TVHE

Because it makes you smarter:

(Source Marginal Revolution)

Note: I am joking, this is not causality.  For one we don’t have a quantity measure of drinking, and the impact of drinking on intelligence is no doubt non-linear.  In fact, you could make the argument that “smarter” people know how control their own alcohol consumption, and so do not face the severe negative impacts of drinking – in a way smart people are more likely to find ways to control, or are not subject to, time inconsistency problems in liqour.

However, I think we should also use this as a reminder that it the link between the consumption of a drug and the drugs impact can be very poorly estimated if we aren’t very careful to control for these sorts of issues – hence why I do not trust a lot of studies out there, especially the ones made by interest groups where all they do is draw lines (95% of studies according to my casual observation).

Update:  CPW sent me the link to the full set of graphs with alcohol involved – it is beautiful.

If doing actions that reward a future self is perceived as costly could we justify these actions.  If thinking about our wealth, human capital, or ability to live in 10 years time is inconceivable, will me over consume now?

In essence this sort of discussion is saying that we discount our future selves TOO steeply (compared to whatever the underlying presumption of a “fair discount factor” is).  Is this a fair value judgment to make in policy?  It is not one I would make, but it appears to be the basis of some overaching policies such as universal healthcare and superannuation.

In this case, we don’t need to worry about a “moral hazard problem” even though (empirically) the actions of moral hazard will appear.  Why?  Because the actors aren’t thinking about the future selves and so these “inefficient” outcomes would have occurred in the first place!  Policy helps to correct this by transfering resources to our future selves to improve outcomes relative to the REAL counterfactual (rather than the idealized one where agents choose on the basis of our subjectively fair discount rate).

I think it is important to keep this issue in mind, because it is a closet behavioural assumption behind most policy.  If we buy this value judgment, then we will believe in a larger role for government then if we didn’t.

Via Dim Post, No Right Turn mentions an article from Werewolf.co.nz by Gordon Campbell.  The article supports the idea of exempting GST on food. There were a number of interesting facts, I definitely enjoyed the articles.

However, even if all the premises are correct and even given significant social justice goals, I think we have to be clear regarding why we think an exemption is the way to go – and in the end I still disagree regarding any exemption.

Read more…

I was impressed by the title of a NZ Herald article today “Fat is normal“.  I was like, yes it is perfectly rational for an individual to put on weight, contrary to what we are often told.  I began to think that if policy wonks would treat the idea of putting on weight sensibly we could avoid weird “anti-fat” policies.

However, then inside the article I saw it was written by a nutritionist – the worst of the prescriptive disciplines in my opinion.  Furthermore, they decided to take an entirely holistic approach to weight gain, removing any individual responsibility and blame the environment.  Namely:

Professor James said that in countries such as Britain and New Zealand, the reason for many people’s obesity was a genetic predisposition in an environment which allowed it to happen with an “out-of-control” food industry and the constant use of cars

What is this.

Read more…

As speculated by some over the weekend, and confirmed today by the Economist, Copenhagen currently appears to be nothing more than a venue for which policy makers will agree to consider a future agreement on Carbon Emissions.

Undoubtedly there exist links between the U.S.’ relaxed approach to the summit and the Obama administrations efforts to pass universal healthcare; for the latter to pass the support of those contributing to the former is required. This is nothing new. What is interesting to note, however, is that such an attitude to favor health over emissions has been indirectly present within the U.S. for some time.

Earlier this year Boston became the second city (following San Francisco) to pass legislation banning the sale of cigarettes in ‘drug’ stores.  Within this legislation there exists a further directive restricting the sale of cigarettes on college campuses. This is where things become interesting. Consider a representative smoker. The impact upon this agent from said legislation results in further effort (i.e.; distance traveled) to obtain cigarettes. As such, the ‘carbon footprint’ of each cigarette has increased within the city of Boston; not too mention the shadow price of the cigarettes themselves.

The question is now posed; are carbon emissions an indirect consequence of health legislation?

Greg Mankiw isn’t impressed by Obama’s comments on health spending. Obama thinks that increasing health spending without limit is a bad thing. Mankiw points to a QJE article that suggests increasing health spending is optimal:

As people get richer and consumption rises, the marginal utility of consumption falls rapidly. Spending on health to extend life allows individuals to purchase additional periods of utility. The marginal utility of life extension does not decline. As a result, the optimal composition of total spending shifts toward health, and the health share grows along with income. In projections based on the quantitative analysis of our model, the optimal health share of spending seems likely to exceed 30 percent by the middle of the century.

