Category: Uncategorized
Will price transparency in health care markets work?
The scholarship suggests that more transparency in health care could backfire, causing prices to rise instead of fall…
“I don’t know if you have had the misfortune of having health economists tell you about Danish cement,” said Amanda Starc, an associate professor of strategy at the Kellogg School of Management at Northwestern, one of several scholars who mentioned a paper with a punny name: “Government-Assisted Oligopoly Coordination? A Concrete Case.”
“Everybody loves the Danish concrete example!” said Matthew Grennan, an assistant professor of health care management at Wharton, who has studied the effects of price transparency on hospital purchases.
The Danish government, in an effort to improve competition in the early 1990s, required manufacturers of ready-mix concrete to disclose their negotiated prices with their customers. Prices for the product then rose 15 percent to 20 percent.
The reason, scholars concluded, is that there were few manufacturers competing for business. Once companies knew what their competitors were charging, it was easy for them to all raise their prices in concert. They could collude without the sort of direct communication that would make such behavior illegal. It wasn’t easy for new companies to undercut the existing ones, because the material hardens so fast that you can’t ship it far…
Research on gasoline markets has likewise found that publicizing prices appears to enable collusion in places where there are only a few competitors. But among more plentiful Israeli supermarkets, a database of prices appears to have lowered them.
Scholars at the Federal Trade Commission put out a paper in 2015 cautioning against the kind of price transparency that the president is embracing.
That is all from Margot Sanger-Katz (NYT). And via Ilya Novak, here is a recent piece by Zach Y. Brown:
This paper examines whether information frictions in the market for medical procedures lead to higher prices and price dispersion in equilibrium. I use detailed data on medical imaging visits to examine the introduction of a state-run website
providing information about out-of-pocket prices for a subset of procedures. Unlike other price transparency tools, the website could be used by all privately insured individuals in the state, potentially generating both demand- and supply-side effects. Exploiting variation across procedures available on the website as well as the timing of the introduction, estimates imply a 3 percent reduction in spending for visits with information available on the website. This is due in part to a shift to lower cost providers, especially for patients paying the highest proportion of costs. Furthermore, supply-side effects play a significant role—there are lower negotiated prices in the long-run, benefiting all insured individuals even if they do not use the website. Supply-side effects reduce price dispersion and are especially relevant when medical providers operate in concentrated markets. The supply-side effects of price transparency are important given that high prices are thought to be the primary cause of high private health care spending in the US.
I hope we learn more about this soon.
Tuesday assorted links
1. James Hamilton on Libra. And Barry Eichengreen on Libra. And Ben Thompson on Libra.
2. African internet shutdowns are increasing.
4. I am not sure how I feel about this obituary of Norman Stone. And is “bizarrely” really the right word?
5. China’s favorite food delivery service is now worth more than its biggest internet search firm.
The rise of the non-religious in the Middle East and nearby
Here is the BBC source, which has several other interesting pieces of information, for instance in the polled countries Erdogan is more popular than Putin who in turn is more popular than Trump: 51-28-12% on the approval ratings.
Those new (?) service sector jobs
Teen mail boat jumpers: “Rain or shine won’t keep these mail jumpers from their appointed rounds. Each year a bunch of high school seniors try out as mail jumpers on Wisconsin’s Lake Geneva and it may be the best summer job ever. The challenge is to dash to the mailbox and race back to the boat before it pulls away. The boat slows down but never stops so you have to…”
Via Jamie Jenkins.
Monday assorted links
1. The commercialization of cornhole.
2. Argentina interview (in Spanish).
3. China and North Korea (NYT).
4. Robert Kaplan on China and other stuff.
5. “This study uses an experimental design to explore how people react to criminal stigma in the context of online dating…White females disclosing parole matched at a higher rate than White females not disclosing parole.” Link here.
