Tag Archives: Modeled Behavior

Park Slope and The Rats of NIMBY

Elisabeth Rosenthal at NYT:

Park Slope, Brooklyn. Cape Cod, Mass. Berkeley, Calif. Three famously progressive places, right? The yin to the Tea Party yang. But just try putting a bike lane or some wind turbines in their lines of sight. And the karma can get very different.

Last week, two groups of New Yorkers who live “on or near” Prospect Park West, a prestigious address in Park Slope, filed a suit against the administration of Mayor Michael R. Bloomberg to remove a nine-month-old bike lane that has commandeered a lane previously used by cars.

In Massachusetts, the formidable opponents of Cape Wind, a proposed offshore wind farm in Nantucket Sound, include members of the Kennedy family, whose compound looks out over the body of water. In Berkeley last year, the objections of store owners and residents forced the city to shelve plans for a full bus rapid transit system (B.R.T.), a form of green mass transit in which lanes that formerly served cars are blocked off and usurped by high-capacity buses that resemble above-ground subways.

Critics in New York contend the new Prospect Park bike lane is badly designed, endangering pedestrians and snarling traffic. Cape Wind opponents argue the turbines will defile a pristine body of water. And in Berkeley, store owners worried that reduced traffic flow and parking could hurt their business.

But some supporters of high-profile green projects like these say the problem is just plain old Nimbyism — the opposition by residents to a local development of the sort that they otherwise tend to support.

Ryan Avent:

The Times piece delves into the psychology of this kind of neighborhood opposition, but what it doesn’t say is that as annoying as this is, it has a far smaller impact on net emissions than the far more common anti-development strain of NIMBYism. Bike lanes make New York City a teeny bit greener. But New York is already much, much greener than most American cities, thanks to its dense development pattern and extensive transit network. Net emissions fall a lot more when someone from Houston moves to New York than when someone from New York starts biking.

Happily, lots of people would LOVE to move to New York. This is one huge benefit we don’t need to subsidize to realize. Unhappily, the benefit is nonetheless out of reach because of the huge obstacles to new, dense construction in New York. New York can’t accommodate more people unless it builds more homes, and it can’t build more homes, for the most part, without building taller buildings. And New Yorkers fight new, tall buildings tooth and nail. They fight them on aesthetic grounds, and because they’re worried about parking and traffic, and because they’re worried about their view, and because they just think there’s enough building in New York already, thank you. And many do this while heaping massive scorn on oil executives and the Republican Party over their backward and destructive views on global warming.

Of course, the obstruction of development is offensive for lots of reasons: it makes housing and access to employment unaffordable, it reduces urban job and revenue growth, it tramples on private property rights, and so on. But the environmental hypocrisy is galling, and it’s not limited to New York. My old neighborhood, Brookland, voted overwhelmingly for Obama (about 90-10, as I recall). Many of the locals are vocally supportive of broad, lefty environmental goals. And yet, when a local businessman wants to redevelop his transit-adjacent land into a denser, mixed-use structure, the negative response is overwhelming, and residents fall over themselves to abuse local rules in order to prevent the redevelopment from happening.

This project would bring new retail with it, which would enable more local residents to walk to a retail destination. It would bring new residents, and those residents would be vastly more likely to walk or take transit to destinations than those living farther from Metro. Forget the economic benefits to the city, the people occupying the new housing units would have carbon footprints dramatically below the national average. But this basically does not matter to the NIMBYs however much they profess to care about the environment.

To the extent that public opinion matters and can be shaped, I think it would be a huge boon for humanity for attitudes toward NIMBYism to turn decidedly negative. People should be ashamed of this behavior, which is both selfish and extravagantly dismissive of property rights.

Kevin Drum:

Earlier today, I linked to a Ryan Avent post complaining that although dense cities like New York are much greener than towns and suburbs, his lefty, environmentally-aware neighbors fight against new high-density developments in the city anyway. A little later, I had an email exchange with HW, a lefty, environmentally-aware New Yorker who thinks Ryan has it all wrong. Here’s the exchange:

HW: It is true that people living in NY have much much lower carbon footprints than those who live in lower density areas. It’s also true that it is a highly desirable place to live. So wouldn’t the way to accomplish more people living in high density areas like NY be to replicate it elsewhere? Or should we insist on cramming more people into NY against NYers’ will and make it a less desirable place to live?

Wouldn’t it be better for 8 million people to live in NY and have it serve as a beacon for a great, lower carbon footprint lifestyle? If you cram an extra million people in, sure, you lower their carbon footprints, but you may also make high density urban living far less attractive and less likely to be replicated around the country.

Avent mentions problems with parking and traffic as a throw-away, but I can tell you, the 4-5-6 running up from midtown to the Upper East Side is quite literally crammed wall-to-wall with people every morning. Parking is unlikely to be an option for anyone unwilling to spend several hundred dollars a month. And yes, another ten skyscrapers will result in the city becoming a darker and more depressing place. Not to mention the fact that the last ten high rises that went up on the Upper East Side were creatures of the housing bubble, resulting in massive losses and lots of empty units.

So would it be so terrible if we built up the downtown areas of Jersey City, White Plains and Stamford instead?

My reply: Well, that’s the funny thing. Building new high-density areas is the obvious answer here, but no one ever does it. Why? I assume it’s because it’s next to impossible to get people to move to new high-density developments. You get all the bad aspects of density without any of the good aspects of living in a big, well-established city.

It’s a conundrum. We could use more well established cities, but no one wants to live in the intermediate stages that it takes to build one. And of course, in well-established smaller towns and cities, the residents fight like crazed weasels to prevent the kind of development that they associate with crime and gangs.

I don’t really know what the answer is.

HW again: I’m not sure that’s entirely true. What about all the downtown redevelopment projects that have happened around the country? Or the urban centers that sprout up around the core of big cities like NY. Next time you are in NY, look across the East River and take a gander at Long Island City. It’s as close to midtown as the Upper East Side, easy to build there, far less expensive, and just as dense. And every single one of those luxury high rises went up in the past 12 years; it’s literally a skyline that didn’t exist 12 years ago. Jersey City is a similar story, both for residential and financial (every big bank has moved their IT back office out there). Or look at the gentrification of Brooklyn!

So why obsess on cramming a couple hundred thousand more people on the island of Manhattan, which will push it past the bursting point? It’s just not a smart premise. In fact, I’ll go further: it bears no relationship to reality. No one would stop a luxury high rise in any of the other four boroughs or right across the river in NJ and it’s just as dense and low-carbon to live in those spots. It’s just that Ryan Avent doesn’t WANT to live in those spots. He wants to live in a cheaper high rise in Manhattan (which, by the way, has seen tons of them go up already in the past decade — in the Financial District, Hell’s Kitchen, the Upper East Side). Avent should ride the 4/5/6 at 8 am every morning for a week, come back, and tell us if his article makes any sense. As a 4th generation NYer, I don’t think it even begins to.

I don’t really have a dog in this fight since I’ve lived in the leafy suburbs of Orange County all my life. But I thought this was an instructive response that was worth sharing. Back to you, Ryan.

Avent responds to the e-mail exchange:

I’m just pointing out the obvious here — many more people would like to live in Manhattan, it would be good economically and environmentally if they did, and it’s bad that local neighborhood groups are preventing them from doing so because they’re worried about their view. Further, my guess is that even without a relaxation in development rules Manhattan will cram in a couple hundred thousand more people, and demand will continue to rise; somehow, Manhattan will manage not to burst. Though it might eventually be swamped, if city-dwelling NIMBYs continue to make Houston exurbs ever more affordable relative to walkable density.

The transportation problem can be solved, in part, by better transportation policy. It is a crime that the subways are crammed while drivers use the streets of Manhattan for free, but that’s a policy failure, not a density failure. It’s also worth noting that heights fall off sharply as one moves away from the central business districts of Lower and Midtown Manhattan. If developers could build taller in surrounding neighborhoods and add residential capacity there, then more Manhattan workers could live within easy walking distance of their offices, and fewer would need to commute in by train.

Finally, let me point out that this is not about what I want. I’m not planning a move to New York, and I’m not remotely suggesting that the government should somehow mandate or encourage high-density construction. I’m simply saying that it should be easier for builders to meet market demand. It should be easier for builders to meet market demand in Manhattan, and Brooklyn, and Nassau County, and Washington, and downtown Denver, and so on. People clearly want to live in these places, and it would be really good for our economy and our environment if they were able to do so. And I find it very unfortunate that residents deriving great benefits from the amenities of their dense, urban neighborhoods are determined to deny those benefits to others.

Matthew Yglesias:

I don’t want to say too much about the debate over increased density in Manhattan because, again, ebook proposal. But one reality check on this whole subject is to note that the population of Manhattan 100 years ago at 2,331,542 people. It then hit a low of 1,428,285 in 1980 and has since then risen back up to 1,629,054.

Back in 1910 there were only 92,228,496 people in the United States. Since that time, the population of the country has more than tripled to 308,745,538. And if you look at Manhattan real estate prices, it’s hardly as if population decline in Manhattan has been driven by a lack of demand for Manhattan housing. Back around 1981 when I was born, things were different. The population of the island was shrinking and large swathes of Manhattan were cheap places to live thanks to the large existing housing stock and the high crime.

Karl Smith at Modeled Behavior:

Many years ago I gave a talk entitled, Green Manhattan, where I made the case that Metropolis was the greenest place in America.

Naturally, I got a lot of funny looks but the line that seemed to win a few converts was this: the best way to protect the environment is by keeping people out of it.

I admit I took a few liberties in the talk, not discussing how agriculture would be performed and supported, for example. Nonetheless, I think this framing breaks the intuition that green is about living with nature rather than letting nature live on its on.

Megan McArdle:

New York hasn’t actually been growing steadily; it’s been rebounding to the population of roughly 8 million that it enjoyed in 1950-70 before the population plunged in the 1970s.  It’s really only in the last ten years that the population has grown much beyond where it was in the 1970.

