The Pope and Michael Kremer

They’ve been talking or it would appear. El Papa said:

I would say that this problem of Aids cannot be overcome merely with money, necessary though it is. If there is no human dimension, if Africans do not help [by responsible behaviour], the problem cannot be overcome by the distribution of prophylactics: on the contrary, they increase it. The solution must have two elements: firstly, bringing out the human dimension of sexuality, that is to say a spiritual and human renewal that would bring with it a new way of behaving towards others, and secondly, true friendship offered above all to those who are suffering, a willingness to make sacrifices and to practise self-denial, to be alongside the suffering.

If people have preferences for more sexual partners then they’ll weigh the costs of having more (the chance of getting infected with an STD) against those benefits. And if these preferences exist, Micheal Kremer says:

Surprisingly, the availability of an imperfect vaccine [wa: e.g. condoms] could reduce welfare, as well as increase prevalence. If the elasticity of the rate of partner change to the marginal probability of infection from an additional partner is greater than one, an individual who gains access to a partially effective vaccine will wind up with a higher risk of infection than without the vaccine. Although the individual benefits, others are made worse off, because prevalence in the pool of available partners will increase… The combined costs of the increased prevalence, plus the expense and side effects of the vaccine, could outweigh the benefits of a reduced risk of infection per partner and so introduction of an imperfect vaccine could make everybody worse off. This analysis suggests that one goal for empirical work should be to determine whether the elasticity of behavioral response to the probability of infection is less than or greater than one.

The Pope is saying people shouldn’t have such preferences. His wasn’t a statement about science (I think he knows condoms act as physical barriers to transmission to disease) its a statement about morals, aka optimal preferences. Does anyone know if that elasticity has been estimated?

Yuppie buffer

A story in the New Yorker:

“They hire someone—this has happened several times—so they don’t have to talk to me,” he went on, growing more animated and reddening with amazement. “It’s like they’re afraid of me! So they hire a guy who’s more comfortable dealing with a masculine-type person. I stand there and talk to the customer, and the customer doesn’t talk to me or look at me, he talks to the intermediary, and the intermediary talks to me. It’s the yuppie buffer.”

(h/t Sharon)

“We’re bored” argument for stimulus

This Lessig comment sounds like he’s wanting the fiscal stimulus because he’s bored by the old way of doing things:

If we’re lucky, we get the chance for this kind of transformation once a generation. It would be a scandal on the scale of the last 8 years to fritter it away.

New, hip things like broadband are cool. Let’s not fritter away the chance to force the whole economy to transition to these technologies.

Don’t get me wrong. I’m a total geek. I DO think broadband, smart grids, high speed railroad, online medical records, etc are cool. Its just not clear to me that these are efficiency improving technologies and even granted that, its not clear why these have to be public investments.

Larry Lessig and Will Ambrosini want these technologies therefore everyone else has to pay for them?

Macro expectations

About Obama’s deficit spending plan, Posner says:

There is a legitimate concern that many of the projects undertaken by the federal government will yield costs in excess of benefits. But the concern is exaggerated, because it ignores the benefits that such projects confer on fighting the depression as distinct from simply improving the nation’s transportation system or reducing carbon emissions or buying military equipment to replace what has been lost in the Iraqi and Afghan wars.

Personally, I keep ignoring this criticism of the criticism of fiscal policy. I think this is because its right. Fiscal stimulus — or at least this fiscal stimulus — is all about expectations.

To take off from the Posner quote, this policy’s effect on expectations has two channels. It will directly support wages, by “creating or saving” jobs, thus discouraging precautionary savings. In light of my last post, policy won’t be implemented fast enough to have an impact through this direct channel. The second, indirect, channel is cheerleading.

As economic statistics get worse and the reporting of them gets more dire, fear rises and expectations get grimmer and grimmer. As Krugman points out, coordinated low expectations cause economic conditions to worsen. Now, because the unemployment rate and GDP are national statistics and headlines announce the state of the nation, people look to great national leaders to cheer them. Obama’s bold, optimistic speeches and policy announcements are the macroeconomic equivalent of “Go team!” at a football game.

The irony of this is plain. If nobody paid attention to national coverage of economic conditions, their low expectations wouldn’t be so correlated and we wouldn’t need great national leaders to cheer us on.

In any case, for that cheerleading to be credible it has to backed by an actual implementation of fiscal policy. It doesn’t matter if its direct effect happens too late and a dollar short.

A definition of God

As implied here :

Dear Global Economy, we thank thee for thy economies of scale, thy professional specialization, and thy international networks of trade under Ricardo’s Law of Comparative Advantage, without which we would all starve to death while trying to assemble the ingredients for such a dinner as this. Amen.

Of mice and maximin

Gabriel summarizes the debate on fiscal stimulus and comes down on John Taylor‘s side (good choice). Those checks we got in the mail from the Feds didn’t increase aggregate demand; while take home pay went up, consumption didn’t. People, on average, put that money in savings (e.g. paid down their credit card debt).

