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Here's Paul Romer on the power of ideas, from his article the Fall 2012 Issues in Science and Technology:
"What makes ideas so remarkable is their capacity for shared use. A bottle of valuable medicine can heal one person, but the formula that is used to make the medicine is as valuable as the total number of people on Earth. Economists call this concept “non-rivalry.”... There is a saying that you all know that we use to capture this character of non-rivalry: If you give someone a fish, you feed them for a day, but if you teach someone to fish, you destroy another aquatic ecosystem."
For me, the classic statement about the economic power of ideas and their relation to the patent system comes from Thomas Jefferson, in a letter he wrote in 1813:
"If nature has made any one thing less susceptible than allothers of exclusive property, it is the action of the thinking power called anidea, which an individual may exclusively possess as long as he keeps it tohimself; but the moment it is divulged, it forces itself into the possession ofevery one, and the receiver cannot dispossess himself of it. Its peculiarcharacter, too, is that no one possesses the less, because every otherpossesses the whole of it. He who receives an idea from me, receives instructionhimself without lessening mine; as he who lights his taper at mine, receiveslight without darkening me. That ideas should freely spread from one to anotherover the globe, for the moral and mutual instruction of man, and improvement ofhis condition, seems to have been peculiarly and benevolently designed bynature, when she made them, like fire, expansible over all space, withoutlessening their density in any point, and like the air in which we breathe,move, and have our physical being, incapable of confinement or exclusiveappropriation.
"Inventions then cannot, in nature, be a subject of property.Society may give an exclusive right to the profits arising from them, as anencouragement to men to pursue ideas which may produce utility, but this may ormay not be done, according to the will and convenience of the society, withoutclaim or complaint from anybody. Accordingly, it is a fact, as far as I aminformed, that Englandwas, until we copied her, the only country on earth which ever, by a generallaw, gave a legal right to the exclusive use of an idea. In some othercountries it is sometimes done, in a great case, and by a special and personalact, but, generally speaking, other nations have thought that these monopoliesproduce more embarrassment than advantage to society; and it may be observedthat the nations which refuse monopolies of invention, are as fruitful asEngland in new and useful devices."
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An Agenda for Medicare Reforms
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What's to be done about Medicare? The Kaiser Family Foundation has usefully pulled together a list of possible "Policy Options to Sustain Medicare for the Future." I especially liked that the report is fairly exhaustive in listing about 130 options (depending on how one counts options, suboptions, and sub-suboptions), and fairly honest in admitting that no realistic cost estimates for many of those options. Here, I'll start with a quick reminder of where Medicare is currently headed, and then list just 12 of the choices--those that in the KFF tally would reduce Medicare costs or raise Medicare taxes by at least $4 billion per year over the next few years.
Medicare spending is taking off for two reasons: as the baby boomer retire, a rising proportion of Americans will become eligible, and continually rising health care costs will push up costs still further. The first figure shows projections for the rising number of Medicare enrollees and Medicare spending as a share of GDP. The second figure shows Medicare spending projected as a rising share of the overall federal budget.
Discussions of how to fix Medicare often head for happy talk about how, if we all just provide patients and doctors with the right information and incentives, and link them together with the right network of health information technology and thoughtful counselors, we can save billions while improving everyone's health. For a recent example, see this report from the United Health UnitedHealth Center for Health Reform & Modernization, which suggests that steps along these lines could save up to $542 billion in Medicare and Medicaid spending over the next decade. It's a cheerful story, and I'm certainly fine with pursuing these kinds of win-win possibilities. But the U.S. health care system has been facing ever-rising costs and talking about win-win solutions for several decades. While we're waiting for the cost savings from these kinds of more enlightened and efficient practices to arrive, we need to start thinking about some less pleasant options.
Here's the list of 12 possibilities from the KFF report that would involve Medicare cost savings or revenue increases of at least $4 billion per year. In that report, all the proposals for better information sharing and quality control and improved decision making by patients and providers have the effect on costs and revenues listed as "Not available," which seems fair to me, given historical experience with attempts along these lines as overall health care costs have continues to rise. What's left are choices that sting (with the effect on costs or revenues in parentheses). The KFF Report gives a couple of pages of more detailed explanation for each of these, along with the other 100+ choices.
1) Raise the age of Medicare eligibility from 65 to 67 ($113 billion over 10 years)
2) 10% coinsurance payment on all home health episodes ($40 billion over 10 years)
3) Restrict first-dollar Medigap coverage ($53 billion over 10 years)
4) Increasing premiums for Part B and Part D: for example, raise Part B premiums by 2% per year until they cover 35% of total Part B expenses ($231 billion over 10 years)
5) Increase Medicare payroll tax by 1 percentage point for all workers ($651 billion over 10 years)
6) Require manufacturers to pay a minimum rebate on drugs covered under Medicare Part D for
beneficiaries receiving low-income subsidies ($137 billion over 10 years).
7) Repeal provisions in the Affordable Care Act that would close the Part D coverage gap by
2020 ($51 billion over 10 years)
8) Reduce and restructure graduate medical education payments to hospitals ($69 billion over 10 years)
9) Rebase SNF and home health payment rates: for example, reducing payment updates for post-acute care by 1.1 percentage points ($45 billion over 10 years)
10) Adopt traditional tort reforms at the Federal level ($40 billion to $57 billion over 10 years)
11) Establish a combined deductible, uniform coinsurance rate, and a limit on out-of-pocket
spending, along with Medigap reforms ($93 billion over 10 years)
12) Set Federal contributions per beneficiary at the average plan bid in a given area, including
traditional Medicare as a plan, weighted by enrollment ($161 billion over 10 years)
A few thoughts:
1) One of the policy changes would dramatically increase costs. Congress has been playing a game for years now in which it lowballs the future costs of Medicare by proposing very large cuts in payments to health care providiers that will take place a few years in the future. Then Congress perpetually pushes back those cuts. To their credit, the official Medicare actuaries have been quite blunt in pointing out "Why Official Medicare Costs are Understated." But if, for example, the currently legislated future cuts in payments to health care providers were replaced with a 10-year freeze on fees and a "only" a 5.9% cut in fees for non-primary care services each year for the first three years, Medicare costs would be $200 billion higher over 10 years than the current legislative estimates. If fees for health care providers rise at the rate of GDP growth, or a percentage point or two faster, then Medicare costs will be $300 billion or more higher over the next 10 years. Thus, take your first few hundred billion in cost savings or revenue increases above, and assume that it's going to go to sidestepping the huge future cuts to health care providers in current legislation.
