Thursday, December 31, 2020

Florida counties give away vaccine for free and there are long lines

See Florida's first-come, first-serve Covid-19 vaccination plan for the elderly leads to scramble by Eric Levenson, Angela Barajas and Ryan Young of CNN. Excerpt:

"Florida's county-by-county plan to vaccinate its elderly population has created a mass scramble for a limited number of doses, leading to hourslong lines at vaccination sites and overwhelmed county hotlines and websites.

In southwest Florida, the Lee County Department of Health encouraged anyone 65 and older and high-risk frontline health care workers to come to one of seven vaccination sites. Each site had just 300 vaccine doses, and "no appointment is necessary," the county said.
The first-come, first-serve plan led to huge lines forming overnight Tuesday as people camped out on lawn chairs and waited for hours."
Here is the definition of a scarce good I use in my classes:

Scarce-A good or resource is scarce when the amount available is less than the amount people would want if it were given away free of charge.

Related posts about problems when thing are given away for free:
There's no such thing as free cheesecake

Wednesday, December 30, 2020

Milton Friedman vs. John F. Kennedy

This is an old post. But JFK came up in yesterday's WSJ.

See Biden’s Win for the American System by Rahm Emanuel. Mr. Emanuel was a senior adviser to President Clinton and chief of staff to President Obama. He represented Illinois’s Fifth Congressional District, 2003-09, and served as mayor of Chicago, 2011-19. Excerpt:

"Everyone has a role to play. So now is a moment to lean into the first Catholic president’s inaugural admonition. As John F. Kennedy said in 1961: “Ask not what your country can do for you. Ask what you can do for your country.”"

Below are the first three paragraphs from the introduction to Friedman's 1962 book Capitalism and Freedom. Friedman won the Nobel Prize in Economics in 1976.

"IN A MUCH QUOTED PASSAGE in his inaugural address, President Kennedy said, "Ask not what your country can do for you - ask what you can do for your country." It is a striking sign of the temper of our times that the controversy about this passage centered on its origin and not on its content. Neither half of the statement expresses a relation between the citizen and his government that is worthy of the ideals of free men in a free society. The paternalistic "what your country can do for you" implies that government is the patron, the citizen the ward, a view that is at odds with the free man's belief in his own responsibility for his own destiny.

The organismic, "what you can do for your 'country" implies that government is the master or the deity, the citizen, the servant or the votary. To the free man, the country is the collection of individuals who compose it, not something over and above them. He is proud of a common heritage and loyal to common traditions. But he regards government as a means, an instrumentality, neither a grantor of favors and gifts, nor a master or god to be blindly worshiped and served. He recognizes no national goal except as it is the consensus of the goals that the citizens severally serve. He recognizes no national purpose except as it is the consensus of the purposes for which the citizens severally strive.

The free man will ask neither what his country can do for him nor what he can do for his country. He will ask rather "What can I and my compatriots do through government" to help us discharge our individual responsibilities, to achieve our several goals and purposes, and above all, to protect our freedom? And he will accompany this question with another: How can we keep the government we create from becoming a Frankenstein that will destroy the very freedom we establish it to protect? Freedom is a rare and delicate plant. Our minds tell us, and history confirms, that the great threat to freedom is the concentration of power. Government is necessary to preserve our freedom, it is an instrument through which we can exercise our freedom; yet by concentrating power in political hands, it is also a threat to freedom. Even though the men who wield this power initially be of good will and even though they be not corrupted by the power they exercise, the power will both attract and form men of a different stamp."

Tuesday, December 29, 2020

An AI Breaks the Writing Barrier

A new system called GPT-3 is shocking experts with its ability to use and understand language as well as human beings do

By David A. Price of The WSJ.

This artificial intelligence "can generate news articles that readers may have trouble distinguishing from human-written ones."

In my macroeconomics class, we talk about the types of unemployment. This AI might be one of them if it replaces human writers.

Structural-unemployment caused by a mismatch between the skills of job seekers and the requirements of available jobs. One example of this is when you are replaced by a machine. 

Excerpts from the article:

"Word has been making its way out from the technology community: The world changed this summer with the rollout of an artificial intelligence system known as GPT-3. Its ability to interact in English and generate coherent writing have been startling hardened experts, who speak of “GPT-3 shock.”

Where typical AI systems are trained for specific tasks—classifying images, playing Go—GPT-3 can handle tasks it was never specifically trained for. Research released by its maker, San Francisco-based OpenAI, has found that GPT-3 can work out analogy questions from the old SAT with better results than the average college applicant. It can generate news articles that readers may have trouble distinguishing from human-written ones.

And it can do tasks its creators never thought about. Beta testers in recent weeks have found that it can complete a half-written investment memo, produce stories and letters written in the style of famous people, generate business ideas and even write certain kinds of software code based on a plain-English description of the desired software. OpenAI has announced that after the test period, GPT-3 will be released as a commercial product."

"If the price is right, there’s a good chance that GPT-3 will make major changes in our working lives. For a range of knowledge workers—news reporters, lawyers, coders and others—the introduction of systems like GPT-3 will likely shift their activities from drafting to editing. On the plus side, the biggest barrier to getting work done, the tyranny of the blank paper or the blank screen, may become much rarer. It’s simple enough just to keep clicking GPT-3’s “generate” button until something halfway usable appears."

