Monday, November 16, 2015

Les fuseaux horaires

Une superbe vidéo du Monde qui m'a appris plein de choses sur les fuseaux horaires (y compris pourquoi il y a une heure de décalage entre UK et France).



Monday, October 19, 2015

The VW Golf pollutes as much as an 18-wheeler truck!

The New York Times has the answer to a question I have been asking myself since VW got caught cheating: why would VW owners bring their cars to be fixed, if the fix decreases the performances of their car? Here is the answer:

The E.P.A. cannot force owners to repair their vehicles, said Julia Ortiz, a spokeswoman for the agency. 
Automakers also cannot require owners to carry out the emissions recall, just as they cannot force owners to take vehicles in to complete a safety recall.
Some states require vehicles to pass emissions tests before they can be registered each year. But those tests are far less sophisticated than the E.P.A.’s, and the Volkswagens that are not repaired are sure to pass them, said John German, a senior fellow at the International Council on Clean Transportation, which played a crucial role in discovering the automaker’s deceit. 
That loophole means the air pollution consequences of Volkswagen’s action — at least on a small scale — are irreparable if enough owners refuse to have their vehicles fixed.
(...) 
Volkswagen must come up with an incentive plan to make repairing the engines irresistible, said Dan Becker, the director of the Safe Climate Campaign at the Center for Auto Safety. 

The article also explains how bad the polluting problem is:

Despite their small size, the Volkswagen diesels produce a large amount of nitrogen oxide pollutants, Mr. German said, up to 40 times what is allowed under the Clean Air Act. The Passat sedan is emitting an amount of nitrogen oxides similar to that of a modern, medium-duty truck, he said, while the Jetta — and its sibling the Golf — have emissions similar to those of a typical modern 18-wheeler, he said. The Jetta and Golf use a different emissions system than the Passat.


Thursday, October 8, 2015

Volkswagen and the Era of Cheating Software

This New York Times article on the VW scandal makes 3 interesting points:


1. Contrary to what is sometimes claimed in the European/French media, US car firms have already been fined in the US for cheating by using a "defeat device":

"This isn’t the first instance of a car company caught cheating by using a “defeat device” on emissions tests. In 1998, Ford was fined $7.8 million for using defeat devices that allowed its Econoline vans to reduce emissions to pass testing, and then to exceed pollution limits when driving at highway speeds. The same year, Honda paid $17.1 million in fines for deliberately disabling a “misfire” device that warned about excess emissions. In 1995, General Motors paid $11 million in fines for the “defeat devices” on some of its Cadillac cars, which secretly overrode the emissions control system at times. The largest penalty for defeat devices to date was an $83.4 million fine in 1998 on Caterpillar, Volvo, Renault and other manufacturers." (my emphasis)

2. The problem is more general since it potentially affects software in all our ways of life:

"In a world where more and more objects are run by software, we need to have better ways to catch such cheaters. As the Volkswagen case demonstrates, a smart object can lie and cheat. It can tell when it’s being tested, and it can beat the test.

The good news is that there are well-understood methods to safeguard the integrity of software systems. The bad news is that there is as yet little funding for creating the appropriate regulatory framework for smart objects, or even an understanding of the urgent need for it. We are rightly incensed with Volkswagen, but we should also consider how we have ceded a lot of power to software that runs everything from our devices to our cars, and have not persisted in keeping tabs on it. We correctly worry about hackers and data leaks, but we are largely ignoring the ramifications of introducing software, a form of intelligence, to so many realms — sometimes called the Internet of Things."

3. Finally, the accompanying illustration is hilarious ;-)

Monday, October 5, 2015

Media in the digital age

As a complement to my previous post, we learn today from the New York Times that

This week, The Times is celebrating a breakthrough: We recently passed one million digital-only subscribers, giving us far more than any other news organization in the world. We have another 1.1 million print-and-digital subscribers, so that in total, we have more subscribers than at any time in our 164-year history.
Many news organizations, facing competition from digital outlets, have sharply reduced the size of their newsrooms and their investment in news gathering.
But The New York Times has not.
We have our subscribers to thank for that.

I would be curious to have the corresponding data for, say, Le Monde (whose quality has, to my humble opinion, plummeted in the last decade, especially compared to the NYT...)

