Marginal Revolution

What's this?

Really, I want to know.  Chris Blattman doesn't know either.  Please tell me in the comments.

Assorted links

1. Ten young progressive intellectuals.

2. International bright young things; the new economic superstars.

3. First Chinese restaurant with three Michelin stars.

4. Best science fiction books of the year; you'll find one list here and another here.

5. Here is Alex Ross's list of the best classical music recordings of the year.

Hospitals as Hotels

Is it that people love a good movie selection, or do they take the movies to be the best available signal of hospital quality?

Amenities such as good food, attentive staff, and pleasant surroundings may play an important role in hospital demand. We use a marketing survey to measure amenities at hospitals in greater Los Angeles and analyze the choice behavior of Medicare pneumonia patients in this market. We find that the mean valuation of amenities is positive and substantial. From the patient perspective, hospital quality therefore embodies amenities as well as clinical quality. We also find that a one-standard-deviation increase in amenities raises a hospital's demand by 38.4% on average, whereas demand is substantially less responsive to clinical quality as measured by pneumonia mortality. These findings imply that hospitals may have an incentive to compete in amenities, with potentially important implications for welfare.

Here is the paper.  The ungated copy is here.  Here is a recent article of relevance:

When the Sacred Heart Medical Center at RiverBend opens in Springfield, Ore., in August 2008, patients and their families will enter a hospital surrounded by wetlands and Douglas firs. Inside, they'll encounter multiple fireplaces, coffee shops and visitors' lounges.

"As you come to the hospital, you'll be greeted warmly as you enter, much as you would by a concierge at a hotel," says Adam Kerner, an executive architect with Anshen + Allen, who partnered on RiverBend with an outside architect whose previous experience had been in designing resorts...

Gerard van Grinsven, president of the Henry Ford West Bloomfield Hospital now under construction in suburban Detroit, says area hospital executives were surprised when he was hired away from hotelier Ritz-Carlton in 2006. Up to then, his two-decade career had been exclusively in hotels and resorts.

But skepticism soon gave way to curiosity and competitiveness, van Grinsven says. In fact, Beaumont Hospitals in nearby Royal Oak, Mich., hired a Ritz-Carlton executive as their director of hospitality a short while later.

Van Grinsven is introducing a bit of the Ritz-Carlton flair to the new hospital, adding touches like mini-hotel rooms for visitors as well as healthy cooking classes for the surrounding community. The facility, which opens in July 2008, will include larger-than-normal emergency patient rooms—roughly 150 square feet—to create more space for visitors, a result of design sessions that included input from patients, nurses and doctors.

Are health insurance markets competitive?

Probably not:

Although the vast majority of Americans have private health insurance, researchers focus almost exclusively on public provision. Data on the private insurance sector is extremely difficult to obtain because health insurance contracts are complex, renegotiated annually, and not subject to reporting requirements. This study makes use of a privately-gathered national database of insurance contracts agreed upon by a sample of large, multisite employers between 1998 and 2005. To gauge the competitiveness of the group health insurance industry, I investigate whether health insurers charge higher premiums, ceteris paribus, to more profitable firms. I find they do, and this result is not driven by cross-sectional differences across firms or plans: firms with positive profit shocks subsequently face higher premium growth, even for the same healthplans. Moreover, this relationship is strongest in geographic markets served by a small number of insurance carriers. Further analysis suggests profits act to increase employers' switching costs, and insurers exploit this inelasticity where they have sufficient bargaining power. Given the rapid industry consolidation during the study period, these findings suggest healthcare insurers possess and exercise market power in an increasing number of geographic markets.

Here is the paper.  Here are ungated copies; I am not sure they are the exact same draft.

Some do, some don't

Some people enjoy running into an occasional primate or farm animal while shopping. Many others don’t.

That's from The New York Times.  This very interesting article is about the growing debate over the role of service animals in public places.  I hadn't known that parrots were being used to help medicated bipolar patients negotiate public situations.  In case you didn't know, I would enjoy running into an occasional (non-human) primate or farm animal while shopping.  Not that I ever have.

I thank John De Palma and Michelle Dawson for the pointers.

Addendum: On service animals here is much more.

Famous economists' famous errors

Bob T., a loyal MR reader, asks the following:

10 (or more) most famous mistakes in economics. Viner on costs and Feldstein on Social Security come to mind. Malthus? Not talking about old vs. new economics, but simple analytical errors and bad predictions.

That's a good start.  What else might be listed?  Just to circumvent various hobby horses in the comments section, let's avoid Marx and Marxists, Keynes, and the last twenty years. 

1. Kenneth Arrow confusing risk subdivision and risk multiplication, in arguing that government should use a riskless rate of discount.

2. The Cambridge, Mass. economists having to admit, finally, that capital reswitching could be quite a general phenomenon (though is it, really?)

