Joy Recommends Toys 2020

We at EWED are making recommendations for holiday gifts. This post is about items that my kids are actually using.

I’ll be putting up links for your convenience. I have gotten lots of kid stuff from neighbors, either buying through websites or just be getting hand me downs. I love the idea of re-using kid items and clothes.

FUN remote-control car. “RC Cars Stunt Car Toy, Amicool 4WD” It doesn’t get stuck. It can flip over and go over many terrain types. It’s not large, meaning it doesn’t take up a lot of room in your house, but it delivers a lot of fun! Can be fun both indoors and outdoors. ($25)

Bikes: You have probably heard about balance bikes. We started on a Strider balance bike (no wheels, kids just kick to go forward).

I wanted to make the transition from balance bike to pedal bike and skip the training wheels stage. I was able to do that, but another item was necessary. Get a pedal bike that is SMALL. I actually got mine from a neighbor, but I found a link that looks similar. The bike in the link has training wheels, but I assume you can take them off. If the wheels of their first pedal bike are SMALL, then they can’t get hurt and the can’t go very fast. My 5-year-old thinks this is really fun. I don’t have the headaches of either him getting injured or worrying that he’ll take off and be out of sight quickly.

Great cheap toy for a toddler. My 2 year old loves the Melissa & Doug Minnie Wooden Magnetic Dress-Up. This has inspired hours of play and conversation. ($10)

Let’s be honest. The kids are getting screen time. When the pandemic hit and daycare (temporarily) closed, I decided to get much more lenient than I had been before about screen time.

Magnus Kingdom of Chess is a great tablet game ($8). My 5-year-old son plays it on an iPad mini. I had made some unsuccessful efforts to interest him in real chess before buying the game. He loves the video game, but what’s amazing is that since he’s started playing the video game, he has become much more interested in playing actual chess with me. In fact, he asks me to play him in chess now. Before I used to worry that how would he even succeed if he hadn’t mastered chess by age 5. Now, he’s actually asking me to play him in chess and I’m thinking secretly ‘I don’t have time for this. Shouldn’t you be playing outside?’. (In our case, my son got some help from parents with playing the game. He might have had a hard time doing it completely by himself.) Let me be quite clear, my son has NOT mastered chess, but his understanding of the pieces really went up because of the video game.

There are also several completely free great apps made by Khan Kids and PBS Kids.

The Sabbath

According to a recent CDC Report on the mental health effects of COVID-19 lockdowns, 1 in 4 young adults (ages 18-24) have had suicidal ideation. Even before COVID-19, many of you may also know about the so-called “deaths of despair” that refers to the rise in mortality among middle-aged white men starting in the late 1990s from suicide, overdose, chronic liver disease or cirrhosis.

With so much existential anguish, my book review is on a slim little book called The Sabbath by Abraham Joshua Heschel. The book is packed with zeal for a day Heschel calls, “a palace in time”,

“The seventh day is a mine where spirit’s precious metal can be found with which to construct a palace in time, a dimension in which the human is at home with the divine; a dimension in which man aspires to approach the likeness of the divine. For where shall the likeness of God be found? There is no quality that space has in common with the essence of God. There is not enough freedom at the top of the mountain; there is not enough glory in the silence of the sea. Yet the likeness of God can be found in time, which is eternity in disguise.”

Heschel divides the world into two categories: space and time. Both are means to understand God. The toil that we experience happens in space and allows us to better understand God as Creator. But, Heschel spends more pages writing about time.

In thinking about time, there is a tension because Genesis 2:2 reads, “On the seventh day God finished his work,” Exodus 20:11 reads, “In six days the Lord made the heaven and earth.” How is it possible to finish making heaven and earth in six days but not to be finished until the 7th day? The rabbi’s resolved this tension by stating that menuha was created on the Sabbath. Menuha is not an object that we create that can be grasped in our hands. Heschel states menuha means something akin to “tranquility, serenity, peace, and repose”. God created an architecture in time and menuha is the special attribute of the seventh day.