This matters because I think you can argue pretty plausibly that New York’s infrastructure has put some limits on the city’s growth–that by 1970 the city had about grown up to those limits, and that we can push beyond them only slowly.  The rail and bus lines that sustain the business district are pretty much saturated, and the roads and bridges can’t really carry many more cars at peak times.  Adding busses could conceivably help you handle some of the overflow, but unless those busses actually replace cars, they’ll also make traffic slower.
Unless you plan to fill the city entirely with retirees who don’t need to go to work, there’s actually not that much more room to build up New York–you could put the people there, but they wouldn’t be able to move.  And even the retirees would require goods and services that choke already very congested entry and exit points.  There has been peripatetic talk about switching all deliveries to night, but that would disturb the sleep of low-floor apartment dwellers, and be fantastically expensive, forcing every business to add a night shift.
At the very least, the current city dwellers are right that adding more people would add a lot more costs to them–crammed train cars, more expensive goods.  In New York, much more than in other places, the competition for scarce resources like commuting space is extremely stark.
That doesn’t mean it is impossible to add a lot more people to New York.  But doing so requires not just changing zoning rules–as far as I know, there’s already quite a lot of real estate in the outer boroughs that could accommodate more people, but it’s not close to transportation, so it’s not economically viable.  If you want to add a lot more housing units, you also need to add considerable complimentary infrastructure, starting with upgrading the rest of the subway’s Depression-era switching systems (complicated and VERY expensive because unlike other systems, New York’s trains run 24/7).  And ultimately, it’s going to mean adding more subway lines, because short of building double-decker streets, there’s no other way for enough people to move.
Those lines don’t have to go to the central business district; there’s already been some success developing alternate hubs in Queens and Brooklyn.  But they do have to go from residential neighborhoods to somewhere that people work, and they have to add actual extra carrying capacity to the system–line extensions do no good if the trains are already packed to bursting over the high-traffic areas of the route.

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Filed under Go Meta, Infrastructure

We’re Talking About Money, Honey

Felix Salmon:

Individuals are doing it, banks are doing it — faced with the horrific news and pictures from Japan, everybody wants to do something, and the obvious thing to do is to donate money to some relief fund or other.

Please don’t.

We went through this after the Haiti earthquake, and all of the arguments which applied there apply to Japan as well. Earmarking funds is a really good way of hobbling relief organizations and ensuring that they have to leave large piles of money unspent in one place while facing urgent needs in other places. And as Matthew Bishop and Michael Green said last year, we are all better at responding to human suffering caused by dramatic, telegenic emergencies than to the much greater loss of life from ongoing hunger, disease and conflict. That often results in a mess of uncoordinated NGOs parachuting in to emergency areas with lots of good intentions, where a strategic official sector response would be much more effective. Meanwhile, the smaller and less visible emergencies where NGOs can do the most good are left unfunded.

In the specific case of Japan, there’s all the more reason not to donate money. Japan is a wealthy country which is responding to the disaster, among other things, by printing hundreds of billions of dollars’ worth of new money. Money is not the bottleneck here: if money is needed, Japan can raise it. On top of that, it’s still extremely unclear how or where organizations like globalgiving intend on spending the money that they’re currently raising for Japan — so far we’re just told that the money “will help survivors and victims get necessary services,” which is basically code for “we have no idea what we’re going to do with the money, but we’ll probably think of something.”

Tyler Cowen:

For reasons which you can find outlined in my Discover Your Inner Economist, I am generally in sympathy with arguments like Felix’s, but not in this case.  I see a three special factors operating here:

1. The chance that your aid will be usefully deployed, and not lost to corruption, is much higher than average.

2. I believe this crisis will bring fundamental regime change to Japan (currently an underreported issue), rather than just altering the outcome of the next election.  America needs to signal its partnership with one of its most important allies.  You can help us do that.

3. Maybe you should give to a poorer country instead, but you probably won’t.  Odds are this will be an extra donation at the relevant margin.  Sorry to say, this disaster has no “close substitute.”

It may be out of date, but the starting point for any study of Japan is still Karel von Wolferen’s The Enigma of Japanese Power.   Definitely recommended.

Adam Ozimek at Modeled Behavior

John Carney at CNBC:

The fact that Charlie Sheen has decided donate a portion of the money from his live stage shows to help people affected by earthquake in Japan should be all you need to know that donating money to Japan is a bad idea.

Earthquakes, hurricanes, floods, tsunamis, volcanoes and even chemical or nuclear disasters can provoke a strong urge on the part of people to want to provide disaster relief in the form of charitable donations directed at those afflicted by the most recent disaster. This is almost always a mistake.

Almost all international disaster relief is ineffective. Part of the reason for this is that relief groups rarely know who is suffering most, or how aid can be most effectively directed.

Reihan Salam

Annie Lowrey at Slate:

Concern and generosity are entirely human—and entirely admirable!—responses to the disaster and tragedy in Japan. But if you really want to be helpful, as Felix Salmon and others have noted, there might be better ways to donate your money than just sending it to Japan. There are two basic rules for being useful: First, give to organizations with long track records of helping overseas. Second, leave it up to the experts to decide how to distribute the aid.

The first suggestion is simple: Avoid getting scammed by choosing an internationally known and vetted group. Big, long-standing organizations like Doctors without Borders and the International Committee of the Red Cross are good choices. If choosing a smaller or local group, try checking with aid groups, Guidestar, or the Better Business Bureau before submitting funds.

The second suggestion is more important. Right now, thousands of well-intentioned donors are sending money to Japan to help it rebuild. But some portion of the donated funds will be earmarked, restricted to a certain project or goal, and therefore might not do the Japanese much good in the end. Moreover, given Japan’s extraordinary wealth and development, there is a good chance that aid organizations will end up with leftover funds they will have no choice but to spend in country—though the citizens of other nations wracked by other disasters, natural or man-made, might need it more. Aid organizations can do more good when they decide how best to use the money they receive.

Taylor Marsh:

As for giving to Japan, don’t and here’s why, unless you want to give specifically to an organization like Doctors Without Borders.

Mahablog:

Felix Salmon wrote a column for Reuters warning people “don’t donate money to Japan.” His argument is that donations earmarked for a particular disaster often “leave large piles of money unspent in one place while facing urgent needs in other places.”

Commenters pointed out that many relief organizations accept donations with a disclaimer that surplus funds may be applied elsewhere. And other relief organizations don’t allow for earmarking of donations at all, but that doesn’t mean they can’t use a burst of cash during an extraordinary crisis.

Salmon also wrote, “we are all better at responding to human suffering caused by dramatic, telegenic emergencies than to the much greater loss of life from ongoing hunger, disease and conflict. That often results in a mess of uncoordinated NGOs parachuting in to emergency areas with lots of good intentions, where a strategic official sector response would be much more effective.”

That last probably is true. I also have no doubt that various evangelical groups already are planning their crusades to Japan to rescue the simple indigenous people for Christ in their time of need. (Update: Yep.)

So if you do want to donate money, I suggest giving to the excellent Tzu Chi, a Buddhist relief organization headquartered in Taiwan. Relief efforts in Japan are being coordinated through long-established Tzu Chi offices and volunteer groups in Japan, not by random do-gooders parachuting in from elsewhere. Tzu Chi does a lot of good work around the globe, so your money will be put to good use somewhere.

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Filed under Foreign Affairs, Natural Disasters

An Apple A Day, Yadda, Yadda, Yadda

Ezra Klein:

File this one under “health care doesn’t work nearly as well as we’d like to believe.” A group of researchers followed almost 15,000 initially healthy Canadians for more than 10 years to see whether universal access to health care meant that the rich and the poor were equally likely to stay healthy. The answer? Not even close.

The researchers ran the data two ways: High-income patients vs. low-income patients, and highly educated patients vs. less educated patients. Over the course of the study, the high-income patients were only 35 percent as likely to die as the low-income patients, and the highly educated patients only 26 percent as likely to die as the low-income patients. And the problem wasn’t that the low-income and low-education patients were hanging back from the health-care system. Because they were getting sick while their richer and better educated counterparts weren’t, they actually used considerable more in health-care services.

The problem, the researchers say, is that the medical system just isn’t that good at keeping people from dying. “Health care services use by itself had little explanatory effect on the income-mortality association (4.3 percent) and no explanatory effect on the education-mortality association,” they conclude.

You don’t want to over-interpret this data. It’s possible that in the absence of insurance, the gap would be much wider. Indeed, there’s good evidence suggesting that’s true. Nevertheless, this should make us very skeptical about a world in which we’re spending almost one out of every five dollars on health-care services. Universal insurance is crucial both for certain forms of health care and for economic security. But as I’ve argued before, it’s probably not the best way to make people healthier. Rather, the best way to make people healthier would be to get health-care costs under control so there’s more money in the budget for things like early-childhood education and efforts to strip lead out of walls, both of which seem to have very large impacts on health even though we don’t think of them as health-care expenditures.

Arnold Kling:

And that is from a study in Canada.3. The Washington Post reports,

A 2006 study by the U.S. Department of Education found that 36 percent of adults have only basic or below-basic skills for dealing with health material. This means that 90 million Americans can understand discharge instructions written only at a fifth-grade level or lower.

My guess is that if you want to improve health outcomes in the United States, ignore health insurance and focus on literacy. Even if it has nothing to do with whether or not they can follow a doctor’s written instructions, my guess is that better literacy has a positive impact on health outcomes. The question is whether educators know enough about how to improve literacy to be able to do so effectively. I hope that is the case.