Related posts:

Can computers write poetry? Could they replace poets?

Will computer programs replace newspaper columnists?  

McDonald’s Tests Robot Fryers and Voice-Activated Drive-Throughs: Burger giant wants to speed service as competition for fast-food diners mounts

Is Walmart adding robots to replace workers or because it is hard to find workers?

Robot Journalists-A Case Of Structural Unemployment?

Structural Unemployment In The News-Computers Can Now Tell Jokes 

WHAT do you get when you cross a fragrance with an actor?

Answer: a smell Gibson.

Robot jockeys in camel races

Are Computer Programs Replacing Journalists?

Automation Can Actually Create More Jobs 

The Robots Are Coming And It Might Not Be A Case of Structural Unemployment 

Broncos to debut beer-pouring robot at upcoming game

Robots Are Ready to Shake (and Stir) Up Bars  

Is Covid causing some structural unemployment?

Monday, December 28, 2020

Remembering the Radio Revolution

This year marks the centennial of KDKA, the Pittsburgh station that initiated regular programming and sparked a transformation in how we listen to music

By John Edward Hasse. He is curator emeritus of American music at the Smithsonian.

It is interesting how quickly radio became popular and widely adopted. Excerpts:

"But it was radio broadcasting, launched in the U.S. 100 years ago, that made listening easier, more accessible and more inclusive. You could tune into vast quantities of music without ever leaving your easy chair. Radio decreased the differences between what different communities—urban and rural, Black and white—could hear. For decades, stations were white-owned and mostly barred Black performers, but the radio airwaves themselves were open to all listeners.

Initially, wise heads had thought that radio should be used for point-to-point national and naval telegraphy and that entertainment would be frivolous. Then in 1920, organized broadcasting of speech and music began in several U.S. cities. In Pittsburgh, Westinghouse Electric & Manufacturing Co.—a maker of radio receivers—established pioneering station KDKA. It became the first station to transmit a scheduled, previously announced program, of presidential election results, alternating with recorded music, on Nov. 2 ( Warren Harding won). And to follow it with regular programming for the general public.

One tremendous draw: You didn’t have to buy “software”—sheet music, piano rolls, or records—to play on your hardware. And in the U.S. (unlike in Britain) once you bought your radio, you didn’t need to buy a license. Radio became the “poor man’s phonograph”—because after you purchased just one piece of equipment, you could listen for free.

Programming in the early years was chaotic, as stations desperately sought talent for the few hours they were on the air. Broadcasts offered drama and a heavy dose of live music, performed in the stations’ studios or piped in from ballrooms, theaters or concert halls by local amateur musicians as well as touring professionals. Some Black jazz bands got picked up remotely— Duke Ellington and Cab Calloway from Harlem’s Cotton Club, for example. It would take another 20 years or so before recordings overtook live music as the preferred format."

"In 1926, RCA, headed by the Russian-born David Sarnoff, established the first coast-to-coast American network, NBC. A year later, what became the CBS radio network was established. Through radio, local artists went regional, and regional styles went national."

"Radio took over as the most efficient way to widely promote a published song, musical act or recording. And radio created a medium for effortless listening of every sort, including music. Radio allowed you to listen to an orchestra or band playing multiple selections of any length without your having to go anywhere or do anything."

"Radio democratized the consumption of American music, making pop crooning, swing bands, country music and opera available to all. Radio sparked the development of an American mass musical culture."

Sunday, December 27, 2020

Physicist suggests that our seemingly 'irrational' decisions may be more accurate than previously thought by current economic and behavioral economic theory

See Is Everything We Know About (Behavioral) Economics Wrong? The ergodicity problem—looking at decisions from more than one point of view by Dr. Jeremy Nicholson, a doctor of Social/Personality Psychology. Excerpts:

I like the statement at the end, which is red and bold. It reminds me of one of the ways I have defined rationality. in my class on the first day. That we try to achieve our objectives by the lowest cost possible, based on the information that we have.

I tell my students that we are not all Einsteins, that we make mistakes. But we do not knowingly make ourselves worse off. But again, we may not have enough information at the time of a decision to make the optimal choice. We might by a TV at Wal-Mart but find out the next day it was cheaper at Best Buy. That does not mean we were irrational.

"Specifically, what may seem like a good bet on average for a group of people may be a disaster for a particular individual over time. Therefore, what is determined to be 'irrational' from a traditional economic perspective, may instead be a completely rational choice for an individual who is considering what is best for their own self-interest over time.

To illustrate this idea further, Peters offers the example of a simple gamble, "toss a coin, and for heads you win 50% of your current wealth, for tails you lose 40%." Viewed only from the traditional economic perspective (of expected utility), taking the gamble seems like a good idea. Specifically, from that perspective, if we were to bet $100, we would expect to win $5 back on average (0.5 x $50 + 0.4 x -$40 = $5). Nevertheless, as behavioral and data scientist Jason Collins explains in his blog post on the topic, this gamble may not be such a good deal from the individual perspective, especially over time. As Collins explains:

" One way to think about what is happening is to consider the four possible outcomes over the first two periods [of the gamble]. The first person gets two heads. They finish with $225. The second and third person get a heads and a tails (in different orders), and finish with $90. The fourth person [gets two tails and] ends up with $36. The average across the four is $110.25, reflecting the compound 5% growth. That’s our positive picture. But three of the four lost money.""

