Dr. Rangel offers one hypothesis:
Years ago there used to be several makers of flu vaccine but that number has fallen to just two. Why? These days the government buys and distributes most of the vaccine and it pays for it below cost. When profits from the vaccine dried up most of the other companies moved on and the two that were left produced only what they thought the nation would need based partly on how much the government usually purchases. Because the profit margin is so thin on vaccines, producing more than was needed would cost these companies millions. In a single payer system could this happen to other drugs? Do we want to find out?
Read his whole post on why national health insurance and single payer systems are bad ideas. Here is another juicy bit:
This problem of completely eliminating the free market would extend to the other sectors of the health care industry from testing to diagnostic equipment to innovative treatments and surgical techniques and on and on. Essentially what happens to an economic system when the government takes over and eliminates any free market is that the quantity and quality of goods and services in this industry goes down. Part of the reason is because competition and innovation are lost. The other part is that the single payer underpays in order to contain costs. Dr. Woolhandler doesn’t seem to understand that this happens when she was asked if rich and middle-class people would accept a single payer system.
Yes our medical care costs more, but that is for two reasons. First, our current mixed public/private system has a variety of screwy incentives. Second, we devote unprecedented amounts of time and money to patients in their last year of life.
Here is the clincher:
Actually waiting lists for medical care in countries with nationalized health care are on the average of six to seven hundred thousand and waits for elective surgery can last four years! Her solution like any other socialist responding to criticism of poor quality in nationalized health care is to raise funding, i.e. raise taxes. But how high? Tax rates in the UK are already among the highest in Europe and the NHS still suffers serious problems with quality and efficiency. Some European countries have tax rates as high as 60%. In these cases health care is not really “free”. It’s only free if you have little or no income, pay little to no taxes, and use a lot of health care services.
Ralph Nader’s Commercial Alert is complaining that movie theaters do not warn moviegoers about previews and commercials before a movie starts. The fear is that Americans are being tricked into wasting their precious time.
Is anyone so stupid as not to know about commercials and previews? At my favorite theater the preliminaries average between 17 and 18 minutes, I have it down pat and they glad volunteered this information to me.
Furthermore early ads promote efficiency. You can come early, and sit through the ads, and get a better seat. Latecomers miss the ads but have to sit behind a tall person or scrunch up their necks in the front row. In quality-adjusted terms, the theater offers different prices, depending on whether you are willing to endure the ads, and how good a seat you want. This, of course, is price discrimination, which as we know usually increases output. If only the television networks could be so clever.
And of course ads are not required:
According to the Los Angeles Times, New Line Cinema and Warner Bros. don’t allow in-theater advertising before their films.
To the extent there are problems, they follow from poor coordination and violated expectations. Most moviegoers know to expect the ads, if anyone should be nudged toward full disclosure it is the theaters without ads. But of course, if this is a problem, they already have a good incentive to advertise that the movie starts promptly.
Keep in mind also that most moviegoers are the young, and they go in groups. They talk during the ads and determine the future of their social alliances, and thus the future of the world. If the time is wasted, it is not the fault of the advertisers.
I drove to the store last night only to find on arrival that I had forgotten my wallet. I returned home frustrated and ready to veg out in front of the tv. It occured to me, however, that my earlier trip was a sunk cost. If the trip was worthwhile the first time it must be worthwhile to return (not so much time had passed as to change the utility of the calculation). I still felt frustrated and I didn’t really want to return but I forced myself to behave like a rational utility maximizer. As I headed back, however, I felt better. Reason and emotion cohered once again as the sunk cost became psychologically sunk.
Score one for economics. A sunk cost is only sunk if you choose to ignore it and economics helps us to do this. But note to self: have more sympathy for students who find the economic way of thinking to be unnatural. Often, they are right.
Arnold Schwarzenegger is Governor of California, Mick Jagger is a Knight of the British Empire, Ozzie Osbourne was raised from the dead and Marginal Revolution is the world’s most popular blog. Surprisingly, only one of these statements is false and we are working on that one.