2) I did leave out a few proposals on the KFF list for increasing taxes on other items and earmarking the funds for Medicare. For example, one could raise taxes on alcohol, tobacco, soft drinks, or employer-provided health insurance and earmark the funds for Medicare. But one could also raise those taxes and spend the money on deficit reduction or some other program, so at least to me, these are not specifically "Medicare" reforms.
3) Just for the record, you can't just add up the cost estimates several of these proposals with, because they interact in various ways. For example, option #3 on restricting first-dollar Medigap coverage overlaps heavily with option #11 on Medigap reforms. If the Medicare age was raised to 67, it would alter the cost changes from all of the other proposals.
My bottom line is that too many of the arguments over Medicare spending are magically nonspecific. Sometimes they describe innovations in health care delivery that would improve health and save money and leave everyone with a big rosy smile. I'm all for such changes, and I'll believe in their effectiveness as soon as they are actually effective in reducing costs--but not before. Other time, politicians talk tough about how they will just put a cap on Medicare spending, or just not let it rise at faster than some certain rate. Again, I'll believe in the workability of such caps when I've seen them operate for a few years.
In contrast, the list above is not a pleasant one. Some of these proposals reduce coverage for the elderly or require them to pay more. Some reduce payments to health care providers. One raises taxes on current workers. I am fully aware that none of these are popular options! Which options are more palatable is an argument for another day. But these are real choices, and the inexorable arithmetic of Medicare's rising costs is likely to force choices among these sorts of options.
Medicare spending is taking off for two reasons: as the baby boomer retire, a rising proportion of Americans will become eligible, and continually rising health care costs will push up costs still further. The first figure shows projections for the rising number of Medicare enrollees and Medicare spending as a share of GDP. The second figure shows Medicare spending projected as a rising share of the overall federal budget.
Discussions of how to fix Medicare often head for happy talk about how, if we all just provide patients and doctors with the right information and incentives, and link them together with the right network of health information technology and thoughtful counselors, we can save billions while improving everyone's health. For a recent example, see this report from the United Health UnitedHealth Center for Health Reform & Modernization, which suggests that steps along these lines could save up to $542 billion in Medicare and Medicaid spending over the next decade. It's a cheerful story, and I'm certainly fine with pursuing these kinds of win-win possibilities. But the U.S. health care system has been facing ever-rising costs and talking about win-win solutions for several decades. While we're waiting for the cost savings from these kinds of more enlightened and efficient practices to arrive, we need to start thinking about some less pleasant options.
Here's the list of 12 possibilities from the KFF report that would involve Medicare cost savings or revenue increases of at least $4 billion per year. In that report, all the proposals for better information sharing and quality control and improved decision making by patients and providers have the effect on costs and revenues listed as "Not available," which seems fair to me, given historical experience with attempts along these lines as overall health care costs have continues to rise. What's left are choices that sting (with the effect on costs or revenues in parentheses). The KFF Report gives a couple of pages of more detailed explanation for each of these, along with the other 100+ choices.
1) Raise the age of Medicare eligibility from 65 to 67 ($113 billion over 10 years)
2) 10% coinsurance payment on all home health episodes ($40 billion over 10 years)
3) Restrict first-dollar Medigap coverage ($53 billion over 10 years)
4) Increasing premiums for Part B and Part D: for example, raise Part B premiums by 2% per year until they cover 35% of total Part B expenses ($231 billion over 10 years)
5) Increase Medicare payroll tax by 1 percentage point for all workers ($651 billion over 10 years)
6) Require manufacturers to pay a minimum rebate on drugs covered under Medicare Part D for
beneficiaries receiving low-income subsidies ($137 billion over 10 years).
7) Repeal provisions in the Affordable Care Act that would close the Part D coverage gap by
2020 ($51 billion over 10 years)
8) Reduce and restructure graduate medical education payments to hospitals ($69 billion over 10 years)
9) Rebase SNF and home health payment rates: for example, reducing payment updates for post-acute care by 1.1 percentage points ($45 billion over 10 years)
10) Adopt traditional tort reforms at the Federal level ($40 billion to $57 billion over 10 years)
11) Establish a combined deductible, uniform coinsurance rate, and a limit on out-of-pocket
spending, along with Medigap reforms ($93 billion over 10 years)
12) Set Federal contributions per beneficiary at the average plan bid in a given area, including
traditional Medicare as a plan, weighted by enrollment ($161 billion over 10 years)
A few thoughts:
1) One of the policy changes would dramatically increase costs. Congress has been playing a game for years now in which it lowballs the future costs of Medicare by proposing very large cuts in payments to health care providiers that will take place a few years in the future. Then Congress perpetually pushes back those cuts. To their credit, the official Medicare actuaries have been quite blunt in pointing out "Why Official Medicare Costs are Understated." But if, for example, the currently legislated future cuts in payments to health care providers were replaced with a 10-year freeze on fees and a "only" a 5.9% cut in fees for non-primary care services each year for the first three years, Medicare costs would be $200 billion higher over 10 years than the current legislative estimates. If fees for health care providers rise at the rate of GDP growth, or a percentage point or two faster, then Medicare costs will be $300 billion or more higher over the next 10 years. Thus, take your first few hundred billion in cost savings or revenue increases above, and assume that it's going to go to sidestepping the huge future cuts to health care providers in current legislation.
2) I did leave out a few proposals on the KFF list for increasing taxes on other items and earmarking the funds for Medicare. For example, one could raise taxes on alcohol, tobacco, soft drinks, or employer-provided health insurance and earmark the funds for Medicare. But one could also raise those taxes and spend the money on deficit reduction or some other program, so at least to me, these are not specifically "Medicare" reforms.
3) Just for the record, you can't just add up the cost estimates several of these proposals with, because they interact in various ways. For example, option #3 on restricting first-dollar Medigap coverage overlaps heavily with option #11 on Medigap reforms. If the Medicare age was raised to 67, it would alter the cost changes from all of the other proposals.
My bottom line is that too many of the arguments over Medicare spending are magically nonspecific. Sometimes they describe innovations in health care delivery that would improve health and save money and leave everyone with a big rosy smile. I'm all for such changes, and I'll believe in their effectiveness as soon as they are actually effective in reducing costs--but not before. Other time, politicians talk tough about how they will just put a cap on Medicare spending, or just not let it rise at faster than some certain rate. Again, I'll believe in the workability of such caps when I've seen them operate for a few years.