"we all think differently when we are making risky and uncertain choices (which are often outside the scope of traditional economic models). Put simply, the economic perspective of expected utility works best when individuals are fully informed and outcomes are certain, allowing them to see the 'big picture' view. When information is scarce, however, they maximize their own outcomes over time instead, by adopting other perspectives (called Heuristics) and doing the best they can within the uncertain and risky situation. Given that, when making your own decisions, it is helpful to be mindful of how deeply and thoroughly you are thinking about the information and risks at hand."

"traditional economic models may fall short under conditions of uncertainty and risk—points previously noted by behavioral economists too. Nevertheless, outside of those conditions, the theories and models of economics are still valuable tools for understanding decision-making as well. So, Peters' (2019) work certainly adds to and supplements economic and behavioral economic models (especially by expanding the notion of what we consider 'rational' decision-making), but it does not invalidate or nullify those other perspectives."

"Humans are not 'irrational' creatures. Rather, we are simply striving to do the best we can, with whatever limited perspectives we have in the moment—and just need more education, information, and support to make better decisions over time." 

Saturday, December 26, 2020

Biden won 95% of counties with Whole Foods but no Cracker Barrel, and just 18% of counties with a Cracker Barrel but no Whole Foods

From Gabriel T. Rubin of The WSJ.

"WHOLE FOODS-CRACKER BARREL GAP reached its highest level in the 2020 election. Biden won 85% of counties that have a Whole Foods Market and just 32% of counties with a Cracker Barrel, according to Dave Wasserman of the Cook Political Report. Whole Foods counties tend to be higher income and located in metropolitan areas, while Cracker Barrels tend to be in more rural areas. The smallest gap since Whole Foods emerged as a national chain was in 1992, when Bill Clinton won 60% of Whole Foods counties and 40% of Cracker Barrel counties. Counties that have both stores are included in both categories. Biden won 95% of counties with Whole Foods but no Cracker Barrel, and just 18% of counties with a Cracker Barrel but no Whole Foods."

Wednesday, December 23, 2020

Use Data to Buy Gifts

See You’re Choosing a Gift. Here’s What Not to Do: Many of our natural impulses turn out to be wrong. Psychological research can help us choose wisely. By Daniel T. Willingham, is a psychologist at the University of Virginia. Excerpts:

"When researchers asked people to recall a gift they . . . had received, price was completely unrelated to enjoyment."

"Givers might favor the beautiful and dramatic because they think about gifts in the abstract: “What’s a good gift?” Recipients, in contrast, imagine themselves using it, and so focus more on utility.

That’s why people buying gift cards for others often prefer luxury brands over everyday brands, but the preference reverses when they are buying for themselves. Indeed, a study examined the prices that resold gift cards commanded on eBay, and showed that people were willing to pay around $77 for a $100 gift card to a more expensive store (for example, Bloomingdale’s), but would pay around $89 for a $100 gift card to an everyday establishment (for example, Lowe’s)."

"Givers didn’t like the idea of giving someone half the money to buy a high-end blender, preferring to give a medium-priced model outright. Recipients showed the opposite preference."

"give people what they ask for. Gift givers think that unexpectedness adds value because it shows thoughtfulness; the wife wasn’t expecting diamonds, but the husband knew she’d love them. But recipients actually think it’s more thoughtful to give a gift that they requested. They see it as showing that the giver attended to and honored their wishes."

"give experiences, not things."

"people don’t mind waiting. Research over the last decade shows that experiences lead to more long-lasting satisfaction than new possessions: A family vacation is a better bet than that diamond necklace."

"Make sure there are choices. Instead of giving a massage, give a gift certificate to a spa that offers a range of services."

Related posts:

Is Christmas Gift Giving Inefficient?

Are Homemade Gifts Better Or More Special?

What Melvin Anthropologist Konner Fails To See When He Criticizes Economists And Their Views On Gift Giving  

Conflicting opinions from economists on the value of giving gifts 

 - Dilbert by Scott Adams 

Tuesday, December 22, 2020

Do artists today respond to financial incentives? The answer, my friend, is blowin’ in the tax code

Yesterday's post about Beethoven ended with a quote from him: "an artist has to be to a certain extent a businessman as well." 

The author of the article I quoted added "True then, true today."" It seems like some artists are businessmen now.

See Bob Dylan’s Catalog Sale Highlights a Tax Advantage for Songwriters: Both the rock icon and the company buying his song rights could enjoy benefits by Richard Rubin and Laura Saunders of The WSJ. Excerpts:

"The answer, my friend, is blowin’ in the tax code.

The sale of Bob Dylan’s songwriting catalog to Universal Music Publishing Group, announced this week, likely means he is trading an ongoing income stream for a lump sum now. The price hasn’t been revealed but is said to be between $300 million and $400 million.

Mr. Dylan’s sale is the latest and largest of a spate of similar deals this year that come with significant tax benefits both for the songwriters selling the rights and for the companies buying them, and those incentives are encouraging transactions.

