How economists could help inform economic and budget analysis used by the US Congress

Staff of the Congressional Budget Office in the new edition of Journal of Economic Perspectves suggest how economists’ research could inform Congress:

The US Congress uses economic and budgetary projections, cost estimates for proposed legislation, and other analyses provided by the Congressional Budget Office (CBO) as part of its legislative process. CBO makes assessments based on an understanding of federal programs and revenue sources, reading the relevant research literature, analysis of data, and consultation with outside experts—and often relies on economic research.

This article begins with a discussion of the role of the Congressional Budget Office and then discusses how economists could conduct research that would help inform the Congress by improving the quality of the analysis and parameter estimates that CBO uses.

It gives overall context and specific examples in seven areas: credit and insurance, energy and the environment, health, labor, macroeconomics, national security, and taxes and transfers.

Access to Credit Reduces the Value of Insurance

Sonia Jaffe, Anup Malani & Julian Reif in the new NBER paper say access to credit reduces community value of insurance:

We analyze the value of insurance when individuals have access to credit markets. Loans allow consumers to smooth financial shocks over time, decreasing the value of consumption smoothing from insurance. We derive formulas for the value of insurance that can be taken to data, and show how that value depends on individual characteristics and features of loans. We estimate that access to a five-year loan decreases the values of community- and experience-rated insurance for the average beneficiary by $232-$366 (58–61%). Even for the sickest decile, this loan access reduces the value of community-rated insurance by $1,099 (17%).

Deep Dive into China’s Intellectual Odyssey

Wang Hui has written this interesting looking book The Rise of Modern Chinese Thought. The edition is now available in English.

Lynn Paramore of INET interviews Hui:

Lynn Parramore: Your book traces the development of three concepts: “principle” (li), “things” (wu), and the “propensity of the times” (shi). What makes these crucial to understanding the progress of Chinese thought?

Wang Hui: Why these very specific concepts? I employed these concepts as clues to describe historical change, rather than employing social history, cultural history, economic history, or military history. I wanted to use these concepts to link different things together. Basically, I think that in all of Chinese studies — and not only Chinese studies, but historical studies, generally, especially in non-Western cultures — two prevalent misgivings have often left scholars feeling frustrated.

First, they struggle with whether or not they can effectively use existing theoretical categories or social scientific paradigms to describe and interpret historical phenomena. For example, if we talk about the traditional Chinese wellfield system [an agrarian plot division for equitable land distribution], people will often describe it as an economic system. But the wellfield system is not only an economic system, but also a social, political, and military system, and, after all, a racial system. So in that sense, once you reduce that phenomenon into the category of the economy, you’ve lost a lot of things. That’s one issue.

The second, of course, is that we are all studying Western social science — it’s a universal phenomenon – so the concepts and paradigms we deploy usually come from studies of Western history. Can they be usefully applied to non-Western historical phenomena? I have found that you always need to construct a dialogue between the different concepts.

In my book, I discuss principle (li), things (wu), and the propensity of times (shi) as philosophical ideas. These are three key categories, but at the same time, I use another set of three antithetical concepts in the more historical analysis. The first is the ancient rites and music culture and institutions. The second concerns political systems, enfeoffment [the feudal land grant system], and centralized administration. The last one was more of a response to what contemporary Western scholars are working on, and also something we’re working on in Chinese studies: the empire and the nation-state. I question these binaries and their application to Chinese studies