Lynne Kiesling offers a lengthy discussion of water privatization, with useful links. I have long thought that water is one of the tough cases for market economics. It is hard to imagine having two sets of pipes built to your home and thus it is difficult to see how competition would operate. Even Milton Friedman, to the best of my knowledge, never came out for laissez-faire for water. An obvious option is to have the pipes regulated, but allow competing carriers within a single piping network. You then have to regulate access to the piping network, and regulate the pricing of that access. Furthermore you must make sure that some institution has sufficient incentive to maintain the value of the piping network, comparable issues have proven problematic in the case of electricity. Managed competition may prove a better form of regulation than municipal ownership, or a vertically integrated natural monopoly, but it is regulation nonetheless. And unlike with electricity, it is hard to see decentralized provision of water becoming the norm anytime in the near future. Electricity offers options such as batteries, solar power, and private generators. Water without pipes is simply hard to live with, get ready to carry buckets on your head.
Nonetheless a good case can be made for the private provision of water, with unregulated pricing, in very poor developing countries, such as much of Africa. Let any private supplier sell water at any price the market will bear. Yes this sounds drastic, but the harsh reality is that otherwise many Africans have no access to piped water in the first place. Even a monopoly price is better than carrying that bucket on your head, and don’t forget that well water can cost ten or twenty times the price of piped water. I recall once reading that if the cure for AIDS were a simple glass of clean water, many Africans still would have no chance.
The problem remains that charging for water is problematic in many developing countries. Property rights are poorly defined and people are not used to paying for municipal services. If you set up water piping to the very poor and tried to collect fees in return, many people simply would not pay and legal recourse would be unclear. What can you do, report them to a credit bureau? Attach their wages? You can see the problems. Right now we know that progress in the water sector will be slow at best.
Economist Ed Glaeser, a trim man, is a vigorous partisan of the Atkins Diet. Nonetheless he argues that McDonald’s brings social benefits, not social costs:
Glaeser’s rationale for suggesting that convenience foods are a social good is that, to judge from consumer behavior in the marketplace, people seem to prefer saving time to being thinner. And in economics, by and large, getting what you want is a good thing. Glaeser notes that until relatively recently, cheaper food (in terms of money as well as time) made us taller and healthier. Only in the past 25 years or so have diminishing returns set in.
Now that less is more when it comes to increased calorie intake, Glaeser expects the marketplace to correct the excesses he attributes to self-control problems. For one thing, food technology can’t advance much farther, “short of direct injection,” whereas weight-loss technology is only in its infancy, with vast room to grow. Glaeser can understand the need for regulation in the schools, or if food companies are misleading people. But he says: “I don’t think anybody ate at McDonald’s and thought it was good for them. I take a dim view of these lawsuits.”
Dr. Rangel tells us how to impress a woman:
Wine her, Dine her, Call her, Hug her, Support her, Hold her, Surprise her, Compliment her, Smile at her, Listen to her, Laugh with her, Cry with her, Romance her, Encourage her, Believe in her, Pray with her, Pray for her, Cuddle with her, Shop with her, Give her jewelry, Buy her flowers, Hold her hand, Write love letters to her, Go to the end of the Earth and back again for her.
How to impress a man;
Show up naked… Bring food… Don’t block the TV.
OK, this is clever, but it is not exactly correct either. One good way to impress a woman is to do something to impress other men (and women). The famous attract women in great droves. And if you want to impress a man, help him think that he has high relative status. “Don’t block the TV” is not nearly as good as being the kind of woman who, through whatever means, can impress other men (and women), and thus reflect favorably upon the man.
Almost half of the new, American-trained, 700 man Iraqi army have quit over disputes over pay and conditions. Has the administration never heard of efficiency wages? We need to pay these guys more than the market wage in order to encourage loyalty and gratitude as well as funneling some money back into the economy. It’s not as if these soliders were costing us much. The pay scale in the new Iraqi army is $50 per month for a recruit, $60 per month for privates, and $180 for a Colonel.
