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Sunday, May 24, 2015
R.I.P. John Nash
Sunday, May 10, 2015
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
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.
Friday, April 3, 2015
One nation under guard
SAMUEL BOWLES and ARJUN JAYADEV in the New York Times:
Another dubious first for America: We now employ as many private security guards as high school teachers — over one million of them, or nearly double their number in 1980.
And that’s just a small fraction of what we call “guard labor.” In addition to private security guards, that means police officers, members of the armed forces, prison and court officials, civilian employees of the military, and those producing weapons: a total of 5.2 million workers in 2011. That is a far larger number than we have of teachers at all levels.
What is happening in America today is both unprecedented in our history, and virtually unique among Western democratic nations. The share of our labor force devoted to guard labor has risen fivefold since 1890 — a year when, in case you were wondering, the homicide rate was much higher than today.
Is this the curse of affluence? Or of ethnic diversity? We don’t think so. The guard-labor share of employment in the United States is four times what it is in Sweden, where living standards rival America’s. And Britain, with its diverse population, uses substantially less guard labor than the United States.
In America, growing inequality has been accompanied by a boom in gated communities and armies of doormen controlling access to upscale apartment buildings. We did not count the doormen, or those producing the gates, locks and security equipment. One could quibble about the numbers; we have elsewhere adopted a broader definition, including prisoners, work supervisors with disciplinary functions, and others.
But however one totes up guard labor in the United States, there is a lot of it, and it seems to go along with economic inequality. States with high levels of income inequality — New York and Louisiana — employ twice as many security workers (as a fraction of their labor force) as less unequal states like Idaho and New Hampshire.
When we look across advanced industrialized countries, we see the same pattern: the more inequality, the more guard labor. As the graph shows, the United States leads in both.
Note that, in 1979 (shown by the pink dot), the United States was less unequal and employed less guard labor. In the graph, inequality in income takes account of payment of taxes and receipt of government transfers such as Social Security. (We measure inequality by the Gini index, a measure that varies from 0 for complete equality — that is, if all families have the same income — to a value of 1 if a single person has all of the income.) The data shown are the most recent for all nations on which comparable measures of inequality and guard labor are available.
For the same countries, guard labor is also more common where those starting out in life face a sharply tilted playing field, such as America, Britain and Italy. These are countries in which the income of a father is a good predictor of the income of his adult son. The countries with the least guard labor are those in which there is greater equality of economic opportunity by this measure: These are Denmark and Sweden, countries in which knowing the father’s income does not enable a very accurate guess of the son’s income when he grows up.
Nobody has a good explanation of why the United States is a standout when it comes to guard labor. Some of the differences in the guard-labor fraction across nations arise because, in many countries, the job of getting people to play by the rules is not left up to enforcement specialists. Anyone who has tried jaywalking in Germany will know what we mean: It’s not the police who are on your case, but your fellow pedestrians. In the United States, when the neighbor’s boisterous party is disturbing sleep, it’s often the police who will get the irate call, not the neighbor. Some of the increase in guard labor over the past century in America may reflect a shift from the informal enforcement of social norms to their enforcement by specialists in uniform.
Does the graph show that inequality causes a country to devote more of its labor force to guard labor? It is hard to be sure. It could be that people with a strong commitment to economic justice are, for some unknown reason, also more law-abiding, explaining the difference between Denmark and the United States. But the correlation evident in the graph could be evidence that economic disparities push nations to devote more of their productive capacity to guarding people and property. Fear and distrust of one’s neighbors and fellow citizens fuel the demand for guard labor. Economic disparities can contribute to both. Among the countries shown, a common measure of distrust of strangers is strongly correlated with both the guard-labor fraction and inequality.
Social spending, also, is strongly and inversely correlated with guard labor across the nations shown in the graph. There is a simple economic lesson here: A nation whose policies result in substantial inequalities may end up spending more on guns and getting less butter as a result.
Nobody doubts that the work of guard labor is essential. One of us, Samuel Bowles, knows this firsthand: His son-in-law is a corrections officer whose work is skilled, demanding and necessary. Every society divides its labor between those who produce things and those who guard the store. But how much guard labor is too much?
“You have money spent on guarding stuff rather than making stuff,”said Michael Hood, an economist at Barclays Capital. “There’s a large population standing around in blue blazers rather than engaged in more productive activities.” He was talking about Latin America, but could have been describing things in the United States.
