Category: Development Economics

A Most Puzzling Chart

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https://twitter.com/Roshanjnu/status/1699639923022999821/photo/1

That chart is from an excellent Twitter thread by Roshan Kishore, Data and Political Economy Editor at the Hindustan Times. Such an excellent thread, in fact, that I finally succumbed and subscribed to the Hindustan Times, in order to read it in full. (Only to find out, I cannot resist adding, that some articles can only be accessed on the HT app, and not on the desktop. Including, of course, this one. Pah.)

But Roshan has been kind enough to share most of the article as a twitter thread, which can be accessed here.

Take a look at the third chart from the first part of Roshan’s (and Abhishek Jha’s) two-part series. MNREGA raised rural wages, which ought to be a good thing, and which arguably even was a contributing factor behind the UPA winning 2009. So what went wrong after 2009? This third chart points towards at least part of the answer:

https://twitter.com/Roshanjnu/status/1699639945135378871/photo/1

But what does “bound to have put pressure on farmer’s margins” mean in practice?

Here’s a really old article from the Times of India:

https://timesofindia.indiatimes.com/india/migrant-workers-trigger-labour-pains-in-punjab/articleshow/3143443.cms

NREGA raised incomes for the very poorest rural households in this country, but you could argue that this was at the cost of hitting the margins of the not-quite-as-poor-but-still-quite-poor. Similarly, margins for “small entrepreneurs employing urban blue-collar workers” would also be hit, since wages for jobs such as these would now have to work off a floor price established by NREGA. In plain simple English, if you wish to hire a blue collar worker, you must pay the worker at least as much as what the worker would get via NREGA, plus transport and adjustment costs.

And then the story gets worse, if you are in charge of UPA-II. You have strong growth post the aftermath of the 2008 crisis, you have a two year episode in which food prices are on the rise globally, and you have lower margins for small farmers and small town entrepreneurs. Which means that you have conditions that are ripe for a wage-price spiral. Which is exactly what happened, of course:

You’ll often get questions like this in class – “Is NREGA good for India or not?”. Roshan and Abhishek’s article is, in a sense, an answer to this question.

Because I would answer such a question by asking another in return: “Good for whom?”

  1. Good for the truly poor in India
  2. Not so good for the marginally less poor in India
  3. Good for the UPA during the 2009 elections
  4. Bad for the UPA during the 2014 elections (and vice-versa for the NDA in case of pts. 3. & 4.)
  5. Not all that good for India as a whole, because we now seem to have:
    • stagnant rural wages once again,
    • lower share of agricultural income going to farmers
    • an inability to implement much needed agricultural reforms

Causality is a tricky little beast. I do not mean to suggest that all of this is because of MNREGA, or because of the National Food Security Act. Both of these are part of the story, and so is their timing. The UPA (I&II) government, the NDA government (2014 and 2019) are also part of the story, as are so many other things. That’s the good and the bad news about being a student of the political economy – it’s a very fascinating and a very complex subject.

But my own answer to the question “Is MNREGA good for India?” is a very definitive “Yes”. But hey, there ain’t no such thing as a free lunch, and as with everything else in life, so also with NREGA. It has its costs, and those have been (and are being) borne by many different entities. As I said, it is complicated.

So where do we go from here?

I would like to write more about this, but that must necessarily be another blogpost. For now, I look forward to your answers!

My thanks to Mihir Mahajan for sharing this excellent Twitter thread with me, and for some very helpful discussions.

Tchova-Tchova

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If you’re wondering, it means “You push, I push”:

In 2012, Mbamba’s leaders signed an agreement with Mariri Investimentos, the organization that runs the project and leases a 224-square-mile conservation concession surrounding the village. An innovative partnership, Tchova-Tchova (meaning “You push, I push”), emerged. Its goal is to boost community income and food production and include villagers in conservation projects while allowing them to manage essential needs, such as water supply, solar lighting, schooling for children, and crop protection against hungry animals. Because of Tchova-Tchova, Mbamba residents find jobs at the environmental center and the Mpopo Ecolodge, in construction, in road maintenance, and as rangers.

