Concentrated roadway power

Money is power and as Mancur Olson first explained in The Logic of Collective Action, not all money is created equal. Mancur was an economist with an uber-macho-sounding first name. It is pronounced ‘Man-Sir’ which sounds like the kind of caricature you would find in an irreverent youth novel by Louis Sachar. In Mancur’s theory, there are transactions costs that prevent large groups of people from engaging in political action. However, a wealthy interest group, even though it is a small minority, can politically dominate the political system because their financial resources are so concentrated. Even when the vast majority of voters have much more total money at stake in a political dispute, unless they can create a political organization where they can concentrate their money, they won’t be able to win a political dispute against more concentrated financial interest groups.

An example of this playing out is the transfer of property rights from pedestrians to automobile drivers back in the 1920s.

A hundred years ago, if you were a pedestrian, crossing the street was simple: You walked across it.

Today, if there’s traffic in the area and you want to follow the law, you need to find a crosswalk. And if there’s a traffic light, you need to wait for it to change to green.

Fail to do so, and you’re committing a crime: jaywalking. In some cities — Los Angeles, for instance — police ticket tens of thousands of pedestrians annually for jaywalking, with fines of up to $250.

To most people, this seems part of the basic nature of roads. But it’s actually the result of an aggressive, forgotten 1920s campaign led by auto groups and manufacturers that redefined who owned the city streets.

“In the early days of the automobile, it was drivers’ job to avoid you, not your job to avoid them,” says Peter Norton, a historian at the University of Virginia and author of Fighting Traffic: The Dawn of the Motor Age in the American City. “But under the new model, streets became a place for cars — and as a pedestrian, it’s your fault if you get hit.” … prior to the 1920s, city streets looked dramatically different than they do today. They were considered to be a public space: a place for pedestrians, pushcart vendors, horse-drawn vehicles, streetcars, and children at play.

“Pedestrians were walking in the streets anywhere they wanted, whenever they wanted, usually without looking,” Norton says… As cars began to spread widely during the 1920s, the consequence of this was predictable: death. Over the first few decades of the century, the number of people killed by cars skyrocketed.

Those killed were mostly pedestrians, not drivers, and they were disproportionately the elderly and children, who had previously had free rein to play in the streets.

The public response to these deaths, by and large, was outrage. Automobiles were often seen as frivolous playthings, akin to the way we think of yachts today (they were often called “pleasure cars”). And on the streets, they were considered violent intruders… As deaths mounted, anti-car activists sought to slow them down. …in 1923, says Norton, …42,000 Cincinnati residents signed a petition for a ballot initiative that would require all cars to have a governor limiting them to 25 miles per hour. Local auto dealers were terrified, and sprang into action… [This] …galvanized auto groups nationwide, showing them that if they weren’t proactive, the potential for automobile sales could be minimized.

In response, automakers, dealers, and enthusiast groups worked to legally redefine the street — so that pedestrians, rather than cars, would be restricted… But in the mid-20s, auto groups took up the campaign with vigor, passing laws all over the country.

Most notably, auto industry groups took control of a series of meetings convened by Herbert Hoover (then secretary of commerce) to create a model traffic law that could be used by cities across the country. Due to their influence, the product of those meetings — the 1928 Model Municipal Traffic Ordinance — was largely based off traffic law in Los Angeles, which had enacted strict pedestrian controls in 1925…

Even while passing these laws, however, auto industry groups faced a problem: In Kansas City and elsewhere, no one had followed the rules, and they were rarely enforced by police or judges. To solve it, the industry took up several strategies.

One was an attempt to shape news coverage of car accidents. The National Automobile Chamber of Commerce, an industry group, established a free wire service for newspapers: Reporters could send in the basic details of a traffic accident and would get in return a complete article to print the next day. These articles, printed widely, shifted the blame for accidents to pedestrians… AAA began sponsoring school safety campaigns and poster contests, crafted around the importance of staying out of the street. Some of the campaigns also ridiculed kids who didn’t follow the rules — in 1925, for instance, hundreds of Detroit school children watched the “trial” of a 12-year-old who’d crossed a street unsafely, and, as Norton writes, a jury of his peers sentenced him to clean chalkboards for a week… This was also part of the final strategy: shame.

