Tyler Cowen's Blog, page 207

Norman Borlaug was born 100 years ago today

In case you didn’t know.

How are the benefits distributed from Medicare Advantage?

There is a new NBER Working Paper by Mark Duggman, Amanda Starc, and Boris Vabson, here is the abstract, with the bold emphasis added by me:

Governments contract with private firms to provide a wide range of services. While a large body of previous work has estimated the effects of that contracting, surprisingly little has investigated how those effects vary with the generosity of the contract. In this paper we examine this issue in the Medicare Advantage (MA) program, through which the federal government contracts with private insurers to coordinate and finance health care for more than 15 million Medicare recipients. To do this, we exploit a substantial policy-induced increase in MA reimbursement in metropolitan areas with a population of 250 thousand or more relative to MSAs just below this threshold. Our results demonstrate that the additional reimbursement leads more private firms to enter this market and to an increase in the share of Medicare recipients enrolled in MA plans. Our findings also reveal that only about one-fifth of the additional reimbursement is passed through to consumers in the form of better coverage. A somewhat larger share accrues to private insurers in the form of higher profits and we find suggestive evidence of a large impact on advertising expenditures. Our results have implications for a key feature of the Affordable Care Act that will reduce reimbursement to MA plans by $156 billion from 2013 to 2022.

There is an ungated version here (pdf).

Assorted links

1. The marvelous floating stage in Bregenz.  And fabric dancing, skip to 6:30 of the video.

2. This story about wealthy Raelian charity is stranger than you might expect.

3. Mercados por todo: un hotel para cadáveres.

4. Is elephant dung coffee the most expensive coffee on the planet?

5. John Cassidy reviews Piketty.  And Russia’s 19 richest people have lost $18.3 billion since the invasion of Crimea.

6. The editor of Lancet is anti-scientific and full of mood affiliation (pdf).

7. Richard Epstein has a new book on the classical liberal constitution.

Will the current Bitcoin rules become obsolete?

One conclusion drawn by Kroll and his Princeton colleagues Ian Davey and Ed Felten is that those rules will have to be significantly changed if Bitcoin is to last. Their models predict that interest in “mining” for bitcoins, by downloading and running the Bitcoin software, will drop off as the number in circulation grows toward the cap of 21 million set by Nakamoto. This would be a problem because computers running the mining software also maintain the ledger of transactions, known as the blockchain, that records and guarantees bitcoin transactions (see “What Bitcoin Is and Why It Matters”).

Miners earn newly minted bitcoins for adding new sections to the blockchain. But the amount awarded for adding a section is periodically halved so that the total number of bitcoins in circulation never exceeds 21 million (the reward last halved in 2012 and is set to do so again in 2016). Transaction fees paid to miners for helping verify transfers are supposed to make up for that loss of income. But fees are currently negligible, and the Princeton analysis predicts that under the existing rules these fees won’t become significant enough to make mining worth doing in the absence of freshly minted bitcoins.

The only solution Kroll sees is to rewrite the rules of the currency. “It would need some kind of governance structure that agreed to have a kind of tax on transactions or not to limit the number of bitcoins created,” he says. “We expect both mechanisms to come into play.”

That kind of approach is common in established economies, which tame things like insider trading with laws and regulatory agencies and have central banks to shape economies. But many backers of Bitcoin prize the way it currently operates without centralized control, and would likely rebel at any suggestion of changing the rules.

The full article, which is here, has other points of interest.  I would put the problem this way.  It is easy to trust a non-proprietary network, and that is often cited as an advantage of Bitcoin, or for that matter as an advantage of a common language or a standard.  At the same time, the non-proprietary nature of the network makes the rules much harder to change because there is no authority to mandate such a change.  You will find related points in many papers of Joseph Farrell.

Hat tip goes to Andrea Castillo.

My TLS review of Frederick Taylor and Felix Martin

The Frederick Taylor book is The Downfall of Money: Germany’s hyperinflation and the destruction of the middle class, and Martin’s is Money: The Unauthorised Biography.

On Taylor I wrote:

It’s about time we heard the classic Weimar hyperinflation story from the side of governance, just as it is indeed illuminating to reread Hamlet while omitting the parts about the Prince.