The fact that God blessed the seventh day, and not the other days, should hint that the seventh day is special. What this means is that time is not homogeneous —some time is different than other time. So it seems there is time for creating and time for remembering that we were created. On the seventh day we remember our relationship with God, that remembrance is a refuge from a fury of sound and distraction. What is more, this remembrance carries us through the rest of the week.

This was a great joy for me to think about The Sabbath today. It was also a reminder. If you are like me and still trying to find your groove amidst Coronavirus, consider setting apart one day from the others. Create a palace in time, a time that is different from all the other time. Remember, time is not homogenous. Your palace will look different depending on your position in life but it should be restorative and help you to remember and be grateful.

At one point, Heschel asks, “. . . is there any institution which holds out greater hope for man’s progress than the Sabbath?” I do not know. But, genuine rest — not diversion — seems necessary in the tensions of our present moment.

To Understand the Pandemic, Look to History (Economic History)

As the holiday shopping season gears up, Joy has invited us to suggest some books that you might give as a gift (or read yourself!).

I have one very strong recommendation: Werner Troesken’s 2016 book The Pox of Liberty. Unfortunately the publisher did not foresee the renewed interest in pandemics due to COVID-19, so you might have to settle for an electronic version of the book right now (though you might have better luck with the publisher than Amazon).

The Pox of Liberty – A Book Review By Dr. Price Fishback - Foundation For  Teaching Economics

Tragically, Troesken passed away two years ago. Many of us would love to hear his thoughts about the current pandemic. The beauty of this book is that we can still learn from him even though he is no longer with us, not only about pandemics of the past, but possibly with lessons for our current health crisis.

Troesken brings his broad knowledge of economics, history, and demography to examine the history of smallpox, typhoid fever, and yellow fever, as well as the policy responses. Broadly Troesken asks: why has the US historically been one of the richest countries in the world, yet so bad at fighting infectious diseases?

I won’t spoil the whole book, but he argues that the answer to both questions can be found in the US Constitution. The liberties protected in the Constitution allowed for the US economy to be among the best performing in the world, but made it hard for the federal and state governments to address pandemics. It’s a trade-off, or rather multiple trade-offs, as Vincent Geloso has put it.

We can see this clearly in the differences between the US and European responses to COVID-19: European countries were able to close their borders which spared many central and eastern European countries from the first wave of the current pandemic (though it does look like this may have been a temporary reprieve, as Czechia, Poland, and others are now seeing dramatic increases in COVID-19 cases). In the US, the virus has slowly spread from state to state, seemingly sparing no one in its path despite varying public policy interventions (including mostly unenforceable travel restrictions). We don’t know what the future holds for COVID, but the constitutional factors at play that Troesken described for smallpox 100 years ago seem to still matter today.

On a personal note, Troesken was a professor of mine in grad school (he spent one year at George Mason University, though most of his career was at Pitt), and he was a big influence on me, especially his teaching style. While I respected his work greatly, I was always puzzled by his interest in infectious diseases. What was the relevance of this topic for understanding the modern world? Well, in 2020, we all found out. And now we miss Werner even more.

Gen Z reads The Complacent Class, Review #2

Another one of my undergraduate students has written a review of The Complacent Class. His name is Vinny Russo and he’s going on to great things. Here’s a link to the first review published earlier by a different student.

For the simple are killed by their turning away, and the complacency of fools destroys them

Proverbs 1:32

When I read the Bible, I see God disrupting the lives of his people and moving them. People get moved as punishment, as well as for a reward or rescuing, including Adam and Eve’s expulsion from the garden and the Jew’s exodus from Egypt. Good things come from the movement of Israel and its people. The United States needs movement, too. Although I wouldn’t wish for a modern-day abusive Pharaoh to force us into some kind of exodus, I do think that Americans can learn from Tyler Cowen and his manifesto for mobility and taking risks. The future of America depends on it.

