YouNotSneaky! argues that it is not necesary to have a higher turn out in elections to get an accurate reflection of the collective social choice. It is even claimed that a higher turnout imposes higher social costs, without commensurate benefits. Using the Law of Large Numbers and Central Limit Theorem, he infers that in an election involving a large electorate, a 10% or 15% turnout would be sufficient to elicit a more or less accurate verdict.
It can be safely surmised that those with strong views and specific positions on issues are more likely to vote, and it would seem only appropriate that this be the case. In contrast, those indifferent to the outcome are likely to stay back, which again seems appropriate enough. Therefore the arguement that voting is a public good and those staying away free-ride on the back of those who vote, would appear to be inaccurate.
Ironically enough, another way to get an accurate voting outcome is to charge the committed voters a specific voting fee, while letting the others vote for free. If a fee is a charged, only those committed to specific causes will pay up for exercising franchise.
Alan S. Gerber, Donald P. Green, and Christopher W. Larimer did a large-scale field experiment involving several hundred thousand registered voters to test the influence of of social pressure as an inducement to political participation. They send out letters telling people whether they and their neighbors have voted in past elections and promising to send a followup letter after the election. The unsubtle message is: voting records are public information, and if you don't vote this year your neighbors will know about it. It was observed that the turnout among those who got the letters was a whopping 8.1 percentage points higher than the control group.
Cass Sunstein and Richard Thaler feel that voters can be "nudged" into voting by asking specific questions about whether they intend to vote or not a few days before the elections. There is another interesting article in the NBER by Aaron Edlin, Andrew Gelman and Noah Kaplan, Voting as a rational choice: Why and how people vote to improve the well-being of others
Sunday, November 9, 2008
Health Care in India
Here are some dismal figures about health care system in India. Just as the graphs in this post explained why China is easily the engine of the world economy, these figures gives ample credence to Time magazine's claim that India is the "sick man of Asia".
1. In the 2001-06 period, while the Indian economy grew almost 50%, the percentage of children under three who are moderately or severely under-weight dropped a mere 1%to 46%, which is worse than in most African countries! Four out of five children are anaemic.
2. Almost one in four women who give birth receives no antenatal care.
3. Just 43.5% of very young children are fully immunized.
4. Public spending forms only 17% of expenditure on health care, compared to 20% in Pakistan, 28% in Bangladesh, 38% in China, 45% in US, 77% in Germany, 81% in Japan, and G7 average of 70%.
5. Percapital total expenditure on health care is $91, to $48 in Pakistan, $64 in Bangladesh, $277 in China, $2293 in Japan, $3171 in Germany and $6096 in US.
6. India has 0.6 doctors and 0.8 nurses per 1000 people, compared to 0.74 and 0.31 for Pakistan, 0.26 and 0.14 for Bangladesh, 1.06 and 1.05 for China, 1.98 and 7.79 for Japan, 3.37 and 9.72 for Germany and 2.56 and 9.37 for the US.
7. Polio and measles immunization coverage is only 58% and 59% in India. The respective figures are 80% and 83% for Pakistan, 81% and 88% for Bangladesh, 93% and 94% for China, close to 100% for all developed nations.
1. In the 2001-06 period, while the Indian economy grew almost 50%, the percentage of children under three who are moderately or severely under-weight dropped a mere 1%to 46%, which is worse than in most African countries! Four out of five children are anaemic.
2. Almost one in four women who give birth receives no antenatal care.
3. Just 43.5% of very young children are fully immunized.
4. Public spending forms only 17% of expenditure on health care, compared to 20% in Pakistan, 28% in Bangladesh, 38% in China, 45% in US, 77% in Germany, 81% in Japan, and G7 average of 70%.
5. Percapital total expenditure on health care is $91, to $48 in Pakistan, $64 in Bangladesh, $277 in China, $2293 in Japan, $3171 in Germany and $6096 in US.
6. India has 0.6 doctors and 0.8 nurses per 1000 people, compared to 0.74 and 0.31 for Pakistan, 0.26 and 0.14 for Bangladesh, 1.06 and 1.05 for China, 1.98 and 7.79 for Japan, 3.37 and 9.72 for Germany and 2.56 and 9.37 for the US.
7. Polio and measles immunization coverage is only 58% and 59% in India. The respective figures are 80% and 83% for Pakistan, 81% and 88% for Bangladesh, 93% and 94% for China, close to 100% for all developed nations.
