Author: James Bailey

Best Books 2021

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I read 23 books in 2021, but none that were written in 2021. Tim Ferriss stopped reading new books deliberately but for me it just happened, something about this year made me want to hang out in the ancient world instead.

I read about how five thousand years ago the Indo-Europeans figured out how to ride horses and use wheels, and so ended up spreading their language to half the world. I read about the Bronze Age Collapse three thousand years ago. Also set three thousand years ago are the semi-mythical events of the Aeneid and the Odyssey; I particularly enjoyed Emily Wilson’s new translation of the latter. From two thousand years ago, Caesar’s Commentaries reads like an action-packed fantasy novel but gives real insight into history and strategy. It was also a good year to go back to the Biblical events of two to three thousand years ago, though I didn’t make it cover to cover.

The one book about the modern world I gave 5 stars in 2021 was The Dictator’s Handbook: Why Bad Behavior Is Almost Always Good Politics. The short version of my review is that it’s secretly a development economics book:

Bueno de Mesquita, author of The Dictator’s Handbook, is a political scientist but his analysis is very much economic, in both the methods (rational choice & methodological individualism) and in the focus on material incentives as the main driver of behavior. The book is good as a manual for aspiring tyrants, but suprisingly great as an explanation for why many poor countries stay poor.

So overall compared to 2020 I don’t have many good books to share, apart from things like The Odyssey that you presumably already know about. The best new writing in 2021 probably isn’t happening in books at all, but in Substacks. Many bloggers switched to the Substack blogging/newsletter platform last year because it makes it easy to monetize their writing, while many professional journalists switched over as a way to keep being paid to write while enjoying near-complete editorial freedom. I recommend Byrne Hobart on finance and business strategy, and Razib Khan on history and genomics. Probably my favorite writing of 2021 was the return of Scott Alexander to blogging, now at Substack as Astral Codex Ten. He is also a great demonstration of just how much the monetization game has changed, as less than a year into the new Substack he is making enough money to start giving large amounts of it away.

Is an Academic Career Still Worth It?

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Being a professor is still great, but the alternatives are getting better fast.

I’m glad I started a PhD in 2009; I wanted to learn more economics and the opportunity cost was low, with the worst job market in a generation. When I went on the job market in 2013, I still thought academia was such a clear favorite that I didn’t even apply to private-sector or government jobs. I wanted to teach, yes, but above all I wanted freedom- the freedom to choose my own research topics, to think deeply, to not have a boss, to not spend 40+ hours every week in an office.

It’s easy to find essays about how academic jobs are terrible, or at least much worse than they used to be. To me, being a tenure-track academic is still great work if you can get it, for all the reasons Bryan Caplan explains here. But I do think the quality of the job is standing still while the alternatives get better. The academic superiority that seemed obvious to me in 2009 and 2013 no longer seems obvious in 2021, due to three big changes:

Higher Demand: The demand for workers with quantitative and/or programming abilities has never been higher. My impression is that now anyone with the ability to do a PhD in a quantitative subject could be making six figures in tech, data science, or finance within a few years if they set their mind to it. Of course, this is simply a difference of degree; its always been the conventional wisdom that you could make more money outside of academia. The gap seems to be growing now, but to me the more important change is

Remote Work: Quality, high-paying remote jobs have gone from rare in 2019 to common today, which is a game-changer for many decisions, including academic vs non-academic. Perhaps the worst part of an academic career is that it forces everyone to move- getting a PhD usually requires moving, and getting your first academic job almost certainly does. This is a huge cost for those who value family and community, a cost many people are unwilling to pay. In 2014 my wife’s career had just brought us to New Orleans, but the closest tenure-track job offer I had was a thousand miles away at Creighton University in Omaha. I took the job and spent the next three years flying back and forth, partly because I wanted to be in academia, but partly because there were no good private sector or government options for an Econ PhD in New Orleans either at the time. Back then the private sector and government economist jobs were plentiful but generally meant moving to one of a few cities (DC, NYC, SF, Boston) and spending all day in an office, so I ignored them. Today I wouldn’t.

