Archive for March, 2010

healthcare reform victory

Monday, March 22nd, 2010

President Obama’s healthcare reform bill yesterday passed the House of Representatives. The legislation offers free or subsidised healthcare insurance for 32 million people – about a tenth of the population – who are currently  uninsured. Those ineligible for free insurance who refuse to purchase insurance will be subject to tax penalties. This is not an extension of Medicare, the public insurance scheme for the elderly. Everyone under the age of 65 who is not living in poverty must purchase insurance from an approved private company. There is no public option.

I always thought that extension of Medicare to the entire population would be a natural, cost-effective way to provide US residents with universal coverage. Medicare is very popular, but its extension to younger ages – originally preferred by Obama – was even less popular than a private insurance mandate.

Clive Crook, a British journalist based in Washington, DC, has been following the healthcare reform debate closely. Here is his assessment of passage of the reform bill:

The superlatives are justified. The passage of comprehensive healthcare reform is this country’s most momentous social reform since the creation of Medicare more than 40 years ago. And in my view the new law is at least that long overdue. It beggars belief that a nation as rich as the United States could have tolerated for years a healthcare system which every other advanced economy would reject out of hand, one which left tens of millions without health insurance, and under which serious illness could very well mean financial ruin. The new law finally confronts the problem, and takes bold steps towards fixing it.

Clive Crook, “A tainted victory”, Crook Blog, 22 March 2010.

Clive Crook adds that this marks the beginning of a reform process that will be difficult because the legislation just passed is very unpopular with voters. “It is a far-reaching, transformative measure that in the end will affect almost everyone; it is opposed by most of the country; and it is now law.”

Google Translate

Sunday, March 21st, 2010

Ever wonder how Google Translate works? David Bellos explains.

Google Translate is a statistical machine translation system, which means that it doesn’t try to unpick or understand anything. Instead of taking a sentence to pieces and then rebuilding it in the “target” tongue as the older machine translators do, Google Translate looks for similar sentences in already translated texts somewhere out there on the Web. ….

The data comes in large part from the documentation of international organizations. Thousands of human translators working for the United Nations and the European Union and so forth have spent millions of hours producing precisely those pairings that Google Translate is now able to cherry-pick. The human translations have to come first for Google Translate to have anything to work with.

The variable quality of Google Translate in the different language pairings available is due in large part to the disparity in the quantities of human-engineered translations between those languages on the Web.

David Bellos, “I, Translator”, New York Times, 21 March 2010.

David Bellos is professor of French and Italian and director of the Program in Translation and Intercultural Communication at Princeton University.

Google Translate can handle 52 languages. It does a superb job with works for which human translations exist. But will it ever be useful for new translation of truly original works? Professor Bellos thinks not. “After all,” concludes Bellos, “when it comes to the real challenges of literary translation, human beings have a hard time of it, too”.

overcrowded prisons

Sunday, March 21st, 2010

The proportion of the population of the United States behind bars – by far the highest in the world – continues to rise. A columnist from The Economist reports that “budget horrors have forced some states, such as California, to release a few thousand non-violent offenders”, but federal courts insist on long jail sentences. The result is overcrowded federal prisons.

An ex-felon I interviewed yesterday described how the prison in Forth Worth where he served time was so crowded that even when he was in solitary confinement, he had two cell mates.

“The joys of overcrowding”, Lexington’s notebook, 20 March 2010.

Samuel Brittan on inflation targeting

Saturday, March 20th, 2010

[Inflation targeting] seemed to be working during the period known as the Great Moderation, when most industrial countries managed to combine low inflation with only moderate fluctuations in economic activity. But then, from the onset of the financial crisis in 2007 and the subsequent recession, these regimes broke down in a spectacular fashion. It is important to be clear about what went wrong. The inflation targets were more or less achieved; and they are still in place. What broke down was the doctrine, spelt out in dozens of central banker speeches, that their pursuit would also bring reasonably stable economic growth and at least moderate asset-price bubbles.

It is vital that any new regime incorporates the low inflation philosophy and does not throw out the baby with the bath water. The proposal of Olivier Blanchard, the International Monetary Fund’s chief economist, to raise inflation targets [from 2] to 4 per cent is the perfect example of how not to proceed. If we can go from 2 to 4 per cent, why not from 4 to 6 per cent or from 6 to 8 per cent and so on?

Samuel Brittan, “Headroom for economic recovery”, Financial Times, 19 March 2010.