In getting pedestrians to follow traffic laws, “the ridicule of their fellow citizens is far more effective than any other means which might be adopted,” said E.B. Lefferts, the head of the Automobile Club of Southern California in the 1920s… Auto campaigners lobbied police to publicly shame transgressors by whistling or shouting at them — and even carrying women back to the sidewalk — instead of quietly reprimanding or fining them. They staged safety campaigns in which actors dressed in 19th-century garb, or as clowns, were hired to cross the street illegally, signifying that the practice was outdated and foolish. In a 1924 New York safety campaign, a clown was marched in front of a slow-moving Model T and rammed repeatedly.

This strategy also explains the name that was given to crossing illegally on foot: jaywalking. During this era, the word “jay” meant something like “rube” or “hick” — a person from the sticks, who didn’t know how to behave in a city. So pro-auto groups promoted use of the word “jay walker” as someone who didn’t know how to walk in a city, threatening public safety…

“The campaign was extremely successful,” Norton says. “It totally changed the message about what streets are for.”

Although there were about thirteen times more pedestrians than automobile owners in the 1920, the automobile owners won the property right to exclude pedestrians from the streets because automobile owners had concentrated interest groups that could use their financial clout to push out propaganda to the newspapers, lobby politicians, and fight court battles in favor of changing American culture to transfer the right of way from ordinary pedestrians to large vehicles. The pedestrians were unorganized and lacked the kind of concentrated financial interest that existed among the automobile manufacturer corporations, dealerships, and owners’ clubs like AAA.

Those concentrated financial interests overturned traditions that had dominated the cultures of the world for millennia. It was a sophisticated campaign to not only change the legal rights to use the roadways, but also change the hearts and minds of every citizen to the point where it is hard to imagine the kind of street scene that was full of people walking along with busses, wagons, and carriages sharing the space.

The automobile lobby also succeeded in funneling government resources away from public transit into building more roads and highway systems and taking away valuable land along our urban roads that had been used by pedestrians and vendors as parkway/sidewalk space which was convered them into a massive socialist parking scheme that now lines the sides of most public streets in America.

Today, there is a new kind of industry that is creating a concentrated financial interest that is aligned with pedestrians and cyclists: the rental bike/scooter corporation. Although it is in its infancy, it is already helping to create a tiny counterbalance to the enormous political power of the automobile interests. The bike-share/scooter startup Bird plans to fund protected bike lanes and it is setting up the same kind of political advocacy groups that the automobile industry created a century ago.

The Los Angeles-based firm announced that it will form a new Global Safety Advisory Board led by David Strickland, former head of the National Highway Traffic Safety Administration (NHTSA), …that will “create, advise, and implement global programs, campaigns, and products to improve the safety of those riding Birds and other e-scooters.” … In addition, Bird will begin steering revenue into a dedicated fund to expand transit infrastructure in the cities where it operates. The initiative would set aside $1 per day from each scooter in operation to help cities build new protected bike lanes, as well as maintain existing ones by repainting and repairing them.

Vox’s Umair Irfan points out that electric scooters have tremendous potential to encourage more public transit because they make the ‘last mile’ easier between a rider’s home and a transit station.

“There’s the West LA rail station that’s a 22-minute walk from me,” Taylor said. “I took a scooter the other day and it took me five minutes.” …”Today, 40 percent of car trips are less than two miles long,” said Bird CEO Travis VanderZanden in a statement in March. “Our goal is to replace as many of those trips as possible so we can to get cars off the road and curb traffic and greenhouse gas emissions.” …Scooter rides are typically less than 2 miles, which is often too short a distance for hailing a ride if you don’t already own a car. This is part of why ride-hailing services like Uber and Lyft are so keen on electric scooters: They fill a need their current services can’t… So scooter rides are going to displace car trips to an extent, which may reduce the number of cars on the road.

