Monthly Archives: December 2012

1994 assault weapons ban may have saved 6000 lives per year

Although not a statistical statement, there is a noticeable association between when the 1994-2004 assault weapon ban was in place and the observed decline in gun-related deaths. That ban also contained other provisions that will have affected availability of guns.

A decline of more than 6000 gun-related deaths per year appears to be  associated  with that legislation before it expired. See linked picture.


Another articles on this issue also has compelling graphs. The title of the paper could be its abstract..

S Chapman, P Alpers, K Agho, M Jones. 2006. Australia’s 1996 gun law reforms: faster falls in firearm
deaths, firearm suicides, and a decade without mass shootings.
Injury Prevention 2006;12:365–372. doi: 10.1136/ip.2006.013714


Two Great Articles in the December JEL

Journal of Economic Literature, December 2012

Two great articles.

Racial Discrimination in the Labor Market: Theory and Empirics

Kevin Lang and Jee-Yeon K. Lehmann

We review theories of race discrimination in the labor market. Taste-based models can generate wage and unemployment duration differentials when combined with either random or directed search even when strong prejudice is not widespread, but no existing model explains the unemployment rate differential. Models of statistical discrimination based on differential observability of productivity across races can explain the pattern and magnitudes of wage differentials but do not address employment and unemployment. At their current state of development, models of statistical discrimination based on rational stereotypes have little empirical content. It is plausible that models combining elements of the search models with statistical discrimination could fit the data. We suggest possible avenues to be pursued and comment briefly on the implication of existing theory for public policy. (JEL J15, J31, J64, J71)
Wonderful synthesis from Kevin and Lehmann, a recent BU Ph.D. alum.

Full-Text Access | Supplementary Materials 

Psychologists at the Gate: A Review of Daniel Kahneman’s Thinking, Fast and Slow

Andrei Shleifer

The publication of Daniel Kahneman’s book, Thinking, Fast and Slow, is a major intellectual event. The book summarizes, but also integrates, the research that Kahneman has done over the past forty years, beginning with his path-breaking work with the late Amos Tversky. The broad theme of this research is that human beings are intuitive thinkers and that human intuition is imperfect, with the result that judgments and choices often deviate substantially from the predictions of normative statistical and economic models. In this review, I discuss some broad ideas and themes of the book, describe some economic applications, and suggest future directions for research that the book points to, especially in decision theory. (JEL A12, D03, D80, D87) 

Nice short summary of key themes from the extraordinary Kahneman book.

Full-Text Access | Supplementary Materials

#2 Include Social Security and Medicare taxes when discussing tax burdens

Time to Change the Tax Discussion #2

This is the second in a five part series on Taxes.

Far too much of the discussion of tax burdens has focused on the federal income tax rates while the federal payroll taxes – Social Security and the Medicare tax – get minor attention. This was epitomized by Mitt Romney’s reference to 47 percent of Americans as not paying any taxes, when what he meant was not paying any Federal income taxes. This line of discussion ignores the fact that low income earners pay Social Security and Medicare taxes. Almost every economist would agree that these payroll taxes affect net pay and incentives in fundamentally the same way as income taxes and hence matter greatly. While true that these are earmarked taxes, they are nonetheless important contributions to federal revenue and affect deficits. In 2012 The federal income tax contributed 32 percent of total federal revenue, while social security and medicare payroll taxes contributed 23.9 percent.  Since these social insurance taxes are either proportional (Medicare tax) or regressive (SSI, since it stops after $110,000 in 2012), they substantially change the overall progressivity of the taxes. the following figure is from the Concord Coalition, based on US Treasury data.

U.S. Treasury Department, Final Monthly Treasury Statement from Sept. 2012

In an earlier blog (What are current marginal tax rates?), I calculated marginal tax rates for various levels of taxable income, which show that currently people earning $70,700 to $142,700 pay the highest marginal tax rates (38.1% including federal, SSI and Medicare taxes, higher if you add in Massachusetts income taxes).Warren Buffett basically referred to this same phenomenon when he said that his secretary paid higher taxes than he does on earned income.

Allowing the Bush tax cuts to expire will return those earning over $388,350 to paying the highest marginal rates (43.4% including the Medicare and ACA taxes).