In contrast, the list above is not a pleasant one. Some of these proposals reduce coverage for the elderly or require them to pay more. Some reduce payments to health care providers. One raises taxes on current workers. I am fully aware that none of these are popular options! Which options are more palatable is an argument for another day. But these are real choices, and the inexorable arithmetic of Medicare's rising costs is likely to force choices among these sorts of options.
How Well Do U.S. Students Read?
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In the Fall 2012 issue of Future of Children, Sean F. Reardon, Rachel A. Valentino, and Kenneth A. Shores consider "Patterns of Literacy among U.S. Students."
Of course, "literacy" is a somewhat elastic term, ranging from the most basic functional literacy that lets a person handle day-to-day tasks like reading a map or a drive-through menu, up to the ability to read more complex and specialized texts with comprehension of strengths and weaknesses. Here's a figure showing various dimensions of literacy and how U.S. children are performing. Nearly all children manage the basics like letter recognition, and beginning and ending sounds, by second grade. But even by 8th grade, a large share of students have real problems with being able to real well enough to evaluate text, especially when faced with nonfiction or with complex syntax.
What are the trends in literacy over time? Performance hasn't changed much. Here's a figure showing reading and math test scores on the National Assessment of Educational Progress (NAEP) tests, from 1971 to 2008. There appears to be a bit of rise for 9 year-old readers in recent years, but at least so far, that hasn't translated to higher reading scores for 13 or 17 year-olds.
Of course, these figures are averages, and it's always important to remember the tails of the distribution. "At any given age, students vary considerably in their literacy abilities. For example, at age nine, students scoring at the 10th percentile can carry out simple discrete reading tasks
(such as following brief written directions), while students scoring at the 90th percentile
are already able to make generalizations and interrelate ideas. ... Roughly 10 percent of seventeen-year-olds have knowledge-based competencies lower than those of the median nine-year-old
student."
How does the literacy of U.S. students stack up against those in other high-income countries?
"On international comparisons, American students perform modestly above average compared with those in other OECD countries, and well above average among the larger set of countries for which the PIRLS [Progress in International Reading Literacy Study] and PISA [Programme for International Student Assessment] studies provide comparative data. Moreover, there is no evidence that U.S. students lose ground relative to those in other countries during the middle-school years.
Between ages ten and fifteen, when most students are learning crucial comprehension and evaluation literacy skills, students in the United States appear to learn at a rate that places them at the average among OECD countries. This evidence of average to above-average performance of U.S. students on
literacy assessments is in stark contrast to the poor relative performance of U.S. students on internationally administered math and science assessments."
And with that comment the authors touch on a point that nags at me from time to time. Literacy sounds like a doesn't always get the attention of STEM education: that is, science, technology, engineering, and mathematics. Literacy lacks a cute acronym. It's a softer subject in some ways: teaching about deeper levels of comprehension can't be as black-and-white as balancing a chemical formula or solving a geometry problem. As the authors suggest at various points, the curriculum pathway to teaching literacy and spoken skills after the most basic level is less clear-cut.
But as I often try to emphasize with students, a national economy is not like an Olympic team, where a few performers can win medals while the rest of us couch potatoes sit at home and watch. In the economy, the vast majority of adults participate, and the economy performs better when workers at all levels have more human capital. For many workers, literacy is much more at the core of their job responsibilities than are specific technical or statistical capabilities. Reardon, Valentino, and Shores offer a useful reminder on the core importance of literacy:
"Literacy—the ability to access, evaluate, and integrate information from a wide range of textual sources—is a prerequisite not only for individual educational success but for upward mobility both socially and economically. In addition, because much of the growth in the economy in recent decades has been in areas requiring moderate- to high-level literacy skills, economic growth in the United
States relies increasingly on the literacy skills of the labor force. Finally, in an information-rich age, thoughtful participation in democratic processes requires citizens who can read, interpret, and evaluate a multitude of often-conflicting information and opinions regarding social and political choices."
Of course, "literacy" is a somewhat elastic term, ranging from the most basic functional literacy that lets a person handle day-to-day tasks like reading a map or a drive-through menu, up to the ability to read more complex and specialized texts with comprehension of strengths and weaknesses. Here's a figure showing various dimensions of literacy and how U.S. children are performing. Nearly all children manage the basics like letter recognition, and beginning and ending sounds, by second grade. But even by 8th grade, a large share of students have real problems with being able to real well enough to evaluate text, especially when faced with nonfiction or with complex syntax.
What are the trends in literacy over time? Performance hasn't changed much. Here's a figure showing reading and math test scores on the National Assessment of Educational Progress (NAEP) tests, from 1971 to 2008. There appears to be a bit of rise for 9 year-old readers in recent years, but at least so far, that hasn't translated to higher reading scores for 13 or 17 year-olds.
Of course, these figures are averages, and it's always important to remember the tails of the distribution. "At any given age, students vary considerably in their literacy abilities. For example, at age nine, students scoring at the 10th percentile can carry out simple discrete reading tasks
(such as following brief written directions), while students scoring at the 90th percentile
are already able to make generalizations and interrelate ideas. ... Roughly 10 percent of seventeen-year-olds have knowledge-based competencies lower than those of the median nine-year-old
student."
How does the literacy of U.S. students stack up against those in other high-income countries?
"On international comparisons, American students perform modestly above average compared with those in other OECD countries, and well above average among the larger set of countries for which the PIRLS [Progress in International Reading Literacy Study] and PISA [Programme for International Student Assessment] studies provide comparative data. Moreover, there is no evidence that U.S. students lose ground relative to those in other countries during the middle-school years.
Between ages ten and fifteen, when most students are learning crucial comprehension and evaluation literacy skills, students in the United States appear to learn at a rate that places them at the average among OECD countries. This evidence of average to above-average performance of U.S. students on
literacy assessments is in stark contrast to the poor relative performance of U.S. students on internationally administered math and science assessments."
And with that comment the authors touch on a point that nags at me from time to time. Literacy sounds like a doesn't always get the attention of STEM education: that is, science, technology, engineering, and mathematics. Literacy lacks a cute acronym. It's a softer subject in some ways: teaching about deeper levels of comprehension can't be as black-and-white as balancing a chemical formula or solving a geometry problem. As the authors suggest at various points, the curriculum pathway to teaching literacy and spoken skills after the most basic level is less clear-cut.