“Economists see migration as a kind of investment. You give up something in the short run, namely the home, job, friends, and conveniences, in the hope of achieving something different and better somewhere else. In the beginning, the move is not supposed to be easy, but it’s a sign of hope, faith in the future, and a belief that a new start can lead to something grander and more glorious.” – (Cowen, Page 24). After joining the military right out of high school, joining a Christian Missions agency, as well as coming to Samford University in Birmingham, Alabama for Undergraduate studies (I am from New York City), I can very much relate to this quote. Every move was difficult in its own way, but the growth in and from the process is invaluable. Should everyone enlist in the military, become a missionary or go to Samford? No. Can most Americans, after completing High school, go to school or find a job in a city other than the one they grew up in? Yes. If more 18-year-olds did this, they would be richer and their actions would boost production in the United States. If you have not done so already, take a leap of faith and pursue your God-given dream, or read Tyler Cowen’s The Complacent Class. Both can change your life. Thanks for reading!

Good Old Lemons

This post doesn’t have a darn thing to do with economics, statistics, or finance. This is a post about citrus storage.

There are problems with buying citrus.

  • If you get a big Sam’s Club size bag of limes, then they start going hard and thin-skinned by the end of a week.
  • A bag of grapefruit? There’s usually one in the bag that’s goes moldy almost immediately and you know what they say about one bad grapefruit spoiling the bunch.
  • Mandarins shrink and get hard to peel.
  • Lemons – even if you refrigerate them – get soft and un-zest-worthy.

There is a solution. Now, our lemons and limes last upwards of 6-8 weeks with hardly a symptom of age. Mandarins don’t shrivel and grapefruits remain edible. No, silly goose, the answer isn’t free markets and the price system.

Maybe it’s all of the additional vitamin C that I’m getting. Maybe it’s the warm and fuzzy feeling of money well spent. But I’m now excited each time that we purchase citrus. And I get a cozy feeling of satisfaction whenever I see a nice lemon that definitely should not still be any good.

The answer is really simple. You too can achieve such amazing results. All you have to do is:

  • Rinse your citrus under water, rubbing gently to remove any invisible bad-guy germs. In reality, you’re probably getting rid of mold spores.
  • Place the wet citrus into a ziploc bag, seal, and refrigerate. The refrigeration further retards the growth of any unwanted spores. The sealed bag prevents too much air flow and drying.( I don’t bother refrigerating grapefruit and oranges because I eat them quickly enough).

That’s it. You too can have 8 week old limes and lemons that you bought on sale or in bulk that are nearly as fresh as the day that you purchased them.

Enjoy!

Certificate of Need Laws

In 1960 $1 out of $20 in the United States was spent on healthcare. Sixty years later, nearly $1 out of $5 is spent on healthcare.

A dozen facts about the economics of the US health-care system

There are many reasons for this increase in spending (e.g. demographic shift, increased income, and more). In this post, I want to focus on competition in the healthcare industry. There is an excellent Brookings Institution piece from earlier this year on competition in healthcare. Martin Gaynor writes,

“The research evidence shows that hospitals and doctors who face less competition charge higher prices to private payers, without accompanying gains in efficiency or quality … the evidence also shows that lack of competition can cause serious harm to the quality of care received by patients.”

If there are benefits to competition in healthcare, the question becomes how we can increase competition. One of Martin Gaynor’s proposals is to eliminate or reform Certificate of Need (CON) regulations that require health care providers to obtain permission slips from a state health planning agency before the provider opens a new facility, purchases new equipment, or supplies a new service.

These laws were enacted federally in 1972 in an effort to control rising healthcare costs. The logic was that healthcare providers who are reimbursed for services would have incentive to invest in facilities and equipment that allows them to perform more services.

There is mixed evidence that CON regulations have achieved their goals. But, what is clear is that requiring permission erects barriers to entry. Moreover, these barriers to entry become more pronounced if the state health planning agencies are captured by existing hospital interests. Consumers like competition but suppliers do not.

In a new paper titled, “The Impact of Certificate of Need Laws on Heart Attack Mortality: Evidence from County Borders”, economist Kevin Chiu reports that the introduction of Certificate of Need Laws resulted in 6-7 additional heart attacks per 100,000 people. He focuses on heart attacks because the acute nature of heart attacks means you can’t “shop for care”.

