IT

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ITS BETTER TO BE THE FIRST OR ONE OF THE FIRST
EVEN IF YOURE WRONG(Especially If You Pick
Interesting Problems To Work On)

• Michael Grossman
• City University of New York Graduate Center and
  National Bureau of Economic Research

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Why?

• Selections in Whos Who in Economics based on
  citations
• So accumulate a lot of citations beginning with,
  for example, Grossman (1972) was wrong
• Stimulate new research
• Illustrate with research done by old, discredited
  economist

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Economic Models of Determinants of Health

• Why do people demand medical care?
• Input into the production of health that is what
  is demanded
• Health is a source of utility
• Health as a component of stock of human capital
  is a determinant of earnings
• Result The Demand for Health A Theoretical and
  Empirical Investigation (1972)

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The Flack

• Editorial in Financial World Americas
  Investment and Business Weekly, December 13,
  1972 Trifle obscure to talk about people
  choosing their level of health.

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Flack Continued

• Isaac Ehrlich and Hiroyuki Chuma (1990) my
  key assumption that health investment is produced
  through a constant-returns-to-scaletechnology
  introduces a type of indeterminacy (bang-bang)
  problem with respect to optimal investment and
  health maintenance choices.
• Peter Zweifel and Friedrich Breyer (1997)
  Unfortunately, empirical evidence consistently
  fails to confirm this crucial prediction that
  the partial correlation between good health and
  medical care should be positive.The notion that
  expenditure on medical care constitutes a demand
  derived from the underlying demand for health
  cannot be upheld because health status and demand
  for medical care are negatively rather than
  positively correlated.

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Flack Concluded

• Rebuttals Walter Ried (1998), Grossman (2000),
  Christoph Eisenring (2000)
• Extensions Titus Galama and Hans van Kippersluis
  (2010) Bob Kaestner (in progress)endogenous
  rate of depreciation healthy and unhealthy
  consumption trade-off between health-related job
  stress and wage

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Public Policy and Infant Health Outcomes

• Extend analysis to production of and demand for
  infant health outcomes
• Not long after a number of new policy initiatives
  were introduced
• - Abortion reform
• - Maternal and infant care projects
• - Community health centers
• - Medicaid
• - Federally subsidized family planning clinics
• - WIC program
• Grossman and Steven Jacobowitz (1981) Hope
  Corman and Grossman (1985) Corman, Grossman, and
  Ted Joyce (1987) effects on neonatal mortality

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What Followed

• Cottage industry on effects of abortion reform
  made Steve Levitt rich
• WIC Marianne Bitler and Janet Currie (2004)
  Joyce, Andy Racine, and Cristina Yunzal-Butler
  (2008) David Figlio, Sarah Hamersma, Jeffrey
  Roth (2009) Hilary Hoynes, Marianne Page, Ann
  Huff Stevens (2009)
• Medicaid Currie and Jonathan Gruber (1996) Lisa
  Dubay, Joyce, Kaestner, and Geraldine Kenny
  (2001)
• Family planning clinics Martha Bailey (2010)
• CHCs Martha Bailey and Andrew Goodman-Bacon, Do
  Community Health Centers Improve Health? Evidence
  from the War on Poverty (ASHEcon Cornell
  Conference)

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Schooling-Health Causality Controversy

• Grossman (1972) productive efficiency leads to
  causal effect of more schooling on better health
• Other causal mechanisms possible
• A lot of empirical evidence suggesting that
  schooling the most important correlate of many
  health outcomesGrossman (1975)
• But relationship may reflect reverse causality or
  omitted third variables
• Victor Fuchs (1982) time preference the most
  notable third variable

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Instrumental Variables Studies

• At least 20 IV studies since 2002 see Shin-Yi
  Chou, Jin-Tan Liu, Grossman, and Joyce (2010)
• Most but not all find that schooling does cause
  favorable health outcomes
• Chou et al. Increase in mothers schooling
  caused by compulsory school reform in Taiwan
  saved almost 1 infant life in 1,000 live births
• Dean Lillard and Eamon Molloy (ASHEcon Cornell
  Conference) Live and Learn or Learn and Live
  Does Education Lead to Longer Lives? Additional
  year of compulsory schooling reduces probability
  of death in the next five years by 2-3 percent.

