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 Grossman
City 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; tradeoff 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
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)
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 antismoking 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 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
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 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.”