But as I often try to emphasize with students, a national economy is not like an Olympic team, where a few performers can win medals while the rest of us couch potatoes sit at home and watch. In the economy, the vast majority of adults participate, and the economy performs better when workers at all levels have more human capital. For many workers, literacy is much more at the core of their job responsibilities than are specific technical or statistical capabilities. Reardon, Valentino, and Shores offer a useful reminder on the core importance of literacy:
"Literacy—the ability to access, evaluate, and integrate information from a wide range of textual sources—is a prerequisite not only for individual educational success but for upward mobility both socially and economically. In addition, because much of the growth in the economy in recent decades has been in areas requiring moderate- to high-level literacy skills, economic growth in the United
States relies increasingly on the literacy skills of the labor force. Finally, in an information-rich age, thoughtful participation in democratic processes requires citizens who can read, interpret, and evaluate a multitude of often-conflicting information and opinions regarding social and political choices."
Checkerboard Puzzle, Moore's Law, and Growth Prospects
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My father the mathematician first posed the checkerboard puzzle to me back in grade-school, perhaps on some rainy Saturday. His version of the story went something like this:
I've had some sense of the power of exponential growth ever since. But what I hadn't thought about is the interaction of Moore's Law and economic growth. Moore's Law is of course named for Gordon Moore, one of the founders of Intel, who noticed this pattern back in 1965. Back in the 1970s, he wrote a paper that contained the following graph showing how much it cost to produce a computer chip with a certain number of components. Here's his figure. Notice that the numbers of component on the horizontal axis and the cost figures on the vertical axis are both graphed as logarithm (specifically, each step up the axis is a change by a factor of 10). The key takeaway was that the number of transistors ("components") on an integrated circuit was doubling about every two years, making computing power much cheaper and faster.
Ever since I started reading up on Moore's law in the early 1980s, there have been predictions in the trade press that it will soon reach technological limits and come to and end. But Moore's law marches on: indeed, the research and innovation targets at Intel and other chip-makers are defined in terms of making sure that Moore's law continues to hold for at least awhile longer. Stephen Shankland offers a nice accessible overview of the current situation in an October 15, 2012, essay on CNET: ""Moore's Law: The rule that really matters in tech" (The Gordon Moore graph above is copied from Shankland's essay.)
As Shankland writes: "To keep up with Moore's Law, engineers must keep shrinking the size of transistors. Intel, the leader in the race, currently uses a manufacturing process with 22-nanometer features. That's 22 billionths of a meter, or roughly a 4,000th the width of a human hair." He cites a variety of industry and research experts to the effect that Moore's law has at least another decade to run--and remember, a decade of doubling every two years means five more doublings!
It's hard to wrap one's mind around what it means to say that the power of microchipo technology will increase by a factor of 32 (doubling five times) in the next 10 years. A characteristically intriguing survey essay from the January 10 issue of the Economist on the future of innovation uses the checkerboard analogy to think about the potential effects of Moore's law. Here's a comment from the Economist essay:
Now, it's of course true that doubling the capacity of computer chips doesn't translate in a direct way into a higher standard of living: there are many steps from one to the other. But my point here is to note that many of us (myself included) have been thinking about the changes in electronics technology a little too much like the king in the checkerboard story: that is, we think of something doubling a few times, even 10 or 20 times, and we know it's a big change, but it somehow seems within our range of comprehension.
But when something has already been doubling every 18 months or two years for a half-century--it is continuing to double!--the absolute size of each additional doubling is starting to get very large. I lack the imagination to conceive of what will be done with all this cheap computing power in terms of health care, education, industrial process, communication, transportation, entertainment, food, travel, design, and more. But I suspect that these enormous repeated doublings, as Moore's law marches forward in the next decade and drives computing speeds up and prices down, will transform lives and industries in ways that we are only just starting to imagine.
The jester performs a great deed, and the king asks him how he would like to be rewarded. The jester is aware that the king is a highly volatile individual, and if the jester asks for too much, the king might just kill him then and there. The jester also knows that the king views his promise as sacred, so if the king says "yes" to the jester's proposal, then the king will honor that promise. So in a way, the jester's problem is how to ask for a lot, but have the king at least initially think it's not very much, so that the king will give his consent.
So the jester clowns around a bit and then says: "Here's all I want. Take this checkerboard. On the first square, but one piece of gold. On the second square, two pieces. On the third square, four pieces, and on the fourth square, 8 pieces. Double the amount on each square until you reach the end of the checkerboard."
In the story, the king laughs at this comic proposal and says, "Your great deed was so wonderful, I would have happily done much more than this! I grant your request!"
But of course, when the king starts hauling up gold pieces from the treasury, he will discover that 2 raised to the 63rd power, the final spot on the checkerboard requires about 9 quintillion gold pieces (that is, 9 followed by 18 zeros).
I've had some sense of the power of exponential growth ever since. But what I hadn't thought about is the interaction of Moore's Law and economic growth. Moore's Law is of course named for Gordon Moore, one of the founders of Intel, who noticed this pattern back in 1965. Back in the 1970s, he wrote a paper that contained the following graph showing how much it cost to produce a computer chip with a certain number of components. Here's his figure. Notice that the numbers of component on the horizontal axis and the cost figures on the vertical axis are both graphed as logarithm (specifically, each step up the axis is a change by a factor of 10). The key takeaway was that the number of transistors ("components") on an integrated circuit was doubling about every two years, making computing power much cheaper and faster.
Ever since I started reading up on Moore's law in the early 1980s, there have been predictions in the trade press that it will soon reach technological limits and come to and end. But Moore's law marches on: indeed, the research and innovation targets at Intel and other chip-makers are defined in terms of making sure that Moore's law continues to hold for at least awhile longer. Stephen Shankland offers a nice accessible overview of the current situation in an October 15, 2012, essay on CNET: ""Moore's Law: The rule that really matters in tech" (The Gordon Moore graph above is copied from Shankland's essay.)
As Shankland writes: "To keep up with Moore's Law, engineers must keep shrinking the size of transistors. Intel, the leader in the race, currently uses a manufacturing process with 22-nanometer features. That's 22 billionths of a meter, or roughly a 4,000th the width of a human hair." He cites a variety of industry and research experts to the effect that Moore's law has at least another decade to run--and remember, a decade of doubling every two years means five more doublings!