Source: National Geographic, “One of Africa’s Largest Wildernesses is Thriving – Because Locals Have a Stake in its Success”

The article (I hope you get to read it by clicking on the link above – and if you can’t, please do figure out how to gain access – it is very much an article worth reading) is a fascinating write-up on how Niassa, a protected area in northern Mozambique is thriving under a very Ostromian model.

If this is the first time you’re hearing the name Elinor Ostrom, I envy you your introduction to her magical world.

Elinor Ostrom was one of the great economists of the twentieth century, and a Nobel prize winner. Here is her Nobel lecture, and here is where you can read it. You’ve already read ChatGPT’s ELI5 above, here is Wikipedia on why Ostrom was so very awesome:

Ostrom studied the interaction of people and ecosystems for many years and showed that the use of exhaustible resources by groups of people (communities, cooperatives, trusts, trade unions) can be rational and prevent depletion of the resource without either state intervention or markets with private property.

https://en.wikipedia.org/wiki/Elinor_Ostrom

Why is the National Geographic article a good example of an Ostromian solution? Because of this problem:

Hunter-gatherers, farmers, rulers of chiefdoms—people have called this region home for thousands of years. But centuries of colonization and a recent civil war have left communities in Niassa desperately poor. If this magnificent wilderness—ancestral lands of people who have lived here for generations—is to be preserved and nurtured for the future, they must be given a direct stake in conservation efforts and tourism.

Source: National Geographic, “One of Africa’s Largest Wildernesses is Thriving – Because Locals Have a Stake in its Success”

What happens if the ancestral lands of people who have lived there for generations are administered without giving them a stake in the conservation efforts being tried there, and without giving them a stake in tourism activities there? Well, no skin in the game is the simplest story.

The slightly more complicated, but rewarding story, is that it (the Ostromian solution) allows for the following:

  1. The preservation of local traditions and beliefs
  2. More involved resource management
  3. Greater community involvement
  4. An application of economic incentives
  5. On the ground partnerships
  6. A sustainable way of addressing human-wildlife conflicts

Fun exercise: team up with somebody else interested in reading this article and see how many of these features you can identify in this article.

Funner exercise: what other features are there in these article that I have not mentioned here?

Ostromian frameworks are a great way to overcome what is known as the “tragedy of the commons” problem, but there is much more to it than “just” this. If you’re looking to learn more about the world in which we live and how it could be made a better place (and why else would you be studying economics?), learning about Elinor Ostrom, her work and its many applications is a great way to start.

Ten other things that I found fascinating in this article, keeping in mind that I’ve limited myself to just ten, there are many more:

