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Home / Tag Archives: 03. Benefits; costs and decisions

Tag Archives: 03. Benefits; costs and decisions

What is the cost of marriage?

To an economist, the cost of an activity is what you give up to pursue it.In the year following a divorce, women's living standards fall by 27 percent while men's living standards rise by 10 percent.Steven Landsburg's classic column on Why Men Pay To Stay Married argues that the difference is a compensating differential, the "price" that men pay to women to compensate them for the relatively unpleasant job of marriage.If men stay in marriages that cost them a lot of money, that just proves...

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What happens if we reduce drug prices by 70%?

Senator Warren's proposed policy fails a benefit-cost test: Between 1982 and 2015, for example, the US saw the launch of 719 new drugs, the most of any country in the sample; Israel had about half as many launches. By looking at the resultant change in each country between mortality and disease, Lichtenberg calculated that the years of life lost before the age of 85 in 2013 would have been 2.16 times as high if no new drugs had been launched after 1981. For a subset of 22 countries with more...

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Privately funded, Randomized Control Trials for policy

Results from the first four RCT's funded by Arnold Ventures.Here are the results for charter schools: The study found that students who won a KIPP middle school admissions lottery were 6 percentage points more likely to enroll in a four-year college than students who lost the lottery (47% of lottery winners enrolled vs. 41% of lottery losers). We view this finding as highly suggestive but not yet strong evidence of an effect because it did not quite reach statistical significance (p=0.085)....

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What could possibly go wrong?

In August the knights of the Business Roundtable announced that they are putting “stakeholders” ahead of shareholders as their primary business purpose. Senator Warren sent the Roundtable a letter saying that she "expects" them to "live up to their promises" by endorsing her bill to change the way that capitalism works: ...Every company with revenue of more than $1 billion would have to obtain a new federal charter, in contrast to the current system of state charters. Instead of serving...

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Are kids safer in a parent’s lap?

...than in their own seat? The Federal Aviation Administration (FAA) says "yes." Although a child has a bigger chance of surviving a crash when belted into their own seat, doing so would cost extra. That cost...would cause some families to revert to car travel, which is less safe. “Consequently,” states the agency in its latest response to the safety board, “entire families would be subject to far higher fatality rates, which would produce a net increase in overall transportation...

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What’s the best way to provide opportunity?

Good profile of economist Raj Chetty who finds that housing vouchers which allow poor families to move to "opportunity" neighborhoods, help younger kids catch up to richer peers.  President Trump signed a bill that uses the research to guide policy: Tenants have just started moving, but the program is already successful: The majority of families who received assistance moved to high-opportunity areas, compared with one-fifth for the control group, which was not provided with the extra...

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Is a Universal Basic Income a good idea?

WSJ editorial arguing for an expansion of the Earned Income Tax Credit (EITC) rather than a Universal Basic Income (UBI). Rather than giving everyone $1,000 per month (this would cost so much in taxes that it would destroy jobs), a guaranteed-income program would offer transfers only to individuals whose monthly income falls below $1,000, thereby coming in at a mere fraction of a UBI’s cost.  By providing "insurance" (when your income falls) as well as "opportunity" (jobs), the EITC seems...

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Why are some prices so high?

MarginalRevolution.com has a terrific post explaining "Baumol's Cost Disease," or in more polite terms, "the Baumol Effect." It rests on two ideas: Opportunity cost:  the cost of an activity is what you give up to pursue it; and Differences in productivity:  some items, like cars, have gotten much easier to produce over time.  To make this concrete, imagine two goods or services, like education and automobiles.  The first has not had much change in productivity over the past 100 years--it...

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“Consumer testimonials are not reliable scientific evidence”

...In the initial immersion week of classes, a Luke Froeb-led lecture and discussion touched on a project at work and changed his decision making process. When he returned to the office, he changed course on how he was putting a bid proposal together. The revised bid added $400,000 to the bottom line, far more than the investment Vulcan was making in his Executive MBA degree. ... After just one class, Vulcan’s MBA investment was in the black,” he recalls with a chuckle.  (link) Consumer...

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The opportunity cost of studying art

From the Economist: economists are paid a huge premium (100%) to compensate them for studying econ vs. art.  Or to turn it around, art majors forego about $50,000/year to study art. Many gifted arts students would struggle to crunch numbers. But for those who can excel at both, the cost of sticking with the arts, in terms of forgone wages, is steep. Cambridge creative-arts students have a-level scores close to those of economics students at Warwick, but earn about half as much. That is...

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