Tyler Cowen's Blog, page 270

My *Politico* piece on Isaac Asimov and the ideologies of the future

Here is the second paragraph of the piece:

In Asimov’s tale ["Franchise"], set in November 2008, democratic elections have become nearly obsolete. A mysterious supercomputer said to be “half a mile long and three stories high,” named Multivac, absorbs most of the current information about economic and political conditions and estimates which candidate is going to win. The machine, however, can’t quite do the job on its own, as there are some ineffable social influences it cannot measure and evaluate. So Multivac picks out one “representative” person from the electorate to ask about the country’s mood (sample query: “What do you think of the price of eggs?”). The answers, when combined with the initial computer diagnosis, suffice to settle the election. No one actually needs to vote.

The full article is here.  There is an on-line version of Asimov’s Franchise here.

Assorted links

1. How Kenyan police receive bribes on their cell phones.

2. Jon Gruber on Obamacare and who is being deceptive and who is not.  And claims about the role of the Cabinet in the Obama administration.

3. Mormons and literature.

4. John Elder Robison quits Autism Speaks.

5. MIE: educate your nanny

6. The new Obamacare fix will create a big mess.  Another question is when the insurance companies will start rebelling against ACA.

7. Judge upholds Google book scan and search.

IBM’s Watson will be made available in a more powerful form on the internet

Companies, academics and individual software developers will be able to use it at a small fraction of the previous cost, drawing on IBM’s specialists in fields like computational linguistics to build machines that can interpret complex data and better interact with humans.

That is a big deal, obviously.  The story is here.

What are some of the biggest problems with a guaranteed annual income?

Maybe this isn’t the biggest problem, but it’s been my worry as of late.  Must a guaranteed income truly be unconditional?  Might there be circumstances when we would want to pay some individuals more than others?  Many critics for instance worry that a guaranteed income would excessively reduce the incentive to work.  So it might be proposed that the payment be somewhat higher if low income individuals go get a job.  That also will make the system more financially sustainable.  But wait — that’s the Earned Income Tax Credit, albeit with modifications.

Might we also wish to pay more to some individuals with disabilities, perhaps say to help them afford expensive wheelchairs?  Maybe so.  But wait — that’s called disability insurance (modified, again) and it is run through the Social Security Administration.

As long as we are moving toward more cash transfers, why don’t we substitute cash transfers for some or all of Medicare and Medicaid health insurance coverage benefits, especially for lower-value ailments?  But then we are paying more cash to the sick individuals.  That doesn’t have to be a mistake, but it does mean that an initially simple, “dogmatic” payment scheme now has multiplied into a rather complex form of social welfare assistance, contingent on just about every relevant factor one might care to cite.

You can see the issue.  Whether on grounds of justice, practicality, or just public choice considerations (“you can keep your current welfare payments if you like them”), we should not expect everyone to be paid the same under a guaranteed annual income.  And with enough tweaks, this version of the guaranteed income suddenly starts resembling…the welfare state, albeit the welfare state plus.  Unemployment insurance benefits wouldn’t end.  More people could get on disability, and without those pesky judges asking so many questions.

The potential problem is that we inherit and in some ways magnify the problems with the current welfare state, rather than doing away with those problems.

Or we could be truly dogmatic about it, and simply pay each person the same amount of money no matter what.  But then do we take away the various forms of in-kind aid which are already in place?  And what about all those former EITC recipients, whose incentive to work is now lower than ever?

Part of the original appeal of the guaranteed income idea, especially as expressed by Milton Friedman, is that it would substitute for welfare programs and bureaucracies, not all of which work well.  On first hearing, the guaranteed income proposal sounds quite “clean.”  In reality, that is unlikely to be the case.

And once we recognize the proposal may be “the current welfare state plus some extra and longer-term payments,” one has to ask whether this is really what we had in mind in the first place.  It seems that if you wanted to reform current programs and also pay people more (debatable, of course), there may be better and easier ways of doing that than reforms which have to fit under the umbrella of “a guaranteed annual income.”

I still think the core idea is a good one, but perhaps “what the core idea is” is less pinned down than I might have wished.

Here is again Annie Lowrey’s very useful piece, which provides an overview of current proposals.

Pinternet

Very cool.

Inefficient forms of aid

A group of Occupy Wall Street activists has bought almost $15m of Americans’ personal debt over the last year as part of the Rolling Jubilee project to help people pay off their outstanding credit.

