Wham-O returns to the USA (Daily Show).
A program in California makes Democrats conserve, and Repulicans anti-conserve (Slate summary, gated original paper here).
Tolerance lowers HIV rates (MR summary here, ungated research paper here).
Trade surplusses are not always good (FE explains how to shrink them).
Chickenomics of Health Care (Krugman)
The State of Macroeconomics (Economist)
Showing posts with label Public Health. Show all posts
Showing posts with label Public Health. Show all posts
Monday, April 26, 2010
Wednesday, August 12, 2009
Monday, June 22, 2009
The Income Distribution Argument
I'd like to propose that the main hubub about health care is about distribution of income, i.e. a shift in the burden of health care from a "benefits received" principle to a "ability to pay" principle. To make any sort of shift like this you have to accept the principle that health care has certain characteristics attributable to a public good (something whose provision is non-excludable and benefits us all) or a merit good (something worth making more universially accessible). These premises are debatable, but I won't deal with them. Let's just suppose that we shift from fully individual, private-paid to fully public-paid (this is, of course not the change that would really be taking place because our current system is not fully private-pay, and no proposal on the table is fully public-pay).
There's not much reason to believe that the financial costs will be too much higher in public-pay as they are in a private-pay system, at least not per-person. But a private, free-market system tells me that if I want 10,000 dollars of benefit, I pay 10,000 (actually, since these contracts are not usually "actuarially fair" it would be more like paying 10000 and getting 8 or 9 thousand). Same goes for everyone else. This is a very "fair" stystem in terms of "benefits received," i.e. what you put in is what you get out.
Unfortunately, there are a lot of people who don't have the dough for 10,000 of health insurance, and there might not be a lower-priced option they can afford. Besides, if there is, it might not cover a lot of things or have a really high deductible (in fact the deductible might be so high that if they ever got so sick that their costs ever required insurance, it might put those same folks into bankruptcy - 68 percent of all individual bankruptcies are heath care related - anyway, so why bother!). This adds to the dimensions of adverse selection and moral hazard typical to the insurance market. Another "fairness" metric is a person's "ability to pay." If a good has "merit" qualities, and some folks cannot afford even a minimal level of it then what you pay is could be indexed to what you earn. Everyone gets 10000 in benefits, but a rich person pays 15000 or more, and a poor person pays a 5-6000. But is it "fair?" Yes, in a manner of speaking, because if we agree that everyone "should" have 10000 in basic coverage, then we wouldn't expect a person earning just 15000 a year to pay 10000 of it to for health insurance. (N.B. At moments like this I almost wish I remembered the game-theory formal notational definitions of "fair" and "envy-free," as well as the proofs for why Walrasian (free-market) equilibria do not generally exhibit this property....almost.)
Here's where I think the income distribution question slips in. Basically, the fight is this: Republicans represent rich folks, and Democrats represent poor folks. Making health care universal will necessitate a higher burden on richer folksto provide a benefit for poorer folks who cannot afford it. The poorest already get medicaid. Median wages have fallen over the last 9 years. Private health care costs are rising. Households view health care as a necessity. Somthing's gotta give. I suspect that if the Bush economic record were more favorable to the middle quintile of the income distribution then the "get costs under control" rhetoric would have been more effective, but rising health costs coupled with falling middle-class incomes means most people are wise enough to know that cutting costs around the edges won't do much. So, let's look at a couple of the proposals:
1. Sort of the two-tiered "keep what you want if you like it" option. People happy with their stuff now get to keep it but you still pay a percentage of your income into the public system. Of course, they will have to help pay for the publicly funded option, so their costs will either go up, or their coverage will change (by moving into the public pool). Poor people could get covered even if they cannot pay for it themselves, or can only afford a small portion of the burden. This would be a little like the education system, which, of course, is not perfect either.
2. Fully public "single-payer" system. This abandons the private option, and everyone receives the same basic plan. However, payment is based on a percentage of your income, thus shifting the payment burden up the income distribution even farther.
