Maxine Udall (girl economist)

Maxine's Links for October 25 2009

NYT Krugman How the other 75% lives

 Digby catches some of the talking heads saying that we’re all dependent on the stock market for our retirement. Which leads to the question, what do you mean “we”, rich man?

 Reuters: Freddie Mac Delinquencies Rise

 Maxine thinks that if you want a socialist country, you should keep voting for lawmakers who support policies that keep sticking it to the middle and lower classes. We’re a democracy. They can vote. And eventually, they’ll want their (larger) piece of the pie back. A more evenhanded bailout with a better safety net for displaced workers, including access to healthcare, would have been fairer.

 Gulf Times: Barry Eichengreen on the US Dollar

               Deflation or devaluation. Somehow, it has to equilibrate.

 FT: Fed Clampdown on Bank Pay Rules

The Federal Reserve, seeking to clamp down on the excessive risk-taking that fuelled the financial crisis, is to promote broad new guidelines on pay and bonuses at banks as part of a major reform of compensation practices. The Fed will promote new risk-adjusted bonus schemes, along with plans that would defer compensation, establish multiyear periods for assessing performance and encourage less payment for short-term results.

Maxine grew up in a family business and, frankly, had we run it quarter to quarter, we’d have been out of business in a year. Maxine thinks that businesses are like sailboats. Small sailboats, like small and midsize businesses, can capsize and sink much more easily than big sailboats and big businesses. That’s why small and mid-size businesses have to be nimble and efficient and always, always thinking about long-term survival and possible future shocks.  Large sailboats and businesses can go a long way on an inefficient tack and are nearly impossible to capsize unless the waves (shocks) are very large or the captain/management is really incompetent.  “Too big to fail” just reinforces and sustains incompetence and mismanagement and calls into question the already questionable belief that economies of scale always and everywhere reflect greater efficiency.  Maxine thinks she needs to go back and re-read JK Galbraith.

FT: Martin Wolf: Why curbing finance is hard to do

This is not to argue that there is no way of making finance safe. There is. But it would be far more radical: deposits would be 100 per cent reserve backed; and the liabilities of other investment vehicles would be adjusted for the market value of their assets at all times. Banking would disappear.

Short of such radicalism, we must approach the task in a more subtle manner. First, create a set of laws and institutions that make it possible to bankrupt any and all institutions, even in a crisis. Second, make financial institutions safer, with much higher capital requirements, against all activities. Third, prevent off-balance-sheet activities. Fourth, impose dynamic provisioning. Fifth, require huge cushions of contingent capital. Finally, cease to favour debt-finance, throughout the economy.

If we did all this, the world of finance would be duller and safer. It would still not have the reliability of jet engines. So long as we allow people to make leveraged bets on the future, breakdowns will occur. The division of finance into utility and casino cannot solve this problem. Only the end of leverage would do so. Do we want that? I doubt it.

Economist: Free Exchange Blog_A few comments about risk

I would say that whether the problem is that bankers can't recognise risk when they see it or recognise it but are incentivised by their pay structures to embrace it, a good policy response is to increase capital requirements.

Wait a minute. Maxine has to ask: Aren’t they paid the big bucks to recognize and manage risk??? Maybe another good policy response would be to let them walk when they threaten it (because their pay has been reduced by a pay csar).

TED: John Gerzama on the post-crisis consumer

Maxine hopes he’s right.

NYT: Joanne Lipman, former deputy managing editor of the WSJ, on the mismeasurement of women

I’ve spent my adult life in business journalism, where we calculate success using hard facts and figures. Researchers have evaluated women’s progress the same way. But in today’s noisy world, that approach isn’t enough. We’ve got to include popular perceptions in the equation as well. Progress in one area without the other is no progress at all. This isn’t simply a woman’s issue; it affects us all. It isn’t about blaming men, or about embracing feminism, which remains a toxic term for some women. Instead, it is up to all of us to help change the conversation.