“It is lamentable to think,” wrote the philosopher John Stuart Mill, in 1848, “how a great proportion of all efforts and talents in the world are employed in merely neutralizing one another.” He went on to conclude, “It is the proper end of government to reduce this wretched waste to the smallest possible amount, by taking such measures as shall cause the energies now spent by mankind in injuring one another, or in protecting themselves from injury, to be turned to the legitimate employment of the human faculties.”
This venerable call to beat swords into plowshares resonates still in America and beyond. Addressing unjust inequality would help make this possible.
Saturday, March 21, 2015
How over-interpreted research has contributed to gluten anxiety
I have come across a very thorough article about gluten celiac disease and gluten intolerance in The New Yorker. The most interesting parts have to do the research done.
"Gluten, one of the most heavily consumed proteins on earth, is created when two molecules, glutenin and gliadin, come into contact and form a bond. When bakers knead dough, that bond creates an elastic membrane, which is what gives bread its chewy texture and permits pizza chefs to toss and twirl the dough into the air. Gluten also traps carbon dioxide, which, as it ferments, adds volume to the loaf. Humans have been eating wheat, and the gluten in it, for at least ten thousand years. For people with celiac disease—about one per cent of the population—the briefest exposure to gluten can trigger an immune reaction powerful enough to severely damage the brushlike surfaces of the small intestine. People with celiac have to be alert around food at all times, learning to spot hidden hazards in common products, such as hydrolyzed vegetable protein and malt vinegar. Eating in restaurants requires particular vigilance. Even reusing water in which wheat pasta has been cooked can be dangerous."
"But something strange is clearly going on. For reasons that remain largely unexplained, the incidence of celiac disease has increased more than fourfold in the past sixty years. Researchers initially attributed the growing number of cases to greater public awareness and better diagnoses. But neither can fully account for the leap since 1950. Murray and his colleagues at the Mayo Clinic discovered the increase almost by accident. Murray wanted to examine the long-term effects of undiagnosed celiac disease. To do that, he analyzed blood samples that had been taken from nine thousand Air Force recruits between 1948 and 1954. The researchers looked for antibodies to an enzyme called transglutaminase; they are a reliable marker for celiac disease. Murray assumed that one per cent of the soldiers would test positive, matching the current celiac rate. Instead, the team found the antibodies in the blood of just two-tenths of one per cent of the soldiers. Then they compared the results with samples taken recently from demographically similar groups of twenty- and seventy-year-old men. In both groups, the biochemical markers were present in about one per cent of the samples.
“That suggested that whatever has happened with celiac disease has happened since 1950,’’ Murray said. “The increase affected young and old people equally.” These results imply that the cause is environmental."
"Gluten anxiety has been building for years, but it didn’t become acute until 2011, when a group led by Peter Gibson, a professor of gastroenterology at Monash University and the director of the G.I. unit at the Alfred Hospital, in Melbourne, seemed to provide evidence that gluten was capable of causing illness even in people who did not have celiac disease. Gibson and his colleagues recruited thirty-four people with irritable-bowel syndrome, all of whom had complained of stomach ailments that largely disappeared when they stopped eating gluten. He put them all on a strictly monitored gluten-free diet, but, unbeknownst to the subjects, about half got muffins and bread with gluten. It was a double-blind study, so neither the doctors nor the patients knew which muffins and bread contained gluten. But most of those who ate the gluten reported that the pain returned; for most of the others it did not. The study was small but meticulous, and the results were compelling. Several similar studies are now under way, but dietary research is notoriously time-consuming and difficult.
Gibson published his findings in the American Journal of Gastroenterology, but, along with other experts, he urged restraint in interpreting data from such a small study. Nevertheless, millions of people with vague symptoms of gastric distress suddenly found something concrete for which to blame their troubles. The market boomed, but the essential mystery remained unsolved: Why was gluten suddenly so hazardous? Perhaps, researchers thought, farmers had increased the protein (and gluten) content of wheat so drastically that people could no longer digest it properly.