Campus vs The Internet: So the practical side of non-academic jobs is getting better, but what about the life of the mind? When I first went to college I loved taking classes in new subjects and going to the events and seminars that were always happening on campus, and part of the appeal of being a professor was to be able to keep doing that. In graduate school I liked attending the seminars where visiting speakers would present their latest research, and hoped to get a job at research-oriented university where I could keep doing that. But these benefits of being on campus don’t seem so important anymore. Partly its that I feel too busy to take advantage of them; most of the time there’s a speaker on campus talking about something cool like a new translation of the Odyssey, I’m either catching up on work or home with my kids. But mostly the internet means this sort of thing is available to everyone all the time. I may have missed Emily Wilson’s talk at my campus but I heard her on Conversations with Tyler. I’m not at an R1 school with scholars in my field presenting new research every month, but there are now more great research seminars online than I have time to watch. The Internet makes it increasingly easy for anyone with the motivation to participate in the life of the mind regardless of where they live or what their job is- certainly as consumers, and in a future post I’ll highlight the increasingly impressive scholarly production coming from non-academics.

Certificate of Need and Mental Health

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Most US states require hospitals and other healthcare providers to obtain a “Certificate of Need” (CON) from a state board before they are allowed to open or expand. These laws seem to be one reason why healthcare is often so expensive and hard to find. I’ve written a lot about them, partly because I think they are bad policies that could get repealed if more people knew about them, and partly because so many aspects of them are unstudied.

States vary widely in the specific services or equipment their CON laws target- nursing homes, dialysis clinics, MRIs, et c. One of the most important types of CON law that remained unstudied was CON for psychiatric services. I set out to change this and, with Eleanor Lewin, wrote an article on them just published in the Journal of Mental Health Policy and Economics.

We compare the state of psychiatric care in states with and without CON, and find that psychiatric CON is associated with fewer psychiatric hospitals and beds, and a lower likelihood of those hospitals accepting Medicare.

Together with the existing evidence on CON (which I tried to sum up recently here), this suggests that more states should consider repealing their CON laws and letting doctors and patients, rather than state boards, decide what facilities are “economically necessary”.

Hospital Merger Update

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The panel on the proposed merger of Rhode Islands two largest hospital systems I mentioned last week happened yesterday, I’ll post some reactions here, there was a lot I didn’t get to say since my section only had 45 minutes split across 4 panelists and Senator Whitehouse naturally got more of the time.

The Lifespan and Care New England CEOs trying to merge their systems opened with what to me seemed like their weakest argument, a general appeal to togetherness. They said that if the Patriots offense and defense had to be kept as separate teams, they wouldn’t be very good. To me the right metaphor is that if you merged all the NFL teams into one super team, they wouldn’t try very hard.

To their credit though, overall the hospital CEOs and President Paxson of Brown University were surprisingly honest about the risks, basically acknowledging that hospital mergers are often just a way to gain market power at everyone else’s expense, but arguing that for various reasons this one is different. They seem to realize that if you define the relevant market area as the state of Rhode Island (as e.g. the Dartmouth Atlas does in their “Hospital Referral Regions”) then the merged entity would have a nearly 80% market share and be challenged by the FTC as an obvious monopoly. So they argue that the relevant market should include Boston and much of Connecticut. They argue that it won’t just be an excuse to raise prices because they are non-profits and the state has rate regulations.

They identified two potential true efficiencies, integrating the electronic medical records of the two systems and being able to easily conduct research across both systems (both systems have many employees who are faculty at Brown Med School, including my wife). In a reasonable world these efficiencies could be gained without merging, though I suspect HIPAA prevents this, meaning one of its many perverse unintended consequences would be incentivizing mergers.

Their biggest admission against interest was that “the primary benefit [of the merger] comes from scale” and that “scale matters for purchasing supplies and staffing”. To me this implies “don’t worry, we won’t use our monopoly power against consumers, we’ll just use it against suppliers and staff”. But the FTC just repealed their consumer welfare standard, and so I think these statements could come back to haunt the merging parties.

Lifespan / CNE Merger Economics

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The largest hospital system in Rhode Island, Lifespan, is trying to merge with the second-largest hospital system in Rhode Island, Care New England. Next Wednesday I’ll be on a panel discussing the proposed merger, following a panel with the Presidents of the three institutions involved (Lifespan, CNE, and Brown University). I’ll summarize my thoughts here.

