Kidney-DiseaseThe latest issue of the American Journal of Transplantation has an excellent and comprehensive cost-benefit analysis of paying kidney donors by Held, McCormick, Ojo, and Roberts. Earlier, Becker and Elias estimated that a payment of $15,000 per living donor would be sufficient to eliminate the US waiting list. The authors adopt a larger figure of $45,000 for living donors and $10,000 for deceased donors and find that even at these rates paying donors generates benefits far in excess of costs.

In particular, a program of government compensation of kidney donors would provide the following benefits (quoting from the article):

  • Transplant kidneys would be readily available to all patients who had a medical need for them, which would prevent 5000 to 10 000 premature deaths each year and significantly reduce the suffering of 100 000 more receiving dialysis.
  • This would be particularly beneficial to patients who are poor and African American because they are considerably overrepresented on the transplant waiting list. Indeed, it would be a boon to poor kidney recipients because it would enable them to reap the great benefits of transplantation at very little expense to themselves.
  • Because transplant candidates would no longer have to spend almost 5 years receiving dialysis while waiting for a transplant kidney, they would be younger and healthier when they receive their transplant, increasing the chances of a successful transplantation.
  • With a large number of transplant kidneys available, it would be much easier to ensure the medical compatibility of donors and recipients, which would increase the success rate of transplantation.
  • Taxpayers would save about $12 billion each year. Dialysis is not only an inferior therapy for end-stage renadisease (ESRD), it is also almost 4 times as expensive pequality-adjusted life-year (QALY) gained as a transplant.

My thoughts on this topic are extremely tentative, hypothetical I would say, but I’ve seen so much other bad commentary I thought I would lay out a possible “model” for what is going on.  I offer this with what I consider to be more than just caveats and qualifications, if you wish simply consider this an exercise in constructing some possibilities to think through.  These are “in my opinion the most likely to be true, compared to alternatives,” but still quite low in terms of their absolute chance of being true.  Here goes:

1. I don’t view Islam as essential to the conflict, though it helps explain some of the second-order causes and effects.

2. I think first in terms of Yugoslavia in the 1990s, which also saw the collapse of an untenable-once-placed-under-pressure nation-state, followed by atrocities.  Building a successful nation state seems to be a “win big, fail big” proposition, and both Yugoslavia and Syria failed.  The West also had its failures leading up to and during the two World Wars, though with a happyish ending.

3. Syria also has become a playground for a proxy war between Iran and Saudi Arabia (among others).  Being a playground for a proxy war is a bad place to be, just ask Vietnam, El Salvador, or Nicaragua.  The mix of #2 and #3 accounts for many of the key features of the crisis, plus as conflict proceeds trust frays and human beings are brutalized, worsening the dynamic.

3b. The proxy war heated up due to a rising Iran, a falling Saudi Arabia, and the collapse of creative ambiguity over roles and responsibilities in what were previously buffer zones.

4. It is very hard to model ISIS, ISIL, Daesh, whatever you wish to call it (the most thoughtful approach I have seen is from Shadi Hamid).  Maybe the group is one fraction crazies, one fraction semi-rational power brokers, and one fraction “momentum traders” who wanted higher status for their local terrorizing and never expected it to get this far and simply could not climb off and stop.  It is hard for groups to back out of strategies which have delivered consistent institutional growth.  In any case, I don’t think of the group as having transitive preferences, even in the intra-profile sense, much less the Arrovian inter-profile sense.

5. I view ISIS as “modern,” or even “hypermodern,” rather than a “return to barbarism.”  The medieval Arabic world was more advanced than Europe in most ways, yet still Islamic ideologically.

6. Islam has the important secondary effect of tying Syria and other Middle Eastern conflicts to disaffected (Muslim) groups living in Western Europe, most of all France and Belgium.  Labor market deregulation, people!

7. Islam has another significant effect.  By melding the political and the theological, it renders the conflict more complex and harder to resolve, and that effect is fundamental to the ideological structure of Islam.  It also helps motivate the proxy war sides taken by Iran (Shii’te) and the Saudis (Sunni).  But note this: when the political order is not up for grabs, Islam does not have the same destabilizing effects.  The merging of the legal and the theological therefore may create greater stability in some equilibria (e.g.,much of Ottoman history, the Gulf monarchies), while less stability in others.