Tim Carney at The Examiner:

During debate over the health-care debate, liberal blogger Ezra Klein wrote that blocking the legislation would “cause the deaths of hundreds of thousands of people.” The liberals were relying on a study from the Urban Institute saying 20,000 people die a year because they are uninsured. Free-market blogger Megan McArdle read the study and concluded:

when you probe that claim, its accuracy is open to question. Even a rough approximation of how many people die because of lack of health insurance is hard to reach. Quite possibly, lack of health insurance has no more impact on your health than lack of flood insurance.

Klein came back with this:

I don’t want to be too harsh, and I don’t want to imply that anyone is sitting around twirling their mustache thinking up ways to hurt poor people. But opposition to health-care reform (which is different than opposition to the people who would be helped by health-care reform) is leading to some very strange arguments about the worth of health-care insurance — arguments that don’t fit with previous opinions, revealed preferences, or even the evidence the skeptics are citing.

But today, with the fight over ObamaCare behind us, and the President dealing with expectations over what his bill can deliver, Klein has a blog post that goes much farther than McArdle ever did. Klein’s headline:

Health care doesn’t keep people healthy — even in Canada

The main thrust of Klein’s blog post:

The problem, the researchers say, is that the medical system just isn’t that good at keeping people from dying. “Health care services use by itself had little explanatory effect on the income-mortality association (4.3 percent) and no explanatory effect on the education-mortality association,” they conclude.

I don’t want to be too harsh, and I’ve got nothing against what Klein used to call “arguments that don’t fit with previous opinions,” so I’ll just recommend you spend more time reading Megan McArdle.

The same is true, I’ll bet, for folks like Tim Carney who like to argue that medical care is ineffective as a way to argue against subsidizing health insurance for poor people. But for the record, the best evidence we have suggests that health-care coverage does much more for the health of poorer people than it does for the health of well-compensated, highly educated people like Carney. That folks like Carney use that evidence to continue a status quo in which they have health insurance and the poor don’t is, I think, proof of how seriously they take their arguments on this score, and of what this discussion is really about — and the answer isn’t “improving the health of the population.”

Karl Smith at Modeled Behavior:

I suspect we have two things going on.First, education confers status and status is related to health outcomes. For example Oscar winners live longer than those simply nominated. How this link occurs is not totally clear. It seems that the hormones associated with stress and disappointment – cortisol for example – reduce long run health. However, this may not be the mechanism. No one really knows at this point.

Second, for a long list of reasons there is correlation between education and physical attractiveness. Physical attractiveness is by evolutionary design a proxy for health. Which to say, healthier folks are more likely to become well educated.

This makes me doubt that power of health improvements from increasing education.

In general it is just damn hard to improve health outcomes. Our bodies are the product of about 4 billion years of evolution. Just making sense of how they work is hard enough. Making them work better is a herculean task.

Jim Manzi at The American Scene:

There is a debate going on in the blogosphere between Ezra Klein, Arnold Kling, Karl Smith, Tim Carney and others about, to put it crudely, whether health care really affects health that much. This is, in part, a proxy debate for whether it is worth it for the U.S. government to provide generous universal health care financing for all of its citizens (or, I suppose, residents).

Either position can be caricatured. On one hand, no sane person would want to be without the advances of modern medicine. Recently, a little girl I know had scarlet fever. A century ago, this would very possibly have meant burying a small corpse; today, it implies a 10-day cycle of swallowing medicine at breakfast and dinner. There are few people on Earth who have as much reason to be proud of how they spend their work week as pharmaceutical researchers.

On the other hand, the link from alternative methods of health care finance, through the actual differences in provision of medical care these imply in the contemporary U.S., to the actual differences in health outcomes these treatment differences would cause, isn’t nearly so obvious. The net health effect of providing universal health care coverage versus some alternative financing system is an empirical question, not a philosophy debate.

I’ve written a lot about why randomized experiments are so critical to understanding cause-and-effect relationships in social policy. In the case of health care financing, the reason is that what system of health care financing you have (high-quality “go to any doctor” plan; good HMO; catastrophic-only plan; VA; go to an emergency room because you are uninsured, etc.) is bound up with a myriad of other factors that influence health. A randomized experiment allows us to isolate the impact of the system of health care financing.

To my knowledge, the only large-scale randomized experiment in the U.S. that has tested the actual effects on health of providing various kinds of healthcare financing was the RAND Health Insurance Experiment (HIE). In this experiment, thousands of families were randomly assigned to one of five different health insurance plans that ranged from something like a plan that provides free health care, to something like a pure catastrophic-only plan in which consumers pay out-of-pocket for day-to-day healthcare. The study tracked what exact health care services each group used, and how their health varied over a period of 3 – 5 years.

Ezra Klein describes this experiment as “the best evidence we have,” and writes that it “suggests that health-care coverage does much more for the health of poorer people than it does for the health of well-compensated, highly educated people.” His statement is correct, but as a summary of the results of this experiment, seems to me to be radically incomplete. In fact, the experimenters wrote of the findings that “cost sharing reduced the use of nearly all health services,” but “the reduction in services induced by cost sharing had no adverse effect on participants’ health.” Think about that. Providing people coverage of their medical costs caused no average improvement in health.

Klein is correct that there appeared to be a net health benefit for the poorest participants, but this was for a tiny proportion of the population, and for a small subset of medical conditions. According to the study, “The poorest and sickest 6 percent of the sample at the start of the experiment had better outcomes under the free plan for 4 of the 30 conditions measured.” There are technical reasons why conclusions from such a experiment are not reliable for post hoc subgroups in the way that they are for average comparison of a test group versus a control group; but even if we were to accept this finding as valid, it’s not obvious to me that we would want to devise a health care financing system for the United States around helping 6% of the population partially ameliorate about 10% of their potential health problems, as opposed to developing some specific supplementary programs for these issues, if they could be addressed feasibly.

Klein clearly has a very sophisticated take on the issue, and wrote in 2009 that health care reform is not primarily about improving health, but in reducing how much we spend on it. As he put it, “The purpose of health reform, in other words, is to pay for health care — not to improve the health of the population.” Fair enough. But the real debate, then, would be about whether market forces or bureaucratic control would be better at reducing costs, not about which would be better at promoting health for the “poorest and sickest” or anybody else. It wouldn’t be about getting better health outcomes.

A single experiment like the RAND HIE is not definitive. Among other things: it finished in 1982, and we live in a different world; any such experiment requires replication; it might be that the important health effects take much longer than 5 years to materialize, and so on. But as an observer of the health care debates, it always struck me as fascinating that the fact that the “best evidence we have” showed that providing health care coverage doesn’t actually improve average health wasn’t treated as more central.

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Filed under Health Care

What DREAMs May Come

John Hudson at The Atlantic with a round-up. Hudson:

In conservative blogging circles, the Democrat’s proposed DREAM Act is causing quite a stir.

Heather MacDonald at The Corner:

An illegal alien who brings his or her child into the country illegally undoubtedly assumes that that child will attend American schools at taxpayer expense.  The parent may also hope that the child will graduate from high school and go on to college. The DREAM Act, newly reintroduced by Sen. Harry Reid to the lame-duck session, puts the official imprimatur on those unofficial intentions, declaring that the U.S. expects and even welcomes such behavior.

Under the DREAM Act, any illegal alien under the age of 35 who entered the country before the age of 16 can apply for legal status if he obtains a GED or graduates from high school and begins post-secondary education. Gang members and those with DUI convictions are not barred from DREAM Act eligibility. The act signals to prospective illegal aliens the world over that if they can just get their child across the border illegally, they have put him on the path towards U.S. citizenship — and, as significant, the child will then be able to apply for legal status for his parents and siblings. And every such student will be granted in-state tuition rates by federal fiat, even if the state in which he resides bans in-state tuition for illegal immigrants.

DREAM Act beneficiaries are certainly the most sympathetic category of amnesty candidates, and opponents of the act have been accused of hard-heartedness. Yet the act indisputably encourages and incentivizes more illegal behavior. It continues to send the message that the U.S. is not serious about its immigration laws, but will always eventually confer the same benefits on people who break the law entering the country as on those immigrants who respected American law. The huge administrative costs of the act — it is conservatively expected to qualify 2.1 million illegal aliens for amnesty — will be borne by U.S. taxpayers and by legal aliens, whose fees fund the citizenship service

Will Wilkinson at Democracy in America at The Economist:

I think it’s useful in this debate to be as clear we can be. We’re mostly talking about Mexicans, so let’s just talk about Mexicans. Lots and lots and lots of Mexicans come across the border to the United States not because they’re a nation of heedless antinomians, but because this is (was?) where the work is. Many come because much of their their family resides here, legally or ilegally. It’s worth noting that the southwestern portion of the United States just was Mexico, once upon a time. There is an undeniable economic and cultural continuity between Mexico and the United States. The border distorts and disrupts it, but it cannot and will never put an end to it. The pattern of traffic between these two countries is not something to choke off, but something sensibly to regulate and rationalise.

“But we do regulate it sensibly!” you may insist. Well, suppose you’re a hardworking and ambitious Mexican with no family legally in the States and not much education, but you’ve got friends there, 50 miles away, and they tell you they’re getting steady, relatively well-paying work. One of the things that’s so attractive to you about America is it’s sound institutions, including its sturdy rule of law. You would very much like to migrate to the United States legally. So what are your options? Zip. Zilch. Zero. You have no options!  There is no way to “get in line” and “wait your turn” because there is no line for you to stand in that leads to the legal right to live and work in the United States. So you pack up one day, take a hair-raising hike through the desert with your young daughter, meet up with your friends in Tucson, and get to work on the American dream. What were you supposed to do? Consign yourself and your daughter to a life on the edge of poverty out of respect for the American rule of law? Please.

The DREAM Act sends the message that although American immigration law in effect tries to make water run uphill, we are not monsters. It says that we will not hobble the prospects of young people raised and schooled in America just because we were so perverse to demand that their parents wait in a line before a door that never opens. It signals that we were once a nation of immigrants, and even if we have become too fearful and small to properly honour that noble legacy, America in some small way remains a land of opportunity.

