Month: August 2009

The economies of scale of living together

by  Tyler Cowen in

Bruce Bartlett sends me a link to this interesting paper:

How large are the economies of scale of living together? And how do partners share their resources? The first question is usually answered by equivalence scales. Traditional estimation and application of equivalence scales assumes equal sharing of income within the household. This paper uses data on financial satisfaction to simultaneously estimate the sharing rule and the economy of scale parameter in a collective household model. The estimates indicate substantial scale economies of living together, especially for couples who have lived together for some time. On average, wives receive almost 50% of household resources, but there is heterogeneity with respect to the wives’ contribution to household income and the duration of the relationship.

The data are from Switzerland, in case you are wondering, not the United States.

Very good sentences about music

by  Tyler Cowen in

Not all the experiments worked — even [Mitch] Miller granted that backing Dinah Shore with bagpipes was a mistake — but his imagination and eagerness to try new approaches would inspire generations of studio innovators.

That is from How the Beatles Destroyed Rock n; Roll: An Alternative History of American Popular Music, by Elijah Wald.

This excellent book explains the music of the 1940s and its import, how dance shaped American popular music, how women determine which musical innovations catch on, how Prohibition affected big bands, and many other topics of interest.

Did you know that in 1955 "The Ballad of Davy Crockett" became the fastest-selling song in American history?; over twenty different versions of the song were on the charts to drive this trend. 

There have been many new books lately on the history of American popular music but this is the one you should buy and read.

The economics of the secret Chinese menu

by  Tyler Cowen in

Jason Kuznicki asks why do they do it?  Why don't they make the "secret menu" common knowledge?  He gives some answers, including:

Americans have some very set though inaccurate ideas about what
“Chinese food” really is. They will generally balk at anything else.
More people will break this way, and avoid the restaurants, than will
break my way, and go to them more often, if they are offered something
new and different.

I would add that perhaps many Chinese restaurants do not want too many non-Chinese customers.  Especially for immigrants, restaurant life is often about ambience, social contacts, and feeling you have a space to call your own.  A restaurant cannot be all things to all people and the #1 best way of judging a restaurant is to look at its customers.  The "beef with broccoli" menu will attract a certain kind of American customer, but without breaking down the sense of segregation and the basic Chineseness of the place.

That said, there is also the fear that the American customers will order from the secret menu and then not like the chicken feet, etc. and give a bad report to their friends.

Thai restaurants don't have secret menus per se, but often you can talk a so-so restaurant into, for your sake, becoming a very good restaurant with real Thai food.

Who watches a parade?, or three questions in the economics of signaling

by  Tyler Cowen in

In Palermo I saw a parade go by the major street and I saw that many people were watching.  I asked myself the obvious Hansonian question: who watches a parade?

A naive economic account might postulate that low income earners, namely those with low opportunity cost — are those who watch a parade.  Yet this was not my sense watching the watchers in Palermo.  And hey I was watching the parade and in Sicilian terms I'm relatively well off.  (Alternatively, was anyone watching "the parade" at all?)

The "signaling revolution" in economics can subvert established tradition.  For instance it overturns some notions of the relevance of opportunity cost.  People with low opportunity costs are often the same people with low expected benefits from signaling.  So how much does the opportunity cost concept really explain?

I also file Sicily, or at least Palermo, under the heading of: "regions where the poor women are at least as beautiful as the wealthy women."  Why is this sometimes true?  (And does this question about investment in beauty have the same logical structure as the one about the parade?)  It does not, in general, hold for the United States or for that matter Sweden, my current locale.

In Palermo I also saw an ugly young man, but he was very macho, haughty, and full of swagger.  He was with a very beautiful young woman.  He was wearing a designer T-shirt — presumably sold to thousands — with the single word "Rebel" emblazoned just below the neck.  She gazed at him admiringly.

Debbie Hirst, not Stephen Hawking

by  Tyler Cowen in

Didn't I cover this story once before?

One such case was Debbie Hirst’s. Her breast cancer had metastasized, and the health service would not provide her with Avastin,
a drug that is widely used in the United States and Europe to keep such
cancers at bay. So, with her oncologist’s support, she decided last
year to try to pay the $120,000 cost herself, while continuing with the
rest of her publicly financed treatment.

By December, she had
raised $20,000 and was preparing to sell her house to raise more. But
then the government, which had tacitly allowed such arrangements
before, put its foot down. Mrs. Hirst heard the news from her doctor.

“He
looked at me and said: ‘I’m so sorry, Debbie. I’ve had my wrists
slapped from the people upstairs, and I can no longer offer you that
service,’ ” Mrs. Hirst said in an interview.

“I said, ‘Where
does that leave me?’ He said, ‘If you pay for Avastin, you’ll have to
pay for everything’ ” – in other words, for all her cancer treatment,
far more than she could afford.

Officials said that allowing
Mrs. Hirst and others like her to pay for extra drugs to supplement
government care would violate the philosophy of the health service by
giving richer patients an unfair advantage over poorer ones.

I'm not saying Obama wants to do this, I am saying there are some unacceptable features of Britain's NHS (update: the policy was reversed in 2008).  The point is not to compare those features to the problems with the U.S. system.  The point is that everyone is gainsaying the Hawking example without recognizing there have been other people in similar predicaments.  How could such a policy ever have been adopted in the first place?  This is just a reminder, it's not a prompt for you to repeat the familiar story that the U.S. pays more without getting better health care outcomes.

