could say that in macro the generation times are much longer, and the DNA replication bits are dodgier, so evolving from something clearly wrong towards something clearly better is taking longer.)

Around the same time that micro was getting problematized by Kahneman and others who questioned the rational utility-maximizing nature of humans, thus launching behavioral economics revolution — which tries to complicate micro theory with a bit of reality — the macroeconomists were just  getting around to incorporating the original microeconomic emphasis on rationality. Just how much micro will change in the next decades in response to the behavioral revolution is unclear, so expecting troglodytesque macro to have already figured this out is unrealistic.

A number of things are unclear to me: just how deep the dissatisfaction with the current models is, how broadly these critiques (vs. others from different directions) are endorsed, and what actually drives change in fields of inquiry. Looking back in another 30-40 years we might see this moment in time as a pivotal shift in the history of the development of macroeconomics — or it may be a little hiccup that no one remembers at all. It’s too soon to tell.

Updates: since writing this I’ve noticed several more additions to the discussion:

The US health care non-system

I spent much of yesterday thinking about the past, present, and future of the American health care system. I’ve largely chosen classes with an international or methodological focus so this was a bit of a departure from my normal fare. In one day I finished up some readings on health reform, wrote a brief paper speculating on what US healthcare will look like in 2030, attended a talk by Uwe Reinhardt largely based on this paper (PDF), and went to a three hour lecture on US health care (part of a class on the economics of the US welfare state).

It’s a mammoth subject, and there are many bloggers who write exclusively about domestic health policy — the guys at the Incidental Economist have smart stuff to say on it every day. There’s so much to be said and done even on the somewhat narrowed subject of the Affordable Care Act (ie, “ObamaCare”).

But that’s not what keeps popping into my head.What keeps getting reinforced is how our system really isn’t a system at all, but a weird conglomeration of lots of different approaches for various fragments of our society that emerged for quirky historical and political reasons. I found this description — from a report comparing various industrialized countries’ systems — humorously understated: “The U.S. does not have a ‘health system,’ but rather a variety of private and public institutions and programs that regulate, finance, and deliver care.” (source)

Paul Starr’s classic Social Transformation of American Medicine is a good start for trying to understand how we got to the ‘variety’ we have today.  The end result is that it doesn’t serve very many people well at all. The US is a great place to get the most advanced care if you can afford it, but even then you’re going to pay a lot more for it. For the non-wealthy the expenses are amplified and we end up rationing care by ability to pay. By pretty much every standard other than innovation (ie, including the delivery of that innovation to those who really need it, not just those who can pay) the US falls dreadfully short. We get poor life expectancy, magnified inequalities, and spending that’s roughly twice as much per person as in any other wealthy country.

Ironically, whether the Affordable Care Act goes into effect in 2014 depends largely on whether Obama gets reelected, and whether Obama gets reelected or not depends largely on what the unemployment rate does between now and November. So the future of the US health system depends in a very real way on fluctuations in the economy over the next eight months, and no one really understand that well at all.

If you’re just looking at the trajectory of the American health system the ACA is a major reform, even a fundamental one.  It will do (and has already started to do) a lot of good things, but I’m skeptical that it will do all that much to fix costs or shift our focus to public health —prevention over treatment. There are a lot of good small fixes in there, but nothing revolutionary when you compare us to other countries.

And this is why I find domestic health policy profoundly depressing. It’s why I’ve chosen to focus more on international health than domestic politics. In international health I think the prospects for witnessing and contributing to massive, heartening, orders-of-magnitude positive change in my professional lifetime are quite real. On US health policy, I’m less optimistic. My friend and classmate Jesse Singal wrote a description of the US health system — in the context of astonishingly ridiculous remarks by some conservatives on contraception — that I think about sums it up:  “…our medical system is an octopus riding a donkey riding a skateboard into a sadness quarry.”


03 2012