3. Ricardo's prediction that most of national output would end up going to the landlords.

4. Paul Samuelson praising the economic performance of Soviet central planning in his Principles text.

5. 93 percent of all proclamations made about the demand for money in macroeconomics.

6. The more exaggerated claims about the Laffer Curve.

7. Various claims that the Fed should have let the money supply fall during the Great Depression.

8. Jevons's claim that England (or was it the world?) would soon run out of coal.

9. Welfare analysis done in overlapping generations models (the standard welfare theorems do not generally hold in such models).

And dare I offer up a controversial pick:?

10. Those who think that the difference between "capital" and "ideas" in a Solow growth model is actually well-defined.

What else can you think of?

What will change *everything*?

Via Arnold Kling, here is a long symposium (a good time waster), from all the names you would expect to contribute to such a symposium, plus Eric Fischl and Brian Eno.  Here is Anton Zeitlinger's offering:

Some day all semiconductors will break down and therefore all computers as, besides historic instruments no computers exist today which are nor based on semiconductor technology. The breakdown will be caused by a giant electromagnetic pulse (EMP) created by a nucler explosion outside Earth's athmosphere. It will cover large areas on Earth up to the size of a continent. Where it will happen is unpredictable. But it will happen since it is extremely unlikely that we will be able to get rid of all nuclear weapons and the probability for it to happen at any given time will never be zero.

The implications of such an event will be enormous. If it happens to one of our technology based societies literally everything will break down. You will realize that none your phones does work. There is no way to find out via the internet what happened. Your car will not start anymore as it is also controlled by computer chips, unless you are lucky to own an antique car. Your local supermarket is unable to get new supplies.There will be no trucks operating anymore, no trains, no elctricity, no water supplies Society will completely break down.

I worry about that too.  A lot of the answers consider nuclear bombs exploding, reengineering the human body, and nanotechnology.

A *New Day*

Sometime in the next week - January 1st if you have that available, or maybe January 3rd or 4th if the weekend is more convenient - I suggest you hold a New Day, where you don't do anything old.

Don't read any book you've read before.  Don't read any author you've read before.  Don't visit any website you've visited before.  Don't play any game you've played before.  Don't listen to familiar music that you already know you'll like.  If you go on a walk, walk along a new path even if you have to drive to a different part of the city for your walk.  Don't go to any restaurant you've been to before, order a dish that you haven't had before.  Talk to new people (even if you have to find them in an IRC channel) about something you don't spend much time discussing.

And most of all, if you become aware of yourself musing on any thought you've thunk before, then muse on something else.  Rehearse no old grievances, replay no old fantasies.

That is Eliezer.  He concludes:

If it works, you could make it a holiday tradition, and do it every New Year.

How to keep away inflation in the future

Larry, a loyal MR reader, asks:

When the US government borrows and prints so much money in the coming few years, how is the country going to keep massive inflation away?

Borrows and prints are different here.  The borrowed money is no inflationary threat, if the U.S. government is willing to raise taxes to pay it off.

As for the newly created reserves, in theory the Fed can suck them out of the banking system at will (and/or change the rate of interest paid on reserves, to influence demand to hold).  But will it hit the right timing in practice?  Let's say the economy miraculously recovered tomorrow.  Banks would be very eager to make more loans than they are doing now and the broader monetary aggregates would go up rapidly.  However the broader aggregates take many months to influence the price level, so in the meantime the Fed would sell assets from its balance sheet and take reserves out of the economy.  These are uncharted waters and the trial and error factor likely will be significant.

It is the lags which give the Fed some chance to react but the lags also mean that the Fed will never quite know if it is proceeding at the right pace.  And will the contractionary open market operations be conducted with all the non-standard assets currently on the Fed's balance sheet?

As I said, uncharted waters.

I give it a reasonable chance that we, in due time, have a secondary recession, resulting mainly from the Fed deflating at too rapid a pace as the economy recovers.

Exotic Ethiopian Cooking

That's the book Yana gave me for Christmas.  I hadn't realized how much the cuisine relies upon red onion and how many of the dishes require a full cup of red pepper paste.  Spiced butter is common too.  The recipe for red pepper paste starts by suggesting "15 lbs." of New Mexico red chiles.  I'm trying it with...15 red chiles.  We'll see how that goes; I've also scaled back the "5 lbs. fresh ginger" to 5 pieces of fresh ginger.

If you're ready with the spiced butter and the red pepper paste (neither is totally simple), most of the recipes take 5-10 minutes and sound quite delicious.

The menu for tonight includes fesenjan chicken, Parsee sweet and sour fish, Parsee lamb with stewed apricots, Ethiopian sauteed beef with injera, and red lentils.  I'll also make Ethoipian pumpkin if I have red pepper sauce left over.  Natasha is preparing Russian vegetable salads.