Tuesday, December 16, 2014

Oregon's Employment at Record High Level in November



Oregon's employment is at an all-time high, according to the Oregon Employment Department.  More impressive, perhaps, is that November recorded an all time record increase in new jobs at 11,200.  The unemployment rate remains at 7.0% which is itself, ironically, a good sign as it means that lots of folks are returning to the job market and looking for jobs.

It looks like the recovery is finally and truly here and the low price of oil will certainly help this as well.

Monday, December 15, 2014

The Paradox of Choice

In economics, an expanded choice set from new goods, increased income, lower prices, etc. is generally a good thing.  You can more easily satisfy your desires when there are more things to choose from.  However, with more choice come more decisions to make, more information to gather more things to compare.  All of this is costly to an individual and these costs can sometimes outweigh the benefits of expanded choice sets, particularly when that expansion comes from additional goods.

There is a good example of this in today's New York Times in the form of an Op-Ed by a former independent record store owner, Sal Nunziato, who laments the lack of a filter for music that the old big label led industry used to provide.  As Mr. Nunziato states "I don’t want thousands of choices. Some choices would suffice, and the suits made that happen." Now we are flooded with choices because there are fewer hurdles to music being made available to consumers.  But the only way to tell if it is any good is to sort through it all and listen to it.  I am sympathetic to this.  I am a child of the vinyl album and this new era of Spotify (I subscribe) is difficult to deal with. I have limited time to search around for reviews and recommendations and have a hard time finding new music that I like - there is just so much to sort through.

I feel the same way about the decline of the mainstream media.  I talk a lot about the demise of real in-depth investigative reporting, but the biggest loss is of the editor whose job it was to make the decisions about what was most important for readers to know.  Now I have too much choice about information from all kinds of edited and un-edited sources.  Ironic that I say this in a blog, but I never intent to be a news source.  My only hope is that my training as an economist lends some value added to discussion of policy and economics news.

But I digress. The big point here is not particularly novel: in the era of information technology we are so flooded with news, entertainment, sports, etc., it can actually make us worse off than we were when there were a few big music labels, a flagship daily newspaper in every city, and a few television networks.  I don't actually believe that on the whole we are worse off.  Far from it, I think we are tremendously better off (as a lover of european soccer I am massively better off now than I was a few years ago), but I do think a good business to be in in the near future is the 'filtering business' - helping consumers weed through the morass of information, entertainment and so on.    

Friday, December 5, 2014

A Quick Note on the November Jobs Report

First off, the news is very good.  This is but one month, yes, but the trends are all good and we have been experiencing relatively robust growth for quite a while.  I say relatively because in past recessions recoveries have been quicker and more robust.  But this recession was different and it has taken a lot of time to unravel all of the damage done to the financial system. So relative to other crises of a similar nature (see: Japan) we are now in pretty robust recovery territory.

Second, the wage growth story that seems to be a popular narrative today is important.  Why?  Because when economists worry about inflation (economists like those in the Fed) what they really look out for is not the CPI or PPI but how price increases are showing up in wages.  The real inflation worry is exactly this feedback loop: higher anticipated prices lead to higher wages which lead to higher prices.  If the Fed starts to worry about this a lot, it is bye bye cheap credit.  So get that mortgage soon.

Third, the unemployment rate is sticky in recoveries and for a good reason.  More folks back looking for jobs is a good thing.

Thursday, December 4, 2014

Fred Thompson: You Can Pay Now Or Later And Now Is (A Lot) Better

Note: Another dispatch from Fred Thompson:


Highway trust funds all over the country are running on empty. That is true at every level of government: federal, state, and local.

Highway maintenance really isn’t optional. Street and highway deterioration is inexorable: highway wear and tear is a simple function of the number, speed, and axle weights of the vehicles using the road and the passage of time, but damage accumulates at a compound rate. Statewide, given current discount rates, every dollar of highway-maintenance spending deferred has an average present value of nearly three dollars in future outlays, ranging from about $1.50 at the margin in Multnomah County to $11 in Clackamas County next door.