Saturday, November 8, 2008
Tipping points in urban neighbourhoods
It has long been felt that racial and economic segregation affects educational, societal, familial, and economic outcomes. It is in this context that it has been a major goal of public policy over the past four decades to reduce racial segregation in neighborhoods, schools, and workplaces. I had blogged earlier about how school choice and educational achievement is dictated by racial segregation annd how different policies have failed to address this issue.
Starting from the seminal research of Thomas Schelling, it is now widely acknowledged that it is impossible to create stable and economically and racially mixed urban neighbourhoods. A number of subsequent models have all concluded that a mixed racial composition is inherently unstable and the only stable equilibria are fully segregated ones. It has been proved that even a small change in the composition sets off a dynamic process that converges to either 0% or 100% minority share.
Now, David Card, Alexandre Mas, and Jesse Rothstein have outlined an alternative "one-sided" tipping model in which neighborhoods with a minority share below a critical threshold are potentially stable, but those that exceed the threshold rapidly shift to 100% minority composition as whites flee the neighbourhood. They find that most major metropolitan areas are characterized by a city-specific "tipping point", a level of the minority share in a neighborhood that once exceeded sets off a rapid exodus of the white population. They also find that the tipping behavior is one-sided, and that neighborhoods with minority shares below the tipping point can attract both white and minority residents.
All this means that it may not be sensible to develop economically mixed residential localities, where the proportion of both the rich and the less well off are sprinkled in more or less equal numbers. It may be more prudent to plan neighbourhoods where either the poor or the rich proportion is less than the tipping point.
Starting from the seminal research of Thomas Schelling, it is now widely acknowledged that it is impossible to create stable and economically and racially mixed urban neighbourhoods. A number of subsequent models have all concluded that a mixed racial composition is inherently unstable and the only stable equilibria are fully segregated ones. It has been proved that even a small change in the composition sets off a dynamic process that converges to either 0% or 100% minority share.
Now, David Card, Alexandre Mas, and Jesse Rothstein have outlined an alternative "one-sided" tipping model in which neighborhoods with a minority share below a critical threshold are potentially stable, but those that exceed the threshold rapidly shift to 100% minority composition as whites flee the neighbourhood. They find that most major metropolitan areas are characterized by a city-specific "tipping point", a level of the minority share in a neighborhood that once exceeded sets off a rapid exodus of the white population. They also find that the tipping behavior is one-sided, and that neighborhoods with minority shares below the tipping point can attract both white and minority residents.
All this means that it may not be sensible to develop economically mixed residential localities, where the proportion of both the rich and the less well off are sprinkled in more or less equal numbers. It may be more prudent to plan neighbourhoods where either the poor or the rich proportion is less than the tipping point.
Morality and free markets
It has been variously argued that greed and avarice, recklessness, and downright dishonesty have been the driving factors behind the ongoing economic turmoil. Richard Posner and Gary Becker have interesting posts elaborating on the virtues and vices of the free market culture.
Gary Becker makes an excellent point that if customers are able to detect when they are being cheated or misled and they buy frequently enough (repeat purchases) for them to have a greater probability of detecting and then punishing the sellers, then honesty will prevail. But then these are conditions not always available, and more so in the financial markets.
Posner draws the distinction between honor based societies, anchored around hierarchy and group loyalty, and commercial cultures, which are democratic, individual-centric and self-interest driven. Without being value judgemental, Posner argues that "commercial cultures creates incentives and constraints that, provided that economic activity is effectively regulated, (an important qualification) maximizes the values that are important to most people".
Drawing the distinction between public and private morality, Max Weber had argued that anyone in a public position - and this includes business and academic leaders as well as politicians - cannot indulge a taste for candor or altruism and expect to be successful at his job. Posner writes, "It is for the same reason that good business leaders drive hard bargains with their suppliers, ignore negative externalities, play off subordinates against one another, lay off workers by the thousands, receive huge compensation packages, and often relocate plants overseas when foreign wages and taxes are lower."
It is by now widely accepted on all sides of the spectrum that some form of regulation is essential. But the distinction should be made between "bad" regulation (with its possibility of regulatory capture and distortion of incentives) and "good" regulation (with the difficulty of identifying them). Differentiating between the two would require government officials and regulators to first bridge the information assymetry and access adequate information about intentions and actions of market participants, then identify appropriate regulatory alternatives, and finally make the most relevant choice in an objective and transparent manner.
Any regulation while formally intended at controlling an activity or transaction, ultimately is aimed at the motives and intentions driving the particular transaction. And finally there remains the question of "quis custodiet ipsos custodes?" or "who will regulate the regulators?" Even at the best of times, these are difficult challenges, giving grist for opponents of any regulation.
