BREAD, Development work you should know about

I'm off to Madison, which I'll talk more about on Friday or Monday. Chris Blattman is off to BREAD's conference in London. BREAD is an organization that runs regular development conferences with presentations by top economists.

The first two papers are particularly interesting looking and I'll give them a closer look later. Here is a list of the agenda and links to papers.

The first "How to Target the Poor: Evidence from a Field Experiment in Indonesia" looks at the best way to figure out which groups to target with poverty relief programs. Finding out who is poor is expensive. One way is to use a proxy means test, which in short means looking at the type of house someone lives in if they don't have running water, concrete floors, electricity or some combination then they are deemed poor and eligible. The other common tool which is cheaper is to find poor communities and give the help to everyone there. Reading the abstract suggests that the first tool works better at figuring out who is really poor, because communities are bad at ranking themselves.

The second paper "Why Do Mothers Breastfeed Daughters Less Than Sons? Evidence and Implications for Child Health in India" Suggests that girls are breast fed less because mothers want to keep fertile after daughters in hopes of having a son. Child mortality mirrors this result and may account for 22,000 missing girls (or about 14% of the difference between the # of girls and boys)

I'm happy I'm going to Madison, but looks like a good bunch of papers.

Flu Shot Rationing

So yesterday I went down to the campus center and got my flu shot. Towson was giving free flu shots to students and charging $10 for faculty members. The plan was to dispense flu shots from 7 to 7 yesterday and today.

The demand for free and $10 flu shots was too high and by just after 2pm on the first day, Towson's clinic was out of flu shots. If we were looking at this from an ECON 101 first week of class, we would say there was a shortage and the clinic should have raised their price.

But sometime later in ECON 101 we also talk about externalities. Towson can produce a lot of positive benifits (externalities) if it gets as many people to get the shot as possible. Students living in dorms are more likely to spread it to each other due to close quarters. So the price favoritism to students is probably a good idea, plus professors have more money so are less likely to decline a $10 flu shot.

I got my flu shot yesterday at 11am. But its worth noting that if the clinic would have been on Monday and Tuesday I might have waited until the second day, since I often work from home on Mondays. In which case I would have been rationed out of getting a flu shot.

Like Mankiw's magic pill from Monday's blog, there are only so many resources or this case flu shots. Should professors have received flu shots, should students have to pay, should student living in dorms pay less? No matter the set up there will be rationing of those flu shots of some sort, because if they are given away there are clearly not enough for everyone.

Finally, thank you to who ever ran and helped with the flu shot clinic. I got in and out in under 5 minutes. It should be considered a successes that all the shots were given.

Economics is the Science of Allocating Scarce Resources

This OP ED in the NY Times by Greg Mankiw is well worth the read (link).

In short Mankiw provides a thought exercise. What if there was a pill if you would take it everyday you would be 100% healthy, but it cost $150,000 a year to make. Even if the US or world spent everything it could not provide the pill to everyone.

So the hypothetical pill like health care is a scarce resource. As Mankiw says in his Principles textbook, resources are scarce. How we allocate them between people the best is economics at its core. You just have to decide what you mean by best?



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Also the comments from Friday are well worth the read. My Beloit friends appear to know about the textbook industry. It appears that some online schools are already forming their own cartel. From the second comment, profs in small town want to help the book store, because profs like book stores.

Both responses provide more evidence that professor are sensitive the price of their students books.

Efronomics and Textbook Cartel

Despite what most students think, some professors actually care about the textbook costs for their class. We care because we want the students to read the text, which they can't do unless they buy it and the higher the price the less likely they are to read it.

I generally teach two classes Economic Development and Introduction to Macroeconomics. For Development I assign three paper back that can be purchased on Amazon for about $10 each used. For intro to macro, I have students use an online homework system called Aplia, which for $80 also includes an online copy of the book. I think Aplia does a good job running the site as my students have few technical glitches and the homework problems are solid. I would like my students to get a better deal.

I could shop around, I think I will next year. But I'm just one professor with 50 intro students, I'll be subject to the market going prices, which is probably $80 if I want an online homework system (which I do).

I was thinking about all of this when I read an entry in Seth Godin's blog on high school musicals (the actual kind not the movie staring Zac Efron). He said his local high school paid $3,000 to stage Grease. He believes the high price was because the High School had little bargaining power when getting the rights to a musical, since few companies option the rights to well known musicals. His suggestion was to form a cartel of high schools that would option musicals. The cartel would be a set of a few hundred school that could use their size to bargain for the rights at discounted prices. My guess is 100s of schools each year put on Grease, but is that really that preferred to say Joeseph and Technicolor Dream Coat.