For related discussion see the earlier blogs

#1 All Taxes and Budgets Should be Expressed as Dollars per Person

#2. Include Social Security and Medicare taxes when discussing tax burdens


All Taxes and Budgets Should be Expressed as Dollars per Person

Time to change the discussion #1

This is the first of five posts on my blog on how discussion of taxes and budgets in the US needs to change to improve decision-making.

Recent political debate and the media throws around costs of millions, billions and trillions of dollars even though there is no easy way for an ordinary citizen to evaluate the meaning of these terms. All of these are very big numbers. Consider the following numbers, sorted from largest to smallest. Which ones should we be worrying about?

Sample of recent numbers in the news (or that should be there)

$16.4 trillion US National Debt [1]

$3.7 trillion Total cost of wars in Iraq, Afghanistan and Pakistan [Reuters,2]

$1.2 trillion Size of tax increases and budget cuts in the fiscal cliff [3]

$1.1 trillion Federal deficit for 2012 [4]

$849 billion What is at stake in the Bush-era tax cuts for the wealthy, those earning more than $250,000, over ten years. [ABC news,5]

$ 807 billion The US government’s estimate of the direct cost of the war in Iraq thru FY2012. [6]

$ 571 billion The US government’s estimate of the direct cost of the war in Afghanistan and Pakistan thru FY2012 [6]

$ 100 billion Cost of the Iraq war that was used in discussions just before attacking Iraq [7]

$ 1.4 billion Financial spending for all presidential candidates, 2011-2012. [8]

$ 446 million The FY2013 annual budget for the Corporation for Public Broadcasting. [9]

$192 million The cost of the 2010 Newton North High School serving half of the Newton MA population [10]

$  83 million Campaigning expenses, all candidates including outside spending, on Elizabeth Warren vs. Scott Brown Massachusetts Senate race, 2012. [11]

$ 11 million Proposed tax override for Newton MA in 2013 to pay for schools [12]

$ 54,000 Cost of running the March special election to vote on the Newton override. [13]

The relevant populations

US population: 315 million people

MA population:  6.6 million

Newton population:  86,000 (half served by Newton North High School, the other by Newton South High School.)

Costs revisited with Ellis commentary


$ 52,000                US National Debt per Person –    High, but can be reduced if we try hard.

$12,000                 Total cost of wars in Iraq, Afghanistan and Pakistan per Person Not worthwhile to me, and 23% of our total US debt!

$ 3,800                  Per person size of the 2013 fiscal cliff, in taxes and reduced spending.

$ 3,500                  Extra cost per person per year to eliminate the federal deficit for 2012. Although similar to the preceding, note that this is for one year, while the above is over ten years… Even jumping over this cliff does not eliminate our deficit.

$ 2,700                  Ten-year cost per person of the Bush-era tax cut on those earning more than $250,000. A lot is at stake here, not small change.

$ 270 Average per year cost per person of Bush-era tax cut on >$250k Doesn’t look like such a big number, and this is how much it reduces our per person annual deficit.

$13,500 Average per year cost per wealthy person (top 2%) of Bush-era tax cuts. Recall that the average income of this group is way higher than $250k

$ 2,600                  The official direct cost per person of the war in IraqWhy isn’t there more discussion of this?

$ 1,800                  Cost per person of the Afghanistan war. Maybe Afghan was worthwhile, but I doubt it.

$   317                    Initial cost per person of the Iraq war used in selling it to the public. How could we have been so wrong?

$       4                    Cost per person of the US presidential campaign. Maybe higher than I wish, but it is not going to break our budgets. Plus it is all voluntary, unlike the taxes.

$       1                    Cost per person of federal funding of public TV and radio. A small portion of their total budget. Why are we talking about this at all?

$4,500                   Cost per Newton resident of the Newton North High School. High, but I bet we more than made it back in increased property values. Even ignoring that more than half was funded by the state, if there are 4 people per household, then this is only 2.6% of median property value in Newton.

$    13                     Cost per Massachussetts resident of the 2012 Senate race. Seems reasonable expense for making big decisions. Plus it only happens every six years for each senate race, so only $2 per year per person.

$  128                     Cost per Newton resident per year of proposed tax override to help pay for schools. Definitely affordable.

$       .62                 Per person cost of running Newton’s March special election. Should not have even made the papers. Informed decision-making costs money.


