Is American health care more productive?

Advocates of national health insurance point out that the U.S. spends more on health care, per capita, than any other country in the world. At the same time, Americans rank only in the middle when it comes to actual health and longevity. So you might believe that we could nationalize the industry, save money, and improve our health. Think again:

The proper way to measure the performance of health care is to measure the difference it makes in the quality of life of people who come for help…What we need to know is whether the higher level of spending means the United States is much less productive in health care than other countries.

In an attempt to test the limits of knowledge here, we studied the treatment of four diseases — diabetes, cholelithiasis (gallstones), breast cancer, and lung cancer — in three countries: Germany, the United Kingdom, and the United States. These three countries were the only countries for which comparable data existed for these diseases, either nationwide or for large regions.

The relevant measures were either life expectancy after treatment or measures of the quality of life. And how about the results:

The United States is more productive in all these diseases except for diabetes in the United Kingdom. [emphasis added] The reasons for this result can be traced directly to the huge differences in the way the health care sector is organized and governed across these three countries. The UK health care system is almost entirely government owned and run…The result has been that the United Kingdom has no invested as quickly in technologies that have dramatically improved the diagnostic capabilities of medicine and significantly reduced recovery time…Germany, on the other hand, has a system more like the United States had twenty years ago. In Germany, medical expenses are paid for on a task-by-task basis for services of doctors and hospitals. As a result, hospitals in Germany have no financial incentive to reduce length of stay.

In other words, Americans pay more but get better health care in return. We die sooner because we eat too much and exercise too little, among other facts. For similar results, see this comparison of the U.S. and Japan.

The quotations are from William Lewis’s interesting The Power of Productivity, see p.97. Lewis is a partner at McKinsey, an economics and management consulting firm. Here are other McKinsey writings on health care ($$), including the comparison with the UK and Germany.

By the way, this essay suggests that most of the productivity benefits of health care spring from pharmaceutical consumption. Of course we lead pharmaceutical production but also pay the highest prices. It would be a disaster for the world as a whole if we tried to save money on this front with tight price controls.

The bottom line: National health insurance is unlikely to save on medical costs, unless it cuts back on treatment drastically.

Does caste matter?

If discrimination against an historically oppressed social group is dismantled, will the group forge ahead? This paper presents experimental evidence that a history of social and legal disabilities may have persistent effects on a group’s earnings through its impact on individuals’ expectations. 321 high-caste and 321 low-caste junior high school male student volunteers in village India participated in an experiment in which their caste either was not revealed or was made salient. There were no caste differences in performance when caste was not revealed, but making caste salient created a large
and robust caste gap in performance. When a non human factor influencing rewards (a random draw) was introduced, the caste gap disappeared. The results suggest that when caste identity is public information, low-caste subjects anticipate that their effort will be poorly rewarded. The experimental design enables us to exclude as explanations socioeconomic differences and a lack of self-confidence by low-caste players.

What are they really saying? When the Experiment-Meister knows who belongs to which caste, and this is common knowledge, the low caste players don’t try very hard. It seems the low caste players don’t expect to keep anything they might win.

Use the same players, but “caste blind,” and the low caste players put in a good showing. Their supposed “self-confidence” problems disappear. In fact the high caste players try harder too.

“Mistrust undermines motivation”, write the authors. How is that for a nice three word sentence?

The bottom line: File under: “More problems with Iraq.” No the Iraqis don’t have a caste system, but they are not used to playing by fair rules either. So we can’t expect them to trust the incentives we put before them.

Here is the full paper, which includes the details on experiment design. Of course one experiment doth not a full conclusion make, but I found this work fascinating. If I had an award for “paper of the week” [hmm…], this one might win it.

Wal-mart watch

Imagine that, a new blog devoted solely to news about Wal-Mart, the “best and the worst.”

Did you know that Wal-Mart will be selling DVD players that edit out the offensive content from movies?

A recent Economist article look at how Wal-Mart keeps on growing bigger:

The mathematics of big numbers suggests that Wal-Mart’s growth must slow. Amazingly, the opposite appears to be happening. In America this year, Wal-Mart intends to open some 50 new discount stores and more than 220 new supercentres, some of which will be existing stores moving to new locations. Overseas, it plans another 140 or so new stores, including relocations. This adds up to some 50m square feet of new space–even more than many of its rivals operate in total.

So why shouldn’t it get its own blog? I don’t know whether the topic will sustain a blog in the long run, but I predict we will see more specialty blogs of this kind. (Read this on babyblogs, which are also accused of violating privacy.) As blog readership continues to rise, the division of labor will increase.

Thanks to the Mises blog for the original pointer. By the way, Kevin Brancato puts out a request for co-bloggers.


Ironically, we spend very little on one of the few public goods that I support, asteroid detection and deflection. Even among the strange group that I interact with, this predilection of mine about avoiding asteroids is considered a little odd. But consider that the probability of being killed by an asteroid collision is about the same as being killed in a commercial airplane disaster – small, but all of humanity is aboard that plane.