The paper is an improvement over the existing literature because it zooms in on counties along state borders with and without CON regulations to get more apples-to-apples comparisons. For example, there could be regional trends that make a Florida to Washington comparison less valuable than a Florida to Georgia comparison. He also performs a number of tests that make the result more believable. For example, CON regulations have zero impact on suicides that normally take place outside the hospital.

Competition reduces prices, increases quality, and encourages innovation. Certificate of Need is one way in which laws have reduced competition in healthcare. The consequences are life-and-death without much apparent upside from cost containment. Currently 35 states still have Certificate of Need Laws. If you’re interested in finding out where your state stands, check out this map from the National Conference of State Legislatures.

The statistically diverse curriculum

It’s important to present undergraduate students with a wide variety of view points. But in my view the diversity of viewpoints is a means, not an end in itself. At the very least, it’s a path to learning how to evaluate arguments, and broaden sensibilities in a very Oakshottian way.

It seems obvious to me (and perhaps I am mistaken) that curricula should be structured around considerations other than mere diversity. After all “fields” of scholarship have formed around the types of conversations that develop when scholars try to learn about some aspect of the universe. There is a structure to knowledge and how it is generated, if only because of the particular history of particular inquiries about the world.

Yet, somehow in every curriculum conversation I have been involved in, I get significant pushback from those that view diversity as an end itself. To put the matter to rest I present the statistically diverse curricula. For the liberal arts core, let’s randomly assign courses and readings to each student such that the average student has the maximally diverse curriculum. The average student will be well rounded. We can even draw courses and readings from some weighted distribution to avoid a bias stemming from viewpoints that have been the most dominant throughout history. I doubt this would satisfy, or even make sense, for those that defend diversity of viewpoints as an end in itself. If the statistically diverse curricula is a no go, then diversity of viewpoints as an end in itself should be a no go as well.

How to Think About Inequality Data and Public Policy

Lately I’ve been thinking about the disagreements among economists about the extent to which inequality has increased in recent decades. I am facilitating a reading group at my university on inequality this semester with some great undergrads, so it has very much been on my mind.

With conflicting data showing different trends, how are we as economists to judge this? How can the general public even have a clue how to judge this?

You may have seen this chart before. It comes from an article in The Economist, which actually does a really good job of explaining the debate over the data if you know nothing about it.

TaxProf Blog

According to some estimates, the share of income going to the top 1% has doubled and is now over 20%. That sounds bad. Maybe we need some more redistribution. Maybe a wealth tax.

But according to other estimates, and taking account of our existing system of progressive taxes and redistribution, the share of income going to the top 1% has not risen at all, is only about 5%. Less worrisome. The existing system of taxes and transfers seems to be doing a pretty good job, or at least no worse than in the last 60 years. No need for a new wealth tax, etc.

So who is right?

Sorry, I don’t have the answer. I think I’m pretty good at digging into economic data (follow me @jmhorp on Twitter for an almost daily dose of data debunking!), but I am no expert in this area. There’s probably only a dozen economists that really understand this data and the trade-offs in different forms of measurement.

So instead of giving you the “correct” answer, I offer you a chance to reflect. Our temptation is to say the “correct” data is the one that comports with our political preferences. If you are a progressive, you probably think inequality is bad and getting worse. Piketty is your man. If you are more of a libertarian, you probably think it’s about the same as recent years. Auten and Splinter must be right!

Stop. And instead, consider how you might view the policy implications of the data you don’t like being the correct data. If you are a progressive, would you still think we need a wealth tax even if the Auten and Splinter data is correct? If you are a libertarian, would you still think things are just fine and maybe we should cut the top tax rate if it turns out that Piketty and co-authors have the real data?

If you answer is the same for the policy implications regardless of what the data say, you might want to check yourself. And if so, why are we even arguing about the data?

Perhaps your answer is “I might have the same policy answer regardless of the data, but there are people out there that are convinced by data.” I think that’s possibly reasonable, and I would like it to be true, but where are these people?

Perhaps the answer is “as a libertarian, I don’t care about inequality so long as the poor and middle class are also sharing in the gains.” Or “as a progressive, I will continue to worry about inequality until the top 1% only has 1% of national income.”