6. Is Amazon getting worse at bookselling? (NYT)
We place too much weight on redundant information
The present work identifies a so-far overlooked bias in sequential impression formation. When the latent qualities of competitors are inferred from a cumulative sequence of observations (e.g., the sum of points collected by sports teams), impressions should be based solely on the most recent observation because all previous observations are redundant. Based on the well-documented human inability to adequately discount redundant information, we predicted the existence of a cumulative redundancy bias. Accordingly, perceivers’ impressions are systematically biased by the unfolding of a performance sequence when observations are cumulative. This bias favors leading competitors and persists even when the end result of the performance sequence is known. We demonstrated this cumulative redundancy bias in 8 experiments in which participants had to sequentially form impressions about the qualities of two competitors from different performance domains (i.e., computer algorithms, stocks, and soccer teams). We consistently found that perceivers’ impressions were biased by cumulative redundancy. Specifically, impressions about the winner and the loser of a sequence were more divergent when the winner took an early lead compared with a late lead. When the sequence ended in a draw, participants formed more favorable impressions about the competitor who was ahead during most observations. We tested and ruled out several alternative explanations related to primacy effects, counterfactual thinking, and heuristic beliefs. We discuss the wide-ranging implications of our findings for impression formation and performance evaluation.
That is from a new paper by Hans Alves and André Mata, via the excellent Kevin Lewis.
Why aren’t remote interviews as useful as face-to-face interactions?
Skype and Zoom aren’t quite as good as meeting in the physical world. But why? Pioneer and Emergent Ventures are looking to fund research on exactly how and why video conferencing interactions are different. Apply at https://pioneer.app and mention this tweet…Given the rise of remote work, the economic impact of this research could be Nobel-worthy.
That is from Daniel Gross, and here you can apply for Emergent Ventures.
Sunday assorted links
Flying and academic quality
Using the University of British Columbia as a case study, we investigated whether the faculty at our institution who flew the most were also the most successful. We found that beyond a small threshold there was no relationship between scholarly output and how much an individual academic flies…
We certainly did find evidence that researchers fly more than is likely necessary. In the portion of our sample composed of only fulltime faculty, we categorized 10% of trips as “easily avoidable”. These were trips like going to your destination and flying back in the same day or flying a short distance trip that could have been replaced by ground travel. Interestingly, green academics (those studying subjects like climate change or sustainability) not only had the same level of emissions from air travel as their peers, but they were indistinguishable in the category of “easily avoidable” trips as well.
But success isn’t just measured by scholarly output, and so we also checked for relationships between how much academics flew and their annual salaries (which are publicly available). We did find a significant relationship: people who fly more, get paid more. Causation though, could lie in the other direction. Prestigious scholars with more grant money may have extra funds with which to book air travel, for instance.
Here is the full post by Seth Wynes, via Anecdotal.
*Talking to Strangers*, the new Malcolm Gladwell book
Definitely recommended, talking to strangers is one of the most important things you do and it can even save your life. This book is the very best entry point for thinking about this topic. Here is a summary excerpt:
We have strategies for dealing with strangers that are deeply flawed, but they are also socially necessary. We need the criminal justice system and the hiring process and the selection of babysitters to be human. But the requirement of humanity means that we have to tolerate an enormous amount of error. That is the paradox of talking to strangers. We need to talk to them. But we’re terrible at it — and, as we’ll see in the next two chapters, we’re not always honest with each other about just how terrible at it we are.
One recurring theme is just how bad we are at spotting liars. On another note, I found this interesting:
…the heavy drinkers of today drink far more than the heavy drinkers of 50 years ago. “When you talk to students [today] about four drinks or five drinks, they just sort of go, “Pft, that’s just getting started,'” the alcohol researcher Kim Fromme says. She says that the heavy binge drinking category now routinely includes people who have had twenty drinks in a sitting. Blackouts, once rare, have become common. Aaron White recently surveyed more than 700 students at Duke University. Of the drinkers in the group, over half had suffered a blackout at some point in their lives, 40 percent had had a blackout in the previous year, and almost one in ten had had a blackout in the previous two weeks.