Check back in 2-3 days. Maxine plans to provide a special blog on one of her personal heroines: Brooksley Born, former Chair of the Commodity Futures Trading Commission, who attempted to raise questions about and possibly regulate derivatives markets in 1998 right after LTCM nearly collapsed. Greenspan, Rubin, Levitt and Summers disenfranchised her easily, thus allowing what Buffet termed “financial weapons of mass destruction” to proliferate and grow for another 10 years, placing us all at risk, creating massive unemployment, and requiring US taxpayers to bail out banks (the opportunity costs of which will be felt for generations). Maxine thinks that anyone, male or female, who had tried to take the punch bowl away would have been disenfranchised, but it must have been SO MUCH easier because Born was a woman.

Maxine's Links for October 23 2009

FT: Interactive Graphic on how the carry trade works

Maxine thinks this is pretty cool and will use it in her classes.

New Scientist: Beyond GDP: We need a dashboard for the whole economy

Measuring quality of life directly is not going to be easy. In passing, the report cites such gems as the finding that women in Columbus, Ohio, surveyed about their feelings, or "affect", while carrying out different activities, felt better walking than when they were having sex.

Maxine has to ask: was that finding age-adjusted??? Surely it was young women (having sex with young men) who reported this, yes?

Atlanta Fed Macroblog: The Growing Case for a Jobless Recovery

Job losses have been disproportionately concentrated in small businesses.

The share of workers reporting that they have been involuntarily cut back to part-time is at a recorded high.

The percentage of employee separations labeled permanent is at a recorded high.

And just in case you still don’t get it:

Never, in the six recessions preceding the latest one, did permanent separations account for more than 45 percent of the unemployed. The current percentage stands at 56 percent as of September and appears to be still climbing:

The workers need a safety net and health insurance.

WSJ: Employers hold off hiring

Companies across the economy are holding off on hiring even as the profit outlook improves, amid economic uncertainty and their own success at raising productivity in rough waters.

Capitalism at its best and its worst.  The workers need a safety net and health insurance.

FT: GE plans health care venture capital fund

“Most of the healthcare money in the US is spent on chronic disease,” Mr Immelt said at GE’s Healthyimagination conference. “We need to focus on chronic disease and preventing disease.”

The wave of the future...

FT: Merck to publish MD payments

Merck is set to become the largest drugs company to start publishing details of its payments to doctors in the latest response to growing criticism of excessive industry influence over drug prescribing.

                It’s about time.

FT: GSK promises full drug trial disclosure

The moves follow several initiatives by GSK and other pharmaceuticals companies, partly under pressure from research funders and the publishers of academic medical journals, which have demanded greater transparency over drug trial results.

Maxine thinks transparency in medical research is a really good thing.

Health Impact Project: Projected health impacts of proposed legislation  mandating 7 days of paid sick leave per year for workers

The HIA, released in June 2009, predicted that the Healthy Families Act, proposed federal legislation mandating seven sick days a year for companies with 15 or more employees, would reduce the spread of illness, and even save lives as a result. The HIA pointed out that a third of flu cases in America each year are transmitted in the workplace and at schools.

Reduced lost productivity, reduced medical care use, reduced emergency room use, all likely to reduce health care costs and improve productivity. Added to that we don’t get sick as often so we don’t lose leisure time either.

Salon.com: Tom Tomorrow on Health Insurance

Salon.com: Tom Tomorrow on Bankers

                Maxine thinks that sometimes humor helps.

Maxine's Links for October 19 2009

WSJ: AIG bonuses were a Treasury failure, Barofsky says

                Maxine is shocked...shocked.....

NYT: Paul Krugman: A Hatchet Job So Bad, It’s Good

“Part of the opposition to a strong individual mandate comes from the sense that Americans will be forced to buy policies from a greedy insurance industry. Giving people, literally, another option — the right to buy into a public plan instead — would defuse that opposition.”

Maxine thinks this is an important motivation for having a public option.

