Quote of the Day on Topics Pertaining to Cost-Benefit Analysis

From Mark Bittman:

This brings us to the Food and Drug Administration, which is responsible for carrying out nutrition labeling in restaurant chains. (This is part of the Affordable Care Act.) When federal agencies propose new regulations, they’re required to do an evaluation to make sure the costs do not outweigh the benefits. Sounds logical enough. But this is the government we’re talking about, and recently the F.D.A.'s interpretation of this order has taken a turn for the absurd. This summer, the F.D.A. discounted by 70 percent the benefits of increased tobacco legislation. Why? That was the value of the “pleasure” lost by smokers, according to the agency, pleasure these addicts would miss by giving up a nasty habit. 

Mass- and hyper-produced food, of course, is ostensibly not as dangerous and arguably more pleasant in its consumption than cigarettes. So the agency was required to discount the “pleasure” lost by eaters who would be discouraged from buying fast food because they determined that its massive calorie load and pathetic nutrition profiles were perhaps not desirable. In an “alternative” analysis, the cost of that pleasure was put at $5 billion over 20 years, which is about the same as the low end of the estimated value of the health benefit we’ll derive by eating less junk..... 

There are, of course, the obvious and almost inane questions like, “How could the F.D.A. possibly know that eaters will lose ‘pleasure’ by eating healthy food as opposed to unhealthy?” “Who is the F.D.A.'s pleasure analyst?” “How can a voluntary choice by a better-informed person to eat better food and improve his or her life possibly be a ‘cost’ ”? And finally, “How can you possibly fix a monetary value on this?” (By the way, this whole scheme, and that’s what it is, was cooked up by a lone graduate student, who determined that “healthier foods are worse off on other dimensions such as taste, price, and convenience.” Clearly, this is a person who’s never prepared broccoli raab with oil, garlic and chiles.)

Emphasis added.

Cuban Socialism Hanging by a Thread

Normalization of relations between the US and Cuba is a mortal threat to the version of socialism that has survived on that island.  Its demise would be all but certain if the economic embargo were lifted.

Every country with a state-controlled economy that has been opened to the rest of the world has seen this control crumble; it is simply not sustainable in a world in which production networks, knowledge and innovation have become global.  If trade and the movement of people are liberalized and Cuba somehow retains dominant public ownership, it will be a miracle.  I make this prediction separate from any value, positive or negative, that might be attached to it.

Only one thing can possibly keep Cuban socialism alive—the intransigence of the new Republican majority in congress.

This Just In!

From Timothy Noah at Politico Morning Shift ("your daily speed read on labor and employment policy):

The machines-mean-fewer-jobs view is known as the “lump of labor” fallacy, first articulated in 1908 by an English economist named Sydney Chapman. But Chapman never lived to see the invention of the silicon chip. Is lump of labor still a fallacy?

Somebody's been "speed reading" the Sandwichman but ought to  s l o w  d o w n. No, the lump-of-labor fallacy was not "first articulated" in 1908 by Chapman.

Walker, T. "Why economists dislike a lump of labor," Review of Social Economy, 2007, vol. 65, issue 3, pages 279-291.

Abstract: The lump-of-labor fallacy has been called one of the “best known fallacies in economics.” It is widely cited in disparagement of policies for reducing the standard hours of work, yet the authenticity of the fallacy claim is questionable, and explanations of it are inconsistent and contradictory. This article discusses recent occurrences of the fallacy claim and investigates anomalies in the claim and its history. S.J. Chapman's coherent and formerly highly regarded theory of the hours of labor is reviewed, and it is shown how that theory could lend credence to the job-creating potentiality of shorter working time policies. It concludes that substituting a dubious fallacy claim for an authentic economic theory may have obstructed fruitful dialogue about working time and the appropriate policies for regulating it.