8. The Laffer curve, resource extraction path of ISIS will weaken with time, causing a fiscal starvation and thus a further move toward mean-reducing, variance-increasing strategies.

9. This won’t end well.  Now go read a book on the Taiping rebellion.

Your thoughts are welcome, please try to stick with the analytical and avoid posturing.  And what Russia is up to in Syria is another mystery, best considered another time.

Opioids for the masses?

by on November 24, 2015 at 1:45 am in Data Source, Economics, Law, Medicine | Permalink

This has long seemed to me an understudied topic, so I was interested to read the job market paper of Angela E. Kilby, who is on the market this year from MIT.  And she does what I like to see in a paper, namely try to figure out whether some practice or institution is actually worth it.

The background is this: “…In the face of concerns that undertreatment of pain was a “serious public health issue,” medically indicated use of these drugs over the past 15 years has increased dramatically, and attitudes have liberalized towards the use of opioids for chronic non-cancer pain.”

When it comes to the increased use of opioids, she finds the following trade-offs:

1. Since 1999, there has been a fourfold increase in drug overdose deaths linked to opiod pain relievers.  In 2013, the number of opiate-linked overdose deaths was 25,117, a higher number than I was expecting.  (But note that most of these can no longer be reduced by the feasible interventions under consideration.)

2. The increased use of opioids seems to pass a cost-benefit test, compared to the passage of a tougher Prescription Monitoring Plan.  With a host of caveats and qualifiers, she measures the pain reduction and other benefits from looser regulation at $12.1 billion a year and the costs of higher addiction rates, again from looser regulation, at $7.3 billion per year.

There is much more to it than what I am reporting, and in general I believe economists do not devote enough attention to studying the topic of pain.

UnitedHealth may exit the provision of ACA plans:

The nation’s largest health insurance provider, UnitedHealth Group, dealt a blow to the Affordable Care Act on Thursday when it warned it may stop offering coverage to individuals through public exchanges after taking a big hit to the bottom line from disappointing enrollment and the law’s unexpected effects.

The insurer’s withdrawal from the Obamacare exchanges would force some 540,000 Americans to find coverage from another provider.

UnitedHealth (UNH) downgraded its earnings forecast, bemoaning low growth projections for Obamacare enrollment and blaming the federal health care law for giving individuals too much flexibility to change plans.

People who purchase insurance through the public exchanges are typically heavy users of their plans, draining insurers’ profits, analysts say.

In a sharp reversal of its previously optimistic projections, UnitedHealth suspended marketing of its Obamacare exchange plans for 2016 — which the company has already committed to offer — to limit its exposure to additional losses.

“We see no data pointing to improvement” in the financial performance of public-exchange plans, UnitedHealth CEO Stephen Hemsley said on a conference call, though he added that “we remain hopeful” the market will recover.

The move comes amid indications that insurers are absorbing steeper costs than they expected from plans offered to individuals through the public exchanges, which are purchased online.

The average premium for medium-benefit plans offered to 40-year-old non-smokers is set to rise 10.1% in 2016, according to the Kaiser Family Foundation.

…Even though UnitedHealth wasn’t a major player yet on the ACA exchanges, the fact that it priced plans conservatively and entered cautiously made its statements more significant, said Katherine Hempstead, who heads the insurance coverage team at the Robert Wood Johnson Foundation.

“If they can’t make money on the exchanges, it seems it would be hard for anyone,” Hempstead said.

But that is not all the news.  There is also:

In many Obamacare markets, renewal is not an option

Shopping for health insurance is the new seasonal stress for many

Health care law forces business to consider growth’s costs

Many say their high deductibles make their health insurance all but useless

and my own Obamacare not as egalitarian as it appears

All five are from the NYT, the first three being from the last two or three days, the other two from last week.  They are not articles from The Weekly Standard

To put it bluntly, I don’t think the mandate part of the bill is working.  These are mostly problems which decay and get worse, not problems which self-correct.

On UnitedHealth, here is commentary from Megan McArdle.  Here is Bob LaszewskiHere is Vox.

