Economics & Marginalia: June 2, 2023

Hi all,

It’s the NBA Finals, a magical time of year when being woken up at 3am by an unhappy toddler can lead to 3 hours of ‘just five more minutes’ of a basketball game on an iPhone (thank you, League Pass). If I appear bleary-eyed in any meetings, blame the Nuggets. In years past, you could reliably boil down the finals to a simple equation: are the other five guys better than LeBron James? For 10 years of my adult life (and 8 years in a row, starting from 2011) that was the question. Now he’s 193 and only around the fifth best player in the world, that’s no longer the equation. All the sports journalists are falling over themselves to write some think pieces and statistical breakdowns of the Miami Heat vs. the Denver Nuggets; there are articles popping up promising me ‘the 7 keys to the NBA finals’, but at a very basic level, the question is the same: are those five guys better than Nikola Jokic? The protagonist has changed from an uber-athletic American with as-carefully cultivated a public presence as you can imagine to a fat, 7-foot Serbian dude who speaks almost entirely in monosyllables or sarcasm, but it’s the same problem: can you beat the unnaturally large genius across the court from you? My strong guess is that the answer this time is going to be ‘no’. If you don’t like basketball, don’t worry: I’m willing to bet this is going be more or less all over by next Friday; and there’s lots of economics below to keep you going till then.

1. The best read of the week for me was Justin Sandefur’s piece on how cost effectiveness analysis got PEPFAR wrong—so good I read it twice, once before and once after it was officially published. PEPFAR was George W Bush’s flagship foreign aid programme, paying for antiretrovirals for around 2 million people in Africa. It is estimated to have saved literally millions of people, but at the time PEPFAR was considered to be a bad investment by many economists: ARVs were, at the time, relatively expensive for every life they saved compared to alternative interventions, even within the health sector. Justin makes several criticisms of the use of cost effectiveness analysis to come to this conclusion, and his piece is worth reading in full, but there are two killer arguments. The first is that there was never any realistic possibility that the money would be used for alternative ways of saving lives in poor countries. It was essentially new money, that they could motivate raising only for something as big and marketable as this. Given that, the relevant criterion was whether it was a good use of money, given the cost of raising it, not whether you couldn’t do anything better with the same amount of money. The other big mistake made was that there was insufficient recognition of how fast the cost of ARVs would fall, and what the role of a massive programme like PEPFAR in causing that to happen would be. I do a lot of work on exactly this kind of problem, and we still make this mistake. We systematically under-use the potential of massive purchases and a guaranteed market to drive down high prices. Governments can make markets, not just participate in them.
2. Very different, and almost as good: the FT have lunch with Daron Acemoglu (register!) at a Hunnanese restaurant and—in-between mouth-watering descriptions of the food (I am very hungry right now)—there is a lot of discussion about the broad strokes in which economics has gotten the science of understanding how the world changes wrong. Daron’s productivity and the quality of his output has made him a meme among economists (my favourite: “Every time Daron Acemoglu sits down, it counts as a conference”), but this interview really highlights how big the questions he asks are. It’s a bit part of why he’s such an important economist, even if you don’t always buy the answers.
3. I’ve been thinking a lot about poverty measurement recently, so I thought this was brilliant: Aart Kraay and co-authors have come up with a new, very intuitive and distribution-sensitive way of measuring welfare. The premise is straightforward: pick a level of income that you consider to be sufficient, or to denote a level of welfare that you want to consider for your analysis. Then you simply calculate the average factor by which individuals would need their income to be multiplied to reach that level—basically, by how much, on average, do incomes need to be multiplied by till they reach the level you care about. I need to read the underlying paper still, but the idea is really quite appealing.
4. Here’s an interesting one:  a new paper uses a regression discontinuity design to suggest that getting the shingles vaccine can reduce your chance of getting dementia (primarily for women, it seems). Alex Tabarrok summarises the paper at face value here; but there was some scepticism online. Paul Novosad thought the data wasn’t a complete slam dunk and the possibility that there was really no effect shouldn’t be discounted; Jessica Pickett pointed out another possible weakness. As a thought experiment, for what decisions would you think this paper is strong enough evidence to act? While it doesn’t make me think the book is closed, and no more research is needed (and probably as a policymaker, I hold fire before deciding to make national, free shingles vaccines available to every adult or child), it’s enough to make me want to get vaccinated myself, and to get my kid vaccinated too (since chickenpox is miserable for some children). It illustrates a more general point I think we don’t appreciate enough: that evidence strength should be evaluated as a function of the decision point it contributes too.
5. I dislike moralism around exercise: the idea that it should be done of its own merits or as some kind of ordeal that we go through to be healthier. So if paying people to take more steps works, as this study suggests, I’m all for it. Michael Sandel might have something to say about it, mind.  
6. I revealed my dislike of Succession last week, but I really liked Branko Milanovic’s discussion of ethics and capitalism as exemplified by the show. Like Branko I always thought the media conglomerate the Roy’s ran was a red herring. They could have made anything, even electric cars, and they would all have remained equally odious. His discussion of ethics and legality pins down something I’d struggled to articulate in comparing it with Deadwood or The Sopranos (or even The Wire), that the moral vacuum Succession operates in seems much more all-encompassing than in those shows. It’s the water they all swim in, and as a result it’s hard to say very much about it directly.
7. I love wine, but I generally hate the way people talk about it (there are noble exceptions: there’s a line in one of Fergus Henderson’s cookbooks about wine pairings that essentially reads “eat what you feel like eating, and drink what you feel like drinking. The odds are they will go together.”) It’s not just the language people use to describe flavour and smell, which should be straightforward and relatable, not flowery and poetic (“a nose reminiscent of an Italian sunset”, what on earth does that actually mean, much less smell like?), it’s how they describe all the culture around it. For small taste of that, read this, on LitHub, calling out the ingrained sexism of a hobby that men monopolised for much too long. How is this not parody? “Writer Jay McInerney described one wine as ‘a youthful and powerful beauty like Milla Jovovich in Resident Evil’”? That sentence puts me off both Resident Evil and Jay McInerny. It almost (almost) makes me want to stick to water.

Have a great weekend, everyone!

R