“Many of these deals are not tax-driven, but some have a significant tax flavor,” says Alan Epstein, who chairs the entertainment and media group at law firm Venable LLP’s Los Angeles office.

There are, for sure, important nontax reasons for artists to cash in when they may have been reluctant before. Concert revenue has dropped sharply during the pandemic and prices for music rights are rising, now at 10 to 20 times the annual royalties.

Spokesmen for Mr. Dylan and Universal, which is controlled by Vivendi SA, declined to comment.

For musicians, a key advantage is that they can sell self-created works and owe capital-gains tax rates of 20% on the sale. That’s instead of owing ordinary tax rates of up to 37% each year on the royalty income they get from streaming, licensing and other uses of their works.

The lower capital-gains rate isn’t available to painters, filmmakers or videogame developers, who pay ordinary income-tax rates on sales as well as royalties.

The advantage exists because in 2006, senators and congressmen heeded the call of the country-music industry and created a special provision for songwriters. Then- Sen. Orrin Hatch (R., Utah), a Finance Committee member and published songwriter, also advocated for the change.

In addition, the 3.8% tax that applies to most capital gains and other passive income of higher earners likely doesn’t apply here because the songwriters are active participants in the business, according to Mr. Epstein.

For those thinking ’bout the government, timing matters, too. The favorable provision for songwriters may not last forever and neither may today’s capital-gains tax rates.

With a Democrat in the White House for the next four years, tax rates are likely heading up or staying flat. President-elect Joe Biden has proposed raising the top tax rate to 39.6% and taxing capital gains at ordinary-income rates for people earning more than $1 million annually. His ability to turn those ideas into law will be limited unless Democrats win control of the Senate in Georgia’s runoffs Jan. 5, but anyone who wants to lock in the Trump-era rates with certainty needs to act in 2020."

"Individuals and U.S. investors in funds buying catalogs typically have a 37% top tax rate and largely nondeductible state taxes, but corporate buyers have a 21% income-tax rate with deductible state taxes. That means an income stream could be worth more to a corporation on an after-tax basis than to an individual."

Monday, December 21, 2020

On his 250th birth anniversary, remembering Beethoven the astute businessman

The musical genius also had a flair for commerce, it turns out 

By Luis Dias writing for magazine. Beethoven turned 250 this past December 16. Even Art can never be completely divorced from economics. Excerpts

"Once Beethoven had poured his creative energy to the fullest into a composition, he regarded it as commercial property, deserving the best possible price on the most favourable terms. Of the hundreds of his letters that have survived, a major chunk deals with the mundane business of getting published: pitching a work, complaining about poor terms, bargaining, and correcting proofs. This is hardly surprising; he is perhaps the first composer whose income depended so much on being published, even more so after his crippling deafness gradually put an end to his career as a performer and to some extent as a teacher as well.

But Beethoven rose to the occasion as quite an astute businessman, regarding publishing and all it entailed as par for the course. He wished to excel in it just as much as in his creativity.

Upon completing a work, Beethoven would offer it to one or more publishers. But before that he needed a copyist, someone who could legibly decipher his scrawl across the manuscript pages so that a publisher could make sense of them. One copyist, Wenzel Schlemmer, undertook that unenviable task for some twenty years.

Once a publisher accepted a work, the real pain of proofreading of invariably faulty engravings and endless corrections would ensue. In one instance, Beethoven found eight mistakes in one published work, corrected them and sent them to another publisher under the heading ‘Edition très correcte’. But in a further comedy of errors, that heading itself was misspelt.

Royalties were unheard of then; the publisher bought a work for a flat fee and would then hope to sell as many copies as possible. It was important to sell as quickly as possible because piracy was a very real threat. As there was no copyright, any successful composer’s hit work was highly susceptible to piracy. The pirate could even be the copyist, who could clandestinely make another copy, spirit it out to another publisher, sometimes even before the legitimate one. The threat was so serious that Mozart had his copyists work only in his apartments, under his watchful eye.

Beethoven railed and ranted when he encountered pirated versions of his music. Since he didn’t have the finance for lawsuits, which could end up nowhere – piracy, plagiarism and forgery were regarded as reprehensible, but not against the law – he resorted to sending spluttering, threatening letters to errant publishers and getting public notices published in newspapers. To be pirated was almost a back-handed index of one’s popularity and success.

As payments for compositions were small (for instance, Beethoven settled for 100 florins for his First Symphony, a shockingly low price), a composer had to churn out a lot of music. This gives us a new perspective on the prodigious output of composers of that era: it was driven not just by creative juices but by the need to put food on the table. Ironically, short piano works would fetch a better price than, say, a symphony, concerto or bigger works, for purely commercial reasons.

 One way (that Haydn usedprofitably) of squeezing as much money out of a work was to give it to two or more publishers in different countries, each one having limited but mutually exclusive territory, so that one could be legitimately paid for the same work more than once. Beethoven followed suit, but then found that if he wanted to prevent pirates preying on his music, he would have to get a work published simultaneously in each country, no easy task in his time of snail-mail and travel.

Another ploy Beethoven resorted to was to offer a piece to the person who commissioned it and pocketing the fee. He would then defer publication but give that patron exclusive rights to the work in manuscript for a given time (usually six months, as he did with Prince Lobkowitz for his Third Symphony). Once that period was over, he could plug and sell it afresh."