Basic economics tells us that if a company with 50% market share buys a company with 25% market share in the same industry, they have strong market power and are likely to use this monopoly position to raise prices.

The real world is often more complicated, especially when it comes to health care, but in this case I think basic economics holds up well. A wealth of empirical evidence, including studies of previous hospital mergers, suggest that reduced hospital competition leads to higher prices without bringing commensurate benefits in quality or efficiency.

I think the Federal Trade Commission will almost certainly challenge the merger, and that they will likely succeed in doing so. The FTC merger guidelines more or less demand it, and current FTC leadership if anything seems to want to be more aggressive than required on antitrust. To me the biggest question is whether they will try to stop the merger entirely, or whether they would allow it to proceed subject to conditions (e.g. spin off one or two hospitals to remain independent)- I’ll be watching with interest and letting you know how it goes.

New: Journal of Comments and Replications in Economics

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I was pleased to see yesterday the announcement of a new journal, the Journal of Comments and Replications in Economics. As the name implies, it will publish articles that comment on or attempt to replicate previously published economics papers.

While empirical economics papers have in some ways become more believable over time, it is still rare for anyone to verify whether the results can actually be replicated, and formal comments on potential problems in published papers have actually become less common over time (though Econ Journal Watch has been a good outlet for comments).

The ability to independently verify and replicate findings should be at the core of science. But economists, like most other disciplines, are generally too focused on publishing original work to test whether already-published papers hold up. When we do try to replicate existing work, the results aren’t very encouraging; at best 80% of economics papers replicate.

If we want people to trust and rely on our work, we need to do better than that. The US Department of Defense agrees, and funded a huge project to determine what types of social science research hold up to scrutiny. I’ve been a bit involved in this and hope to sum up some of the results once this semester is over. For now, I’ll just say I’m happy to see the new Journal of Comments and Replications in Economics (and that it is both free and open-access, a rare combo) and I hope this represents one more small step towards economics being a real science.

Happy 400th Thanksgiving from EWED

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In 1621 the pilgrims were starving after their communal farming system gave them little incentive to work hard, leading them to rely on the generosity of their native neighbors at the first Thanksgiving. But in the long run they were able to produce their own feasts after switching to a private property system. Economist Ben Powell tells the story briefly here, or you can read the primary source, William Bradford’s Diary here.

It is customary in many families to “give thanks to the hands that prepared this feast” during the Thanksgiving dinner blessing. Perhaps we should also be thankful for the millions of other hands that helped get the dinner to the table: the grocer who sold us the turkey, the truck driver who delivered it to the store, and the farmer who raised it all contributed to our Thanksgiving dinner because our economic system rewards them

Powell calls this “the real lesson of Thanksgiving”, and while I think there are other great angles to the story this is certainly a real lesson of Thanksgiving.

Inflation: Get Concrete, Get Specific

James Bailey4 Comments

The recent debate over US inflation seems to be full of mood affiliation on both sides, where people start with a mood (“panic” or “don’t worry”) and then look for facts to fit the mood.

My natural temperament is “don’t worry” and that is what I’ve generally thought about inflation, but the latest number of 6.2% inflation over the last year is a bit concerning, and makes me glad the the Fed has announced they plan to taper off of new asset purchases. But overall I think people are still talking past each other, and I wish more people would answer these questions:

What will CPI inflation be over the next 12 months?

What specifically should the Fed do differently, if anything? How quickly should they taper and raise rates?

If you are currently thinking “panic” or “don’t worry”, what data could come in that would change your mind?

I’ll start with my answers, informed more by my gut than by quantitative models: my guess for inflation over the next year is 4-5%, the Fed has things about right but I’d say “tighten faster” rather than “tighten slower” if I had to pick. I expect inflation to slow noticeably in the spring as the economy transitions from the unusual boom in demand for goods back to demand for services after Christmas and the Delta wave, as more people get back to work and supply bottlenecks have time to work themselves out. I would start to get more seriously concerned if we see no slowing by June, or if market-based measures of inflation or NGDP projections start to move substantially (2pp) higher.

