Tag: angus deaton

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

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.

EC101: Links for 5th December, 2019

If you think of one’s opinion about RCT’s as a spectrum, I fall on the “I think it’s not a bad idea at all” part of it. How might I be wrong? Five articles that help me understand this.

  1. “Lately I find myself cringing at the question “what works in development?” I think it’s a mistake to think that way. That is why I now try hard not to talk in terms of “program evaluation”.“Does it work?” is how I approached at least two of the studies. One example: Would a few months of agricultural skills training coax a bunch of ex-combatants out of illegal gold mining, settle them in villages, and make it less likely they join the next mercenary movement that forms?

    But instead of asking, “does the program work?”, I should have asked, “How does the world work?” What we want is a reasonably accurate model of the world: why people or communities or institutions behave the way they do, and how they will respond to an incentive, or a constraint relieved. Randomized trials, designed right, can help move us to better models.”
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    Chris Blattman on the issue. (Note that this was written in 2016)
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  2. “In the early 2000s a group emerged arguing that important improvements to development and hence to human well-being could be achieved through the wide spread use of independent impact evaluations of development programs and projects using randomized control trial methods (RCT) of choosing randomly “treatment” and “control” individuals. I have been arguing, since about that time, that this argument for RCT in IIE gets one small thing right (that it is hard to recover methodologically sound estimates of project/program causal impact with non-experimental methods) but all the big things wrong.”
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    You can’t write anything about RCT’s without writing about Lant Pritchett’s opinion about them.
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  3. “Like other methods of investigation, they are often useful, and, like other methods, they have dangers and drawbacks. Methodological prejudice can only tie our hands. Context is always important, and we must adapt our methods to the problem at hand. It is not true that an RCT, when feasible, will always do better than an observational study. This should not be controversial, but my reading of the rhetoric in the literature suggests that the following statements might still make some uncomfortable, particularly the second: (a) RCTs are affected by the same problems of inference and estimation that economists have faced using other methods, and (b) no RCT can ever legitimately claim to have established causality.”
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    Angus Deaton weighs in (and if you ask me, this is my favorite out of the five)
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  4. “The economists, like the medical researchers, seem to have lost touch
    with their proper role. They are not ethically assigned to master our lives.
    The mastering assignment is what they assume when they focus on
    “policy,” understood as tricking or bribing or coercing people to do what’s
    best. It sounds fine, until you realize that it is what your mother did to you
    when you were 2 years old, and had properly stopped doing to you by the
    time you were 21. The field experimenters scorn adult liberty. And that is
    the other way many economists have lost touch. As noted by the
    economist William Easterly, another critic of the experimental work, and as
    argued at length by your reporter in numerous books, the real way to solve
    world poverty is liberty. Not dubious, fiddly, bossy little policies handed
    down from the elite. ”
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    Dierdre McCloskey (as usual) doesn’t pull punches.
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  5. A set of links about the topic from Oxfam.

Links for 11th April, 2019

  1. “Who has the upper hand in bargaining for wages and employment benefits? Who dominates markets and who must submit to market forces? Who can move across borders and who is stuck at home? Who can evade taxation and who cannot? Who gets to set the agenda of trade negotiations and who is excluded? Who can vote and who is effectively disenfranchised? We argue that addressing such asymmetries makes sense not only from a distributional standpoint, but also for improving overall economic performance. Economists have a powerful theoretical apparatus that allows them to think about such matters.”
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    Dani Rodrik makes the case for rewriting economics, rather than tinkering with it at the margins, in order to really tackle the problems that the world faces today. An article worth reading – I’d linked to their manifesto earlier.
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  2. “In San Lucar, selfish behavior is unacceptable. But in New York, a city with 8 million people, selfish behavior is the norm. It’s a dog-eat-dog mentality. Policemen are everywhere and sirens are the sound of the city. During rush hour on 5th Avenue, pedestrians fight like soldiers on a battlefield. They step over homeless people, weave through strangers, and J-Walk through red lights.Why are people so cooperative in San Lucar, but so selfish in New York?”
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    If you are a student of game theory, you already know that the answer is game theory. But the article is worth reading because it should prompt you to wonder if there is a deeper answer than the one provided – and Adam Smith might be a good place to begin.
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  3. “First, declining growth is a key, albeit low-frequency, cause of today’s social and economic distress. Second, the unfortunate consequences of the ICT revolution are not inherent properties of technological change. Rather, as Rajan notes, they reflect a “failure of the state and markets to modulate markets.” Though Rajan does not emphasize it, this second point gives us cause for hope. It means that ICT need not doom us to a jobless future; enlightened policymaking still has a role to play.”
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    Angus Deaton reviews Raghuram Rajan’s latest book, and leaves us with a sense of appreciation for the book (and in my case, a desire to read it), but also with a deep sense of foreboding about where we may end up as a society.
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  4. “That leads to a broader point: “tech” is not simply another category, like railroads or telecom. Tech is a means, not an end, but Senator Warren’s approach presumes the latter. That is why she proposes the same set of rules for the sale of toasters and the sale of apps, and everything in between. The truth is that Amazon is a retailer; Apple a combination of hardware maker and platform makers. Google is a search and advertising company, and Facebook a publishing and advertising company. They all have different value chains and different ways of impacting competition, both fairly and unfairly, and to fail to appreciate just how different they are is a great way to make bad laws that not only fail to fix problems but also create entirely new ones.”
    Ben Thompson on how to think about tech (and in a very long article, this excerpt really matters): tech is the means to an end, and therein lies all the difference in the world.
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  5. “You may never have heard of Islamestan, in Chinese Turkestan, or its one-time “king”, Bertram Sheldrake. Islamestan is long gone, swallowed up in the historical shifts of a turbu­lent region, but for a brief and unlikely moment, an English pickle-factory heir ruled, with his wife, Sybil, over the newly independent Muslim country, to the far west of China.”
    Stories don’t get much better than this, and that’s putting it mildly.