  1. The chonde-chonde ceremony
  2. Niassa, the hunting reserve where this solution is being implemented, is larger than the country of Switzerland. Africa is really, really, really big, and learning just how big it is never ceases to surprise me
  3. The economics of a sustainable model (at least on the face of it, at any rate) when it comes to sport-hunting concessions made for fascinating reading
  4. Positive and negative incentives to protect wildlife and habitat was such a great teaching moment!
    “The more animals, the more tourism dollars, the rationale goes. A community conservation fund administered by the villagers rewards wildlife-friendly behavior. For every tourist who visits the environmental center, Mariri Investimentos pays $25 into the fund. For every prize animal a tourist spots—a lion, elephant, leopard, buffalo, wild dog, or hyena—Mariri pays eight dollars into the fund. For every month with no elephant poaching in the vicinity, the fund earns $155. But if Mariri’s rangers find evidence of poaching, money is deducted—$19 for every snare, for example; $232 is docked for every lion killed; and a poached elephant takes $310 from the community fund.”
  5. My word for the day: ungulates
  6. My learning for the day: aardvark means earth-pig. Huh.
  7. Baobab trees live for up to two thousand years. (As you can see, I know very little about biology, so please bear with me if my “discoveries” are old news to you)
  8. Trade is a non-zero sum game across species too! This was such a fascinating thing to learn:
    “Some hives are hidden inside woody nooks or hollow trees far smaller than baobabs. To get to them, Yao honey collectors have struck up a mutually beneficial relationship with the greater honeyguide, a bird they call sego. It’s one of few animals that can digest beeswax. When the birds see a person, and a hive is not far away, they utter a chittering Morse code—tji-tji-tji tji-tji-tji—to signal there’s honey to be had nearby. An attentive Yao answers with a distinctive brrrr-HM, brrrr-HM, brrr-HM.
    The honeyguide leads the way, flitting from tree to tree with the honey hunter in pursuit, calling back and forth as they go. When hunter and bird reach the hive, he pacifies the bees with smoke, chops down the tree, cracks open the bole with an axe, and pulls the honeycomb free. Then he shares the loot, leaving a pile of sugar-laden honeycomb for his guide. 
    In 2015, evolutionary biologist Claire Spottiswoode, from the University of Cape Town, in South Africa, and Cambridge University, in the U.K., teamed up with Yao honey hunters Orlando Yassene and Musaji Muamedi to find out if the birds are responding to any old sound or specifically to the Yao call. The team walked through the woodlands on a series of simulated honey hunts, playing three different sounds on a portable speaker: the Yao’s brrrr-HM call; arbitrary human sounds; and other animal sounds, such as the call of a ring-necked dove. The segos were at least twice as responsive to the brrrr-HM call and led the team to hives three times more often in response to it.”
  9. Grab a cup of coffee, and even if you choose to not read the article, please savor all of the photographs. Do this on a computer, because a phone won’t give you the same experience.
  10. My favorite was the photo of the fisherman with the fish in his mouth. What about you?

Odisha’s Bonded Laborers

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Unifying India’s Healthcare Markets

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When I teach introductory macro, I like to begin by telling my students that a good framework to keep in mind is these three questions:

  1. What does the world look like?
  2. Why does the world look the way it does?
  3. What can we do to make it better?

This is regardless of the class I’m teaching. If it is undergraduate students, we spend a lot of time on these questions, without getting as much into the intricacies as I would in, say, a Masters programme. But I find the framework to be a very powerful one, precisely because it is so simple.

Another advantage is that the framework can be used to analyze slices of the economy.

Health, for example. Only for the Indian economy, for example.

  1. What does the market for healthcare in India look like?
  2. Why does it look the way it does?
  3. What can we do to make it better?

About three years ago, I learnt that the answer to these questions wasn’t simple at all.

Think about the first of these questions. What do we mean when we say “the market”, for example? Is it the same market if you are a government employee as opposed to a private citizen? Is it the same market if you are a state government employee as opposed to a central government employee? Is it the same market if you are a rich private citizen as opposed to a poor private citizen?

What do we mean when we say “the same market”? Well, can all these categories access the same services, from the same service providers, at the same prices? If not, why not?

Of course, when you ask these questions, you are in Second Question territory. Why are these markets different? What was the reasoning behind making them different? Has that purpose been served, or not? If it has, can we unify these markets? If it has not, should we not be asking why not? Should we not be thinking about how to reform or unify these markets?

Of course, when you ask these questions, you are in Third Question territory. If you agree that the healthcare market in India isn’t perfect just yet, then you should be thinking about ways to make it better. But better might mean different things to different people! Some people might say hey, if only government got the hell out of this market, outcomes would be so much better. Other folks might say hey, if only government stayed in this market, but with the following tweaks, outcomes would be so much better.

Trouble is, both sides of the argument have a point. Some markets do, indeed, function better with minimum government. But that is only under certain conditions. And some markets do, indeed, function better with more government. But that too, is only under certain conditions.

