Tyler Cowen's Blog, page 282

Saving Lives with Distributed Intelligence

One of the general features of information technology is that through coordination it makes better use of distributed resources, such as workers, automobiles or energy. An excellent case in point is being tested in Stockholm, Sweden. SMSlivräddare (in Swedish) has a large list of people who are trained in cardiopulmonary resuscitation (CPR). When an emergency call is received indicating a possible heart attack, SMSlivräddare finds the mobile phone user(s) closest to the potential victim and alerts them with a text message. The message also contains a map to the victim’s location.

Survival rates for heart attack outside a hospital in Sweden are low, only about 5-10% but every minute shaved off the time it takes to begin CPR increases the survival rate by 10%. When notified, SMS responders arrive faster than ambulances about 50% of the time so the potential for saving lives is quite large (final data on the research project are not yet in).

Could such a system work in the United States? Maybe, a similar but more passive app is available in a few locations. Legal issues are a threat. Good Samaritan laws offer some protection although they often apply only to medical professionals. The threat, however, is not really to the responder but to the service. It’s interesting to watch Shark Tank, anytime a medical entrepreneur makes an appearance the sharks run away for fear of liability. Still, if the service were attached to a hospital and integrated with ambulances services, it ought to be possible to be insulated but this will require significant political entrepreneurship.

Hat tip: Connor Tabarrok.

The new Andrew K. Rose paper on fixed and floating exchange rates

The pdf is here, and the core result is that during the recent global financial crisis, fixed exchange rate regimes fared as well as floating rates with inflation targeting.  (Krugman comments here, Antonio Fatas comments here.)  That finding should not come as a surprise, for a few reasons:

1. Floating rates can be tough on countries which import a lot of oil, or which import critical inputs for their production or exports.

2. A lot of countries in 2008-2009 did not experience a traditional AD-only shock, rather they experienced trade shocks, which for the purposes of macro are like real shocks.  Floating rates offer less protection against real shocks than against nominal shocks.

3. One of the benefits of floating rates is that a country can crank up the rate of price inflation when it needs to, to offset negative demand shocks.  If you are targeting an inflation rate, you are not doing this and that means you lose out on a potential benefit of floating rates.

4. Fixed rates (or rather a single currency) have been a definite disaster for the eurozone.  Because of the nature of the EU, the absence of capital controls (except for Cyprus), and proximity, it is easy to switch your funds out of the failing countries, thereby whacking their banking systems.  I would rather have a euro in a German bank than a Greek bank, and so on.  This problem with “fixed rates” is especially strong in common currency areas with insolvent banks, and excess sovereign-bank connections, and it is less difficult in other fixed rate settings.

Britain’s curious economic recovery

Simon Nixon reports:

Now the U.K. is providing another mystery. Next week’s GDP data are likely to show that the economy grew 0.8% in the third quarter compared with the previous quarter. Indeed, if recent survey data are to be believed, growth could be heading for 5% year-over-year, according to Rob Wood, chief U.K. economist at Berenberg Bank.

Yet this growth spurt has taken economists almost entirely by surprise. It is hard to identify a single leading forecaster predicting such a strong recovery at the start of the year, or even at the end of the first quarter.

At least two points are worthy of note.  First, the possibility of catch-up growth, at least for countries with reasonably well-functioning labor markets, has in general been under-discussed in the debates on “austerity.”  Second, it still may be the case that a latter British generation may have lower real wages than their immediate forerunners.

The Ideological Migration of the Economics Laureates

That work fills up the latest issue of Econ Journal Watch.

This issue of Econ Journal Watch (download, .pdf) is given over to a special project that considers such changes as may have occurred among the 71 individuals who, through 2012, won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.

Ideological profiles of all 71 laureates make up the bulk of the issue. The 71 profiles are bundled in a single large document that is equipped with handy links for internal navigation.

Ideological change is interpreted in terms of either growing more classical liberal or growing less classical liberal. Daniel Klein leads the project. In his overview essay he explains the investigation, its many limitations, and the findings.

…David Colander served as overseeing referee, and he reports on the project.

Twelve of the laureates replied to a questionnaire requesting that they discuss their ideological outlooks at different times in their lives. The twelve who replied are Kenneth Arrow, Ronald Coase, Peter Diamond, Eric Maskin, James Mirrlees, Roger Myerson, Edward Prescott, Thomas Schelling, William Sharpe, Vernon Smith, Robert Solow, and Michael Spence. Their responses are included in their profiles, and they are also collected in a standalone appendix.

This is path-breaking work in intellectual history, the best contribution to the history of modern economics in recent memory, fascinating as intellectual biography and autobiography, and it should be snapped up immediately by some enterprising publisher.

Some evidence that incentives for good teaching can work

In a new NBER Working Paper, Thomas Dee and James Wyckoff report:

Teachers in the United States are compensated largely on the basis of fixed schedules that reward experience and credentials. However, there is a growing interest in whether performance-based incentives based on rigorous teacher evaluations can improve teacher retention and performance. The evidence available to date has been mixed at best. This study presents novel evidence on this topic based on IMPACT, the controversial teacher-evaluation system introduced in the District of Columbia Public Schools by then-Chancellor Michelle Rhee. IMPACT implemented uniquely high-powered incentives linked to multiple measures of teacher performance (i.e., several structured observational measures as well as test performance). We present regression-discontinuity (RD) estimates that compare the retention and performance outcomes among low-performing teachers whose ratings placed them near the threshold that implied a strong dismissal threat. We also compare outcomes among high-performing teachers whose rating placed them near a threshold that implied an unusually large financial incentive. Our RD results indicate that dismissal threats increased the voluntary attrition of low-performing teachers by 11 percentage points (i.e., more than 50 percent) and improved the performance of teachers who remained by 0.27 of a teacher-level standard deviation. We also find evidence that financial incentives further improved the performance of high-performing teachers (effect size = 0.24).