McClatchy: How Moody’s Sold Its Ratings---and sold out investors

As the housing market collapsed in late 2007, Moody's Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression.

Anyone who believes that market forces will ensure ethical behavior needs to read this. In some markets, yes, but not in markets characterized by uncertainty, information asymmetry and complexity. Not when there is a fortune to be made in the short-term and most people can’t tell what it is you’re really doing.

FT: BofA reports $1bn Loss

FT: Summers urges bankers to back reform

FT Op-Ed: Countdown to the next crisis

FT: SEC hires Goldman alum for watchdog post

                Fox...chicken coop...Oh, wait, this is finance...it’s different, right?

FT: Michael Moore Must Leave US to Find New Elite

Five long years ago, Mr Kapur and some of his Citi colleagues penned a dense research note on the issue of “plutonomy” – a word they invented to describe economies powered (and controlled) by a rich elite, such as the US and UK.

The essential thesis is that plutonomies arise when there are factors such as “disruptive productivity gains, financial innovation, capitalist-friendly governments, overseas conquests and dopamine-heavy immigrants, the rule of law, patent protection and great complexity exploited by the wealthy of the time”.

So much for government of the people, by the people, for the people....

Bloomberg: Geithner Aides reaped millions working for banks, hedge funds

But now they’re on our side because this is finance and it’s different, right?

NYT: Bailout helps fuel a new era of Wall Street wealth

“All of this is facilitated by the Federal Reserve and the government, who really want financial institutions to get back to lending,” said Gary Richardson, a research fellow at the National Bureau of Economic Research. “But we have just shown them that they can have the most frightening things happen to them, and we will throw trillions of dollars to protect them. I have big concerns about that.”

Why oh why does moral hazard only matter when some poor unemployed, uninsured, about to lose his house worker might be helped by a subsidy or extended unemployment benefits?

Tax them, tax everyone who works for an investment bank that received a taxpayer bankrolled bailout and bonus, claw it all back, and use it to fund health reform and mortgage restructuring and to extend unemployment benefits. They should be delighted to assist the people who saved them and made their success possible. It’s the very least they could do.

NYT Krugman: The banks are not alright

The main thing for the time being is probably to do as much as possible to support job growth. With luck, this will produce a virtuous circle in which an improving economy strengthens the banks, which then become more willing to lend. Beyond that, we desperately need to pass effective financial reform. For if we don’t, bankers will soon be taking even bigger risks than they did in the run-up to this crisis. After all, the lesson from the last few months has been very clear: When bankers gamble with other people’s money, it’s heads they win, tails the rest of us lose.

Maxine will repeat: Tax them, tax everyone who works for an investment bank that received a taxpayer bankrolled bailout and bonus, claw it all back, and use it to fund health reform and mortgage restructuring and to extend unemployment benefits. They should be delighted to assist the people who saved them and made their success possible. It’s the very least they could do.

Maxine will add that she had real concerns about a “no-strings attached” bailout that targeted financial institutions without guarantees that the monies would be recycled to infrastructure and job creation. Next time, let Wall Street fail and bailout Main Street directly. If moral hazard doesn’t matter when structuring bailouts for investment banks, it shouldn’t matter for bailouts of the American people.  Maxine thinks it would be less expensive in the long run to have some proportion of the population slacking off on the government dole than to fund another Wall Street casino, especially one that produces no tangible benefits for anyone other than large investment banks.

Maxine's Links for October 16 2009

The Week: Brad Delong, We can afford a second stimulus

As long as unemployment remains high, and interest rates are at rock-bottom lows, the prudent thing for government to do is keep on spending. The arithmetic speaks for itself.

NYT blog: Subprime and the banks: guilty as charged

“But where do you think mortgage brokers were getting the subprime mortgages they were selling to customers? From the big banks, that’s where. Chase, Wells Fargo, Bank of America — they were all doing it.”

Maxine sez: Just wait ‘til you see what health insurers can do with a subprime health insurance market...