3. "Tax Credits." Rich folks love this option. Being able to deduct health care from their taxable income is great for them for two reasons: one, they all purchase health care anyway; and two, they pay a higher marginal tax on the income they get to deduct. This option would actually be MORE regressive than the current system (and if you think the revenues to make up for the "credit" are growing on trees you're crazy!). Good God, if you believed the republicans you'd think that tax cuts are could discover a cure for AIDS and build moon colonies, but guess what? They won't insure more people.
4. Stay with what we have and try to curb costs. Either way cost-efficiency needs to be addressed. Pulling more people into the pool for normal coverage might cut some costs per-person, but might increase costs in the aggregate, so this might not be such a bad thing.
Unless you believe that health care is a merit good, there will probably continue to be 12-15% of the population uninsured, and a growing percentage who are underinsured.
There's not much reason to believe that the financial costs will be too much higher in public-pay as they are in a private-pay system, at least not per-person. But a private, free-market system tells me that if I want 10,000 dollars of benefit, I pay 10,000 (actually, since these contracts are not usually "actuarially fair" it would be more like paying 10000 and getting 8 or 9 thousand). Same goes for everyone else. This is a very "fair" stystem in terms of "benefits received," i.e. what you put in is what you get out.
Unfortunately, there are a lot of people who don't have the dough for 10,000 of health insurance, and there might not be a lower-priced option they can afford. Besides, if there is, it might not cover a lot of things or have a really high deductible (in fact the deductible might be so high that if they ever got so sick that their costs ever required insurance, it might put those same folks into bankruptcy - 68 percent of all individual bankruptcies are heath care related - anyway, so why bother!). This adds to the dimensions of adverse selection and moral hazard typical to the insurance market. Another "fairness" metric is a person's "ability to pay." If a good has "merit" qualities, and some folks cannot afford even a minimal level of it then what you pay is could be indexed to what you earn. Everyone gets 10000 in benefits, but a rich person pays 15000 or more, and a poor person pays a 5-6000. But is it "fair?" Yes, in a manner of speaking, because if we agree that everyone "should" have 10000 in basic coverage, then we wouldn't expect a person earning just 15000 a year to pay 10000 of it to for health insurance. (N.B. At moments like this I almost wish I remembered the game-theory formal notational definitions of "fair" and "envy-free," as well as the proofs for why Walrasian (free-market) equilibria do not generally exhibit this property....almost.)
Here's where I think the income distribution question slips in. Basically, the fight is this: Republicans represent rich folks, and Democrats represent poor folks. Making health care universal will necessitate a higher burden on richer folksto provide a benefit for poorer folks who cannot afford it. The poorest already get medicaid. Median wages have fallen over the last 9 years. Private health care costs are rising. Households view health care as a necessity. Somthing's gotta give. I suspect that if the Bush economic record were more favorable to the middle quintile of the income distribution then the "get costs under control" rhetoric would have been more effective, but rising health costs coupled with falling middle-class incomes means most people are wise enough to know that cutting costs around the edges won't do much. So, let's look at a couple of the proposals:
1. Sort of the two-tiered "keep what you want if you like it" option. People happy with their stuff now get to keep it but you still pay a percentage of your income into the public system. Of course, they will have to help pay for the publicly funded option, so their costs will either go up, or their coverage will change (by moving into the public pool). Poor people could get covered even if they cannot pay for it themselves, or can only afford a small portion of the burden. This would be a little like the education system, which, of course, is not perfect either.
2. Fully public "single-payer" system. This abandons the private option, and everyone receives the same basic plan. However, payment is based on a percentage of your income, thus shifting the payment burden up the income distribution even farther.
3. "Tax Credits." Rich folks love this option. Being able to deduct health care from their taxable income is great for them for two reasons: one, they all purchase health care anyway; and two, they pay a higher marginal tax on the income they get to deduct. This option would actually be MORE regressive than the current system (and if you think the revenues to make up for the "credit" are growing on trees you're crazy!). Good God, if you believed the republicans you'd think that tax cuts are could discover a cure for AIDS and build moon colonies, but guess what? They won't insure more people.
4. Stay with what we have and try to curb costs. Either way cost-efficiency needs to be addressed. Pulling more people into the pool for normal coverage might cut some costs per-person, but might increase costs in the aggregate, so this might not be such a bad thing.
Unless you believe that health care is a merit good, there will probably continue to be 12-15% of the population uninsured, and a growing percentage who are underinsured.