What I find interesting is the choice of assumptions in this article. Read more…

We’ve written a lot on this blog about taxing cigarettes. The usual arguments focus on health costs and potential ‘internalities’. When you look at the calculated costs of these things you usually get a number much smaller than the tax rate on a pack of cigarettes. Today it was suggested to me that cigarettes are nonetheless undertaxed in NZ. That’s because those calculations don’t include the statistical value of lives lost from smoking. If the value that people place on a life were taken into account at around $4m/life the cost of smoking would be far higher than the tax imposed. It would then take into account the harm to all those around the smoker who would be devastated at the loss of their life.

I haven’t had a chance to think it over in detail so I’m interested to know what you think about the argument. While I don’t have any numbers to back anything up, my initial thoughts are:

• Smokers’ lives aren’t usually all that much shorter than anyone else’s. It’s not like car accidents which claim people of all ages. That makes it difficult to apply the same number, unless we have an age adjusted figure available.
• Smokers do care about those around them so they’ll take into account the feelings of others when they make the decision to smoke. Some of the cost to those around them is thus internalised.
• People close to the smoker have an opportunity to directly bargain with them over their cigarette consumption. Perhaps government intervention isn’t needed to solve this problem.
• VSL calculations are usually done using willingness to pay to avoid harm. That approach puts a number on how much someone values their own life. Does that $4m figure represent the valuation of one’s own or someone else’s life? I imagine willingness-to-pay to avert the death of others is significantly lower. In fact, given people’s willingness to pay to save the lives of blameless and starving African children, I imagine they aren’t going to pay a whole lot to save someone with a pack-a-day habit.

I don’t know how big this number is, but it does sound kinda significant even given my reservations. So why isn’t it included in the calculations of people like Viscusi, Gruber and Koszegi? I’m sure there’s an obvious answer, but I don’t have it so I’m hoping your collective wisdom can help me out here

The Liberal Conspiracy has interesting article on the drug decriminalisation in Portugal. Two highlights for me.

The opening paragraph:

The right predicted Bad Things: Drug use would explode, tourists would travel from far and wide to get high on the streets of Lisbon, law and order would collapse, and people would start riding around in modified cars and fighting in Thunderdomes

This just made me laugh:)

Now what made me cringe was the stats from a Cato paper looking at Portugal:

Prevalence rates for the 15–24 age group have increased only very slightly, whereas the rates for the critical 15–19 age group—critical because such a substantial number of young citizens begin drug usage during these years—have actually decreased in absolute terms since decriminalization.

Perhaps most strikingly, while prevalence rates for the period from 1999 to 2005, for the 16–18 age group, increased somewhat for cannabis (9.4 to 15.1 percent) and for drugs generally (12.3 to 17.7 percent), the prevalence rate decreased during that same period for heroin (2.5 to 1.8 percent), the substance that Portuguese drug officials believed was far and away the most socially destructive.

If you feel confused after reading that paragraph don’t worry. The Liberal Conspiracy’s description of this passage hit the  spot for me:

What the above basically demonstrates is that if you cherry-pick the right start years and end years for an age-group, you can get almost any result you want

Lies, damned lies and statistics….

I’ve previously suggested that mandatory helmet laws are bad for the environment. Well new research suggests that they’re actually bad for health outcomes, too:

A model is developed which permits the quantitative evaluation of the benefit of bicycle helmet laws. The efficacy of the law is evaluated in terms of the percentage drop in bicycling, the percentage increase in the cost of an accident when not wearing a helmet, and a quantity here called the “bicycling beta.”
…
Empirical estimates using US data suggests the strictly health impact of a US wide helmet law would cost around $5 billion per annum. In the UK and The Netherlands the net health costs are estimated to be $0.4 and $1.9 billion, respectively.

That’s a LOT of money and that lot of money in net health costs could save a LOT of lives. If there’s a net social health cost to mandatory helmet laws then they’re hurting more people than they help. That’s a good reason not to have them if you care about saving lives, or minimising harm, or maximising welfare. Read more…

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.