Recognition of this fact is one of the reasons that transport funding was placed in trust funds. Earlier generations feared that, if gas-tax dollars were not carefully walled off, myopic officials would raid highway maintenance funds to sustain other, trendier endeavors. They were right, of course. What they failed to take into consideration was the failure of elected officials to keep gas-tax rates abreast of inflation, let alone the dramatic improvements in vehicle miles per gallon of gas that have occurred of late. State per-gallon tax rates have been static for 20 years and mileage per gallon is up nearly 30 percent.


Tim Nisbett, in a guest column in the November 21, 2014, Oregonian, opined that “our transportation funding system is ready for a tax fairness overhaul.” Nisbett cited with approval a recent editorial from the Grants Pass Daily Courier calling for a “shift to income taxes to augment or replace the state's existing gas tax system.”

Nisbett’s argument rests on a series of premises. The first is that the ‘user pays’ mechanism, which matches tax burdens to the benefits citizens get from public services, cannot keep up with our transportation needs. Second, transportation taxes comprise a sizable portion of the average working family's contribution to state and local services. Third, these taxes are inherently regressive and that “the roadways of the future will require greater support from those best able to pay for them.” Finally, user fees exact an especially unfair toll on rural Oregonians, who tend to use the roads much more than the rest of us.

I think I am on Tim Nisbett’s side on this issue, but I don’t buy his argument, at least not entirely. Only one of Nisbett’s claims is unambiguously correct: that gas taxes are regressive. While it is true that gas tax revenues haven’t kept up with transportation needs, doubling state gas tax rates would largely fix that problem. The reason gas-tax revenues are inadequate is that they have fallen way behind the nominal growth in the state’s economy, which is entirely due to the legislature’s unwillingness to increase tax rates, along with DMV fees, over the past fifteen years. Doubling the per gallon tax rate would merely return the transportation tax burden on ordinary Oregonians to the level of 2000.

Nor are gas taxes a particularly heavy burden for most of us. The average driver pays significantly less than $100 in gas taxes and DMV fees per vehicle per year. Of course, the burden is higher on folks who drive more than average, especially rural drivers, but those who drive more than average also cause more road wear and tear than the rest of us. Moreover, urban drivers already provide big subsidies to country-road users. It is estimated that gas and weight-use-per-mile taxes resulting from operations on rural highways cover less than a third of their construction cost and upkeep.



I am a fan of user fees. As an economist, I like their incentives and I like the information that they can generate. Consequently, I would argue that increasing per-gallon gas tax rates (and indexing them to inflation) is the first thing that needs doing. We ought to do the same thing with DMV fees, so that they are no longer a burden on the highway trust fund, but instead contribute to it, as they were meant to. There is a simple way to offset the regressivity of gas-tax increases: drop the marginal tax rate for the 5 percent bracket of Oregon’s personal income tax (the first $3,500 of adjusted gross income) to zero. That would meet our transportation needs and, at the same time, increase the overall progressivity of Oregon’s state and local tax system. Nisbett called for a Red/Blue coalition for meeting the state’s transportation needs; this seems to be a better candidate for such a coalition than boosting our highest marginal personal tax rate, which is already the highest in the U.S.

I would also note that it is now possible to design and implement cost-effective mechanisms that more precisely monitor road use than ever before. In the long run, that could be of immense value for transportation planning and influencing road use. Those devices should probably be tried out on commercial vehicles, which are already subject to a weight-use-per-mile tax (in part because the highway damage caused by multi-axle freight vehicles is not directly covariant with fuel consumption). If the system works, it could be adapted to personal vehicles as well. Indeed, the Oregon Department of Transportation is now testing alternatives to the gas tax that would similarly track participating personal vehicles.

However, treating ODOT’s experiments as a solution to the transportation-funding problem seems very much like putting the cart before the horse. Increasing taxes is politically difficult, changing tax mechanisms is nearly as hard; doing both at the same time is practically impossible. Our roads need more money now.





Tuesday, November 25, 2014

Big in Manaus

Here is a picture my colleague, Vladimir Ponczek, sent me and our co-author, AndrĂ© Portela Souza, of a publicity banner for his talk on our research, "Child Labor and Learning," that he is giving today in Manaus, Amazonas.  He says the banner is in the main square and that the Mayor of Manaus is going to attend.


Today Manaus, tomorrow the world!