Friday, June 19, 2009
Markets and Health Care
It's not at all clear what the "best" solution to the current health care problem is. Of course, if the market were competitive and well-functioning, the "most efficient" thing to do would be to just price it and let people choose whether or not they want it.
Sounds great, but that's problematic. People choosing whether or not to get health insurance might know somewhat more about their own health histories than the insurer does, and try to game the system. People who think they're healthy might try to go without health insurance, or maybe alternate their decision so that they get it one year and not the next and so on. (In fact, a lot of people do this with the optional vision or dental coverage in their current health plans.) This gaming of the system by "healthy" people would drive up the price of insurance for regular subscribers because the insurer would know that those people are less healthy on average (or have an informed guess to that effect). That's why as a compulsory subscriber to a group plan most folks "pay" (between themselves and the portion that their employers pay) about $10,000 for insurance, whereas the on the individual market prices run about 15,000. Also, when "healthy" non-subscribers get "unlucky" (which some inevitably will) their reliance on urgent care drives the costs up even more for everyone, including subscribers.Thus, since there is incomplete information, adverse selection, etc., markets don't do the job all that well.
The employer-based system we have now is pretty good, in the sense that it resolves most of the adverse-selection problem by pooling subscribers according to something roughly independent of the quality of their health (i.e. subscribing everyone according to where they work rather than whether they voluntarily enter the insurance market). This does reduce costs, but this system is flawed, too. It distorts labor markets (giving some firms an incentive to move operations to Canada, Mexico, or Asia) because health benefits can comprise up to 30% of the labor cost for some lower-skill occupations. Not only that, but if you can only find part-time work or lose your job, you become uninsured, too (or face the higher prices of the private insurance market discussed above). Mandates might resolve this (we do this for auto insurance, by the way), but people are afraid of this option because some folks are likely to not be able to afford the cost.
That sort of brings us to the current debate, which is more about income distribution than anything else. It represents the classic trade-off between equity and efficiency in drawing up economic policy. It also brings the issue of "public goods" and "merit goods" into the debate. While there is little argument that health care is really a "public good," it may be a "merit good." I'll think about the distributional effects of "reform" tomorrow.
Sounds great, but that's problematic. People choosing whether or not to get health insurance might know somewhat more about their own health histories than the insurer does, and try to game the system. People who think they're healthy might try to go without health insurance, or maybe alternate their decision so that they get it one year and not the next and so on. (In fact, a lot of people do this with the optional vision or dental coverage in their current health plans.) This gaming of the system by "healthy" people would drive up the price of insurance for regular subscribers because the insurer would know that those people are less healthy on average (or have an informed guess to that effect). That's why as a compulsory subscriber to a group plan most folks "pay" (between themselves and the portion that their employers pay) about $10,000 for insurance, whereas the on the individual market prices run about 15,000. Also, when "healthy" non-subscribers get "unlucky" (which some inevitably will) their reliance on urgent care drives the costs up even more for everyone, including subscribers.Thus, since there is incomplete information, adverse selection, etc., markets don't do the job all that well.
The employer-based system we have now is pretty good, in the sense that it resolves most of the adverse-selection problem by pooling subscribers according to something roughly independent of the quality of their health (i.e. subscribing everyone according to where they work rather than whether they voluntarily enter the insurance market). This does reduce costs, but this system is flawed, too. It distorts labor markets (giving some firms an incentive to move operations to Canada, Mexico, or Asia) because health benefits can comprise up to 30% of the labor cost for some lower-skill occupations. Not only that, but if you can only find part-time work or lose your job, you become uninsured, too (or face the higher prices of the private insurance market discussed above). Mandates might resolve this (we do this for auto insurance, by the way), but people are afraid of this option because some folks are likely to not be able to afford the cost.
That sort of brings us to the current debate, which is more about income distribution than anything else. It represents the classic trade-off between equity and efficiency in drawing up economic policy. It also brings the issue of "public goods" and "merit goods" into the debate. While there is little argument that health care is really a "public good," it may be a "merit good." I'll think about the distributional effects of "reform" tomorrow.
Thursday, June 18, 2009
Trust the Producer?