To the extent that I’ve been on the wrong side of this, I blame the cognitive bias I seem to fall prey to most often- mistaking reversed stupidity for intelligence. Just because lots of people make obviously incorrect predictions of hyperinflation doesn’t mean that inflation will be low.

No, 6.2% inflation per year is not in the same universe as hyperinflation (50% inflation per month)

*The usual disclaimer applies- my affiliation with the Fed gives me zero insider information about or influence over monetary policy and I don’t speak for them.

Starship: Quantity has a Quality of its own

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If the SpaceX Starship ends up working as planned, it will do the same things our rockets do now, but at one one-hundredth the price. In an inspiring blog post, Casey Handmer argues that even people within the industry have yet to appreciate the qualitatively different opportunities that this price drop would enable:

By refilling in LEO, a fully loaded deep space Starship can transport >100 T of bulk cargo anywhere in the solar system, including the surface of the Moon or Mars, for <$100m per Starship. Starship is intended to be able to transport a million tonnes of cargo to the surface of Mars in just ten launch windows, in addition to serving other incidental destinations, such as maintaining the Starlink constellation or building a big base at the Lunar south pole.

Second, and more importantly, shoehorning Cassini 2.0 or Mars Direct into Starship fails to adequately exploit the capabilities of the launch system. Not to pick on Cassini or Mars Direct, but both of these missions were designed with inherent constraints that are not relevant to Starship. In fact, all space missions whether robotic or crewed, historical or planned, have been designed with constraints that are not relevant to Starship. 

What does this mean? Historically, mission/system design has been grievously afflicted by absurdly harsh mass constraints, since launch costs to LEO are as high as $10,000/kg and single launches cost hundreds of millions. This in turn affects schedule, cost structure, volume, material choices, labor, power, thermal, guidance/navigation/control, and every other aspect of the mission. Entire design languages and heuristics are reinforced, at the generational level, in service of avoiding negative consequences of excess mass. As a result, spacecraft built before Starship are a bit like steel weapons made before the industrial revolution. Enormously expensive as a result of embodying a lot of meticulous labor, but ultimately severely limited compared to post-industrial possibilities. 

Starship obliterates the mass constraint and every last vestige of cultural baggage that constraint has gouged into the minds of spacecraft designers. There are still constraints, as always, but their design consequences are, at present, completely unexplored. We need a team of economists to rederive the relative elasticities of various design choices and boil them down to a new set of design heuristics for space system production oriented towards maximizing volume of production.

As they say, read they whole thing, especially the part about space tractors. I leave you with one final quote:

It is time to raise the scope of our ambition and think much bigger

Give the Gift of Cooking and Murder-Bears

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What is the point of reading non-fiction?

Hopefully it is entertaining, and you feel like you are learning something, though usually it is hard to recall much of a book a year after you read it. The best you can usually hope for is that it makes you look at the world differently. But how often does a book actually clearly change what you do?

While there are dozens, perhaps hundreds of books that changed how I think, Tim Ferriss’ books stand out for actually changing how I act. It was after reading The 4 Hour Body that I finally starting going to the gym every week, and it was after reading The 4 Hour Chef that I started to really cook.

Giving anything fitness-related as a gift can be dicey, so of the two I’d recommend The 4 Hour Chef as a gift. Its huge, its pretty, and its not just a book of recipes (though it has lots of them)- it is what made me think I no longer need recipes.

If instead you’d rather forget about big self-improvement books and just go for fun/entertaining, my best recommendation you’ve probably never heard of is Murder-Bears, Moonshine, and Mayhem: Strange Stories from the Bible to Leave You Amused, Bemused, and (Hopefully) Informed.

As a said as part of a review of my favorite non-fiction last year, its funny but not just funny. Its not just trying to highlight the craziest stories, its also full of lessons about how to read potentially confusing passages. “Murder-Bears” is a reference to the end of 2 Kings ch 2:

From there Elisha went up to Bethel. As he was walking along the road, some boys came out of the town and jeered at him. “Get out of here, baldy!” they said. “Get out of here, baldy!” He turned around, looked at them and called down a curse on them in the name of the Lord. Then two bears came out of the woods and mauled forty-two of the boys