All posts by Rian

Pigouvian taxes on soda

Economics, Health

The Center for Science in the Public Interest — an organization I’ve wanted to work for — is pondering a soda tax. It’s not a new plan… I first had the idea in the fall of last year, though I didn’t write about it, and Ezra Klein has written about it twice. (1, 2) Quite a few people in a Kaiser Family Foundation/NPR poll (PDF) are in favor of it as well:

 
I don’t see a problem with it, really. It’s not a bad idea to take the negative externalities associated with a given activity and force the market to internalize them. I have a paper sitting on my hard drive that I’ve been meaning to adapt for the web for a while, but I’ll share a snippet here:

Money that would have greater marginal utility upstream is instead being spent downstream, because measuring the downstream effects are easier than measuring upstream effects. We spent an estimated $91.3 billion in diabetes care in 2002. How much money could be saved not just in diabetes but on healthcare in general if we combated the upstream problem of obesity instead of throwing money at its downstream consequences? Drastic expenditures on things like adverse cardiovascular events? In 1995, the economic cost of obesity was estimated at $99.2 billion. In 1997, an estimated 19.4% of the US population was obese (PDF). In 2007, that number jumped to 26.6% (PDF). Converting 1995 dollars to 2007 dollars, assuming that real per capita obesity costs did not increase over time (very unlikely) gives us this chart:

 
Obesity is probably the main public health concern in the United States these days. Communicable diseases have largely been eliminated through public health efforts, leaving lifestyle diseases as the main cause of morbidity in this country. If we cut our obesity rates in half, we could eliminate quite a lot of spending further down the line.

That adds up to about $240 billion a year spent on obesity care.

Pigouvian taxes work. By making the market account for the negative effects of its activity, it modifies consumer behavior — if not on an individual level, then certainly on a macro level. A 3 cent tax on soda doesn’t sound like much, but I’d put a significant chunk of change on it having a measurable effect on obesity. Of course it would only be one step in a real comprehensive public health strategy, but certainly not a bad step.

Before we go taxing soda, however, I would also humbly suggest that we get rid of the corn subsidies that make high fructose corn syrup so cheap, and eliminate sugar tariffs as well. Not that sugar is any healthier than HFCS from a public health standpoint, but it’s not generally good policy to layer a tax on an already-distorted market. If we stopped subsidizing corn production, we might not even need to have a soda tax… the increase in price might well take care of the over-consumption problem by itself.

Revisiting talent in the public and private sectors

Business, Economics, Finance

At the end of November, I mused about public sector’s problem of attracting and retaining top-notch talent:

Ben Bernanke’s salary as chairman of the Fed is just over $191,000. Henry Paulson as CEO of Goldman Sachs made $16.4 million according to Forbes. […] I find it very hard to believe that compensation plays no role whatsoever in an individual’s choice of employment.

This all seems terribly obvious to anyone who thinks about it, and Nate Silver has commented on the same phenomenon with a real-world example:

In retrospect, it is clear that regulators did not have the human capital to keep up with the financial industry, and to understand it well enough to be able to exert effective regulation. Given the wage premia that we document, it was impossible for regulators to attract and retain highly-skilled financial workers, because they could not compete with private sector wages. Our approach therefore provides an explanation for regulatory failures.

That is, the excessive wages paid by Wall Street not only lure talent away from other parts of the private sector, but also from the public sector, where employees are subject to government wage controls. The very people who might be the most capable of enforcing regulations on the banks instead wind up working for them.

This is a very real problem. Some of the work that I did in my first job after college at KPMG involved valuing intellectual property in conjunction with international tax disputes. We had our economists, and the IRS had theirs. The thing was, however, that our economists were better than the IRS’s, because if someone at the IRS was any good, we’d hire them away and treble their salary. Part of a good regulatory reform plan, then, would be to increase the salaries paid to employees at institutions like the Fed, the Treasury, the IRS, and the FDIC.

So how do we solve the problem? Tripling an IRS economist’s salary probably means they’re making in excess of $400K/year, which is more than the President makes. Is it feasible to have regulators that make more than the President?