Even in well-functioning, reasonably competitive markets, I cannot think of an economist who would simply say "trust the producer to tell you how much should be consumed and at what price." I don't walk into Walmart and say "tell me what I need this week and we'll pay for it," and neither do most people. But that is exactly the argument some people make about health care. With this propaganda coming out, no wonder prices are so high!
Point 1: The market for health care is one that is inherently prone to imperfect information. In some ways, patients know more about their health and their habits, but doctors know more about their diagnosis and treatment. In fact, doctors specialize in knowing more about things that are wrong with you, so we really don't wand to correct the problem by making patients 100% informed (that would be prohibitively costly). There needs to be some sort of external regulator here.
Point 2: Health care is already rationed by bureaucrats, and we wouldn't have it any other way. Private insurance has armies of bureaucrats that determine what types of procedures and what costs will be approved for your care, not your doctor. If they didn't do this, you wouldn't be able to afford health care.
Point 3: Lots of people have public insurance already, and actually prefer it to being thrown out on the market for private insurance. Most people who are eligible for Medicare, VA benefits, or TriCare (and do not have any employer-provided benefits) happily take these benefits. Even the bureaucracy doesn't seem to bother them that much. In fact a lot of the most expensive patients in the system are already paid for using tax dollars.
Point 4: Private insurance is much more costly per person than being part of a group plan because insurees in the private individual market are adversely selected. Mostly sick people choose to be insured in this corner of the market. Healthy people in this part of the market who don't have insurance sometimes get very unlucky all of a sudden, and their urgent-care costs drive up costs for others.
Point 5: Private insurance premiums are not "actuarially fair" in economic terms. In other words, the premium i pay them exceeds the total expected cost of providing care over the entire pool of insurees. In other words, insurance companies make "economic profit," which should be distinguished from "accounting profit," or "proprietors' income."
I'm not sure if single-payer is the way to go, but the total net cost probably won't go up too much. If you think of the labor cost your employer pays in health insurance as wages you're not getting, it's outrageous! Between my employer and myself, I already pay about $10,000 per year! If that money simply shifted from my BC/BS to the government, and I got a comparable level of care, what does it matter? Bottom line: it's not patients and doctors who decide things now. Bureaucrats already decide and will continue to do so regardless.
Point 1: The market for health care is one that is inherently prone to imperfect information. In some ways, patients know more about their health and their habits, but doctors know more about their diagnosis and treatment. In fact, doctors specialize in knowing more about things that are wrong with you, so we really don't wand to correct the problem by making patients 100% informed (that would be prohibitively costly). There needs to be some sort of external regulator here.
Point 2: Health care is already rationed by bureaucrats, and we wouldn't have it any other way. Private insurance has armies of bureaucrats that determine what types of procedures and what costs will be approved for your care, not your doctor. If they didn't do this, you wouldn't be able to afford health care.
Point 3: Lots of people have public insurance already, and actually prefer it to being thrown out on the market for private insurance. Most people who are eligible for Medicare, VA benefits, or TriCare (and do not have any employer-provided benefits) happily take these benefits. Even the bureaucracy doesn't seem to bother them that much. In fact a lot of the most expensive patients in the system are already paid for using tax dollars.
Point 4: Private insurance is much more costly per person than being part of a group plan because insurees in the private individual market are adversely selected. Mostly sick people choose to be insured in this corner of the market. Healthy people in this part of the market who don't have insurance sometimes get very unlucky all of a sudden, and their urgent-care costs drive up costs for others.
Point 5: Private insurance premiums are not "actuarially fair" in economic terms. In other words, the premium i pay them exceeds the total expected cost of providing care over the entire pool of insurees. In other words, insurance companies make "economic profit," which should be distinguished from "accounting profit," or "proprietors' income."
I'm not sure if single-payer is the way to go, but the total net cost probably won't go up too much. If you think of the labor cost your employer pays in health insurance as wages you're not getting, it's outrageous! Between my employer and myself, I already pay about $10,000 per year! If that money simply shifted from my BC/BS to the government, and I got a comparable level of care, what does it matter? Bottom line: it's not patients and doctors who decide things now. Bureaucrats already decide and will continue to do so regardless.