Yes, the DREAM Act also incentivises illegal activity. But if the activity is not one that ought to be illegal, perhaps we should consider changing the law? Something to consider, anyway. In the meantime, this small reform will make America a somewhat more decent place.

David Frum at The Week:

Well that seems compassionate! And it’s only a small group of people we’re talking about, right? Just 60,000 a year.

Wrong. Hugely wrong.

Let me give some alternative scenarios, all of which would become possible if the DREAM Act were enacted.

Possibility No. 1: You are an illegal alien who entered the country at age 21, too old to qualify for DREAM. You’ve been apprehended and are threatened with deportation. What to do? Simple — using falsified papers, you file an application under DREAM anyway. Filing an application immediately halts deportation proceedings.

Wait a minute, you wonder: won’t using false papers get me in trouble? Not a bit. Just the opposite. Even if the fraud is detected and your application is refused, you simply revert to your previous status. In the process, however, you have gained a new legal advantage: DREAM forbids the Department of Homeland Security from using any information in a DREAM application in deportation proceedings. So now you argue that the deportation proceedings are fatally tainted because you have yourself provided DHS with information that they could now use against you.

The ploy might fail. Still: what a great no-risk option!

Possibility No. 2:. You’re a 40-year-old illegal alien who entered the country as an adult. You have a third-grade education. You are barely literate even in Spanish. Your back is bothering you; you are not sure how long you can continue working. Quite frankly, no country on earth would regard you as a desirable immigrant. Don’t despair. DREAM can offer you too an amnesty and gain you access to a lifetime of taxpayer-funded disability payments.

You have kids don’t you? If they apply successfully under DREAM, they can sponsor you. While some talk about DREAM applicants as “skilled” immigrants, in fact the law’s requirements are so lenient that your kids would have to mess up very seriously to forfeit the law’s benefits. All they need to do is enroll in some institution of higher learning or the military and survive there for two years. Graduation is not required.

Does that sound expensive? Don’t worry: your kids will receive in-state tuition rates and will be eligible for federal student aid.

They’re too young for university? Don’t worry: They can file the papers at age 12. As soon as they give notice of their future intent to attend to college or join the military, they immediately receive safe haven.

They don’t find military life attractive? If they can show “significant hardship,” they can quit before their two years have been fulfilled. Honorable discharge is NOT a requirement under the DREAM law.

They have had a little trouble with the law? Maybe a history of moving violations that put people’s lives at risk? So long as they have not been convicted of a serious crime, they’re okay.

DREAM is an amnesty not only for the people described by The Economist blogger, but also for all their parents and siblings.

Possibility No. 3. I’m still living in Guatemala, but I’d dearly like to come to the United States. Can DREAM help me?

Si se puede.

DREAM sends a message to every teenager on planet Earth: Come to America. If you enter the United States before age 16, and if you can remain here for five years (or can buy papers that purport to show you have lived here for five years), you’re as good as a citizen already. No deportation proceedings. No risk that your application will be used against you. Lenient and subsidized requirements for permanent residency. What’s not to love?

Wilkinson responds:

First, it’s not quite right to think of DREAM, a narrowly tailored provision that offers a relatively small group of young people a path to citizenship only if they are able to clear a number or hurdles, as an “amnesty”. Second, the process by which our notional 40-year-old undocumented immigrant can become a citizen is precisely the same as the process by which Mr Frum’s Canadian father could become a citizen through Mr Frum’s sponsorship. It’s not amnesty, and Mr Frum is simply goading the nativist rabble by choosing to misuse language in this way. Moreover, Mr Frum effectively misrepresents his scenario by conveniently omitting the dispiritng timeline. Let’s fix that.So, you’re Mr Frum’s 40-year-old undocumented immigrant. DREAM, which requires you to be between 12 and 35 at the time of application, does nothing for you, even if you did come into the country as a child. But you have a daughter who does qualifies. Woohoo! You’re in like Flynn, right? Well, no. Probably not.

Suppose DREAM becomes law in 2011. Your kid applies right away and earns status as a “conditional legal resident” (or “CLR”). Now, can you your kid sponsor you for legal permanent residency? No, she cannot. Only citizens can sponsor their parents. Suppose your kid goes to college and stays out of trouble. The earliest she can apply to become an “LPR” or “legal permanent resident” (ie, get a green card) is 5 1/2 years after approval for conditional permament residency. That’s some time in 2016 at the earliest. Now, a green card-holder can apply for citizenship after five years. Under DREAM, as I understand it, once a CLR is approved for a green card, the time spent as a CLR counts toward citizenship. So someone approved for a green card under the auspices of DREAM ought to be able to apply for citizenship right away. Let’s assume miracles from the bureaucracy and say all these applications are processed and approved at the speed of light. So, thanks to DREAM, your daughter will be a citizen no sooner than 2016, at which point she can finally sponsor you (as long as she’s over the age of 21). But don’t get excited yet! You entered the country illegally, and were working illegally before applying for a green card, and that means you aren’t eligible for a green card. ( See question 10 here.) So, sorry, DREAM can’t help you.

Suppose you entered the United States legally on a visa and then left your minor daughter here once your visa expired, or something like that. In that case, she could sponsor you for permanent residency after qualifying for citizenship through DREAM. In this case, you could be an American as soon as 2021, assuming magical bureaucratic efficiency. Of course, among those young people able to work their way to citizenship through DREAM, how many will have parents who qualify for sponsorship? Not many.

Mr Frum ends by spreading a falsehood. He writes:

And best of all: DREAM stands as an ongoing invitation, forever and ever. DREAM’s benefits extend not only to people who happen NOW to be illegally present inside the United States. DREAM’s benefits will be extended to all those who may enter illegally in future.

This is flat-out wrong. Unfortunately, DREAM is a niggardly, one-time affair. According to the text of the bill, DREAM applies only if “the alien has been physically present in the United States for a continuous period of not less than 5 years immediately preceding the date of enactment of this Act…” That is to say, DREAM wouldn’t apply to kids who came to America three years ago, much less to any kids who comes in the future. Mr Frum is sowing confusion when he says that

DREAM sends a message to every teenager on planet Earth: Come to America. If you enter the United States before age 16, and if you can remain here for five years (or can buy papers that purport to show you have lived here for five years), you’re as good as a citizen already.

Were Mr Frum to read the bill, he would see that he has made a serious error. DREAM is a stopgap measure of exceedingly limited scope which would slightly mitigate the injustices wrought by America’s reality-defying immigration and citizenship law. I look forward to his correction.

David Frum here, here and here. Frum:

I’ll answer Will Wilkinson’s specific points, but I first have to say this: Wilkinson’s mode of arguing exemplifies why the immigration debate doesn’t ever seem to go anywhere.

Advocates of more and more immigration habitually use a 4-stage method best identified by Antony Jay and Jonathan Lynn in the Yes Minister series. The stages go as follows:

1) Nothing is going to happen.

2) Something may be about to happen, but we should do nothing about it.

3) Maybe we should do something about it, but there’s nothing we *can* do.

4) Maybe there was something we could have done, but it’s too late now.

Immigration proponents are so convinced that more immigration is good in itself that they do not always worry as much as they should about the way in which they achieve their aims. They sell huge society-changing transformations as small incremental steps.

When the sales pitch proves wrong or hugely exaggerated, they seem untroubled. Wilkinson’s own blitheness perfectly exemplifies the pattern. Running through his first post is a persistent undertone that the very idea of immigration laws is a big mistake. “Yes, the DREAM Act also incentivises illegal activity. But if the activity is not one that ought to be illegal, perhaps we should consider changing the law?”

Then when I point out the various ways in which this incentive operates, he squawks that the law in fact is “narrowly tailored” and applies only to “a relatively small group.”

Is it too Freudian to suspect that the lurid accusation of deceit repeatedly lodged by Will Wilkinson reveal an awareness of the credibility problems on his side of the argument?

Adam Ozimek at Modeled Behavior

Mark Krikorian at The Corner:

The Democrats are trying to tinker with the DREAM Act to make it more palatable. Most notably, they’ve lowered the top age for eligibility from 35 to 30, but that misses the point. As I note in my piece on the homepage, what’s important is the age when they arrived, not how old they are now — someone who’s lived here continuously since they were 12 months old is simply not in the same boat as someone who arrived a month before their 16th birthday and is now 21, but DREAM treats them the same.

And I didn’t even address the cost issue, about which my colleague Steven Camarota writes today. He estimates that the bill’s college-attendance requirements will cost U.S. taxpayers $6.2 billion in subsidies for educating the illegal aliens who are expected to enroll to get a green card. And the roughly 1 million additional illegal-alien students at state universities and community colleges will reduce the educational opportunities that would otherwise have been available to Americans.

Jena McNeill at Heritage:

There is a big reason why the DREAM Act was a campaign promise for Reid, the same reason the White House recently hosted high-level meetings with members of the Hispanic caucus regarding the bill and has expressed so much interest in passing it: The act would be an amnesty for millions of illegal aliens inside the United States. This is something the White House and Reid have been desperately seeking through a comprehensive immigration bill, but has yet to gain traction in Congress.

Amnesty has never been a good way to solve the illegal immigration problem—whether through the DREAM Act or a mass legalization. As we learned in the 1986 amnesty, doing so simply encourages more individuals to break the law and enter the United States illegally. Among several other concerns, the DREAM Act rewards those who violated immigration laws by granting them in-state tuition while state laws deny legal aliens on student visas tuition benefits. The act’s lax standards would make it tough to police for fraudulent applicants, while the government would be prohibited using information submitted to deport anyone who files a DREAM Act application and does not qualify.

