The Risk of a Fiscal Crisis

CBO offers a useful issues brief.

Stocks Look Cheap

family reunion t-shirts

Ruby's arrival conflicted with the family reunion this year, so we didn't get to attend (which was a real bummer).  But I did get to help with some family reunion t-shirts.  Way back in the day, a family member ran a flour mill and the brand was Green's Perfection.  There are precious few flour sacks still around, and they have become kind of a hot commodity in the family.  I might get in trouble for posting this, but Jared and I have one (I guess that is one of the perks of naming your first born son after said family member).  :)

I used a photo of the flour sack to make the family t-shirts.  With a bit of editing in Picnik, I was able to get a nice, bright text on a solid white background.  Then I set up a quick shop at CafePress (it's free!), and the shirts were ready to purchase for whoever wanted one.  So easy!

One thing I love about CafePress is there is something for everyone.  You can upload your designs onto all kinds of products, so if grandma isn't a big t-shirt wearer, she can get a tote bag or an apron or something.  The onesies and kids tees are my personal favorite. Oscar and Ruby are perfection, after all (to me).

Need more family t-shirt ideas?  Jordan at Oh Happy Day posted about Angela Hardison's collection of family reunion t-shirts, and I think they are all brilliant.  Wouldn't it be nice to have a graphic designer in the family?

Do Kindergarten Teachers Matter More than Parents?

New research on the value of kindergarten teachers is remarkable. 

In fact, it seems a bit hard to believe. If kindergarten teachers matter as much as this new research suggests, then you would think that parents would have a large influence on their kids' adult outcomes. After all, you spend a lot more time with your parents than in your kindergarten class. But much research in behavioral genetics finds very little evidence for significant parental effects. (See Judith Harris's The Nurture Assumption.) So I am puzzled.

Update: Judith Harris emails me:

I guess it's been a while since you read my book. In Chapter 11 of The Nurture Assumption I described the case of a gifted first-grade teacher, "Miss A," who had a long-lasting beneficial effect on her students, and I proposed an explanation of how and why this happened.

Yes, it has been a while, and since I am now at the Jersey shore, I don't have a copy handy. I much appreciate the correction.

Update 2: From Raj Chetty, one of the authors of the study:

I'm writing in reference to your interesting comment about our Kindergarten paper. I think our results are actually consistent with your perfectly sensible intuition that parents should matter more than teachers, for two reasons:

(1) the Kindergarten class effects are large in aggregate but explain a small share of the variance in earnings (less than 5%) overall. A better class leads to higher average earnings (3% higher earnings for a 1 SD improvement in teacher quality), but there is a lot of variation around the mean.

(2) The best evidence I've seen on the long term impacts of parents is this quasi-experimental paper by Bruce Sacerdote published in the QJE. It shows that parental characteristics explain about three times more of the variation in adult outcomes than KG classes, consistent with your intuition.

Thanks!

Etsy favorites - kids and babies

My mom flew home to St. Louis this morning, and I drove away from the airport feeling pretty sick.  But, my tears have dried, and I managed to get both kids up to the apartment from the parking lot all by myself.  Oscar is sleeping and I can type one-handed holding the babe.  I keep reminding myself that people have been successfully parenting multiple children for thousands of years. I just might survive this after all! 

I have some craftiness in the works, but it is not quite ready to share.  In the meantime, can I share some of my very favorite etsy shops with you? They are each overflowing with handmade goodness. And since I have personal experience with each shop (either through a purchase or from receiving a gift), I feel confident in giving them each my whole-hearted recommendation.

First up, Ummashin's Goodies - I was first introduced to this shop a little over a year ago.  Hannah makes the most beautiful crocheted hats, headbands, shoes and accessories.  Oscar had the blue and brown brim beanie, and I swear - we could not walk 10 feet down the streets of New York without someone asking us about it. 

Hannah was nice enough to send me some hats and a headband for Ruby when I found out we were having a girl (that's Ruby sporting the headband, which she looks delicious in).  I've since picked up a few extra girly items and have a mighty wish list building.

I am admittedly biased with my sister-in-law's shop, Komfort Kids - but she makes really beautiful blankets.  They are soft flannel on one side and satin on the other, with a coordinating satin border.  I especially love the vintage flannels, like the Moon Walk.

These blankets are so addictive ... I have nieces and nephews approaching 10 years old who still can't part with their blankies.

