Month: December 2010
In today's world of now, now, now and me, me, me! It's nice to know that one company wants you to think about the next generation.
Hat tip: Daniel Lippman.
In 1902, European nations responded to a Venezuelan government debt default with military force. German, Italian and British gunboats blockaded ports, seized customs houses and bombarded a Venezuelan fort. Venezuela caved, agreeing to restructure and pay its debts.
These days, when European leaders see Greece and Ireland on the brink of default, they don't send gunboats–they send money.
That's from Kevin Hassett.
The authors are Noel Maurer and Carlos Yu and the subtitle of this excellent book is How American Took, Built, Ran, and Ultimately Gave Away the Panama Canal. In the old days they might have called this book The Panama Canal. Excerpt:
In 1920, when the Panama Canal first opened to commercial traffic, real freight rates between Britain (Liverpool) and the West Coast of the United States (Portland, Oregon) dropped 27 percent. In 1921, the canal's first year of operation, real shipping costs dropped another 35 percent…by 1922, shipping costs had fallen 31 percent below their prewar average.
Within a few years, oil prices in California and Texas had converged. The authors estimate a social rate of return of nine percent for the first two decades of the canal's existence and they do include the costs of defending it.
In my view, whether as tourists, economists, or historians, people do not spend enough time thinking about the Panama Canal. Here is the book's home page.
A new survey of the FDAs impact on medical technology innovation reports that the FDA is slow, inefficient and costly. The survey is from the Medical Device Manufacturers Association so take it with a grain of salt (but see below). What is most telling, however, is how manufacturers rate the FDA compared to its European counterpart(s).
Overall Experience: 75 percent of respondents rated their regulatory experience in the EU excellent or very good. Only 16 percent gave the same ratings to the FDA…
Respondents also cite specific concerns with the FDA process (not just a general complaint of slowness which could be efficient) such as:
…44 percent of participants indicated that part-way through the regulatory process they experienced untimely changes in key personnel, including the lead reviewer and/or branch chief responsible for the product’s evaluation.
As a result:
On average, the products represented in the survey were available to patients in the U.S. a full two years after they were available to patients in Europe (range = 3 to 70 months later).
In some cases, respondents said they initiated their regulatory processes within and outside the U.S. at the same time, but received clearance/approval in the U.S. much later. In anticipation of long, expensive FDA reviews, others said they decided to seek or obtain European approval first in an effort to generate sales overseas that could help fund their U.S. regulatory efforts.
The survey has a good discussion of potential biases. To those not familiar with the industry it might seem obvious that the MDMA would want to bash the FDA but my experience is that companies in the business don't like to complain. Indeed, the survey notes:
A number of companies indicated that they would not respond due to fear of retribution from the FDA (despite assurances we would maintain their confidentiality).
Addendum: Loyal reader Josh Turnage has produced a video plea to the FDA on behalf of his mother to leave Avastin approved for breast cancer.
“The money supply is too large,” said Andy Xie, an economist based in Shanghai who formerly worked at Morgan Stanley. “They increased the money supply to stimulate the economy. Now land prices have jumped 20 times in some places, 100 times in others. Inflation is broad-based. Go into a supermarket. Milk is more expensive in China than it is in the U.S.”
In Shanghai, where the average monthly wage is about $350, a gallon of milk now costs about $5.50.
The article is a good survey of some Johnny-come-lately China skeptics.
Retail sales probably climbed in November for a fifth consecutive month as Americans began their holiday shopping, showing consumers are playing a bigger role in the U.S. recovery, economists said before a report this week.
The story is here. As D.H. Robertson insisted, there is the money-goods margin and not just the money-bonds margin (Richard Ebeling taught me that point). On the money-goods margin we seem to be experiencing an ongoing rise in aggregate demand. Is the claim that retail spending went up this much, for months, but could not possibly have gone up any higher? If so, I do not believe that claim.
Are we out of the liquidity trap yet?
1. As I've been saying, derivatives clearinghouse regulation isn't working. And that was supposed to be one of the best, least controversial, and most non-partisan parts of Dodd-Frank.
I find it increasingly hard to resist the notion that he is the most enduring director of our time. I've now seen Syndromes and a Century (the best place to start), Blissfully Yours, and Tropical Malady and wish to rewatch them all. Uncle Boonmee Who Can Recall His Past Lives (not yet on DVD) won the Golden Palm at Cannes this year. Themes of his movies include dreams, medicine and its authority relationships, sex and eroticism, homosexuality, the nature of cinema itself, memory, sudden fractures of reality, surrealism, and the modernization of Thailand. [Insert Dancing About Architecture cliche here.] You could frame most of the shots from these movies and turn them into stunning photographs. The plot structure is stronger than it appears at first. These movies also have notable (though quiet) soundscapes, as you would find in a Tarkovsky film.
If you expect to disagree, try then the excellent Ong Bak.
That is the theme of my current New York Times column. Since the non-high-technology supply side of medicine is so restricted and unresponsive to market incentives, the health care market is out of balance. A large number of doctors, for instance, do not accept Medicaid patients and that is because the Medicaid reimbursement rate is lower than Medicare or private insurance. It's a key question how the queueing of Medicaid patients (and to some extent Medicare patients) will proceed as the demand for health care rises.
