How much do we waste on health care?
Arnold Kling writes:
I am prepared to make the following bet: ten years from now, it will be objectively clear that the United States provided significantly better health care to its citizens between 1990 and 2005 than did other developed countries. From the vantage point of 2015, the policy blunder of the past fifteen years will not be that the United States spent too much on health care, but that other countries spent too little. The socialized systems, forced to ration health care because tax revenues are not sufficient to pay for state-of-the-art care, are constraining their citizens from being diagnosed and treated as well as Americans.
And why do we spend so much on health care?
While the usual suspects receive attention that is disproportionate to their true impact on U.S. health care spending, two important factors receive relatively little attention: physician compensation; and the utilization of high-tech procedures. Both of these are much higher in the United States than elsewhere.
Physicians are paid more than twice as much in the United States as in other developed countries. Because physician services are about one fourth of all health care spending, we could eliminate one eighth of our health care spending by reducing doctor salaries to the levels of other countries.
The other big factor is utilization of high-tech procedures, such as MRI’s, CT scans, and open-heart surgery. If Americans would cut back on the utilization of these procedures, that would reduce health care spending by hundreds of billions of dollars.
The question is whether our medical care would deteriorate if we were to pay our doctors much less while at the same time reducing our utilization of expensive capital resources. It seems reasonable to conjecture that the quality of diagnosis and treatment ultimately would suffer.
Read the whole thing; this could be my favorite Arnold Kling essay. And if there could be five issues I wish I understood better, this would be one of them.
Where do new names come from?
…it isn’t famous people who drive the name game. It is the family just a few blocks over, the one with the bigger house and newer car. The kind of families that were the first to call their daughters Amber or Heather and are now calling them Lauren or Madison. The kind of families that used to name their sons Justin or Brandon and are now calling them Alexander or Benjamin. Parents are reluctant to poach a name from someone too near — family members or close friends — but many parents, whether they realize it or not, like the sound of names that sound "successful."
But as a high-end name is adopted en masse, high-end parents begin to abandon it. Eventually, it is considered so common that even lower-end parents may not want it, whereby it falls out of the rotation entirely. The lower-end parents, meanwhile, go looking for the next name that the upper-end parents have broken in.
That is from Steve Levitt’s Freakonomics, with Steven Dubner, here is my previous post on this excellent book. Here is the CD version of the book. Levitt, by the way, picks "Aviva" as a girl’s name ready to "break out," but even I wouldn’t name my kid after an insurance company.
Fab labs
Fab labs are going to rock the world economy like no technology has since the advent of the internal combustion engine. People wonder about the future potential of the Internet – this is a big part of it.
At first, fab labs will be a novelty. They will be hailed as a way for U.S. manufacturers to compete with cheap overseas labor. For the most part manual labor will be eliminated altogether. These first fabricators will be large machines capable of a narrow range of manufacturing. Consumers will be happy with the new goods, mostly plastic toys at first, cheap and marked "Made in America." The Chinese will grumble.
Then some electronics manufacturer, perhaps even a Japanese firm like Sony, will begin single-step fabrication of electronics in factories close to the markets – often right here in the U.S. These electronics will be cheap and tough. The toughness is fortunate because they won’t be repairable. They will be a solid piece of plastic with the electronics embedded within. The electronics will be embedded, printed really, within the plastic like another layer of ink on a page. Again, consumers will be happy.
Around this time a large home-building operation will start fabricating homes. The homes will be compared to Henry Ford’s Model T. A three-man crew will be able to run a fabricator capable of producing a completed home within three days. The homemaker will run three shifts so that the fabricator can operate night and day.
Homebuyers will love these new cheap homes. Homeowners will grumble as home prices dip.
But the real shakeup will begin when some enterprising computer firm offers the first home fab lab. It will connect directly to the computer and look like a large printer. But it will also "print" solid objects. The first models will be capable of fabricating simple things. Manufacturers will laugh nervously at these first models. "Who wants to pay $5,000 to wait 48 hours to print a toothbrush?" they will ask. And they’ll be right. At first just a few nerdy enthusiasts will have them. But they’ll begin writing and exchanging fab plans.
That whoosing sound you’ll hear will be money flying out of the manufacturing and distribution sectors into computer companies (and elsewhere). The home fab labs will get cheaper, faster, and more capable.
And the file sharing black market will grow by leaps and bounds. There will be congressional hearings as companies like Apple and Motorola complain that their intellectual property, the plans for iPods and telephones, are being cloned or just flat stolen and posted on the Internet. There will be efforts to outlaw or limit these devices. People will be jailed for fabricating illegally powerful new fab labs. Others will go to jail for intellectual property theft. But consumers will demand better and better fab labs. Ultimately the majority will rule.