Mark Thoma: Five Fatal Flaws of Finance

Because the financial sector cares almost exclusively about high accounting yields and “profits”, it misallocates capital away from firms and entrepreneurs that could best improve the real economy (e.g., by reducing short-term profits through funding the expensive research & development that can produce innovative goods and superior sustainability) and could best reduce poverty and inequality (e.g., through microcredit finance that would put the “Payday lenders” and predatory mortgage lenders out of business).

It misallocates capital. That’s another way of saying it’s inefficient. Thus endeth one of the primary reasons for preserving these markets in their current form.

No More Mister Nice Blog on Robert Frank’s Economic Naturalist

Maxine found this REALLY refreshing and shares some of the blogger’s sentiments about economists’ tendency to manufacture stories that fit their theory with absolutely no inclination to investigate or consider other non-economic explanations. The wedding dress is a perfect example of just how wrong economic conjecturing by male economists can be.

Yglesias: Christina Romer (girl economist) versus political reality

The New Republic: Top Ten Things worth fighting for (in health reform)

NYT: Calvin Trillin nails one causal factor in the financial crisis over a martini.

The only thing Maxine might quibble with is the assignment of blame. Smart guys might’ve securitized the risk, but does that really let the dumb guys running the show off the hook? Maxine also feels compelled to ask: are quantitative skills synonymous with intellect? Especially in the absence of any reflection on or knowledge of both historical events and fat-tailed distributions that most empiricists are well aware of?

Maxine's Tribute to (girl political economist) Elinor Ostrom, Co-Winner of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2009

Maxine is thrilled by this award. Not just because Elinor Ostrom (girl political economist) is the first woman to receive this prize, but because of the subject matter for which Drs. Ostrom and Williamson are recognized .  It signals the continued expansion of economics beyond the neo-classical to a richer, messier social science that includes market failures and cooperative successes.

2009 Nobel Prize Winners Elinor Ostrom “for her analysis of economic governance, especially the commons” and Oliver E. Williamson “for his analysis of economic governance, especially the boundaries of the firm.”

The Economist on the 2009 Nobel Memorial Prize in Economics

Politics Daily: Elinor Ostrom & the Triumph of the Commons

"What is missing from the policy analyst's tool kit -- and from the set of accepted, well-developed theories of human organization -- is an adequately specified theory of collective action whereby a group of principals can organize themselves voluntarily to retain the residuals of their own efforts."

Maxine thinks that condo and co-op homeowners associations may be the counterfactual.

National Science Foundation Congratulates Nobel Laureates

Paul Krugman on Ostrom and Williamson

Marginal Revolution on Elinor Ostrom and the Well-Governed Commons

Forbes: Markets Aren’t Everything

Rethinking Institutional Analysis Interviews with Vincent and Elinor Ostrom

Insights on linking forests, trees, and people from the air, on the ground, and in the laboratory by Elinor Ostrom & Harini Negendra

 

“Governing natural resources sustainably is a continuing struggle. Major debates occur over what types of policy ‘‘interventions’’ best protect forests, with choices of property and land tenure systems being central issues. Herein, we provide an overview of findings from a long-term interdisciplinary, multiscale, international research program that analyzes the institutional factors affecting forests managed under a variety of tenure arrangements.”

 

You go, girl!

 

 

Maxine's Links for October 10 2009

Maxine believes that Nobel Memorial Prize (2001) winner, Joe Stiglitz, is the closest thing we have to a modern-day Adam Smith. 

Instead of adapting to changing knowledge and economic conditions, we have embraced a bizarre version of Adam Smith’s original writings, much as fundamentalists of any religion distort and then enshrine a bizarre (often self-serving to those in power) version of sacred texts. The economics of the 21^st century will almost certainly be different in some ways from those of the 18^th century. To believe otherwise and to insist that public and economic policy should reflect a distorted version of moral philosophic writings of the 18^th century is self-defeating in the long run. (Although, apparently beneficial to a few at the top of the income/power distribution.) If we care about the US and if we care about capitalism as the underlying framework for our economy, then we must alter the popular narrative about the power of markets to fix everything. And we must stop, stop, stop trying to force markets that can never, ever be competitive because of information asymmetries and uncertainty (e.g., health and health insurance) into a competitive framework.  