The new health care bill will on net make this problem worse, even though it has some offsetting incentives for more GPs. Most Republican Party proposals will make this problem worse, by bolstering reimbursement rates for Medicare and perhaps also by worsening Medicaid. In Massachusetts the number of emergency room visits has gone up rather than down, even as near-universal coverage was achieved. And so where do we stand?
The American system of federalism, with its checks and balances and slow policy evolution, has many strengths, but it has also helped create this crazy quilt of health care reimbursement rates. The more demand-side pressure is placed on medical supply, the more Medicaid and Medicare reimbursements rates will determine who and what is rationed.
One option is to simply allow budget pressures to dominate, forcing down even private insurance reimbursements. Most people would end up with low, Medicaid-like reimbursement rates, and would endure long waits and low-quality service. But wealthier people could jump the line by paying more. Think of “Medicaid for everyone” but the rich.
An alternative is giving most people means-tested vouchers for a fixed amount of insurance coverage – which can run out or face up-front caps – making Medicaid and Medicare less of a blank check. The cost explosion would be checked by shifting more of the burden onto consumers. We would have better incentives for consumer-oriented care, and cost control, but we would be making an explicit public decision, at some point or another, to let some people do without medical care.
Recently the Arizona state government restricted transplant coverage for Medicaid patients, but it remains to be seen whether such measures can be applied to Medicare recipients. President Obama already has reversed some of the planned, budget-saving cuts to Medicare.
An entirely different approach is suggested by the system in Singapore, where the government requires savings (say 10 percent to 12 percent of income), patients pay for medical care from those savings, and the government takes care of additional catastrophic expenses. That system has a good record for cost control and access, but would Americans accept so much required saving?
The default course is to maintain or extend Medicare reimbursement rates, raise taxes considerably and accept that Medicaid recipients will face worsening health care access. If you hear of a new solution to the health care puzzle, put aside the politics and instead think through the endgame. Ask not about the rhetoric, but rather about the reimbursement rates.
Here is a good post on Medicare reimbursement rates. Ezra Klein recently had a good post on how the coexistence of private insurance and Medicare messes around with both, but I cannot find it through Google; please leave the link if you know it (update: link is here).
One general problem is that Medicaid is crushing state budgets, but diminishing Medicaid — overall the cheapest form of coverage currently available — would likely impose greater health care costs on some other part of the system. One big question, which I did not have space to consider, is whether cheap private insurance could be much better in the absence of coverage mandates.
Addendum: Arnold Kling comments.
2. Chris Hayes is emcee, and I try to explain Keynes to the readers/listeners of The Nation.
A friend, and a prospective consumer of Hot Pot, inquires for tips on planning a wedding. I will offer a few:
1. Non-contractibility is a bigger problem than you think. You can agree on the number of people, and the amount you will spend on flowers, but ex post many questions will pop up at the margin. One of the two persons will care more about the right answer than the other. One party will be more willing to work on the wedding than the other. Contract in advance for a method of disagreement resolution, not just on the details of the wedding. Get ready for the fact that one person cares less about the wedding than the other and realize this is not the same as caring less about the marriage.
2. Refuse to accept the intransitivity of indifference: "If we invite Uncle Fester, we surely can't turn down Auntie Mame," etc. Just say no and (in vain) expect our federal government to do the same.
3. The purchases are a classic Hansonian "showing that you care" problem and the capitalist suppliers are not on your side. Early, up front, do something to show that you don't care. Buy a cheap paper cup. Relish the feeling. Accept it. Celebrate it. Then let the other person see you still care. Break in the idea of showing that you don't care.
4. Googling to "advice for planning a wedding" is a nightmare of P > MC commercial promotions, not just in the ads but also in the main search results. Rely more on the reader advice, in the comments section, from a very good economics blog.
What am I forgetting?
…Prospective parents put off by the rigor of traditional adoptions are bypassing that system by producing babies of their own–often using an egg donor from one country, a sperm donor from another, and a surrogate who will deliver in a third country to make what some industry participants call "a world baby."
They turn to PlanetHospital and a handful of other companies. "We take care of all aspects of the process, like a concierge service," says Mr. Rupak, a 41-year-old Canadian.
…During one client meeting over tea in Chicago, Mr. Rupak first answers a question about the possibility of breast-feeding if you're not the birth mother. Then, as the conversation wraps up, he says: "I have some good news for you. We'll be offering you and your husband complimentary teeth-cleaning while you're in Hyderabad."
From the WSJ, interesting throughout.
If you wish to buy a gift card from a store, at a discount, how big a discount can you get?
WalMart – 3%
Target – 4%
Home Depot – 7%
iTunes – 8%
Land's End – 9%
California Pizza Kitchen – 10%
Macy's, The Limited – 11%
Bath and Body Works – 13%
Lucky Brand Jeans – 15%
Mostly I am surprised that Macy's is so high and CPK is so low.
Or are people trying to encourage the production of a public good? Here is David Sedaris:
"A couple of books ago, I put a tip jar on my signing table and I made over $4,000 on my tour … I told people it was all for me to spend on candy. They were delighted because it’s funny to give money to someone who doesn’t need it. If there had been a beggar outside the bookstore, at the end of the evening, he might have had 75 cents. Whereas at the end of my best evening in Dallas [I had] $530 in tips."
For the pointer I thank Bob Cottrell.