John Cochrane on portable health insurance
The entire Op-Ed is interesting and noteworthy, but the part on health insurance is perhaps the cutting edge of the piece analytically:
Health insurance should be individual, portable across jobs, states and providers; lifelong and guaranteed-renewable, meaning you have the right to continue with no unexpected increase in premiums if you get sick. Insurance should protect wealth against large, unforeseen, necessary expenses, rather than be a wildly inefficient payment plan for routine expenses.
People want to buy this insurance, and companies want to sell it. It would be far cheaper, and would solve the pre-existing conditions problem. We do not have such health insurance only because it was regulated out of existence. Businesses cannot establish or contribute to portable individual policies, or employees would have to pay taxes. So businesses only offer group plans. Knowing they will abandon individual insurance when they get a job, and without cross-state portability, there is little reason for young people to invest in lifelong, portable health insurance. Mandated coverage, pressure against full risk rating, and a dysfunctional cash market did the rest.
Rather than a mandate for employer-based groups, we should transition to fully individual-based health insurance. Allow national individual insurance offered and sold to anyone, anywhere, without the tangled mess of state mandates and regulations. Allow employers to contribute to individual insurance at least on an even basis with group plans. Current group plans can convert to individual plans, at once or as people leave. Since all members in a group convert, there is no adverse selection of sicker people.
I suppose my worry is this. As individuals age, they will become greater health risks and that will hold even if Cochrane keeps Medicare going. That means a higher price for their individual portable insurance. It is not clear to me under what conditions premia can be raised legally (what does “unexpected increase” mean?), but it seems the result is much higher premia for sick people, or legally-mandated low premia, but then providers will restrict access and lower the quality of care, as another means of raising the price of course. Contractually speaking, price is verifiable but quality of care is not. The overall problem is not one of “adverse selection” but rather simply that the good information of the suppliers means that insurance is hard to sell at all for many conditions.
I do understand the option of letting the premia rise, and selling insurance against that event too, and maybe that could work. Still, it is surprising how many insurance markets don’t really blossom even if it seems they would make economic sense. Just ask Robert Shiller or look at the earlier history of failed CPI futures. I’d like to experiment with Cochrane’s idea, which I think has real promise, but on a trial basis first. The question is what such a trial might actually mean, and who would be willing to give up their current arrangements to make such an experiment possible. If the recent Obamacare reactions show anything, it is that status quo bias is getting stronger all the time in matters of health care.
Assorted links
1. “Let them eat cake that looks like ramen.”
2. Dani Rodrik has lots of tweets on what is going on in Turkey.
3. “Spengler” makes claims about China.
4. Is fake knee surgery as good as real knee surgery? And is the decline of football proceeding?
5. Update on the “auction off the rights to kill a black rhino to save some black rhinos” debate.
Google Glass: my early impressions
I have one now and I wish to thank whoever it is that offered me the invitation to buy. It is a privilege to have an early chance to preview and try out what may well prove to be a major technological advance.
That said, I still don’t find this to be a useful device. Here are my difficulties, many of which are specific to me:
1. Right now it’s only for people who see well. I kept on wanting to put on my (non-Google) glasses to view things through Google Glass. That doesn’t work. I also find it involves eyestrain and discomfort to look up into that upper right corner. That’s probably my defect rather than Google’s, but in contrast I know I am high quality enough to use their search engine and probably their driverless car as well. (Gmail remains a toss-up but I fear I am failing at it, even though I use it only for storage.)
2. I would do better if the small screen were above the left eye rather than the right.
3. It works through wireless, which means either a) I can use it at home which is exactly where I don’t need it, or b) I can carry around a WiFi device, which indeed I do have, but at some point it all stops being so easy, and furthermore there are then two battery lives to worry about (4-5 hours for Glass, I am told by various sources), two things I need to turn on and off, and higher carrying costs. There is by the way a Bluetooth method for running them through (some) smart phones, I am not sure at what difficulty or expense.
4. I tried to prime its connection to two wireless systems (home, and the mobile WiFi device) and each time I required the services of the help desk. I wouldn’t call it buggy, but it doesn’t have the seamless, intuitive ease of use that we are growing to expect from new devices.
5. Glass is comfortable enough to wear, but when you take it off there is no easy and safe way to fold it up and put it away safely. It’s non-wear carrying costs appear to exceed its liquidity premium.
6. The timeline seems to get crowded — but with what? — and getting out of the timeline and into other functions is not intuitive. In general the shifting around across functions involves awkwardness. There is the tap, the multiple tap, the forward and backward finger slides, and movements of your head, all of which need to be somewhat learned and coordinated.
7. Perhaps my biggest worry is that my iPad does most of what Glass is supposed to do, at least as far as I can tell. I find that my carrying costs for the iPad are quite low, especially since I am usually carrying around a bag of books anyway. When using Glass, I feel I first have had to grab an iPad, shrink it a good amount so I can no longer easily view it, tape it to my upper right forehead, and start tapping on it and sliding it instead of using the keyboard.