I Dunno? ¯\_(ツ)_/¯

Does anybody really give a shit about the "genealogy and critique of applied welfare economics"? Apparently not. Ninety-nine views and no comments. One whole comment ("Important.") on "#NUM!éraire, Shmoo-méraire."

I was going to write a couple of more installments on theory of welfare economics and practice of cost-benefit analysis but what's the use? It has all been said -- and ignored. So if I say it again and it is ignored again what difference does that make?

This is only the nuts and bolts of how total bullshit ("unacceptable nonsense") is molded into unyielding policy certainties. There are no sinister conspiracies lurking in the shadows. Just half-witted theoretical "brilliance," dull-witted bureaucratic appetite for "formulas" and feeble-witted inattentive inertia.

People really don't care that the economic models used to inform international climate negotiations are built with factory-reject tinker-toys? Apparently not.


Motivate me.

Greg Mankiw Endorses William Kristol as the GOP’s Health Care Economist

Actually Mankiw gives a nod to this. Skipping the Republican spin – this plan lists three things (I guess):

“Ending the Unfairness in the Tax Code—by Offering Tax Credits to the Uninsured and Individually Insured”; “Solving the Problem of Expensive Preexisting Conditions”; “Lowering Health Costs Across the Board”.

The first one sounds like a very old GOP line and the last two sound more like goals than credible means to achieving those goals. So who is this The 2017 Project? It Board of Directors includes:

William Kristol, chair; Spencer Abraham; Yuval Levin; Dan Senor

I’m sorry but this sounds more like a 2016 campaign stunt rather than a serious proposal regarding health care policy.

They Said, We Said

From the New York Times: “The Europeans regard the settlements [on occupied Palestinian territory]  as illegal; Washington regards them as unilateral actions and calls them ‘obstacles to peace.’”

The Europeans regard the surface of the earth as curved; Washington regards it as “an obstacle to horizontal vision”.

Torture and TV

Reading several articles in WaPo and various blogposts by various people in the last few days inspires me to this post.  I wish to deal with an unpleasant reality, that apparently over recent years torture has become more acceptable to the American people according to published polls. Ironically it appears that the biggest jump in this respectability came in the first year or two of Obama's presidency, with it being more or less a draw, while after 2010 or so, while  the gap has never been huge, those approving of torture under at least some conditions has consistenly outnumbered those who do  not.  What is going on here?

While I am sure  it is not all there is to it, and I hope  the recent release of the Senate  report, perhaps combined with widespread outrage over police brutality, might shift the balance back somewhat, a major input to how we got to this position of such widespread approval despite President Reagan signing anti-torture treaties, has been TV.  Many think it was 9/11 that led to the shift, and clearly that led to the increase in the actual use of torture.  But it looks as if the public approval of torture, or an increase in that approval, came quite a bit later.

That TV may have played a major role was highlighted in an excellent WaPo column on Friday by Catherine Rampell.  She noted several shows that may have played a role in this, starting with "24" but including "Homeland" "The Blacklist,"and others.  She brings out in light of the recent report that these shows have spread two serious falsehoods about American intel/military people and their use of torture.  One of these is that those that are tortured are terrorists, and the second is that torture works, those so  viciously interrogated do provide useful information against their fellow terrorists.  These two myths have been shown so frequently over such a long time on these shows that it is no wonder so many have come to believe them.

The Senate Intelligence Committee report makes it clear that both of these are profoundly wrong.  Out of the 119 people who suffered from "EIT," in the report, it turns out that 26 were completelyl innocent, several of these actually (previously) useful informants for the US.  Secondly, case by case, the report demolishes the claims that useful facts were drawn from those so interrogated. Jose Rodriguez and Dick Cheney (who has not read the report by his own admission) might continue to claim otherwise, but it is  now clear both that the CIA lied to Congress and others about the efficacy of torture, but even those really in the know really know it does not work, with current CIA Director, John Brennan, just now admitting that he cannot name a single clear case where torture provided anything useful.  Those getting their information on this from TV shows are completely deluded.