Between 1989 and 2010, U.S. attorneys seized an estimated $12.6 billion in asset forfeiture cases. The growth rate during that time averaged +19.4% annually. In 2010 alone, the value of assets seized grew by +52.8% from 2009 and was six times greater than the total for 1989. Then by 2014, that number had ballooned to roughly $4.5 billion for the year, making this 35% of the entire number of assets collected from 1989 to 2010 in a single year. According to the FBI, the total amount of goods stolen by criminals in 2014 burglary offenses suffered an estimated $3.9 billion in property losses. This means that the police are now taking more assets than the criminals [emphasis added].

That is from Martin Armstrong, via Noah Smith and Michael Hendrix.  While private sector robberies are underreported by a considerable amount, this is nonetheless a startling contrast.

Can this be true?

Whistleblowers for Innovation

by on November 17, 2015 at 7:21 am in Economics, Law | Permalink

We reward whistle blowers who help to prosecute people who are defrauding the government by giving them a share of the proceeds. Bradley Birkenfeld, for example, provided evidence to the US government that the Swiss bank UBS was illegally enabling US tax evaders. The case led to a $780 million dollar fine against UBS and Birkenfeld collected a sweet cut, $104 million.

Derek Khanna at the R Street Institute suggests a similar system to reward innovators (pdf).

Imagine a research team developed a cancer drug that could save the federal government $1 billion a year. Under the innovation savings program, a portion of those savings would flow back to the researchers themselves, in exchange for their not patenting the technology. In order to be eligible for a prize payout, the innovation would need to meet a minimum cost-savings threshold established by Congress (e.g., $100 million). Since the researchers would be paid out of funds already authorized by Congress, there would be no additional cost to taxpayers, who instead would expect to see still additional savings.

…This idea is directly inspired by the centuries-old concept of “qui tam” claims. Qui tam statutes allowed a private citizen to bring action on behalf of a government to recover a penalty….

But programs that seek only to stamp out waste, fraud and abuse do little to encourage the kinds of innovations that would reduce costs on the “front end.” That’s the goal of the innovation savings program: to provide a profit mechanism, separate and apart from patents and direct subsidies, to encourage innovations that could revolutionize such fields as medical technology, energy efficiency and payment processing

The benefits of such a system are not only that it avoids some of the costs of patents but that it would also work when patents are not available. It only works when the government is a big player but that’s a huge share of the economy.

Worthwhile Canadian Initiative (really)

by on November 17, 2015 at 3:41 am in Economics, Law | Permalink

Canada recently became the first country in the world to legislate a cap on regulation. The Red Tape Reduction Act, which became law on April 23, 2015, requires the federal government to eliminate at least one regulation for every new one introduced. Remarkably, the legislation received near-unanimous support across the political spectrum: 245 votes in favor of the bill and 1 opposed. This policy development has not gone unnoticed outside Canada’s borders.

Canada’s federal government has captured headlines, but its approach was borrowed from the province of British Columbia (BC) where controlling red tape has been a priority for more than a decade. BC’s regulatory reform dates back to 2001 when a newly elected government put in place policies to make good on its ambitious election promise to reduce the regulatory burden by one-third in three years. The results have been impressive. The government has reduced regulatory requirements by 43 percent relative to when the initiative started. During this time period, the province went from being one of the poorest-performing economies in the country to being among the best. While there were other factors at play in the BC’s economic turnaround, members of the business community widely credit red tape reduction with playing a critical role.

That is from a study of Canadian regulation by Laura Jones.

The paper is by David Hugh-Jones, and this is from the research summary:

The study examined whether people from different countries were more or less honest and how this related to a country’s economic development. More than 1500 participants from 15 countries took part in an online survey involving two incentivised experiments, designed to measure honest behaviour.

Firstly, they were asked to flip a coin and state whether it landed on ‘heads’ or ‘tails’. They knew if they reported that it landed on heads, they would be rewarded with $3 or $5. If the proportion reporting heads was more than 50 per cent in a given country, this indicated that people were being dishonest…

The countries studied – Brazil, China, Greece, Japan, Russia, Switzerland, Turkey, the United States, Argentina, Denmark, the United Kingdom, India, Portugal, South Africa, and South Korea – were chosen to provide a mix of regions, levels of development and levels of social trust.