Fewer cars mean a little less political power for the automobile interests caused the rise of private corporations that can lobby in favor of multi-modal transit will help change the politics of road usage.

…perhaps one of the greatest benefits of scooters will be that they will force a larger discussion of whom or what we prioritize when we design cities.

Posted in Public Finance

Mind the gap in life expectancy WITHIN America

We read a lot about the growing political divide in America and we hear a lot of commentary about the two Americas in terms of income inequality.  But a bigger inequality problem is the gap in life expectancy.  Here’s a map of life expectancy at birth in 2014:

JAMA Internal Medicine, 2017


It is hard to claim that there is equal opportunity in America when there is a gap of over 20 years in life expectancy between different counties in the US.  Generally speaking, the worst areas are Native American reservations and the parts of former slave states that have been the least transformed by massive immigration since the abolition of slavery.

And the inequality in life expectancy keeps getting worse. The following map shows where life expectancy got better between 1980 and 2014 (in blue) or got worse (in red):

JAMA Internal Medicine, 2017

In general, the healthiest areas have been getting better and many of the worst areas have been falling further behind.  At a state-by-state level, the following graph shows that some states have been getting healthier (in blue) whereas other states have been backsliding (red).


The fall in life expectancy in the red areas is so bad that it has been dragging down overall average life expectancy in the US for the past three years in a row. This is the biggest crisis in American life expectancy in a century.

The nation is in the longest period of a generally declining life expectancy since the late 1910s, when World War I and the worst flu pandemic in modern history combined to kill nearly 1 million Americans. Life expectancy in 1918 was 39. Aside from that, “we’ve never really seen anything like this,” said Robert Anderson, who oversees CDC death statistics.

Unlike a century ago, this time around few of our national political leaders seem to care.  This is why we need better statistics of economic well being like MELI which incorporate life expectancy.  Politicians care more about GDP than about life expectancy even though life expectancy is much more important for well being in a rich country.

The decline in life expectancy is mainly affecting people who earn less than the median income as I wrote about earlier. Here is the relationship between life expectancy and economic class:

Richer people live longer and the gap in life expectancy has been steadily growing. The following graphs show how much the gap rose over just 13 years:

Although Americans above the median income have similar life expectancy no matter where they live, life expectancy among lower-income Americans varies widely from place to place.  Rich Americans have similar life expectancy no matter where they choose to live, but because of the variance in life expectancy among the poor, some regions, like Detroit, have much greater inequality in life expectancy than other areas, like New York City.

Whereas most people think of country living as being healthier than stressful city life, country music famously describes country life as a sad ballad and the statistics paint a sad picture too.  Life expectancy is lagging more in rural areas and progressing in urban areas. The following map shows premature mortality which is worse (darker) in rural counties.

Now compare the mortality rate above with the following map counties with big urban populations where the darker counties have cities. The high-population counties with cities generally have lower mortality on the above graph than rural counties.

The gap in lifespan is also increasing between college graduates (basically the top 30% most educated as represented by the orange line below) who continue to progress and high-school dropouts who are in trouble (the black line showing the bottom 10%).  Vox explains:

An October 2018 working paper out of Dartmouth College sliced the mortality data along lines of education and found a similar trend. Researchers looked at the rising mortality among middle-aged, non-Hispanic whites by education status. The rise, they discovered, is almost entirely driven by the least-educated 10 percent of the population, while the most educated among us are seeing their mortality rates go down:

Novosad/Rafkin at Darmouth College

“Like the poor, the least educated experience a range of socioeconomic disadvantages,” the researchers, Paul Novosad and Charlie Rafkin, wrote, “such as high unemployment, low insurance coverage, poor nutrition, and exposure to harmful environmental factors.”