I would also note that not just John McCain, himself a super hawk who was tortured extensively in Vietnam, but military personnel who have fought abroad, are far more against torture than the US population, with two articles in the Post today confirming this latter fact.  They know what is involved and how readily those being tortured will lie to save themselves.  Quite aside from the morality, those who know the most, are the most opposed to this atrocity.  I only hope that many Americans come to realize that reality is not what they have been seeing on all these TV shows regarding this matter.

Barkley Rosser

Torture, Fuck You

Sorry about my socially unacceptable title, but if you do not like it, well, fuck you.

So, my wife and I, like John McCain, have been tortured.  What was done to my wife is sort of in the public record. What was done to me I promised I would not reveal publicly, and I am a man of my word, as I think every person who is reading this knows.

Needless to say, we support the release of this report about what was done by our country, just as does our fellow torturee, John McCain, whom I once had a long private conversation with and whom I respect, despite having disagreements with him on various issues.

I am not into demanding that those who degraded the moral foundaton of the US be prosecuted (see Dick Cheney especially). I think that those attempting to demand that this report be withdrawn or rejected should just cut it.  As near as I can tell, pretty much all of you who are defending this abomination have not been there or experienced that.  Be grateful if you have not.

Barkley Rosser

Genealogy and Critique of Applied Welfare Economics

When he was little, Ian Malcolm David Little lived in a big house. It had 20 servants and 23 bedrooms. Little's mother, Iris's grandfather, Thomas Brassey, "was perhaps the greatest 'captain of industry' the world has ever seen." According to Little's obituary in the Independent, his great grandfather was made an earl in 1911, which would have been remarkable since Thomas Brassey Sr. had died forty years earlier.

It was actually I.M.D. Little's great uncle, Thomas Brassey Jr., who was made an earl in 1911. In 1872, Brassey Jr. wrote Work and Wages, an empirical study of wages, hours and output using the extensive labour accounting records accumulated by his father. Brassey's book had quite an impact on economic thinking. The prominent American economist, Francis Amasa Walker, extolled the authoritative status of Brassey's evidence:

[B]y far the most important body of evidence on the varying efficiency of labor is contained in the treatise of Mr. Thomas Brassey, M.P., entitled Work and Wages, published in 1872. Mr. Brassey's father was perhaps the greatest "captain of industry" the world has ever seen… The chief value of Mr. Brassey, Jr.'s work is derived from his possession of the full and authentic labor-accounts of his father's transactions....

Subsequently, in what is "regarded to be the first modern economic textbook," Alfred Marshall credited Walker for "forcing constantly more and more attention to the fact that highly paid labour is generally efficient and therefore not dear labour…" Marshall judged that fact to be "more full of hope for the future of the human race than any other… [although it] will be found to exercise a very complicating influence on the theory of Distribution."

That is to say it was Brassey's evidence that lent weight to Walker's theoretical arguments that "complicated" the theory of distribution. In the early twentieth century, Marshall's star pupil, Sydney Chapman, collaborated with Brassey Jr. on a three-volume continuation of his Work and Wages, which included an analysis of the hours of labour that incorporated the more theoretically-advanced analysis of that topic first elaborated in Chapman's 1909 Economic Journal article, "Hours of Labour." In his 1872 review of Brassey's book, Frederic Harrison had written:

To this first proposition — that the rate of wages affords no indication of the cost of production — Mr. Brassey adds a second, which is quite as significant. "It is equally true," he says, " that the hours of work are no criterion of the amount of work performed." Now this is very instructive, especially at the present time. Throughout the movement to substitute the day of nine hours for that of ten, the public instructors invariably assume that this is equivalent to a loss in productive power of 10 per cent. Nothing can be more utterly belied by facts. 

