Road to Sociology Watch

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From The Economist

A similar study of American economists by Ms May and others also found men more sceptical of government regulation, more comfortable with drilling in the Arctic National Wildlife Refuge, and more likely to believe that a higher minimum wage would cause unemployment. Women were 14 percentage points less likely to agree that Walmart generates net benefits, and 30 points more likely to agree that American openness to trade should be tied to higher labour standards abroad.

Pointer from Tyler Cowen. One of the factors that will cause economics to move left will be efforts to bring more women into the profession. This development will be praised in most quarters.

My health care essay: condensed version

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The Myths Surrounding Health Care Policy. A random excerpt:

But in practice, it is not so easy for statisticians and economists to over-ride the judgment of doctors. As anyone who has ever tried to set up a bonus system for salespeople can tell you, all compensation systems can be “gamed.” It is easy for doctors to change how they report what they do, without having much effect on their actual decisions. In fact, this was what happened in the largest experiment with “pay for quality” to date, which was conducted in the UK.

Finished my assignment: a 20-page essay on health care

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It’s actually more like 12 pages, single-spaced. About 6000 words.

I am not sure what to do with it. Here is the conclusion:

As individuals, we would like unlimited access to medical services without having to pay for them. Collectively, this leads to high spending on health care. High spending on health care is the main problem of the U.S. health care system. As we have seen, it is unlikely that this problem can be solved by changing the way health care providers are paid or by government experts devising a more efficient system.

From a health outcomes standpoint, the United States might do better to spend less on medical services and instead spend more on efforts to reduce homicides, automobile accidents, obesity, and substance abuse. There is a lot of leverage that can be obtained if improvements in those areas can be achieved.

There are two directions that the United States could go in order to reduce health care spending. The “left turn” would move in the direction of Canada. The “right turn” would move in the direction of Singapore.

The “left turn” would be to introduce government rationing of medical services. This might come about if the share of health care spending financed by taxpayers continues to rise and the consequent strain on government budgets forces government programs to restrict access to services.

The “right turn” would be to increase household’s exposure to the costs of health care and health insurance. For example, the government could eliminate the tax subsidy for employer-provided health insurance, steering more households into the individual market. The government could set up a combination of catastrophic insurance, health savings accounts, and subsidies for the poor similar to those in Singapore.

With either a “left turn” or a “right turn,” we are likely to see a two-tier health care system. With a “left turn,” the government will hold down its spending by limiting access to expensive services that are not clearly highly beneficial. But wealthy people will still be able to afford those services by paying for them privately.

With a “right turn,” people will have to self-ration their use of medical services. Poor people will be limited in what they can obtain by the nature of the subsidies that they receive. They will consume the medical services that are covered by government subsidies. Wealthy people will have ample savings accounts to obtain whatever medical services they desire.

As of now, I do not see any strong momentum either toward the left or the right. For the near future, the United States is likely to continue along its current high-spending path.

So-called experts on U.S. vs. Europe in health care spending

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The European IGM Experts Panel was polled on the following proposition:

Higher quality-adjusted US healthcare prices contribute relatively more to the extra US spending than does the combination of higher quantity and quality of US care (interpreting quantity and quality to reflect both greater American healthcare needs due to underlying population health and the delivery of more or better healthcare services to Americans).

Of those voicing an opinion, those who agree outnumber those who disagree by almost 5 to 1.

They are wrong. The amazing blogger at Random Critical Analysis (who is this person? I am dying to know) takes down the “it’s the prices, stupid” claim. Just one of the many statistics the blogger cites is

The human health share of total employment also explains a fair amount of the variance in the HCE [Health Care Expenditure] share of GDP and the US, unsurprisingly, has a proportionally larger health workforce.

In other words, using the size of the workforce in the health care sector as a measure, or at least an indicator, of the amount of real resources devoted to health care, then if you want to explain what makes the U.S. an outlier, it’s the quantities, stupid.

A Null Hypothesis Exception?

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Alex Tabarrok writes,

What if I told you that there is a method of education which significantly raises achievement, has been shown to work for students of a wide range of abilities, races, and socio-economic levels and has been shown to be superior to other methods of instruction in hundreds of tests? Well, the method is Direct Instruction

Many years ago, I ordered a book on Direct Instruction. Trust me, you would hate it if you were a teacher. An you might hate it as a student. So it is quite counterintuitive that it works. It is very focused on repetitive drills.

On the other hand, I remember a 6th-grade math teacher who liked to hand out arithmetic speed drills. I didn’t hate those. And maybe having really solid fundamentals is what is important.

Me vs. Steven Pinker

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In an interview, Pinker says,

I’m skeptical about that we’re going to see enhancements of human nature by genetic engineering, nanotechnology, or neural implants (though these technologies may be used to mitigate disabilities, a different matter). We now know that there is no “gene for musical talent” that ambitious parents will implant into their unborn children—psychological traits are distributed across thousands of genes, each with a teensy effect, and many with deleterious side effects (such as a gene that makes you a bit smarter while increasing your chance of getting cancer). Also, people are risk-averse (sometimes pathologically so) when it comes to their children and when it comes to genetic engineering—they don’t accept genetically modified tomatoes, let alone babies.