Sunday, September 28, 2008
Industries Where the Customer May not Always be Right
Found this on Freakonomics. Consumers who bone up on their own health may actually interfere with their own health care. Interesting. Any other applications where the customer may not be "right" and "information may actually lead to worse service? Education? Investing?
Thursday, September 4, 2008
Menu Costs and Information
Are the costs of changing menus really the main barrier that makes restaurants not want to print caloric and nutritional information?
Tuesday, August 19, 2008
If You Can't Bring Compeitive Markets to Health Care ...
bring your health care to the competition.
Competition lowers prices and improves welfare for the average consumer. Trade, offshoring, outsourcing, immigration, privatization, etc. all tend to promote competition. But one problem with health care is that high fixed costs and localization of many markets allow the market to be dominated by a small number of providers who don't have to do much to compete, and often cross-subsidize losses on emergency care with high prices on "elective care." The Economist briefing asks, "What if elective care procedures can be performed equally well in developing countries at a cost low enough to offset the travel cost?"
Until recently most medical outsourcing was limited to hospitals reducing costs by having tests performed and analyzed offshore. But now, folks are taking it to the competition themselves. Other issues here are complex, but it provides an interesting economic analysis in three areas: competition/basic micro; trade and offshoring, and; insurance.
The first two are related and more clear cut. Insurance is an interesting aspect because one might ask what happens once insurance companies start to save a buck by allowing patients to go to India for their knee surgery? Will they begin to require patients to do so if they want that to be covered at their current rates? Will the compensate for it by lowering prices? Will insurers, foreign providers, and patients be equally informed about the benefits and costs? How will US providers respond - will they compete by lowering prices or will they try to differentiate their product by bashing foreign facilities and/or playing to nationalism? All intersting questions. I do not have the answers to them.
Competition lowers prices and improves welfare for the average consumer. Trade, offshoring, outsourcing, immigration, privatization, etc. all tend to promote competition. But one problem with health care is that high fixed costs and localization of many markets allow the market to be dominated by a small number of providers who don't have to do much to compete, and often cross-subsidize losses on emergency care with high prices on "elective care." The Economist briefing asks, "What if elective care procedures can be performed equally well in developing countries at a cost low enough to offset the travel cost?"
Until recently most medical outsourcing was limited to hospitals reducing costs by having tests performed and analyzed offshore. But now, folks are taking it to the competition themselves. Other issues here are complex, but it provides an interesting economic analysis in three areas: competition/basic micro; trade and offshoring, and; insurance.
The first two are related and more clear cut. Insurance is an interesting aspect because one might ask what happens once insurance companies start to save a buck by allowing patients to go to India for their knee surgery? Will they begin to require patients to do so if they want that to be covered at their current rates? Will the compensate for it by lowering prices? Will insurers, foreign providers, and patients be equally informed about the benefits and costs? How will US providers respond - will they compete by lowering prices or will they try to differentiate their product by bashing foreign facilities and/or playing to nationalism? All intersting questions. I do not have the answers to them.
Wednesday, July 16, 2008
Gun Shows and Market Failure
Since the VT shooting, firearms, public health, and emergency preparedness have become a serious and important issue for the State of Virginia (N.B.-I know, it's the "Commonwealth" of Virginia, but it's fun to irritate the redneck aristocracy 'round these parts). Measures in two important areas were considered: (1) reform of the mental health system, most of which ended up being a Criminal Justice-oriented compromise, but a net improvement in many cases (page 2, bottom; page 3, top); (2) stricter rules on background checks for the sale and purchase of firearms, which was killed ("Carried Over"; page 3, middle).
My focus, for the moment is on the Kill Bill on the measure attempting to close the "Gun Show Loophole" on criminal background checks. Basically, there are about a half-dozen loopholes at various state levels that circumvent the federal laws requiring background checks for people purchasing firearms. Admittedly, Cho, the shooter at VT, did not purchase his guns through any such loophole, but that does not mean the argument for closing the loophole is closed. Cho did get his bullets from one such "loophole dealer, which reminds me of this:
Chris Rock Bullet Controll
Anyway, both sides bring strong moral arguments to the table on the broader issue of gun control, so I will try to take a more market oriented approach. Suppose that we meet in a market and we exchange corn for shoes. Better yet, we meet and I buy corn from you for the "social contrivance" Paul Samuelson called money. There is nothing that you really need to know about the corn or that I need to know about how you intend to use it that affects my expected profit from selling the corn or has any externality on any third party. In jargony terms, there's no real market failure in the form of informational asymmetry, moral hazard, or externality.