I think these are the normal fallback answers. But really? Libertarians: if the income of the top 1% doubled in a decade, but the bottom 99% increased by 0.5%, you would be fine with this, because at least no one declined? Progressives: you would really support increasing taxes on the rich, despite any downside to this, until incomes were exactly equalized?

Frankly, I don’t believe anyone really holds either of those extreme positions. So surely, the data must matter? We want some reasonably shared benefits from economic growth, but no one really demands that they be exactly equal, right?

So, consider your own biases. Don’t engage in motivated reasoning. And think through how your views might change if you are wrong about the data. Perhaps someday Mother Nature will reveal herself, we’ll have the true inequality data, and we’ll see if we were honest about our reflections.

Aggregate Demand Regimes

Is inflation correlated with output growth?

Consider the AD-AS model which is often expressed in growth rates. Economists will often say that the short-run supply curve is flatter in the short-run and vertical in the long-run. In other words, aggregate demand policy can have SR output effects, and only has LR price effects.  Sounds good.

But there is a lot of baggage hiding behind “can have effects”. Often we’ll say that lackadaisical businesses cause a flatter SRS and that businesses with rational expectations have a vertical one. Also sounds good.

What causes the steepness of the SR supply curve? I’m sure that there are multiple determinants in regard to expectations. Here’s what got me on this topic. David Andolfatto shared the below graph and asked “Does lowflation necessarily mean low growth?.

Good question. My answer includes expectations concerning the monetary policy regime. Specifically, my answer was “It does in a regime of volatile and uncertain nominal income. Surprise AD growth pushes us up the SRAS.” Andolfatto called me out and in the right way, asking “What’s the evidences for this?

[…crickets…]

I had no evidence. I had the AS-AD model in hand and some logic – but no evidence. My logic is as follows. In a monetary regime that includes a constant rate of AD growth, output and price growth are inversely correlated. If NGDP grows at 5% always, then inflation falls when output growth rises. In other words, AD is exactly what people expect – illustrated as a vertical SRAS curve.

However, expectations are different in a regime of erratic AD. Let’s say that the rate of AD growth is unknown, but that the variance is known. If this is the world that you live in, then you make hay when the sun shines. Businesses sell more in periods of higher income. And, because they’re marching up the marginal cost curve, prices also rise. Alternatively, it may be that output growth is inflexible and prices rise as a goods are rationed.

Regardless of the truth, the above explanation is just story-telling. I had no evidence. What would the evidence even be? Here’s what I settled on. First, let’s express the AS-AD model in quarterly growth rates. In order to get a handle on monetary regime AD variance, I calculated the standard deviation of the NGDP growth rate by Fed Chair. Presumably, the Fed chair has a decent amount to do with monetary policy and the rear that occupies that chair is an indicator of when a regime begins and ends. I calculated the correlation between the GDP deflator and RGDP growth rates by regime. Below is the scatter plot.

What does it tell us? It tells us that regimes of stable AD growth experience a negative correlation between inflation and output growth. It also tells us that a AD growth volatility is associated with a positive correlation between inflation and output growth. So,  Does lowflation necessarily mean low growth? It does in a regime of volatile and uncertain nominal income.

(Of course this is all casual. It makes sense to me at first blush though. Having said that, the line of best fit also looks like it’s driven by the 2 extremely variable times: McCabe & Powell.)

Spontaneous Emergence of Property Rights in the Classroom

Last week I posted about Bart Wilson’s talk on his new book “The Property Species” and promised to share a class demonstration about the emergence of property rights in the classroom. But first let me tell you why I did this demonstration.

When I was a student I hated assignments that go through the motions of learning, but provide no learing. Building a paper maché volcano, while fun for some, teaches little about volcanic eruptions. Shaking and opening a soda bottle (pop?) is more instructive: it’s the fall in pressure as the bottle is opened that leads to the rapid release of the gas disolved in the liquid, the same thing happens to magma. And while being able to algebraically solve for the equilibrium price given supply and demand functions is a very necessary evil (to a point), it teaches little about the process of competition and price formation.

