Archive for category Uncategorized
Squeal.
Posted by The Marginalist in Uncategorized on August 7th, 2009
Ambulances, Rent Seeking, and Public Services
Posted by The Marginalist in Uncategorized on August 7th, 2009
Apologies, somehow the font got smaller for this post. You can control+scroll and the font will change.
Hat Tip to John Goodman: Man Takes 603 rides in an ambulance — in five months! Costing Medicaid $118,158.
Take Mr. Graham’s case. His trips cost Medicaid $118,000, but the government reimbursements are low. In fact, most ambulance companies lose money, up to 30% or more, when they transport Medicaid patients, because the government simply does not pay the full cost. Therefore, Mr. Graham’s actual cost to the ambulance company and to the health care system in general, is much more, as high as $360,000.
To which Republican Chris Collins says:
Erie County Executive Chris Collins, a Republican, says government is not the answer to limiting that type of alleged abuse and waste.
“Fundamentally, inherently I think the private sector is better able to do anything and everything compared to government,” Collins said.
A few things spring to mind:
I don’t think ambulatory services have time to check for whether or not someone has health insurance that pays for it or not, or which ambulatory service to call.
The idealist in me says you could conceivably offer bids to companies to run or provide parts of the ambulatory service. For example, I don’t the government itself produces ambulances, and I don’t think they ought to.
The realist in me looks at politics and notices that subjecting a public good to private competition often means private entities will engage in rent seeking. This basically means that private companies will employ resources to lobby (read: bribe) public officials to give them the contracts. This happens, and it’s a waste of resources as well as a poor way to obtain efficient public outcomes.
Rent Seeking: When private entities use resources to get the government to give them what they want. For example, if a corporation gave a political figure a campaign contribution and they received a no-bid contract, that would possibly be rent seeking.
The other realist in me says, “well, so what? Even if government produced ambulances, they’d need to buy materials for the ambulances from private entities anyways, such as steel and rubber companies. Then it would be steel and rubber companies engaging in rent seeking, not ambulance producers. That doesn’t solve the rent seeking problem, it just shifts it backwards in the production process.”
And from there, it’s tempting to say, “well, why don’t we just have the government take over all aspects of ambulance manufacturing, from mining raw materials to assembly?” But ambulance making is terribly complex if you wanted to do all of it. No private nor public entity would be able to do it efficiently because they would suffer from diseconomies of scale.
Milton Friedman used to say, “Nirvana is not for this world.” I don’t think there’s a perfect solution for rent seeking. You never solve the problem, you only shift it around — and even if you somehow managed to do it, it would involve a massively inefficient entity that manages every aspect of whatever service you’re trying to provide. That’s not a libertarian vs. socialist or government vs. private sector argument; it’s straight economic logic.
Obviously having the government manage every single aspect of ambulance making is not ideal. Having the private sector handle every single aspect of ambulatory service in a normal market is not ideal either. Somewhere in between, the vague and elusive “best solution” exists.
But when Collins says “Fundamentally, inherently I think the private sector is better able to do anything and everything compared to government,” I appreciate the criticism of government-managed services — but, please, don’t be stupid about it.
Richest 1% Pay More than 40% of Taxes
Posted by The Marginalist in Uncategorized on July 30th, 2009
Or, “Excuse for Me to Make a Graph”
HT Greg Mankiw: According to the Tax Foundation, the richest 1% pay more than 40% of taxes — the largest proportion paid by them in history, and more than the bottom 95%.
This is due, of course, to changing tax rates and increased income inequality over the past decades. I don’t think this graph tells the whole story, so I made my own. Statistics are from here, who got them from here.
The only thing useful I learned in high school physics was how to make graphs in Excel. Anywho, take from this graph what you will. But before I go, I’ll throw in one last very important graph that explains increasing income inequality over the past decades:
No, the rich aren’t richer because of a vast conspiracy to funnel all the money to the top 5%. It’s because our economy has shifted to a point where unskilled labor isn’t that useful anymore.