If we do not do this, Nell Minow (New Yorker below) is right: we, WE, are doing more to destroy capitalism than Karl Marx could ever have done.

Below are two links that are peripherally related to issues Stiglitz raises about the way the bailouts were structured and the way CEO pay has been determined along with a number of links to interviews with or articles by Joe Stiglitz.

Simon Johnson: Too Politically Connected to Fail

What a friend we have in Geithner...

New Yorker: Nell Minow & CEO Pay (Abstract only until Oct 12 2009)

“These guys are doing more to destroy capitalism that Marx.” –Nell Minow

Maxine has been saying this for years, but Maxine does not share Minow’s confidence in shareholders to provide the correct incentives (unless all shareholder incentives are structured for long-term investment, not quarterly remittances to shareholders). If all shareholders were Warren Buffet, then Nell ‘s way would work.

New Yorker: James Surowiecki interviews Joe Stiglitz (video)

James Surowiecki spoke with Professor Joseph Stiglitz, the Nobel  [Memorial] Prize-winning economist, about the mishandling of the financial crisis, the relationship between government and markets, and the future of capitalism around the world. They met last month at Stiglitz’s office at Columbia University.

Vanity Fair: Joe Stiglitz on Capitalist Fools

“The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, “I have found a flaw.” Congressman Henry Waxman pushed him, responding, “In other words, you found that your view of the world, your ideology, was not right; it was not working.” “Absolutely, precisely,” Greenspan said. The embrace by America—and much of the rest of the world—of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.”

 

FT: Joe Stiglitz on a better measure of well-being

 

Maxine thinks this is a good idea for a number of reasons, not least of which is that GDP growth that benefits only a few is not likely to be something Adam Smith would have viewed as a strength of capitalism.

 

Democracy Now: Joe Stiglitz on Obama’s policies for the banking system and on single payer (Video & Transcript)

 

Nobel Prize-Winning Economist Joseph Stiglitz: Obama Has Confused Saving the Banks with Saving the Bankers

 

Maxine things this is why so many people believe that the government has helped banks but not people. They don’t count bankers as people. Why is that, she wonders?

 

And on Single-Payer:

 “I think I’ve reluctantly come to the view that [single payer] the only alternative. You know, we’ve tried a lot of other things. And we’ve been — you know, I was in the Clinton administration, and we debated a lot of alternatives, and I’ve watched things as they’ve emerged and, you know, evolved over the last twelve, sixteen years, and I think there’s a growing consensus that the private market exclusion is not going to work.”

 

Incentives work. Incentives in financial markets are wrong. If an individual’s only motivator is money, short-term self-interest, not enlightened self-interest, will dominate that individual’s behavior. There has to be an “impartial spectator,” an observing ego, a deontological commitment, or a desire for virtue in order to assure enlightened self-interest (e.g., long-term self-interest that recognizes the interconnectedness (social externalities) of individual bad and good behavior.) The Gyges of the world thrive in a world where transactions are not transparent and the only metric that is valued is money (without reference to the social (i.e., productive) value it is supposed to represent).

Maxine's Economics of Education Links for October 9 2009

NYT: Paul Krugman weighs in on US short-sightedness on education

“Beyond that, we need to wake up and realize that one of the keys to our nation’s historic success is now a wasting asset. Education made America great; neglect of education can reverse the process.”

If you read nothing else today, read this one, then re-read Maxine’s post on “Intergenerational Win-Win”. We are have become a splintered, short-sighted, penny-wise, pound-foolish nation. If we care about the US and its standing in the world, we will invest in the people of the US. It is the people of the United State that is “too big to fail.” That means too big to allow to become uneducated and too big to allow to die from curable, preventable disease.