In particular, it is mainly poor, rural, white Americans who have been seeing the biggest drop this year, and this has been a trend since at least 1990 as Nobel Prize winner Angus Deaton famously documented.  White mortality due to “deaths of despair” have almost tripled in the US unlike in all other countries studied.  The main reasons life expectancy is dropping is are increases in suicide, alcohol and drug deaths, and heart disease. In a way, they are all diseases of broken hearts.

How much would you give up to be able to live twenty years longer? Life expectancy varies so much across the United States it is twenty years longer in some counties than in others! That is a bigger gap in life expectancy within the counties of the United states than the gap between the United States and any country in the world except a handful of the very worst basket cases.

If we used median life expectancy rather than mean, this would look slightly different, but (almost) nobody uses that.

One of the preventable ways American health is getting worse is mothers dying during childbirth more frequently than in the past.  America had one of the best records for maternal health in the 1950s through the 1970s, but progress in America ended in 1979 and since then the US maternal mortality rate has gotten worse whereas probably all other nations on earth have improved.  Even North Korea has slightly improved its maternal mortality rate since 1979.  Meanwhile, the US has gotten worse–so bad that the US is now worse than any other industrialized nation.


It may be hard to tell from the graph, but average mortality has more than doubled in the past 30 years.  This should be considered a crisis folks!

Posted in Health

The expected value of potential lives lost during atomic testing

Rob Reid wrote a great explanation of the horrible risk taken during the Manhattan Project, when American nuclear scientists took a chance estimated at one-in-three million that the first atomic test would create a chain reaction that would ignite the atmosphere of the entire planet in a massive explosion and incinerate every living thing near the earth’s surface. 

 This prospect was first raised by Edward Teller, who later became the father of the hydrogen bomb. Robert Oppenheimer, who would soon lead the Los Alamos lab, called it a “terrible possibility”

It’s also worth noting that Enrico Fermi took bets on the burnt-sky scenario on the big day…

The one-in-three-million estimate came from Arthur Compton, who oversaw the project’s plutonium production. And I’d say he was as smart as anyone there (Compton won the Nobel Prize for specifying light’s quantization from assumptions about the subatomic interactions of X-ray photons and their scattering angles — a sentence I don’t even understand)…

If we assume Arthur Compton’s reasoning was sound, we can derive the atomic test’s EV from the 2.5 billion people alive at the time. There’s a one-in-three-million chance that everyone dies, and 2.5 billion divided by three million is 833. Plus there are huge odds that no one dies — and any probability times zero deaths equals zero. Adding the two products, the net expected death toll using Compton’s odds is 833 (though, of course, that doesn’t account for the resultant loss of future generations). Does this mean the New Mexico test was morally equivalent to condemning 833 random people to certain death?…

 Even with the certitude of hindsight, he later declared, “Better to accept the slavery of the Nazis than to run the chance of drawing the curtain on mankind!”…
In his ingenious 2003 book, Britain’s Astronomer Royal, Martin Rees, applies a similar, and immensely provocative analysis to a certain experiment conducted at the CERN and Brookhaven supercolliders. It incurred a non-zero chance of destroying the Earth, and perhaps the entire universe. And for those who are skimming this article, I repeat:

Destroying. The motherfucking. Universe.

Yes, really. The experiment created conditions that had no precedent in cosmic history. As for the dangers, Rees characterizes “the best theoretical guesses” as being “reassuring.” However, they hinged on “probabilities, not certainties” and prevailing estimates put the odds of disaster at one in fifty million.

From the dawn of time until the start of the Cold War, no one was in a position to risk things on this scale…

Given the global population at the time, that EV was 120 deaths… 
Imagine how the world would treat the probabilistic equivalent of this. I.e. a purely scientific experiment that’s certain to kill 120 random innocents. It would never be allowed. No — not even if it was really, really, really clever.

These tests would have also in a way killed all future generations who would never be born, and a shortcoming of the above analysis is that it implicitly considers their lives to be worthless.  It also ignores other costs.  For example, the New Mexico testing also resulted in numerous people dying of radiation exposure including some of the scientists themselves who tended to die of cancer at an higher rate than others. 