Neuromarketing research uses a magnetic resonance imaging machine, or MRI, to determine which parts of the brain react to different types of advertising in an effort to help marketers develop more effective marketing techniques for selling their products or services.
The critics charge that the research is directed at finding a “buy button” in the mind. Critics also raise the specter of mind control and the loss of individual autonomy. Commercial Alert makes the following threat:
“It is wrong to use medical research for marketing instead of healing,” Ruskin said. “If Emory University doesn’t stop this immediately, we will do everything in our power to shut down Emory’s federal funding.”
My take: The neuroscience techniques remain unproven, but in the meantime corporations are subsidizing an important science. Many of our most significant scientific discoveries have been by accident, when people were looking for some other result altogether. The support for research may well have a real long-run payoff.
Furthermore the worries are overblown. Let’s say we found such a buy button and that corporations could use that knowledge in their ads. Would it really shift the marketing balance of power in favor of sellers? Over time I would expect buyers to compensate, as the knowledge would not stay secret for very long. We could imagine lists of products that were sold by manipulative techniques, and customers would know to stay away from such products. A technological arms race would be set off. We could imagine private entrepreneurs selling “counter-persuasion” techniques to customers, perhaps in the form of drugs, warning buzzers, or counter-subliminal images flashed into your eyeglasses (the latter product is already under development!). Or how about programming the microchip credit card embedded in your arm to discourage or prevent such manipulation-induced purchases? Or how about if consumers use neuroscience to learn how to be truly happy staying at home and cultivating their gardens?
Sellers seem to have the biggest advantage when manipulation techniques are less than transparent. So neuroscience research into buyer behavior may be a classic prisoner’s dilemma problem. Various sellers may pursue such knowledge, hoping to get a leg up on the competition. The long-run result may be an evaporation of business advantage and an empowering of consumers.
Thanks to Kevin McCabe for the pointer on this issue, check out his neuroeconomics blog.
According to the Census Bureau, New Yorkers are now more bothered by false car anti-theft alarms than by any other feature of city life, including crime or bad public schools. If you ask me, it is the whooping ones that are worst of all, it is hard to stay overnight in Manhattan without hearing one. It also appears that the alarms do not hinder theft. First, most are false alarms and everyone now ignores them. Second, thieves have learned how to disable the alarms quickly.
False alarms also can make a community more dangerous, by signaling to everyone either that a) theft is common, or b) no one cares, or both. It becomes common knowledge that the community has poorly defined property rights. Here is the full story on this aspect of the problem.
Alternative technologies do a much better job of stopping car theft. You can buy a silent pager that communicates the theft only to the car owner. This one works only for tough guys, though, if I knew that my (insured) car was being stolen, I would run the other way. Better is the “silent engine immobilizer,” which simply shuts down the engine when a thief is tampering with the ignition. General Motors and Ford are now using this technology.
The flu vaccine is now running very scarce, you can wait for weeks and there is no guarantee of getting it at all. Most of the supplies are already in the hands of doctors. Note also the following:
Random immunization is almost useless because, for many viruses, more than 95% of the population must be vaccinated to prevent the disease’s spread.
But things are not as grim as they might sound. First:
An alternative to the flu shot is FluMist, a more expensive inhaled version of the vaccine, which is recommended for healthy people between the ages of 5 and 49. There are about 4 million doses available of FluMist, health officials said.
Although those below 5 and over 49 are the at-risk groups, they are less likely to catch the flu if the rest of us are healthy.
Second, we could administer flu shots more wisely by targeting superspreaders, here is one proposal:
Reuven Cohen of Bar-Ilan University in Israel and his colleagues propose a simple modification of random vaccination that is more effective, according to their computer simulations. The idea is to randomly choose, say, 20% of the individuals and ask them to name one acquaintance; then vaccinate those acquaintances. Potential super-spreaders have such a large number of acquaintances that they are very likely to be named at least once, the researchers found. On the other hand, the super-spreaders are so few in number that the random 20% of individuals is unlikely to include many of them.