Wednesday, November 5, 2014

Football-nomics

A column that appeared in The New York Times' Upshot section caught my attention.  It being election season, David Leonhardt wrote about football being a new partisan divide:


To the list of issues that divide the country along partisan lines, you can add an unusual item: football. 
Yes, virtually every slice of America still watches football in enormous numbers. But blue America — particularly the highly educated Democratic-leaning areas of major metropolitan areas — is increasingly deciding that it doesn’t want its sons playing football. 
The number of boys playing high school football has fallen 15 percent over the last six years in both Minnesota and Wisconsin, according to the National Federation of State High School Associations. The decline in Colorado has been 14 percent. It has been 8 percent in Massachusetts and Maryland, 7 percent in New York and 4 percent in California
The problem is, of course, the increasing evidence that football is bad for your brain.  This appears to be especially true if played as an adult pro, but there are also worrying signs that it may be bad for high school aged kids as well.
 
This article, however, got me thinking more about class than political views.  I don't refute the premise above but I hypothesize that you could look at participation in football and socio-economic status (SES), you would find a high correlation between participation in the sport and lower SES.  In fact, if you go to the poll Leonhardt references you find this:

"Highly educated (college degree or higher) individuals were ... about half (46 percent) as likely to be comfortable with sons playing football, relative to adults with lower levels of educational attainment."

So I suspect my hypothesis is correct.  All of this leads to the conclusion that football payers will be increasingly drawn from poorer populations.

At the same time NFL ticket prices have increased:


Which raises the specter of poor folks causing themselves serious harm playing a sport in front of rich folks: gladiator indeed.  In the past 'gladiator' has been used to describe the NFL but it appears to be gaining new resonance.

As an academic economist, what interests me is why participation cuts along SES lines.  I think there is a simple model that describes the situation.  A potential participant in football thinks about the expected payoff of participating which could lead to college scholarship and eventual pro paycheck on top of the fun factor.  There is also a payoff to not participating - perhaps less fun but potentially better long term health.  This payoff to not participating depends on the outside option - what would the person do if not play football as a profession.  Those from wealthier, more educated families are likely to have better outside options - colleges and careers less available to poorer kids.

So my model looks like this.  You choose to pursue football seriously if:

Exp. Payoff = Exp. Benefit – Exp. Cost > Exp. Payoff of Outside Option

As we learn more about the dangers of football to long-term health the expected payoff from participating falls for everyone regardless of socio-economic status.  But the expected payoff from the outside option is unchanged as we learn more about the detrimental effects of football participation but increase with SES.  I have illustrated this below:


The blue lines are the expected payoff from football and the shift is downward as we learn more about head injuries and their long-term impacts.  Kids choose to participate in football if the blue line is above the black (the value of the outside option).  So high SES kids choose not to participate but as the blue line falls fewer higher SES kids participate leaving only the lowest SES kids playing football.

Now, of course, like any model this is a overly simplified (which is the point of models, after all) and there is tons of complexity in the real world not captured here.  But the point is, if this is one of the dynamics going on in football we could quickly come to the point where the gladiator analogy is quite apt.   And we could quite quickly get into some very uncomfortable territory about what is ethical in terms of allowing and sanctioning a sport that causes serious harm to its participants.

I am a HUGE football fan and so I hope there are reforms and ways to make the game safer because I would hate to lose it.

Monday, November 3, 2014

The Economics of Marijuana Legalization

So I am trying to claw my way back into more regular blog posts and what better occasion than the midterm elections coming up to do so...or so I thought.  My well-intentioned plan was to try and inject some economics into the ballot measures, but it has been hard to find time to stop and blog.

So in a last gasp effort on the eve of the election I just do a quick drive-by on what economists have learned about the effects of legalizing marijuana.

In a well-cited paper, my former Colleague Dan Rees and his co-authors, Ben Hansen of the U of O and Mark Anderson, find that: "The first full year after coming into effect, [medical marijuana] legalization is associated with an 8–11 percent decrease in traffic fatalities."  The implication is that marijuana is a substitute for alcohol and easing access to marijuana reduces alcohol consumption and related DUI traffic fatalities.