Back to textbooks. I wonder if universities are doing this. What if the Towson Economics department which teaches by my rough estimates 600-700 student in Intro to Macro each semester got together and tried to bargain with a company for exclusive rights to provide an online homework system. If a conservative estimate is 1,000 students a year in intro to macro and 1,000 in micro, we could be talking 2,000 students at $80 a pop we are a $160,000 in value.

Of course getting faculty members to agree on anything is always difficult let alone the same textbook. But even forming a cartel of 4 or 5 faculty may be large enough to get some bargaining power.

Beer Duopoly

"Whenever there are only two companies (in an industry), there is a tendency for prices to rise," Gitter said. "As long as they're willing to follow each other, they can keep (raising prices)."

From a recent article on the rising price of beer from Gerald Ensley at the Tallahassee Democrat.

In short with the merger of Miller and Coors now two companies MillerCoors and Anheuser Busch control 80% of the US beer market. Most people know a monopoly is when one company controls a market, when two companies control a market its called a duopoly. The two companies can't legally work together to raise prices like a monopoly (that's called collusion), but one can raise their price and hope the other follows to maintain higher prices.

The Wall Street Journal chronicles the price increase that is coming and points like I did to the new duopoly.

As I suggested to Ensley, the only way to fight these companies is to grab another beer brand, I myself fought the duopoly last night with a frosty Sam Adams (which sells 8% of the market).

But if Sam follows suit, I'm still OK because I can always relax and have a homebrew.

Last Month Cash for Clunkers, This Month no Civics for Cash

My dad forwarded me this article from the Columbus Dispatch about the aftermath of Cash for Clunkers around Central, Ohio.

The good news is that cash for clunkers led to huge increases in sales, which is what it was supposed to do. The bad? news is that as one dealer says in the article they don't have any cars left to sell, in his case the dealership's inventory fell from 200 to less than 10 cars


But I'm not sure this is bad. The point of the program was to increase the production of cars. Car makers are not going to start making cars until the dealers need more cars, which won't happen until they sell the old ones.

The key question is did the program get people to buy cars who would not have purchased cars without the program in the next year or so, or was the increase just due to people changing the timing of their purchase.

That is the more difficult analysis and it remains to be seen.

Who is Poor

An article in the National Review from the Heritage Foundation lists some Census Bureau data about people who are poor in the US.

In short the facts show most poor people in the US have TV, cars, air conditioning and reasonable sized houses.

A couple of thoughts. I agree the poverty measure in the US which is basically 3 times the amount needed to purchase a decent diet, a definition which worked well in the 1960s but not so much now. Since food is much cheaper and incomes higher. The measure also does not control for difference in prices between places like New York City and North Dakota.

I'm not sure facts about TVs and AC is the right way to look at it. Even people who are poor by international standards (live on less than $1 a day) have TVs or radios (from this article)


On the other hand keeping a consistent definition allows comparisons between eras, so I'm not sure the current poverty line measure should be thrown out.

I don't know a lot about American welfare programs to me it comes down to health care access and schools. I think there is also evidence that early childhood intervention can pay off (here)


h/t to Newmark's Door

YOU LIE! When is this over? Can I go to the Bathroom?

The connection was just too perfect his morning. Today Planet Money had a short story on the economics of misbehaving in school (here). They report on how on the first day of New York City School a principle gives a big welcome speech to the whole school. In the middle of it a student raises his hand , this wasn’t supposed to be a question and answer time. The student shouts out “when is this going to be over?” The story goes on to talk about how students use cost-benefit to decide to missbehave. The cost being punished, the benefit being the popular kid by sending a signal you are brave and aren’t scared of authority figures.

This reminded me of a scene from the 4th season of the Wire, where a kid does the same thing at an assembly, but instead yells “I have to go to the bathroom.”

Not 10 minutes after the kids misbehaving story on NPR they talked about Rep. Joe Wilson shouting “YOU LIE” at the President.

I wonder if the signal Rep. Wilson would have sent would have been different if he shouted “When is this over?” or maybe even “Can I go to the Bathroom?”

Zone Defense: I still don't understand zoning laws

The Washington Post today reports on Cleveland Park a nice DC neighborhood, which is having trouble with empty store fronts. I used to live a 15 minute walk from Cleveland park and still venture over there for food sometimes.

As the article points out that 1/6 of the store fronts in Cleveland Park are empty. From econ 101 this could indicate landlords are trying to charge too much. But they can't just rent to anyone.

From the article
"Drawing the most blame is the 1989 zoning restriction limiting bars and restaurants to no more than 25 percent of the area's total linear store frontage, a threshold that the neighborhood has reached."

The thinking behind the zoning law was that restaraunts bring in people like me who drive over from Silver Spring and take up parking and cause traffic. It also raises rents for potential dry cleaners, grocery stores, and video rental places. All businesses which sell more to those living there.

