And here is yet another paper suggesting that medical care, or at least some forms of it, has relatively low marginal value.  The subtitle of this one is “Evidence from Mandatory Checkups in Japan” and the authors are Toshiaki Iizuka, Katsuhiko Nishiyama, Brian Chen, and Karen Eggleston.  Here is the abstract:

Using unique individual-level panel data, we investigate whether preventive medical care triggered by health checkups is worth the cost. We exploit the fact that biomarkers just below and above a threshold may be viewed as random. We find that people respond to health signals and increase physician visits. However, we find no evidence that additional care is cost effective. For the “borderline type” (“pre-diabetes”) threshold for diabetes, medical care utilization increases but neither physical measures nor predicted risks of mortality or serious complications improve. For efficient use of medical resources, cost effectiveness of preventive care must be carefully examined.

Here is the NBER link.

If pharmaceutical reciprocity is a good idea for the United States, it’s a great idea for smaller countries. Indeed, this is mostly what happens in practice, even if not by law, since smaller countries can’t afford or justify the expensive US process. Fred Roeder of the Montreal Economic Institute makes the case for reciprocity in Canada:

…reciprocal recognition of drug approval authorities on both sides of the Atlantic would incentivize Canadian, European and American authorities to spend less time and money conducting parallel reviews. If the HPFB, the FDA or the EMA approved a drug, patients in Canada, Europe and America would have immediate access to it — increasing consumers’ choice as new drugs are offered to patients faster and more affordably, with less red tape driving up costs.

A reduction in approval time can be a win-win for patients and firms because a decrease in approval time is an increase in effective patent length without an actual increase in patent length. The numbers below are optimistic, but the idea that streamlining approval can increase profits and stimulate investment is correct:

These market-oriented reforms would not benefit not only consumers, but the pharmaceutical companies as well, expanding the timespan of the patents. On average, new drugs have a mere 10 to 14 years of patent protection remaining by the time they are sold to consumers after they have successfully jumped over all the government hurdles. Streamlining the drug approval process would increase the timespan of patented drugs on the market by 50 to 70 per cent.

Roeder also mentions Bart Madden’s important book Free to Choose Medicine. (For those who don’t know, I am proud to be the Bartley J. Madden chair in economics at Mercatus at GMU.)

That is the topic of my latest Bloomberg column, here is one excerpt:

What’s also striking is that, if the Trump budget can work at all, the spending cuts are probably not needed. It would suffice to cut taxes only, and allow the economy to grow out of an even-greater budget deficit. In this regard, the Trump budget reflects a deep incoherence, and it inconsistently mixes various optimistic and pessimistic scenarios. If the spending cuts are required for fiscal stability, then we probably shouldn’t be doing the tax cuts.

This framework allows us to pinpoint the huge and, I would say, excessively dangerous gamble in Trump’s budget. There is no guarantee that the growth rate of the economy remains higher than the government’s borrowing rate. It is common in American history that government borrowing rates run 5 percent or higher, and the aging of the American population, or perhaps an unexpected catastrophe, such as a war, could lower the growth rate. 1 And once a government becomes addicted to borrowing, it is hard to shake the habit, as subsequent tax increases damage economies.

Do read the whole thing, which focuses on g vs. r…

Heaven forbid that people of means should pay for their own health care, what a sensible idea this was:

Last week, she [Theresa May] came up with a flawed but constructive answer to the crisis of funding in social care. The elderly would finance their care out of their own estate upon death. The upper limit on their contribution would go but they could keep £100,000 for their children. In the mixed metaphors that proliferate in politics, a floor would replace a cap.

The idea turned old age into a high-stakes game of chance — die suddenly and your estate would go untouched, contract dementia and it would shrivel over time — but it confronted voters with the principle that things must be paid for and challenged the Conservative cult of inheritance. Mrs May made it central to her election manifesto. Her self-image as a firm leader hinged on her fidelity to this brave, contentious idea.

A few days of popular disquiet and the cap is back.

That is from Janan Ganesh at the FT.  Solve for the fiscal equilibrium!

Tuesday assorted links

by on May 23, 2017 at 12:18 pm in Uncategorized | Permalink

*Art Collecting Today*

by on May 23, 2017 at 2:19 am in Books, Economics, The Arts | Permalink

The author is Doug Woodham, and the subtitle is Market Insights for Everyone Passionate About Art.