A Reader Responds to Health Care
Posted by The Marginalist in Uncategorized on July 22nd, 2009
So Sam L responded to my 9 health care proposals, pointing out what he thought were some flaws in my health care package. I usually don’t respond to user comments, but this one was rather well thought-out. And I don’t know what to write about next, besides finding an article in the Wall Street Journal and writing some snarky comment about government.
So here’s how it’ll be: Sam managed to write a comment that was well organized, point-by-point, so I’ll quote each point and respond to it. However, I do not want to turn this blog into something where I’m debating commenters, so from now on the policy is that I will respond to comments once, but no more. So if Sam writes something else, I’ll let him have the last word.
Bold emphasis is added by me. After the jump, of course.
My 9 Policy Proposals to Improve Health Care
Posted by The Marginalist in Uncategorized on July 19th, 2009
I guess it’s pretty easy for me to criticize other peoples’ health care proposals. So, in the endless boredom of a summer with nothing to do, I’ll offer my take on how to deal with our health care problem. Here we go.
Yeah, I know this is long. Bear with me.
Read the rest of this entry »
Monday Microeconomic Muse: Eating Quickly to Save the Economy, Pt. 2
Posted by The Invisible Hand in Uncategorized on June 8th, 2009
A well-deserved apology: I haven’t posted recently because of SATs, a plethora of pernicious projects, and family/personal issues. In future, I’ll try to post more regularly. In any case, enjoy! –The Invisible Hand
CONTINUING from my previous post, I pose the question: what are some other explanations for the correlation noted in the article Eat Quickly, for the Economy’s Sake by The New York Times’ Floyd Norris?
First, to recapitulate: what is the correlation? Developed countries in which people on average eat faster appear to have higher GDP growth rates. But wait! We forgot to define GDP:
GDP: The total value of all final goods and services produced in one fiscal year.
The term “final goods and services” refers to goods and services produced for immediate consumption. Only final goods and services are counted in GDP calculations to avoid double-counting the value of, say, a piece of lumber, which has value both as a raw material and perhaps in the future as furniture.
Culture
CULTURE could be the third variable that causes both faster eating and higher GDP growth rates. Quite simply, those who eat faster may also work faster. Faster work could mean higher productivity, which in turn leads to more final goods and services produced and therefore higher GDP.
More food consumed
ALTHOUGH this explanation does not offer a third variable which relates eating speed with economic growth, I will offer it for the sake of rigor: it is a well-documented phenomenon that people who eat faster also eat more (this is why dietitians recommend eating slower to reduce the appetite so as to combat overeating). This article, from BBC News, explains the relationship between the amount of food consumed, the rate of eating, and the risk of obesity quite well. Therefore, it is reasonable to assume that a fast-eating society will consume more food than one whose members eat at a more relaxed pace. Food is a final good, therefore it is included in GDP. Hence, societies may be increasing their real GDPs simply by eating more food. In summary, faster eating leads to more food being consumed which leads to higher GDP.
Destruction
THIS one is a bit facetious, but it demonstrates an important point: GDP is not a perfect indicator of societal well-being.
It’s possible that people who eat faster move around and behave faster, too. In my experience in a home filled with clumsy, hyperactive brothers, fast behavior tends to lead to lots of broken items (from vases to plates to table fans to cameras). With tongue in cheek, I propose that this could happen on a much larger scale in countries where people eat quickly, as compared to societies wherein people eat more slowly. If this happens, people will naturally consume more goods to make up for the goods destroyed by high-speed activity. This increased consumption will increase GDP.
Clearly, this shows that GDP does not necessarily measure happiness or societal well-being perfectly, because societies in which goods are constantly being bought to replace goods which break all the time will have higher GDPs than societies in which people buy durable, lasting goods.
Other examples of how societal ills contribute to increased GDP are divorces (divorce lawyers’ skills constitute a marketable skill whose purchase is included in GDP) and deaths (purchases of undertakers and morticians’ skills are included in GDP calculations).
Conclusion
OBVIOUSLY, there are a variety of plausible conclusions which this correlation (or any correlation, for that matter) could point to. How do we figure out which conclusion is the most accurate? Short answer: we can’t, really, without doing a lot more research. Only by measuring more and more possible factors can the most reasonable conclusion be drawn. In our case, we would have to look at the number of hours worked in each of the relevant countries, in addition to worker efficiency, the capital stock, the relative power of unions and lobbyists, and each of a host of other factors affecting GDP growth in order to find determine conclusively whether or not this correlation is at all meaningful.