Posted in Globalization & International, Health, Managerial Micro, Violence & Peace

Good Guys with guns vs. Bad Guys with guns

I’m a pragmatic pacifist who wishes to minimize violence and I accept that some violence might be necessary to accomplish this. Of course, everyone says that they want to minimize violence, so how is a pacifist like me any different? The difference is one of Bayesian probabilities. I believe that the probability that violence will reduce other violence is very small in wartime. I accept just war theory in theory, but in practice it just never seems to work out, so I look at history and judge that the chance of the violence of war to be the best way to minimize violence is very, very small. In contrast, police officers have a long history of using violence (and mostly just the threat of violence) to reduce worse violence and that has mostly worked well, so I’m fine with policing even though I would hate to have to personally carry a gun and threaten people with lethal force. I’m a bit of a hypocrite because I’m not willing to do the work of a police officer myself, but I’m glad that other people do it and I’m happy to summons a police officer if I think that they could reduce violence via their ability to threaten violence (deterrence).

This idea is basically the same as just war theory. Just war theorists argue that although the violence of war is bad, a just end can justify the means. I accept that premise in theory, but in practice, I see very little probability that it has ever worked to minimize violence and death. As Helmuth von Moltke the Elder said, “No battle plan survives contact with the enemy.” Just war theory fails in practice because as soon as the fog of war descends, the plans for both the means and the ends change unpredictably. On the other hand, the logic of just war theory really does to work to support the use of violent means (and mostly just the threat of violence) in policing and criminal justice.  This has had a very high probability to achieve ends that are more just and less violent than the alternative (anarchy). There are certainly exceptions to this rule, but I’d argue that it applies for all societies with at least moderately dense populations and governments that are more than minimally competent. In other words, it works in the places where the vast majority of humans live today.

So I’m happy to support the idea that a bad guy with a gun are usually  stopped by good guys with guns (the police). But there is a category of bad guys with guns that cannot be deterred by good guys with guns. Rob Reid explains:

But killers bent on suicide are notoriously tough to deter. Some deny this — like the fantasists who burble about armed guards preventing school shootings. But in schools and elsewhere, mass shootings happen under the noses of armed guards all the time.

This includes the canonical spree at Columbine. That school indeed had a well-trained, armed defender on duty. But he in no way mitigated the massacre’s outcome. A common retort is that if one gun’s not enough, then lots of campus guns should surely do the trick! But what’s the effective dose? Four armed guards? Forty armed teachers? Four hundred armed students?

How about 45,000 trained soldiers? That’s the resident population of Fort Hood, the largest U.S. military base. And it couldn’t stop a wimpy shrink from killing 13 and injuring dozens in 2009 (although he didn’t die during the attack, the perpetrator intended to, so he classifies as a suicidal mass murderer.) Five years later, a second gunman at the base killed four and injured 13 before killing himself. Fort Hood could presumably fend off an ambitious military onslaught. But a lethal defense is no deterrent to an attacker with a death wish. Indeed, it’s a massive added attraction.

The Fort Hood mass shootings prove that arming and training lots of good guys with guns doesn’t stop bad guys with guns from committing mass shootings.

One of the problems is that you don’t know ahead of time who will become a bad guy and giving lots of people guns and training them to kill also means creating a worse bad guy problem because it makes more people more lethal if and when they switch over to the dark side. It is hard to know who is going to become a bad guy in advance, and it is harder to predict who will become a mass murderer when there are more and more people to keep track of because more and more people have weapons of mass destruction like machine guns.

The other problem is the element of surprise and planning. Even if lots of good guys have guns like at Fort Hood, the bad guy is going to be well aware of that fact and plan accordingly for positioning himself in a easy-to-defend sniper position. Even those mass shooters who didn’t care about planning basic defensive tactics have usually been able to rapid-fire kill a bunch of people before getting shot down just due to the sheer advantage of surprise.

