Tyler Cowen's Blog, page 477

Yikes

The Spanish two-year rate is now over 7%.  LeBron James at center is not their only current problem…

A password so secret even you don’t know it

From Rebecca Rosen:

Researchers from Stanford, Northwestern, and SRI have a new paper laying out a crafty little solution: Make people memorize passwords that they don’t know. If you don’t know your password, you can’t tell it to anyone.

Huh? How can you have a password you don’t know?

Perhaps the best analogy is the playing of a song on a musical instrument. If you’ve ever memorized a piece of music, you know that, given the instrument, you could play it no problem. The piece is in your muscle memory. But given a staff sheet and a pencil, writing it out would be a challenge. You would need to thump it out with your fingers and write down your observations, but you don’t just know the order of the notes.

…The catch is that unlike a piece of music, for which you’ve memorized a sequence that someone could, perhaps, record if they watched you tap it out enough times, this system then “tests” whether you are the real you, by having you “play” all sorts of strands, with the ones you’ve practiced mixed in. Only someone who has received the training will play their own sequences more smoothly and rapidly. “A performance gap that is substantially different from the one obtained after training indicates an attack,” the authors explain.

In effect, the software is creating a code by which you can say, I am who I say I am, and the computer recognizes it. Of course, all passwords convey that to some extent, this one is just much, much harder to pass on.

CBO forecasts Medicaid Wars

In 2022, for example, Medicaid and the Children’s Health Insurance Program (CHIP) are expected to cover about 6 million fewer people than previously estimated, about 3 million more people will be enrolled in exchanges, and about 3 million more people will be uninsured…

Only a portion of the people who will not be eligible for Medicaid as a result of the Court’s decision will be eligible for subsidies through the exchanges. According to CBO and JCT’s estimates, roughly two-thirds of the people previously estimated to become eligible for Medicaid as a result of the ACA will have income too low to qualify for exchange subsidies, and roughly one-third will have income high enough to be eligible for exchange subsidies.

There is more here.

Iceland and Ireland

From a new Mercatus working paper by David Howden, here is the conclusion:

When the tale of these two crises is told, the conclusion is typically that one set of policies was more beneficial than the other. In this paper we have shown that the truth lies somewhere in the middle. Icelanders have benefited by evading a debt overhang through an undue bank bailout that has shielded entrepreneurs and investors from losses. The Irish commitment to open capital flows and willingness to reduce domestic prices to regain competitiveness has allowed prices to return to levels necessary for entrepreneurs to use as signals to invest. Countries facing similar crises—be they currency, banking, or general economic crises—would be well-advised to heed these two lessons when drafting recovery plans of their own.

Assorted links

1. Adam Gurri’s thoughts on the great stagnation.

2. Dan Ariely’s column is now a regular feature in the WSJ, here is installment two.  You can ask Dan questions at AskAriely@wsj.com.

3. The African School of Economics.

4. The Mark Regnerus controversy.

5. Ungated version of Indonesians immigrating to Australian jails.

Immigration to Australian jail

MANDATORY sentencing — a key element of Labor’s policy to deter asylum boats — is having the opposite effect, encouraging Indonesian crew attracted by Australia’s relatively high prison pay.

Lawyer and former diplomat Anthony Sheldon says jailed crew members can make $20 a day in Australian jails, in his submission to the Gillard government’s expert panel on asylum-seekers.

Sadly, the rest is gated…but there is also this bit:

“The preference of a number of older fishermen is to remain in detention in Australia,” Mr Sheldon says in the submission.

“Depending on their jobs in prison, they can earn up to $20 per day, making them wealthy beyond comparison upon their return to their villages after their sentence is served.

“They also receive free dental and medical services during their imprisonment. “Combined with the relative safety of their work in prison compared to the dangerous work at sea, Australian imprisonment is very desirable.”

For the pointer I thank Philip Hegarty.

*The Economist’s Voice 2.0*

Edited by Aaron Edlin and Joseph Stiglitz, the book has many fine short essays by various luminaries…

Assorted links

1. Noah Smith’s dissertation, plus a mention of my most fundamental view: “”Larry Summer’s maxim,“It isn’t easy to understand how the world works.”"

2. Spanish baby stealing as an approach toward social change, and an old argument for the minimum wage.

3. Henry’s music bleg, with lots of comments.

4. Arnold Kling on education, disruption, and Benjamin Lima.

5. China’s railway arteries, photographed.

6. Olympic runner to compete, without a passport or home country.

Mere exposure to money

The paper is by Eugene M. Caruso, Kathleen D. Vohs, Brittani Baxter and Adam Waytz.  The title of the paper is “Mere Exposure to Money Increases Endorsement of Free-Market Systems and Social Inequality.”  Abstract:

The present research tested whether incidental exposure to money affects people’s endorsement of social systems that legitimize social inequality. We found that subtle reminders of the concept of money, relative to nonmoney concepts, led participants to endorse more strongly the existing social system in the United States in general (Experiment 1) and free-market capitalism in particular (Experiment 4), to assert more strongly that victims deserve their fate (Experiment 2), and to believe more strongly that socially advantaged groups should dominate socially disadvantaged groups (Experiment 3). We further found that reminders of money increased preference for a free-market system of organ transplants that benefited the wealthy at the expense of the poor even though this was not the prevailing system (Experiment 5) and that this effect was moderated by participants’ nationality. These results demonstrate how merely thinking about money can influence beliefs about the social order and the extent to which people deserve their station in life.

For the pointer I thank Robin Hanson.

*Affluence and Influence*

The author is Martin Gilens and the subtitle is Economic Inequality and Political Power in America.  A few points:

1. It is an interesting book.

2. It is poorly written and the first fifty pages should have been abolished.

3. It argues, using a comprehensive data set, that the preferences of poor and even middle income people are neglected or underrepresented in the policy process.  The preferences of the wealthiest ten percent seem to have more sway.

4. It should take greater care to distinguish the preferences of the (often ill-informed) poor across means and ends.  Say a poor or middle class person feels “I want tariffs” and also “I want prosperity.”  The elites then push through free trade to produce prosperity and for that matter to get reelected and perhaps also to serve commercial interests and donors.  Have they met or frustrated the preferences of the poor?  By the metrics of Gilens the poor did not get their way but that is not obviously the correct conclusion.  Matt makes a related point.

5. Many lower- or middle-income voters decide to vote retrospectively over outcomes (mostly), rather than over policy inputs.  That suggests we should judge the responsiveness of the system in terms of how well it aims toward those outputs, not whether it gives lower-income voters their preferred policy inputs.

6. What is wrong with this simple alternative hypothesis?:  Politicians seek some measure of redistribution-weighted prosperity to get reelected.  Wealthier voters are better educated and smarter, so they have a better sense of which policies will bring that about.  It seems the wealthier voters are getting their way on policy inputs, but a deeper look shows the pressures on politicians are quite general.

7. I would be falling prey to the fallacy of mood affiliation if I simply assumed the author wanted policy to be more responsive to the wishes of the poor and middle class.  Still I can ask whether this would be a desirable end.  Aren’t they less educated and less well-informed on average?  Don’t they also care about politics less and derive less of their status from political processes and outcomes?  Do I want them to have a greater say over social issues, including gay marriage?  No.

Here is a Boston Review symposium on the book, including many responses from the notables on the sidebar, along with a response from the author.