Martin Wolf outlined seven attributes of regulation of financial markets. Nouriel Roubini has ten fundamenal issues in reforming financial regulation and supervision. William Buiter has these ideas about the new regulatory architecture.
Gary Becker makes an excellent point that if customers are able to detect when they are being cheated or misled and they buy frequently enough (repeat purchases) for them to have a greater probability of detecting and then punishing the sellers, then honesty will prevail. But then these are conditions not always available, and more so in the financial markets.
Posner draws the distinction between honor based societies, anchored around hierarchy and group loyalty, and commercial cultures, which are democratic, individual-centric and self-interest driven. Without being value judgemental, Posner argues that "commercial cultures creates incentives and constraints that, provided that economic activity is effectively regulated, (an important qualification) maximizes the values that are important to most people".
Drawing the distinction between public and private morality, Max Weber had argued that anyone in a public position - and this includes business and academic leaders as well as politicians - cannot indulge a taste for candor or altruism and expect to be successful at his job. Posner writes, "It is for the same reason that good business leaders drive hard bargains with their suppliers, ignore negative externalities, play off subordinates against one another, lay off workers by the thousands, receive huge compensation packages, and often relocate plants overseas when foreign wages and taxes are lower."
It is by now widely accepted on all sides of the spectrum that some form of regulation is essential. But the distinction should be made between "bad" regulation (with its possibility of regulatory capture and distortion of incentives) and "good" regulation (with the difficulty of identifying them). Differentiating between the two would require government officials and regulators to first bridge the information assymetry and access adequate information about intentions and actions of market participants, then identify appropriate regulatory alternatives, and finally make the most relevant choice in an objective and transparent manner.
Any regulation while formally intended at controlling an activity or transaction, ultimately is aimed at the motives and intentions driving the particular transaction. And finally there remains the question of "quis custodiet ipsos custodes?" or "who will regulate the regulators?" Even at the best of times, these are difficult challenges, giving grist for opponents of any regulation.
Martin Wolf outlined seven attributes of regulation of financial markets. Nouriel Roubini has ten fundamenal issues in reforming financial regulation and supervision. William Buiter has these ideas about the new regulatory architecture.
Placebo effect and Value effect
Discounting for the obvious biological variations, it has been found that similar patients respond differently to the same treatment, depending on the context. My mother would find a prescription by our family doctor much more effective than the same prescription delivered by another doctor! Some patients tend to respond better to treatments involving expensive diagnostic tests and drugs, even though the tests and drugs have been found to be (substantively) no different from their cheaper versions. These and other similar phenomenon have been the subject of extensive experimentation by researchers in recent years.
A medical treatment is said to have placebo effects if patients who are optimistic about the treatment respond better to the treatment. Using clinical trials of anti-ulcer and cholesterol-lowering drugs, Anup Malani found conclusive proof that clinical trials manipulate patient expectations. He suggests that instead of comparing the treatment and control arms of a single trial, one should compare the treatment arms of two trials with different probabilities of assignment to treatment. If there are placebo effects, patients in the higher probability trial will experience better outcomes simply because they believe there is a greater chance of receiving treatment.
Now, Dan Ariely and a group of researchers have conducted studies to prove that just as a placebo pill can reduce pain, a higher price can create the impression of higher value.
The subjects were given an initial series of electric shocks and asked to rate the pain they felt after each shock. The subjects were then allowed to take a placebo pill that they were told was similar to codeine. In fact, the pill had no direct medical benefit at all. While half of the patients were told that their (false) treatment cost $2.50 per pill, the other half were told that their pill had been discounted to $0.10 per pill. They were then given a second series of electric shocks, and once again, asked about how much it hurt.
While 85% of the patients taking the $2.50 pill reported that the second set of shocks were less painful, only 61% of those taking the (identical!) $0.10 pill reported the shocks to be less painful. So the more expensive the pill, it seems, the larger its perceived effect — even when the pill actually has no medical effect!
Previous studies have shown that pill size and color also affect people’s perceptions of effectiveness. In one, people rated black and red capsules as "strongest" and white ones as "weakest". Other information like the country where the drugs were manufactured can also affect perceptions.
(HT: Freakonomics)
Update 1 (20/3/2011)
Dan Ariely and Co conduct experiments and find that brand name products are more effective, if not in quality atleast in the way they generate response in its users.