In a newer paper by Wen, Hockenberry and Cummings, released as an NBER working paper, it is found that the implementation of Medical Marijuana Laws (MML): "increases marijuana use mainly among those over 21, where there is also a spillover effect of increased binge drinking, but there is no evidence of spillovers to other substance use.

Finally, Anderson, Hansen and Rees are back at it with this paper that suggests that the: "results are not consistent with the hypothesis that legalization leads to increased use of marijuana by teenagers." Again, they are talking about medical marijuana.

Recreational legalization is still so new we don't have any good studies yet that I am aware of.  So the takeaway.  It appears that marijuana use by adults increases with medical marijuana legalization but it is not clear whether it it is a substitute or complement to alcohol.  It does not appear to increase teenage use nor lead to the abuse of other substances.

Do with this info what you will.

Monday, October 6, 2014

Steve Jobs and Pricing in the Nines



When the new iPhone 6 was announced, so too were prices that ended in 99.  This is almost ubiquitous in consumer pricing, but it catches my eye because it comes from the company of Steve Jobs.  From what I know if Steve Jobs I suspect that this pricing would not have pleased him, he seems like the kind of person for whom the price of $200 is much more elegant than $199.  And yet, even when he was in change, Apple product prices inevitably ended in 9.

So why is this?  It seems that the rational costumer of economic theory would not be moved by such tricks, instantly rounding up or understanding that $199 is simply a dollar less than $200.  But the widespread use of pricing in nines clearly suggests that the story is more complex.  Pricing in the nines remains, then, a bit of a puzzle in economics.

Most economic and psychological theories that I have encountered have to do with consumers not really spending cognitive energy to fully evaluate the price.  Psychological research has suggested that we tent to fixate on the most important number - the one the the far left.  Economists have suggested we truncate to use cognitive energy economically.   I wonder if we are happy to fool ourselves to convince ourselves to buy something we really want.  In other words, we feel better knowing we have spent "less than $200" on the new iPhone we really want.  Which is, I suppose, just another form of the same explanations above.

Whatever the reason, I bet Steve Jobs didn't like it.

Thursday, September 18, 2014

Pleased



As a British subject and member of Clan Munro, I must say I am grateful the Union stands.

This whole thing has been interesting to me as it really signals a major generational shift.  As I wrote in an e-mail to a friend upon hearing the news:
As a Briton of Scots and English heritage, I approve.  As an economist, I am relieved as I was worried about the future of an independent Scottish economy tied to the Pound.
Most interestingly to me is the generational shift this whole thing signaled.   
My grandfather was born in England to a Scot and was fiercely proud of his Scottish heritage and clan, but he served in the RAF in WWII and fought under the Union flag.  I think his generation identified strongly with the United Kingdom as a result.  But that memory has faded as new generations without such a unifying experience identify less and less with the UK.  
I guess this is also a part of the imperial history of the UK.  The union flag used to fly over all of the colonies as well.  I do believe that Scotland and the rest of the UK are better off together economically.  Socially, I actually think it is often better to be forced to get along in the same family then to separate and be angry neighbors.  I am in favor of more national autonomy for Scotland but happy they remain in the UK. 

Friday, September 12, 2014

Should We Reset Property Tax Assessments at Sale?


Editor's Note: I really can't give any prognosis for how soon this moribund blog will recover.  It has been a pretty stressful time in the Emerson household and this blog has had to take a back seat. Fortunately, we have the sagacity of Fred Thompson to warm our hearts and stimulate our brains in my absence. 

Take it away Fred:

Property taxes are fair and efficient only where there is a reasonable relationship between tax payments and property wealth. Severing that link renders their incidence both arbitrary and capricious. Oregon has a one-off property tax system, which emphasizes stable growth in tax assessments and payments and inter-jurisdictional uniformity in tax rates. On balance this system has probably been good for Oregonians.

However, it has one feature that is not entirely likeable: assessments are not readjusted to realign tax payments with property values. Consequently, those that are out of step with their neighbors tend to drift ever farther apart over time. Figure 1 shows the assessment ratios (assessed value/market value) of 14 houses along one side of a block in Portland’s Alberta Development District last year. This is clearly an extreme example, but when the current system of property tax assessment went into effect, assessment ratios within neighborhoods tended to be closely bunched together. This is increasingly not the case.