The study’s author Dr David Hugh-Jones, of UEA’s School of Economics, found evidence for dishonesty in all the countries, but that levels varied significantly across them. For example, estimated dishonesty in the coin flip ranged from 3.4 per cent in the UK to 70 per cent in China. In the quiz, respondents in Japan were the most honest, followed by the UK, while those in Turkey were the least truthful. Participants were also asked to predict the average honesty of those from other countries by guessing how many respondents out of 100 from a particular country would report heads in the coin flip test. However, participants’ beliefs about other countries’ honesty did not reflect reality.

This is interesting:

“Differences in honesty were found between countries, but this did not necessarily correspond to what people expected,” he said. “Beliefs about honesty seem to be driven by psychological features, such as self-projection. Surprisingly, people were more pessimistic about the honesty of people in their own country than of people in other countries.

And consider this from Hugh Jones:

“I suggest that the relationship between honesty and economic growth has been weaker over the past 60 years and there is little evidence for a link between current growth and honesty,” said Dr Hugh-Jones. “One explanation is that when institutions and technology are underdeveloped, honesty is important as a substitute for formal contract enforcement. Countries that develop cultures putting a high value on honesty are able to reap economic gains. Later, this economic growth itself improves institutions and technology, making contracts easier to monitor and enforce, so that a culture of honesty is no longer necessary for further growth.”

The research paper is here, and for the pointers I thank Charles Klingman and Samir Varma.

Jones, by the way, makes it clear there are a variety of kinds of honesty, and inferences from any single test should be limited.  For Japan in particular the measured level of honesty depends critically on which test is applied.  The real lesson of the study may simply be that most groups are dishonest, and people are not even honest with themselves about their views of the dishonesty of others.  Honesty depends a good deal on context too.  On some of these questions, see some skeptical comments from Kevin Drum.

If you are looking for simple correlations: “…at individual level, there is no evidence that religious adherence is associated with honesty.”  How about having a Ph.d.?

That is the title of an Arnold Kling blog post, it runs like this (I am not adding an extra layer of indentation):

“With this:

Speaking this week at the EmTech conference in Cambridge, Massachusetts, Editas CEO Katrine Bosley said the company hopes to start a clinical trial in 2017 to treat a rare form of blindness using CRISPR, a groundbreaking gene-editing technology.

…The condition Editas is targeting affects only about 600 people in the U.S., says Jean Bennet, director of advanced retinal and ocular therapeutics at the University of Pennsylvania’s medical school.

I don’t think that the FDA is prepared for what is coming.”

Indonesia’s anti-drugs agency has proposed building a prison on an island guarded by crocodiles to hold death row convicts, an official said, an idea that wouldn’t be out of place in a James Bond film.

The proposal is the pet project of anti-drugs chief Budi Waseso, who plans to visit various parts of the archipelago in his search for fierce reptiles to guard the jail.

“We will place as many crocodiles as we can there. I will search for the most ferocious type of crocodile,” he was quoted as saying by local news website Tempo.

Waseso said that crocodiles would be better at preventing drug traffickers from escaping prison as they could not be bribed — unlike human guards.

There is more here, via Charles Klingman and Mark Thorson, try this Bond movie clip too.

What if the entire town moves?:

When independent traders in a small Welsh town discovered the loopholes used by multinational giants to avoid paying UK tax, they didn’t just get mad.

Now local businesses in Crickhowell are turning the tables on the likes of Google and Starbucks by employing the same accountancy practices used by the world’s biggest companies, to move their entire town “offshore”.

Advised by experts and followed by a BBC crew, family-run shops in the Brecon Beacons town have submitted their own DIY tax plan to HMRC, copying the offshore arrangements used by global brands which pay little or no corporation tax.

The Powys tax rebellion, led by traders including the town’s salmon smokery, local coffee shop, book shop, optician and bakery, could spread nationwide.

The article is here, via John Chilton.  Georgists of the world unite!

It is going slowly, to say the least:

Heaving under mountains of paperwork, the government has spent more than $1 billion trying to replace its antiquated approach to managing immigration with a system of digitized records, online applications and a full suite of nearly 100 electronic forms.

A decade in, all that officials have to show for the effort is a single form that’s now available for online applications and a single type of fee that immigrants pay electronically. The 94 other forms can be filed only with paper.

This project, run by U.S. Citizenship and Immigration Services, was originally supposed to cost a half-billion dollars and be finished in 2013. Instead, it’s now projected to reach up to $3.1 billion and be done nearly four years from now, putting in jeopardy efforts to overhaul the nation’s immigration policies, handle immigrants already seeking citizenship and detect national security threats, according to documents and interviews with former and current federal officials.