It's hard to wrap one's mind around what it means to say that the power of microchipo technology will increase by a factor of 32 (doubling five times) in the next 10 years. A characteristically intriguing survey essay from the January 10 issue of the Economist on the future of innovation uses the checkerboard analogy to think about the potential effects of Moore's law. Here's a comment from the Economist essay:
Ray Kurzweil, a pioneer of computer science and a devotee of exponential technological extrapolation, likes to talk of “the second half of the chess board”. There is an old fable in which a gullible king is tricked into paying an obligation in grains of rice, one on the first square of a chessboard, two on the second, four on the third, the payment doubling with every square. Along the first row, the obligation is minuscule. With half the chessboard covered, the king is out only about 100 tonnes of rice. But a square before reaching the end of the seventh row he has laid out 500m tonnes in total—the whole world’s annual rice production. He will have to put more or less the same amount again on the next square. And there will still be a row to go.
Erik Brynjolfsson and Andrew McAfee of MIT make use of this image in their e-book “Race Against the Machine”. By the measure known as Moore’s law, the ability to get calculations out of a piece of silicon doubles every 18 months. That growth rate will not last for ever; but other aspects of computation, such as the capacity of algorithms to handle data, are also growing exponentially. When such a capacity is low, that doubling does not matter. As soon as it matters at all, though, it can quickly start to matter a lot. On the second half of the chessboard not only has the cumulative effect of innovations become large, but each new iteration of innovation delivers a technological jolt as powerful as all previous rounds combined."
Now, it's of course true that doubling the capacity of computer chips doesn't translate in a direct way into a higher standard of living: there are many steps from one to the other. But my point here is to note that many of us (myself included) have been thinking about the changes in electronics technology a little too much like the king in the checkerboard story: that is, we think of something doubling a few times, even 10 or 20 times, and we know it's a big change, but it somehow seems within our range of comprehension.
But when something has already been doubling every 18 months or two years for a half-century--it is continuing to double!--the absolute size of each additional doubling is starting to get very large. I lack the imagination to conceive of what will be done with all this cheap computing power in terms of health care, education, industrial process, communication, transportation, entertainment, food, travel, design, and more. But I suspect that these enormous repeated doublings, as Moore's law marches forward in the next decade and drives computing speeds up and prices down, will transform lives and industries in ways that we are only just starting to imagine.
Email Spam Declines? Or Just Migrates?
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In the last few years, from 80-90% of all e-mail traffic has been spam. This imposes a considerable cost in terms of computer security and people's time. In the Summer 2012 issue of my own Journal of Economic Perspectives, Justin M. Rao and David H. Reiley discuss the "The Economics of Spam" and conservatively estimate social costs to businesses and consumers of about $20 billion per year.
But in 2012, it looks as if the tide may be turning against e-mail spam, at least a bit.
Some evidence comes from monitoring of spam done by Kaspersky Lab, a seller of information technology security services. In particular, Darya Kudkova has written the "Kaspersky Security Bulletin: Spam Evolution 2012." The first bar chart, from the Economist magazine, showing Kaspersky Lab data on showing monthly patterns of spam from 2006 up through 2012. The second bar chart, from Kudkova's report, shows monthly spam patterns just during 2012.
The Rao and Reiley offers an extended discussion of how the spam wars have evolved over time. (Here is my post on this paper from last August.) As example, they describe a study in which a group attempted to send 345 million spam e-mails, but three-quarters were blocked when the server was blacklisted. The 82 million e-mails that escaped the blacklist then had to run the normal gauntlet of anti-spam software, and ultimately, there were ultimately just 28 purchases.
However, the Kaspersky report suggests that even better anti-spam software has been the main driver of the decline. "This continual and considerable decrease in spam volumes is unprecedented....
The main reason behind the decrease in spam volume is the overall heightened level of anti-spam protection. To begin with, spam filters are now in place on just about every email system, even free ones, and the spam detection level typically bottoms out at 98%. Next, many email providers have introduced mandatory DKIM signature policies (digital signatures that verify the domain from which emails are sent)."
The other big change mentioned in the report is that, partly as a result of the improvements in shutting down spam on e-mail, the spammers are trying to use other pathways to your credit cards. The Kaspersky report comments:
But in 2012, it looks as if the tide may be turning against e-mail spam, at least a bit.
Some evidence comes from monitoring of spam done by Kaspersky Lab, a seller of information technology security services. In particular, Darya Kudkova has written the "Kaspersky Security Bulletin: Spam Evolution 2012." The first bar chart, from the Economist magazine, showing Kaspersky Lab data on showing monthly patterns of spam from 2006 up through 2012. The second bar chart, from Kudkova's report, shows monthly spam patterns just during 2012.
The Rao and Reiley offers an extended discussion of how the spam wars have evolved over time. (Here is my post on this paper from last August.) As example, they describe a study in which a group attempted to send 345 million spam e-mails, but three-quarters were blocked when the server was blacklisted. The 82 million e-mails that escaped the blacklist then had to run the normal gauntlet of anti-spam software, and ultimately, there were ultimately just 28 purchases.
However, the Kaspersky report suggests that even better anti-spam software has been the main driver of the decline. "This continual and considerable decrease in spam volumes is unprecedented....
The main reason behind the decrease in spam volume is the overall heightened level of anti-spam protection. To begin with, spam filters are now in place on just about every email system, even free ones, and the spam detection level typically bottoms out at 98%. Next, many email providers have introduced mandatory DKIM signature policies (digital signatures that verify the domain from which emails are sent)."
The other big change mentioned in the report is that, partly as a result of the improvements in shutting down spam on e-mail, the spammers are trying to use other pathways to your credit cards. The Kaspersky report comments:
"When anti-spam experts answer questions about what needs to be done in order to reduce the amount of spam, in addition to anti-spam legislation, quality filters and user education, one factor that is always mentioned is inexpensive advertising on legal platforms. With the emergence of Web 2.0, advertising opportunities on the Internet have skyrocketed: banners, context-based advertising, and ads on social networks and blogs. Ads in legal advertising venues are not as irritating for users on the receiving end, they aren’t blocked by spam filters, and emails are sent to target audiences who have acknowledged a potential interest in the goods or services being promoted. Furthermore, when advertisers are after at least one user click, legal advertising can be considerably less costly than advertising through spam.In other words, the economics of sending and screening emails, together with the economics of online advertising, is tipping the balance a bit for spammers. Getting people to click on offers in random emails is becoming more costly; getting people to click on random advertisements is becoming easier. Before you send a credit card number, be sure you know who is at the other end.