"On the “tiresome business” of publishing, Beethoven grumbled in a letter to the publisher Hofmeister: “There ought to be in the world a market for art, where the artist would only have to bring his works and take as much money as he needed. But, as it is, an artist has to be to a certain extent a businessman as well.” True then, true today."

Sunday, December 20, 2020

Why being kind to others is good for your health (and that can include donating money)

By Marta Zaraska writing for the BBC. She is the author of "Growing Young: How Friendship, Optimism and Kindness Can Help You Live to 100."

Adam Smith said when people act selfishly they are led, as if by an invisible hand, to make society better off. So what if you try to help others because you know it will make you better off? Are being kind (altruistic) or selfish?

Excerpts from the article:

"Science reveals that altruistic behaviours, from formal volunteering and monetary donations to random acts of everyday kindness, promote wellbeing and longevity.

Studies show, for instance, that volunteering correlates with a 24% lower risk of early death – about the same as eating six or more servings of fruits and vegetables each day, according to some studies. What’s more, volunteers have a lower risk of high blood glucose, and a lower risk of the inflammation levels connected to heart disease. They also spend 38% fewer nights in hospitals than people who shy from involvement in charities. 

And these health-boosting impacts of volunteering appear to be found in all corners of the world, from Spain and Egypt to Uganda and Jamaica, according to one study based on the data from the Gallup World Poll.

Of course, it could be that people who are in better health to begin with are simply more likely to be in a position to pick up volunteering. If you are suffering from severe arthritis, for example, the chances are you won’t be keen to sign up to work at a soup kitchen.

“There is research suggesting that people who are in better health are more likely to volunteer, but because scientists are very well aware of that, in our studies we statistically control for that,” says Sara Konrath, a psychologist and philanthropy researcher at Indiana University.

Even when scientists remove the effects of pre-existing health, the impacts of volunteering on wellbeing still remain strong. What’s more, several randomised lab experiments shed light on the biological mechanisms through which helping others can boost our health.

In one such experiment, high school students in Canada were either assigned to tutor elementary school children for two months, or put on a waitlist. Four months later, after the tutoring was well over, the differences between the two groups of teenagers were clearly visible in their blood. Compared to those on the waitlist, high-schoolers who were actively tutoring the younger children had lower levels of cholesterol, as well as lower inflammatory markers such as interleukin 6 in their blood – which apart of being a powerful predictor of cardiovascular health, also plays an important role in viral infections."

"But it’s not just the effects of formal volunteering that show up in the blood either – random acts of kindness do as well. In one study in California, participants who were assigned to conduct simple acts of kindness, such as buying coffee for a stranger, had lower activity of leukocyte genes that are related to inflammation. That’s a good thing, since chronic inflammation has been linked to conditions such as rheumatoid arthritis, cancer, heart disease, and diabetes.

And if you put people into a functional magnetic resonance imaging (fMRI) scanner, and tell them to act altruistically, you may see changes in how their brains react to pain. In one recent experiment, volunteers had to make various decisions, including whether to donate money, while their hands were subjected to mild electric shocks. The results were clear – the brains of those who made a donation lit up less in response to pain. And the more they considered their actions as helpful, the more pain-resistant they became. Similarly, donating blood appears to hurt less than having your blood drawn for a test, even though in the first scenario the needle may be twice as thick.

There are countless other examples of the positive health effects of both kindness and monetary donations. For instance, grandparents who regularly babysit their grandchildren have a mortality risk that is up to 37% lower than those who don’t provide such childcare. That’s a larger effect than may be achieved from regular exercise, according one meta-analysis of studies. This assumes the grandparents are not stepping into the parents’ shoes completely (although, admittedly, caring for grandkids often does involve a lot of physical activity, especially when we are talking about toddlers).

On the other hand, spending money on others rather than for your own pleasure can lead to better hearing, improved sleep and lower blood pressure, with the effects as large as those of starting new hypertension medication.

Meanwhile, writing a cheque for a charity can be a good strategy for boosting your muscle power. In one experiment that tested handgrip strength, participants who made a donation to Unicef could squeeze a hand exerciser for 20 seconds longer than those who had not given away their money."

For Tristen Inagaki, neuroscientist at San Diego State University, there is nothing surprising in the fact that kindness and altruism should impact our physical wellbeing. “Humans are extremely social, we have better health when we are interconnected, and part of being interconnected is giving,” she says.

Inagaki studies our caregiving system – a network of brain regions tied to both helping behaviours and health. This system likely evolved to facilitate parenting of our infants, unusually helpless by mammalian standards, and later probably got co-opted to helping other people, too. Part of the system is made up from the reward regions of the brain, such as the septal area and ventral striatum – the very same ones that light up when you get three cherries in a row on a slot machine. By wiring parenting to the reward system, nature has tried to assure we don’t run away from our screaming, needy babies. Neuroimagining studies by Inagaki and her colleagues show that these brain areas also light up when we give support to other loved ones.

Besides making caregiving rewarding, evolution also linked it with reduced stress. When we act kindly, or even simply reflect on our past kindness, the activity of our brain’s fear centre, the amygdala, goes down. Again this could be linked to raising children.