I started buying from Little Sapling Toys when Oscar was a baby.  He loves his wooden stacker and still plays with it.  My favorites are the wooden teethers, which come in just about every shape imaginable, including your home state.  I really want to get the lacing toy for a nice, quiet church activity.

I shop at Clickity Clack specifically for their assorted wooden cars.  Oscar LOVES them, and you can't beat the price.

Ok, just one more ... I have recently become a huge fan of the headbands in the baby and girls sections of Allora Handmade.  I bought two for Ruby and they are beyond precious.

Have I caused significant damage to your pocketbook yet?  Happy shopping!  :)

Readings for the Pigou Club

1. Gib Metcalf makes the case.  (He suggests that club members email their support for higher Pigovian taxes to the National Commission on Fiscal Responsibility.)
2. USA Today joins the club.

Al Roth

Forbes profiles my Harvard colleague.

The Mid-Session Review

The Obama administration has just released the Mid-Session Review of the Budget.  (As one of my friends snarkily puts it, "Release at 4 pm on Friday...who could have expected when we're living in a new era of fiscal responsibility?")

This budget document shows what would happen to the federal budget under the Administration's economic forecast and assuming that all the President's proposed policies are adopted.  What does the document show?  Based on a quick read, here is what I see:

• The Administration believes we will have real growth about 4 percent over the next four years.  Unemployment is projected to fall steadily, reaching to 5.5 percent at the end of 2015.
• Deficits are projected to shrink but will not fall below 3.4 percent of GDP over the ten-year budget window.
• The ratio of debt to GDP rises in each of the following ten years, with no end in sight.
• The document once again holds out the hope that the fiscal commission will save the day by somehow finding a way to put the budget on a sustainable path.

Econ Jargon Watch

A friend of mine who is an editor read the Solow piece I posted yesterday and emailed me this comment:

I was particularly interested to read the following sentence:

"But this is not a bad FIRST APPROXIMATION in many cases."

I don't think I have edited one econ manuscript that has not used the phrase "first approximation" many, many times. When econ PhDs are given out, are you all required to sign a secret agreement that says you must use this phrase in anything you write?

Note that I have not found a similar phrase in the other disciplines for which I've edited several books (chemistry, biology, anatomy, physiology, genetics, physics, political science, and history).

Solow on DSGE Models

Bob testifies in front of Congress on the topic (believe it or not).

Thanks for Arnold Kling for the pointer.

Harvardians in the FT

• Ken Rogoff
• Larry Summers
• Niall Ferguson

The Dodd-Frank Anti-Stimulus Bill

The Wall Street Journal reports:

The nation's three dominant credit-ratings providers have made an urgent new request of their clients: Please don't use our credit ratings.

The odd plea is emerging as the first consequence of the financial overhaul that is to be signed into law by President Obama on Wednesday. And it already is creating havoc in the bond markets, parts of which are shutting down in response to the request.

Standard & Poor's, Moody's Investors Service and Fitch Ratings are all refusing to allow their ratings to be used in documentation for new bond sales, each said in statements in recent days. Each says it fears being exposed to new legal liability created by the landmark Dodd-Frank financial reform law.

The new law will make ratings firms liable for the quality of their ratings decisions, effective immediately. The companies say that, until they get a better understanding of their legal exposure, they are refusing to let bond issuers use their ratings.

That is important because some bonds, notably those that are made up of consumer loans, are required by law to include ratings in their official documentation. That means new bond sales in the $1.4 trillion market for mortgages, autos, student loans and credit cards could effectively shut down.

There have been no new asset-backed bonds put on sale this week, in stark contrast to last week, when $3 billion of issues were sold. Market participants say the new law is partly behind the slowdown.

Government Spending by Another Name

Wise words from Marty Feldstein:

When it comes to spending cuts, Congress is looking in the wrong place. Most federal nondefense spending, other than Social Security and Medicare, is now done through special tax rules rather than by direct cash outlays. The rules are used to subsidize a wide range of spending including education, child care, health insurance, and a myriad of other congressional favorites.

These tax rules—because they result in the loss of revenue that would otherwise be collected by the government—are equivalent to direct government expenditures. That's why tax and budget experts refer to them as "tax expenditures." This year tax expenditures will raise the federal deficit by about $1 trillion, according to estimates by the congressional Joint Committee on Taxation. If Congress is serious about cutting government spending, it has to go after many of them....