Chapman's analysis of the hours of labour was reiterated 11 years later in A. C. Pigou's Economics of Welfare, which, according to Little in his Critique of Welfare Economics, "appears to have popularized the use of the word 'welfare' by calling his book The Economics of Welfare." In his footnote (p. 78) discussing the evolution of terminology, Little nominated 'satisfaction' and 'happiness' as precursors to welfare. But why not 'distribution'?

Pigou's discussion of the hours of labour firmly adhered to the empirically-grounded theoretical "complication" of the theory of distribution that was launched with Brassey's Work and Wages and was elaborated by Walker, Marshall, Chapman and finally Pigou. J. R. Hicks and Lionel Robbins shared Pigou's confidence in Chapman's analysis of the hours of labour. In his 1929 article "The economic effects of variations of hours of labour" Robbins wrote:

The days are gone when it was necessary to combat the naïve assumption that the connection between hours and output is one of direct variation, that it is necessarily true that a lengthening of the working day increases output and a curtailment diminishes it.

Of course those days weren't gone. Or if they were gone, they soon returned. The complication was undone by "a simple book-keeping artifice," which is to say by a sleight of hand.

The Otherwise Less Desirable Characteristics of a Hoax

Folks, it's a hoax! It's gotta be a hoax. Quantifying the otherwise more desirable characteristics of unhealthy foods (or the less desirable characteristics of healthy foods) takes Jeremy Bentham's expression "nonsense on stilts" to a new level. It's nonsense on stilts riding a unicycle blindfolded.

Please tell me it's a hoax! Desirability is not an attribute of the object of desire.

Don't take my word for it.

What does Lacan say about desire? "Our desires are not our own, they are the Other’s"

What does Žižek say about desire? "We don’t really want what we think we desire."

What does Rene Girard say about desire? "Desire usually is born out of the contemplation.of someone else who is desiring and who designates to you the object he's desiring as desirable." (1:57)

 

And what, pray tell, does Luis Buñuel have to show us about That Obscure Object of Desire? Well...

As Mathieu sees her, Conchita is so changeable that Buñuel has cast two lovely new actresses to play her—Carole Bouquet, who looks a little like a young Rita Hayworth, as the coolly enigmatic Conchita, and Angela Molina as the earthy, flamenco-dancing Conchita whom he follows to Seville. 

Poor old Mathieu. The night he succeeds in getting Conchita to his country house, where she has promised to be his mistress, the Conchita who goes into the bathroom to change, changes not only her clothes. Miss Bouquet goes in but Miss Molina comes out.

Costs and Benefits of Desire

"Accounting for the facts that healthy foods are otherwise less desirable and that consumers already have some information about health, the net benefit to consumers possible from consuming healthier foods is 30-40% of the value of the gross health benefit from switching to the healthiest possible diet."

What "facts"? A Reuters report on Monday told the story of the $5.27 billion in "lost pleasure" estimated in a U.S. Food and Drug Administration analysis of product labeling. According to the report, to arrive at that estimate, "the agency relied almost solely on a 2011 paper by then-graduate student Jason Abaluck."

In all fairness to Abaluck, the paper strikes this reader as an earnest and diligent graduate student exercise in mathematical modeling. Of course quantifying the "otherwise less desirable" characteristics of healthy foods is sheer nonsense. But that's not an issue for mathematical modeling. Do the conclusions follow rigorously from the assumptions? That's all that counts. Assuming that healthy foods are otherwise less desirable... But why would you?

Freedoms, of Information and Academic

There’s a legal dispute at the University of Kansas surrounding the emails of Arthur Hall, a Koch brothers acolyte and head of the university’s Center for Applied Economics.  A student group filed a public records request, demanding to see all correspondence between Hall and the brothers Koch.

This interests me because we've had similar public records requests at my institution, asking all faculty to submit emails pertaining to one topic or another.  I've been vocal in saying that the requests were over-broad and threatened academic freedom.  What do I say now that the shoe is on the right foot rather than the left?