Big cost numbers are easier to understand when expressed as a cost per person.

Some big numbers don’t look very scary. Others look worse.

The numbers that get a lot of play in the media are not necessarily the right numbers.

Thought to Ponder: Why is it that almost no one in Newton is worried about having incurred a debt for one school in the amount of $4500 per resident, while citizens, and our Congress in particular, seems paralyzed to contemplate reducing our federal debt by a similar amount?



[2] Reuter. 2012. Cost of war at least $3.7 trillion and counting. based on estimates from “Cost of War at which is sponsored by the National Priorities Project.




[6] Congressional Research Service, 2011. The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11. updated continually at “Cost of War at

[7] Tom Russert Interview with Vice-President Dick Cheney, “NBC News’ Meet the Press,” Transcript for March 16, 2003.

[8] Center for Responsive Politics, 2012.Most Expensive Races 2012 Overview and

[9] Corporation for Public Broadcasting. 2012 Fiscal Year 2013 Operating Budget.

[10] Newton Tab. 2012. Newton North High School final cost $6M less than expected.

[11] Center for Responsive Politics, 2012.Most Expensive Races 2012 Overview


[13] Newton Tab, December 12, 2012. Table showing breakdown of the various costs of the special election in March, 2013 on the override.

HCC risk adjustment formulas for ACA Exchanges

HHS announced the new risk adjustment formulas proposed for the ACA Health Insurance Exchanges on December 7, 2012.
Here is the citation and direct link.
Department of Health and Human Services. HHS Benefit and Payment Parameters for 2014, and Medical Loss Ratio. 2012 [Dec 7 2012]. Available from:
Focus only on the first 33 pages for teh Risk adjustment system.
This proposed regulations provides details on the risk adjustment formula that is proposed for the Federal and STate Health insurance exchanges. At its heart is an HCC model similar to the Medicare 100 condition HCC model. Innovations are that it has separate models for four metal levels (bronze, silver, gold, platinum), it uses a concurrent rather than prospective framework, it has separate models for infants, children and adults. It was estimated at RTI using Truven Health Analytics 2010 MarketScan® data, which we also have licensed at Boston University for research use. The rules are a painful 373 pages long. Focus on pages 1-33 for an overview of the RA approach.
Other NPRM (=Notice of Proposed Rule Making) for regulations of the ACA are the following.
EHB/AV (Essential Health Benefits/Actuarial Value) NPRM:
Citation: US National Archives and Records Administration. 2012. Code of Federal Regulations. Title 45. Patient Protection and Affordable Care Act; Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation; Proposed Rule. [Available at:!documentDetail;D=CMS-2012-0142-0001]

Discussion: The rule discusses accreditation of health plans in a federally-facilitated or state-federal partnership exchange. States that plans offered inside and outside of the exchange must offer a core package of benefits including the following: Ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative services, lab services, preventive and wellness services and chronic disease management, and pediatric services.

The rule also specifies options for each state’s “benchmark” plan. Plans must offer coverage greater than or equal to that offered by the benchmark plan.

The rule also specifies that HHS will provide an AV calculator to help issuers determine health plan ACs. The calculator uses a nationally representative sample. Starting in 2015, HHS will accept state-specific datasets to use with the calculator. The rule proposes a 2% AV window around the AV specified by for each metal group.

Market Reform NPRM:

Citation: US National Archives and Records Administration. 2012. Code of Federal Regulations. Title 45. Patient Protection and Affordable Care Act; Health Insurance Market Rules; Rate Review; Proposed Rule. [Available at:!documentDetail;D=CMS-2012-0141-0001]

Discussion: This rule focuses on reforms to the health insurance market. It includes guaranteed issue, premium regulation (rate bands, rate restrictions), single statewide risk pool, etc. The rule also proposes regulation changes to streamline data collection.

MPFS (Medicare Physician Fee Schedule) Rule:
Citation: US National Archives and Records Administration. 2012. Code of Federal Regulations. Title 42. Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule, DME Face-to-Face Encounters, Elimination of the Requirement for Termination of Non- Random Prepayment Complex Medical Review and Other Revisions to Part B for CY 2013. [Available at:]
More rules and regulations are presented here.
I thank without implicating Tim Layton (BU RA extraordinaire) for organizing this information for me.