The trick is in getting everybody to agree on what these conditions are, and to get everybody to agree about to what extent they’re applicable for a given economy at a given point of time. I doubt that we will ever get everybody to agree about everything for all countries for the foreseeable future. But then again, if we did, life would be pretty boring, and people like me would be out of a job.

By the way, I asked ChatGPT these questions. Here are its answers.

But for our country (India), and for the circumstances that India finds herself in today, Murali Neelakantan and I have answers to the first and the second questions. And we have a proposal for the third. These answers can be found in a paper that we’ve written, called Unifying India’s Healthcare Markets. Please go through the paper, and I hope you find stuff to disagree with. I also hope you’ll tell us why you disagree with it, and how we might go about resolving these disagreements.

Because you see, our hope is to not win an argument with you. It is to learn how to best answer the third question. Because what could possibly more important for India?

So please, read the paper, and let us know what you think – especially if you disagree with us.

Respectful disagreements are underrated!

As always, thank you for reading.

Nothing is so permanent as a temporary government program

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The title of today’s blogpost is a line by Milton Friedman, of course.

This chart, from Andrew Batson’s blogpost, caught my eye:

https://andrewbatson.com/2023/08/08/stimulus-is-never-just-temporary/

Quite a few things to note over here:

  1. The difference between the three lines, which is in and of itself interesting
  2. The persistence of augmented net borrowing (including unofficial local government borrowing)
  3. China is, in a sense, still recovering from the fiscal excesses of 2008

Here’s Andrew on the third point:

China’s political system therefore does not have a good track record of being able to take away the punch bowl in good economic times in order to be able to share out more punch in the bad times. The dubious legacy of the 2008 stimulus means that China now needs fiscal consolidation to get long-term debt dynamics under control–at exactly the moment that it once again faces a shortage of aggregate demand.

https://andrewbatson.com/2023/08/08/stimulus-is-never-just-temporary/

The context, of course, is that China is struggling to recover from the pandemic. There’s lots of reasons this is happening:

There are several reasons to be gloomy about China’s economic prospects, from America’s export controls on advanced semiconductors and skittish foreign investors, to President Xi Jinping’s crackdown on big tech firms. But the main culprit for the recent weakness is property, which before the pandemic was a crucial source of growth across the economy. Activity slowed, first as the government sought to rein in heavily indebted developers, and then more recently as sales have stayed weak. Between January and May, for instance, real-estate investment fell by 7.2%, compared with the same period a year ago. The danger is that the property bust now becomes an enduring malaise.

https://www.economist.com/leaders/2023/06/22/chinas-economic-recovery-is-spluttering-the-prognosis-is-not-good

…but given what happened in 2008 (and since), a fiscal stimulus seems to be off the table where China is concerned.

Fiscal profligacy is not, in other words, a good idea. Don’t get me wrong: I am not saying fiscal expenditure is a bad idea. In fact, in a country like India, it is unavoidable, and for a variety of reasons. But the answers to the questions:

  1. How much to spend?
  2. Where to spend?
  3. When to spend?

…are always important in the context of fiscal policy.

Note that this is not a comment about India and her fiscal policy both during and after the pandemic. It is simply a reminder that fiscal policy is extremely difficult to get right in terms of when to start, what the magnitude should be, and when to stop.

For example:

When Japan’s asset-price bubble burst at the end of 1989, growth slowed dramatically. Firms and households, burdened by debt, paid off their liabilities rather than spending on goods and services. Together with a shrinking workforce, this meant that Japan’s gdp growth lagged behind the rest of the rich world.
Part of the problem was that policymakers were too slow to respond. It was not until 1999 that the Bank of Japan cut its benchmark rate to zero; the government directed stimulus towards investment, rather than consumption.
The bust turned into decades of stagnation. Unfortunately, China looks as if it may repeat the same mistake. The government remains fond of directing stimulus to investment, rather than towards handouts.

https://www.economist.com/leaders/2023/06/22/chinas-economic-recovery-is-spluttering-the-prognosis-is-not-good

To spend the right amount, to start at the right time, to end at the right time, and to make sure one spends it right where it’s needed – it’s easy for a blogger to say that this matters. It is easy to point out where a country has gone wrong with the benefit of hindsight. But to actually do it when it is needed the most, that’s a whole other challenge.