8. I do understand the “hands-free” point, but it does not benefit me much. I wouldn’t use Glass when driving, don’t need it when cooking, and don’t wish to take photos when doing that other thing.
The pluses are that the voice recognition seems to work pretty well and the photos and video are decent quality, on top of the remarkable fact that the device is possible at all. Wearing the Glass is extremely light and relatively comfortable. The help line is open on Christmas day and involves no wait time at all. It’s remarkable, when you first open the device, how little there is to the whole thing. You keep on thinking “so where’s the rest of it?” and there is no more, a small band encased in light plastic performs all of these remarkable functions and Glass brings us yet one step closer to a future world of pure seamless magic, albeit a magic for acrobatic eyes only.
I still feel Google Glass has remarkable potential, but for me it is not yet something I wish to use rather than analyze.
Here is one useful review, more positive than my account, and here is another review.
Are your eBooks reading you?
“What writer would pass up the opportunity to peer into the reader’s mind?” she asked.
Scribd is just beginning to analyze the data from its subscribers. Some general insights: The longer a mystery novel is, the more likely readers are to jump to the end to see who done it. People are more likely to finish biographies than business titles, but a chapter of a yoga book is all they need. They speed through romances faster than religious titles, and erotica fastest of all.
At Oyster, a top book is “What Women Want,” promoted as a work that “brings you inside a woman’s head so you can learn how to blow her mind.” Everyone who starts it finishes it. On the other hand, Arthur M. Schlesinger Jr.’s “The Cycles of American History” blows no minds: fewer than 1 percent of the readers who start it get to the end.
Oyster data shows that readers are 25 percent more likely to finish books that are broken up into shorter chapters. That is an inevitable consequence of people reading in short sessions during the day on an iPhone.
…He contrasted two romance novels. One had few Amazon reviews and little promotion, but Scribd’s data showed 6 out of 10 readers were finishing it — above average for the genre. Another romance had hundreds of reviews on Amazon, but only about 4 out of 10 readers bothered to finish it. They began closing the book, the data showed, when the writer plunged deeper into fantasy. Maybe this was not a good idea.
Some writers, of course, might not be receptive to hearing this.
“If you aren’t careful, you could narrow your creativity. You won’t take risks,” said Ms. Loftis, the young adult novelist. “But the bigger risk is not giving the reader what she wants. I’ll take all the data I can get.”
There is more here.
Assorted links
1. Interview with Neil Wallace, and another one here (pdf). Both are interesting.
2. A good best jazz of 2013 post.
3. Yet another good argument against free will.
4. Quits seem low, even if we adjust for high unemployment.
5. Cyprus update: “The one bright spot is tourism from Russia, which is enjoying an explosive growth as the country slips into a new economic and cultural orbit.”
6. A better set of Christmas presents there are not. And an amusing Christmas satire on economics blogs, quite good.
Merry Christmas!
Merry Christmas from New Orleans and best wishes for the New Year to all our readers.
Merry Christmas!
Is the United States saving rate too low?
Evan Soltas reports:
The conventional story is that the U.S. has undersaved and overconsumed for decades…
Why is that story wrong? It ignores the fact that households and institutions make up only about a third of U.S. gross saving.
Domestic businesses, which do the other two thirds of U.S. saving and are not reflected in that personal savings rate, have been saving far more than they have in the past. That has offset the decline in personal saving. We can see that in a graph of gross private saving over gross domestic income below.
The U.S. saves about one fifth of gross domestic income — it saved a little more than that in the 1970s and over the last few years, a little less than that in the 1950s and the 1990s. The apocalyptic trend towards zero savings is simply not there. What appears to be a long-term decline in the savings rate is in fact a hand-off between households and businesses in who does the saving.
There are useful graphs at the link and basically it means you should have bought those extra Christmas presents. I would add the cautionary note — for Americans but not for the world — that business savings may be more mobile internationally than are household savings. You also can view these numbers as a harbinger of greater wealth inequality in our future.
Assorted links
1. Cyborg call centers and telemarketing.
2. Using drones to market real estate.
3. How many ACA subsidies will need to be returned to the government? And David Brooks on ACA and mandates. And are these the right traffic estimates for healthcare.gov?
4. Michael Pollan on the intelligence of plants, very good piece.
Might this be another “doubly stupid” economic policy?
The first part is this:
Thousands of disgruntled horse and pony riders rode through the French capital to complain about tax increases they say will put many of them out of business and send 80,000 animals to the abattoir.
The “cavaliers” blocked roads from the symbolic Paris squares, Place d’Italie, Place de la Bastille and Place de la Nation, in protest at government plans to almost treble VAT on equestrian centres.
The response of the government is this:
France has about 700,000 horse-riding instructors and 2.3 million people who ride, 82% of them women. It is the third most popular sport in France.