This column will be posted eventually to www.samuelbrittan.co.uk -but the site is temporarily down.

neuroeconomics

Friday, March 19th, 2010

Neuroeconomic theory will soon play a crucial role in the building of new reliable theories capable of explaining and predicting individual behaviour and strategic choices. The main message is that the individual is not one coherent body. The brain is a multi-system entity (with conflicting objectives, restricted information, etc.) and therefore the decision-maker must be modelled as an organisation. We conclude with an analogy. Before the so-called modern theory of the firm, organisations were modelled as individual players characterised by an input-output production function. The systematic study of interactions between agents and decision processes within organisations (acknowledging informational asymmetries, incentive problems, restricted communications channels, hierarchical structures, etc.) led to novel economic insights. Applying a similar methodology to study individual decision-making is, in our view, the most fruitful way to understand the bounds of rationality.

Isabelle Brocas and Juan D. Carrillo, “Neuroeconomic theory: Using neuroscience to understand the bounds of rationality”, VoxEU, 18 March 2010.

Isabelle Brocas and Juan Carrillo teach economics at the University of Southern California, where they co-direct the Theoretical Research in Neuroeconomic Decision-making (TREND) Institute. They are advocates of neuroeconomics, but very much aware that the new field “is controversial. While some consider it to be an irrelevant body of research, there are those who claim it is essential.”

the US as imperial power

Thursday, March 18th, 2010

[After taking] the Philippines from Spain in 1898, occupation not liberation followed. The same techniques used against the American Indians —terror, atrocities, native reservations— were put to service crushing the squalid Filipinos. Nine-tenths of the generals fighting in the Philippines had fought Indians. The commanding general thought that it might be necessary “to kill half the Filipinos in order that the remaining half of the population may be advanced to a higher plane of life.” ….

Most Americans are clueless about the Philippines occupation, in which hundreds of thousands of civilians died. Even after recent wars they have little sense of the United States as an imperial power.

“American power: Empire state”, The Economist, 13 March 2010.

The anonymous author is reviewing Dominion from Sea to Sea: Pacific Ascendancy and American Power (Yale University Press, 2009), written by Chicago historian Bruce Cumings (1943-). Professor Cumings specializes in modern Korean history and contemporary international relations in East Asia.

Thanks to Christopher Maule for the pointer.

what do China and Germany want?

Wednesday, March 17th, 2010

Martin Wolf is concerned that China and Germany, with their huge trade surpluses, are endangering the entire global economy. The two countries are very different, but both “believe that their customers should keep buying, but stop irresponsible borrowing”. This is impossible, since countries with trade deficits must finance them by borrowing (or from income earned on capital account). German and Chinese policymakers seem not to understand this elementary truth.

Here is Martin Wolf on China:

Speaking at the end of the National People’s Congress, Mr Wen [Jiabao, China’s premier] declared: “What I don’t understand is depreciating one’s own currency, and attempting to pressure others to appreciate, for the purpose of increasing exports. In my view, that is protectionism.” He also insisted he was worried about the safety of China’s dollar investments.

What, I wonder, does Premier Wen mean by this, apart from telling the US to leave China’s exchange rate policies alone? If the US desire for a weaker dollar is “protectionist”, how much more so is China’s determination to keep its currency down, come what may? There is nothing evidently “protectionist” about asking a country with a huge current account surplus to reduce it, at a time of weak global demand. If I understand China’s declared position correctly, it wants the US to deflate itself into competitiveness, instead, via fiscal and monetary contraction and, presumably, falling domestic prices. That would be dreadful for the US. But it would be dreadful for China and the rest of the world, too. It is also not going to happen. China surely knows that.

Martin Wolf, “China and Germany unite to impose global deflation”, Financial Times, 17 March 2010.

The German position is much the same, except that Germany targets eurozone partners rather than the US.

Bayesian reasoning

Sunday, March 14th, 2010

Science journalist Tom Siegfried has written an excellent column on the use and abuse of statistics. The essay is somewhat wonkish – inevitable, given the topic – but very readable. It should be easy to understand for anyone who has had a basic course in statistics. Mr Siegfried complains that “statistical tests are widely misunderstood and frequently misinterpreted. As a result, countless conclusions in the scientific literature are erroneous, and tests of medical dangers or treatments are often contradictory and confusing.”

Siegfried covers a lot of ground, but what I enjoyed most was his discussion of Bayesian reasoning, a method of analysis devised by the English clergyman Thomas Bayes and published posthumously in 1763. Standard tests of statistical significance, reported as P=.05 (sometimes written P=0.95), are almost always misinterpreted – even by scientists in peer-reviewed papers – as a 5% probability of error (95% probability of a correct inference). Researchers rarely explain what the finding of a P value of 0.5 really means, possibly because they themselves do not know. The correct meaning is “there is only a 5 percent chance of obtaining the observed (or more extreme) result if no real effect exists (that is, if the no-difference hypothesis is correct)”.

For a simplified example, consider the use of drug tests to detect cheaters in sports. Suppose the test for steroid use among baseball players is 95 percent accurate — that is, it correctly identifies actual steroid users 95 percent of the time, and misidentifies non-users as users 5 percent of the time.