And:
Poets die young. That is not just a cliche. The life expectancy of poets, as a group, trails playwrights, novelists, and non-fiction writers by a considerable margin. They have higher rates of “emotional disorders” than actors, musicians, composers, and novelists. And of every occupational category, they have far and away the highest suicide rates — as much as five times higher than the general population.
It also turns out that the immediate availability of particular methods of suicide significantly raises the suicide rate; it is not the case that an individual is committed to suicide regardless of the means available at hand.
Returning to the theme of talking with strangers, one approach I recommend is to apply a much higher degree of arbitrary specificity, when relating facts and details, than you would with someone you know.
In any case, self-recommending, this book shows that Malcolm Gladwell remains on an upward trajectory. You can pre-order it here.
Saturday assorted links
Friday assorted links
1. Country Time paying kids’ fines, lobbying for legalizing lemonade stands (link has video chatter on it).
2. 100 best drummers of all time? Listed at #98 is Karen Carpenter.
3. Let’s ask the astrologers about Libra!
4. David Henderson reviews *Big Business: A Love Letter to an American Anti-Hero*, you need to scroll down a wee bit.
5. The Brown Shoe case ugh, antitrust that makes no sense (NYT).
Labor market polarization and the fertility decline
In the years since the Great Recession, social scientists have anticipated that economic recovery in the United States, characterized by gains in employment and median household income, would augur a reversal of declining fertility trends. However, the expected post-recession rebound in fertility rates has yet to materialize. In this study, I propose an economic explanation for why fertility rates have continued to decline regardless of improvements in conventional economic indicators. I argue that ongoing structural changes in U.S. labor markets have prolonged the financial uncertainty that leads women and couples to delay or forgo childbearing. Combining statistical and survey data with restricted-use vital registration records, I examine how cyclical and structural changes in metropolitan-area labor markets were associated with changes in total fertility rates (TFRs) across racial/ethnic groups from the early 1990s to the present day, with a particular focus on the 2006–2014 period. The findings suggest that changes in industry composition—specifically, the loss of manufacturing and other goods-producing businesses—have a larger effect on TFRs than changes in the unemployment rate for all racial/ethnic groups. Because structural changes in labor markets are more likely to be sustained over time—in contrast to unemployment rates, which fluctuate with economic cycles—further reductions in unemployment are unlikely to reverse declining fertility trends.
That is from a new paper by Nathan Seltzer, via the excellent Kevin Lewis.
Currency manipulation doesn’t actually work so well
That is the topic of my latest Bloomberg column, here is one excerpt on the empirical side:
It is also worth keeping in mind a number of empirical points. First, the ECB has not historically been all that expansionary. Rather, it is renowned for a fairly tight monetary policy. Eurozone rates of price inflation are usually below 2%, and that does not seem about to change.
Second, up through the late 1990s, Chinese currency manipulation consisted of keeping the value of the currency “too high” rather than “too low.” Yet in those earlier times, Chinese exporters still were gaining ground. And since 2005, the Chinese currency has risen considerably — arguably, it has attained the levels one would expect in a normally adjusting market. More recently, the Chinese central bank may be propping up the currency, to limit capital flight from China. That is currency manipulation, but in a manner that will damage Chinese exports, not help them, and indeed China probably is headed toward having permanent trade deficits with the rest of the world.
Finally, countries with low household savings rates tend to run trade deficits, and of course that is the U.S., with savings rates usually below 10% and often as low as 4%. Obviously, if you spend most of your money, some of those expenditures will go abroad, and that will hurt your trade balance. Whether or not you think that is a problem, America’s savings shortfall has little to do with Chinese currency manipulation.
Of course President Trump and yes also Elizabeth Warren are the main offenders here. Read Warren’s Medium essay on these topics, it is shocking in its crude nationalism: “A Plan for Economic Patriotism.“
Thursday assorted links
1. Map of medieval trade routes.
2. Japanese TV show about working overtime, or trying not to (NYT).
3. Do the banks want Libra? (FT, gated, very good piece).
4. New pro-social media book and essay.