Now consider a few examples of so-called market failures starting with the used car market. Georg Akerlof used this market to describe the market for "lemons." Basically, only sellers know for sure if their product is a lemon, and this informational asymmetry drives down the price that all sellers are able to obtain, thus crowding out "good" used cars, leaving only lemons. In this example there was some very important information that the seller had that the buyer did not, thus worsening the quality of the market. Similar models by Joseph Stiglitz and Michael Spence use information asymmetry to describe employers' efforts to screen "ability" and "effort" of their employees in labor markets.
We can also consider the auto insurance market. In this case, buyers are "adversely selected": only the buyer knows if he is a bad or reckless driver. The result? One result might be that it drives up the cost for users who are good and careful drivers, or good drivers are not insured (insured drivers are "adversely" selected). Alternatively, this type of market can have an equilibrium in which good drivers are not "overcharged," but they separate themselves from the "bad" drivers by choosing to "under-insure," and only "bad" drivers get full insurance. A similar argument has been applied to health care.
I think that in their best moments, advocates for stricter background checks are really just trying to address these simple market failures. Basically, the best way to protect the gun-ownership rights of honest, law-abiding citizens is to take steps to ensure that those who buy guns (be it at gun shows, estate auctions, or other "loopholes") are not "adversely selected" due to some informational asymmetry, because the potential harm to third-parties (externalities) are so immediate and severe. I
My focus, for the moment is on the Kill Bill on the measure attempting to close the "Gun Show Loophole" on criminal background checks. Basically, there are about a half-dozen loopholes at various state levels that circumvent the federal laws requiring background checks for people purchasing firearms. Admittedly, Cho, the shooter at VT, did not purchase his guns through any such loophole, but that does not mean the argument for closing the loophole is closed. Cho did get his bullets from one such "loophole dealer, which reminds me of this:
Chris Rock Bullet Controll
Anyway, both sides bring strong moral arguments to the table on the broader issue of gun control, so I will try to take a more market oriented approach. Suppose that we meet in a market and we exchange corn for shoes. Better yet, we meet and I buy corn from you for the "social contrivance" Paul Samuelson called money. There is nothing that you really need to know about the corn or that I need to know about how you intend to use it that affects my expected profit from selling the corn or has any externality on any third party. In jargony terms, there's no real market failure in the form of informational asymmetry, moral hazard, or externality.
Now consider a few examples of so-called market failures starting with the used car market. Georg Akerlof used this market to describe the market for "lemons." Basically, only sellers know for sure if their product is a lemon, and this informational asymmetry drives down the price that all sellers are able to obtain, thus crowding out "good" used cars, leaving only lemons. In this example there was some very important information that the seller had that the buyer did not, thus worsening the quality of the market. Similar models by Joseph Stiglitz and Michael Spence use information asymmetry to describe employers' efforts to screen "ability" and "effort" of their employees in labor markets.
We can also consider the auto insurance market. In this case, buyers are "adversely selected": only the buyer knows if he is a bad or reckless driver. The result? One result might be that it drives up the cost for users who are good and careful drivers, or good drivers are not insured (insured drivers are "adversely" selected). Alternatively, this type of market can have an equilibrium in which good drivers are not "overcharged," but they separate themselves from the "bad" drivers by choosing to "under-insure," and only "bad" drivers get full insurance. A similar argument has been applied to health care.