It may seem counterintuitive that childcare might be stress-reducing – ask any new parent and they’ll likely tell you that caring for babies isn’t exactly a trip to the spa. But research shows that when animals hear the whimpers of infants of the same species, the activity of their amygdalae tempers down, and the same thing happens to parents when they are shown the photo of their own child. Inagaki explains that the activity of the brain’s fear centre has to go down if we are to be truly useful to others. “If you were completely overwhelmed by their stress, you probably couldn’t even approach them to help them in the first place,” she says.

All this has direct consequences for health. The caregiving system – the amygdala and the reward areas – are networked with our sympathetic nervous system, which is involved in regulating our blood pressure and inflammatory responding, Inagaki explains. This is why turning your caregiving on can improve your cardiovascular health, and help you live longer. 

Adolescents who volunteer their time have been found to have lower levels of two markers of inflammation – interleukin 6 and C-reactive protein."

Adam Smith wrote a book called The Theory of Moral Sentiments. One point he made there was that we are able to sympathize with other people by trying imagine what they are going through (and I wonder if we need to be good storytellers to be able to do that). Neuroeconomist Paul Zak has been studying how the hormone oxytocin plays a role in making us feel good when we have empathy for others (beware: Zak is a big hugger). See an earlier post Adam Smith vs. Bart Simpson for more details.

There is an interesting book called Paleopoetics: The Evolution of the Preliterate Imagination. It relates storytelling to evolution.

Click here to go the Amazon listing. It is by Christopher Collins, professor emeritus of English at New York University. Here is the description:

"Christopher Collins introduces an exciting new field of research traversing evolutionary biology, anthropology, archaeology, cognitive psychology, linguistics, neuroscience, and literary study. Paleopoetics maps the selective processes that originally shaped the human genus millions of years ago and prepared the human brain to play, imagine, empathize, and engage in fictive thought as mediated by language. A manifestation of the "cognitive turn" in the humanities, Paleopoetics calls for a broader, more integrated interpretation of the reading experience, one that restores our connection to the ancient methods of thought production still resonating within us.

Speaking with authority on the scientific aspects of cognitive poetics, Collins proposes reading literature using cognitive skills that predate language and writing. These include the brain's capacity to perceive the visible world, store its images, and retrieve them later to form simulated mental events. Long before humans could share stories through speech, they perceived, remembered, and imagined their own inner narratives. Drawing on a wide range of evidence, Collins builds an evolutionary bridge between humans' development of sensorimotor skills and their achievement of linguistic cognition, bringing current scientific perspective to such issues as the structure of narrative, the distinction between metaphor and metonymy, the relation of rhetoric to poetics, the relevance of performance theory to reading, the difference between orality and writing, and the nature of play and imagination."
Click here to read a longer description by Collins himself.

Here is the new article from this week The Dalai Lama Explains Why Being Kind to Others is the Secret to Happiness. Excerpt:
"Have you ever wondered why it matters that you care for other people?

It seems commonsense that this is a good way to live life. But there are dominant philosophies today that suggest we need to maximize our own individual self-interest.

This comes from economic theories of capitalism that suggest when people look after their own self-interest, then society is better off.

The Dalai Lama explains why this doesn’t make sense in the beautiful passage below. As he says, it’s an obvious fact that your own sense of wellbeing can be provided through your relationships with others. So it’s best to start cultivating practices of kindness and compassion."
Then the article has a long statement from the Dalai Lama on this philosophy. But some economists might say that you can't run a successful business if you don't care about others and try to learn their wants and desires. Here is what Adam Smith said in The Wealth of Nations
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages”

Related Posts:

Texas A & M economists study cheating (and how much might not depend on being rich or poor)

Adam Smith vs. Bart Simpson 

Do you have to be selfish to make more money?

Want to be happy and successful? Try compassion

The Dalai Lama Says It Is Sometimes OK To Be Selfish

People sometimes pay for for goods even when they don't have to 

Saturday, December 19, 2020

The Best Herd Immunity Money Can Buy

Paying people to get the Covid-19 shot may be the way to overcome skepticism about the vaccine

Jason L. Riley of The WSJ. Excerpts:

". . . how do you convince enough people to get inoculated at a time when public trust in government institutions is at historic lows?

One way to go is using carrots instead of sticks. Telling people they can’t fly or send their kids to school may work in some cases, but there’s evidence that paying people to get vaccinated might be more effective. In a typical year, less than half of American adults bother to get flu shots. But a 2015 study conducted by economists at Swarthmore College found that offering people a $30 reward was enough to increase vaccination rates by 12 percentage points.

A growing number of high-profile economists have called for using such a model to address Covid. They include Paul Romer, a Nobel Prize winner; N. Greg Mankiw, chairman of the Council of Economic Advisers under George W. Bush ; and Steven Levitt of “Freakonomics” fame. A proposal floated in August by Robert Litan of the Brookings Institution would offer $1,000 to 275 million Americans, or roughly 80% of the population, to take the vaccine. The cost would be about $275 billion—a large number, but not in comparison to the trillions we’ve already spent battling Covid. Congress is currently contemplating yet another pandemic relief package with a price tag of at least $900 billion."