We’ll get the fab labs, but intellectual property theft will be prosecuted more and more seriously. Other types of petty theft will become less common. Why shoplift when you can steal the fab plans for the Playstation 5 off some obscure website or file sharer? File sharing will be heavily policed, but the black market will always be with us.
There will be other changes. Brick and mortar retail stores will be converted to public spaces or abandoned. Some public spaces will be restaurants, coffeehouses, clubs, bars, and churches. But multi-use space will be in increasing demand as connectivity tools allow easy coordination of impromptu events.
Here is the whole post, courtesy of The Speculist.
My puzzles: Say this were true. What general investments should you make? Would we expect real interest rates to rise or fall? The growing wealth of the future suggests that the marginal utility of future dollars will be very small. That suggests high real rates of interest (intuition: future dollars aren’t worth so much, so you need a high return to "deliver" dollars into that period). That being said, time preference would be relatively low, given higher wealth. The average product of capital would be high but how about the marginal product of capital? Capital would be so plentiful you might do very trivial things with it. When Western economies were relatively stagnant, were real rates of interest higher or lower?
Roland Fryer, Harvard economist, on race
I am headed out the door to the Salvador Dali exhibit in Philadelphia; supposedly it rehabilitates his often rather sloppy work. In a rush, I offer you today’s New York Times article on Roland Fryer, the 27-year-old African-American Harvard economist who is studying race. Stephen Dubner — Steve Levitt’s co-author on Freakonomics — wrote this excellent piece, which is worth printing out and reading in its entirety. Here is an alternative link, if the first one doesn’t work. Here is Alex’s earlier post on Fryer, which deals with the effectiveness of buying grades with cash.
Monitor your date or rival
By attaching electrodes to regular
eating utensils, inventor James Larsson has created knives and forks
that can pick up on whether the person across the table feels
uncomfortable or pleased.London-based
Larsson hopes to help those who have difficulty reading signals such as
body language from their date. "Geeks have major challenges dating," he
says. The device analyses data from the cutlery to provide information
about how their dinner companion is feeling.
I doubt this will help; if you need the cutlery your own banter is probably falling flat. My query is how and where business negotiations will take place, once these technologies are widely available. And hey guys, let’s play poker over my house tonight…
Here is the full story.
Cheap talk?
Teenagers who take virginity pledges — public
declarations to abstain from sex — are almost as likely to be infected
with a sexually transmitted disease as those who never made the pledge,
an eight-year study released yesterday found.Although young people who sign a virginity pledge
delay the initiation of sexual activity, marry at younger ages and have
fewer sexual partners, they are also less likely to use condoms and
more likely to experiment with oral and anal sex, said the researchers
from Yale and Columbia universities.
Here is the story. Here is the pledge:
"Believing that true love waits, I make a commitment to God, myself, my
family, those I date, and my future mate to be sexually pure until the
day I enter marriage."
Which skills do computers reward?
Gligoric, on the basis of his own experience, considered the optimal age of a chess player to be 33-36. But today, with the appearance of powerful computers and the Internet, chess is rapidly growing younger. There has been a revolutionary change, not only in the process of preparation, but also in chess thinking itself: now there is little sense in relying, as before, on general evaluations of the type ‘unclear’ or ‘with compensation’ – you have to think very concretely. Instead of deep reflection and philosophising at the board, what has come to the forefront is the ability to calculate intensively and to maintain extreme concentration of thought throughout the game. Computer programs help young talents to quickly acquire the necessary knowledge, since a tenacious young memory can store a great amount of information, and deficiencies in positional understanding are compensated by precise calculation and the ability to maintain the tension of the struggle.
That is from Gary Kasparov, who really does know. It counters the usual belief that the rise of computers rewards broad human intuition, which the computer cannot so easily replicate. But Kasparov sees the question more clearly. It is not how humans and computers compete in chess, but rather how they can best cooperate.
Can it be true more generally that computers reward calculating ability more than general intuition? Perhaps the Internet gets the young up to speed on the facts in a given area and then they race ahead on their superior speed and analytical abilities. What can better teach these skills than a super-fast computer, noting that you can’t use the computer in all settings to replace the human.
I am reminded of my favorite dictum about academic co-authorship: the best co-authors are those with similar skills, not radically differing skills. Let’s not also forget that it is similar countries which trade the most with each other, not radically differing countries. So maybe the people who can best "trade" with computers are…er…people who are (relatively) like computers.
By the way, Kasparov just retired; he is 41 years old.
Markets in Everything: Nein!
Markets in Everything usually deals with unusual items but today’s post is about a German website where buyers and sellers bid on labor contracts. Here’s the idea:
The
concept of jobdumping.de is simple. An employer posts a job that needs
doing, along with the maximum wage he or she is willing to pay.