Friday, October 2, 2015

The Creative Apocalypse That Wasn't

The New York Times has published a very thorough article in its magazine (here) where the author uses data to study how the "creative class" (people creating music, movies or books) has been doing since the advent of Napster. May be surprisingly, its main point is that they have been doing ... quite well!:

"Taking 1999 as my starting point — the year both Napster and Google took off — I plumbed as many data sources as I could to answer this one question: How is today’s creative class faring compared with its predecessor a decade and a half ago? The answer isn’t simple, and the data provides ammunition for conflicting points of view. It turns out that Ulrich was incontrovertibly correct on one point: Napster did pose a grave threat to the economic value that consumers placed on recorded music. And yet the creative apocalypse he warned of has failed to arrive. Writers, performers, directors and even musicians report their economic fortunes to be similar to those of their counterparts 15 years ago, and in many cases they have improved. Against all odds, the voices of the artists seem to be louder than ever."

For instance:

"According to the O.E.S., songwriters and music directors saw their average income rise by nearly 60 percent since 1999. The census version of the story, which includes self-­employed musicians, is less stellar: In 2012, musical groups and artists reported only 25 percent more in revenue than they did in 2002, which is basically treading water when you factor in inflation. And yet collectively, the figures seem to suggest that music, the creative field that has been most threatened by technological change, has become more profitable in the post-­Napster era — not for the music industry, of course, but for musicians themselves. Somehow the turbulence of the last 15 years seems to have created an economy in which more people than ever are writing and performing songs for a living."


How can this be?


"Part of the answer is that the decline in recorded-­music revenue has been accompanied by an increase in revenues from live music. In 1999, when Britney Spears ruled the airwaves, the music business took in around $10 billion in live-­music revenue internationally; in 2014, live music generated almost $30 billion in revenue, according to data assembled from multiple sources by the live-music service Songkick. Starting in the early 1980s, average ticket prices for concerts closely followed the rise in overall consumer prices until the mid-1990s, when ticket prices suddenly took off: From 1997 to 2012, average ticket prices rose 150 percent, while consumer prices grew less than 100 percent. It’s elemental economics: As one good — recorded music — becomes ubiquitous, its price plummets, while another good that is by definition scarce (seeing a musician play a live performance) grows in value. Moreover, as file-­sharing and iTunes and Spotify have driven down the price of music, they have also made it far easier to envelop your life with a kind of permanent soundtrack, all of which drives awareness of the musicians and encourages fans to check them out in concert. Recorded music, then, becomes a kind of marketing expense for the main event of live shows."
(...)
"It’s true that most of that live-­music revenue is captured by superstar acts like Taylor Swift or the Rolling Stones. In 1982, the musical 1-­percenters took in only 26 percent of the total revenues generated by live music; in 2003, they captured 56 percent of the market, with the top 5 percent of musicians capturing almost 90 percent of live revenues. But this winner-­takes-­all trend seems to have preceded the digital revolution; most 1-­percenters achieved their gains in the ’80s and early ’90s, as the concert business matured into a promotional machine oriented around marquee world tours. In the post-­Napster era, there seems to have been a swing back in a more egalitarian direction. According to one source, the top 100 tours of 2000 captured 90 percent of all revenue, while today the top 100 capture only 43 percent."


And the news seem to be even better for the other creative industries:

"Of the big four creative industries (music, television, movies and books), music turns out to be the business that has seen the most conspicuous turmoil: None of the other three has seen anywhere near the cratering of recorded-­music revenues. The O.E.S. numbers show that writers and actors each saw their income increase by about 50 percent, well above the national average. According to the Association of American Publishers, total revenues in the fiction and nonfiction book industry were up 17 percent from 2008 to 2014, following the introduction of the Kindle in late 2007. Global television revenues have been projected to grow by 24 percent from 2012 to 2017. For actors and directors and screenwriters, the explosion of long-form television narratives has created a huge number of job opportunities. (Economic Modeling Specialists International reports that the number of self-­employed actors has grown by 45 percent since 2001.) If you were a television actor looking for work on a multiseason drama or comedy in 2001, there were only a handful of potential employers: the big four networks and HBO and Showtime. Today there are Netflix, Amazon, AMC, Syfy, FX and many others."