Assuming there are enough of us around after a hit, I can just see the commission now.

Q. Why was our government woefully unprepared to prevent the deaths of millions of citizens and world-wide devastation?

A. We had only vague, historical information.

Q. What about 2002 EM7?

A. That was a previous administration.

Q. What about 2004 FH

A. NASA did not provide us with a specific threat.

Q. Didn’t you know about Tunguska?

A. That was a foreign threat.

Much more information, with plenty of references, comes from Randall Parker, the far-seeing Future Pundit, who actually works on things like asteroid detection.

China fact of the day

Latest research shows that every day in China at least 300 people are killed in traffic accidents, ranking the country top in the world for both the death toll and the death rate. And the figure is accelerating by 10 per cent every year.

Here is the full story

Peter Gallagher points out the following:

That’s a huge rate of slaughter: 110,000 deaths and 560,000 injured on China’s roads last year. It’s more than 200 times the death rate from SARS (for example) which killed 349 people in China in the eight months from November, 2002 to July 2003 (WHO data), creating a much higher level of anxiety.

The Chinese have fewer cars on the road and drive at slower speeds. Nonetheless “driver negligence” catapults them to the top [bottom] of these rankings.

Nauru goes bankrupt

Remember Nauru? That small Pacific island that got rich off phosphates? The BBC narrates:

Nauru’s rich reserves of phosphates – an ingredient for high-grade fertiliser – created enormous wealth during the 1970s and 1980s.

The island’s 10,000 inhabitants enjoyed one of the world’s highest standards of living, as well as exemption from tax and immigrant labour to perform all menial jobs.

But the phosphates have run out and things have turned sour. Amanda Butler tells us that the government faces foreclosure on 5 May if it does not pay a debt of 230m Australian dollars (US$169m; £94m).

What does it mean for a government to face foreclosure? Well, this government owns the Mercure Hotel in Sydney, a shopping center in the suburbs, and a “derelict” Melbourne tavern. But heck, why not close up the country altogether?

There have been reports that the island’s inhabitants could be given Australian citizenship as a reward for their help with asylum [seekers].

Alternatively, there have occasionally been proposals to move Nauru’s population to another unoccupied Pacific island.

The politically incorrect question: Why do these very small countries exist in the first place? Before answering that question, check out some photos and a short travelogue of Nauru. Or look elsewhere. New Zealanders claim that there are more Tongans in New Zealand than on the mainland of Tonga. Does either the world, or the islanders, still reap a positive cultural externality from maintaining these small groups? If all these islanders simply moved to Australasia, wouldn’t everyone be much better off within a generation? Those are questions, not answers. But I, for one, would not mourn the disappearance of Nauru. Or as the philosophers would say “Nauru as we know it.”

Addendum: Here is some radio narrative. Thanks to Nathan Fong for the pointer.

The future of American education?

Once he [Weinstein] gets to college, he’ll be told to relax, go slow and enjoy learning for its own sake.

Colleges are offering a range of services for stressed students, says the New York Times.

There are now free massages and dogs to cuddle in exam seasons, biofeedback workshops and therapists available to help students work through their first C [TC: what about grade inflation? haven’t we gotten rid of C’s?].

At Harvard, the training given to graduate students who live in the undergraduate houses has in recent years expanded to include ways to help students fight perfectionism — a theme on many campuses — as well as negotiate matters involving race, class and sexual identity.

…Washington University in St. Louis has established stress-free zones during finals, where students can get chair massages and listen to New Age music.

Here is the full story, most of which concerns the difficulty of getting into a top school.

Robert Barro vs. Paul Krugman the conservative

Here is the debate, the link includes a streaming video as well.

The exchanges are an odd mix of agreement about many positive facts and squabbling over the rhetorical gloss. Their core disagreement concerns a value judgment about how much government should be spending:

Robert Barro: The reason I like the tax cuts is twofold. One is that I think it improves the incentives for the longer run economic performance for growth. And secondly, that I favor a smaller size of the government and I learned from the Reagan period that a way to accomplish that is to starve the government of revenue and I look at this as further going in that direction.

Paul Krugman: But that’s where we get to the nub of the matter. At this point talking about what looked like long-run deficits of 4% or 5% of GDP, 25% of the federal budget. You can’t close that gap. If you’re talking about a smaller government, what you mean is major cuts in the level of benefits provided by social security and Medicare. There’s no way to do it without that. Now that–if you favor that, then you favor tax cuts that lead the government to that kind of financial hole because it provides you the reason to cut these programs.

Here is more:

Robert Barro: Milton Friedman asked me once to name a program I thought that people were getting their money out of in terms of a government program. So I answered national defense. And then he said, well give me another example.