Suppose an anonymous player tests positive. What is the probability that he really is using steroids? Since the test really is accurate 95 percent of the time, the naïve answer would be that probability of guilt is 95 percent. But a Bayesian knows that such a conclusion cannot be drawn from the test alone. You would need to know some additional facts not included in this evidence. In this case, you need to know how many baseball players use steroids to begin with — that would be what a Bayesian would call the prior probability.

Now suppose, based on previous testing, that experts have established that about 5 percent of professional baseball players use steroids. Now suppose you test 400 players. How many would test positive?

• Out of the 400 players, 20 are users (5 percent) and 380 are not users.

• Of the 20 users, 19 (95 percent) would be identified correctly as users.

• Of the 380 nonusers, 19 (5 percent) would incorrectly be indicated as users.

So if you tested 400 players, 38 would test positive. Of those, 19 would be guilty users and 19 would be innocent nonusers. So if any single player’s test is positive, the chances that he really is a user are 50 percent, since an equal number of users and nonusers test positive.

Tom Siegfried, “Odds are, it’s wrong”, Science News, vol. 177 #7, 27 March 2010.

The naive answer (95 percent probability of guilt) is almost surely wrong. This is not due to Bayes. Rather, it is a misinterpretation of standard tests of significance that were developed by mathematician Ronald A. Fisher in the 1920s. What Bayesian reasoning adds – not without controversy – is a “prior probability”, an informed guess about the expected probability of something in advance of the study. In this example, the informed guess is that 5% of professional baseball players use steroids. Suppose, instead, that our informed guess is that 25% of players use steroids. Then, the chances that a player who tests positive really uses steroids is 86 percent. If the no-difference hypothesis applies (we ‘know’ that half the players use steroids and half do not) then the naive answer of 95 percent would be correct. But, if we ‘know’ that more than half the players are on steroids, then the chances that a player who tests positive is really a user exceeds 95 percent. Here are calculations for the case where 75% of players use steroids:

• Out of the 400 players tested, 300 are users and 100 are not users.

• Of the 300 users, 285 (95 percent) would be identified correctly as users.

• Of the 100 nonusers, 5 (5 percent) would incorrectly be indicated as users.

So the odds that the test is accurate for a player who tests positive is is (285/290)= 98 percent, which is greater than the naive answer. This is intuitively plausible, since the vast majority of players are known to be on steroids.

Tom Siegfried is editor of the bi-weekly magazine Science News. His home page, with links to past columns, is here and his recent columns are posted here.

tacos al pastor

Saturday, March 13th, 2010

I always wondered why Mexico City’s ubiquitous “tacos al pastor” resemble Turkish döner kebabs. Now I know.

[A] treat here is the tacos “al pastor”, a recipe developed in Mexico City by Lebanese immigrants. Thin slices of neck and shoulder of pork are marinated in achiote, guajillo chillies and Mexican oregano, among other … ingredients. After marinating, the meat is layered up on to large kebabs with a pineapple attached to the top. As the spit turns, the pineapple caramelises and drips its juice slowly over the meat. The result is mouthwatering and unforgettable, served shaved off into tacos with the simple garnish of white onion, lime and fresh coriander.

Thomasina Miers, “A taco-tasting tour of Mexico City”, Financial Times, 13 March 2010.

another Zombie idea

Friday, March 12th, 2010

Zombie ideas are ideas that refuse to die, no matter how often they are refuted. Paul Krugman in his column today attempts to slay one, “the claim that President Obama [with health reform] is proposing a government takeover of one-sixth of the economy, the share of G.D.P. currently spent on health”.

Well, if having the government regulate and subsidize health insurance is a “takeover,” that takeover happened long ago. Medicare, Medicaid, and other government programs already pay for almost half of American health care, while private insurance pays for barely more than a third (the rest is mostly out-of-pocket expenses). And the great bulk of that private insurance is provided via employee plans, which are both subsidized with tax exemptions and tightly regulated.

The only part of health care in which there isn’t already a lot of federal intervention is the market in which individuals who can’t get employment-based coverage buy their own insurance. And that market, in case you hadn’t noticed, is a disaster — no coverage for people with pre-existing medical conditions, coverage dropped when you get sick, and huge premium increases in the middle of an economic crisis.

Paul Krugman, “Health Reform Myths”, New York Times, 12 March 2010.

What I find truly amazing is that US public spending on health care, as a percentage of GDP, is identical to that of Canada; yet the US system is full of holes, while Canada, with this budget, provides everyone with coverage. If you count tax expenditure (tax breaks for private insurance), the US actually spends more public money on health care, as a percentage of GDP, than Canada does on universal health care.