If tax expenditures are not cut, taxes on households and businesses will have to rise to prevent an explosion of the national debt, which is now projected to increase to 90% of GDP by 2020 from today's 63%. When benefits for Social Security and Medicare are set aside, the rest of the outlay side of the budget is too small—7.5% of GDP—to provide much scope for reducing annual budget deficits that are now projected to average 5% of GDP for the rest of this decade. In contrast, total tax expenditures are now 6.4% of GDP.

Merle Hazard on the Greek Debt

I have crafty friends

Isn't this headband pretty?  My friend Heidi made it for me (I love having crafty friends).  She recently stared a craft blog called Made by Heidi and has lots of fun projects posted, including how to make these awesome zipper rosettes.  Or you can buy one from her etsy shop!

I'm going to post about some of my other favorite esty shops later this week ... hope you don't mind.  There won't be giveaways or anything like that, I'm just spreading the love.

Speaking of love ...

The principle of comparative advantage applies even to union picketing

A reader alerts me to this amusing story:

To Protest Hiring of Nonunion Help,

Union Hires Nonunion Pickets

Billy Raye, a 51-year-old unemployed bike courier, is looking for work.

Fortunately for him, the Mid-Atlantic Regional Council of Carpenters is seeking paid demonstrators to march and chant in its current picket line outside the McPherson Building, an office complex here where the council says work is being done with nonunion labor.

"For a lot of our members, it's really difficult to have them come out, either because of parking or something else," explains Vincente Garcia, a union representative who is supervising the picketing.

So instead, the union hires unemployed people at the minimum wage—$8.25 an hour—to walk picket lines. Mr. Raye says he's grateful for the work, even though he's not sure why he's doing it. "I could care less," he says. "I am being paid to march around and sound off."

Jeremy Siegel's Forecast

The Wharton economist is optimistic:

If post-World War II patterns hold for the future, he calculated last week, prospects for stock investments are excellent: there would be a 96.6 percent probability of a positive return for the next 5 years, going up to 100 percent for 10- and 20-year periods. Average real returns would be stellar — about 11 percent annually in holding periods from 1 to 20 years.

Median Duration of Unemployment

Click on graphic to enlarge.

This recession looks very different, and much more troubling, than those in the recent past.  I wonder how this dramatic change in the nature of unemployment will alter traditional macroeconomic relationships, such as Okun's Law and the Phillips curve.

Some research suggests that the long-term unemployed put less downward pressure on inflation.  If that is indeed the case, then the increase in long-term unemployment may mean that we will see less deflationary pressure than we might have expected from the high rate of unemployment.  In other words, the NAIRU may have risen, perhaps quite substantially.  This is mostly conjecture, however.  It seems likely we will see more work on this topic in the coming years.

The Problem with Biofuels

Some people who oppose Pigovian taxes, such as a gasoline tax, say we should reduce our gasoline consumption by subsidizing substitutes, such as biofuels.  A new CBO report estimates how expensive that is:

The costs to taxpayers of using a biofuel to reduce gasoline consumption by one gallon are $1.78 for ethanol and $3.00 for cellulosic ethanol.

Given the magnitude of that number, isn't it far better to tax gasoline and reduce income taxes than to subsidize biofuel, which in turn requires increasing taxes to pay for it?

Kudos to Senator Bingaman for raising the issue.

The CEA's Impossible Job

The ARRA, the fiscal stimulus act passed last year, gave the Council of Economic Advisers an impossible job: measuring how many jobs the act created.  Here is the CEA's latest attempt.  As far as I can tell, there are two kinds of evidence here.

First, there are model simulations.  That is, the CEA took a conventional Keynesian-style macroeconomic model and used those set of equations to estimate the effect the stimulus should have had.  Essentially, the model offers an estimate of the policy's effect, conditional on the model being a correct description of the world.  But notice that this exercise is not really a measurement based on what actually occurred.  Rather, the exercise is premised on the belief that the model is true, so no matter how bad the economy got, the inference is that it would have been even worse without the stimulus.  Why?  Because that is what the model says.  The validity of the model itself is never questioned.

(Moreover, the fact that other organizations simulating similar models come to similar conclusions is no evidence about the validity of the model's simulations.  It only tells you the CEA staff did not commit egregious programming errors when running their computer simulations.)

Second, the CEA offers some statistical evidence that things got better after the stimulus passed.  Some of this evidence comes early in the document in the form of simple graphs.  Some comes later by examining deviations from forecasts based on a two-variable vector autoregression.  But the nature of the evidence is basically the same: Post hoc ergo propter hoc.