And the news are good even for independent bookstores:


"This would be even more troubling if independent bookstores — traditional champions of the literary novel and thoughtful nonfiction — were on life support. But contrary to all expectations, these stores have been thriving. After hitting a low in 2007, decimated not only by the Internet but also by the rise of big-box chains like Borders and Barnes & Noble, indie bookstores have been growing at a steady clip, with their number up 35 percent (from 1,651 in 2009 to 2,227 in 2015); by many reports, 2014 was their most financially successful year in recent memory. Indie bookstores account for only about 10 percent of overall book sales, but they have a vastly disproportionate impact on the sale of the creative midlist books that are so vital to the health of the culture."

And why is the culture sector still alive and kicking, despite ubiquitous piracy?

"At the same time, there are now more ways to buy creative work, thanks to the proliferation of content-­delivery platforms. Practically every device consumers own is tempting them at all hours with new films or songs or shows to purchase. Virtually no one boughtanything on their computer just 20 years ago; the idea of using a phone to buy and read a 700-page book about a blind girl in occupied France would have sounded like a joke even 10 years ago. But today, our phones sell us every form of media imaginable; our TVs charge us for video-­on-­demand products; our car stereos urge us to sign up for SiriusXM."

As for the supply side:


"And just as there are more avenues for consumers to pay for creative work, there are more ways to be compensated for making that work. Think of that signature flourish of 2000s-­era television artistry: the exquisitely curated (and usually obscure) song that signals the transition from final shot to the rolling credits. Having a track featured during the credits of ‘‘Girls’’ or ‘‘Breaking Bad’’ or ‘‘True Blood’’ can be worth hundreds of thousands of dollars to a songwriter. (Before that point, the idea of licensing a popular song for the credits of a television series was almost unheard-­of.) Video-­game budgets pay for actors, composers, writers and song licenses. "
(...)
"The biggest change of all, perhaps, is the ease with which art can be made and distributed. The cost of consuming culture may have declined, though not as much as we feared. But the cost of producing it has dropped far more drastically. "
(...)
"It has never been easier to start making money from creative work, for your passion to undertake that critical leap from pure hobby to part-time income source. Write a novel or record an album, and you can get it online and available for purchase right away, without persuading an editor or an A&R executive that your work is commercially viable. From the consumer’s perspective, blurring the boundaries has an obvious benefit: It widens the pool of potential talent. But it also has an important social merit. Widening the pool means that more people are earning income by doing what they love."

Read the whole article here, it is worth it.

Thursday, October 1, 2015

Quel budget décent pour un célibataire ou une famille en France?

C'est la question que s'est posé l’Observatoire national de la pauvreté et de l’exclusion sociale (ONPES), et qui est abordée dans cet article du Monde.

(D'où on infère, entre autres, que le salaire d'un Directeur de Recherches au CNRS (3200€ par mois environ en milieu de carrière) ne suffit pas à générer un budget décent pour un couple avec deux enfants...)


Les minima sociaux sont loin des critères d’« une vie décente »

Quel est le budget décent pour un célibataire ou un couple avec deux enfants permettant une participation à la vie sociale dans la France de 2015 ? C’est à cette question de fond que s’est attelé pour la première fois l’Observatoire national de la pauvreté et de l’exclusion sociale (ONPES). Dans une étude qui doit être rendue publique vendredi 6 mars, l’organisme indépendant s’est penché sur les besoins incontournables au quotidien, et la distance avec le réel du quotidien des Français. Il faut ainsi entre 1 424 euros et 3 515 euros selon la composition du ménage et son type de logement (social ou privé). Bien loin des minima sociaux.


La méthode est nouvelle : des chercheurs français ont réuni 200 ménages vivant dans deux villes moyennes (Tours et Dijon), de tous niveaux sociaux, pour leur demander pour chaque situation sociale quel serait le budget en deçà duquel on ne vit pas décemment. Ils ont ainsi évalué le« panier de biens et de services » nécessaire dans tous les domaines : logement, transports, alimentation, vie sociale, habillement, équipement, hygiène, santé, garde d’enfants… Faut-il disposer d’une chambre pour les enfants de sexe différents, d’une voiture ? Quels soins sont incontournables pour participer à la vie sociale ? Partir en vacances une semaine par an, inviter des amis, prendre un repas à l’extérieur, est-ce indispensable ?
L’ONPES évalue ainsi le budget de référence d’un couple avec deux enfants logeant dans le parc social à 3 284 euros, celui d’une famille monoparentale logée dans le privé à 2 830 euros. Un retraité devra disposer d’au moins 1 816 euros s’il habite le privé, plus qu’un célibataire dans le même cas (1 571). Les résultats surprenants de l’étude qualitative sont corroborés par les études plus classiques de l’Insee ou celle du ministère des affaires sociales. Mais au lieu de dessiner la France des pauvres, elle met en lumière celle qui a peur de tomber dans la pauvreté. Qui, sans dans le besoin, s’astreint à des restrictions dues à la crise.