In short, be very careful of the studies and reports heavily laden with percentages and proportions that the mainstream media is liable to cite. Furthermore, know the definitions of the terms used in said articles, so as not to confuse an important-sounding economic term (such as GDP) for a more attractice but fundamenally different idea (e.g, societal well-being or standard of living). To quote Mark Twain, “There are lies, damned lies, and statistics.”
– The Invisible Hand
Quasi-Freedom Friday Post
Posted by The Marginalist in Uncategorized on May 22nd, 2009
NO real Freedom Friday post today (busy with Ron Paul and Prom stuff), but I found a nice little gem. HT to Cafe Hayek:
Why government can’t run business:
The Obama administration is bent on becoming a major player in — if not taking over entirely — America’s health-care, automobile and banking industries. Before that happens, it might be a good idea to look at the government’s track record in running economic enterprises. It is terrible.
In 1913, for instance, thinking it was being overcharged by the steel companies for armor plate for warships, the federal government decided to build its own plant. It estimated that a plant with a 10,000-ton annual capacity could produce armor plate for only 70% of what the steel companies charged.
When the plant was finally finished, however — three years after World War I had ended — it was millions over budget and able to produce armor plate only at twice what the steel companies charged. It produced one batch and then shut down, never to reopen.
Or take Medicare. Other than the source of its premiums, Medicare is no different, economically, than a regular health-insurance company. But unlike, say, UnitedHealthcare, it is a bureaucracy-beclotted nightmare, riven with waste and fraud. Last year the Government Accountability Office estimated that no less than one-third of all Medicare disbursements for durable medical equipment, such as wheelchairs and hospital beds, were improper or fraudulent. Medicare was so lax in its oversight that it was approving orthopedic shoes for amputees.
Freakonomics on the Cake-Cutting Problem
Posted by The Marginalist in Uncategorized on May 8th, 2009
FREAKONOMICS has some insight on the cake-cutting problem. Yeah, cake-cutting is totally relevant to economics….
5. All three roommates hold hands over open flame; whoever lasts longest gets room of his choice.
Cake-cutting problem: The problem of deciding how to divide limited resources fairly and efficiently.
Akerlof and Shiller on Government Regulation
Posted by The Marginalist in Uncategorized on April 24th, 2009
Akerlof (UC-Berkeley, nobel laureate) and Shiller (Yale) think there should be more of it.
Such a world of animal spirits justifies the economic intervention of government. Its role is not to harness animal spirits but really to set them free, to allow them to be maximally creative. A brilliant player wants a referee, for only when the game has appropriate rules can he really show his talents. While the sports of baseball and football haven’t changed much in the last century, the economy has — and American financial regulation hasn’t had an overhaul in 70 years. The challenge for the Obama administration, along with the U.S. Congress and our SROs, is to invent a new and better American version of the capitalist game.
If anyone is interested, Shiller’s Financial Markets course lectures are available at Open Yale Courses (along with a game theory course, which everyone should find interesting. OYC has courses in physics, english, etc).
– The Marginalist
Another Earth Day Post
Posted by The Marginalist in Uncategorized on April 23rd, 2009
From Don Boudreaux at Cafe Hayek: What Earth Day Means to Me
I’m thankful for the automobile, which has cleaned our streets and highways of animal feces, which is both foul and filthy itself, and that attracts flies that spread it into our homes and workplaces.
I’m thankful for the automobile also because it allows us to travel in a cleaner environment than we had when we traveled on horseback or in buggies. Modern automobiles cool or heat the air immediately surrounding their passengers, making these passengers comfortable and, in summer, less sweaty and stinky.
I’m thankful for air-conditioning that keeps our interior environments not only comfortable but more healthy, as it allows us to better keep insects out of our homes, shops, factories, and offices — and also, in humid places, to dramatically reduce the growth of mold and mildew in our homes.
And so on and so forth — the lesson: Sometimes the costs of modern life are high, but the benefits are even higher.