IT’S BETTER TO BE THE FIRST OR ONE OF THE FIRST EVEN IF YOU’RE WRONG

(Especially If You Pick Interesting Problems To Work On)

Michael GrossmanCity University of New York Graduate Center and National Bureau of Economic Research

Why?

• Selections in Who’s 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

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)

The Flack

• Editorial in Financial World: America’s Investment and Business Weekly, December 13, 1972: “Trifle obscure to talk about people choosing ‘their level of health.’”

Flack – Continued• Isaac Ehrlich and Hiroyuki Chuma (1990): “[my] key

assumption that health investment is produced through a constant-returns-to-scale…technology 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.”

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

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

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)

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 outcomes—Grossman (1975)

• But relationship may reflect reverse causality or omitted “third variables”

• Victor Fuchs (1982): time preference the most notable third variable

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 mother’s 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.

Economics of Substance Use and Abuse

Grant Outcome

Economics of Substance Use and Abuse

Field Work

Economics of Substance Use and AbusePrice 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)

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)

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

More FlackAlcohol 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

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 teenager’s 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

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

Rules of Research1. 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.”