I think that in their best moments, advocates for stricter background checks are really just trying to address these simple market failures. Basically, the best way to protect the gun-ownership rights of honest, law-abiding citizens is to take steps to ensure that those who buy guns (be it at gun shows, estate auctions, or other "loopholes") are not "adversely selected" due to some informational asymmetry, because the potential harm to third-parties (externalities) are so immediate and severe. I
Sunday, July 13, 2008
Ted Kennedy's Brain
Here's a thoughtful post from Freakonomics. So, on first blush it would seem that the social cost of Ted Kennedy's treatment may be very high because it is crowding out resources from more routine medicine that may benefit more people. But I'm not sure this stands the test... unless you're a staunch republican (but, ironically, if you ARE a republican you have to honor and respect the Kennedys' right to choose to receive such treatments, even if they do bid up the cost). It's clear from the principle of "revealed preferences" that the private cost benefit to Mr. Kennedy (and his family) favors vigorous treatments. The implication of the article is that that treatment is the type of low-success-probability procedure that may tend to drive up costs for the rest of us. But, since Ted Kennedy is highly productive and employed in the service of the public, it is possible that extending his life and allowing him to continue is legacy of championing health care and other public-good initiatives like social insurance, his extensive treatments may still create a net gain to society. It's unlikely that this is entering the calclulus, but it is food for thought.
Thursday, June 19, 2008
Thursday, June 12, 2008
Prohibition, the War on Drugs, Zero-Tolerance Laws, and Abstinence
The world is full of perverse unintended consequences in response to government attempts to eradicate markets, even when there is a well-intended reason for attempting to do so (usually to "save the children"). Fewer children drinking, using, driving under the influence or being sexually promiscuous is clearly a good thing. Does that mean that we should advocate for a monolithic policy of prohibition or should we take a more nuanced approach?
We certainly learned this lesson the hard way during prohibition. The prohibition of alcohol led to more crime, and while some individuals may have done without, significantly more folks simply used and produced alcohol more recklessly than they ever would have before prohibition.
There is also considerable dissent against the stupid war we are waging against drugs. This policy has driven the price of narcotics through the roof, created a monopolistic cartel market structure that has introduced an incentive to engage in violence to capture profits and other rents, and created entrenched bureaucracies in government that distort information and lobby for higher budgetary allocations and/or rights to retain money and property seized in raids. (A nice paper on this is Benson, Ramussen, and Sollars, “Police Bureaucrats, Their Incentives, and the War on Drugs,” Public Choice 83 n. 1, 21-45, 1995.)
Zero-Tolernce and lowering absolute thresholds in DUI laws also doesn't work. Under 0.10% BAC laws you've got a window of about 3 drinks before you're over. Basically, it has a divergent effect on use: a few more drinkers will abstain knowing that if they drive at about two drinks they're over the limit, but it raises the BAC levels of other social drinkers who drive after a party because being over the limit at 3 drinks is not much different from being over the limit t 5 drinks once you're caught. My friend Darren Grant has a neat forthcoming paper in Economic Inquiry on this.
If that weren't enough, check out this article from the Economist. Basically, Britain is trying to get kids to drink less by forbidding it, and forcing pubs to show more diligence in enforcing the 18 or older law on drinking. As a result, more teens are abstaining, but their volume of use is on the rise! As it turns out, for kids who were sidling up to the bar at 17, 16, 15 years of age, the old drunks and bartenders actually did a pretty good job of keeping an eye out and keeping them from obliterating themselves. Neat!
We certainly learned this lesson the hard way during prohibition. The prohibition of alcohol led to more crime, and while some individuals may have done without, significantly more folks simply used and produced alcohol more recklessly than they ever would have before prohibition.
There is also considerable dissent against the stupid war we are waging against drugs. This policy has driven the price of narcotics through the roof, created a monopolistic cartel market structure that has introduced an incentive to engage in violence to capture profits and other rents, and created entrenched bureaucracies in government that distort information and lobby for higher budgetary allocations and/or rights to retain money and property seized in raids. (A nice paper on this is Benson, Ramussen, and Sollars, “Police Bureaucrats, Their Incentives, and the War on Drugs,” Public Choice 83 n. 1, 21-45, 1995.)
Zero-Tolernce and lowering absolute thresholds in DUI laws also doesn't work. Under 0.10% BAC laws you've got a window of about 3 drinks before you're over. Basically, it has a divergent effect on use: a few more drinkers will abstain knowing that if they drive at about two drinks they're over the limit, but it raises the BAC levels of other social drinkers who drive after a party because being over the limit at 3 drinks is not much different from being over the limit t 5 drinks once you're caught. My friend Darren Grant has a neat forthcoming paper in Economic Inquiry on this.