Logiquement, ce sont les familles monoparentales - des femmes seules avec enfants - et les retraités qui sont le plus touchés par ces économies forcées : les premières sont à 55 % en situation de pauvreté et à 40 % avec des moyens insuffisants pour vivre décemment. Les personnes retraitées vivant seules sont dans une situation également inquiétante, avec des taux de 14 % et 45 %. Les autres catégories ne sont cependant pas florissantes. « Ceux qui se serrent la ceinture représentent près de 40 % de la population », précise Didier Gelot, secrétaire général de l’organisme


C’est dans le détail des tableaux de l’étude que se nichent les enseignements les plus précieux sur les économies forcées réalisées par les différents ménages. Si on savait que ce sont les budgets loisir, santé, et vie sociale qui sont les premiers amputés, les résultats diffèrent selon la composition de la famille. Les familles monoparentales rognent pour moitié sur leurs besoins en matière de soins, et dépensent près de trois fois moins que ce dont elles auraient besoin en frais de garde d’enfants et de cantine scolaire. Les retraités, eux, font aussi des économies sur le poste santé, plus encore quand ils sont en couple ; ils dépensent proportionnellement plus en habillement. Les couples actifs avec ou sans enfant ont des dépenses en transports deux fois supérieures aux budgets de référence.

Sunday, July 19, 2015

The pope, global warming and the market

Terrific article in the New York Times about the pope's latest encyclical on global warming, and more generally why the pope can't be a liberal and trust the market (my emphasis in bold in the text below):

Pope Francis’ Climate Error




TORONTO — AMONG environmental activists, the international market for carbon credits is often compared to the medieval sale of indulgences. Pope Francis presides over the Roman Catholic church, the institution that created the market for indulgences, so you might expect him to be more sympathetic on this issue.
And yet his recent encyclical “Laudato Si,” while forcefully urging action to combat climate change, specifically criticizes the sale of “carbon credits.”
The pope claims that the environment cannot be “safeguarded or promoted by market forces.” Confronting the climate crisis will require a deeper, spiritual transformation of society, replacing “consumption with sacrifice, greed with generosity, wastefulness with a spirit of sharing.”
I find nothing objectionable about the pope’s moralizing tone and language of “sin.” But his skepticism about market-based solutions to climate change is rooted in a misunderstanding. A market-based approach to controlling greenhouse-gas emissions — through carbon taxes or tradable emissions permits — does, in fact, reflect moral conviction. The pope gets carried away condemning the “efficiency-driven paradigm of technocracy,” overlooking the fact that efficiency, in this context, is a moral principle.
The central idea in all of these programs — from the Emissions Trading System in Europe to the carbon tax adopted in the Canadian province of British Columbia — is to put a price on carbon, so that all businesses and consumers are held accountable and charged for the environmental consequences of their actions.
It’s a moral idea that Francis himself endorses elsewhere in the encyclical, when he agrees that “the economic and social costs of using up shared environmental resources” must be “fully borne by those who incur them.” That idea, called “full cost accounting,” is precisely what motivates those who want to see a price on carbon. When prices reflect the full social cost of consumption, it allows us to minimize the waste of resources — or as economists would put it, to maximize efficiency.
This commitment can be found at the heart of the “polluter pays” principle, which Pope Francis also endorses. Most people like this idea when it’s read forward: “If you pollute, then you should pay.” They dislike it, however, when read backward: “If you’re willing to pay, then you should be allowed to pollute.”
It’s the second reading that offends people when they contemplate rich countries, rather than reducing their own carbon emissions, paying people in poor countries to do it for them. Yet any sensible approach must allow this, because of the giant disparities in the cost of reducing emissions in different countries.
For countries that rely on nuclear power, like France, or burn very little coal, reducing greenhouse-gas emissions is enormously costly. By contrast, China can achieve reductions at a small fraction of the cost. So it makes sense for the reductions to happen in China, not France. This is what emissions trading allows.
The pope is not hostile to market mechanisms because he is a raving socialist, as some have suggested. Instead, his stance is a natural consequence of his theology.