More or less the same.  First, I am not impressed by the argument that emails on publicly-owned email clients or using publicly-issued accounts constitute those that should be turned over.  Many relevant communications that should be disclosed are on private systems, and drawing the line at who owns what will simply drive most of the traffic onto the protected networks.  That means less transparency, not more.  Second, as I’ll explain, many of the communications on public systems have nothing to do with the purposes behind public disclosure.

Why do we have these freedom of information laws in the first place?  It’s so that the public can learn about the decision-making process in the public sector—transparency and accountability.  Why was a regulation written in one way rather than another?  Why were important contracts not let out for bid?  That’s what the public deserves to know and what the laws are for.  University employees, including faculty, should be subject to these laws insofar as they are engaged in decision-making.

General political attitudes are not decision-making.  Arthur Hall can think whatever he wants about climate change, and his emails discussing his views on this or other academic/intellectual/civic topics ought to be confidential.  Just because he doesn't believe in global warming doesn't mean he should be chilled.  But his emails concerning resource allocation, programmatic initiatives and other aspects of his work as a decision-maker are pertinent and ought to be released.  In that respect he should be treated like any other public employee and held to the same standards of transparency.

Upstream, Downstream: Why a Campus-Based Carbon Tax Is a Bad Idea

Severin Borenstein is against fossil fuel divestment but says universities could move ahead by instituting a campus-level carbon tax.  This would create incentives to lower carbon footprints, he says, while also being educational in itself.  He’s particularly enamored of the way a tax would force climate activists to actually pay, rather than relying on the cheap talk of political advocacy.

I won’t explore the psychological underpinnings of the you-have-to-earn-your-activism-by-paying-a-personal-price thing, but on purely economic grounds I’m surprised that Borenstein didn’t pick up on the extreme inefficiency of such a downstream mechanism.

First a word of explanation: a policy like a carbon cap or tax can be instituted at any level, from the world as a whole down to your own home.  You can tax carbon emissions across an entire economy at so many dollars per ton, or you could tax your own household the same way.   The national or international level is what we call upstream, your home is downstream.  A campus is in between, but in terms of scale much closer to a household than a 300+ million citizen country.

Why does it matter?  In one word, substitution.  The more upstream a tax or cap is instituted, the more opportunities there are for substituting one good or production method for another.  If you tax your household, you can change your own personal consumption, but you can’t change the carbon content of the consumption options themselves.  For instance, where I live there is no effective mass transit between my town and the big metropolises to the north and south (Seattle and Portland).  The only way I can reduce the travel portion of my carbon footprint is to not go there.  But if the choice is posed at a higher level, like the country or at least the Pacific northwest, we can set up better transit services, so I can have the option of getting out of my car and onto a train.

As you can imagine, the upstream-downstream question for climate policy is huge.  Upstream is politically harder—you have to get more people on board—but economically much, much better.

So you have to wonder why Borenstein would think that a very downstream tax, like that on a single college campus, is a good idea.  Yes, everyone would be forced to make choices, but the choices open to them are a small and inefficient subset of those our society actually confronts.  A campus carbon tax would be a powerful source of miseducation.

Economics and Ideology, Terribly Muddled

With great resolve and all the best intentions, I began reading “Political Language in Economics” by Zubin Jelveh, Bruce Kogut, and Suresh Naidu.  This is the research version of the journalism version published by 538, both referenced by Tyler Cowen.

But I stopped at p. 8, wondering how it is possible for three obviously intelligent people to jointly pen such an arbitrary, implausible and internally inconsistent theory of the role of ideology in economic research.

Here’s what they assume:

1. Personal ideology is a scalar on a left-right continuum.  This corresponds to the direction and degree of political partisanship in the two-party electoral system of the US.

2. Economists choose the ideological content of their research to maximize their utility.

3. Their personal ideology is pre-given and unaffected by the results of their research (or anyone else’s).

4. Their professional identity, from which they also get utility, depends on how close their research is to the political center.  This would show they are neutral technocrats.