Interested job seekers then compete with each other for the job by
underbidding, meaning the employer ends up with the person willing to
do the job for the least amount of money.
The system can also
work the other way, with workers entering their skills in the auction
at the minimum price they’re willing to work for, and interested
employers then push the wage up as they outbid each other.
Nothing unusual about that – freelancers as well as firms bid on contracts like this all the time. And yet in Germany, where unemployment is at a record high, this website has generated a furious response:
…some German labor market experts have had harsh words for the Internet site. Dirk Niebel of the Liberal Democratic party even went so far as to call the premise "immoral" in an interview printed in the Berliner Zeitung on Tuesday.
"I find it strange," he said. "It smacks of a slave market."
Freedom is slavery. Amazing.
Thanks to Mike Jackmin for the pointer.
How to anger Fidel Castro
Cuban President Fidel Castro has
criticized Forbes magazine for the "infamy" of listing him among the
world’s richest people, with a net worth of $550 million."Once
again, they have committed the infamy of speaking about Castro’s
fortune, placing me almost above the queen of England," Castro said in
a speech to top officials of Cuba’s ruling Communist Party, military
and police."Do they think I am (former Zairian President) Mobutu
(Sese Seko) or one of the many millionaires, those thieves and
plunderers, that the empire has suckled and protected?" he said in
reference to his capitalist archenemy, the United States…The magazine said Castro derived his fortune from a web of state-owned
companies that include retail conglomerate CIMEX, pharmaceutical
company Medicuba and a convention center near Havana.
Here is the full story.
Markets in bunny lives?
Here is the gruesome side of the Coase Theorem:
Toby is the cutest little bunny on the planet. Unfortunately, he will DIE on June 30th, 2005 if you don’t help. I rescued him several months ago. I found him under my porch, soaking wet, injured from what appeared to be an attack from an alley cat. I took him in, thinking he had no chance to live from his injuries, but miraculously, he recovered. I have since spent several months nursing him to health. Toby is a fighter, that’s for sure.
Unfortunately, on June 30th, 2005, Toby will die. I am going to eat him. I am going to take Toby to a butcher to have him slaughter this cute bunny. I will then prepare Toby for a midsummer feast. I have several recipes under consideration, which can be seen, with some pretty graphic images, under the recipe section.
I don’t want to eat Toby, he is my friend, and he has always been the most loving, adorable pet. However, God as my witness, I will devour this little guy unless I receive 50,000$ USD into my account from donations or purchase of merchandise. You can help this poor, helpless bunny’s cause by making donations through my verified PayPal account by clicking on any of the Donate buttons on this site, or by purchasing merchandise at the Savetoby.com online store.
So far the guy claims (it appears to be verified but who knows?) to have received over $18,000, here is the site. My advice, by the way, is not to send the guy a cent. Here is the guy’s hate mail. Here is the Washington Post coverage. And while you might be appalled (or is that the point?), keep in mind that most of you do in your versions of Toby without offering a reservation price at all.
Thanks to Mitch Berkson for the pointer.
Addendum: Here is an argument that the site is a hoax.
13 scientific puzzles
Read them here. My favorite:
Several times a day, for several days, you induce pain in someone [children: do not try this at home]. You control the pain with morphine until the final day of the experiment, when you replace the morphine with saline solution. Guess what? The saline takes the pain away.
This is the placebo effect: somehow, sometimes, a whole lot of nothing can be very powerful. Except it’s not quite nothing. When Fabrizio Benedetti of the University of Turin in Italy carried out the above experiment, he added a final twist by adding naloxone, a drug that blocks the effects of morphine, to the saline. The shocking result? The pain-relieving power of saline solution disappeared.
So what is going on? Doctors have known about the placebo effect for decades, and the naloxone result seems to show that the placebo effect is somehow biochemical. But apart from that, we simply don’t know.
Here is one more puzzle on string theory, courtesy of Craig Newmark. Or try this one, on what it is like to be watched by a robot.
Post for capital theory geeks
Bryan’s central argument is the following:
In the modern world, the typical person gets richer in the typical year. Once again, this gives even perfectly patient people a reason to increase their demand for current consumption. Imagine you are going to inherit $1,000,000 next year. According to the law of diminishing marginal utility, you would want to increase your consumption now when the marginal utility is high, and pay for it by cutting back your consumption in the future when the marginal utility is low. No time preference story need apply.
I would put it differently. The argument for positive interest rates does not require "pure time preference," but it does require assumptions about the intertemporal substitutability of consumption. Diminishing marginal utility, in the classic sense, is defined at a single point in time. But how do differing marginal utilities of consumption vary across time? How does my two millionth dollar next year compare to my one millionth dollar today (Steve Miller asks the same)? This variable is distinct from either classic time preference or classic diminishing marginal utility. For Caplan’s argument to work, we must assume that consumption tomorrow is a relatively close substitute for consumption today.