"Based on the results from several third-party studies, we have calculated that at an average price of $150 per 1 million spam emails sent, the final CPC (cost per click, the cost of one user using the link in the message) is a minimum of $.4.45. Yet the same indicator for Facebook is just $0.10. That means that, according to our estimates, legal advertising is more effective than spam. Our conclusion has been indirectly confirmed by the fact that the classic spam categories (such as fake luxury goods, for example) are now switching over to social networks. We have even found some IP addresses for online stores advertising on Facebook that were previously using spam."
"Advertisers have also been drawn to yet another means of legal Internet promotion: coupon services, or group discount websites where users can purchase so-called coupons. These services appeared several years ago. After a user buys a coupon, he/she presents it when purchasing a product or service and receives a discount. In 2012, coupon services gained a lot of popularity. Many companies around the world are striving to grow their client base, and in turn, clients receive generous offers. ... The popularity of coupon services has made the migration of advertisers from spam to other platforms more noticeable. At the same time, the prevalence of coupon services has had an impact on spam. Malicious users have started to copy emails from major coupon services, using the originals to advertise their own goods or services, or to lure users to a malicious website."
3 Ocak 2013 Perşembe
Why Doesn't Someone Undercut Payday Lending?
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A payday loan works like this: The borrower received an amount that is typically between $100 and $500. The borrower writes a post-dated check to the lender, and the lender agrees not to cash the check for, say, two weeks. No collateral is required: the borrower often needs to show an ID, a recent pay stub, and maybe a statement showing that they have a bank account. The lender charges a fee of about $15 for every $100 borrowed. Paying $15 for a two-week loan of $100 works out to an astronomical annual rate of about 390% per year. But because the payment is a "fee," not an "interest rate," it does not fall afoul of state usury laws. A number of state have passed legislation to limit payday loans, either by capping the maximum amount, capping the interest rate, or banning them outright.
But for those who think like economists, complaints about price-gouging or unfairness in the payday lending market raise an obvious question: If payday lenders are making huge profits, then shouldn't we see entry into that market from credit unions and banks, which would drive down the prices of such loans for everyone? Victor Stango offers some argument and evidence on this point in "Are Payday Lending Markets Competitive," which appears in the Fall 2012 issue of Regulation magazine.
Stango writes:
Payday lending fees do look uncomfortably high, but those with low incomes are often facing hard choices. Overdrawing a bank account often has high fees, as does exceeding a credit card limit. Having your electricity or water turned off for non-payment often leads to high fees, and not getting your car repaired for a couple of weeks can cost you your job.
Moreover, such loans are risky to make. Stango cites data that credit unions steer away from making payday loans because of their riskiness, and instead offer only only much safer loans that have lower costs to the borrower, but also have many more restrictions, like credit checks, or a longer application period, or a requirement that some of the "loan" be immediately placed into a savings account. Credit unions may also charge an "annual" fee for such a loan--but for someone taking out a short-term loan only once or twice in a year, whether the fee is labelled as "annual" or not doesn't affect what they pay. Indeed, Stango cites a July 2009 report from the National Consumer Law Center that criticized credit unions for offering "false payday loan `alternatives'" that actually cost about as much as a typical payday loan.
Stango also cites evidence form his own small survey of payday loan borrowers in Sacramento, California, that many of them prefer the higher fees and looser restrictions on payday loans to the lower fees and tighter restrictions common on similar loans from credit unions. Those interested in a bit more background might begin with my post from July 2011, "Could Restrictions on Payday Lending Hurt Consumers?" and the links included there.
But for those who think like economists, complaints about price-gouging or unfairness in the payday lending market raise an obvious question: If payday lenders are making huge profits, then shouldn't we see entry into that market from credit unions and banks, which would drive down the prices of such loans for everyone? Victor Stango offers some argument and evidence on this point in "Are Payday Lending Markets Competitive," which appears in the Fall 2012 issue of Regulation magazine.
Stango writes:
"The most direct evidence is the most telling in this case: very few credit unions currently offer payday loans. Fewer than 6 percent of credit unions offered payday loans as of 2009, and credit unions probably comprise less than 2 percent of the national payday loan market. This “market test” shows that credit unions find entering the payday loan market unattractive. With few regulatory obstacles to offering payday loans, it seems that credit unions cannot compete with a substantively similar product at lower prices.The question of whether payday lending should be restricted can make a useful topic for discussions or even short papers in an economics class. The industry is far more prevalent than many people recognize. As Stango describes:
"Those few credit unions that do offer a payday advance product often have total fee and interest charges that are quite close to (or even higher than) standard payday loan fees. Credit union payday loans also have tighter credit requirements, which generate much lower default rates by rationing riskier borrowers out of the market. The upshot is that risk-adjusted prices on credit union payday loans might be no lower than those on standard payday loans."
"The scale of a payday outlet can be quite small and startup costs are minimal compared to those of a bank. ... They can locate nearly anywhere and have longer business hours than banks. ... There are currently more than 24,000 physical payday outlets; by comparison there are roughly 16,000 banks and credit unions in total (with roughly 90,000 branches). Many more lenders offer payday loans online. Estimates of market penetration vary, but industry reports suggest that 5–10 percent of the adult population in the United States has used a payday loan at least once."
Payday lending fees do look uncomfortably high, but those with low incomes are often facing hard choices. Overdrawing a bank account often has high fees, as does exceeding a credit card limit. Having your electricity or water turned off for non-payment often leads to high fees, and not getting your car repaired for a couple of weeks can cost you your job.
Moreover, such loans are risky to make. Stango cites data that credit unions steer away from making payday loans because of their riskiness, and instead offer only only much safer loans that have lower costs to the borrower, but also have many more restrictions, like credit checks, or a longer application period, or a requirement that some of the "loan" be immediately placed into a savings account. Credit unions may also charge an "annual" fee for such a loan--but for someone taking out a short-term loan only once or twice in a year, whether the fee is labelled as "annual" or not doesn't affect what they pay. Indeed, Stango cites a July 2009 report from the National Consumer Law Center that criticized credit unions for offering "false payday loan `alternatives'" that actually cost about as much as a typical payday loan.
Stango also cites evidence form his own small survey of payday loan borrowers in Sacramento, California, that many of them prefer the higher fees and looser restrictions on payday loans to the lower fees and tighter restrictions common on similar loans from credit unions. Those interested in a bit more background might begin with my post from July 2011, "Could Restrictions on Payday Lending Hurt Consumers?" and the links included there.