Some might say it is all but impossible, but if you are a serious student of the Indian economy, you’re going to have to admit it is unavoidable.

Macro is hard.

Two Typically Tylerian Takes

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Allow me a quick pat-self-on-the-back for the alliteration before we proceed, will you?

Right, so how to think about too much (or too little) government in healthcare? Some of us might say one, and some of us might say the other.

How many of us will say “neither”?

I observe also that Obamacare passed, and American life expectancy fell. I do not blame Obamacare for that, but I do notice it. As a result, I have grown increasingly interested in “how can we boost biomedical scientific progress?” and increasingly less interested in “how can we reform health insurance coverage again?” All the more because we seem to be living in a biomedical progress of science golden age.

https://marginalrevolution.com/marginalrevolution/2023/07/the-amy-finkelstein-and-liran-einav-health-care-plan.html

Many of us can say “both”, and I very much do. But this specific way of saying “both” I find fascinating:

…imagine a health care policy that stated individuals have a true right to access any health care technology invented up through say…2004 or so. Individuals would be guaranteed “2004 value health care lives.” (In 2004 that certainly seemed pretty good.) But for subsequent health care developments, a free market will reign. Is not guaranteeing basic needs an essential part of the egalitarian argument? Surely not everything needs to be equalized? Anyway, no one believes in guaranteeing individuals protection against all the rare diseases out there, as that would cost too much. So a line will be drawn somewhere.

https://marginalrevolution.com/marginalrevolution/2023/03/a-view-that-hardly-anyone-embraces.html

Some points I would like to note here:

  1. Thinking out of the box is hard to do, and needs a lot of reading, and then a lot of thinking. I’m not very good at all three things, and practice is key.
  2. If an issue has remained intractable for a long time, and the debate seems to only get shriller without any resolution, perhaps it is time to consider a solution that lies outside of the framing of the debate.
  3. How do we know when this becomes applicable? See pt. 1
  4. Write every single day. Or train like an athlete, if you prefer.
  5. Read MR every single day. I’m quite serious about all of these, but this last one is the easiest to achieve.

Too Much Government in Healthcare

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This is a continuation of yesterday’s post, and in this post, I seek to come up with the best libertarian arguments for why healthcare markets should have as little government as possible.

Three questions for you to consider:

  1. When patients receive a healthcare service, how much should they pay for it?
  2. When doctors and other providers deliver a healthcare service, how much payment should they receive?
  3. How should these amounts be determined?

These questions aren’t mine. They’re taken from John C. Goodman’s book, “Priceless: Curing the Healthcare Crisis“. These are excellent questions, and as an economist, I do not find them remotely objectionable. Were I to analyze (or teach somebody how to analyze) a market for a good or service, this would be a very good place to begin.

You may be tempted to ask questions about externalities, moral hazard etc., and how these affect the provisioning and pricing within these markets, but I would argue that this really is the third question at play. In other words, I find this list fairly comprehensive.

What are the author’s own answers to these questions?

  1. Patients should pay a price for care equal to its marginal social cost.
  2. Providers should receive a price equal to the marginal social value their care creates
  3. Wherever possible, these prices should be determined in competitive markets.

Again, as an economist, I find this unobjectionable. Note that our concerns about different forms of market failures are accounted for by using the phrase “wherever possible”. Presumably, if markets are not competitive, price determination should happen by other means.

As an Indian economist, I need to ask what happens if patients are unable to pay a price for care equal to its marginal social cost. And I also need to ask what these other means for price determination might be, in case the market for healthcare isn’t competitive. Note that I don’t mean either of these as criticisms of what has been said. I simply wish to state that different countries will have different constraints and features, and at least in the case of India, I think both of these are truly important and relevant questions.