Friday, December 18, 2020

The EU forbids the use of gender to help calculate car insurance premiums, leading women to pay more and men to pay less

See The elusive equilibrium by Koen Smets. Excerpt:

"Insurers only care about the risk, and not about gender. If a particular category of people poses a higher or lower risk, all else being equal, than another one, they will seek to reflect that in the premium. When, as a society, we do not want to have inequity in the premiums, then we should accept that a unified premium might lead to a different disequilibrium and new inequities.

Motor insurance in Europe forms a very interesting case study. Traditionally, insurers charged women less, because they tend to be safer drivers, and hence make fewer and smaller claims. Unlike life expectancy, the factors determining the risk here are much more linked to individual choice and behaviour. Since 2012, an EU directive forbids insurers to use gender as an element in the calculation of the premium. So, in Q4 2011, men paid on average 17% more than the overall average premium, while women paid 20% less. In 2018, that difference with the overall average premium had shrunk to a 5% uplift for male drivers, and a 6% discount for female drivers. (The residual difference stems from the fact that men tend to drive more miles per year, in more powerful cars.) So, relatively speaking, the ‘gender equity’ intervention has increased the average premium for the lower-risk women by more than 17%, while it has cut it by just under 10% for the higher-risk men. Is this an improvement? It’s not so sure."

If men are less safe, insurers need them to charge men more. But the EU police has forced the companies to charge men too little and women too much. It probably brings some dangerous male drivers into the market while causing some females to drop out. Overall, driving is probably less safe.

I play a game in class that touches on insurance. Click here to see the Lessons From the Supply and Demand Game.

The insurance market has a problem, though. The customers don’t always tell their insurance company their bad habits (like smoking, riding a motor cycle without a helmut, etc.). So they don’t know how risky you are and therefore don’t know what price to charge you. So sometimes these markets are not efficient.

Related posts:

Lose the Fat to Lower Your Insurance Rates  
How Did Astronauts Of The 60s "Purchase" Life Insurance?
Should Overweight People Pay More For Health Insurance?
Should We Pay People To Adopt A Healthy Lifestyle? 

'Spy car' worries raised by new Allstate patent
Should your company or insurer reward you for meeting exercise goals?
How insurance companies are using technology to better assess how risky customers might be
The EU Says Insurers Can No Longer Discriminate On The Basis Of Gender   
Some History of Insurance

Thursday, December 17, 2020

Lower Costs Draw Tech Firms to Texas

See Texas’ Tax Advantage Is All About Individuals, Not Business Taxes: Companies moving from California likely won’t see their own tax bills shrink, but executives and employees could pay less. Excerpts:

"Moves by high-profile companies to Texas from California are likely to improve the personal finances of executives and offer employees more affordable housing—but make little difference to the firms’ tax bills.

Oracle Corp. ORCL +1.33% and Hewlett-Packard Enterprise Co. HPE +0.41% are the latest big corporations to announce moves to the Lone Star State. Elon Musk, the chief executive of Tesla Inc., is also moving to Texas, and the electric car company is expanding there.

The announcements have highlighted the vastly different tax and regulatory systems in the country’s two most populous states. California relies more on taxing personal income, particularly of high-income households, and operates a growing regulatory structure. Texas leans on more regressive property and sales taxes and boasts a more laissez-faire environment. The biggest difference: High-paid executives who move can see their state income-tax bills go from 13.3% to nothing.

But corporate investors hoping for big tax and other savings may need to temper their enthusiasm. Business-tax considerations are likely to prove secondary at best, tax and economic-development experts say. They are dwarfed by the allure of more-affordable housing, lower cost of living and lighter regulatory burdens.

For companies, much of the difference between California and Texas boils down to ease and cost of hiring—not just now but down the road.

“A lot of it, honestly, is just long-term workforce availability,” said King White, chief executive of Site Selection Group, a consulting firm that helps companies decide where to open or move facilities.

Companies have also grown frustrated with the cost of attracting and keeping employees, as living expenses soar in Northern California especially, and as regulatory mandates expand. “The compounding effects of California’s economic and political environment is making it more difficult to run a business effectively,” Mr. White said."

"The Tax Foundation, a conservative-leaning Washington group, puts Texas 11th in its ranking of state business-tax climates, with California 49th. That is largely a function of individual taxes, some of which do fall on business income. The group ranks California ahead of Texas on corporate and property taxes."

"The bigger factor—outweighing any change in business taxes—is likely to be the lower cost of employing workers in the state. For most people, that calculation is more about housing costs, said Darien Shanske, a tax law professor at the University of California, Davis. Housing scarcity and land-use regulations are bigger drivers of payroll costs than taxes."

Related post

The Texas Economy Is The Time Magazine Cover Story This Week (from 2013)

Rents are relatively low in San Antonio

Wednesday, December 16, 2020

How Property Booms Eat Our Economic Future

Growing body of research looking at U.S. and Chinese real-estate markets suggests long booms may drag on productivity of the economy

By Mike Bird of The WSJ. Excerpt:

"New evidence comes from the Bank for International Settlements, with a paper by economist Sebastian Doerr showing that among U.S. listed companies, those with a higher share of real-estate assets are persistently less productive than their industry peers.

That alone wouldn’t be a problem as such. Some companies are always more productive than others. But rising real-estate prices make it easier for companies that own real estate to access funding because of their growing collateral, so multiyear booms in property prices compound the problem.

