02
Dec
11

A quintet of econo-inkblots

More demonstrations that people’s priors overwhelm such trivial things as facts and data:

——

Here’s the esteemed Aaron Carroll on the proliferation of medical technology:

It’s a pretty straightforward example of “people respond to incentives” with a public-choice flavour to it.

Doctors who did not have a financial stake in the MRI machines had about 23% of their scans come back negative. Doctors who did have a financial stake in the MRI machines, on the other hand, had about 42% of their scans come back negative. It seems like docs with a financial stake in the machines might have had a lower threshold for ordering a scan. Moreover, they seemed to order scans on younger patients. The average age of a patient sent for a scan by docs with a financial stake was 50, while it was 57 for docs with no financial interest.

This can be read as either (a) “Markets work!  Giving doctors a stake in MRI diagnostics leads to more scans being run, which gives us more chances to catch dangerous conditions” or (b) “Information asymmetry leads to doctors and MRI manufacturers colluding to capture rents from patients by ordering unnecessary scans”.  I’m leaning towards (b).

——

Next, Tyler Cowen reports some new results on unions and earnings:

The results suggest unions raise the lower end of the distribution by around 30 log points, with a much smaller effect on the upper tail, and a modest effect on average earnings. Estimates of average effects by baseline earnings quantile suggest the distributional effects correspond to individual-level earnings effects that vary by skill. Unionization also appears to reduce employment of the lowest skilled workers. These results are consistent with a model of union wage setting in which unions set wages so as to maximize the probability of certification, subject to a minimum profit constraint for the employer. The optimal union wage schedule pays low-skilled union members above marginal product but reduces the return to skill.

This can be read as either (a) “Unions are great!  They increase wages for people at the low end of the scale and flatten out income inequality at the top end!” or (b) “Unions are awful!  They make hiring workers with less skill or experience more expensive, so more of those workers go unemployed, and they punish high-skill workers by paying them less than they deserve!”

——

Sticking with the same blog, Alex Tabarrok comments on a recent IJ victory:

Excellent news; yesterday the Ninth U.S. Circuit Court of Appeals issued a unanimous opinion stating that compensation for bone marrow donation, specifically peripheral blood stem cell apheresis, is legal because such donation does not fall under the National Organ Transplant Act (NOTA).

This can be read as either (a) (quoting the government’s argument):

because it is much harder to find a match for patients who need bone marrow transplants than for patients who need blood transfusions, exploitative market forces could be triggered if bone marrow could be bought.

or (b) (quoting a doctor and med-school prof):

one out of five […] patients dies because no matching bone marrow donor can be found, and many others have complications when scarcity of matching donors compels him to use imperfectly matched donors. One plaintiff is a parent of mixed race children, for whom sufficiently matched donors are especially scarce, because mixed race persons typically have the rarest marrow cell types.

Protip: If you answered (a), you are a horrible person, or perhaps a bioethicist (but I repeat myself).

——

Arnold Kling explodes the inflation-hawk position:

The would-be monetary doves on the left believe we are in a liquidity trap, and the would-be monetary doves on the right are frightened of inflation.

I think what this is getting us is the worst possible combination–expansionary fiscal policy and non-stimulative monetary policy. The hawkish monetary policy may limit inflation in the near term (when lower inflation is not necessarily a good thing), but meanwhile the long-term inflationary pressures are building due to the fiscal deficits.

Nick Rowe goes wharrgarbl on a similar line of argument:

Sometimes I despair. Sometimes I wonder if the inflation fallacy is at the root of all the US and Eurozone troubles. It’s so easy to get popular support for the idea that printing money will cause inflation, and inflation means a fall in our real income. So it’s much better to have high unemployment, low employment, low real output, and errrr, low real income, than to risk having low real income.

In this case it’s expansionary (“doveish”) monetary policy that’s the inkblot.

——

Finally, here’s Karl Smith making the internet angry:

I hold these positions

  1. Climate Change is almost certainly real
  2. Humans are almost certainly causing it with carbon emissions, deforestation and domestication of animals
  3. There will be large environmental costs associated with climate change include a very rapid increase in extinctions
  4. There are likely to be major population dislocations because of climate change
  5. There are likely to be major agricultural shifts because of climate change.

Nonetheless, we should pursue the development of fossil fuels as rapidly as possible including looking for ways to streamline regulation in North American regarding fossil fuel production.

RTWT.  This inkblot splits on ideological lines:

(a) Did you get pissed off when he claimed that climate change was real and human-caused?

(b) Did you get pissed off when he claimed that we should actively increase fossil fuel use?

(c) Did you actually read to the end of the article?  And if so,

(d) Did you get pissed off when he pointed out that most racists are old people?  (Also, possibly bioethicists.)

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