Just before I read this, I posted the following on a private discussion forum:

For those of you have read The Diamond Age, what feature of the future Stephenson depicts there do you find least plausible? I’ll nominate the Illustrated Primer. I bet that no educational technology that relies on communication with the student will ever prove as successful as the primer is portrayed. When it comes to achieving dramatic gains in cognitive skills, some form of biological intervention will prove workable sooner.

When I was in high school, SAT tutors were unheard of. The whole concept would have seemed distasteful. What parent would be so neurotic and competitive as to get their kid a tutor for the SATs? But once a few parents started doing it, other parents thought that they had to do it in order to keep up. Nowadays, I get the sense that any affluent parent who does not get their kid a tutor feels like they are handicapping their child. I’ve been predicting that in another generation, biological enhancement will go through a similar phase change–going from unthinkable to commonplace very quickly.

In your comments, please address substantive issues, leaving out your personal opinions of Pinker or me.

Caplan, Hanushek, and my own views on education

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A reader asked me to comment on the debate between Bryan Caplan and Eric Hanushek on the extent to which education confers real skills or is merely a signal. I thought that the only point that Hanushek scored was when he produced data showing that the sheepskin effect is smaller than in other studies.

As a proponent of the Null Hypothesis, I am not the one to defend the human capital view. Where I differ from Bryan is that I am inclined to put even more weight on an ability-bias story, leaving less room for signaling. For example, my understanding is that the differences in earnings between people who are accepted to Ivy League schools and similar people who are not accepted ends up being pretty small. If it were mostly signaling, then losing out on the brand-name seal of approval should be more costly.

Jason Collins on Grit

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He writes,

I will say that Duckworth appears to be one of the most open recipients of criticism in academia that I have come across. She readily concedes good arguments, and appears caught between her knowledge of the limitations of the research and the need to write or speak in a strong enough manner to sell a book or make a TED talk.

. . .But Duckworth does not address the typical problem of studies in this domain – they all ignore biology. Do the students receive higher grades because their parents are more demanding, or because they are the genetic descendants of two demanding people? Are they world-class performers because their parents model a work ethic, or because they have inherited a work ethic? Are they consistent with their extracurricular activities because their parents consistently keep them at it, or because they are the type of people likely to be consistent?

He points out that “grit” is mostly conscientiousness. The case that conscientiousness matters is sound. I do think there are some studies that show that conscientiousness can be coached, but I am not confident that it is settled science.

My essay on why economics does not progress

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In Economists Wake Up: It’s the 21st Century, I write,

Along the Akerselva River in Oslo Norway, the buildings of the industrial era have been re-purposed or replaced. The same is true in Pittsburgh, Pennsylvania or Birmingham, England. But economists still inhabit the world of the 19th century, in which hordes of interchangeable workers in stark factories toil in the service of the owners of capital.

Read the whole thing, along with today’s other blog post.

Why Doesn’t Economics Progress?

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Don Boudreaux offers one hypothesis.

Academic journals are not the place to repeat long-ago-discovered truths. A bias, however, arises from this role of academic journals and of the need for scholars to publish in them – namely, a disproportionate amount of attention is given in academic journals to speculative ideas and to exceptions to long-ago-discovered truths. Foundational ideas and long-ago-discovered truths appear only in the background of academic journals, or whenever someone discovers (or believes that he has discovered) an exception to these.

David Henderson has his own take.

I read this as suggesting that the bias toward novelty in academic journals retards progress in economic thinking, by crowding out established truths. That may be an issue. But I have a different issue, which I will get to.

First, on the topic of trade across borders, I share with Boudreaux the presumption that once you establish that A has voluntarily bought X from B and that this was an ethical transaction, you are done. It is not relevant which side of a border B happens to live on. To come up with a relevant distinction, you will have to try some fancy intellectual footwork, and even then you are unlikely to overturn the logic of the free trader.

But for the most part, the problem in academic economics is not that truth has stood still and economists have moved away from it. On the contrary, I am struck that the economy is evolving faster than economics. Economists are still using 19th-century apparatus, such as the capital-labor distinction and marginal-cost pricing theory, in a 21st-century economy that those concepts do not fit very well. Even worse, many economists have so much confidence in their work that they are willing to advocate policy schemes based on very unreliable analytical methods. This gap between antiquated and inadequate models and the hubristic claims of economists is the issue that most disturbs me.

We are not white-coated scientists dealing with brainless inanimate objects or unintelligent lower creatures. We are not continuously cutting down on our ignorance and increasing the share of economic behavior that we understand.

We are studying phenomena that can change at a faster pace than we can acquire knowledge. We are studying humans who are embedded in institutions that are more nimble and clever than we are. In the markets where we attempt to make policy, such as health care or banking, there is usually much more knowledge embedded in the people and organizations that work in those fields than there is in our long-distance observation of them. And we are not gaining on them. They are gaining on us.