Of course, there were a lot of other things going on in the economy at this time.  Monetary policy, for example, has gone to extraordinary measures to get the economy going.  TARP was also an unusual intervention that seems to have done its job of returning the economy to some degree of financial normalcy (even if leaving the bad taste of increased moral hazard).  Giving credit for the economic improvement to the fiscal stimulus is a large leap.

In the end, I do not find this CEA document very persuasive.  At the same time, I feel the CEA's pain.  The stimulus act instructed them to do the (nearly) impossible.  Perhaps someday someone will conduct a study that credibly measures the macroeconomic effects of this particular fiscal stimulus.  But it won't be easy.  And it won't look much like the study released today.

maternity leave swap with KoJo Designs - pom pom name pennant tutorial

Hi friends - I thought I'd break out of my newborn haze a little this morning and share some pictures of Ruby:

Ruby is about the sweetest baby I've ever known.  She is a chubby little thing and happy as can be.  We even got a little sleep last night!  I love her pretty hands and how often she smiles in her sleep.  Oscar loves to lean over her moses basket every morning and shout out a very enthusiastic, "HI!  HI!  HI!"

Also, I am excited to welcome Kirstin and Jordan of kojo designs to my blog today.  Since Kirstin is having a baby in August, she proposed that we do a little maternity leave swap to give us each a bit more time to return to crafting.  I've been a long-time fan of kojo's blog and projects, so I was thrilled with the idea!  They have a beautiful tutorial prepared for you today.

So without further ado ... here are Kirstin and Jordan:


Hello there. Congratulations to Jill and a big welcome to Miss Ruby (isn't she lovely?)!  We love babies... there isn't anything as exciting as bringing a new family member home from the hospital.  At the same time, there isn't anything quite as exhausting!  Which brings us to this blog swap- hopefully it gives Jill, Jared and Oscar a little more time for newborn baby kisses and snuggles and naps.  And hopefully our tutorial today gives you some ideas for nursery decor (well, technically, I made this for my toddler's new "big boy room," so I guess it could be any-room decor) as well.

First things first- we are Kirstin and Jordan, sisters who blog over at kojodesigns.  Besides our aforementioned love for babies and making things for our little ones, we have slight addictions to pretty paper and fabric, love nothing more than putting together a kickin' party or shower, and both still subscribe to Martha Stewart Weddings (even though we've each been married for 7+ years- haha!).  We LOVE Jill's blog (the maternity pencil skirt I made using her tutorial wins the award for most worn maternity item during my pregnancy) and are thrilled to be here today.

Let's get started on a pom pom name pennant, shall we?

To make this string-of-goodness, you'll need:
-yarn in your palette
-Goodwill-bound tshirts in your palette (optional)
-a pom pom maker
-floral wire or craft wire
-coordinating felt (a few 9x12 sheets), cut into dime sized circles
-coordinating grosgrain ribbon (I used 3 yards)
-a hot glue gun and hot glue

1. Make a whole pile of pom poms using a medium sized pom pom maker.  Each letter takes about twenty pom poms.  Here are a couple tutorials for using a pom pom maker to make yarn pom poms and jersey pom poms.

2. Print full page sized outlines of letters that spell your name (or word of choice).  I used Powerpoint.  Use a fairly basic font- since you'll be bending wire to match your printouts and don't want a ton of loops or serifs.  Then, bend floral wire or craft wire in place to match each letter outline.  Doubling up the craft wire will give you a solid base for your pom poms.

3. Begin tying pom poms onto your wire letters all in a row.  Switch up the colors so you have an even mix of your color palette.  The pom poms will be a little wiggle-y at this point, don't worry about that.

4. If you haven't already, cut out a stack of dime sized felt circles that match your palette.  You'll need one circle for each pom pom.

5. Once your entire letter is covered in pom poms, secure the pom pom in place by hot gluing a felt circle to the back of the pom pom.  This will glue it in place on the wire.  When you're finished, the back of your letter will be lines of felt circles (my pom poms were close enough together that the felt circles touched each other) in the shape of your letter.  Repeat until you have a whole name (or word) of pom poms.

6. Attach a loop of grosgrain ribbon to the top of each of your letters.  If your letter has two 'tops' (like my "u"), attach two loops.