Nerdiest GPA requirements ever

Economics

BU’s GPA requirements for their Economics PhD students:

GPA Requirements
All courses must be passed with a grade of B- or higher. The core average must be pi (3.1416) and an overall grade point average (GPA) of 3.0 for the M.A.P.E. and the Ph.D. must be attained in all courses taken after enrollment in the Graduate School at Boston University. At the end of each academic year, a student’s course grade average is reviewed. Failure to maintain satisfactory standing results in recommendation for termination from the Ph.D. program.

Awesome.

Whither this data?

Economics, Math, , ,

I’m trying to do some analysis on car accident statistics with respect to at-fault collisions for people driving vehicles with automatic transmissions vs those who drive stick. While the NHTSA has a surprisingly advanced query system set up that allows you to drill down to pretty specific results without much trouble, I can’t seem to find this data. I’ve gone through the raw data as well, and this information doesn’t appear to be collected.

I’m trying to find out whether transmission type has an effect on accident rates.

VIN numbers are collected, and this information is associated with a specific VIN, but is there a way to easily pull this information from somewhere? Hmm.

Children, social insurance, and birth rates

Culture, Economics, ,

A new twist on children-as-social-insurance. Today’s Stone Soup:

The Sandwich generation

 
Sandwich generation indeed…

—

This reminded me of some fascinating information from the Gates Foundation. In his first annual letter, Bill wrote that better health is linked with smaller families, so as the overall health of an impoverished region gets better, overpopulation has a long-run tendency to decline, so Malthusian objections aren’t applicable. Women don’t have to have as many babies to ensure that some survive:

Better health, smaller families, Gates Foundation

The entire letter is worth reading (PDF). The Gates Foundation is doing some interesting work, and I really like their emphasis on measuring results. I look forward to the day that measurement is politically acceptable and expected in American society. Especially in places like public schools.

In honor of Darwin

Culture, Science & Technology,

Darwin’s 200th birthday is this week, and Harvard is having a Darwin Day on Thursday which I will (alas!) be unable to make it to. (Just like I was unable to make it to the last Harry Potter book launch in the Square. I have rotten luck like that.)

The NYTimes has some great coverage of Darwin this week in their science section, both as a man and as a scientist. His story is one that is tragically ironic. A Christian who struggled with the ramifications of his discoveries, yet a man who is today reviled by many of those who share his core faith.

John Whitfield has been blogging the Origins as a run up to Darwin Day. An intriguing idea… I wonder how many biologists haven’t read it? I haven’t read it, but I’m not a biologist, and it is on my list. First off is Dawkins’ The Ancestor’s Tale which is currently sitting on my bookshelf. (Speaking of which, now that the Kindle 2 is out, I could probably keep most of my collection in digital format with me much like I have virtually all of my music on my iPod…)

My favorite article of the bunch, so far. Darwinism Must Die So That Evolution May Live:

Science has marched on. But evolution can seem uniquely stuck on its founder. We don’t call astronomy Copernicism, nor gravity Newtonism. “Darwinism” implies an ideology adhering to one man’s dictates, like Marxism. And “isms” (capitalism, Catholicism, racism) are not science. “Darwinism” implies that biological scientists “believe in” Darwin’s “theory.” It’s as if, since 1860, scientists have just ditto-headed Darwin rather than challenging and testing his ideas, or adding vast new knowledge.

Using phrases like “Darwinian selection” or “Darwinian evolution” implies there must be another kind of evolution at work, a process that can be described with another adjective. For instance, “Newtonian physics” distinguishes the mechanical physics Newton explored from subatomic quantum physics. So “Darwinian evolution” raises a question: What’s the other evolution?

Almost everything we understand about evolution came after Darwin, not from him. He knew nothing of heredity or genetics, both crucial to evolution. Evolution wasn’t even Darwin’s idea.

Darwin’s grandfather Erasmus believed life evolved from a single ancestor. “Shall we conjecture that one and the same kind of living filaments is and has been the cause of all organic life?” he wrote in “Zoonomia” in 1794. He just couldn’t figure out how.

Gregor Mendel, an Austrian monk, discovered that in pea plants inheritance of individual traits followed patterns. Superiors burned his papers posthumously in 1884. Not until Mendel’s rediscovered “genetics” met Darwin’s natural selection in the “modern synthesis” of the 1920s did science take a giant step toward understanding evolutionary mechanics. Rosalind Franklin, James Watson and Francis Crick bestowed the next leap: DNA, the structure and mechanism of variation and inheritance.