To understand the pope’s position, remember that, even though he is adopting a progressive stance on the environment, he is not a liberal. Indeed, he rejects one of the central tenets of liberalism, which is a willingness to acknowledge genuine disagreement about the good.
The fundamental problem with markets, in Pope Francis’ view, is that they cater to people’s desires, whatever those desires happen to be. What makes the market a liberal institution is that it does not judge the relative merits of these desires. The customer is always right.
Pope Francis rejects this, describing it as part of a “culture of relativism.” The customer, in his view, is often wrong. He wants an economic system that satisfies not whatever desires people happen to have but the desires that they should have — a system that promotes the common good, according to the church’s specification of what that good is.
And there lies the deepest tension in this encyclical. In the introduction, Francis addresses the work not just to Catholics but to all of humanity — in recognition of the fact that climate change is a global problem and will require the cooperation of all peoples, of all faiths, to resolve. But he then appeals to a conception of the common good that is specifically Christian, and criticizes markets on the grounds that they do not promote that conception.
Here he reveals the limitations of his own approach. The problem of climate change is so urgent that we cannot wait around for people to come to some kind of spiritual agreement. What we can demand, here and now, is that people pay the full cost that their consumption imposes on others, including future generations.
This is what carbon pricing achieves. This market-based solution, precisely because it is liberal, is the only one that has any chance of serving as a basis for global cooperation.



Monday, June 22, 2015

An alternative European map


I had missed this funny article by The Economist, redrawing Europe's map.

Funny, but with one big mistake! As all Tintin fans know, Syldavia and Borduria do have a common border, in the mountains:





The European map is outdated and illogical. Here's how it should look




PEOPLE who find their neighbours tiresome can move to another neighbourhood, whereas countries can't. But suppose they could. Rejigging the map of Europe would make life more logical and friendlier.

Britain, which after its general election will have to confront its dire public finances, should move closer to the southern-European countries that find themselves in a similar position. It could be towed to a new position near the Azores. (If the journey proves a bumpy one, it might be a good opportunity to make Wales and Scotland into separate islands).

In Britain's place should come Poland, which has suffered quite enough in its location between Russia and Germany and deserves a chance to enjoy the bracing winds of the North Atlantic and the security of sea water between it and any potential invaders.

Belgium's incomprehensible Flemish-French language squabbles (which have just brought down a government) are redolent of central Europe at its worst, especially the nonsenses Slovakia thinks up for its Hungarian-speaking ethnic minority. So Belgium should swap places with the Czech Republic. The stolid, well-organised Czechs would get on splendidly with their new Dutch neighbours, and vice versa.



Belarus, currently landlocked and trying to wriggle out from under Russia's thumb, would benefit greatly from exposure to the Nordic region, whose influence played a big role in helping the Baltics shed their Soviet legacy. So it should move northwards to the Baltic, taking the place of Estonia, Latvia and Lithuania. These three countries should move to a new location somewhere near Ireland. Like the Emerald Isle, they have bitten the bullet of “internal devaluation”, regaining competitiveness by cutting wages and prices, rather than taking the easy option of depreciating the currency, or borrowing recklessly as Greece has. The Baltics would also be glad to be farther away from Russia and closer to America. Amid the other moves, Kaliningrad could shift up the coast towards Russia, ending its anomalous status as a legacy exclave of the second world war and removing any possibility of future Russian mischief-making about rail transit.

Into the slots vacated by Poland and Belarus should come the western and central parts of Ukraine. Germany, with the Ukrainian border now only 100km from Berlin, would start having to take the country's European integration seriously. The Ukrainian shift would allow Russia to move west and south too, thus vacating Siberia for the Chinese, who will take it sooner or later anyway.

Next comes some reordering of the Balkans. Macedonia, Albania and Kosovo should rotate places, with Macedonia taking Kosovo's place next to Serbia, Kosovo moving to Albania's slot on the coast, and Albania shifting inland. Paranoid Greek fantasies about territorial claims from the deluded Slav irredentists from the north would evaporate. Bosnia is too fragile to move and will have to stay where it is.

Switzerland and Sweden are often confused. So it would make sense to move Switzerland north, where it would fit neatly into the Nordic countries. Its neutrality would go down well with the Finns and Swedes; Norway would be glad to have another non-EU country next door.