7.  Thread another piece or grosgrain ribbon through your loops to make a pennant.  Use two coordinating colors of grosgrain if you please.

8.  Hang your pennant and admire your color coordinated, custom room decor!

Again, congratulations Jill!  Thanks for having us today!

The Return of Command and Control

As I discuss in Chapter 10 of my favorite textbook, economists usually favor market-based solutions to control pollution over command-and-control regulations.  Sadly, it looks like policy is moving in the opposite direction.  The WSJ reports:

The original U.S. cap-and-trade market, which succeeded in slashing the power-plant emissions that cause acid rain, is in disarray following the issuance of new federal pollution rules.

The collapse in the pioneering market where power producers trade permits that allow them to emit sulfur dioxide and other pollutants that cause acid rain comes as policy makers seek to establish a similar market to curb the emissions of carbon, a cause of climate change.

The acid-rain market has struggled for the past two years as utilities, states and investors waited for the Environmental Protection Agency to issue new rules. The rules, released last week, put tougher limits on emissions by power plants but rely less on trading. As a result, the allowances that utilities now trade to allow them to emit sulfur dioxide are expected to become worthless.

The Trilemma

Click here to read my column in Sunday's NY Times.

The Root Cause of the Crisis

According to Raghu Rajan: Skill-biased technological change, followed by ill-advised policies.

hello, ruby!

before ...

after!

As you can see, yesterday was a busy day.  I love when I finally finish a work-in-progress.  :)

Jared, Oscar, and I couldn't be more thrilled with the addition of little Ruby to our family.  She has a very enthusiastic fan club.

Posting will be very light for the next several weeks while we get re-adjusted, but I hope to pop in every now and again.  Please forgive me for not responding to comments, or if your emails go unanswered.  I will return eventually!

Prices adjust when the exchange rate can't

A Harvard student emails me the above photo.  He says,

I'm on holiday in Mykonos, Greece, and just spotted the sign in the attached photo....Could a real exchange rate adjustment finally be on the way for Greece?

road show costumes

The youth at my church are doing a performance for what we call a "road show" - basically the kids from each congregation in the area put together a short, musical-type skit, and then we all get together to watch and enjoy. I'm helping out with costumes. It's a good thing my mom arrived this week, because I'm not sure if I would have been able to get it done otherwise.

 
We have a group of cheerleaders in our skit called the Lucky Charms, so I made them lucky horseshoe shirts, some old-school pom pom hair bands, and a megaphone prop.  The shirts are kind of fun because I added glitter to the top coat of the stencil paint (these shirts are freezer paper stenciled) and attached some rhinestones using Elmer's Craft Bond Fabric and Paper Glue.  They should really sparkle under the stage lights.

Phew.  So glad these are done.

P.S.  I'm having a baby TOMORROW.  Wish me luck.  :)

Are stimulus skeptics logically incoherent?

Paul Krugman writes:

There’s now a lot of talk about the fact that U.S. corporations are sitting on a lot of cash, but not spending it. I don’t find that particularly puzzling: with huge excess capacity, why invest in building even more capacity. But almost everyone seems to agree that if we could somehow get businesses to spend some of that cash, it would create jobs.

Which then raises the question: how can you believe that, and not also believe that if the U.S. government were to borrow some of the cash corporations aren’t spending, and spend it on, say, public works, this would also create jobs?....

I have never seen a coherent objection to this line of argument.

A coherent objection to this line of argument might be the following: If the government borrowed the money to spend, it would need to eventually pay the money back. That means higher future taxes, on top of the future tax increases that President Obama already will need to impose to finance his spending plans. Higher future taxes reduce demand today for at least a couple reasons. First, there are Ricardian effects to the extent that consumers take future taxes into account when calculating their permanent income. Second, those future taxes are not likely to be lump-sum but will be distortionary; it is plausible that at least some of those future tax distortions may adversely affect the incentive to invest today.

That is, businesses may be reluctant to invest in an economy that they expect to be distorted by historically unprecedented levels of taxation in the future.  The more the government borrows, the higher taxes will need to go, the more distorted the future economy will be, and the less attractive is investment today.
 
I am pretty sure Paul would not find this line of argument persuasive.  As far as I can tell from reading his commentary over the years, he does not believe that the distortionary effects of taxes are particularly large and so they do not figure much into his policy analysis.  But many other economists (and I suspect many stimulus-skeptics like the tea-partiers) believe that taxes have significant incentive effects and can prevent the economy from reaching its full potential.  Their argument seems logically coherent, even if it relies on a different set of parameter values for the relevant elasticities than Paul believes to be true.