Rolling Jubilee, set up by Occupy’s Strike Debt group following the street protests that swept the world in 2011, launched on 15 November 2012. The group purchases personal debt cheaply from banks before “abolishing” it, freeing individuals from their bills.

By purchasing the debt at knockdown prices the group has managed to free $14,734,569.87 of personal debt, mainly medical debt, spending only $400,000.

There is more here, and here.  One question is how many of these people will go into bankruptcy anyway.  Another is why not just send the money to even poorer individuals?  The low market value of the debt, of course, means these individuals (mostly) would not have paid anyway, so the leveraged return on this investment is not as high as is being claimed.

For pointers I thank Mitch Berkson and Samir Varma.

Attempting to insure against your own destruction, enslavement, and cultural abnegation

A new finance product has been proposed:

Funding the Search for Extraterrestrial Intelligence with a Lottery Bond
Jacob Haqq-Misra
(Submitted on 11 Nov 2013)

I propose the establishment of a SETI Lottery Bond to provide a continued source of funding for the search for extraterrestrial intelligence (SETI). The SETI Lottery Bond is a fixed rate perpetual bond with a lottery at maturity, where maturity occurs only upon discovery and confirmation of extraterrestrial intelligent life. Investors in the SETI Lottery Bond purchase shares that yield a fixed rate of interest that continues indefinitely until SETI succeeds—at which point a random subset of shares will be awarded a prize from a lottery pool. SETI Lottery Bond shares also are transferable, so that investors can benefact their shares to kin or trade them in secondary markets. The total capital raised this way will provide a fund to be managed by a financial institution, with annual payments from this fund to support SETI research, pay investor interest, and contribute to the lottery fund. Such a plan could generate several to tens of millions of dollars for SETI research each year, which would help to revitalize and expand facilities such as the Allen Telescope Array. The SETI Lottery Bond is a savings product that only can be offered by a financial institution with authorization to engage in banking and gaming activities. I therefore suggest that one or more banks offer a lottery-linked savings product in support of SETI research, with the added benefit of promoting personal savings and intergenerational wealth building among individuals.

The pointer is from Mark Rodeghier.

Assorted links

1. How smart software discovers new recipes.

2. Photos of abandoned Christmas and Santa Claus parks.

3. England employed camels and elephants on the home front in World War I.

4. John Tavener has passed away.

5. Barter markets in everything: thirty squats for a train ticket.  And the culture that is Sweden: invisible bike helmets.

6. Fiverr and factor price equalization.

Firearms and Suicides in US States

Suicides outnumber homicides in the United States by 3:1. (In 2010 there were 38,364 suicides and 12, 996 homicides.) Lots of studies have investigated the relationship between firearms and homicide but the potential for reverse causality makes this a difficult problem. More homicides in a region, for example, might cause an increase in gun ownership so a positive correlation between guns and homicide doesn’t tell you which is cause and which is effect. Reverse causality is less of a problem for understanding the guns to suicide link because it’s less likely that a rash of suicides would encourage gun ownership.

In my latest paper, Firearms and Suicides in US States, (written with the excellent Justin Briggs) we examine the easier question, what is the relationship between firearms and suicide? Using a variety of techniques and data we estimate that a 1% increase in gun ownership leads to a .5 to .9% increase in suicides.

Even if one thinks that suicides don’t cause gun ownership one might imagine that they are correlated due say to a third factor such as social anomie. We have an interesting test of this in the paper. If suicides and gun ownership were being driven by a third factor we would expect gun ownership to be correlated with all suicides not just gun-suicide. What we find, however, is that an increase in gun ownership decrease non-gun suicide. From an economics perspective this makes perfect sense. As gun ownership increases, the cost of gun-suicide falls because guns are easier to access and as the cost of gun-suicide falls there is substitution away from non-gun suicide.

Put differently, when gun ownership decreases other methods of suicide increase. Substitution among methods is not perfect, however, so when gun ownership decreases we see a big decrease in gun-suicide and a substantial but less than fully compensating increase in non-gun suicide so a net decrease the number of suicides.

Our econometric results are consistent with the literature on suicide which finds that suicide is often a rash and impulsive decision–most people who try but fail to commit suicide do not recommit at a later date–as a result, small increases in the cost of suicide can dissuade people long enough so that they never do commit suicide.

The results in the paper appear to be robust but the data on gun ownership is frustratingly sparse due to political considerations.

The changing income distribution for lawyers (Average is Over)

As of 2010, a graph of starting salaries looks like this:

As of 1991, it looked like this:

That is from Peter Turchin.  Here is a WSJ article by Ben Casselman on the widening job market gap more generally.