Wednesday, November 21, 2007

Avoiding bag eggs

A story today that babies can sort out the good sorts from the bad and potentially avoid trouble. Well, at least the research is suggestive of that.

It is consistent with our experience. Our eldest, before the age of 1, had worked out which other kids might take toys or otherwise annoy here. Her strategy was to scream loudly whenever they came within a metre of her. That proved quite effective in getting the attention of adults and scaring those children away.

Our son, on the other hand, would simply avoid them. If one of those children came towards him he would drop the toy and move away. This concerned me somewhat but then I noticed that the child usually lost interest in the toy about a minute later and my son would swoop back in and pick it up without the other child noticing. He worked completely under the radar and clearly had worked out that toys were not lost forever.

I didn't observe any such things with our third child. Going on chances, for all I know, she might be one of the troublesome ones. Although she is by far the most social of our children so it is hard to tell what this means.

Friday, November 16, 2007

Thursday, November 15, 2007

Pain acting

Children can fake being in pain or distress. Makes it hard to sort out the truth from the rest. In my experience, a bit of incentives goes a long way here. Steve Levitt thinks so too:
Apparently, they have figured out how to make needles thinner and sharper, so they slide in and out with minimal pain. At least, that’s what the nurse who gave me the shot told me. Nonetheless, my kids still cry when they get shots — at least, they do when it’s my wife’s turn to bring them to the doctor. When I’m there, I promise them a box of Nerds if they don’t cry. Lo and behold, there are never any tears. They are amazed to hear that Nerds (the candy version, that is) didn’t exist when I was a kid. Yet another example of the miracles of technology.
It is all just an application of mechanism design.

Thursday, November 8, 2007

Baby bonus blues

According to the Sydney Morning Herald, the Minister for Family and Community Services, Mal Brough, thinks it’s a good thing that I am not an obstetrician. Actually, technically, I have delivered two babies (of my own) but there was a trained specialist at my side. That is, of course, another story.

But he has a point. If I were an obstetrician, it is unlikely that I would have spent the last week looking at ABS birth statistics. Instead, being an economist, my ANU colleague, Andrew Leigh and I seized upon them. The reason was to see whether the government had done it again. By poorly implementing the baby bonus had they caused potential disruption to maternity wards?

It turns out that the answer was, “yes and in a significant way.” Last year, we studied the introduction of the $3,000 baby bonus on the 1st July, 2004. That introduction made that day the biggest birthday in Australian history and the only day to have over 1,000 births. Indeed, statistically, 1167 births were shifted from June to July that year. It is also the case that the babies born were larger. Not surprisingly, we were concerned given that the bonus was to rise again on 1st July, 2006 by $834.

So Mal Brough may think it unseemly to think that parents would put the life of their unborn baby at risk. I think so too. But that doesn’t mean it doesn’t happen. Moreover, it is not the delay of one birth I am worried about but the cumulative impact of this as maternity hospitals become unnecessarily congested. I happen to believe that the goal of health policy is to keep economics out as much as possible from health decisions. Certainly, governments shouldn’t put it there for no reason.

We raised concerns directly with the government in June last year and then, when we were ignored, released the paper publicly calling for a phased-in increment to the baby bonus. We weren’t the only ones. The Royal Australian and New Zealand College of Obstetricians and Gynaecologists approached the government but were similarly ignored. And so, in 2006, the baby bonus increased.

There was always some hope that the smaller jump would mean less disruption. Perhaps parents wouldn’t care about $834? It turns out that hope is na├»ve. This is no small amount of money to parents just about to get an income shock. Statistically, just under 700 have shifted their births from the last week of June to the first week of July, 2006. (Here is a link to our research).

In July 2008 it is all scheduled to happen again when the baby bonus jumps to $5,000. The policy response is clear. If you need to increase the baby bonus (and it is unclear why that would be the case), do it gradually. If the jump was over the course of a few weeks, the extra outlays for the government would be a couple of million dollars. That may seem like a lot but in the context of over a $1 billion in payments every year on the baby bonus alone, it is a drop in the ocean.

It is the role of an economist to look for potential problems even if we don’t like to think they are there. Parents avoid having babies on the 1st April and 29th February seemingly because they are worried about awkward birthdates for their children. That is statistical fact. Similarly, in June, 2004 and July, 2006, they delayed births if they could to get extra cash. The government dangled the carrot on that occasion and parents responded. Perhaps there were no adverse health outcomes but I don’t think it is worthwhile for governments to role that dice for no gain.

I have written about the 2004 and 2006 events on his blog. See also Andrew Leigh.