By limiting restaraunts Cleveland Park residents could have cheaper services for themselves. Although housing prices also might decline if people prefer to live in neighborhoods with more restaraunts.

I really have no clue if for Cleveland Park residents this is a good policy. For me and the building owners trying to rent out space to restaraunts who are interested in opening up the policy is bad though.

Oh well at least Spices is still there.

Those Who Do Not Work Do Not Eat

In the last quarter of the 19th century, it took 1,700 hours of labor to purchase the annual food supply for a family. Today it requires just 260 hours, and it is likely that by 2040, a family’s food supply will be purchased with about 160 hours of labor.

from Robert Fogel Nobel Prize winning economic historian via Greg Mankiw

Americans now spend around 10% of their income on food. Those living on a $1 a day in the poorest countries in the world spend between 50%-70% on food. Fogel cites that in the US late 19th century it was close to 90%.

This makes me think of the recent Planet Money (NPR's econ show) podcast on 12th century economics (listen here you may want to skip the first 1.5 minutes)

As Phillip Daileder the historian notes in the podcast most of economic progress can be thought of as the result of increasing food productivity.

On this subject my favorite recent work is this paper by Nunn and Qian claims that almsot 20% of the world's population growth is due to the spread of the potato.

So next time you go out with 4 of your friend. You should order some fries and thank the fries because without potatoes there would be one less person at the table.

I'll Go Back To Rockville: Strip Mall Food Finds

On Sunday a friend of a friend took me to a great Taiwanese restaurant in Rockville. It helped that her parents are Taiwanese and she ordered for us. It was one of the better meals I have had in the DC area in a while and with beer, dessert and tip it was $17 a person. Actually that's an understatement the meal was AWESOME!

I think this is my first strip mall find in Maryland. Tyler Cowen has been touting strip malls as the new locals of interesting ethnic cuisine. This article he wrote in the post a few years back discusses the change.

In short rents got too high in Chinatown, Dupont, Georgetown, and Adams Morgan (former hubs of great little restaurants with food from around the world) so ethnic restaurants moved to strip malls in Rockville, Annadale, and Wheaton. Also as Cowen points out second generation immigrants have more money for cars and eating out.

We had a similar experience looking for dim sum in DC all the good places are in suburbs. So unfortunately the good food finds in the DC area may require a car ride.

Baby Sitting, Video Games, and Monetary Economics

In the NY Times Magazine Paul Krugman provides an overview of the intellectual battels in economics over the last 50 years (link).

In the article Krugman cites a famous example published of a baby sitting co-op. The idea was that each parent would get 20 coupons When someone watched their kid they gave that person a coupon for each 1/2 hour of babysitting. As the story goes unfortunatly people wanted to have on hand more than 20 coupons so people where unwilling to use the coupons for fear of not having enough. This was used as an example to show that more coupons should be printed so people would spend them and babysitting would happen again. Which is an analogy for what federal reserve can do, when people aren't spending $s, print more of them.

I was thinking of this while checking out the website Goozex. The website works that you can trade video games and movies. Send someone a movie and you get points, want to get a movie then you cash in your points. The key to the system is that you can buy more points, so it isn't closed. Goozex sets the points price of each game . Unlike the babysitting co-op the price can be changed if Goozex sees a surplus or shortage of say Rock Band or Forrest Gump.

Living on a $1 a Day

Anyone interested in development economics should read the paper "The Economic Lives of the Poor" by Abhijit Banerjee and Esther Duflo (linked here). Its been out for a few years but the paper will become a classic. In 22 pages it gives a great sense of how families who live on less than a $1 a day per person spend their money (mostly on food but also on alcohol/tobacco, weddings, and funerals) and why they can't escape poverty. There is no math involved too.

I really liked this section on why it is so hard to save.

... saving at home is hard: The money may be stolen (especially if you live in a house that cannot be locked) or simply grabbed by your spouse or your son. Perhaps equally importantly, if you have money at hand, you are constantly resisting temptation to spend:. to buy something you want, to help someone who you find difficult to say no to, to let your child have the sweet he wants so badly. This is probably especially true of the poor, because many of the temptations you are being asked to resist are things that everyone else might take for granted.

But you don't have to take my word for it...

Models of Growth

Articles about how economic growth will consume all the earth's resources have been written for a few hundred year. This one by David Barash in the Chronicle of Higher Education links current economic models to a Madoff schemes, because they don't account for the finite resources of the earth

Economic models do take finite resources into account. In the Solow Growth Model, perhaps the most common model taught in economic growth, economic growth measured by GDP per capita (ie income per person) will go toward zero. One common interpretation is because of finite resources. The model also factors in that the earth's resources depreciate unless investment and savings are made. If we don't save enough the economy contracts.

Basic economic models do not rely on increased consumer spending, but on increased production through technology growth.