The article is here, hat tip goes to Felix Salmon.

Here is my latest NYT Upshot column, on the topic of the Affordable Care Act.  Here is what is to me the key excerpt:

But there is another way of looking at it, one used in traditional economics, which focuses on how much people are willing to pay as an indication of their real preferences. Using this measure, if everyone covered by the insurance mandate were to buy health insurance as the law dictated, more than half of them would be worse off.

This may seem startling. But in an economic study, researchers measured such preferences by looking at data known as market demand curves. Practically speaking, these demand curves implied that individuals would rather take some risk with their health — and spend their money on other things — partly because they knew that even without insurance they still would receive some health care. These were the findings of a provocative National Bureau of Economic Research working paper, “The Price of Responsibility: The Impact of Health Reform on Non-Poor Uninsureds” by Mark Pauly, Adam Leive, and Scott Harrington; the authors are at the Wharton School at the University of Pennsylvania.

One implication is that the preferences of many people subject to the insurance mandate are likely to become more negative in the months ahead. For those without subsidies, federal officials estimate, the cost of insurance policies is likely to increase by an average of another 7.5 percent; even more in states like Oklahoma and Mississippi. The individuals who are likely losers from the mandate have incomes 250 percent or more above the federal poverty level ($11,770 for a single person, more for larger families), the paper said. They are by no means the poorest Americans, but many of them are not wealthy, either. So the Affordable Care Act may not be as egalitarian as it might look initially, once we take this perspective into account.

I should stress that, at this point, I don’t see any realistic alternative to trying to improve ACA.  Still, I find it distressing how infrequently this problem is acknowledged or dealt with, probably from a mix of epistemic closure, a “health insurance simply has to make people better off” attitude, and a dose of “let’s not give any ammunition to the enemy.”  In fact, I think a lot of Democratic-leaning economists and commentators are doing a real disservice to their own causes on this one.

It’s worth noting that Kentucky, one of the best-functioning ACA state exchanges, just elected a Republican governor who very explicitly pledged to tank the current set-up as much as possible, Medicaid too.  I think it’s time to admit this is not just Tea Party activism or Hee Haw political stupidity, rather a large number of the people subject to the mandate simply are not better off as would be judged by their own preferences.  And that is not a secondary problem of Obamacare, it is a primary problem.

Interestingly, I found the NYT reader comments on my piece to be fairly supportive, which is not always the case.  There’s a good deal of “this happened to me, too,” and not so much raw invective about whatever defects I may have.

I think it is a big mistake to argue Obamacare is on the verge of collapse, or whatever other exaggeration of the day may be at hand.  Still, I don’t find the current set-up of the exchanges to be entirely stable, at least not in terms of ongoing popularity, much less consumer sovereignty.

A key question is what happens moving forward.  One option, which I had not initially expected, is for the exchanges to narrow and evolve into an expanded version of some of the earlier plans for a segregated high-risk pool.  In that case, the argument would morph from “don’t worry, enough people will sign up for the exchanges” into “the welfare effects here are still positive, because fortunately not everyone signs up for the exchanges.”  The high risk pool would then at some point require additional subsidies.  In the past, I argued that the penalties for not signing up were too low, but under this scenario it may be desirable to lower rather than raise those penalties.

We’ll see.  The piece covers other issues as well, do read the whole thing.

Here is Megan on the costs of ACA plans.  Here are some interesting calculations from Jed Graham.

Here is the Stanford report of his passing, well done, and here are previous MR mentions of Girard.  He was one of the world’s great thinkers.

Police in the East Rock section of New Haven are trying to send a strong message to residents to lock their doors amid several car break-ins and they are doing it an a rather unconventional way.

Starting today, police who notice valuables left in plain view inside unlocked cars will take them to keep them safe from would-be burglars, according to the New Haven Register.

There have been eight car break-ins in one week alone and Lt. Herbert Sharp told the Register that this strategy will prevent burglars from getting expensive items from cars, while forcing residents to make a trip to the police station to pick up belongings.

After taking the valuables, police will either leave a note or call the resident.

There is a noisy video at the link, via Craig Palsson.