But there is more to wheat than gluten. Wheat also contains a combination of complex carbohydrates, and the Australian team wondered if these could be responsible for the problems. Gibson and his colleagues devised a different study: they recruited a group of thirty-seven volunteers who seemed unable to digest gluten properly. This time, the researchers attempted to rule out the carbohydrates and confirm gluten as the culprit. Gibson put all the volunteers on a diet that was gluten-free and also free of a group of carbohydrates that he and his colleagues called FODMAPs, an acronym for a series of words that few people will ever remember: fermentable oligosaccharides, disaccharides, monosaccharides, and polyols. Not all carbohydrates are considered FODMAPs, but many types of foods contain them, including foods that are high in fructose, like honey, apples, mangoes, and watermelon; dairy products, like milk and ice cream; and fructans, such as garlic and onions.
Most people have no trouble digesting FODMAPs, but these carbohydrates are osmotic, which means that they pull water into the intestinal tract. That can cause abdominal pain, bloating, and diarrhea. When the carbohydrates enter the small intestine undigested, they move on to the colon, where bacteria begin to break them down. That process causes fermentation, and one product of fermentation is gas. In Gibson’s new study, when the subjects were placed on a diet free of both gluten and FODMAPs, their gastrointestinal symptoms abated. After two weeks, all of the participants reported that they felt better. Some subjects were then secretly given food that contained gluten; the symptoms did not recur. The study provided evidence that the 2011 study was wrong—or, at least, incomplete. The cause of the symptoms seemed to be FODMAPs, not gluten; no biological markers were found in the blood, feces, or urine to suggest that gluten caused any unusual metabolic response.
In fact, FODMAPs seem more likely than gluten to cause widespread intestinal distress, since bacteria regularly ferment carbohydrates but ferment protein less frequently. Although a FODMAP-free diet is complicated, it permits people to eliminate individual foods temporarily and then reintroduce them systematically to determine which, if any, are responsible for their stomach problems. FODMAPs are not as trendy as gluten and not as easy to understand. But, biologically, their role makes more sense, Murray says.
“That first paper, in 2011, blew our minds,” Murray told me. “Essentially, it said that people are intolerant of gluten, and it was based on a well-designed, double-blind study. When people were challenged with gluten, by eating the muffins, they got sick. We just couldn’t figure it out. But then came the second study. By then, it was almost too late to put the genie back in the bottle. You have millions of people out there completely convinced that they feel better when they don’t eat gluten—and they don’t want to hear anything different.”"
First, a first piece of research establishes an increase in celiac disease since the 50ies:
"But something strange is clearly going on. For reasons that remain largely unexplained, the incidence of celiac disease has increased more than fourfold in the past sixty years. Researchers initially attributed the growing number of cases to greater public awareness and better diagnoses. But neither can fully account for the leap since 1950. Murray and his colleagues at the Mayo Clinic discovered the increase almost by accident. Murray wanted to examine the long-term effects of undiagnosed celiac disease. To do that, he analyzed blood samples that had been taken from nine thousand Air Force recruits between 1948 and 1954. The researchers looked for antibodies to an enzyme called transglutaminase; they are a reliable marker for celiac disease. Murray assumed that one per cent of the soldiers would test positive, matching the current celiac rate. Instead, the team found the antibodies in the blood of just two-tenths of one per cent of the soldiers. Then they compared the results with samples taken recently from demographically similar groups of twenty- and seventy-year-old men. In both groups, the biochemical markers were present in about one per cent of the samples.
“That suggested that whatever has happened with celiac disease has happened since 1950,’’ Murray said. “The increase affected young and old people equally.” These results imply that the cause is environmental."
But this has to be contrasted with the much larger fraction of the population claiming that they are gluten intolerant. An there, it seems that research has played an unfortunate role...:
"Gluten anxiety has been building for years, but it didn’t become acute until 2011, when a group led by Peter Gibson, a professor of gastroenterology at Monash University and the director of the G.I. unit at the Alfred Hospital, in Melbourne, seemed to provide evidence that gluten was capable of causing illness even in people who did not have celiac disease. Gibson and his colleagues recruited thirty-four people with irritable-bowel syndrome, all of whom had complained of stomach ailments that largely disappeared when they stopped eating gluten. He put them all on a strictly monitored gluten-free diet, but, unbeknownst to the subjects, about half got muffins and bread with gluten. It was a double-blind study, so neither the doctors nor the patients knew which muffins and bread contained gluten. But most of those who ate the gluten reported that the pain returned; for most of the others it did not. The study was small but meticulous, and the results were compelling. Several similar studies are now under way, but dietary research is notoriously time-consuming and difficult.
