The long-stalled farm bill, which represents nearly $1 trillion in spending over the next 10 years and passed on a rare bipartisan vote, 68 to 32, produced clear winners and losers. Over all, farmers fared far better than the poor.
The nearly 1,000-page bill, which President Obama is to sign at Michigan State University on Friday, among other things expanded crop insurance for farmers by $7 billion over a decade and created new subsidies for rice and peanut growers that would kick in when prices drop. But anti-hunger advocates said the bill would harm 850,000 American households, about 1.7 million people spread across 15 states, which would lose an average of $90 per month in benefits because of the cuts in the food stamp program.
New York Times article: Senate Passes Long-Stalled Farm Bill, With Clear Winners and Losers
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Washington Post reports on the economic breakdown of oil-rich Venezuela: At markets, Chavez successor falls short. ARACAS, Venezuela — On aisle seven, among the diapers and fabric softener, the socialist dreams of the late Venezuelan president Hugo Chávez looked as ragged as the toilet paper display. Employees at the Excelsior Gama supermarket had set out a load of extra-soft six-roll packs so large that it nearly blocked the aisle. To stock the shelves with it would have been pointless. Soon word spread that the long-awaited rolls had arrived, and despite a government-imposed limit of one package per person, the checkout lines stretched all the way to the decimated dairy case in the back of the store. Good diagnosis: Venezuela’s real problem, economists say, is that a shortage of U.S. dollars is squeezing the ability of the government and the private sector to import. Even in upscale Caracas shopping malls, international chain stores such as Zara and Gucci are gutted, their employees standing around with nothing to sell and the mannequins left naked. Bad diagnosis: “The store owners are doing this on purpose, to increase sales,” said Marjorie Urdaneta, a government supporter who said she believes Maduro when he accuses businesses of colluding with foreign powers to wage “economic war” against him. New York Times article on publication bias: Fears that this is resulting in some questionable findings began to emerge in 2005, when Dr. John P. A. Ioannidis, a kind of meta-scientist who researches research, wrote a paper pointedly titled “Why Most Published Research Findings Are False.” That's the theory. Here's some data: ... C. Glenn Begley, who is chief scientific officer at TetraLogic Pharmaceuticals, described an experience he had while at Amgen, another drug company. He and his colleagues could not replicate 47 of 53 landmark papers about cancer. Some of the results could not be reproduced even with the help of the original scientists working in their own labs. Now is that an artifact of publication bias too? Who knows?!
I feel that a big leap forward in science right now would be a category of journals that only commissions studies replicating important findings (or asking important new questions) and will publish the results, regardless of the answer. That will beat publication bias. Determine what you want to study ex-ante and publish the results regardless of how it turns out. Only then can we really know what's going on. Great article in the New York Times about gas subsidies in Venezuela. You can get a sense of the politics behind bad economic policy: Venezuela has the world’s cheapest gasoline, about six cents a gallon, a price so low that drivers often fill their tanks for less than a dollar and tip the gas station attendant more than the cost of the fuel pumped into their cars. Who benefits? Despite the socialist orientation of Venezuela’s government, the wealthy and middle class benefit greatly from the fuel subsidy because they are more likely to have a car, while the poor primarily benefit through the effect on mass transportation fares. Two researchers at the Harvard Kennedy School, José Ramón Morales and Douglas Barrios, calculated that the value of the gasoline subsidy for the top 10 percent of households in 2010 was about $3,755 a year, compared with $506 a year for the bottom 10 percent. The clock is ticking on climate change, according to this New York Times article: U.N. Says Lag in Confronting Climate Woes Will Be Costly. Nations have so dragged their feet in battling climate change that the situation has grown critical and the risk of severe economic disruption is rising, according to a draft United Nations report. Another 15 years of failure to limit carbon emissions could make the problem virtually impossible to solve with current technologies, experts found. Climate change is a classic example of a public good--which means it can only be acquired through our governments. We can't just up and go to the store to buy it. (The last chapter of Economics covers public goods.) The right choice for society depends on our individual stances on the matter. So let's examine our personal stance on through a simple thought experiment.