John Cochrane has a nice paper in which he answers the first of these questions:

“What about the homeless guy with a heart attack?”
Let’s not confuse the issue with charity. The goal here is to fix health insurance for the vast majority of
Americans –people who have jobs, people who buy houses, cars, and cell phones, people who buy
insurance for their houses and life insurance for their families.
Yes, we will also need charity care for those who fall through the cracks, the victims of awful disasters,
the very poor, and the mentally ill. This will be provided by government and by private charity. It has to
be good enough to fulfill the responsibilities of a compassionate society, and just bad enough that few will choose it if they are capable of making choices. I wish it could be better, but that’s the best that is
possible. For people who are simply poor, but competent, vouchers to buy health insurance or to refill
health savings accounts make plenty of sense

Cochrane, J. H. (2013). After the ACA: Freeing the market for health care. Available at SSRN 2213027. (pp 23-24)

In other words, government intervention is necessary, unless the provisioning is entirely and always possible via private charity. At least in India’s case, I feel fairly safe in assuming that private charity is simply not going to be enough, now or in the foreseeable future.

As regards the second question: why isn’t the market for healthcare competitive?

I ran a simple Google search for “Assumptions of Competitive Markets“, and clicked on this link. Pick any other link that you prefer, but I would assume that the list won’t change all that much.

Competitive markets will have price takers, identical goods, a large number of buyers and sellers, easy entry and exit, and complete information. Some other websites may talk about zero search costs and zero transaction costs, but you can argue that this comes under complete information.

Is the market for healthcare in India competitive? Ask yourself which of these assumptions are met in the context of healthcare in India.

Where we lie on the spectrum between “hell yes” and “gawd no” may differ, but I think it is safe to say that most of us will be closer to “gawd no”. If your answer differs from this, I would love to know why.

But long story short, here would be my summarization of the libertarian approach to healthcare in the abstract:

As long as markets are competitive, and most people are above a certain income threshold, healthcare is best served by having as little government intervention in regulation and provisioning of healthcare as possible.

If that is not an acceptable statement for a libertarian approach to healthcare, please let me know how and why you would rephrase it.

If, on the other hand, it is an acceptable statement, then I have follow-up questions:

  1. If markets are not competitive, are we better off trying to make them competitive, or are we better off provisioning healthcare with government intervention? I ask this question specifically in an Indian context, but feel free to think about other nations while answering as well.
    Why does this matter? Because of opportunity costs. A resource that is spent on making markets competitive is a resource not spent on the provisioning of healthcare. Given the amount of poverty in India, this is an important question to think about.
  2. What is a good income threshold to keep in mind, and how do we know the answer is mostly correct?
  3. How many people need to be above this threshold for government to mostly withdraw from regulation and provisioning of healthcare?
  4. What does “as little government intervention as possible” mean? What should the government move out of first (regulation or provisioning), and why? Also, how?

I look forward to your answers!

Angus Deaton on Adam Smith and the Provisioning of Healthcare in America

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Join me in staring at this chart. I have been doing so, on and off, for the past couple of days:

https://www.bostonreview.net/articles/how-misreading-adam-smith-helped-spawn-deaths-of-despair/

This is Figure 2 from a speech given recently by Angus Deaton at the Adam Smith Tercentenary celebrations at the University of Glasgow on June 8, 2023. I’ll have much more to say about the speech – that is the subject of today’s post – but for the moment, look at the chart.

It shows you life expectancy at age twenty-five in the United States of America (US) and Scotland (SCO). What does life expectancy at age twenty-five mean? Well, what does life expectancy at any age mean?