This conforms to standard economic theory, but not, by the way, our cherished models ((Won’t anyone defend Keynesian fiscal stimulus?)). People that win a lottery will tend to put most of their winnings in savings and only consume a small bit at a time because they know its a one time windfall. On the other hand, people who get a raise at work will tend to consume most of the additional pay because they expect the additional pay to be in each of their future pay checks. ((Hey, what about Ricardian equivalence? In what sense aren’t all fiscal policies permanent ? Contra Taylor, “permanent” tax cuts without out spending cuts aren’t credible.))

These theoretical results depend on people having access to credit. Hypothetically, suppose you’re a poor student expecting to get a lavishly paid job when you go on the job market next year because you expect no Economic department budgets will be cut in the aftermath of the Great Depression 2.0. Let’s say. Anyway, you know you’re income will be much higher in the future and you’d like to spend some of that higher income today. There’s no reason for your future self to live high on the hog while your stuck in the present eating Top Raman. In other words, you’d like to borrow from your future self. Well, that’s not very likely because access to credit for poor students is limited.

Now, suppose the government sends you a check for $500. Even though this is a temporary increase in your income, contrary to that fancy economic theory above, you’re going to consume it all and not save any of it. You do this because you wanted to borrow money from you future self, but weren’t able to. You not saving is, in effect, you borrowing from your future self.

But darn us economist, here we are talking about efficiency again. What if government actors care about maximizing the consumption of the least well off? Sure their stated preferences, as evidenced by their reference to Keynsian stimulus in public statements, are for efficiency. But stated preferences and a smile buys you crappy happiness research. Instead the government may just care about those most hurt by recession and those most likely to be credit constrained and thus those more likely to increase their consumption after fiscal stimulus.

Does our Benovolent Dictator (with a mouse in his shirt pocket to make my title work) have maximin preferences? If his preferences reflect a typical individuals social preferences or the median voter’s typical social preferences, then my guess is yes.

Time for another flip-flop on Iraq?

Now that many supporters of the war have had their mea culpas, its appropriate — given the annealing process that is the transformation of public opinion to written history — for the pendulum to swing back towards the pro-war camp. Eric Posner:

The sanctions regime, which began in 1990, destroyed Iraq’s economy (reducing GDP by as much as three quarters) and impoverished millions of Iraqis. Particular attention was given at the time to its effect on children. The contemporary critics of the sanctions pointed out that before the sanctions began, the child mortality rate was about 50 per 1000; during the sanctions, on one accounting the rate soared to about 128 per 1000 (click on "basic indicators" here). More conservative estimates were in the range of a doubling of child mortality. Using the more conservative estimate, at one million births per year, this works out to an annual difference of 50,000 children surviving to the age of 5 (for various qualifications, see here). Today, the child mortality rate is below the pre-sanctions figure, and so every year in excess of 50,000 more Iraqi children survive than during the sanctions. The data are hotly contested but the trends are unmistakable and will continue to strengthen if security improves. Meanwhile, violent deaths of civilians, while still far too high, are declining; a very cautious estimate of 500-800 per month, based on the most recent reports on the Iraq Body Count website, is much lower than the avoided deaths of children compared to the sanctions regime. A conservative estimate is that more than 40,000 Iraqis survive per year today than during the sanctions regime, and probably most of them children.  The tight correlation between GDP and child mortality across countries bolsters this conclusion.
Let’s suppose that the sanctions regime had continued for 10 years, from 2003 to 2013, and further that security flattens out—it doesn’t get worse, but it doesn’t get better. Under these assumptions, 400,000 Iraqi children would have died if the war had not occurred and the sanctions regime continued. Now, almost 100,000 Iraqis died during the war, and so one of the war’s benefits is that it saves the lives of 300,000 Iraqis (over 10 years).

Did I mention that I was against the war before I was for it and then abandoned the cause to only change my mind again?

This is my experience, it is subjective

Regarding intolerant religious people, Richard Heck writes:

Are we entirely sure that religious people do tend to be kinder and more compassionate than secular people? And are we sure of this, especially, when we do not set aside the notable exceptions [WA: e.g. homosexuals]?

I know its The Correct Thing To Say that religious people are intolerant and they are especially towards certain groups. This is the objective social fact of the matter and of course there’s the conclusive proof set out by that bumper sticker: hate isn’t a family value.

Having grown up in a place where the people are moderately religious ((Five churches in a town of 1400 people.)) and then living most of my adult life amongst secular liberal types, my experience, though, is that the latter are relatively more intolerant especially when it comes to the former. At Berkeley, I was washed clean of all my conservative values which in retrospect weren’t any worse than those liberal values that replaced them. Just different.

I wonder if there’s any data on this? I prefer the “revealed preference” kind, though. Secular liberal types tend to put a premium on calling themselves tolerant thus biasing survey answers.