So unless the bad guy shoots himself first, good guys with guns always stop bad guys with guns… eventually, but the best way to stop bad guys with guns from killing people is to keep bad guys from getting weapons of mass destruction in the first place.

(Note to pro-gun fanatics:  You won.  Sensible gun control is politically impossible in the US, but I don’t care much because other issues are much more important for public health anyhow.)

Posted in Violence & Peace

A public conspiracy to protect pharmaceutical profits at taxpayer expense

Every so often I get requests to sign a petition supporting various business interests. The petitions are promoted by fly-by-night “organizations” that are fronts for lobbyists like  Lately I’ve been getting emails from that are worried about the pharmaceutical industry’s profits:

Various Democrats have promoted the idea that Medicare should be able to negotiate the prices it pays for pharmaceuticals just like Walmart or CVS does so that Medicare can pay less than list price just like every large private corporation does and they are particularly worried now because Donald Trump has often said that he agrees and his administration has been actively pursuing ways to do this.

In most rich nations the government holds down pharmaceutical prices by negotiating with manufacturers for discounted prices. Although the US government (via Medicare, Medicaid, the VA, etc.) is by far the largest buyer of drugs in the world, it is also the only buyer in the world that cannot legally negotiate prices because the government has banned itself from doing so. So the government is stuck paying the highest price (the list price) along with unlucky individual Americans who have a bad PBM.

Because Americans pay much higher drug prices and allow more drug marketing, we spend FAR more on drugs than any other country on earth.

America accounts for less than 4.3% of the world population, but 45% of the world’s pharmaceutical expenditures in 2016! Americans use fewer drug prescriptions than many rich nations (Japan prescribed 60% more per person), but our prices are much higher which means that the USA provides the global pharmaceutical industry with much more than 45% of their profits. The US is also unusual in that nearly 75% of US drug expenditures went to branded drugs (as opposed to generics) even though 84% of prescriptions in the US specified cheap generics (the highest percent utilization of generics of any rich nation). So the US is paying the majority of the world’s pharmaceutical profits

I didn’t sign the letter and Vernon Smith (who often lends his once-respectable name to such efforts), and other signatories should be embarrassed to let this lobbying effort use their names. The lobbyists themselves are so embarrassed that they don’t even say who is funding and managing the organization that is collecting signatures. The entire effort is being run like a conspiracy that is so criminal or embarrassing that its funders and leadership (other than the people named on the letter who are hopefully well compensated for having their names associated with the project) are trying to obfuscate responsibility. Rather than even use their own website domain for collecting signatures, they are using a Google Doc that is harder to trace to its owners. They will probably take down the document soon, so below is the full text. Their claims are misleading, but no doubt they will sucker some people into signing.

Concerned Economists

* Required

We write to express concerns about a proposal that would adopt an international price model index to establish drug prices under portions of the Medicare program. Such a system would reference drug prices set by selected foreign governments to determine the maximum price at which a particular drug could be sold under Medicare.

Implementing a reference pricing system in the United States would create price controls that bring with them the same types of harms these policies have caused in foreign countries, to the detriment of the health care system at large and investments in U.S. research and development. History has shown that price controls on any commodity or service produce unintended but consistently detrimental effects.

In general, setting price controls at below-market rates leads to shortages, squeezes the cost bubble toward some other portion of the economy, and imposes a deadweight cost on society. In this case, price controls can lead to a reduction in patient access to certain drugs, less investment in the research and development of new drugs, and cost-shifting that raises the prices of other therapeutics. Ultimately, patients will suffer as cures are delayed or entirely undeveloped, while taxpayers will be denied potential savings from drugs that could obviate more expensive treatments in government healthcare programs, and the investment of capital in development of new medicines.

Policymakers looking to reform drug pricing models should reject price controls and instead pursue alternative market-based approaches that would lower prices, expand access, and encourage more innovation.