They write, "Study participants facing a glaring light were asked to read printed words as accurately and as quickly as they could, receiving compensation proportional to their performance. Those wearing sunglasses tagged Ray-Ban made fewer errors, yet read more quickly, than those wearing the identical pair of sunglasses when tagged Mango (a less prestigious brand). Similarly, ear-muffs blocked noise more effectively, and chamomile tea improved mental focus more, when otherwise identical target products carried more reputable names."
A medical treatment is said to have placebo effects if patients who are optimistic about the treatment respond better to the treatment. Using clinical trials of anti-ulcer and cholesterol-lowering drugs, Anup Malani found conclusive proof that clinical trials manipulate patient expectations. He suggests that instead of comparing the treatment and control arms of a single trial, one should compare the treatment arms of two trials with different probabilities of assignment to treatment. If there are placebo effects, patients in the higher probability trial will experience better outcomes simply because they believe there is a greater chance of receiving treatment.
Now, Dan Ariely and a group of researchers have conducted studies to prove that just as a placebo pill can reduce pain, a higher price can create the impression of higher value.
The subjects were given an initial series of electric shocks and asked to rate the pain they felt after each shock. The subjects were then allowed to take a placebo pill that they were told was similar to codeine. In fact, the pill had no direct medical benefit at all. While half of the patients were told that their (false) treatment cost $2.50 per pill, the other half were told that their pill had been discounted to $0.10 per pill. They were then given a second series of electric shocks, and once again, asked about how much it hurt.
While 85% of the patients taking the $2.50 pill reported that the second set of shocks were less painful, only 61% of those taking the (identical!) $0.10 pill reported the shocks to be less painful. So the more expensive the pill, it seems, the larger its perceived effect — even when the pill actually has no medical effect!
Previous studies have shown that pill size and color also affect people’s perceptions of effectiveness. In one, people rated black and red capsules as "strongest" and white ones as "weakest". Other information like the country where the drugs were manufactured can also affect perceptions.
(HT: Freakonomics)
Update 1 (20/3/2011)
Dan Ariely and Co conduct experiments and find that brand name products are more effective, if not in quality atleast in the way they generate response in its users.
They write, "Study participants facing a glaring light were asked to read printed words as accurately and as quickly as they could, receiving compensation proportional to their performance. Those wearing sunglasses tagged Ray-Ban made fewer errors, yet read more quickly, than those wearing the identical pair of sunglasses when tagged Mango (a less prestigious brand). Similarly, ear-muffs blocked noise more effectively, and chamomile tea improved mental focus more, when otherwise identical target products carried more reputable names."
Friday, November 7, 2008
To-do list for Obama
Former New York Governor Rudy Guiliani once said, "You campaign in poetry and govern in prose". Barack Hussein Obama did the former in mellifluous style, and now has a fromidable set of governance (mainly economic) challenges to surmount! An epic in prose is the need of the hour!
Bad news continues to mount - sales declined by double digit among all categories of retailers, markets continue their free fall, auto sales plummet, rising unemployment, and hospitals see fewer paying patients. All these dismal news topped with this and this!
Update 1
More from Greg Mankiw, Alan Blinder, Robert Shiller, Ben Stein, Robert Frank, Tyler Cowen, and Peter Bernstein.
Bad news continues to mount - sales declined by double digit among all categories of retailers, markets continue their free fall, auto sales plummet, rising unemployment, and hospitals see fewer paying patients. All these dismal news topped with this and this!
Update 1
More from Greg Mankiw, Alan Blinder, Robert Shiller, Ben Stein, Robert Frank, Tyler Cowen, and Peter Bernstein.
Even in recession Wal Mart makes a fortune!
With consumer spending plummeting, all major American retailers are cutting staff, discounting merchandise and closing stores to survive. Except Wal Mart, which, ironically enough, appears to be benefitting even more from the bleak economic environment. NYT hits the nail on the head, "As Americans cope with the worst economy in a generation, heading to Wal-Mart is an automatic reflex for many of them."
Even as retailers are experiencing double digit declines in sales, the Bentonville giant, with its "lowest prices in the market place" policy, has reported sales gorwth even higher than of last year.
Update 1
McDonald's also reported increase in sales by 8.2% in October, 2008. This is another indicator that consumers prefer flock to value when the bad times arrive.
Even as retailers are experiencing double digit declines in sales, the Bentonville giant, with its "lowest prices in the market place" policy, has reported sales gorwth even higher than of last year.
Update 1
McDonald's also reported increase in sales by 8.2% in October, 2008. This is another indicator that consumers prefer flock to value when the bad times arrive.
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