Germany can stay where it is, as can France. But Austria could shift westwards into Switzerland's place, making room for Slovenia and Croatia to move north-west too.* They could join northern Italy in a new regional alliance (ideally it would run by a Doge, from Venice). The rest of Italy, from Rome downwards, would separate and join with Sicily to form a new country, officially called the Kingdom of Two Sicilies (but nicknamed Bordello). It could form a currency union with Greece, but nobody else.




* A welcome side-effect of these changes will be to make space for previously fictional creations such as Anthony Hope's Ruritania, Hergé's Syldavia and Borduria, and Vulgaria, the backdrop for “Chitty Chitty Bang Bang”.

Friday, June 5, 2015

3 new working papers (and 2 slightly older ones)

This sabbatical year at UQAM (Montreal) has been most productive ;-)

Here are 3 working papers just recently out. Comments most welcome!

1.      “The dynamics of capital accumulation in the US: Simulations after Piketty”, with J. Roemer. TSE WP2015/568, CESifo WP2015/5329.

Abstract:
We calibrate a sequence of four nested models to study the dynamics of wealth accumulation. Individuals maximize a utility function whose arguments are consumption and investment. They desire to accumulate wealth for its own sake – this is not a life-cycle model. A competitive firm produces a single good from labor and capital; the rate of return to capital and the wage rate are market-clearing. The second model introduces political lobbying by the wealthy, whose purpose is to reduce the tax rate on capital income. The third model introduces differential rates of return to capitals of different sizes. The fourth model introduces inheritance and intergenerational mobility.

2.      “The political choice of social long term care transfers when family gives time and money”, with Marie-Louise Leroux. TSE WP2015/569, CESifo WP2015/5384


Abstract:
We develop a model where families consist of one parent and one child, with children differing in income and all agents having the same probability of becoming dependent when old. Young and old individuals vote over the size of a social long term care transfer program, which children complement with help in time or money to their dependent parent. Dependent parents have an intrinsic preference for help in time by family members. We first show that low (resp., high) income children provide help in time (resp. in money), whose amount is decreasing (resp. increasing) with the child’s income. The middle income class may give no family help at all, and its elderly members would be the main beneficiaries of the introduction of social LTC transfers. We then provide several reasons for the stylized fact that there are little social LTC transfers in most countries. First, social transfers are dominated by help in time by the family when the intrinsic preference of dependent parents for the latter is large enough. Second, when the probability of becoming dependent is lower than one third, the children of autonomous parents are numerous enough to oppose democratically the introduction of social LTC transfers. Third, even when none of the first two conditions is satisfied, the majority voting equilibrium may entail no social transfers, especially if the probability of becoming dependent when old is not far above one third. This equilibrium may be local (meaning that it would be defeated by the introduction of a sufficiently large social program). This local majority equilibrium may be empirically relevant whenever new programs have to be introduced at a low scale before being eventually ramped up.



3.   “On the Political Economy of University Admission Standards”, with Francisco Martinez-Mora. TSE WP2015/582, CESifo WP2015/5382

Abstract:
We study the political determination of the proportion of students attending university when access to higher education is rationed by admission tests. Parents differ in income and in the ability of their unique child. They vote over the minimum ability level required to attend public universities, which are tuition-free and financed by proportional income taxation. University graduates become high skilled, while the other children attend vocational school and become low skilled. Even though individual preferences are neither single-peaked nor single-crossing, we obtain a unique majority voting equilibrium, which can be either classical (with 50% of the population attending university) or "ends-against-the-middle", with less than 50% attending university (and parents of low and high ability children favoring a smaller university system). The majority chosen university size is smaller than the Pareto efficient level in an ends-against-the-middle equilibrium. Higher income inequality decreases the majority chosen size of the university. A larger positive correlation between parents'income and child's ability leads to a larger university populated by a larger fraction of rich students, in line with the so-called participation gap. Our results are robust to the introduction of private schooling alternatives, financed with fees.



And, finally, two working papers, out last fall, which I forgot to mention here previously

4.      “Adverse Selection vs Discrimination Risk with Genetic Testing. An Experimental Approach”, with D. Bardey and C. Mantilla. CESifo WP2014/5080.