First Name * ________

Last Name * ________

Affiliation * ________

Email * ________

UPDATE December 10:  I just got my third email solicitation which is extending their deadline, so the “Concerned Economists” must not be fooling as many people as they had hoped into signing.  If you are in DC, see if you can find out what is at the address they have posted on the letter: Concerned Economists | 122 C St NW, Washington, DC 20001

Posted in Health, Public Finance

An airline “dent and scratch sale”

A classic story of price discrimination that textbooks tell is the appliance ‘dent and scratch’ sale in which an appliance store will deliberately create cosmetic damage on some of their washers and refrigerators so that they can sell them at a low markup to customers who won’t pay their regular high price. But they don’t want their high-profit customers to buy the marked-down appliances and the cosmetic damage keeps people like Bill Gates from getting the cheaper deal. Ironically, they dented appliances actually cost the stores more money than the pristine appliances because the stores have to pay employees to bang them up strategically.

Similarly, airlines charge a high markup on drinks nowadays, so they would rather not give anyone anything to drink for free. To encourage passengers to pay for water, they will give a cup of free ice, but not a cup of free water even though the free ice costs more than plain water would cost. Now that airlines want passengers to pay to pick their own assigned seats, some airlines are using algorithms to automatically split up families to encourage them to pay for the ‘extra’ service of sitting together.  Again, it costs more to develop a computer program to split up groups to get some of them to pay extra to sit together, but it only costs a little bit more to create the worse version of the product.

1843 Magazine has more examples:

In the late 1980s IBM’s LaserPrinter, retailing at $2,395, printed ten pages per minute. In 1990 it launched the LaserPrinter E. At $1,495 the economy model offered a big discount and printed at half the speed of its pricier sibling. But the new printer was not made using cheaper parts, or assembled by workers on lower wages. In fact it was just the original printer with extra inputs: microchips has been added to slow it down. IBM had not designed a low-cost printer, they had spent time and money making their original product worse.

…[Deliberate] product sabotage…

in 1849. French railways offered three classes of travel with the lowest tier pretty rough: the carriages had no roofs, and the seats were wooden benches with no covers. Surely, people complained, the discomfort was unnecessary. Dupuit pointed out the value in the inconvenience: by making third class really bad, only the truly threadbare would use it. Those with a little more cash would reveal their preference for comfort and stump up for a second-class ticket.

Today Eurostar offers a ticket that uses Dupuit’s logic. It offers ultra-cheap tickets that do not specify the time of travel (this is revealed two days before the trip takes place). Adding uncertainty to a traveller’s itinerary is a reduction in quality. But it is useful because it forces business travellers – who must be in London or Paris at a specific time – away from this bargain option.

It might seem like product sabotage should be banned. But as research by Preston McAfee – now chief economist at Microsoft – has shown, it can make customers better off. The key test is whether the practice means more goods are sold. Suppose the French had regulated trains so that all carriages had roofs. All those in second class might have switched to third class, potentially rendering both uneconomical to provide. Altering quality, even if that means damaging goods, can make total supply rise.

It rankles WaPo reporter Catherine Rampell that hotels are increasingly tacking on high-profit fees for necessities. This is partly price discrimination, but it is also obfuscation of prices.  After customers have practically put themselves in a hostage situation, the company surprises them with high charges for ordinarily inexpensive necessities like parking, WIFI, and a “resort fee” (even when it is a hotel on the interstate that has no resort). Movie theater and sports stadium concessions use a similar pricing strategy.

Posted in Managerial Micro

Is there a better way to educate smart people?

Alia Wong at The Atlantic reports about a new Harvard study that

surveyed roughly 500 economics Ph.D. candidates at eight elite universities, and found that 18 percent of them experienced moderate or severe symptoms of depression and anxiety. That’s more than three times the national average, according to the study. Roughly one in 10 students in the Harvard survey also reported having suicidal thoughts on at least several days within the prior two weeks. (Other recent studies have had similar findings, including one published earlier this year that described graduate-student mental health as a “crisis.”) The study’s results, which also include survey responses from nearly 200 faculty members, indicate that many Ph.D. students’ mental-health troubles are exacerbated, if not caused, by their graduate-education experiences. They also felt

…that their work isn’t useful or beneficial to society. Only a quarter of the study’s respondents reported feeling as if their work was useful always or most of the time, compared with 63 percent of the entire working-age population. Only a fifth of the respondents thought that they had opportunities to make a positive impact on their community.