The BP Spill: What's the Monetary Cost of Environmental Damage?
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In April 2010, the BP Deepwater Horizon oil drilling rig suffered an explosion followed by an enormous oil spill. Here, I'll first lay out the question of much BP is likely to end up paying as a result of the spill, a number which is gradually being clarified by the passage of time and evolution of lawsuits. But beyond the question of what is going to happen, economists face a controversy about how best to place a dollar value on these kinds of environmental damages--and the most recent issue of my own Journal of Economic Perspectives has a three-paper symposium on the "contingent valuation" method.
A couple of weeks ago, Attorney General Eric Holder announced at a press conference in New Orleans: "BP has agreed to plead guilty to all 14 criminal charges – admitting responsibility for the deaths of 11 people and the events that led to an unprecedented environmental catastrophe. The company also has agreed to pay $4 billion in fines and penalties. This marks both the single largest criminal fine – more than $1.25 billion – and the single largest total criminal resolution – $4 billion – in the history of the United States."
But as Nathan Richardson of Resources for the Future points out, the criminal penalty is a small slice of what BP will end up paying: "But remember that this criminal settlement is only a small part of BP’s liability. Earlier this year, BP reached a preliminary $7.8b class settlement with a large number of private plaintiffs (fishermen, property owners, etc.) harmed by the spill. That agreement is currently under review by a federal district court judge. This is in addition to $8b in payments made to private parties who agreed not to litigate (from BP’s oil spill “fund”). Future payments to private parties are likely as claims on the fund are resolved or as those who were not part of the class settlement pursue separate claims. BP also claims to have paid out $14b in cleanup costs.
But that’s not all. BP still must face civil suit from the federal government (and states) over natural resources damages. ... BP also faces civil penalties under the Clean Water Act, which would quadruple from $5.5b to $21b if gross negligence is found. In other words, BP will pay out the largest criminal settlement in U.S. history and it will be only a small share of its total liability."
I don't have anything new to say about the parade of events leading up to the spill, nor about the halting efforts to stop the flow and start a clean-up. For details on what happened, a useful starting point is the report from the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling that was released in January 2011. From the Foreword of that report: "The explosion that tore through the Deepwater Horizon drilling rig last April 20 [2010], as the rig’s
crew completed drilling the exploratory Macondo well deep under the waters of the Gulf of
Mexico, began a human, economic, and environmental disaster. Eleven crew members died, and others were seriously injured, as fire engulfed and ultimately destroyed the rig. And, although the nation would not know the full scope of the disaster for weeks, the first of more than four million barrels of oil began gushing uncontrolled into the Gulf—threatening livelihoods, precious habitats, and even a unique way of life. ... There are recurring themes of missed warning signals, failure to share information, and a general lack of appreciation for the risks involved.... But that complacency affected government as well as industry. The Commission has documented the weaknesses and the inadequacies of the federal regulation and oversight, and made important recommendations for changes in legal authority, regulations, investments in expertise, and management."
In editing the Fall 2012 issue of my own Journal of Economic Perspectives, I found myself focused on a narrower issue: How does one put a meaningful economic number on widespread environmental damage. The issue has three papers focused on a method called "contingent valuation," which involves using survey results to estimate damages. Catherine L. Kling, Daniel J. Phaneuf and Jinhua Zhao offer an overview of the disputes and issues surrounding this method. Then, Richard Carson makes the case that contingent valuation methods have developed sufficiently to be an accurate estimating technique, while Jerry Hausman offers a skeptical view that contingent valuation surveys are so fundamentally flawed that their results should be completely disregarded. As usual, all JEP articles from the most recent back to the first issue in 1987 are freely available on-line, compliments of the American Economic Association.
From an economic perspective, the fundamental difficulty here is that not all the environmental damages affect economic output. A major oil spill, for example, affects production directly in industries like fishing and tourism and other industries directly, but it also affects birds and fish and beaches in ways that don't show up as a drop in economic output. In the economics literature, these losses are sometimes know as "passive use value." The notion is that even if I never visit the Gulf Coast around Louisiana and Mississippi, nor eat fish caught there, my utility can be affected by the environmental destruction that occurred. Thus, the argument goes that economic theory should take this "passive use" into account--roughly, the value that people place on the environmental damage that occurred--in thinking about lawsuits and policy choices.
The immediate objections to contingent value methods of setting such values are obvious: If people are just asked to place a value on environment damage, isn't it plausible that their answers will be untethered by reality? Richard Carson, a strong advocate of these methods, faces such skepticism head-on. He writes: "Economists are naturally skeptical of data generated from responses to survey questions—and they should be! Many surveys, including contingent valuation surveys, are inadequate." He also argues, "The best contingent valuation surveys are among the best survey instruments currently being administered while the worst are among the worst."
Carson emphasizes that a high-quality contingent valuation survey takes considerable care to provide what can be several dozen pages of focus-group-tested information to consider, and emphasizes to the responders that the results of the survey are likely to help guide policy outcomes. In such a setting, he argues that people have the information and incentives to answer truthfully. Hausman responds that such surveys are plagued by difficulties: for example, the "hypothetical bias" that people tend to overstate their value when they aren't actually paying; or that valuations can vary according to how questions are phrases, like whether the question asks about willingness-to-pay to avoid environmental damage or willingness-to-accept that the same amount of environmental damage will be done; or that when people value, say, three projects separately or the combination of those three projects, their answers often don't add up. Carson discusses how those who carry out such surveys seek to deal with these issues and others. Hausman says that legislatures, regulatory agencies, and courts, relying on expert opinion, are by far a preferable way to take passive use value into account. Kling, Phaneuf and Zhao point out that over 7,000 of these contingent valuation studies have been done in the last two decades, provide a background and framework for thinking about all of these issues. Of course, those who want all the ins and outs and gory details are encouraged to check out the articles themselves.
To my knowledge, no contingent valuation surveys of the costs of the BP oil spill have yet been published. But it is interesting that after the Exxon Valdez spill, the eventual settlement roughly matched the estimates of the contingent valuation study. As Richard Carson notes: "Soon after the Exxon Valdez spill in March 1989, the state of Alaska funded a contingent valuation study, contained in Carson, Mitchell, Hanemann, Kopp, Presser, and Ruud (1992), which estimated the American public’s willingness to pay to avoid an oil spill similar to the Exxon Valdez at about $3 billion. The results of the study were shared with Exxon and a settlement for approximately $3 billion was reached, thus avoiding a long court case." As contingent valuation studies of the BP spill are published, it will be interesting to compare them with the amounts that BP is paying in the aftermath of the Deepwater Horizon spill.