Abstract:
We develop a theoretical analysis of two widely used regulations of genetic tests, disclosure duty and consent law, and we run several experiments in order to shed light on both the takeup rate of genetic testing and on the comparison of policyholders’ welfare under the two regulations. Disclosure Duty forces individuals to reveal their test results to their insurers, exposing them to the risk of having to pay a large premium in case they are discovered to have a high probability of developing a disease (a discrimination risk). Differently, Consent Law allows them to hide this detrimental information, creating asymmetric information and adverse selection. We obtain that the take-up rate of the genetic test is low under Disclosure Duty, larger and increasing with adverse selection under Consent Law. Also, the fraction of individuals who are prefer Disclosure Duty to Consent Law increases with the amount of adverse selection under the latter. These results are obtained for exogenous values of adverse selection under Consent Law, and the repeated interactions experiment devised has not resulted in convergence towards an equilibrium level of adverse selection.

5. “Politically Sustainable Probabilistic Minority Targeting” with E. Peluso. CESifo WP 2014/4915. Under revision for the Journal of Public Economics.

Abstract:
We show that a transfer targeting a minority of the population is sustained by majority voting, however small the minority targeted, when the probability to receive the transfer is decreasing and concave in income. We apply our framework to the French social housing program and obtain that empirically observed departures from these assumptions are small enough that a majority of French voters should support a positive size of this program. We also provide a sufficient condition on this probability function under which more targeting results in a lower equilibrium size of the transfer system.



Tuesday, June 2, 2015

3 recent publications

Time to tidy up before leaving UQAM for Toulouse...

1. « Lobbying, family concerns and the lack of political support for estate taxation »Economics & Politics2015, forthcoming (with Pierre Pestieau)

Abstract
We provide an explanation for why estate taxation is surprisingly little used, given the skewness of the estate distribution. Taxing estates implies meddling with intra-family decisions, which is frown upon by many. At the same time, given the concentration of estates a small proportion of the population stands to gain a lot by decreasing estate taxation. We provide an analytical model, together with numerical simulations, where agents bequeathing large estates make monetary contributions in order to play up the salience of the encroachment aspects of estate taxation on family decisions and to decrease its political support.

Paper available here

2. « Private, social and self insurance for long-term care in the presence of family help »Journal of Public Economic Theory2015, forthcoming (with Pierre Pestieau)

Abstract
We study the political determination of the level of social long-term care insurance when voters can top up with private insurance, saving and family help. Agents differ in income, probability of becoming dependent and of receiving family help, and amount of family help received. Social insurance redistributes across income and risk levels, while private insurance is actuarially fair. The income-to-dependency probability ratio of agents determines whether they prefer social or private insurance. Family support crowds out the demand for both social and, especially, private insurance, as strong prospects of family help drive the demand for private insurance to zero. The availability of private insurance decreases the demand for social insurance but need not decrease its majority chosen level. A majority of voters would oppose banning private insurance.

Paper available here


3. « Life expectancy heterogeneity and the political support for collective annuities »The Scandinavian Journal of Economics2015, forthcoming (with Helmuth Cremer). 

Abstract
Individuals, differing in productivity and life expectancy, vote over the size and type of a collective annuity. Its type is represented by the fraction of the contributive (Bismarckian) component (based on the worker's past earnings) as opposed to the noncontributive (Beveridgean) part (based on average contribution). The equilibrium collective annuity is either a large mostly Bismarckian program, a smaller pure Beveridgean one (in accordance with empirical evidence), or nil. A larger correlation between longevity and productivity, or a larger average life expectancy, both make the equilibrium collective annuity program more Beveridgean, although at the expense of its size.

Paper available here.



Sunday, May 24, 2015

R.I.P. John Nash

BREAKING NEWSSunday, May 24, 2015 10:53 AM EDT
John Nash, Nobel-Winning Mathematician Portrayed in ‘A Beautiful Mind,’ Dies in Crash
John F. Nash Jr., a mathematician who shared a Nobel Prize in 1994 for work that greatly extended the reach and power of modern economic theory and whose decades-long descent into severe mental illness and eventual recovery were the subject of a 2001 film, “A Beautiful Mind,” was killed in a car crash Saturday in New Jersey. He was 86.
Mr. Nash, and his wife, Alicia, 82, were killed when the taxi they were riding in lost control and hit a guard rail and another vehicle, said Sgt. Gregory Williams of the New Jersey State Police.
Sergeant Williams said the taxi was traveling southbound on the New Jersey Turnpike when the driver lost control while attempting to pass another vehicle. Mr. and Mrs. Nash were ejected from the vehicle and pronounced dead at the scene. The taxi driver and the driver of the other car were treated for non-life threatening injuries. There are no criminal charges at this time.
Dr. Nash was widely regarded as one of the great mathematicians of the 20th century, known for the originality of his thinking and for his fearlessness in wrestling down problems so difficult few others dared tackle them. A one-sentence letter written in support of his application to Princeton’s doctoral program in math said simply, “This man is a genius.”
His theory of noncooperative games, published in 1950 and known as Nash equilibria, provided a conceptually simple but powerful mathematical tool for analyzing a wide range of competitive situations, from corporate rivalries to legislative decision making. Dr. Nash’s approach is now pervasive in economics and throughout the social sciences and is applied routinely in other fields, like evolutionary biology.

