Author Archives: Arnold Kling

Five books on the financial crisis

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My list is here. For example,

Of the journalistic accounts of the crisis, my favorite is Bethany McLean and Joe Nocera, All the Devils are Here. I think that it helps to bring out two important aspects of the crisis. One aspect is the lack of awareness that many senior executives at financial firms had about the complex risks embedded in their firms’ portfolios. Another aspect is the role played by lobbying by Wall Street firms and Fannie Mae in shaping the mortgage finance system as it evolved in the decades leading up to the crisis.

Telepresence

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[Note: I originally scheduled this post to be published next week, but I moved it up after listening to the conversation between Mark Zuckerberg, Tyler Cowen, and Patrick Collison. In the transcript, Zuckerberg says

So rather than people moving–inventing a new hyperloop or cars, I tend to think the set of technologies around–whether it’s augmented reality or virtual reality or video presence that just lets people be where they wanna be physically and feel present with other people wherever they need to be to do their job, to connect with the people they care about–that feels to me the better long-term solution.

Those are the thoughts I express and elaborate on below.]

I remember hearing Robert Metcalfe (link goes to Wikipedia) speak about twenty years ago, and when he was asked what he thought was the killer application for the Internet, he said “telepresence.”

I thought of this when I saw the paper on mobility in the United States by Kyle Mangum and Patrick Coate, pointer from Tyler Cowen.

repeat mobility is common. That is, people living in their “home” locations are far less likely to migrate than those away from home.

My train of thought went as follows.

1. I view the paper as showing that many people come to like where they live. The repeat movers are either innately restless or experimenting.

2. When people my age talk about their children’s work lives, a sentence that comes up frequently is, “They let him (her) work remotely.” Of my three daughters, one works in Boston for an organization based in Maryland, one works from home three days a week, and the third probably could continue to work remotely if her husband moves.

3. In fact, a lot of married couples have job opportunities in different cities.

4. Recall that Patrick Collison said that his firm set up a department that he calls “Remote.”

5. As Patrick pointed out in that same conversation with Reid Hoffman, Zoom Meeting is quite a step forward in the videoconferencing arena. I can’t really articulate what makes it better than Skype or Google Hangouts, but it just feels more conference-y.

6. If I were in the venture capital business, I would make a bet that remote work will grow exponentially, and I would assemble a portfolio of companies based on that bet. Will more people wear body cameras? Do small companies need better support for interstate human resource functions? What are the needs of the home-office worker? What sorts of meeting-scheduling systems address the challenges posed by remote work forces?

7. I think that blue-collar work may be an overlooked opportunity for telepresence. Techies talk about telemedicine, but it seems to me that it is much harder to remotely work on someone’s body than it is to do other tasks remotely. So blue-collar telepresence may come first. Professor Daniel Markovitz, author of the Meritocracy Trap (in another conversation I plan to annotate) says that Amazon warehouse workers already are subject to remote monitoring.

–How about tele-sanitation? Bathrooms at places like airports and hospitals have to be cleaned and re-stocked very often, and robots could do that. But the robots might not be able to operate completely independently. A remote operator could help the robot be more adaptable to situations.

–How about tele-chauffer? Even if self-driving cars are not ready for the road, who says that the driver has to be in the car? In the case of truck driving, the number one source of job dissatisfaction is being away from home all the time Telepresence could solve that problem. Perhaps a co-pilot does not have to be on the plane (assuming you want the pilot to be there).

–The highway construction workers who operate machines. Do they need to be there?

–The workers building skyscrapers. Could they operate by managing robots remotely?

8. Think of what Zoom Meeting and other telepresence apps will be able to do when 5G is ubiquitous.

Affluence and substance abuse

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Random Critical Analysis finds a connection.

The combination of the slowing efficacy of incremental health expenditures (flat of the curve spending) and the rising burden of western illnesses implies a potentially unambiguous negative relationship between income and life expectancy may arise amongst upper-income countries.

Read the whole thing. Case and Deaton describe opioid deaths as American exceptionalism. RCA emphatically disagrees, saying that greater national affluence is associated with greater rates of drug use. That strikes me as not really intuitive, because I am guessing that within a country, the relationship between income and drug use is negative, not positive.

By “western illnesses” he seems to mean lifestyle illnesses, including obesity and substance abuse. One thought that occurs to me is that health among Americans may have been hurt more than helped by the drop in smoking. Other forms of comfort are more harmful, so curbing one form does not help if other forms are substituted.

McCloskey vs the Nobel Laureates

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Deirdre McCloskey is no fan of the experimental methods of the latest winners of the Nobel Prize.

a good deal of the work of the Nobelists, is as startlingly unethical, and stupid, as the notorious Tuskegee syphilis experiment run from 1931 to as late as 1971. African-American men were randomly assigned to not get the penicillin that the medical scientists from the U.S. Department of Health already knew cured the disease.

Pointer from Don Boudreaux.

More broadly, she attacks the mindset of mainstream economists that their purpose in life is to come up with policies for government to impose on the public. She argues against interventionist policies both in principle and in terms of consequences. She argues that adults are entitled to make their own decisions unaffected by government policy; moreover, when they do enjoy liberty, the results are greater prosperity.

My thoughts:

1. If we take it as given that government is going to undertake policy, then it might be better informed by controlled experiments. For example, in education, over 99 percent of experiments are not controlled. The bureaucrats implement a new curriculum without testing whether it achieves desired objectives (assuming that those objectives are clearly articulated).

2. What should economists say about policy? I think that McCloskey would argue that our over-arching observations, about the effectiveness of markets and the public-choice problems inherent in government intervention, overpower the fantasy-despot analyses of market failure. We know that market processes better implement experimentation, evaluation, and evolution. She would say that experiments cannot teach us anything that takes us beyond that insight or that refutes it.

An American health care scam?

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Described in an EconTalk episode with Russ Roberts and Keith Smith.

So, a $100,000 bill, the hospital collects $13,000. They claim that they lost $87,000.

This $87,000 loss maintains the fiction of their not-for-profit status, but it also provides the basis for a kickback the federal government sends to this hospital in the form of what’s called Disproportionate Share Hospital payments.

So, when you hear uncompensated care, that is the $87,000 that your friend saw written off on the difference between hospital insurance and what insurance paid.

So, the fact is, the hospital made money on that case. But they claimed that they lost $87,000.

And then that fictional loss provides the basis for a kickback from the federal government, called–it’s uncompensated care or DSH, Disproportionate Share Hospital payments.

I would like to know more about the revenue and expense breakdown at hospitals. I am not going to jump on this as a big factor until I see something more definitive.

The problem I have is this: if hospitals are being paid exorbitant amounts per procedure, where is the money going? Bloat? Profits? High salaries? Waste? Cross-subsidies for procedures that are under-charged? I want to see the analysis of the accounting.