Life expectancy at a certain age is the mean additional number of years that a person of that age can expect to live, if subjected throughout the rest of his or her life to the current mortality conditions (age-specific probabilities of dying, i.e. the death rates observed for the current period).

https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Glossary:Life_expectancy

In simple English, if you made it to the age of twenty-five as an American man in the year 1990, you could expect to live an additional fifty-one years from there on in (see the chart on the left).

Except for two problems.

The first problem is that the number, while indeed improving over time, started to drop off a little before 2020. A little before 2020, note, so this is not the pandemic we’re talking about.

And the second problem is a much bigger one. The red line in the chart on the left that I have been talking about is the red line at the top. That is the line for men in the United States with a BA degree.

The red line at the bottom of the chart – the life expectancy at age twenty-five for men in the United States without a BA degree – that red line is the one that I have not been able to stop thinking about. Here’s why:

  1. It is lower than the line for those with a BA throughout the entire period of analysis. US men without a BA degree have had lower life expectancy at twenty-five for the last thirty years.
  2. The life expectancy for this cohort at twenty-five started to drop off in 2010 – a full decade prior when compared to those with a BA degree.
  3. Not only has that drop-off not been arrested, it has accelerated a little before 2020. The data is probably even worse post 2020, but Angus Deaton has chosen to stop at 2020, since the topic of his speech isn’t the effects of the pandemic.

Outcomes over intentions, always remember. It doesn’t matter what the intentions were in 1990 or have been since then. Whatever they may have been (and are), the outcomes show that something, somewhere has gone wrong.

What has gone wrong? Can it be fixed? If so, how? Why should an Indian blogger care about this when there are so many other problems more specific to India?

I’ll answer each of these questions in turn, but I’ll begin with the last of these first.

Why should an Indian blogger care about this when there are so many other problems more specific to India?

For the same reason that an Indian blogger should care about what South Korea got right in the 1950’s when it comes to industrial policy. Because we should aim to try and replicate policies that have worked in other parts of the world, while being mindful of the opportunity costs of these policies. And by the same token, we should aim to try and avoid policies that have not worked in other parts of the world, while being mindful of the opportunity costs of not implementing those policies.

The second half of the last sentence in the paragraph above is quite something to think through, but we’ll get to it later on.

Being a student of the Indian economy requires you to be a student of economic policies the world over, and that over the years.

What has gone wrong?

Not just what has gone wrong, of course, but also why has it gone wrong.

It is here that we get into the deep and tricky part of the ocean. Tricky because the diagnosis of a problem depends upon your ability to reason things through. Your ability to reason things through is in turn dependent upon:

  1. How well you know you know your facts
  2. How well you are able to analyze them in order to reach a conclusion
  3. How familiar you are with the developments within the subject being analyzed
  4. The tools and theories being used for analysis.

Let’s take the first three of these as a given in this specific instance, and so too the first part of the fourth. It is the second part of fourth point that Angus Deaton focusses upon.

What are we analyzing here? The fact that life expectancy at twenty-five for American men is declining, and that the decline is worse among men without a BA degree. What theory should we advance for trying to understand why this has happened?

There can be many, but let’s cleave them into two parts for now.

Theory 1: There is too little government support when it comes to the provisioning of healthcare in the United States of America.

Theory 2: There is too much government support when it comes to the provisioning of healthcare in the United States of America.

The good news is that one hundred percent of economists upon reading this have gone “Aha! Exactly!”

The bad news is that some of them said so upon reading Theory 1, and some of them upon reading Theory 2.

So which is it? Why so, and how do we know?

I wouldn’t be much of an economist if I didn’t have an answer to this question. But more importantly, I wouldn’t be much of a teacher if I didn’t give you an overview of both theories. That is exactly what I plan to do over the course of the next two days, so stay tuned.

Duncan Weldon on Pinning Down the Causes of the Industrial Revolution

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… and no, this is not “just” history. As Duncan says in his third tweet in this thread, “understanding why countries have successfully industrialized in the past has important lessons for many parts of the world today”.

Shrug 2

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