Questions I haven’t made much progress on

by on October 24, 2009 at 9:39 am in Economics, Medicine | Permalink

1. If you are in a liquidity trap, is your exchange rate indeterminate?  Under what conditions?  Along what range?

2. Does it matter if the other currency is also in a liquidity trap?

3. What will result from the intersection of two possible trends: insistence on a greater equality in health care outcomes, and the development of new technologies — some at the genetic level for the individual — which will lead to a greater inequality of health care outcomes?

1 Michael F. Martin October 24, 2009 at 10:23 am

On 1 and 2 — not indeterminate, but carry trades are far riskier since liquidity traps can end with sudden flips from savings to consumption — sudden meaning a period of months. Aren’t currency markets liquid enough to handle such a shift? Sure there will be big winners and losers, but how would the exchange rate be indeterminate in a liquidity trap? I don’t know the numbers well enough to know the answer.

2 Brian October 24, 2009 at 11:07 am

I’m going to stick with #3 for this one. I think ao is spot on in this case, it’s not a zero sum game.

At root for this question is what obstacles are in place for greater equality. Naturally, the frontier of medicine will be significantly more expensive (increasing marginal cost?). If we treat this as the only factor, it’s settled.

However, this expense is only looking at half the equation. If genetic modification were to be so successful that, even at its great cost, it still saves money over the course of the person’s life, the game changes completely.

The ultimate issue then becomes a question of capital. Even at a lower overall cost, it is a significant cost at one time. It’s almost identical to buying a house with cash or mortgage.

In the end, if the genetic solution does save costs overall (a reasonable assumption unless we’re willing to measure utility by a different variable) it does not have to crowd out equality.

3 Tomasz Wegrzanowski October 24, 2009 at 12:32 pm

#3 – technology brings mostly greater equality in health outcomes due to severely diminishing returns. The same about of money and technology will make far more significant difference to people who would otherwise be the most unhealthy. We can even make people with HIV live four time longer, but barely add a few years to lifespans of an average person.

It would be highly surprising if this diminishing returns curve reversed itself, or even flattened.

(and this isn’t tautological; by contrast with people, money applied to a mid-healthy country like China works a lot better than applied to a low-health country like most of Africa, or high-health country like most of Western Europe).

4 Anne T. Positivist October 24, 2009 at 6:47 pm

There would have to be a complete breakdown in the forex market. The dollar value of a day’s forex trading exceeds that of the NYSE Euronext in a month, so it’s not going to happen.

5 brian October 24, 2009 at 11:03 pm

I for one am not advocating greater equality in outcomes, only greater equality in access to basic/routine care. And I don’t think I am alone.

please forgive me for being dense. i believe i understand what you’re saying in its format–it’s a popular defense of property rights, we are all equally entitled to pursue property, but not have an equal division of it.

in this case, however, i think i may misunderstand something. it seems that access to care, by its nature, means an amount of care. one cannot have meaningful access to care without having more care.

unless of course you’re saying that all people of meaningful variables should be treated equally. that is, all non-smokers should be treated similarly, but different from all smokers (or whatever other set of variables you choose).

the problem i’m seeing with this is that it’s difficult to determine what variables should count. do we count only genetic, but not environmental factors? do we use a sort of excise tax for insurance?

i’m very curious to see how this would pan out. i used to be a john locke type property theorist, so i am interested in how it would apply in this case.

6 rjs October 25, 2009 at 5:11 am

my take on #3 – auto evolution is something we must undertake; this species is woefully incapable of deling with the problems it faces:

the human race is almost finished

here’s another take, which includes specific genetic proposals: – the moral imperative of our future evolution

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