Taylor has oddly little on monetary policy in his book, even though he clearly understands the core issues.  On Martin’s book I wrote:

Like Taylor’s work, this is an excellent book to read, full of interesting history and insight, and very clear and well written.  It is an overview of the history of money, and thought about money, yet through a more philosophical lens than is usually the case.  It is not clear, however, if the central thesis of the book is either correct or relevant.

Martin tends to trace financial crises to the defects in underlying philosophies of money, such as whether money is viewed as a thing or as a sign.  I also wrote this about the book:

Yet, to paraphrase Freud, sometimes a financial crisis is just a financial crisis.

If you click on the top link here and register for a trial period, you can read the review.

Should we teach the habits of highly effective people?

Faculty members at Alamo Colleges in San Antonio objected earlier this year to their chancellor’s move to make a course inspired in part by the popular self-help book The 7 Habits of Highly Effective People part of the core curriculum. Instructors said they felt left out of the decision-making process and weren’t sure if the course, which would replace one of only two required humanities classes in the core, deserved that kind of curricular billing.

It is strange, is it not, that the attempt to teach habits of highly effective people is considered gauche and unworthy of the time of students?  (It is unlikely that the objections stem from a belief that the wrong habits are being taught.  That said, you can read more about the Mormon roots of Stephen Covey and his ideas here.)  You can read more about the episode at Alamo Colleges here.

What do Singapore utility bills look like?

I thank a loyal MR reader — presumably for Singapore — for these images.

Are computers better at detecting real human pain?

In a fascinating project, researchers at University of California San Diego and the University of Toronto have found that computers are far better than humans at recognizing the difference between real and fake pain in the faces of test subjects. In fact, while humans could tell the difference 55 percent of the time, robots could tell it 85 percent of the time.

There is more here, and I thank Andrew Dresner for the pointer.

Assorted links

1. Grandmothers pose with their signature dishes.

2. Can you sue a robot for defamation?

3. Ex-NASA physicist launches London school for dog selfies.

4. Which parts of magic tricks can be copyrighted?

5. 36 hours in Mexico City.

Facts about fame (in praise of college towns)

From Seth Stephens-Davidowitz in today’s NYT:

Roughly one in 2,058 American-born baby boomers were deemed notable enough to warrant a Wikipedia entry. About 30 percent made it through art or entertainment, 29 percent through sports, 9 percent through politics, and 3 percent through academia or science.

…Roughly one in 1,209 baby boomers born in California reached Wikipedia. Only one in 4,496 baby boomers born in West Virginia did. Roughly one in 748 baby boomers born in Suffolk County, Mass., which contains Boston, made it to Wikipedia. In some counties, the success rate was 20 times lower.

…I closely examined the top counties. It turns out that nearly all of them fit into one of two categories.

First, and this surprised me, many of these counties consisted largely of a sizable college town. Just about every time I saw a county that I had not heard of near the top of the list, like Washtenaw, Mich., I found out that it was dominated by a classic college town, in this case Ann Arbor, Mich. The counties graced by Madison, Wis.; Athens, Ga.; Columbia, Mo.; Berkeley, Calif.; Chapel Hill, N.C.; Gainesville, Fla.; Lexington, Ky.; and Ithaca, N.Y., are all in the top 3 percent.

Why is this? Some of it is probably the gene pool: Sons and daughters of professors and graduate students tend to be smart. And, indeed, having more college graduates in an area is a strong predictor of the success of the people born there.

But there is most likely something more going on: early exposure to innovation. One of the fields where college towns are most successful in producing top dogs is music. A kid in a college town will be exposed to unique concerts, unusual radio stations and even record stores. College towns also incubate more than their expected share of notable businesspeople.

African-Americans who grew up around Tuskegee did very well in achieving Wikipedia fame.  Yet how much a state spends on education does not seem to matter.  And this:

…there was another variable that was a strong predictor of Wikipedia entrants per birth: the proportion of immigrants. The greater the percentage of foreign-born residents in an area, the higher the proportion of people born there achieving something notable. If two places have similar urban and college populations, the one with more immigrants will produce more notable Americans.

The piece is fascinating throughout, and you will note that Seth is a Google data scientist with a Ph.d. in economics from Harvard.  His other writings are here.  Some of you may wish to see my book What Price Fame?