I liked everything in this book, note that the author is a Ph.d economist, has been a partner for McKinsey and also held a major position for Christie’s.

That said, I felt it should have done much more to explain how art is used for money laundering, and also tax arbitrage through donations at inflated prices, based on corrupt appraisals.  Those are big reasons why art prices for highly liquid works have boomed so much over the last few decades.  Arguably art markets are some of the most corrupt markets in the Western world today.

Measured by the number of Instagram followers, the three biggest artists in the world today are Banksy, JR, and Shepard Fairey.

For deceased artists, the Twitter hashtags game is won by Warhol, Picasso, Dali, and van Gogh, with da Vinci, Monet, and Michelangelo coming next.

Of the 25 highest priced artists in the world today, as measured by auction sales, 8 of them are Chinese.  How many of them can you say you are familiar with? On that list are Cui Ruzhuo, Fan Zeng, Zhou Chunya, Zhang Xiaogang, He Jiaying, Huang Yongyu, Liu Wei, and Ju Ming.

Here is more by Zhou Chunya.

Oscar Wilde once said: “When bankers get together for dinner, they discuss art.  When artists get together for dinner, they discuss money.”

I can gladly recommend this book, noting it tells only part of the story.

That is the topic of my latest Bloomberg column, here is one bit, the optimistic part:

When observing the evolution of market prices in reaction to Trump, I am currently left with a mix of very optimistic and very pessimistic sentiments.

First, the European Union, and not the U.S., really does remain the center of Western civilization. The underappreciated good news is that European growth rates are edging up, the euro as a currency appears to have a more secure future, and Brexit, though I view it as a major mistake for the U.K., is not pulling apart the broader European project. The refugee crisis has stabilized, and right-wing populist parties are not taking over Europe. I see that (legitimate) concerns about the impact of Trump are distracting many people from these quite positive developments.

Second, I now view many asset classes as at least partially dependent on Chinese capital, but I’m not so afraid of that capital going away, as those positions have built-in hedges. If China does well, the flow of Chinese capital will continue. If China does poorly, capital will leave China rather rapidly and seek out foreign investments, and that too gives non-Chinese markets a fair degree of protection. China’s highly leveraged position may be precarious internally, but the West has a built-in hedge, namely that bad times for China still send more capital our way, at least for a while. That’s another piece of security that we have been distracted from seeing, though I’m not sure it is good news for China itself.

If you were wondering what to make of low expected volatility in markets, it’s typically worth looking at which asset prices have been volatile. I have two nominations: Chinese corporate bonds and Chinese commodity prices, both of which have fluctuated considerably with changing expectations about Chinese deleveraging. But those have not created a broader crisis of volatility, which is consistent with the above story about how the world as a whole has been growing economically safer. Furthermore, the ongoing growth of emerging economies implies more global diversification over the long run for both trade and investment.

Do read the whole thing.

The culture that is Shanghai

by on May 22, 2017 at 1:50 pm in Education | Permalink

A storm has erupted in China over its hyper-competitive education system, after oversubscribed private schools in Shanghai sought to filter intake by conducting tests and checks not only on prospective pupils but also parents and grandparents.

That is from Emily Feng at the FT, via Dan Wang.

Monday assorted links

by on May 22, 2017 at 11:35 am in Uncategorized | Permalink

Those are one year nominal interest rate futures, basis points on the vertical axis, and this was the result of political troubles relating to another impeachment.  The image is courtesy of AJ.

I’ve been guilty of this too, and I apologize.  It strikes me that it has become politically acceptable among some of the high status people in my Twitter feed to make fun — if only implicitly — of the ugly, idiosyncratic, puzzled, sweaty, or otherwise mockable images sometimes presented by members of the Trump administration.

I’ve also seen a tendency to use images to play on some of the ruling Saudis as fitting stereotypes of sinister or perhaps comical, or some combination of the two.  At the very least, “orientalism” is making a comeback, and with some of the people who have been objecting to Trump’s own stereotypes.

I do not see these as positive developments.  It is inevitable that, to some extent, we judge people by their looks, and in some instances it may be practical and indeed necessary as well.  That said, I doubt if it is a good idea to publicly mock the ugly and the mockable for being ugly and mockable.  Even if they are evil, or doing the world harm.