If Reid moves forward, the DREAM Act debate will almost certainly be filled with nice anecdotes about college education, military service, and additional tax revenues. Don’t be misled. Despite these seemingly humanitarian aims, the White House and Reid know what the DREAM Act debate it really about—finding a way to avoid the law and legalize illegal immigrants inside the United States. Packing amnesty in pretty paper doesn’t mean it isn’t still an amnesty. Congress and the White House need to focus instead on reforms to the immigration system that will enforce the law, maintain security, and promote the economy. Such a system requires robust enforcement of immigration laws inside the U.S., a secure border, reforms in the visa system, and cooperation with Mexico and other appropriate countries on law enforcement/public safety issues as well as free market initiatives.

David Knowles at AOL:

The Dream Act, legislation designed to give children of undocumented workers who came to the United States under the age 16 a path to citizenship in exchange for a promise to attend college or join the military, will be debated in Congress today.

Alabama Republican Sen. Jeff Sessions, a staunch opponent of the Dream Act, penned an op-ed for CNN in which he stated the following:

Because the Dream Act does not expire, or impose any numerical cap, the scope of the bill’s amnesty program could be enormous. And by rewarding illegality, the legislation will incentivize even more of it — and send the message that future illegal immigrants will be rewarded with amnesty as well.

Meanwhile, one of the bill’s sponsors, Sen. Dick Durbin, D-Ill., pointed out that punishing the children of illegal immigrants who have grown up as Americans is itself un-American.

These brave young men and women, who have all this energy and all this dedication, have no country. They have no legal status in this country. They didn’t have any voice in that decision about whether to come here. They were the kids brought in the back of a car or the back of a truck into the United States. But they grew up here believing America was home.

Gary Locke, President Barack Obama’s commerce secretary, agrees with Durbin, telling reporters:

The American taxpayer has invested in them, and unless we pass the Dream Act, we will keep throwing away this hard-earned investment. Also, a quarter of startup companies that eventually went public in the past 15 years were started by immigrants, he said, meaning some of these students could “develop the next Google or Intel.

The conservative Heritage Foundation, on the other hand, sees little to like about the proposed legislation:

Among several other concerns, the Dream Act rewards those who violated immigration laws by granting them in-state tuition while state laws deny legal aliens on student visas tuition benefits. The act’s lax standards would make it tough to police for fraudulent applicants, while the government would be prohibited using information submitted to deport anyone who files a Dream Act application and does not qualify.

 

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Filed under Immigration, Legislation Pending

Giovanni Peri Does A Study (And Pedro Should Buy A House)

Nathaniel Cahners Hindman at The Huffington Post:

Champions of strict immigration reform, be warned: there may be an economic consequence to tightening America’s borders.

Immigration is actually good for employment, wages and productivity, according to a new study from the San Francisco Fed.

States that have had a large influx of immigrants tended to produce more, hire more and pay workers more than states that have few new foreign-born workers, the study shows. For every one percent increase in employment from immigration, the study finds, a state will see a .4 to .5 percent increase in income per worker.

In conducting the study, Giovanni Peri, an associate professor at University of California, Davis, compared output per worker and employment in states that have had large immigrant inflows with data from states that have few immigrant inflows. Peri found no evidence that immigrants “crowd-out” employment for American citizens.

Peri concludes that immigration boosted states’ output, income and employment because the economies “[absorbed] immigrants by expanding job opportunities rather than by displacing workers born in the United States.” Further, the results of the study support the theory that U.S.-born workers and immigrants tend to take different occupations, says Peri.

Felix Salmon:

Never mind the stimulus vs austerity debate: here’s something that both sides should be able to get behind. It’s a simple legislative fix which increases tax revenues without raising taxes; which increases the demand for housing; which increases the economy’s productive capacity; and which boosts wages for American workers. It’s about as Pareto-optimal as legislation gets. So let’s open the borders, and encourage much more immigration into the US!

The SF Fed’s Giovanni Peri has the latest research on the subject:

Statistical analysis of state-level data shows that immigrants expand the economy’s productive capacity by stimulating investment and promoting specialization. This produces efficiency gains and boosts income per worker. At the same time, evidence is scant that immigrants diminish the employment opportunities of U.S.-born workers.

The effects of immigration on US wages are large, positive, and significant:

Over the long run, a net inflow of immigrants equal to 1% of employment increases income per worker by 0.6% to 0.9%. This implies that total immigration to the United States from 1990 to 2007 was associated with a 6.6% to 9.9% increase in real income per worker. That equals an increase of about $5,100 in the yearly income of the average U.S. worker in constant 2005 dollars. Such a gain equals 20% to 25% of the total real increase in average yearly income per worker registered in the United States between 1990 and 2007.

It’ll be interesting to see how much debate this paper receives. Anti-immigration forces are more likely to ignore it than attack it, I think, if they don’t like what it says. And George Borjas seems to have stopped blogging over a year ago, which is a shame, because he would be the perfect foil for Peri.

Kevin Drum:

What’s really striking about this is that the very mechanism that provides the productivity boost — the fact that immigrants don’t speak English well and therefore push native workers out of manual labor and into higher-paying jobs — is precisely the thing that most provokes the immigrant skeptics. They all want immigrants to assimilate faster and speak English better, but if they did then they’d just start competing for the higher paying jobs that natives now monopolize.

The usual caveats apply here. This is only one study. (Well, two actually, but still.) And in order to generate useful results the authors have to control for a whole menagerie of variables that can muck things up. There’s always a chance that some important variable got missed or that another one got controlled for incorrectly. So don’t take this as the last word. It does, however, join a growing literature that suggests immigration has no negative effect on wages and might actually have a positive effect. Interesting stuff.

Matthew Yglesias:

Think of some classic “bad” jobs that we find a lot of immigrants doing—basically the tidying-up industries. Now imagine that tomorrow 75% of the maids, the janitors, the dishwashers, the gardeners, the people who make the beds at hotels, etc. are all teleported to Mexico. This is a class of low-income people that’s vanished, so it’s possible that their teleportation will make certain statistical sets look better. But what’s going to be the impact on the living standards of those of us Left Behind in the United States of America?

Well there are really only two things that can happen here. One is that to an extent things can just be allowed to be dirtier and the other is that to an extent people can spend less time doing things that aren’t cleaning and more time cleaning. Down the first pathway, overall living standards decline because of the increase in the overall level of filth. Down the second pathway, overall living standards decline because of the decrease in the production of other goods and services. It’s true that amidst this overall decline in living standards some specific individuals would probably benefit (the remaining 25% of cleaners, for example) which is why there’s room for empirical research like the SF Fed paper linked above, but it’s easy to see that on the whole immigration boosts living standards even before you consider the positive impact on the immigrants.

At issue is the fact that here in the developed world we’re not peasant farmers fighting to support ourselves on a fixed quantity of viable agricultural land. When new workers come onto the scene and do jobs, they create more surplus. To get the kind of zero-sum effect that people think occurs when you get rid of immigrants, what you would actually need to do is send retirees to the Death Panels and turn them into Soylent Green. But of course even there we note that the interests of elderly people matter, morally speaking, and it would be grossly wrong to simply write them off in the interests of efficiency.

Adam Ozimek at Modeled Behavior:

Calculated Risk tells us the key to fixing the housing market:

The key to the housing market is to absorb the excess inventory. That means more households and fewer new housing units. Luckily housing starts are very low right now, but unfortunately there is very little job growth (and therefore little new household formation).

But job growth is not the only way to get new household formation, as I’ve argued again and again, we have immigration at our disposal. Of course, there are the usual complaints about jobs. But the weakness of this argument can be seen in a new paper Felix Salmon directs us to:

Statistical analysis of state-level data shows that immigrants expand the economy’s productive capacity by stimulating investment and promoting specialization. This produces efficiency gains and boosts income per worker. At the same time, evidence is scant that immigrants diminish the employment opportunities of U.S.-born workers.

It is well understood that the removing capital tariffs and protectionism would increase overall efficiency and incomes. Since immigration restrictions are labor market protectionism we shouldn’t be surprised to see that is has similar positive effects.

Unfortunately, journalists and pundits don’t seem to oppose labor protectionism nearly as much as they oppose capital protectionism. We would see an outcry among op-eds and pundits if we were seeing a worldwide rise in capital protectionism, because they recognize that beggar-thy-neighbor policies make everyone worse off. But no similar reaction has come from the rise in global labor protectionism

More Yglesias:

[…] Something that certainly shouldn’t be controversial is the fairly obvious point that if we allowed more immigrants to come to the United States this would bolster home price values in a clearer and more sustainable way than any kind of crazy patchwork of tax breaks. Right now we have more houses than households, if we had more immigrants we’d have more households. We’d work off the excess inventory more quickly, and be closer to the day when home construction returns as a viable economic sector.

Adam Ozimek offers up some quantitative research on the scale of the effect citing research from Albert Saiz (PDF) indicating that “[i]mmigration inflows equal to 1% of a city’s population were associated with increases in average or median housing rents and prices of about 1%.”

One way to especially take advantage of this effect and politically frame it as housing stabilization policy would be to create a special new class of visa specifically for people who purchase homes in the United States.

Patrick Appel at Sullivan’s place

Reihan Salam:

Well, I wouldn’t describe myself as belonging to the “anti-immigration forces.” But I will say that the study’s findings are hardly surprising. We’ve known for a pretty long time that immigration tends to increase wage dispersion by raising effective incomes at the top and depressing them at the bottom. And Peri’s findings regarding the impact on average income doesn’t tell us much about the distribution of gains. Felix excerpts the following from Peri:

Over the long run, a net inflow of immigrants equal to 1% of employment increases income per worker by 0.6% to 0.9%. This implies that total immigration to the United States from 1990 to 2007 was associated with a 6.6% to 9.9% increase in real income per worker. That equals an increase of about $5,100 in the yearly income of the average U.S. worker in constant 2005 dollars. Such a gain equals 20% to 25% of the total real increase in average yearly income per worker registered in the United States between 1990 and 2007. [Emphasis added.]