Looking at data covering the U.S. from 1993 to 2008, capital was reallocated toward productivity laggards over time, worsening the overall picture for the economy. For every 10% increase in real-estate prices, an industry would record a 0.6% relative decline in total-factor productivity due to the effect of skewed capital allocation."

Tuesday, December 15, 2020

Hand sanitizer and the law of increasing opportunity cost

This is based on a WSJ article from last March. Rapidly increasing production of a certain good in a short period of time leads to increasing opportunity costs as less capable resources have to be switched over (capital has to be re-tooled and workers retrained). All of that adds costs that were not there before. So it actually costs more to produce additional units, on average.

See One Company’s Hands-On Effort to Ramp Up Sanitizer Production: Inside the push at EO Products to quadruple its output—without raising prices by Sharon Terlep of The WSJ. Excerpts:

"EO Products, a Bay Area maker of bath and body products, has quadrupled production of its high-end hand sanitizer. It is running extra shifts, speeding up lines, hiring temporary workers and converting factory lines designed for other products to make hand sanitizer instead."

"At one point last month, one of the company’s suppliers ran out of the aluminum-like seals that go on hand-sanitizer gel bottles and are roughly the size of the tip of a pinkie finger. Federal regulations require stringent testing of any replacement seal, so there was no quick answer."

"Purell parent company Gojo Industries Inc. is rationing sales to stores to protect supply for hospitals and other businesses."

"the state of New York has prison inmates making sanitizer to bolster supply."

"U.S. hand-sanitizer sales were up more than 470% for the week ended March 7, compared with the year-earlier period."

"Neither hand sanitizer nor soap is among the most profitable products for the company, so the switch-over will drag on margins. But the company hasn’t raised prices and isn’t considering doing so. 

“Raising prices at this time would not be in alignment with our core values,” Mr. Feegel said. “All the business rules about profitability are off the table.”"

"the company had to cap online sales as some retailers have turned to the company’s website to restock store shelves."

"So many callers have special circumstances that Ms. Jones implemented a strict rule against making exceptions to ship products to customers. Staffers broke the rule once and sent a bottle from their office supplies to a caller in a particularly dire situation, she said."

"Ramping up demand for hand sanitizer, in particular, is challenging because it is regulated by the Food and Drug Administration as an over-the-counter product and must meet the agency’s safety and efficacy standards."

"All the company’s hand sanitizer is currently made at its own factory, but it plans to hire private-label manufacturers to make the products using its formula, specifications and rules around employee pay and sustainability."

Related posts:

Flushing out the true cause of the global toilet paper shortage amid coronavirus pandemic 

Ventilators and the law of increasing opportunity cost

Here are some basic terms that economists use to discuss this issue:

Opportunity Cost-
The value of the best foregone alternative. There is no such thing as a free lunch. If we want to build one more skyscraper, we may have to give up one submarine, since there may not be enough steel to go around (steel is scarce!).

The law of increasing opportunity cost-
As more of a particular good is produced, the opportunity cost of its production rises. Why is the law of increasing opportunity cost true? Different resources are better suited to different productive activities. This is just about the same as saying people have different abilities, like some are more entrepreneurial and some are more bureaucratic.

Let’s assume that we have society with five workers who can make either of two goods, candles or shoes. Now the best candle maker will not necessarily be the best shoemaker and some candle makers will be better than others. This simply means that workers have different abilities.

In the real world, the best doctor would not be the best lawyer. Some plumbers are better than others.

In the table below, the number of candles OR shoes that each worker can make in a day is listed.


Again, the workers have different abilities, just as they do in the real world.

What are all of the combinations of candles and shoes that this society can make? If all the workers make candles, they can make 25 (just add up how much each worker can make). How many shoes? ZERO, since each worker spends all day in the candle factory (this is combination A in the table below).

If we want to make some shoes, the first worker we would tell to stop making candles, if we are rational and trying to get the best deal, would be worker V.  So we gain 7 shoes and lose 3 candles. That is why combination A is 22 and 7. Worker V no longer makes candles since they are making shoes. So the opportunity cost of making a shoe is some number of candles (and vice-versa).

The rest of the combinations that show what would happen if we kept moving workers out of candle making and into shoe making is in the table below.


Now what happens to the opportunity cost as we move from combination A to combination B? Then combination B to combination C, and so on? The table below shows this:

Candles Given Up
Shoes Gained
Candles per Shoe
A to B
B to C
C to D
D to E
E to F

By moving from point A to point B, we give up 3 candles to gain 7 shoes. The cost of each shoe in candles is .429 (3/7). Then we give up 4 candles to get 6 shoes, with each shoe costing .667 candles. The more shoes we try to produce, the more candles that have to be given up to get each shoe. So the opportunity cost of producing shoes rises.

This is called the law of increasing opportunity cost.

The law of increasing opportunity cost-As more of a particular good is produced, the opportunity cost of its production rises. (see how the numbers rise in the “Candles per Shoe” column in the table above)

Why is the law of increasing opportunity cost true? Different resources are better suited to different productive activities. This is just about the same as saying people have different abilities, which is what we see in the number of candles and shoes each worker can make.