Gibson published his findings in the American Journal of Gastroenterology, but, along with other experts, he urged restraint in interpreting data from such a small study. Nevertheless, millions of people with vague symptoms of gastric distress suddenly found something concrete for which to blame their troubles. The market boomed, but the essential mystery remained unsolved: Why was gluten suddenly so hazardous? Perhaps, researchers thought, farmers had increased the protein (and gluten) content of wheat so drastically that people could no longer digest it properly.
But there is more to wheat than gluten. Wheat also contains a combination of complex carbohydrates, and the Australian team wondered if these could be responsible for the problems. Gibson and his colleagues devised a different study: they recruited a group of thirty-seven volunteers who seemed unable to digest gluten properly. This time, the researchers attempted to rule out the carbohydrates and confirm gluten as the culprit. Gibson put all the volunteers on a diet that was gluten-free and also free of a group of carbohydrates that he and his colleagues called FODMAPs, an acronym for a series of words that few people will ever remember: fermentable oligosaccharides, disaccharides, monosaccharides, and polyols. Not all carbohydrates are considered FODMAPs, but many types of foods contain them, including foods that are high in fructose, like honey, apples, mangoes, and watermelon; dairy products, like milk and ice cream; and fructans, such as garlic and onions.
Most people have no trouble digesting FODMAPs, but these carbohydrates are osmotic, which means that they pull water into the intestinal tract. That can cause abdominal pain, bloating, and diarrhea. When the carbohydrates enter the small intestine undigested, they move on to the colon, where bacteria begin to break them down. That process causes fermentation, and one product of fermentation is gas. In Gibson’s new study, when the subjects were placed on a diet free of both gluten and FODMAPs, their gastrointestinal symptoms abated. After two weeks, all of the participants reported that they felt better. Some subjects were then secretly given food that contained gluten; the symptoms did not recur. The study provided evidence that the 2011 study was wrong—or, at least, incomplete. The cause of the symptoms seemed to be FODMAPs, not gluten; no biological markers were found in the blood, feces, or urine to suggest that gluten caused any unusual metabolic response.
In fact, FODMAPs seem more likely than gluten to cause widespread intestinal distress, since bacteria regularly ferment carbohydrates but ferment protein less frequently. Although a FODMAP-free diet is complicated, it permits people to eliminate individual foods temporarily and then reintroduce them systematically to determine which, if any, are responsible for their stomach problems. FODMAPs are not as trendy as gluten and not as easy to understand. But, biologically, their role makes more sense, Murray says.
“That first paper, in 2011, blew our minds,” Murray told me. “Essentially, it said that people are intolerant of gluten, and it was based on a well-designed, double-blind study. When people were challenged with gluten, by eating the muffins, they got sick. We just couldn’t figure it out. But then came the second study. By then, it was almost too late to put the genie back in the bottle. You have millions of people out there completely convinced that they feel better when they don’t eat gluten—and they don’t want to hear anything different.”"
Monday, February 16, 2015
Kinky budget constraint
This post explains the previous one (I was googling "kinky budget constraint" and found the funny graph depicted in he previous post...)
My experience is that many people misunderstand taxation by brackets, and assume that the higher marginal tax rate associated with a higher bracket (say, for income taxation) must be paid on the whole income, so that earning one more €/$/£ results in owing a lot more than one more €/$/£ in taxes.
Thanks to The Economist, I have found an example of a very badly conceived taxation scheme where the higher tax rate in higher brackets applies to the whole income: stamp duty in the UK:
My experience is that many people misunderstand taxation by brackets, and assume that the higher marginal tax rate associated with a higher bracket (say, for income taxation) must be paid on the whole income, so that earning one more €/$/£ results in owing a lot more than one more €/$/£ in taxes.
Thanks to The Economist, I have found an example of a very badly conceived taxation scheme where the higher tax rate in higher brackets applies to the whole income: stamp duty in the UK:
Observe the nice bunching of transactions (in blue) just below the thresholds...
Oh, and the new rate (which is nicely linear by parts) will decrease the stamp duty for 98% of transactions.
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