But how does immigration impact the median worker rather than the average worker? And how does it impact wages of workers at, for example, the 10th percentile?

In 2006, Peri co-authored a paper with Gianmarco I.P. Ottaviano of the Universita’ di Bologna that added an important wrinkle [PDF]:

Using our general equilibrium approach we estimate that physical capital adjsust promptly and fully to immigration (already within one year) and that immigrants are imperfect substitutes for US-born workers within the same education and experience group (because they choose different occupations and have different skills). These two facts, overlooked by the previous literature, imply a positive and significant effect ofimmigration on the average wage of U.S.- born workers, already in the short run. They also imply a small negative effect of immigration on wages of uneducated US born workers and a positive wage effect on all other US-born workers. Hence only a very small fraction of the increase in College/High School Dropout wage gap during the 1990-2004 period can be attributed to immigration.

A central question is how we weight the impact of immigration on “uneducated” US born workers. I tend to think the U.S. can accommodate a relatively large immigrant influx — I’d like to see an influx only slightly smaller than what we have now when we combine authorized and unauthorized immigrants, but with authorized and skilled immigrants much closer to 100 percent of the total than is presently the case. But that’s because I’m less concerned about wage dispersion than my left-of-center counterparts.

I wonder if my interlocutors would accept that we should only pay attention to the average effect of, say, changes to tax policy and ignore the impact on the median household. I doubt it.

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Filed under Economics, Immigration

Staring At Shoes In Regards To The Wall Street Journal Article

Heather Horn at The Atlantic with the round-up

Robert Barro at The Wall Street Journal:

The unemployment-insurance program involves a balance between compassion—providing for persons temporarily without work—and efficiency. The loss in efficiency results partly because the program subsidizes unemployment, causing insufficient job-search, job-acceptance and levels of employment. A further inefficiency concerns the distortions from the increases in taxes required to pay for the program.

In a recession, it is more likely that individual unemployment reflects weak economic conditions, rather than individual decisions to choose leisure over work. Therefore, it is reasonable during a recession to adopt a more generous unemployment-insurance program. In the past, this change entailed extensions to perhaps 39 weeks of eligibility from 26 weeks, though sometimes a bit more and typically conditioned on the employment situation in a person’s state of residence. However, we have never experienced anything close to the blanket extension of eligibility to nearly two years. We have shifted toward a welfare program that resembles those in many Western European countries.

The administration has argued that the more generous unemployment-insurance program could not have had much impact on the unemployment rate because the recession is so severe that jobs are unavailable for many people. This perspective is odd on its face because, even at the worst of the downturn, the U.S. labor market featured a tremendous amount of turnover in the form of large numbers of persons hired and separated every month.

For example, the Bureau of Labor Statistics reports that, near the worst of the recession in March 2009, 3.9 million people were hired and 4.7 million were separated from jobs. This net loss of 800,000 jobs in one month indicates a very weak economy—but nevertheless one in which 3.9 million people were hired. A program that reduced incentives for people to search for and accept jobs could surely matter a lot here.

Moreover, although the peak unemployment rate (thus far) of 10.1% in October 2009 is very disturbing, the rate was even higher in the 1982 recession (10.8% in November-December 1982). Thus, there is no reason to think that the United States is in a new world in which incentives provided by more generous unemployment-insurance programs do not matter much for unemployment.

Another reason to be skeptical about the administration’s stance is that generous unemployment-insurance programs have been found to raise unemployment in many Western European countries in which unemployment rates have been far higher than the current U.S. rate. In Europe, the influence has worked particularly through increases in long-term unemployment. So the key question is what happened to long-term unemployment in the United States during the current recession?

To begin with a historical perspective, in the 1982 recession the peak unemployment rate of 10.8% in November-December 1982 corresponded to a mean duration of unemployment of 17.6 weeks and a share of long-term unemployment (those unemployed more than 26 weeks) of 20.4%. Long-term unemployment peaked later, in July 1983, when the unemployment rate had fallen to 9.4%. At that point, the mean duration of unemployment reached 21.2 weeks and the share of long-term unemployment was 24.5%. These numbers are the highest observed in the post-World War II period until recently. Thus, we can think of previous recessions (including those in 2001, 1990-91 and before 1982) as featuring a mean duration of unemployment of less than 21 weeks and a share of long-term unemployment of less than 25%.

These numbers provide a stark contrast with joblessness today. The peak unemployment rate of 10.1% in October 2009 corresponded to a mean duration of unemployment of 27.2 weeks and a share of long-term unemployment of 36%. The duration of unemployment peaked (thus far) at 35.2 weeks in June 2010, when the share of long-term unemployment in the total reached a remarkable 46.2%. These numbers are way above the ceilings of 21 weeks and 25% share applicable to previous post-World War II recessions. The dramatic expansion of unemployment-insurance eligibility to 99 weeks is almost surely the culprit.

To get a rough quantitative estimate of the implications for the unemployment rate, suppose that the expansion of unemployment-insurance coverage to 99 weeks had not occurred and—I assume—the share of long-term unemployment had equaled the peak value of 24.5% observed in July 1983. Then, if the number of unemployed 26 weeks or less in June 2010 had still equaled the observed value of 7.9 million, the total number of unemployed would have been 10.4 million rather than 14.6 million. If the labor force still equaled the observed value (153.7 million), the unemployment rate would have been 6.8% rather than 9.5%.

Karl Smith at Modeled Behavior:

Based on Cable News and a notable NYT column one might think that economists are perpetually at one another’s throats. This is far from the truth. The hierarchical nature of the economics profession lends an ecclesiastical air to many of our interactions. Brilliant figures are treated with enormous reverence.

To wit, when an eminent figure like Robert Barro says something that strikes most of as inane the most common reaction is shoe staring

[…]

For better or worse the blogosphere has changed that. Economists of all stripes will descend upon Barro over the next 36 hours. If he replies, which I suspect he will not, this will be an interesting moment.

Scott Grannis at Seeking Alpha:

Robert Barro has a good article in yesterday’s WSJ, titled “The Folly of Subsidizing Unemployment.” In it, he argues reasonably that “the expansion of unemployment-insurance eligibility to as much as 99 weeks from the standard 26 weeks” has made the economy less efficient “because the program subsidizes unemployment, causing insufficient job-search, job-acceptance and levels of employment.” My chart above helps illustrate the numbers he uses in his article, making it clear that we have never before seen such a large number of people receiving unemployment compensation. The 1981-82 recession saw a higher unemployment rate than we have seen in the recent recession, but one-third fewer people were subsidized for not working. This undoubtedly helps explain why this recovery has proceeded at a very disappointing pace.

Robert Reich:

I have the questionable distinction of appearing on Larry Kudlow’s CNBC program several times a week, arguing with people whose positions under normal circumstances would get no serious attention, and defending policies I would have thought so clearly and obviously defensible they should need no justification. But we are living through strange times. The economy is so bad that the social fabric is coming undone, and what used to be merely weird economic theories have become debatable public policies.

Tonight it was Harvard Professor Robert Barro, who opined in today’s Wall Street Journal that America’s high rate of long-term unemployment is the consequence rather than the cause of today’s extended unemployment insurance benefits.

In theory, Barro is correct. If people who lose their jobs receive generous unemployment benefits they might stay unemployed longer than if they got nothing. But that’s hardly a reason to jettison unemployment benefits or turn our backs on millions of Americans who through no fault of their own remain jobless in the worst economy since the Great Depression.

Yet moral hazard lurks in every conservative brain. It’s also true that if we got rid of lifeguards and let more swimmers drown, fewer people would venture into the water. And if we got rid of fire departments and more houses burnt to the ground, fewer people would use stoves. A civil society is not based on the principle of tough love.

In point of fact, most states provide unemployment benefits that are only a fraction of the wages and benefits people lost when their jobs disappeared. Indeed, fewer than 40 percent of the unemployed in most states are even eligible for benefits, because states require applicants have been in full-time jobs for at least three to five years. This often rules out a majority of those who are jobless – because they’ve moved from job to job, or have held a number of part-time jobs.

So it’s hard to make the case that many of the unemployed have chosen to remain jobless and collect unemployment benefits rather than work.

Anyone who bothered to step into the real world would see the absurdity of Barro’s position. Right now, there are roughly five applicants for every job opening in America. If the job requires relatively few skills, hundreds of applicants line up for it. The Bureau of Labor Statistics says 15 percent of people without college degrees are jobless today; that’s not counting large numbers too discouraged even to look for work.

Barro argues the rate of unemployment in this Great Jobs Recession is comparable to what it was in the 1981-82 recession, but the rate of long-term unemployed then was nowhere as high as it is now. He concludes this is because unemployment benefits didn’t last nearly as long in 1981 and 82 as it they do now.

He fails to see – or disclose – that the 81-82 recession was far more benign than this one, and over far sooner. It was caused by Paul Volcker and the Fed yanking up interest rates to break the back of inflation – and overshooting. When they pulled interest rates down again, the economy shot back to life.

Alex Tabarrok:

It’s not clear to me why we should assume that the share of long-term unemployment in this recession should equal that in 1983.

Barro also argues:

We have shifted toward a welfare program that resembles those in many Western European countries.

In contrast Josh Barro, son of Robert, in How much do UI Extensions Matter for Unemployment, concluded that 0.4% was probably on the high side:

Two Fed studies suggest that [extensions of UI] may have contributed 0.4 to 1.7 percentage points to current unemployment. But a closer look at this research makes me skeptical that the effects have been so large.

…The incentive effects of UI extension must also be weighed against the stimulative effects of paying UI benefits. For some reason it’s become almost taboo to note this on the Right, but UI recipients tend to be highly inclined to spend funds they receive immediately, meaning that more UI payments are likely to increase aggregate demand. UI extension also helps to avoid events like foreclosure, eviction and bankruptcy, which in addition to being personal disasters are also destructive of economic value.