Figure 1: An Extreme Example of Neighborhood Dispersion



How serious is this problem? How misaligned are tax payments and property values, is the misalignment getting worse, and, if so, how much? To answer these questions for one jurisdiction, my colleague, Robert Walker, and I, regressed tax bills on market values for every residence in Portland for each of the years 2003-2012. In this analysis the coefficient of correlation (R2) shows the strength of the relationship between property wealth and tax payments: the higher the R2 the stronger the relationship (according to professional assessment standards, an R2 less than .80 is unsatisfactory). The regression coefficient shows how tax bills change as a result of changes in property value. If greater than 1, a 1% change in in property value is associated with an increase in the tax bill of more than 1%; less than 1, an increase of less than 1%. As a general rule, the greater the misalignment between property wealth and tax bills over time, the greater the likelihood that low-valued properties will be hit with relatively higher tax bills than high-valued properties.

Figure 2 shows what happened in Portland. The results for 2003 and 2004 are for the whole city; for 2005 through 2012, the city is divided at the Willamette, owing to the adoption of a higher statutory tax rate on the Westside of the river.

Figure 2: How Tax Bills Vary with House Prices, Portland


What Figure 2 shows is that, on the Westside of Portland, the relationship between property values and tax bills remains reasonably strong, although the trend appears to be downward. On the Eastside, more homes started off out of step with their neighbors and, over time, have drifted ever farther apart.

We don’t want to overstate the dimensions of the problem: it is real, but even on the Eastside, the misalignment is not huge, on average, and, while it is growing worse, it is doing so at a fairly slow rate. Nevertheless, the direction of change is unmistakable and the longer we go without fixing this problem, the more costly and unpleasant the fix will be.

Cognizant of this problem, the League of Oregon Cities has proposed that property tax assessments be “reset” whenever a home is sold, which would instantly stop the growth in misalignment and, over time, reduce it to a stable and acceptable level (see below).

This fairly straightforward proposal has triggered a surprising amount of opposition. The Oregonian’s editors claim that it would supercharge tax collections and create new inequities: “People who’d just bought homes would resent, with good reason, neighbors who’d owned their homes for a long time.” Bill Sizemore agrees, adding that, compared with the current system in which assessed value does not change when a home is sold,adjusting assessed values to sales prices creates far worse inequities. This has been well documented. Our system may allow … inequities …, but adjusting values at the time of sale creates gross inequities between next door neighbors.” The Oregonian’s Erik Lukens concludes, “this is a classic ‘tax the other guy’ proposal that taxpayers likely will regret. There are problems with the property tax system … but this isn't a very good solution.”

Are the critics correct? As is usually the case, it helps to look at the numbers, not merely a few illustrative cases. Using our Portland data, we can estimate what would have happened to property taxes if assessments had been reset whenever a title transaction occurred and recalculate the R2s from the previous exercise. We have performed this analysis using two different reset standards: setting assessed value equal to real market value, as initially proposed by the League of Oregon Cities, and setting it equal to market value multiplied by the ‘changed property ratio’ (CPR), as proposed by several county assessors. (CPR is a county’s mean assessment ratio, i.e., the assessed value of all the properties in the county of a given property class divided by the real market value of those properties. This procedure is used throughout Oregon and is currently applied to all newly built properties and major improvements.)

What this analysis shows is that resetting assessed value to real market value each time a sale occurred would increase 2012 R2s on the Westside from .89 to .93, on the Eastside from .71 to .84, and total annual property tax collections 11.4%. In other words, contrary to Sizemore’s claims, the inequities would be substantially less on average, on both sides of town and overall, than under the current system. However, this proposal would also, as the Oregonian alleges, significantly boost property tax payments. In contrast, reassessment using the CPR increases the Westside R2 to .95, the Eastside to .89, and total property tax revenues by less than 2%. This appears to be an altogether fairer, less objectionable way to go.