Paul Krugman: Well, there we are. Look, if George W. Bush wants to run in 2004 on the program that we don’t need Medicare and we don’t need Social Security and we don’t need Medicaid and we don’t need the Parks Department, and you can go on down the list of everything that isn’t national defense and I intend to cut taxes so that we can’t afford anything except national defense, I’d be happy [sic] if the American people were to give him a majority of the votes on that basis by all means, but that’s not the way that they’re campaigning. They’re campaigning on the basis, you get these tax cuts and we’re going to give you all of these programs we take for granted without any constraints and that’s a lie. [TC: Hey, wasn’t Social Security sold on a misrepresentation in the first place?]

Here’s a takeaway quotation:

Paul Krugman: I’m a conservative. I want to preserve these programs we have and that unfortunately requires more revenue than we’re collecting after the Bush tax cuts.

Hayek is blossoming in the blogosphere

Two new Hayekian blogs started this week. Taking Hayek Seriously is a group blog with an Austrian and free market orientation. Cafe Hayek is run by Russ Roberts (he guestblogged for us a few weeks ago) and Don Boudreaux. Don is my chair and boss at GMU. I am glad to see he has the blogging bug. I like their subtitle: “Where Orders Emerge”.

Here is a humorous site comparing the two Hayeks.

What’s wrong with perfection?

That’s the self-appointed topic of philosopher Michael Sandel. What if we could genetically engineer ourselves to be far “better” human beings? What would be wrong with that? Here is his answer, writ short:

A lively sense of the contingency of our gifts–a consciousness that none of us is wholly responsible for his or her success–saves a meritocratic society from sliding into the smug assumption that the rich are rich because they are more deserving than the poor. Without this, the successful would become even more likely than they are now to view themselves as self-made and self-sufficient, and hence wholly responsible for their success. Those at the bottom of society would be viewed not as disadvantaged, and thus worthy of a measure of compensation, but as simply unfit, and thus worthy of eugenic repair. The meritocracy, less chastened by chance, would become harder, less forgiving. As perfect genetic knowledge would end the simulacrum of solidarity in insurance markets, so perfect genetic control would erode the actual solidarity that arises when men and women reflect on the contingency of their talents and fortunes.

Here is the longer argument.

In other words, Sandel is saying that if we bring about a world where everything is the result of genes, people will be less caring. Social solidarity will diminish.

I doubt this. If you want to drum up sympathy, hold up a picture of a young child with birth defects.

And at what margin is contingency good for us? Would it also increase social solidarity to have our lives “contingent” upon diarrhea, malaria, and tuberculosis?

Going out on a limb:

The future of solidarity may be up for grabs, but for different reasons than Sandel recognizes. The real question is whether parents will prefer to genetically engineer children with more or less social solidarity. I’ll predict more. The benefits of sexual selection (attracting a quality mate) will outweigh the shorter-run benefits from greater selfishness. Don’t parents already scold their children to have a stronger social conscience? Wouldn’t caring kids also be more…obedient? Now you might try to breed a kid who loves only his spouse and children, and cares about no one else. How good a job will this person get? Remember, this future world may also allow us to test for what genes people have. What better for a job interview than to take a piece of hair and see how much the person is a cooperator? I expect genetic engineering to increase the gains from trade. As for politics, imagine if candidates had to reveal their genetic profiles.

Genetic engineering also will accelerate the pace of evolution. Given that birth control is cheap, the women on the future will love children more than do the women of today.

Which country does the most to help the world’s poor?

Foreign Policy magazine will tell you it is the Netherlands. If you click on the link, you will see their rankings. (Note that the paper edition has more detail and less confusing visuals.) Denmark and Sweden are next in line, the U.S. comes in seventh. Japan comes in last among the developed nations. The metrics are adjusted to per capita terms.

Unlike many other studies, this metric goes beyond foreign aid payments. It also considers immigration policy, trade, and investment as means of helping the world’s poor.

Looking at the index, the aid component is too heavily weighted and the immigration component is underweighted. I find the issue-by-issue scores most informative. Canada has the best immigration score, the U.S. is a close second. The U.S. has the best trade score. The Netherlands and Germany have the highest investment scores. The Scandinavian countries have the highest aid scores, by far. Norway has the lowest trade score, largely because of its high agricultural tariffs. By the way, here is an earlier MR post on the importance of remittances.

The bottom line: OK, I am an American. But it is hard for me to resist pushing the United States into the top slot. Can we look at all of history since the 1930s? If you consider military and cultural influence over the long haul, I think we have it clinched.

Yellow Pages

Aside from the obvious, such as big and colorful, what Yellow Page ads work best?

People who go to the pages often feel uncertain and vulnerable (think car repair, plumbers, florists etc.) It’s important, therefore, to send a reassuring, optimistic message, like “We care,” “Our family serving your family,” or “Pain Free.”

Consumers also don’t seem to like much text; they do like interesting images or graphics and an identifiable difference between one company and its competitors.

“People don’t like to see pictures of the problem,” said Larry Small, director of research for the industry trade group. “If you’re selling auto insurance, and you show a wrecked car, people don’t like that. What they want to see is a car that looks new, a person smiling because his problem has been taken care of.”

My conclusion: Bush will win the election.