Sunday, April 19, 2015

An application of Coase theorem, including redistributive implications

For the next time I teach Public Finance... The redistributive implications are especially funny...

From The New York Times

Don’t Want Me to Recline My Airline Seat? You Can Pay Me


I fly a lot. When I fly, I recline. I don’t feel guilty about it. And I’m going to keep doing it, unless you pay me to stop.
I bring this up because of a dispute you may have heard about: On Sunday, a United Airlines flight from Newark to Denver made an unscheduled stop in Chicago to discharge two passengers who had a dispute over seat reclining. According to The Associated Press, a man in a middle seat installed the Knee Defender, a $21.95 device that keeps a seat upright, on the seatback in front of him.
A flight attendant asked him to remove the device. He refused. The woman seated in front of him turned around and threw water at him. The pilot landed the plane and booted both passengers off the flight.


Obviously, it’s improper to throw water at another passenger on a flight, even if he deserves it. But I’ve seen a distressing amount of sympathy for Mr. Knee Defender, who wasn’t just instigating a fight but usurping his fellow passenger’s property rights. When you buy an airline ticket, one of the things you’re buying is the right to use your seat’s reclining function. If this passenger so badly wanted the passenger in front of him not to recline, he should have paid her to give up that right.
I wrote an article to that effect in 2011, noting that airline seats are an excellent case study for the Coase Theorem. This is an economic theory holding that it doesn’t matter very much who is initially given a property right; so long as you clearly define it and transaction costs are low, people will trade the right so that it ends up in the hands of whoever values it most. That is, I own the right to recline, and if my reclining bothers you, you can pay me to stop. We could (but don’t) have an alternative system in which the passenger sitting behind me owns the reclining rights. In that circumstance, if I really care about being allowed to recline, I could pay him to let me.
Donald Marron, a former director of the Congressional Budget Office,agrees with this analysis, but with a caveat. Recline negotiations do involve some transaction costs — passengers don’t like bargaining over reclining positions with their neighbors, perhaps because that sometimes ends with water being thrown in someone’s face.
Mr. Marron says we ought to allocate the initial property right to the person likely to care most about reclining, in order to reduce the number of transactions that are necessary. He further argues that it’s probably the person sitting behind, as evidenced by the fact people routinely pay for extra-legroom seats.
Mr. Marron is wrong about this last point. I understand people don’t like negotiating with strangers, but in hundreds of flights I have taken, I have rarely had anyone complain to me about my seat recline, and nobody has ever offered me money, or anything else of value, in exchange for sitting upright.


If sitting behind my reclined seat was such misery, if recliners like me are “monsters,” as Mark Hemingway of The Weekly Standard puts it, why is nobody willing to pay me to stop? People talk a big game on social media about the terribleness of reclining, but then people like to complain about all sorts of things; if they really cared that much, someone would have opened his wallet and paid me by now.
A no-recline norm would also have troubling social justice implications — for short people. Complaints about knee room are not spread equally across our society. They are voiced mostly by the tall, a privileged group that already enjoys many advantages. I don’t just mean they can see well at concerts and reach high shelves. Tall people earn more money than short people, an average of $789 per inch per year, according to a 2004 paper in the Journal of Applied Psychology.
The economists Anne Case and Christina Paxson advanced the theory that tall people earn more because they have higher I.Q.s. Taller men on the dating website OkCupid receive more messages from women and have more sex partners than their short counterparts.
Instead of counting their blessings, or buying extra-legroom seats with some of their extra income, the tall have the gall to demand that the rules of flying be reconfigured to their advantage, just as everything else in life already has been. Sometimes — one Upshot editor who shall remain nameless included — they even use the Knee Defender to steal from their fellow passengers.
Now that’s just wrong.