Thursday, August 14, 2014

Oregon Origins


I pop my head up above the earth to post this little gem from the wonderful New York TimesUpshot blog.  They have one for each state and it is some fun clicking.  The graphic here does not label the vertical lines but they are, moving from right to left: 2012, 2000, 1990, 1980, 1970 and so on. It was in the late sixties that the mass influx of Californians started.  My dad followed in the early 1980s.  My sons were born in Colorado and I moved them back in 2006 so they are under western states, though sometimes Colorado is considered midwestern (a jarring description for a kid who grew up partly in Wisconsin).   What is fascinating is the general theme of the West still being a land of immigrants, while in the Northeast the same-state born folks are generally in the in the high 60% range.  Same with the Midwest and even more in the South.  The story is, in those places you are either bon and stay or you leave.  But in the West, we are still welcoming immigrants and moving about amongst ourselves.

[P.S. A note of thanks to the well-wishers who have reached out to me.  All is well in the Emerson household, but we are still adjusting to some new life realities.]

Wednesday, July 9, 2014

Dear Readers

Dear readers:

Recently a family health crisis has caused a severe disruption in my life and made it impossible to continue to blog for the time being.  I do hope to return to blogging at some point but right now I need to focus my attention and energy elsewhere.  Please accept my apologies and understand that blogging will be light to non-existant for another month or two.  If you follow me on Twitter you'll know when a new post is up. 

Fred Thompson: Do You Really Think the DOD Spent $140 Billion to Protect the Lowland Gorilla?

Note: Here is another dispatch from Fred Thompson.  

We were talking about the Ebola Virus outbreak in West Africa, which has been boiling for several months now, when a colleague asked: “There are Ebola vaccines for primates and mice, but not for humans.  Why?” And, answered: “for the same reasons that there has been a West Nile vaccine for horses for a decade, but none for humans— partly regulatory hurdles, but more decisively the actions of that ‘free marketplace’ that our governmental and corporate elites are so fond of.”

I replied, colleague, the Center for Disease Control has a limited budget. It is obligated to allocate its resources in the most cost effective manner possible – which means doing as much good as it can with the funds at its disposal – if other initiatives generate more quality-adjusted life years (QUALYs) per dollar, they have first call on the dollars. Normally, where health issues are concerned, Congress appropriates funds whenever an agency can show that a program will generate net benefits (expected additional QUALYs @ $400K each less program cost – in this case the cost of developing and distributing a vaccine – is greater than 0). Presumably, the CDC has not made such a representation with respect to Ebola. As for West Nile Fever, the finding was negative (taking account only of threats to Americans).

Decision tree for vaccination program analysis



My colleague replied: “The CDC’s evaluation concerns only the desirability of widespread vaccination, and they’re probably right on that point. But this doesn’t address the prior question of the non-existence of the human vaccine. I continue to feel that the government should be in the business of developing and manufacturing vaccines, and perhaps all pharmaceuticals.”  

So far as vaccines are concerned, I agree. But vaccines are a special category of pharmaceuticals. Pharmaceuticals generally look like toll goods (non-exhaustible but excludable). Vaccines look more like pure public goods. Left to the private sector, they would almost certainly be undersupplied. For that reason, most vaccine development is underwritten by public agencies. In some instances, those agencies will not stop with research and development, but will also guarantee sufficient purchases to pay for the testing needed to prove the safety (to humans) and efficacy of new formulations, which the FDA requires before it will grant regulatory approval for a prescribed use. In most cases, however, the US government will underwrite these activities only where it is deemed cost effective to do so. Consequently, your horse can get a jab for West Nile virus, but you cannot. Moreover, you won’t be able to get one legally in the US until the FDA is satisfied through clinical tests that the vaccine is both safe and effective (unless, of course, you are a uniformed member of the US military deploying abroad).




Note that the legal requirements for the approval of new formulations (or the application of existing formulations for new purposes) are not subject to any kind of benefit cost test, but are very close to absolute fiat (although, under special circumstances, the FDA can put a new formulation on a fast track aimed at reducing testing costs; it can also weigh relative health risks, although it does so very cautiously). Moreover, proving the efficacy and safety of a vaccine is fraught with difficulties not encountered by other drugs. First, they are supposed to be prophylactic. One doesn’t have a population of the afflicted to test the formulation upon (using a nice neat double-blind experimental design, with the test population randomly assigned to treatment and control groups). Consequently, testing for efficacy under normal circumstances requires large sample sizes and monitoring over a wide area for a long period, which greatly increases the cost of approval and the return on investment (no matter who makes the investment). Second, with respect to safety, vaccines are inherently hazardous. This http://www.naturalnews.com/vaccines.html is way over the top but it gives a feel for the potential for litigation that vaccines entail; yet another reason business enterprises usually avoid vaccine development.