As a result, I am inclined to favor further extension of UI benefits while the job market remains so weak. I am not concerned that this leads us down a slippery slope to permanent, indefinite unemployment benefits (which historically have been one of the drivers of high structural employment in continental Europe) as the United States has gone through many cycles of extending unemployment benefits in recession and then paring them back when the economy improves, under both Republican and Democratic leadership.

I call this one on both counts for Josh.

Arnold Kling:

He claims that the unemployment rate would be much lower now if Congress had not passed any extensions of unemployment benefits. I have not gone through his analysis, but I suspect that I, like Alex Tabarrok, would not find it persuasive. Nonetheless, I think there is a case to be made for allowing people to continue to collect unemployment benefits after they find a new job, until their benefits are scheduled to expire. We can argue about how generous the unemployment benefits should be overall, but for any level of benefits it is possible to reduce the disincentive to find work.

Mark Thoma:

Calling Barro’s claim questionable, as in the title, was probably too generous.

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We Now Return You To This 24,536th Episode Of “Bloggers Debating Whether The Stimulus Worked”

Megan McArdle:

Today’s earlier post has naturally aroused suspicions that I am simply a knee-jerk stimulus opponent.  This is not true.  I tepidly supported the notion of stimulus, though I also thought that the stimulus we did was not well executed, because Democrats wanted to use it to execute their policy priorities, rather than to provide maximal stimulus.  I said at the time that “shovel-ready” infrastructure projects really weren’t; that’s not how the government procurement process works, and the federal government tends to slow things down, not speed them up.  As it was under George Bush, politicians seemed more interested in using stimulus as an excuse for stuff they already wanted to do, than in actually figuring out what was most stimulative.  (My candidates:  payroll tax cut, more lavish unemployment benefits).

And what do I think now?  Well, protestations aside, the stimulus we ended up doing was huge.  Maybe it wasn’t as huge as some would have liked, but $800 billion dollars is almost 6% of GDP. (2% if you spread it over 3 years, as the stimulus was).  All told, running a deficit of 10+% of GDP ought to have some pretty powerful stimulative effect.

So far, I’ve been underwhelmed.  Maybe we were going to end up so far in a ditch that we wouldn’t even be able to see sky when we looked up, only mud.  On the other hand, maybe simply not repeating the massive, massive monetary mistakes of the 1930s was enough to keep us out of the Great Depression, and the stimulus merely tinkered around the edges.  I find the latter at least as plausible as the former.

When you combine middling and hard-to-prove results with the fact that the stimulus we got was so obviously wrapped up in the political agenda of the Democratic Party, I think that the case for stimulus has gotten weaker.  Stimulus is always going to get wrapped up in the agenda of whatever party is in power–it will concentrate too much on long-term strategic attempts to change the aggregate level of government expenditure; it will be deployed inefficiently; it will be stretched out to maximize electoral rather than economic effectiveness.

I’d much rather see people talking about how best to ease the economic transition.  One way to think of recessions is that they always represent the transition point between two states of the economy:  high inflation to low inflation, overleveraged to under, or what have you.  Those transitions involve a great deal of human suffering, and contra the “work the rot out” school of economic policy, I do not think that this suffering is necessary.

Stephen Stromberg at WaPo:

But the bigger problem is that the argument about the stimulus is basically unwinnable, for now. That’s because, when you look past the gotcha quotes, much of the Obama administration’s justification for the Recovery Act relies on a difficult-to-prove counterfactual — that it created or saved jobs.

So, unemployment could even be going up, and the president could still claim the stimulus was a success, since it could have been worse. Here, the GOP conference ignores this argument entirely, as it so often does, by pointing to negative raw data and ignoring the Democrats’ argument that you have to compare them to a far more catastrophic baseline. Obama’s critics on the left often do the same to conclude that the stimulus was much too small.

I tend to sympathize with the administration on this. It’s shocking how quickly people have forgotten the rank fear that pervaded the country in late 2008 and early 2009. As with the Troubled Assets Relief Program, approving the stimulus was important if only to prove that the government would not let the economy fall off a cliff. At the same time, policymakers had to pay attention to folks worried — without much reason in the short-term, it turned out, but it was hard to know that then — about inflation and the willingness of private capital to finance American government debt at low interest rates. How do you quantify the number of jobs saved from ministering to such psychological preoccupations? It’s hard, but it doesn’t mean they weren’t saved.

Tim Cavanaugh at Reason:

Where do Keynesians go now that even public radio is talking about the failure of one of history’s costliest Keynesian stimulus efforts?

At City Journal, Guy Sorman notes how quickly the managed-market winds have shifted. When the credit unwind started, the papers, the TV and the newsweaklies declared capitalism dead in just a little less time than it took for Kent Brockman to declare his loyalty to the Space Ants. Less than two years later, you can’t buy good press for the stimulus; the economy is frozen solid in August; the nation is rediscovering — despite the herniated efforts of local, state and federal government — the virtues of thrift; and if you search for Keynes on the interwebs, all you turn up are headlines like “How Dr. Keynes killed the patient.”

But here’s the tell: We’re already starting to see the first of the “Today’s Keynesians are misreading Keynes” walk-back arguments.

As an idea, neo-Keynesianism is dead. (As public policy, of course, it will live forever.)

Josef Joffe at TNR:

As the joke goes, this is the reason why there are no one-handed economists; they are always saying: “on the one hand, on the other…” But, in the second year of the stimulus, it has become a lot harder to argue that Keynes is cool, and it is a lot easier to contend that tightfisted Angela Merkel, though a physicist by training, has a better knack for economic management than the Bloomsbury Sage—at least 74 years after he published his General Theory.

OK, it is silly to draw so much conclusion from so little evidence, and, whatever the gainsayers argue, Obama will throw more money at the economy as the midterms draw closer. But think of the issue in the simplest of terms: As a businessperson or consumer, would you now spend your money in the face of a rising deficit that is guaranteed to bring on either inflation or tax hikes or both? Maybe you can find the answer in the Holy Writ that is the General Theory. Confidence matters, and this is what the great man had to say in Book III: “The government program may, through its effect on ‘confidence’, increase liquidity-preference or diminish the marginal efficiency of capital, which may retard other investment…” Translation by Joffe: “The stimulus may lead to cash-hoarding and, by depressing the return on capital, diminish private investment.” Keynes may have been wiser than his disciples.

Jonathan Chait at TNR:

The truth is that you can’t prove whether the stimulus worked or not. You can try to reconstruct the effects of the stimulus (and other government interventions) as Alan Blinder and Mark Zandi did. But you’re still making assumptions on the basis of economic models — mainstream assumptions shared by most economists, but assumptions nonetheless. Actually proving the case would require going back to 2009 and re-running history with everything the same but no stimulus. Since we can’t do that, all we can do is guess.

Of course, Republicans aren’t making a good faith effort to gauge the effects of the stimulus. They’re simply looking for a pseudo-economic argument that allows them to blame Obama for everything that has happened since the economic crisis of 2008. Lindsey’s article is a rationalization for that political strategy.

Jim Manzi at TNR:

Chait is right. The reason we don’t know whether the stimulus has worked in the United States is fundamental. And I believe it has significant implications for how we should approach public policy in the recession.

[…]

I believe that recognition of our ignorance should lead us to two important, though tentative and imprecise, conclusions.

First, we should treat anybody who states definitively that the result of stimulus policy X will be economic outcome Y with extreme skepticism. And weaseling about the magnitude of the predicted impact such that all outcomes within the purported range of uncertainty still magically lead to the same policy conclusion doesn’t count; we should recognize that we don’t even know at the most basic level whether stimulus works or not.

Second, “boldness” in the face of ignorance should not be seen in heroic terms. It is a desperate move taken only when other options are exhausted, and with our eyes open to the fact that we are taking a wild risk. Actual science can allow us to act on counterintuitive predictions with confidence–who would think intuitively that it’s a smart idea to get into a heavy metal tube and then go 30,000 feet up into the air? But we don’t have this kind of knowledge about a stimulus policy. We are walking into a casino and putting $800 billion dollars down on a single bet in a game where we don’t even know the rules. In general, in the face of this kind of uncertainty, we ought to seek policy interventions that are as narrowly targeted as is consistent with addressing the problem; tested prior to implementation to whatever extent possible; hedged on multiple dimensions; and designed to be as reversible as is practicable.

What I am trying to describe here is not a policy per se, but an attitude of epistemic humility.

Chait responds to Manzi:

Manzi is a much nicer person then I am, so it’s no surprise that I will return the favor of him saying that I’m right by replying that he’s wrong. Here are a few of the problems with his case. First, and more importantly, I was arguing that the precise effect of the stimulus can’t be measured. That doesn’t mean we have no idea whether it worked. There is a general, though not unanimous, consensus within the economic field that increasing spending or reducing taxes temporarily increases economic growth. Basically, we do know the rules — increasing the deficit in order to pave some roads and cut taxes for middle-income people will increase the size of the economy; the primary debate is just how much.

Now, it’s true that the conservative movement has invested a great deal of time into throwing cold water on this basic consensus. I think this campaign should be viewed as largely political. Private forecasters unanimously believe that fiscal stimulus can temporarily boost growth. They give no credence whatsoever to the various right-wing alternative models in which fiscal stimulus does not boost growth. Moreover, in 2001, when the objective case for fiscal stimulus was much weaker, there was no real debate about the efficacy of fiscal stimulus. The fact that Republicans are fiercely contesting the merits of fiscal stimulus now, while almost nobody was doing so when the case was much weaker in 2001, suggests that the right’s skepticism is a political phenomenon.

Second, we are not really taking a “wild risk” by devoting $800 billion to mitigating the deepest economic crisis since the Great Depression. The long term fiscal cost of the stimulus is quite minimal:

The opposing risk, of allowing an economic free-fall, seems much greater. The risks of a depression are enormous. Of course, one side effect of such an outcome would be massive political gains for the opposition party. No doubt this helps explains the more sanguine attitude Republican elected officials — I am not implicating Manzi here — took toward the 2008 crisis, as opposed to their urgency in the face of the far more shallow 2001 recession.