And we need to start early. This isn’t just about college and community college.

Here’s the Minneapolis Federal Reserve on the returns to early childhood education:

Minneapolis Federal Reserve Publications on Early Childhood Education

“Although education and the acquisition of skills is a lifelong process, starting early in life is crucial. Recent research—some sponsored by the Federal Reserve Bank of Minneapolis in collaboration with the University of Minnesota—has documented the high returns that early childhood programs can pay in terms of subsequent educational attainment and in lower rates of social problems, such as teenage pregnancy and welfare dependency.”

MIT Report on Early Education for All

Investments in quality child care and early childhood education do more than pay significant returns to children—our future citizens. They also benefit taxpayers and enhance economic vitality. Economic research—by Nobel Prize-winners and Federal Reserve economists, in economic studies in dozens of states and counties, and in longitudinal studies spanning 40 years—demonstrate that the return on public investment in high quality childhood education is substantial.

 

U Chicago Report: Making the Economic Case for Early Education

 

“The key to the success of intensive early enrichment programs is that they have lasting effects on all the noncognitive skills that, acquired early enough, help lay the foundation for learning and achieving throughout life.”
—James Heckman

 

James Heckman’s work is especially interesting. It focuses not just on education but on child development as means to reduce inequality. He investigates not just cognitive development, but also  noncognitive development which is critical for developing the ability to delay gratification and make wise long-term choices. Economists view the ability to delay gratification in order to achieve higher future payoffs as  lowering the discount rate for future payoffs.

 

Here is a very readable interview with James Heckman.

 

Maxine's Links for October 8 2009

WSJ: Wider Health Care Access Pays Off

“In new research ... three economists -- Kenneth Chay of Brown University, Jonathan Guryan of the University of Chicago's Booth School of Business and Bhashkar Mazumder of the Federal Reserve Bank of Chicago ...[link] improvements in test scores of black teenagers from the South in the 1980s to improved health care they received as children after Southern hospitals were integrated in the 1960s. The bottom line, in a working paper circulated by the Chicago Fed, is this: "Improved post-neonatal health among blacks born between the early 1960s and early 1970s...led to long-term improvements in the academic and cognitive skills of these cohorts as teenagers."”

This is additional support for Maxine’s intergenerational win-win.

Orthopedists fail to disclose payments from device makers

“Orthopedists failed to disclose over 20% of the payments they receive from makers of hip and knee replacements when presenting research related to the companies' products, a new study found.”

Maxine isn’t sure that undisclosed conflicts of interest should be viewed as information asymmetries in the classic sense of that term, but the “seller” certainly knows something that the “buyer” doesn’t know and the effect is to distort demand and almost certainly price in a market where both are already distorted by bad signals. Physicians that Maxine knows have assured her that they would “never” be influenced by the receipt of money from pharma and device manufacturers. Whew! That’s a relief!

Mountain-top Mining (aka mountain top removal) hits wall on mountain-top blasting

“Last week, the Environmental Protection Agency said it was holding up 79 permit applications for mining projects in Central Appalachia due to concerns the projects would damage water quality in nearby streams and violate the Clean Water Act. Another 180 applications are pending.”

Maxine will be the first to admit that there is a tension between jobs and protecting the environment that should not be ignored. And there is a tension between cheap energy sources and the environment that should not be ignored. But Maxine grew up in them thar mountains and finds the current approach to their disposal not unlike the short-term perspective that has dominated financial and mortgage markets and corporate boardrooms for the last 30 years (at least). Add to this that technology has steadily eroded the number of jobs associated with surface mining, the option good nature of mountains and the environment generally, and the uninternalized externalities of coal extraction and consumption and Maxine is pretty sure the balance sheet in favor of removing mountaintops has eroded significantly.

WSJ: Banks at risk from commercial real estate loans And that ain’t all...

WSJ: US, Lenders seek ways to head off new mortgage default wave And just in case that isn’t enough...