What’s up for grabs?



Novartis’ and Pfizer’s applications to the FDA for fast-tracking vaccines aimed at preventing meningitis B infections is the kind of exception that proves the rule. Current vaccines approved in the US cover four strains of bacterial meningitis, but not strain B. In this case, the vaccine is already available in Canada and Europe and there is solid evidence that it is safe and good reason to believe that it is also effective. So we have a situation in which there are no or minimal development costs, compelling evidence that the clinical trials will be successful, and even the expectation that FDA will fast track approval. That isn’t the case with respect to the Ebola or West Nile vaccines.

Why doesn’t the US government just pay for vaccine research for diseases prevalent in the 3rd world? It does, but its budget is limited. Moreover, in most instances vaccination programs aimed at diseases for which vaccines now exist are far more cost effective than the development of new vaccines. “A systematic review of the literature on the cost-effectiveness and economic benefits of vaccines in low- and middle-income countries conducted by IVAC was published in the December 17, 2012 issue of Vaccine. The review identified 108 relevant articles from 51 countries spanning 23 vaccines. Among the 44 articles that reported costs per QUALY saved, vaccines cost less than or equal to $100 per QUALY in 23 articles (52%) and less than $1,000 per QUALY in 38 articles (86%).” Ozawa et al. – http://www.ncbi.nlm.nih.gov/pubmed/23142307

Finally, even where it is not cost effective to do so, US government will pay for vaccine research against terror threats – and Ebola has been deemed a bioterror threat. But the government still won’t finance widespread clinical trials because of the enormous costs. Scientists from the Vaccine Research Center (VRC) at the National Institute of Allergy and Infectious Diseases (NIAID) have been conducting limited human trials on Ebola vaccines since 2003 and on fast acting vaccines since 2007. Both vaccines have been tested for safety on dozens of volunteers without significant adverse effects (not nearly enough for FDA approval but probably enough for military purposes) and both produce antibodies with the appropriate markers.



Also, March 5, a Canadian firm, Tekmira Pharmaceuticals, reported that the U.S. Food and Drug Administration had agreed to fast-track testing of TKM-Ebola, an anti-Ebola viral therapeutic, also developed under the sponsorship of the U.S. Department of Defense. 

Are these treatments effective in humans? (Actually, according to one report, in 2009, a researcher in Hamburg, Germany, accidentally pricked herself with an Ebola-infected syringe. She was treated with a vaccine brought in from Canada, which consisted of a weakened vesicular stomatitis virus genetically engineered to contain a portion of an Ebola virus protein that had been proven effective in monkeys. She was subsequently observed to be asymptomatic.) It’s hard to imagine financing the massive clinical trials that would be required to answer the effectiveness/safety questions under normal circumstances.

Epidemics can change this calculus. They raise the possibility of human trials in situations where volunteers, treatment and controls, are directly exposed to the disease, vastly reducing the needed sample size and trial time. Doctors without Borders, which had positive results from a quick and dirty vaccine in the Congo, has been pushing hard for permission to run clinical trials of these vaccines in West Africa, both from NIH and the local governments in question.

So, dear colleague, the US is already pretty much doing what you want, although maybe not exactly. Reasonable people can disagree about how many dollars to spend and for what. But it doesn’t look to me like slavish adherence to “the ‘free marketplace’ that our governmental and corporate elites are so fond of” is of more than tangential importance here. Rather, in the case of pharmaceuticals, our regulatory apparatus is simply much more sensitive to the threats from dangerous drugs than it is to the threats from dangerous diseases and, maybe, that’s not an entirely bad thing. With respect to Ebola and West Nile, we have vaccines. They will probably work on people. In a serious emergency they would almost certainly be used.



Wednesday, June 18, 2014

Attendance in Sports Leagues Around the World

Once again The Economist comes through with a fun chart:



Note the MLS is the sixth highest average attendance soccer league in the world.  I would, however, argue that this should be normalized by population to make a rank comparison. Oh wait, there it is in the last column - economists think alike!