Addendum: In another post, Paul plots investment and the output gap, points out the well-known fact that investment is highly procyclical, and then concludes that investment is down because the economy is weak.  I wish figuring out cause-and-effect were so easy!

When I first learned Keynesian economics, the causation was often taken to go in the other direction: Animal spirits drove investment, which in turn drove the business cycle. Unfortunately, eyeballing time series rarely tells us what causes what. Correlation is not causation, even in the blogosphere.

An Interview with Bob Hall

Via the Minneapolis Fed.

The Ubiquitous Ken Rogoff

• A NY Times profile of Reinhart and Rogoff.
• Ken confirms his membership in the Pigou Club.

how to make printables on picnik

Several people asked how I used picnik.com to make the recipe card in my last post, and since I haven't made much else this week, I thought I'd share.  You see, I use picnik for much more than editing photos.  It is where I make my blog banner and buttons, party invites, gift tags, cupcake toppers, you name it.  It is kind of fabulous.

Start with a blank .jpg image.  An easy way to do that is to just open Microsoft Paint and save the file without doing anything to it.  Upload your blank picture to picnik.com, and it will look like this:

A blank canvas, ready to turn into whatever you wish!

Starting under the Edit tab, you can crop your image to whatever size you wish.  I cropped mine square.

I go to the Create tab next, and usually the first thing I do is add a background color.   In the Effects section, scroll down to the Duo-Tone effect.  Since you are working with a blank image, it will fill in a solid color of your choice.

I'm going to turn this image into a round cupcake topper, so the next place I go is the Frames section.

Select Rounded Edges and turn that Corner Radius to the maximum setting for a perfect circle (if your starting image is a square).  You can also round the edges just a bit, add a square frame ... just play around to find what you want!

Next, I go to Stickers if I want to add an image.  I'll be honest ... the stickers aren't mind-blowing.  And there are some better options when you purchase the premium membership.  But, there are some good free images in there if you look around.  I'll create a cupcake topper using only free picnik features.

You can turn your background color into a border by adding a geometric shape.   You'll be eye-balling the centering, but it isn't too difficult.

Then I find a fun image to add, like this bus (sorry for the color swap - I changed my mind).  Some of my favorite free images come from the Common Symbols, Beards, Iconian Stickers, and Floralia sections.

Next, add text.  Here I used my favorite font, GeosansLight.

If you right click on an image or text, you get a few helpful options.  For example, if you want to change the order of your layers, you can select an image or text, right click, and Send to Back.  Or, if you want two of the exact same images, select the image, right click, and Duplicate Shape.

This comes in especially useful for when you add multiple text boxes, and you want them to all be a consistent text color.  Select the original text, right click on it, and Duplicate Text.  You can edit the duplicated text to say something new, but it will be in the same color as the original.

When you are happy with your image, go to the Save & Share tab and save to your computer.  You now have an image you can use for just about anything!  For cupcake toppers like the example above, I import the image into a Word Document or Powerpoint, re-size as needed, and duplicate it to make a whole page to print.

If you like my bus topper, here is the image.  Right click to save the image to your own computer, and feel free to use it for cupcakes, stickers, or whatever you'd like (for personal use only).  I can see this as part of a really cute Transportation-themed child's birthday party.

I hope that helps!  I really only touched the bare-bones of what this site can do when creating an image from scratch, so play around with it.  And if you use this program and have tips to share, please leave a comment!

A New Problem for Insurance Markets

An article in the Wall Street Journal notes that scientists have identified genetic markers for the proclivity to live a long life.  This raises a host of interesting economic questions:

• Will insurance companies start offering better life-insurance rates to those with these markers? 
• Will they require annuity purchasers to take this test and offer the long-lived worse rates? 
• If insurance companies do not use these markers, perhaps because of regulation, will the availability of these tests cause the markets for life insurance and annuities to unravel because of increased adverse selection?
• In light of the above considerations, what should public policy be toward insurance companies using these tests?
• To the extent that public policy is  motivated by utilitarian concerns, should there be redistribution based on the outcome of these tests?
• If so, in which direction should it go?  Away from those who are long-lived and can work a long life, or toward them, as they have longer periods of old age and retirement to finance?

The Influence of Alberto Alesina

From Businessweek.