So the Austrians are correct that we must consider "preferences across time" as a broad category behind the phenomenon of interest. That being said, the intertemporal substitutability of consumption is closer to Irving Fisher’s notion of time preference as a marginal allocation than it is to Mises.
Why does all this matter? There is no quick, easily bloggable explanation. But to race ahead to the conclusion, this extra dimension of preferences offers us some hope in explaining apparent anomalies in equity returns and market pricing of debt securities (though here is one critique). And here are some implications for the conduct of monetary policy.
Intertemporal consumption involves local complements, not substitutes, when habit formation (this link is for Bryan) is sufficiently strong. If you would like a fun exercise, try to figure out what this implies for the term structure of interest rates in a world with zero time preference…
And if you don’t already understand what this post is about, don’t bother trying to learn.
Markets in everything
How many times have you had a deer head ready to go and then realize it had a pair of feet to go with it? Well now, with Van Dyke’s freeze dried deer feet you can always have a few on hand and ready to go. Keep a few mounted on a panel in your show room and make a little extra income without all the work. These beautiful whitetail feet come ready to go. Simply install a piece of 1/4" threaded rod and attach to any panel. Available in three sizes, these will certainly be a real timesaver and moneymaker for your shop!
Here is the link, with photo, and thanks to Elizabeth Childs for the pointer. Try this one too.
Eggbeaters
If the transformation of eggs by heat seems remarkable, consider what beating can do! Physical agitation normally breaks down and destroys structure. but beat eggs and you create structure. Begin with a single dense, sticky egg white, work it with a whisk, and in a few minutes you have a cupful of snowy white foam, a cohesive structure that clings to the bowl when you turn it upside down, and holds its o wn when mixed and cooked. Thanks to egg whites we’re able to harvest the air, and make it an integral part of meringues and mousses, gin fizzes and souffles and sabayons.
The full foaming power of egg white seems to have burst forth in the early 17th century. Cooks had noticed the egg’s readiness to foam long before then, and by Renaissance times were exploiting it in two fanciful dishes: imitation snow and the confectioner’s miniature loaves and biscuits. But in those days the fork was still a novelty, and twigs, shreds of dried fruits, and sponges could deliver only a coarse froth at best. Sometime around 1650, cooks began to use more efficient whisks of bundled straw, and meringues and souffles start to appear in cookbooks.
That is from Harold McGee’s superb On Food and Cooking: The Science and Lore of the Kitchen. Imagine the writing and expository skills of a Richard Dawkins, but applied to applied chemistry in the kitchen, and maintained at a consistent and gripping level for 809 pages. The only problem with this book is that the magnitude of the quantity and quality is simply overwhelming.
Dan Klein and I used to have a saying: "You so much learn the whole book." In marked contrast is Roger Penrose’s The Road to Reality: A Complete Guide to the Laws of the Universe. Penrose remains a brilliant scientist and writer. But never before have I seen a book that so clearly consists of material that I either a) already know, or b) will never know.
Musical protectionism
The French police are arresting symphony orchestra musicians from Eastern Europe. Why?
The reason for importing musicians
from the east to play in countries like France is simple: money. "The
tour would’ve been too expensive with French musicians, so there
wouldn’t have been a tour at all," Mr. Miller argues. While a company
like the one conducted by Mr. Miller might charge about €15,000
($20,055) for a show, a French orchestra would probably cost three
times that amount, Mr. Miller reckons–pricing them out of the 300- to
800-seat venues they were playing, typically in towns of less than
100,000 people. "I don’t feel at all that I’m taking work away from a
French musician," Mr. Miller told me. Musicians like the Bulgarians he
was conducting, meanwhile, "need the work, they don’t hold out for very
high fees and they play well." "Artistically," he added, "the tour was
a great success."
Not all the musicians have their papers:
A German conductor, Volker
Hartung, whose Cologne New Philharmonic was also employing some East
European musicians, was arrested as he came out for an encore following
a performance of Ravel’s "Bolero" and Bizet’s "Carmen." After also
being held for two days, Mr. Hartung was released with a warning but,
according to the Guardian newspaper, has been banned from performing in
France "until further notice." This was, according to Gerald Mertens,
director of Deutsche Orchestervereinigung, or the German orchestra
union, the second time Mr. Hartung was arrested in France for
underpaying his musicians and not obtaining proper authorization for
them to perform in France.
After deep reflection and debate, the French musicians’ unions have decided to side with the French police, and not with the Muse. In fact, some of the arrested musicians blame the unions themselves for the crackdown.