Tuesday, June 17, 2014

Oregon Adds 4,200 Jobs in May


The unemployment rate remained essentially unchanged at 6.9%

Soccernomics: Exciting World Cups are a Rarity - Live This One Up!


To give the haters some ammunition: The dull nil-nil draw and draws in general are a World Cup tradition.  See above from The Economist.  This year, something is different.

Fred Thompson: Some Modest Suggestions For Fixing Oregon’s Property Tax System

Note: here is another dispatch from Fred Thompson.

Thanks to a series of initiatives and referenda during the decade of the 1990s, primarily Measure 5, enacted in 1990, and Measure 50, enacted in 1997, Oregon has acquired a one-off property-tax system, which emphasizes stable growth in tax payments and inter-jurisdictional uniformity in tax rates. The system seems to be somewhat popular. At least the property tax no longer consistently tops the worst-tax list in local polls. Nevertheless, the prestigious City Club of Portland, after a year spent studying property taxes, concluded that “the current Frankentax has got to go” and proposed to restore the property tax system that was in effect in 1990, with some major modifications.

My reading of the evidence tells me that they are wrong, in the sense that they want to take a sledgehammer to things where a tack hammer would suffice. The current system gives Oregon a lot more funding predictability and stability than the old one, it places different jurisdictions on a more equal footing with respect to the provision of public services, it has reduced the burden of property taxes across the board, and has led to increased understanding on the part of voters about how much they will pay and why; it has, as the City Club stresses, also greatly reduced local autonomy, made public schools creatures of the state, reduced government services, and reduced reliance on one of the most progressive tax sources available (given that both wealth and income are measures of ability to pay).

Like the City Club, I too am troubled by the transfer of fiscal autonomy from local school districts to the state. But, evidently, that is precisely what the state’s taxpayers wanted. Insuring equal student funding, while preserving local autonomy, is about as practicable as building a perpetual motion machine. Much the same thing can be said about the regime’s effects on the provision of general-government services. Here too, I share the City Club’s concerns.
However, I would point out that the most severe local service shortfalls, as in Curry and Josephine Counties, have occurred in jurisdictions with statutory tax rates below one percent. State mandated lock-in of general-government o tax rates was justified by compression-driven cannibalization of inter-jurisdictional tax bases, but it applies equally to all jurisdictions, whether they are in compression or not. That hardly makes sense. Indeed, rather than freezing them, requiring the approval of any affected jurisdiction to increase local rates would on the face of it constitute a more reasonable fail-safe mechanism. If none of a jurisdiction’s neighbors are affected by a tax increase or if arrangements satisfactory to all the parties concerned can be worked out, the jurisdiction ought to be free to raise rates consistent with the levies its citizens have authorized.
Moreover, we now have conclusive proof assessment quality is slowly but inexorably deteriorating. That means that the burden of the property tax is increasingly not borne in proportion to the value of property owned, but is in fact arbitrarily and capriciously allocated. That is unfair. It is also something that can and should be fixed.
With respect to this issue, the League of Oregon Cities recently proposed a constitutional amendment that would “reset” a property’s assessment for tax purposes to real market value when it is sold. This looks like a reasonable solution to the problem of deteriorating assessment quality. Reassessment to market tends to improve tax uniformity. Moreover, from what we know about residential mobility, the folks who are most likely to stay put are the ones we want most to protect against rapid, unanticipated increases in their tax bills: senior citizens without mortgages, perhaps the most important beneficiaries of Measure 50. Shifting to a system of reassessment to market at title transfer would preserve that protection. In any case, given the high proportion of properties now at the Measure 5 limit and the general increase in the assessment ratios that has taken place over the past five years, this seems like a politically opportune time for political action. Right now reassessment on title transfer would harm relatively few homeowners, primarily the ones who have already received disproportionate gains under Measure 50.

How well would this work? Probably reasonably well. Assessment quality is deteriorating at the rate of about one percent each year; real estate turnover is about eight percent. Consequently my guess is that reset at transfer would take us to a stable coefficient of dispersion of less than 10 percent and covariance levels between market value and tax payments of 90 percent or better.