Many people (rightly) criticized Trump’s campaign imitation and mockery of what seemed to be a spastic individual.  Let’s say Trump had done the same imitation of a spastic who had been convinced of robbery and murder.  Would that have been better?  Well, maybe better but still not good.  Don’t mock the looks, even of wrongdoers, even if those are looks of stupidity or boorishness, and of course members of the Trump administration have not been so convicted.

What if there are some people born looking sinister (by our standards), but are perfectly nice and friendly?  Or say there were witches, and witches were bad, and most witches had long, crooked noses, but some other people did too.  Should we caricature/criticize witches for this appearance?

Furthermore, the standards for ugly and mockable are in fact not always so clear, and trying to cement them in with our mockery is problematic.

This also should be a lesson as to how easily people can slip into enjoying racist, sexist, and otherwise objectionable memes.  Returning to the Saudis, it is especially easy to use this particular photo because stereotypes of Arabs still are permissible in some parts of American discourse:

Would that photo have been retweeted so many times if it simply had looked like a normal Western bureaucratic meeting?  And yes, you can use this photo to show Trump is a hypocrite, relative to his earlier pronouncements about the Saudis, but of course the picture communicates much more, namely that the Saudis have a very different and sometimes strange-looking (to us) culture.

We should not hesitate to criticize what we think is wrong.  But criticizing the appearance of various wrongs, as embodied in the looks of various people, is going a step further.  Don’t let the wrongdoers distract you from the reality that your use of images may be promoting an unjust generalization, or in fact mocking people for non-objectionable cultural elements.  In other words, the use of images may be promoting “lookism.”

This is one of the most serious problems with photos on Twitter, namely that we are not good enough to use them carefully.  Right now, the unjust philosophy of lookism is on a rampage, bigly.

Uber seems to be moving to a system where some rides cost more than others, even in the absence of surge pricing:

An Uber spokesperson assured Axios that pricing has nothing to do with a rider’s perceived level of income, past rides, or any individual characteristics.

So far only for UberPool in limited locations, I also am interested in this as a test of whether social media can strike down price discrimination.  What will the prices be contingent upon?  Traveling to a starred Michelin restaurant?  Why then use UberPool?  Here is further (but still incomplete) information, and yet more here.  How long will it take people to figure out the implied rules for contingent prices?  Are we these days capable of accepting any such rules as fair?

The pointer is from Matthew Kahn.

Sunday assorted links

by on May 21, 2017 at 11:44 am in Uncategorized | Permalink

1. The Saudi monarchy as private firm.

2. Noah on YIMBY vs. NIMBY.

3. Obit of Hegelian Duncan Forbes, one of the best I’ve read, from 1994.

4. What kinds of secrets does the average person admit to keeping?

5. How fake are nature documentaries?

6. The culture that is Northwestern:

Student protesters shut down a sociology class at Northwestern University on Tuesday, after a professor invited an Immigration and Customs Enforcement (ICE) public relations officer to be a guest speaker.

The protesters, chanting and waving banners, argued that the officer’s presence on campus represented a threat to undocumented students. But the professor — who canceled the class during the protest because she was concerned for the speaker’s safety — said she had been hoping to start a dialogue.

“The goal was to bring in somebody who was familiar with how that agency is structured,” Beth Redbird, an assistant professor in the Department of Sociology…

Addendum: The same professor wrote #7 here.

7. I thought Tower was a superb and original movie, documenting the shooting episode from UT Austin in 1966; here is one good review.

As Table 3 shows, eight of the nation’s 12 largest metropolitan areas have lost domestic migrants since 2010. These areas are either pricey coastal regions, or are located in the industrial Midwest. New York, Los Angeles and Chicago have led the nation in domestic out migration for more than three decades. However, because each also receives substantial numbers of international migrants, their overall migration loss for 2010-2016 is minimized. This is also true for other domestic migration losers on the list.

In contrast, Dallas, Houston, and Atlanta registered significant domestic in-migration gains.

That is from William H. Frey, there is much more at the link.  The pointer is from Amy Liu.


That is nominal rates of change, and that is from Pedro Nicolaci da Costa.