Suppose there's a product on the market right now that will insure you and your descendants against the ill effects of climate change due to carbon emissions. It costs $5,000. Will you buy it? If yes, you should vote for policies aimed at curbing carbon emissions. If no, you should vote against it. Me? I'd buy that product in a heartbeat--even if it costs a lot more than $5,000. Upsetting the ecosystem, overpopulation, and nuclear weapons in the wrong hands are the three potential catastrophes that keep me up at night (or would, if I wasn't such a good sleeper). If I can eliminate one of these threats with a measly $5,000--I'm all in. That's why I wish all governments could get together and agree to a carbon tax. Tunisia is about to pass a fairly moderate constitution. It's a giant leap forward for the region.
The New York Times reports: "Two years in the making and now in its third draft, the charter is a carefully worded blend of ideas that has won the support of both Ennahda, the Islamist party that leads the interim government, and the secular opposition. It is being hailed as one of the most liberal constitutions in an Arab nation." The support from the Islamists didn't come easy though: "It was partly the crisis in Egypt — including the overthrow last summer of the Islamist government of President Mohamed Morsi, Egypt’s first popularly elected leader — that prompted Ennahda to make important concessions and seek consensus on the new Tunisian Constitution. The assassination on July 25 of a left-wing politician, Mohamed Brahmi, in Tunis — the second political assassination in the country in six months — drew a sharp public reaction, weakening the Islamists." Netflix CEO Reed Hastings' excellent thoughts on management, Netflix Culture: Freedom and Responsibility, went viral a few years ago. I just came across it for the first time via this Harvard Business Review article by Patty McCord, former Chief Talent Officer at Netflix. Both the slide and the article are worth reading.
Greg Mankiw, in a New York Times op-ed about how to help the working poor, explains why direct redistribution works better than a minimum wage (a result I keep emphasizing in Economics).
John Cochrane of the University of Chicago Booth School of Business had a great op-ed in the WSJ about the Affordable Care Act, a.k.a. Obamacare. I have been meaning to do a post on Obamacare for a while. I haven't studied the issue in much depth, but in general I've been supportive because the previous system was clearly broken. My take was that there was a market failure because of the problematic nature of insurance markets (moral hazard and adverse selection), and we needed some sort of intervention. Here's what I saw as broken with the old system: (1) Lots of people were uninsured. They were forced to show up at hospital ERs and then not pay. Taxpayers ended up paying for this backdoor insurance anyway. It was an expensive and inefficient kind of insurance that placed a lot of unnecessary stress on both the uninsured and the taxpayers. (2) Even people with insurance were not truly insured. Everyone was just one job loss and one chronic condition away from becoming uninsured because (a) insurance was tied to jobs and (b) insurers could discriminate on the basis of pre-existing conditions. (3) Medical costs were increasing in a way that just didn't make any sense to me. Obamacare requires everyone to purchase health insurance (providing subsidies for those who can't afford it) and prohibit insurers from discriminating on the basis of pre-existing conditions. I thought that both these moves were important steps in the right direction. The website fiasco highlighted the government's inability to do anything right, but that didn't bother me so much because I felt that the heart of Obamacare was really a private health insurance market operating under new rules--not a centralized government-administed insurance program that most Obamacare opponents make it out to be. But Cochrane gives me some food for thought. He claims that the previous system was broken because insurance was tied to jobs: Health insurance should be individual, portable across jobs, states and providers; lifelong and guaranteed-renewable, meaning you have the right to continue with no unexpected increase in premiums if you get sick. Insurance should protect wealth against large, unforeseen, necessary expenses, rather than be a wildly inefficient payment plan for routine expenses. Seems obvious to me now, but I hadn't linked the absence of lifelong guaranteed-renewable health insurance to the dysfunctional rules tying health insurance to jobs. I am more optimistic now that deregulating the health insurance marketplace free will solve many of the problems facing our healthcare system, and might well be a better alternative to the Obamacare. But I would still keep the Obamacare requirements that everyone has to buy insurance and that insurers can't discriminate on the basis of pre-existing conditions.
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Ben Mathew
Author of Economics: The Remarkable Story of How the Economy Works Archives
October 2016
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