You will find the paper ungated here.

Assorted links

1. Progress with solar panels.

2. Changing minds or changing channels?

3. Interview with Magnus Carlsen.  Interview with M.I.A.  And Noel Gallagher on modal logic and reading.

4. Editing Ezra Vogel in China.

5. Claims about sex in Japan (speculative, some but not all of us believe what is in this piece).

6. Raj Chetty defends the idea of economics as a science.

Nobel Laureate Lawrence R. Klein has passed away

You will find some short coverage here.  Via Justin Wolfers.

Hard Social Science Fiction: Neptune’s Brood

Hard science-fiction is science fiction that respects the findings and constraints of contemporary science. By analogy, I deem hard social science fiction* to be science fiction that respects the findings and constraints of contemporary social science especially economics but also politics, sociology and other fields. Absent specific technology device such as a worm-hole, hard science fiction rejects faster than light travel as little more than fantasy. I consider Eden-like future communist societies similarly fantastical. Nothing wrong with fantasy as entertainment, of course, just so long as you don’t try to implement it here on earth.

Charles Stross is one of my favorite hard social science fiction authors. Stross writes both hard science-fiction and hard social-science fiction, sometimes in the same book and sometimes not. The Merchant Prince series, for example is hard social-science fiction drawing on development economics with a fantasy walk-between-the-worlds element while Halting State is hard-hard science-fiction set in the near future (n.b. HS memorably begins with a bank robbery from Hayek associates).

Stross’s latest, Neptune’s Brood, is hard-hard science-fiction set far in the future and perhaps best illustrated with this telling quote:

It is a truth universally acknowledged, that every interstellar colony in search of good fortune must be in need of a banker.

Although set far in the future, Neptune’s Brood contains plenty of commentary on recent events if one reads it carefully for hidden meaning, i.e. a Strossian reading. It is no accident, for example, that it opens with a quote from David Graeber’s Debt and finishes with altruist squids.

Neptune’s Brood is Stross’s attempt to understand money by thinking about what money and banking would look like given interstellar travel and relativity. Not surprisingly, Stross draws upon Paul Krugman’s Theory of Interstellar Trade and also (perhaps less explicitly) on the new monetary economics of Fama, Black, Hall, Cowen and Krozner. One plot point turns on what might happen should the velocity of money increase dramatically! I was also pleased that privateers make an appearance.

Hard social-science fiction is not just about economics. NB also contains interesting commentary on technology, religion, social organization, reproduction and their mutual influences. I wouldn’t put NB at the top of my list of Stross favorites but I enjoyed Neptune’s Brood and you need not let the commentary interfere with the story itself which in Stross fashion moves along at a rapid clip with plenty of enjoyable action and mystery. Recommended.

* yes, it should probably be hard social-science science-fiction but that is too much of a mouthful.

Lines are overrated, and totally empty restaurants are underrated

Some readers (or journalists) ask me if I have further principles for finding good food which are not outlined in my ethnic dining guide or in An Economist Gets Lunch.  Of course I do, though many of them are not easily articulated in the medium of print (some involve scent, for instance, others are about the intangible feel of a place).

Here is one I should have put in the book: Lines are overrated.

Furthermore totally empty restaurants are (often, not always) underrated.

Natasha and I recently took two friends out to a new Bangladeshi restaurant in Arlington, which by the way was spectacular.  But as they first walked into the restaurant, they seemed taken aback that the place was empty and indeed it felt more than a bit deserted, as if no one had eaten there for days.

I showed no sign of wishing to leave.

Here is the logic.  Let’s say a restaurant allows a line to form outside the door.  Why don’t they just raise their prices?  Well, for one thing the line, and the accompanying difficulty of getting a reservation, is a way of marketing the restaurant to potential customers.  Which means the place needs marketing in some manner, which means its audience is in some way not so well-informed about where they ought to be eating.  They tend to be trendy people who follow…lines.  Conformists, in other words.

A lot of places with lines are quite good but when they fall they fall hard.  In the meantime, the presence of a line indicates the place extracts consumer surplus in some fairly inefficient ways, so why should you go, especially if you are not a conformist?  I recall the wise words of my undergraduate differential equations teacher, Professor Lim, who once averred “I don’t want in line.”

What about a totally empty, deserted restaurant?  Well, it depends on ethnicity.  If it’s an Ethiopian place, it means everyone is coming much later.  Go anyway, and enjoy the personal attention you get.

What about an Afghani or Pakistani place or for that matter a Haitian place?  They may make their livings doing catering or weddings.  In those cases, emptiness is often a sign of quality.  It means they make their food for truly demanding customers who demand the best for ceremonial purposes.  It means they have not learned how to sell out or dumb down their food, and they just don’t have enough compatriots in the neighborhood to put many people in the seats on a regular basis (for these reasons, emptiness is not a good sign in say the Eden Center, where the number of Vietnamese diners is quite high, or say in Mexican restaurants on Kedzie street in Chicago, and so on).  Very often empty restaurants come from cultures where consumption is intensely seasonally cyclical, and that is positively correlated with food quality.

Purveyors of empty restaurants are also Adam Smith’s classic overconfident, delusional entrepreneurs.  That’s who I want cooking for me, as most great food is not in fact that profitable.

Best yet is the restaurant which bars its door and remains locked altogether.

Arrived in my pile

Yuval Levin, The Great Debate: Edmund Burke, Thomas Paine, and the Birth of Right and Left.

Cass R. Sunstein, Conspiracy Theories and Other Dangerous Ideas.

Price Fishback, Jonathan Rose and Kenneth Snowden, Well Worth Saving: How the New Deal Safeguarded Home Ownership.