goonix

Tony Veitch and the economics of suicide

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The Herald are reporting that Tony Veitch has (once again) attempted to take his life. The story is very sad but did get me thinking about whether suicide is ever a rational response.

There is some literature (here, here and here) on this very topic. The most interesting thing for me was that an attempt at suicide can be rational so long as the attempt is not successful. A failed attempt tends to significantly increase income (by 20.3% on average, relative to those who consider suicide but do not make an attempt) as more resources, such as healthcare and affection, are made available to the person who made the attempt. The more serious the attempt, the greater is the impact on income (36.3% on average for so-called ‘hard-suicide’ attempts).

This economic approach to suicide runs counter to the traditional view that suicide occurs at a fragile point in time when someone is acting irrationally.

In the instance of Tony Veitch, it is difficult to see how a positive income effect would be gained from his numerous attempts at suicide, given his broadcasting career has been ruined by the case. However, this might be underplaying the positive, non-financial, effect that a ‘cry for help’ can have on an individual. On the other hand, Tony Veitch could simply be acting irrationally.

Whether Tony Veitch is acting rationally or irrationally, one thing is certain – the case is extremely tragic.

jamesz

Woe is not primarily me

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Ed Glaeser makes an important point about the current recession over at Economix:

it is important to recognize that in this recession, just as in every other recorded downturn, unemployment is overwhelmingly concentrated among those who started with less.
…
The overall unemployment rate for the more educated is only 4.3 percent. Individuals with a high school degree, but no college, have a 10 percent unemployment rate (not seasonally adjusted). The unemployment rate for high school dropouts is 15.5 percent. Moreover, the unemployment rate gap between the most- and least-skilled is widening, not narrowing.

It’s easy for professionals to complain about the problems facing the finance system and the lack of work for finance professionals. Let’s not forget that they are actually very well off compared to the average person in this recession, as in others. Governments may be bailing out financial firms but, if we want to help the most people, we should think about how best to aid the less fortunate among us who are suffering far more.

jamesz

Now vs the Great Depression

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Matt says the QSBO makes things look pretty bad. A couple of economic historians over at VoxEU think it’s not just bad, it’s worse than the Great Depression:

World stock markets, Now vs GD

World stock markets, Now vs GD


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Matt Nolan

Consumer debt, monetarism, and depressions

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Economist’s View links to an interesting article by Steven Gjerstand and Vernon Smith.

In this article they say that the high level of consumer debt in a number of countries is a concern – and indicates the possibility of a depression style contraction. This has the ring of truth. However, they also say:

The causes of the Great Depression need more study, but the claims that losses on stock-market speculation and a monetary contraction caused the decline of the banking system both seem inadequate

I am not quite sure that this is the case. Ultimately, there is a distinct difference between the contraction caused by a tightening in the money supply and a contraction that results from the reallocation of resources in the global economy. The Great Depression faced both – thanks to central banks around the world we only face the issues associated with the reallocation.

I see the monetarist explanation as an explanation of some of the “policy errors” during the Great Depression – not a strict explanation of the pain experienced during that period. Lets have a little discussion:

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Matt Nolan

Scott Sumner: Insightful analysis

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Seriously, lets all go and read Scott Sumner.  He discusses how monetary policy can still be effective even when the cash rate hits zero, and I find it difficult to fault his reasoning.

I would suggest reading all the posts, but there are a few that touched me:
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jamesz

Kneejerk reactions aren’t always the best

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The American public/politicians swelled with outrage at the reports of AIG paying bonuses recently. Puffed up with anger, Congress decided to implement ad hoc measures to eliminate the bonuses. Was it a good idea? Well, in retrospect it seems ill-informed and badly judged, as Megan McArdle details:

[T]he people who actually lost the money have, from most accounts, either been sacked, or left on their own. The people who got the bonuses were not involved with the dangerous trades, other than to help wind them down. …

Also, apparently, these payments were neither retention bonuses in the conventional sense, nor performance bonuses. They were guaranteed payments used to persuade employees from other parts of the Financial Products division to stay and wind down the FP’s books.

Ooops! But I think there’s a greater harm here than the injustice done to those employees, who’ve been robbed of their compensation for a year’s work. Read more