Third, Manzi suggests that remedies be as narrowly targeted as possible, reversible, and tested prior to implementation. The stimulus was pretty narrowly targetted. It consisted of spending and tax cuts designed to increase consumption. It is completely reversible in the sense that the spending and tax cuts are temporary.

Being “tested,” as I noted, is not possible. But it’s not possible to test very much in macro-economics. We can’t run natural experiments with whole economies without the aid of time travel. Manzi’s analogies of flying in an airplane assume is that there’s some safe, default option — staying on the ground, keeping away from the casino. That isn’t a realistic way to think about economics. Doing nothing in the face of economic catastrophe is a policy choice. To the extent that it’s been “tested,” it’s been shown to produce terrible results. The better attitude than trying to imagine some safe default course of action, I’d suggest, is to hew to precepts generally accepted within the economics field.

Manzi responds to Chait:

Chait begins his reply by claiming that I “oppose any stimulus at all.” This is a position which I did not present in the post, and which I do not hold. In fact, I have consistently advocated stimulus in the face of the current crisis, and generally in venues that are not as hospitable to this idea as The New Republic.

I was arguing in my post that we should approach stimulus with appropriate humility about our knowledge, not that we should never execute such a policy. That’s why the sentence in my post that immediately follows those Chait excerpted, is: “What I am trying to describe here is not a policy per se, but an attitude of epistemic humility.”

Chait then moves on to criticize the reasoning behind my imagined position against any stimulus spending.

His first argument is that he was only saying we can’t measure stimulus precisely, but that we still know enough to act with confidence:

First, and more importantly, I was arguing that the precise effect of the stimulus can’t be measured. That doesn’t mean we have no idea whether it worked. There is a general, though not unanimous, consensus within the economic field that increasing spending or reducing taxes temporarily increases economic growth. Basically, we do know the rules — increasing the deficit in order to pave some roads and cut taxes for middle-income people will increase the size of the economy; the primary debate is just how much.

Now, it’s true that the conservative movement has invested a great deal of time into throwing cold water on this basic consensus. I think this campaign should be viewed as largely political.

Chait correctly identifies this as the most important of his arguments, so I’ll spend the most time replying to it. The problems with this criticism are that: (1) it is false, (2) it is a straw man, and (3) by far most important, it doesn’t address my point.

1. It is false.

Chait is trying to define the position that stimulus will not increase output as intellectually illegitimate. (Though, again, this is not a claim that I have made.)

It is certainly true that a large majority of professional economists accept the view that “increasing spending or reducing taxes temporarily increases economic growth”—but that is very far from claiming that disputing it is largely a political campaign. Robert Barro, Professor of Economics at Harvard, John Cochrane, Professor of Finance at the University of Chicago, and Casey Mulligan, Professor of Economics at the University of Chicago, have each separately argued that it is somewhere between plausible and likely that the multiplier for stimulus spending under relevant conditions is indistinguishable from zero (i.e., that stimulative spending will not materially increase economic output). According to surveys of professional economists reported by Greg Mankiw, about 10 percent of economists do not agree with the statement that “Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy.” Both the Wall Street Journal and the Financial Times have run opinion columns expressing the view that a multiplier of zero is a plausible to likely theory.

I have not been afraid to call out influential conservative activists when I believe they are engaging in crank refusal to accept a scientific finding. But in a genuinely scientific field which has accepted a predictive rule as valid to the point that there is a true consensus—such that the only reason for refusal to accept it is crankery or, in Chait’s terms, “politics”—you don’t usually see: several full professors at the top two departments in the subject, when speaking directly in their area of research expertise, challenge it; 10 percent of all practitioners in the field refuse to accept it; and the two leading global general circulation publications in field running op-eds questioning it.

2. It is a straw man

If the U.S. government were to borrow and spend $1 trillion with the sole result of increasing U.S. GDP in Q4 2010 by $1, it would have “temporarily increased economic growth”—but no sane person would advocate such a policy. It would not be, in either the common-sense meaning of words, or in the terms of my post, a stimulus policy that “worked.” The relevant policy question is whether stimulus spending “temporarily increases economic growth” enough to make such a policy rationally advisable . Economists are all over the place on their estimates for impact of stimulus policy across the range that is relevant to the policy decision.

A great many leading economists may accept the proposition that enough stimulus spending will probably cause at least some increase in output for a short period of time in some circumstances, yet are still uncomfortable with the kind of stimulus spending strategy that is the actual subject of current political debate. In 2009, James Buchanan (1986 Nobel Laureate in Economics), Edward Prescott (2004 Nobel Laureate in Economics), and Vernon Smith (2002 Nobel Laureate in Economics) promulgated this statement:

“Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we do not believe that more government spending is a way to improve economic performance.”

3. It doesn’t address my point

It is nerdy-sounding, but I believe critical to this discussion, to distinguish between measurement and knowledge. I made a very strong claim about measurement, and a very specific claim about knowledge.

I claim that we cannot usefully measure the effect of the stimulus program launched in 2009 at all. We can call this a “natural experiment” all day long, but in the absence of a control case, we cannot know what output would have been had we not executed the policy. Econometric models are not sufficient to estimate this counterfactual. Therefore, there is no achievable level of output in the United States in 2010, 2011, and so on that would enable a definitive answer to the question, “What was the effect of stimulus spending on output?” See, for example, in my original post, the response of leading economists when confronted by unemployment with stimulus that turned out to be higher than they projected unemployment would be without stimulus:

Ms. Romer famously projected in January 2009 that without government support, the unemployment rate would reach 9%, but with support the government could keep it under 8%. It’s 9.5% today.

Some Obama administration officials privately acknowledge they set job-creation expectations too high. The economy, they argue, was in fact sicker in 2009 than they and most others realized at the time. But they insist unemployment would have been worse without the stimulus.

All potentially useful predictions made about the output impact of the stimulus program are non-falsifiable. Failure of predictions can be simply justified by this sort of ad hoc explanation after the fact.

Adam Ozimek at Modeled Behavior on Manzi:

Specifically, he cites the fact that the University of Chicago’s Barro, Fama, and Mulligan are stimulus skeptics, and according a survey from Mankiw, so are 10% of all economists. But I don’t think 10% of economists and a handful of high-profile experts disagreeing is sufficient to say there is not a strong consensus.

For economics 90% agreement is a pretty high level of agreement, and I would be surprised to find a consensus much stronger on that on most issues. From a survey of economists by Whaples we can see that ”only” 87.5% of economists agree that the U.S. should remove all remaining tariffs and trade barriers, 90.1% believe that employers should not be restricted from outsourcing jobs, 85% agree that subsidies to agriculture should be removed, and the same percent say it about sports subsidies as well. From another survey of economists, 87.5% agree that the U.S. trade deficit is not primarily due to other nations’ nontariff trade barriers, 83.5% agree or agree with provisos that tax policy can affect the long-run rate of capital formation, 93% agree that pollution taxes or tradeable permits are more efficient than emissions standards, 92.9% agree or agree with provisos that flexible exchange rates are effective, and 92.6% agree that tariffs or import quotes reduce the general welfare of society.

Despite the disagreement by 7% to 17% of economists on these issues I would argue that are all accurately characterized as representing as a strong consensus. Whaples calls the agreement in those examples a “consensus” and “an overwhelming majority”, and Fuller and Geide-Stevenson, the authors of the other paper, explicitly refer to those examples as representing a “strong consensus”.

Yet I’m certain that on each of these issues you could find experts at the top 10 economics departments that agree with the minority position. Stiglitz alone will probably disagree with more than half of them, and you won’t have to look hard to find a half a dozen other Ivy League dissenters.

My point is not to disagree with Manzi that a strong consensus means it is okay to call anyone who disagrees with the consensus a “crank” or “politically motivated”, but just to point out that the bar he’s set for a “true consensus” pretty much means that there’s is no “true consensus” on important issues in economics. Then again, he may very well agree with that point.

Karl Smith at Modeled Behavior:

Jim Manzi and I are kindred spirits on the issue of epistemic humility. Out in the real world – as opposed to the whiteboard – only one thing is for sure and that is that this is all going to end very, very badly. The long run is not your friend.

In the mean time, little is for certain. In particular, we are not clear on exactly what the consequences of economic stimulus were. However, it is important to clarify what some economists may have meant by stimulus skepticism.

I wrote frequently in the weeks leading up to the passage of the stimulus that I was a stimulus skeptic. I signed a letter offered by John Boehner for economists who believe that IIRC, stimulus is not the best way to revive our economy.

At no time, however, did I believe that stimulus would have no effect on output. That is, unlike what I believe to be Mulligan and Fama’s stance, I did not believe that labor markets always clear.

What I did think is that I wanted to take what, even then, seemed like enormous monetary risks. It has been rumored that Tim Geithner suggested securing the assets of all major banks in the United States. While I didn’t formally support that, it did not seem absurd to me. Nor, did massive nationalization of the banking system and certainly not aggressive purchases of government securities.

While taking on all of these risks I didn’t see the need to add the confusion and inevitable political food fight of stimulus on top of it. Moreover, if one was going to do a stimulus it seemed much more sensible to simply slash the payroll tax. The bang for the buck would have been less but you can cram a whole lot more bucks through the payroll tax system than you can through the appropriations mechanism. Additionally, the public choice issues in cutting the payroll tax were much more manageable.

The point of all of this is that I listed myself as a stimulus skeptic but I wasn’t at all skeptical about the stimulating powers of government spending. I was skeptical as to whether that was the ideal course of action. That skepticism was as much rooted in my understanding of American political dynamics and my own tolerance for risk as in any scientific claims about macroeconomics.

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