This is why I teach at a place like Bluffton University rather than working at a research university. I feel like I am doing useful work and making a positive impact on my community. I decided to go this direction when my advisor, Joe Persky, was complaining about how hard it is to do anything beneficial for society through economic research and yet that is what economics graduate school is completely oriented towards. He said that even most Nobel Prize winners in economics really don’t make a positive difference for the world. However, I was teaching classes at the time and I saw that I was making a difference in the lives of my students in the work I was doing, so I decided to focus on teaching after I finished my research.

That is also why I spend more time blogging than trying to publish academic research. I get a lot more readers on my blog than most academics ever get for all their academic publications. The life of PhD students is pretty brutal and while struggling with poverty and exams, there is sometimes rampant sexual harassment.  A 2016 survey at the University of Oregon found that 38% of female graduate students and 23% of men said they had been sexually harassed by faculty or staff.  These challenges are why half of Ph.D. Students quit without finishing. For the few who do finish, it takes a long time, on average about eight years. That is a lot of lost income. And then it is hard to find an academic job in most fields. Alia Wong wrote:

A 2014 report found that nearly 40 percent of the doctoral students surveyed hadn’t secured a job at the time of graduation. What’s more, roughly 13 percent of Ph.D. recipients graduate with more than $70,000 in education-related debt, though in the humanities the percentage is about twice that. And for those who do secure an academic post, census data suggest that close to a third of part-time university faculty—many of whom are graduate students—live near or below the poverty line.

In contrast, the statistics for medical school make it look super easy.  Almost everyone graduates from medical school.  When the graduation rate for medical doctors declined from 98% in the 1970s to only 97% in the 2000s, there was freaking out with numerous publications fretting about the high dropout rate!

And unlike Ph.D. students, medical students all get a job that pays more than at least 90% of Americans get.  Medical students, despite their huge advantages, have mental health that is about as bad as it is for Ph.D. students:

According to the Journal of the American Medical Association (JAMA), almost 30% of medical students suffer from depression or symptoms of depression. In addition, 1 out of 10 medical students report experiencing suicidal thoughts. That means medical students are five times more susceptible to depression than the general population.

Why are med students so depressed when they don’t have to worry about jobs or debt after graduation and there is little chance of dropping out? One of my doctor friends said the worst part of his training was the forced sleep deprivation during the years of practice after classes end when medical students are used as cheap labor thereby boosting profits for their supervisors.

[Medical] interns are routinely kept awake for 24hr shifts which may lead to increased patient deaths because “practicing medicine while sleep-deprived is akin to working while drunk.” There is no educational rationale for making the least experienced doctors work while fatigued and sleep deprived, but many doctors who have passed through this initiation rite defend it with cult-like devotion and it does provide a lot of cheap labor for their supervisors and makes a great barrier to make it harder to become a doctor.  Medical students typically work 80 hours per week on shifts often lasting 24 hours at a time for years during their residencies and that reflects a considerable cutback due to new regulations in the 2000s.

Fortunately, my experience in graduate school at the University of Illinois at Chicago was mostly very positive.  I had my days of anxiety, but I mostly enjoyed the challenges and found it very interesting and stimulating and I enjoyed working with my community of students and faculty.  I was also never completely set upon finishing so I didn’t stress out much when I saw about 80% of my fellow students fail to finish.  I just took it one month at a time,

I also think that graduate school in economics is better than most disciplines, particularly disciplines in the humanities. If you want to know more, Noah Smith explains why economics is one of the best kinds of PhD degrees.  Public Health also seems like a great area from what I know of the experience of my wife and her classmates at our alma mater.

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