Sunday, February 9, 2025

Is your master's degree worthless?

Economist:
In America returns are especially large in computer science and in engineering. They are slightly smaller in other science subjects, in part because an undergraduate degree in these already bumps up salaries by quite a lot. Teachers who bag graduate degrees in education tend to earn more, even if wages for the profession as a whole are fairly low, because many American school districts automatically raise the pay of those who have them.

Saturday, February 8, 2025

Would Thomas Jefferson approve of DOGE?

From ChatGPT:

Thomas Jefferson would likely have mixed feelings about a Department of Government Efficiency, depending on its scope and function.

  • Why He Might Approve: 
    •  Limited Government & Fiscal Responsibility – Jefferson was a strong advocate for minimizing government waste and ensuring efficient use of public funds. If such a department worked to reduce bureaucracy and streamline operations, he might have supported it. 
    •  Republican Virtues – He believed in a government that served the people effectively without unnecessary complexity, so an effort to improve government efficiency could align with his ideals. 
  • Why He Might Disapprove: 
    • Bureaucratic Expansion – Jefferson was skeptical of centralized power and large government institutions. The very creation of a new department could be seen as adding more layers to the bureaucracy he often opposed. 
    •  State vs. Federal Power – He strongly favored states’ rights and decentralized governance. If the department operated at the federal level, he might argue that efficiency efforts should be handled at the state or local level instead. 
  • Final Thought: If structured as a temporary commission to identify inefficiencies and reduce waste, Jefferson might have supported it. But if it became a permanent federal agency with expanding influence, he would likely have opposed it as a contradiction to his vision of a small, decentralized government.

Friday, February 7, 2025

All he wants is "good pricing"

Fron WKRN:
“There are too many liquor stores in Lebanon, just at the rate that more stores are opening. I never really felt that way before,” Andrea Ross, the owner of Cheers Wine and Liquor, said. “We know multiple liquor store owners in Lebanon [TN] that are great people, great business owners, but in order for us to continue to be able to provide good pricing and all the things that we offer, we have to be able to sustain the business.”
For anyone who has not read Chapter 6, what the incumbent liquor store owner means by "good pricing" is high pricing. To the residents of Lebanon, good pricing is low pricing. 
  • By limiting competition from entrants, the city council create incentives for incumbents to support their reelection campaigns.
  • Does the city council have enough information to make good decisions about the number of liquor stores, and the incentive [see above] to do so?
HT:  MH

Monday, February 3, 2025

Adverse Selection in Genetic Insurance Markets

A new paper by Azevedo, Beauchamp, and Linnér (ABL) finds that some predictions are coming true and that may be a problem. Economists predicted that the Human Genome Project would uncover many markers for diseases that may not present themselves until much later. For two decades, these predictions were hard to come mainly because single-gene mutations are not as informative. ABL show that more recent improvements developed from data on nearly half a million people in the UK Biobank has become much more predictive. This affects insurance markets.

In many countries, but not the US, a market for Critical Illness Insurance (CII) is growing. 

Critical illness insurance (CII) pays out a lump sum in the event that the insured person gets diagnosed with any of the medical conditions listed on the policy (Brackenridge et al., 2006). The lump sum can be used as the policyholder wishes. The policy pays out once and is thereafter terminated.

Consumers with bad test results should gobble up insurance. CII providers will have to adjust rates for this adverse election. Consumers with good test results will not find the insurance worth it. Will CII providers require genetic tests? Will they be allowed to risk rate their policies? As the predictive power of genetic testing improves, as it surely will, these issues will become more acute.

Hat tip: Marginal Revolution