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Economics of Substance Use and Abuse

• Grant Outcome

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Economics of Substance Use and Abuse

• Field Work

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Economics of Substance Use and Abuse

• Price Elasticities Grossman and Colleagues
• Cigarettes-teenagers participation -1.25,
  consumption -1.45, Eugene Lewit, Douglas Coate,
  and Grossman (1981)
• Cigarettes-all ages -0.75, Gary Becker,
  Grossman, and Kevin Murphy (1994)
• Cigarettes-pregnant women quit elasticity
  between 0.84 and 1.04, Joyce, Greg Colman,
  Grossman
• Alcohol-young adults, number of drinks in past
  year -0.65, Grossman, Frank Chaloupka, and
  Ismail Sirtalan (1998)
• Cocaine-young adults between -0.67 and -1.35,
  Grossman and Chaloupka (1998)

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Results Continued

• Price Sensitivity of Alcohol Overuse and Misuse
• Motor vehicle accident mortality, Henry Saffer
  and Grossman (1987)
• Child abuse, Sara Markowitz and Grossman (2000)
• Risky sexual behavior and sexually transmitted
  diseases, Markowitz and Grossman (2005)
  Grossman, Kaestner, and Markowitz (2004)

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Again the Flack

• What, you did not include fixed effects and
  obtain clustered (Huber) standard errors!
• True of some of these studies, especially Lewit,
  Coate, and Grossman (1981)
• Cigarettes
• Jonathan Gruber and Jonathan Zinman (2001)
  teenage smoking participation elasticity of -0.67
• Philip DeCicca, Don Kenkel, and Alan Mathios
  (2008) Insignificant participation elasticity,
  with a measure of anti-smoking sentiment held
  constant in a panel with observations at ages 18
  and 26
• Christopher Carpenter and Philip Cook (2008)
  Youth participation price elasticity of -0.56 in
  a long repeat cross section for 1991-2005
• Andrew Sfekas, Dean Lillard, and Eamon Molly,
  Smoking and Public Policy (ASHEcon Cornell
  Conference) Prices and taxes matter

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More Flack

• Alcohol and Related Outcomes
• Thomas Dee (1999) negative effect of beer tax on
  teen drinking disappears once state fixed effects
  are included
• Grossman (2005) Price elasticity of teen binge
  drinking of
• -1.5 in pure time series with 29 observations
• - Real price of beer rose by 7 percent between
  1990 and 1992 due to Federal tax hike
• - Binge drinking fell by 4.3 percentage points
• - Predicted decline from regression is 3.7
  percentage points
• Little within-state variation in beer taxes over
  long periods of time, but a number of large
  recent increases basis of current research by
  Kitt Carpenter

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Flack Concluded

• Some of Grossman et al. estimates are in context
  of Becker-Murphy rational addiction model, which
  has been criticized especially by behavioral
  economists
• Benjamin Cowan, Forward-Thinking Teens The
  Effects of College Costs on Adolescent Risky
  Behavior (ASHEcon Cornell Conference) Lower
  two-year college tuition costs in teenagers
  state of residence deter substance use and sexual
  partnership while in high school. Youths with
  more favorable prospects for future schooling
  have more to lose from engaging in these behaviors

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Economic Aspects of Obesity

• Rapid increase in obesity since 1980 encouraged
  Henry Saffer and me to start to work in this area
  in 2000
• Chou, Grossman, and Saffer (2004) Chou, Inas
  Rashad Kelly, and Grossman (2008) effects of
  food prices, fast-food restaurants and
  advertising by these restaurants on TV, and
  cigarette prices
• Eleven sessions on obesity at ASHEcon Cornell
  Conference

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Rules of Research

1. Think once, compute three times.
2. If you have bad results and you do more work, the
   results will get better.
3. The converse of rule 2 If you have good results
   and you do more work, the results will get worse.
4. It is more important to obtain biased estimates
   of interesting effects than to obtain unbiased
   estimates of uninteresting effects.
5. Develop an overall research philosophy. Mine was
   summed up by the late Carl Furillo, who played
   right field for the Brooklyn Dodgers. In 1957,
   when the Dodgers moved to Los Angeles and broke
   my heart, he said As long as they pay me, I'll
   play anywhere.