A couple of weeks ago, Attorney General Eric Holder announced at a press conference in New Orleans: "BP has agreed to plead guilty to all 14 criminal charges – admitting responsibility for the deaths of 11 people and the events that led to an unprecedented environmental catastrophe. The company also has agreed to pay $4 billion in fines and penalties. This marks both the single largest criminal fine – more than $1.25 billion – and the single largest total criminal resolution – $4 billion – in the history of the United States."
But as Nathan Richardson of Resources for the Future points out, the criminal penalty is a small slice of what BP will end up paying: "But remember that this criminal settlement is only a small part of BP’s liability. Earlier this year, BP reached a preliminary $7.8b class settlement with a large number of private plaintiffs (fishermen, property owners, etc.) harmed by the spill. That agreement is currently under review by a federal district court judge. This is in addition to $8b in payments made to private parties who agreed not to litigate (from BP’s oil spill “fund”). Future payments to private parties are likely as claims on the fund are resolved or as those who were not part of the class settlement pursue separate claims. BP also claims to have paid out $14b in cleanup costs.
But that’s not all. BP still must face civil suit from the federal government (and states) over natural resources damages. ... BP also faces civil penalties under the Clean Water Act, which would quadruple from $5.5b to $21b if gross negligence is found. In other words, BP will pay out the largest criminal settlement in U.S. history and it will be only a small share of its total liability."
I don't have anything new to say about the parade of events leading up to the spill, nor about the halting efforts to stop the flow and start a clean-up. For details on what happened, a useful starting point is the report from the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling that was released in January 2011. From the Foreword of that report: "The explosion that tore through the Deepwater Horizon drilling rig last April 20 [2010], as the rig’s
crew completed drilling the exploratory Macondo well deep under the waters of the Gulf of
Mexico, began a human, economic, and environmental disaster. Eleven crew members died, and others were seriously injured, as fire engulfed and ultimately destroyed the rig. And, although the nation would not know the full scope of the disaster for weeks, the first of more than four million barrels of oil began gushing uncontrolled into the Gulf—threatening livelihoods, precious habitats, and even a unique way of life. ... There are recurring themes of missed warning signals, failure to share information, and a general lack of appreciation for the risks involved.... But that complacency affected government as well as industry. The Commission has documented the weaknesses and the inadequacies of the federal regulation and oversight, and made important recommendations for changes in legal authority, regulations, investments in expertise, and management."
In editing the Fall 2012 issue of my own Journal of Economic Perspectives, I found myself focused on a narrower issue: How does one put a meaningful economic number on widespread environmental damage. The issue has three papers focused on a method called "contingent valuation," which involves using survey results to estimate damages. Catherine L. Kling, Daniel J. Phaneuf and Jinhua Zhao offer an overview of the disputes and issues surrounding this method. Then, Richard Carson makes the case that contingent valuation methods have developed sufficiently to be an accurate estimating technique, while Jerry Hausman offers a skeptical view that contingent valuation surveys are so fundamentally flawed that their results should be completely disregarded. As usual, all JEP articles from the most recent back to the first issue in 1987 are freely available on-line, compliments of the American Economic Association.
From an economic perspective, the fundamental difficulty here is that not all the environmental damages affect economic output. A major oil spill, for example, affects production directly in industries like fishing and tourism and other industries directly, but it also affects birds and fish and beaches in ways that don't show up as a drop in economic output. In the economics literature, these losses are sometimes know as "passive use value." The notion is that even if I never visit the Gulf Coast around Louisiana and Mississippi, nor eat fish caught there, my utility can be affected by the environmental destruction that occurred. Thus, the argument goes that economic theory should take this "passive use" into account--roughly, the value that people place on the environmental damage that occurred--in thinking about lawsuits and policy choices.
The immediate objections to contingent value methods of setting such values are obvious: If people are just asked to place a value on environment damage, isn't it plausible that their answers will be untethered by reality? Richard Carson, a strong advocate of these methods, faces such skepticism head-on. He writes: "Economists are naturally skeptical of data generated from responses to survey questions—and they should be! Many surveys, including contingent valuation surveys, are inadequate." He also argues, "The best contingent valuation surveys are among the best survey instruments currently being administered while the worst are among the worst."
Carson emphasizes that a high-quality contingent valuation survey takes considerable care to provide what can be several dozen pages of focus-group-tested information to consider, and emphasizes to the responders that the results of the survey are likely to help guide policy outcomes. In such a setting, he argues that people have the information and incentives to answer truthfully. Hausman responds that such surveys are plagued by difficulties: for example, the "hypothetical bias" that people tend to overstate their value when they aren't actually paying; or that valuations can vary according to how questions are phrases, like whether the question asks about willingness-to-pay to avoid environmental damage or willingness-to-accept that the same amount of environmental damage will be done; or that when people value, say, three projects separately or the combination of those three projects, their answers often don't add up. Carson discusses how those who carry out such surveys seek to deal with these issues and others. Hausman says that legislatures, regulatory agencies, and courts, relying on expert opinion, are by far a preferable way to take passive use value into account. Kling, Phaneuf and Zhao point out that over 7,000 of these contingent valuation studies have been done in the last two decades, provide a background and framework for thinking about all of these issues. Of course, those who want all the ins and outs and gory details are encouraged to check out the articles themselves.
To my knowledge, no contingent valuation surveys of the costs of the BP oil spill have yet been published. But it is interesting that after the Exxon Valdez spill, the eventual settlement roughly matched the estimates of the contingent valuation study. As Richard Carson notes: "Soon after the Exxon Valdez spill in March 1989, the state of Alaska funded a contingent valuation study, contained in Carson, Mitchell, Hanemann, Kopp, Presser, and Ruud (1992), which estimated the American public’s willingness to pay to avoid an oil spill similar to the Exxon Valdez at about $3 billion. The results of the study were shared with Exxon and a settlement for approximately $3 billion was reached, thus avoiding a long court case." As contingent valuation studies of the BP spill are published, it will be interesting to compare them with the amounts that BP is paying in the aftermath of the Deepwater Horizon spill.
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