The government has promised subsidies to prevent riding schools from going under…
The article is here, and I thank Phil Steinmeyer for the pointer. Here is a previous example of a multiply stupid policy, strange how they both involve horses…
From the comments, on seasonal business cycles
ohwilleke reports:
While “Christmas” is new, the notion of a consumption splurge after the fall harvest, followed by a lean late winter-early spring season (Lent/Ramadan) before the spring harvest is deeply rooted in pre-modern agricultural reality. When you have an abundance of perishable goods it makes sense to consume them before they go bad, and then to string out the more limited supply of durable foodstuffs when fresh foodstuffs are scarce. In the same way, summer vacation is rooted in the need to free up children for agricultural labor at times of peak demand. As noted above, spring weddings supply a consumption boost after the Spring Harvest and also are timed to minimize the likelihood of critical parts of a first pregnancy taking place during the lean late winter-early spring (although these days it has more to do with the end of the school year).
Only with cheap and fast trans-hemispheric shipping (together with a lack of significant piracy for most of that trade), and advances in food preservation and refrigeration in the last half century or so, have those agricultural considerations become irrelevant (although, of course, excess and lean times should fall at different parts of the year in the Southern hemisphere and in places like Southern India, the Sahel, and the tropics of Asia, African and South America that have different seasons).
Japan and China use end of year bonuses (often as 6-12% of annual compensation) as a significant part of annual compensation as a way to share rather than leveraging macroeconomic risk for firms and the economy as a whole. In good years, when there is more supply, lots of people get big bonuses; in bad years, scarcity is widespread. The main virtue of this approach is that it makes firms more robust and puts them under less pressure to engage in cyclic layoffs but making labor costs look more like equity and less like debt. This too was well suited to an agricultural tradition rooted in sharecropping or the equivalent that was once widespread in all feudal economies as well as in neo-feudal economies in places like the American South. This isn’t a strategy limited to the orient. It is also the quintessential Wall Street economy model utilized by major financial firms like investment banks and the large law firms that serve them.
The pressure from the “real economy” – both the goods and services supply side and the labor demand side – to have punctuated consumption is much weaker now than it once was, particularly in economies or sectors of economies without the strong annual bonus tradition. The largest sectors of the modern economy that are both strongly cyclic in terms of business cycles and very seasonal within each year, are construction and real estate – and these cycles also drive a fair amount of durable goods consumption. Both construction and real estate are weakest in the winter. Agriculture’s share of the economy is now much more stable from a consumer’s perspective and much smaller as a percentage of the total economy. Real estate handles cyclic shifts by being largely commission based. Construction relies on highly fragmented project specific team building through networks of general contractors and subcontractors rather than integrated firms (a pattern also common in the film industry and theater industry).
Bottom line: The finance oriented macroeconomic models obsessed with interest rates, inflation, GDP growth rates, unemployment rates and size of the public finance sector are ill suited to analyzing optimal seasonal business cycle patterns. A more fruitful analysis looks at the roots of current seasonal patterns in economic history and at the way that the “real economy” has changed with technology to see if those patterns still make sense, perhaps for new reasons.
You will find ohwilleke’s blog here.
Where are the returns to skill highest?
Intriguingly, returns to skills are systematically lower in countries with higher union density, stricter employment protection, and larger public-sector shares.
That is from Eric A. Hanushek, Guido Schwerdt, Simon Wiederhold, and Ludger Woessmann, the NBER paper is here. There is an ungated OECD version here.
The loyal Kalashnikov
Later in life, he disapproved of anyone who he thought had hastened the Soviet Union’s downfall, or who had been unable to control the political and economic turbulence that followed. In memoirs and interviews, he was harshly critical of Mikhail S. Gorbachev and Boris N. Yeltsin.
To the end he remained loyal to what he called Socialist ideals and the leaders who gave them shape, and seemed untroubled by the hardships endured by his family during the early years of Soviet rule. His family’s land and home had been seized during collectivization, and when he was a child the family was deported into the Siberian wilderness. His father died during their first Siberian winter, and one of his brothers labored for seven years as a prisoner digging the White Sea canal.
Still, General Kalashnikov spoke of his great respect for Lenin and Stalin alike. “I never knew him personally,” he said of Stalin, “and I regret this.”
There is more here. I think of him as one of the last tinkerer-inventors from the mechanical tradition, which stretched through the twentieth century but is becoming increasingly obsolete. Precisely because he was from this tradition, his famed rifle was relatively easy to fix, clean, and maintain, easy to equip with interchangeable spare parts, and thus it was easy to use for killing people in poorer countries with lower levels of the division of labor. There is a good Wikipedia page on the rifle here. He will go down in history as a good example of what was wrong with much of the twentieth century
Assorted links
1. The dialects of the United States: take this quiz. I didn’t even know you could call them anything other than “roly-polys.”
2. Paul Oyer, an economist on on-line dating.
3. Edward Luce on disrupting the disrupters.
4. Toward a theory of what dogs prefer.
6. Are adolescents more or less likely to learn from bad news (pdf)?
7. Cass Sunstein on NSA reform. And more on health care price transparency, from John Cochrane.
Another Obamacare glitch
Stella Paul reports:
Millions are losing their health insurance policies and being forced onto the ObamaCare exchanges, where most plans only provide local medical coverage. As Americans realize they must pay for all non-emergency medical care when they leave their home county.
The pointer is from Arnold Kling.