If that weren't enough, check out this article from the Economist. Basically, Britain is trying to get kids to drink less by forbidding it, and forcing pubs to show more diligence in enforcing the 18 or older law on drinking. As a result, more teens are abstaining, but their volume of use is on the rise! As it turns out, for kids who were sidling up to the bar at 17, 16, 15 years of age, the old drunks and bartenders actually did a pretty good job of keeping an eye out and keeping them from obliterating themselves. Neat!
Friday, January 25, 2008
Be Cheery
Be cheery, says The Economist magazine. Extreme poverty is plummetting world wide. I agree.
Wednesday, January 16, 2008
Globalization and Syphilis
This article from the NYTimes Caught my eye. Basically the celebrated discoverers of the New World are partly to blame for the 1494 epidemic of syphilis in Europe. Similar issues are posed today with bird flu, HIV, and so on. It's an interesting point on the fact that "globalization" can have certain externalities, especially in the context of the environment, public health, and national security, especially when it comes to the free movement of people (in terms of tourism as well as immigration). But should this news reinforce or support our "agorophobia" (an interesting term referring to a fear of "going outside" or "fear of the marketplace") about trade and globalization? Heck no! It means we should attack the root of the issue instead of trying to avoid it through restrictions, if you asked me (not that anyone did or will).
Friday, October 26, 2007
Wealth or Health?
Check out this 20 minute presentation by a gentleman named Hans Rosling on "TED Talks." Dr. Rosling is a doctor does research in the medical profession on public health in the "Developing Wolrd" and maintains an analysis tool known as "Gapminder." One interesting contribution he makes is his ability to express trends in data in a very intuitive, visual way.
The econometrician inside of me has about a thousand "buts" for the presentation, but it represents a great start- it does the essential surface "strip mining" that helps us see what things need better testing, and which things can be used as controls. It reminds me of something I learned from Roger Koenker: "If you torture the data enough, it will confess." In Dr. Rosling's case, he sheds quite a lot of light on the nature of health and wealth with very little of the usual waterboarding that economists usually do.
The most intersting part of it is that growth does not seem to "trickle down" to aspects of welfare such as life expectancy, infant and child mortality, etc. on average. Conversely, it seems to be the case that things like public health, evolution in institutions and society, etc. act as a precursor to growth, something about which Daron Acemoglu has been on the economics profession's case for some time now. And, it shouldn't be surprising-- the industrial revolution in Britain followed a similar pattern, as I've mentioned here before.
Yet, Dr. Roslings conclusions are similar to those that economists, even the most neoclassically trained among us, would readily agree with. First, that things like trade and markets are helping a number of countries pull themselves out of despair and poverty; second, that political institutions and good government play a critical role in ensuring that the benefits of growth are distributed in a way that respects the median citizen; third, that these factors HAVE contributed to a considerable normalization and flattening in the distribution of world income over the last half-century.
The econometrician inside of me has about a thousand "buts" for the presentation, but it represents a great start- it does the essential surface "strip mining" that helps us see what things need better testing, and which things can be used as controls. It reminds me of something I learned from Roger Koenker: "If you torture the data enough, it will confess." In Dr. Rosling's case, he sheds quite a lot of light on the nature of health and wealth with very little of the usual waterboarding that economists usually do.
The most intersting part of it is that growth does not seem to "trickle down" to aspects of welfare such as life expectancy, infant and child mortality, etc. on average. Conversely, it seems to be the case that things like public health, evolution in institutions and society, etc. act as a precursor to growth, something about which Daron Acemoglu has been on the economics profession's case for some time now. And, it shouldn't be surprising-- the industrial revolution in Britain followed a similar pattern, as I've mentioned here before.
Yet, Dr. Roslings conclusions are similar to those that economists, even the most neoclassically trained among us, would readily agree with. First, that things like trade and markets are helping a number of countries pull themselves out of despair and poverty; second, that political institutions and good government play a critical role in ensuring that the benefits of growth are distributed in a way that respects the median citizen; third, that these factors HAVE contributed to a considerable normalization and flattening in the distribution of world income over the last half-century.
Sunday, September 23, 2007
Baby Crib Recall
China and TRADE HAVE NOTHING TO DO WITH THIS! It's a design flaw by US designers and managers!
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