If you want to do a broader comparison, here is more on the NHS and drugs.  Did you know that Rilutek, the main drug (its efficacy is debated) for treating ALS (Lou Gehrig's disease), has been available in the UK since 1997.  It was approved by the FDA in 1995 though covered by Medicare only after the prescription drug bill.  As of 2004, single-payer system New Zealand wasn't offering the drug at all.  If you're wondering, single-payer Canada had approval of the drug in 2000, but with partial early usage in 1995.

By the way, Medicare does cover ALS, even if you're not 65, but various important forms of home adaptation and assistance are left uncovered, as is often the case with Medicare.  It seems the U.S. is the best place for drugs but quite possibly not the best coverage overall for ALS.  If you're looking for one good health care reform, consider dropping the reimbursement rate penalty for home care.

My knowledge of ALS-related issues is not extensive, but aren't such comparisons more interesting than reading another blog post bashing idiots? The more you bash the idiots, the more you are playing into the hands of…the idiots.

Timing

by  Alex Tabarrok in
Let's say a meeting, originally scheduled for Wednesday, has been moved forward two days. What is the new day of the meeting?

That's a question from Mark Frauenfelder at Boing Boing.  The answer says a lot about how you implicitly think about time.

If you think it's Friday, you imagine time as something you move through. If you think it's Monday, you think of time as something that passes by you.

According to this research, a bit sketchy it seems to me, Friday people tend to be angrier.  FYI, I'm a Monday person (it took me some time to see the question could have another answer!).

Avalanches as weapons

by  Tyler Cowen in

Avalanches were used as highly effective
weapons during World War 1.  This disastrous weapon started when lots of
snow fell in the Alps during the December of 1916.  People could tell that
the avalanche risk was high.  A big avalanche killed 250 soldiers while
tumbling down on the barracks.  Some unknown person got the idea that
avalanches could make a highly effective weapon.  The avalanche war had
begun.  Avalanches could be started and even directed by just bombing a
mountain.  History has not yet calculated the exact number of deaths. 
Deaths have been estimated as high as 40,000 on each fighting side.  Humans
are responsible for these death causing, disastrous avalanche killer.

Other web sites bear out similar versions of this story, although often the number of deaths is cited at 60,000.

I was put on to this anecdote from Bill Streever's very good new book Cold: Adventures in the World's Frozen Places.  Single-topic popular science books may feel like an exhausted genre, but we're still seeing good ones come along.

Consumer Driven Health Care Plans

by  Alex Tabarrok in

For about the last 10 years the United States has been experimenting with consumer driven health care plans.  CDH plans typically combine a high-deductible insurance policy with a health savings account or health reimbursement account.  CDH plans now cover well over 8 million individuals, up considerably from 4.5 million in 2007 and these types of plans continue to grow rapidly.  So what have been the results?

The American Academy of Actuaries has recently produced a review of high quality research on these plans.  Here are their conclusions:

The primary indications are that properly designed CDH plans can produce significant (even substantial) savings without adversely affecting member health status.  To the knowledge of the work group, no data-based study has emerged that presents a contrary view.

Cost-savings in the first year of instituting a CDH plan relative to a traditional plan ranged from 12% to 21%, remarkably large figures.  Moreover, costs appear to grow more slowly under CDH plans than under traditional plans.  

The knock on CDH plans has always been that they could cause people to avoid preventative case.  Not only does this appear to be false it’s the opposite of the truth:

Generally, all of the studies indicated that cost savings did not result from avoidance of inappropriate care and that necessary care was received in equal or greater degree relative to traditional plans.  All of the studies reported a signficant increase in preventative services for CDH participants.

Especially interesting is that some of the studies found that CDH plans resulted in better compliance with evidence-based care.

Note that these results come from CDH plans instituted within the current system.  One would expect that the general equilibrium effects of consumer driven health plans would be even larger than the partial equilibrium effects, see Singapore for evidence (but consider Tyler’s remarks). 

The American Academy of Actuaries is a credible organization but I would like to see more of the underlying data.  All of the studies the AAA reviewed used credible methodologies, controlled for selection and were based on substantial data but the major studies so far have been industry funded.

It’s remarkable that in the current debate over how to control health care costs so little attention is being given to the important results of our 10-year experiment with consumer driven health plans.

*Midnight in Sicily*

by  Tyler Cowen in

It's an excellent book, whether on Sicily or Italy more generally, and it is written by Peter Robb.  It is also an excellent book about Naples:

Every transaction in Naples, every social act, requires a complex and at times exhausting social trafficking, a subtle and insidious play whereby the socially weaker player contrives to ingratiate himself and at the same time take the piss out of the stronger, to catch the other wrong-footed, but delicately, imperceptibly, to introduce some subliminal sense of social unease that may then be used as leverage.  To create if possible a sense of obligation, of gratitude, even dependency.  There isn't necessarily any malice in this.  It's an old art of creating strength out of weakness and Neapolitan amiability itself is part of it.  In Naples it has always been a necessary art of survival.  If respect is the crucial concept in social relations in Sicily, the Neapolitan counterpart is its opposite, disrespect.

I also liked this sentence:

In Naples you remembered being happy and never why.