Using the team’s vaccination strategy, a disease can be stopped by vaccinating less than 20% of the individuals, in some cases, according to their computer model of a human population. The method can also be tweaked: if a larger sample is asked for names, and those named twice are vaccinated, the total number of vaccinations required can be even lower.
The trick may be getting these people to take the shots, but surely economists can come up with a useful incentives scheme for that, I would prefer a subsidy over a tax.
Last year the highest-earning British artist was Damien Hirst, the creator who cuts up dead sharks and puts them in formaldehyde. He pulled in twelve million British pounds last year (over twenty million dollars), although dealer’s commissions may have eaten into this figure. As an aside, many buyers of Hirst’s early dot paintings, see the link for an image, are unhappy because most of those works were made with ordinary household paints and are now falling apart.
A close second on the earnings list was Andrew Vicari, now resident in Monte Carlo, since 1974 he has been the official painter to the Saudi Royal Family.
What a pair. Hirst I admire for his visceral impact but I could not live with most of his works, not the least because some of them involve live, buzzing insects. Would you wish to own “the beauty of a disused shop full of butterfly pupae, hatching from white canvases, feeding on sugar syrup, mating, laying eggs and dying”? Or rather would you call the exterminator to get rid of something like that?
I wouldn’t hang a Vicari on my walls, check out his painting of the first Gulf War. I now have a better understanding why the Saudi Royal Family is in such trouble.
But let us look at the bright side. No one (well, hardly anyone) ever said capitalism was about rewarding people in accord with their merits. An unequal distribution of rewards is part of the system that generates more diverse art of many kinds, click here to see a compelling portrait by Lucien Freud, or here for a broader choice of images. Click here for a sparkling Howard Hodgkin, here for a broader choice of Hodgkin images, which always bring a splash of color. They are the British painters I will buy when they start paying bloggers.
The earnings information is from The Art Newspaper, one of the highest quality periodicals of any kind.
Obesity rates in the United States have increased dramatically in the past two decades – so much so that manufacturers of everything from clothes to coffins are now super-sizing. But did you know that the entire increase can be explained by three Oreo cookies a day? The trouble is that calories accumulate so holding caloric expenditures constant even a small permanent increase in calories consumed can lead to serious weight gain over long periods of time. Food is getting cheaper and work is becoming more sedentary so it is going to be very difficult to control weight gain. I review some of the recent economic literature on obesity here.
Despite a number of government programs, for example, Swedes continue to get bigger just like everyone else.
For years, this nation of nine million has had the sorts of programs, combining healthy diet and physical exercise, that antiobesity advocates elsewhere in the world dream about. Vending machines in Swedish schools are practically unheard of. TV commercials of any kind aimed at kids under 12 are banned. Schoolchildren as young as eight learn to cook healthy meals. Sports programs are heavily subsidized to get youngsters up and about. But Swedish children are plumping up at alarming rates anyway. The number of kids who are overweight has tripled in the past 15 years — roughly the same rate as in other European countries — to 19% of boys and 15% of girls.
I suspect our only real hope is better tasting fat and sugar substitutes. So far I am not too impressed but I do recommend Russel Stover’s low-carb mint patties.
I am always pleased when one of my crank folk medicine theories is proven to be true, or at least possible. It turns out that low-level X-Rays might be much more dangerous than we had thought. In fact they might even be more dangerous than high-level X-Rays, because the cells do not repair themselves in the same way. Keep this in mind when you visit the dentist, I haven’t let them do this to me for six years now, despite continual entreaties and guarantees that it is safe. I picked this fact up from the January 2004 issues of Discover magazine, which covers the 100 biggest science stories of the year, go buy a copy and catch up on a year’s worth of science reading, not yet on-line.