This is why I was reluctant to having my first Intro to Economics class write their own version of “I pencil”, quite a few years ago. Driving the point of how largely anonymous exchange and specialization, coordinated peacefully through property, prices, and profits and loss makes the modern world possible is very important. But how much can you really learn about this by watching and transcribing an episode of “How It’s Made”? For most students, not much at all. Partly in dread of reading and grading 80 versions of “I whiteboard marker”, or “I toothbrush”, and partly following my conscience I decided to throw in a twist.

The twist may seem evil and arbitrary at first. Students still had to choose a good and write their own version of “I _____” , but if two students wrote about the same good I would divide their grade by 2. If three students wrote about the same good I would divide their grade by 3 and so on. I did not give any additional prompts about how they should sort out potential conflicts or coordinate amongst themselves. These were just the rules of the assignment.

Without this seemingly arbitrary grading rule, goods to write about were not scarce. By changing the grading rules, goods to write about became scarce. While there are many more goods to write about than students, certain goods stand out in the mind, and extra effort must be devoted in thinking up a new good, and finding out if someone had already looked around their room and chosen the same good. Now students also had to coordinate amongst themselves or run the risk of a fairly severe penalty to their grade.

As expected, I have never had to enforce the the harsh grading penalties (anecdotal, I know). Students always find a way to coordinate and establish property rights over suddenly scarce goods. The point of the assignment was no longer about I pencil, but about the emergence of property rights and social coordination (and hopefully a little bit about I pencil as well). I didn’t act as a central authority that imposed and enforced property rights. I merely changed the incentives and constraints, hoping that the costs of coordinating and setting up agreements was smaller than the costs of not doing this.

When they turned in their assignment, we discussed how they had actually coordinated. Over the years I have seen multiple ingenious mechanisms. From class forums using the university platform, to a simple spreadsheet circulated amongst the students via email or WhatsApp. In the good old times before the pandemic they would sometimes meet after class and sort it out in person. Sometimes they created a common pool of goods and one of their classmates is chosen to distribute them among their peers. Leaders emerge to fill various roles from dispute resolution to registering claims. How this person is chosen also varies from class to class. Some students volunteer, others have it thrust upon themselves. The use of a homesteading rule is fairly common, first to choose gets the good in cases where there are multiple claims. In class we discuss why they use this rule, rather than last to choose gets the good, and the problems this alternative would entail.

I have only had one instance of a strong and contested dispute among “property owners”. That semester students had to not only write but present their work. Two groups (that semester “I _____” was a group assignment) wanted to do a good they thought would be amusing to present in class. I’ll leave it up to your imagination what good students in their late teens and early twenties might find to be amusing to present in class. The two groups of students underwent a rather complicated dispute resolution system with the rest of the class playing the role of arbiters of the multiple claims to the same good. Neither group wanted to budge, but one group ended up ceding the rights in the end.

What I like about this little classroom demonstration is that it makes it easier to teach the emergence of institutions as the products of human action but not human design. Order without design is a difficult concept to grasp, but maybe even more importantly it is a concept that is difficult to accept. But after this demonstration, not anymore, students experience the emergence of property rights. An added bonus is that in this case scarcity is clearly a product of the relation between their minds and how they relate to the world, not about objective quantities of goods.

Property rights emerge through their coordination but are not centrally imposed. They coordinate because a change in the environment turned a previously free good, the subject of their short “I ____” essay, into a scarce (economic) good. As you can probably tell Harold Demsetz is one of my favorite economists of all time. After the barrier of disbelief is breached, we can easily talk about the spontaneous emergence of money, cover a little about how property rights emerged in whaling on the high seas, and the spontaneous origin of law (very useful for future law students usually educated in the positivist tradition, as is the norm in Ecuador).

I later learned of the fish game (I am not an experimentalist). But, no disrespect intended, it seems a little contrived. I still like my assignment better. While the goldfish game teaches the tragedy of the commons, the “I _____” assignment teaches how the tragedy can be solved without a centralized authority by having students solve if for themselves and come to grips with the real limitations and problems they faced, albeit on a much smaller scale. I am still hoping for an experimentalist that thinks something serious can be made out of my little classroom demonstration.