Correlation is not causation: birth weight determines mortality, not the animus of white physicians

Economist: 

CORRELATION: “when Black newborns are cared for by Black physicians, the mortality penalty they suffer, as compared with White infants, is halved.” 

MISTAKENLY INFERRING CAUSALITY FROM CORRELATION:

This striking finding quickly captured national and international headlines, and generated nearly 700 Google Scholar citations. The study was widely interpreted—incorrectly, say the authors—as evidence that newborns should be matched to doctors of the same race, or that white doctors harboured racial animus against black babies. It even made it into the Supreme Court’s records as an argument in favour of affirmative action, with Justice Ketanji Brown Jackson (mis)citing the findings. A supporting brief by the Association of American Medical Colleges and 45 other organisations mentioned the study as evidence that “For high-risk black newborns, having a black physician is tantamount to a miracle drug.”

CAUSALITY:  birth weight determines mortality, not the animus of white physicians

...a disproportionately high share of underweight black babies were treated by white doctors, while a disproportionately high share of healthy-weight black babies were treated by black doctors.

IRONY:

That a flawed social-science finding which fitted neatly within the zeitgeist was widely accepted is understandable. Less understandable is that few people now seem eager to correct the record. The new study has had just one Google Scholar citation and no mainstream news coverage. 

Who regulates the regulators?

From REASON:

For decades, the California Coastal Commission has had near-unchecked authority to regulate development along the state's 860-mile coastline, and it's been unafraid of using it. 

It's now trying to expand its terrestrial authority to outer space. 

This past week, the commission voted to oppose plans by private space company SpaceX to launch more rockets from Vandenberg Space Force Base in Santa Barbara County, California. 

The commission is asserting for the first time that SpaceX must get coastal development permits to shoot more rockets into space. SpaceX and the Department of the Air Force have conversely argued that SpaceX launches are federal activity that's exempt from the commission's regulatory powers.

WORSE:  it appears that the regulators opposed the launch due to Elon Musk's political beliefs.  The case now goes to trial.  

The hidden cost of regulatory uncertainty

Innovation drives growth and at our current growth rate of 2%, US income doubles in 36 years. In contrast, EU income doubles in 108 years. There are many reasons for the US/EU difference regulation, income taxes, subsidies and "regulatory uncertainty." President Biden’s appointees have createdted huge regulatory uncertainty in antitrust (see earlier post) which deters acquisitions which are the proverbial “exits” that drive startups.

Failures ==> Learning ==> Success

Economist:

...SpaceX’s existing Falcon 9 rockets had a similar string of spectacular failures (it even released a blooper reel). But there was a method behind all the explosions. The idea is that flying lots of hardware, and failing rapidly, lets you learn from reality, which is the best teacher of all. That sort of mindset, best-known in Silicon Valley, is not how the rocket business has traditionally worked. But it is hard to argue with the results: SpaceX’s Falcon rockets have now made more than 350 successful landings. That has helped the firm cut the cost of getting a tonne of payload into space by perhaps a factor of ten. It now dominates the launch industry.

Why has US left other rich economies in the dust?

Economist:

On a per-person basis, American economic output is now about 40% higher than in western Europe and Canada, and 60% higher than in Japan—roughly twice as large as the gaps between them in 1990. Average wages in America’s poorest state, Mississippi, are higher than the averages in Britain, Canada and Germany.

WHY?

• Economies of Scale: a good idea hatched in California or product built in Michigan can, in short order, spread to 49 other states. 
• Flexible Labor Market : ...allowing people to move to better-paying jobs and drawing workers to more productive sectors. 
• Immigration: A long, porous southern border [allows] the labour force to steadily grow ... to fill the hard, dirty jobs that many native-born Americans have no interest in doing. 
• Oil & Gas:...the improvements in techniques for extracting hydrocarbons from once-unpliant shale rocks have turned America into the world’s biggest producer of oil and gas.
• Light touch Regulation:  ...has given high-tech companies room to play and grow. It also enabled the experimentation which led to the shale revolution. 
• Better regulation: After the global financial crisis of 2007-09, [regulators] clean up bank balance-sheets, and making aggressive use of monetary policy to support growth. 
• Good Macro policy: government’s willingness to step on the accelerator pedal when [the economy] has sputtered, ...[response to the] covid slowdown ... with...fiscal stimulus packages that left other countries in the dust.

What happens when you cut the supply of Northwestern football by 75%?

WSJ: Price goes up by 900%!

Ryan Field, where Northwestern played until this season, sat over 47,000 fans—nearly four times as many as the [temporary] cv lakeside stadium.

Tickets for last Saturday’s home game against Indiana started at $129 on the school’s official site, an increase of more than 900% on the $17 average secondary-market price for last season’s home opener.

The shift in capacity creates a natural experiment, a movement along the demand curve, that allows us to calculate the Price Elasticity of Demand for Northwestern football. 

(Price Elasticity of Demand) = (% change in quantity)/(% change in price) = (-75)/900 = -1/12, 

a very inelastic demand, i.e., one whose quantity does not respond much to price changes.  

But this natural experiment may make demand look less elastic than it really is because of the quality increase: its intimate feel and views of Lake Michigan, make the new stadium more attractive.  This increase (shift) in demand due to higher quality increases the price change, making demand appear less elastic than if the new stadium were the same quality as the old one.  

HT: Lamar

AI podcast on Ch1 by Notebooklm.Google (Is this better than reading text?)

Ch1 Podcast Comments solicited

Bargaining with Longshoremen

How much bargaining power did the two sides have in the recent dock workers' strike? 

For shippers, what is the cost of a one day delay in coming to terms? The port of New York handled 6.6 million Twenty-foot Equivalent Unit (TEU) containers in 2022, but the East cost and Gulf coast ports for which data are available handled ~21 million. The average value of a TEU is $54.500. Assume firms have a 20% annual discount rate for a little back-of-the-envelope calculation.

	Port of New York	All Affected Ports	Units
Volume Handled 2022	6.6	20.8	Million TEU
Value of TEU 2020	$54.5	$54.5	$Thousands
Annual Value	$359.7	$1,133.6	$Billion/Year
Daily Value	$985.5	$3,105.8	$Million/Day
Daily Carrying Cost	$540.0	$1,701.8	$Thousand/Day

The carrying cost alone is over $1.7 million per day, perhaps more in 2024 due to inflation and increases in trade volume. This is also a lower-bound since there will also be production disruptions & spoilage of goods. The cost to shippers might come to $3-5million per day.

What is labor's cost of a one day delay in coming to terms? The earnings of the 45,000 affected dock workers could be anywhere from $39/hour to $200,000/year. Suppose half of these would have worked on any day and that a typical day is eight hours of work, the 45,000*0.5*$39/hour*8hours = ~$7million per day. This is an upper-bound since opportunity cost of workers time is not $0. The cost to workers might be $3-5million per day.

You can adjust any of these assumptions as you deem appropriate, but it seems that the two parties were pretty evenly matched.

Colocating Complements

 

Providers of complementary services can increase demand by reducing the search costs of shared customers. Perhaps colocation will suffice but the next step would be vertical integration.

New interactive games to teach supply, demand, and pollution, a "negative externality"

From MarginalRevolution.com:

MRU videos are free for anyone’s use anytime, anywhere and don’t forget there are also two new econ-practice games on negative externalities and positive externalities and a fun choose your own adventure story on Unintended Consequences (most textbooks just teach when regulation works. We are more balanced.)

HIGHLY RECOMMENDED: These are GREAT exercises for teaching students about Demand, Supply, and shifts in Demand and Supply!

Frank Zappa on Project Selection