5. Thus the first choice they have to make is how fully to reflect their personal ideology versus their professional identity in their research.  This is summarized in a parameter.

6. But to achieve their career goals their research needs to be published, and they have to be hired and promoted by their academic departments.  This interest depends on the distance between their chosen research ideology and the ideology of editors, senior professors in their department, etc.  The tradeoff between “personal” (ideology and identity) and “market” (conformism) interests is summed up in another parameter.

All of these assertions are pre-empirical, and no argument is made for any of them.  They are simply assumed.  In fairness to the authors, they probably didn't think this part of their paper was very important.  It was just a standard-issue u-max model inserted to “ground” the empirical work in.....something.  It was their measurement and data analysis that they expected to garner attention, and so they have.

But the theory still matters, because you can’t separate conception and measurement.  For instance, the first assumption, that political ideology is a scalar rather than a vector, is at the heart of their empirical methods.  If they’re wrong about the first, the second doesn't hold up.  And so on.

My view is that assumptions 1-5 are indefensible.  Only #6 is plausible to me, but even here I suspect they are grossly oversimplifying.  Take the role of journal editors.  Editors will vary in the extent to which they will favor submissions based on their personal ideology, for at least two reasons.  First, some ideological positions are more supportive of suppressing alternative views than others.  (I make no presumption as to what those positions are, but you might have a hunch.)  Second, editors too face constraints, and imposing some ideological biases will be less costly for them than others.  Imagine a committed egalitarian who is the editor for a finance journal.  An article is submitted which argues for higher CEO salaries.  The editor would like to discriminate against it but worries about repercussions if a pattern of such discrimination is observed.  Now imagine a committed “market-rewardist” finance editor irritated by a submission that argues for narrower pay differentials.  The symmetrical constraint would be that the editor might worry that his or her finance professor peers may detect too much bias in favor of market-driven pay outcomes.  But are these two scenarios likely to be symmetrical?

Finally, the claim that professional identity is best served by centrism is baldly ideological.  There is an amusing contretemps on p. 8.  The main text speaks of a “preference for being neutral or centrist”, which seems to imply that being in the political center means you are neutral in the sense of unbiased.  Attached to this is a footnote, however, which reads in its entirety, “We do not interpret “centrist" as “unbiased" or more accurate, however, as being non-partisan or centrist could in fact be another form of bias.”  Well, yes, but that’s exactly what they do, since they identify centrism with professional self-respect and “being non-partisan experts”.  Strangely, they add that researchers might derive utility from centrism because it makes them “difficult to pigeonhole politically”, as if centrists don’t sit in a little cognitive box like most everyone else.  My guess: a reviewer made them add that footnote, although the authors were too inside their own centrism-seeking framework to pursue its consequences.

Like I said, I stopped here, and the good stuff is apparently later on.  According to Cowen, however, the authors ultimately suggest “re-centering” research to replace published results by what the results would be, according to the empirical model, if the researchers were perfectly centrist.  Personally, I’m going to adjust their findings to approximate what they would have been if Jelveh, Kogut and Naidu were fire-breathing radicals, in favor of maximum political and economic equality, democracy and freedom.  No bias in that.

UPDATE: Kevin Drum goes after the "good stuff" here.

Face it: Boys Can’t Do Words

Courtesy of Devin Pope and Justin Sydnor in the Spring 2010 Journal of  Economic Perspectives, via Timothy Taylor, we have this graphic that shows, along the horizontal axis, the ratio of girls to boys in the top 5% of the NAEP reading test:

This proves what many of us have suspected all along: boys are genetically inferior when it comes to reading, at least careful reading.  Their brains are not wired for words.  So stop trying to make excuses for things like guys failing to understand mortgage contracts or IPCC reports on climate science.  This is not a social failing; it’s because of evolutionary inheritance.  Back in the cave age, males who got absorbed in reading were eaten by sabretooths or something.  Pretending that biological differences don’t exist is just Political Correctness, and we know how horrible that is.