NYT: Credit markets are still seized up

And just in case, you doubt the NYT, here it is in the WSJ: Drought of Credit Hampers Recovery. (Of course, Maxine, doubts the WSJ since Rupert bought it.)

FT: Falling US dollar evokes worry among some about reserve currency status

Sarah Palin (!) is weighing in on the issue, providing some insight into the lunatic fringe’s take on this. Cooler heads seem less convinced that the problem is immediate although it is definitely real. Not to contradict Ms. Palin (who is most definitely NOT a girl economist), but Maxine is more concerned about “casino-like” behavior in carry trading. Therein may lie the danger to US reserve currency status.

“While the latest swoon in the dollar is attracting attention, analysts say that it needs to be put in context. In trade-weighted terms, the dollar is essentially back to where it was at the start of the financial crisis on August 9, 2007, according to Federal Reserve data. While the price of gold has gone up, financial market measures of inflation expectations have not. The yield on the 10-year note was trading at 3.18 per cent on Wednesday. Indeed, analysts say that the dollar’s slide stems more from investors’ growing appetite for risk and the prospects of interest rate rises elsewhere. “The first order reason for the decline in the dollar has been the normalisation of markets,” said Ken Rogoff, a Harvard professor and former IMF chief economist. “The financial crisis probably has brought forward the day when the dollar is no longer dominant – but maybe from 75 years to 40 years.” “

The Economist on the world economy's return to "normal" (Just in case you doubt the NYT and WSJ).

NYT: Paul Krugman asks a question about credit, lending, and finance that should be answered

NYT: And Paul Krugman answers LOTS of readers' questions

Brad Delong offers one more reason for a public option

TNR: Jonathan Chait writes a critique of Ross Douthat's incoherent and misleading NYT op ed on “democrats and income inequality” in the US (and saved Maxine and others the time and energy).

Maxine's Health Care Links for October 7 2009

BBC: Swedish study finds that women's education has positive effect on male partners' health

“A well-educated woman positively influences both her own and her partner's chances of a long life, Swedish research suggests.”

Maxine is willing to bet that this is an externality that is never taken into account in economic evaluations of the benefits and costs of women’s education (except in developing countries, maybe).

USA Today: Healthcare bills tackle gender gap coverage

“Some Republicans, such as Sen. Jon Kyl of Arizona, say basic policies shouldn't be required to include coverage for things that not everyone will use. "I don't need maternity care and so requiring that to be in my insurance policy is something that I don't need and will make the policy more expensive," Kyl said during a debate about the legislation last week.”

Really? Maxine doesn’t have children, but she pays for public education through her property taxes. She always thought that it was because she (and the State) have an interest in and benefit from a better educated populace. She’s surprised that the family values crowd doesn’t recognize the public interest in and benefit from healthy babies who receive adequate prenatal care because their mom’s have maternity benefits that are underwritten to some extent by the rest of us in the risk pool. I mean, Maxine doesn’t smoke either, but somehow she expects that her health insurance premiums will reflect coverage for the negative sequelae of smoking that the smokers in the risk pool will incur.

WaPo: A physician ecounters the medical system as a patient and learns empathy          

“One thing's for sure: I've lost the smugness and condescension I often felt when listening to others' stories about being trapped by the system and manipulated into excessively complex and specialized medical situations. Unlike most of my patients, I actually knew what my diagnosis was and what to do about it, but I learned how difficult it is to remain objective when you're feeling very sick.”

Here it is, folks, in a nutshell, why eliminating information asymmetries around probable diagnosis will not reduce health care costs. Our test patient had a MD so the knowledge asymmetry was eliminated but the diagnosis uncertainty remained (after all, it MIGHT be something else even though he knew it was Shingles, so we should do more tests to rule those low probability things out). And who can blame him? Maxine is not sure she would have behaved any differently.

WaPo: Facilities Fees are new item on your healthcare bill

“A second patient, DeLois Gibson, was charged a facility fee of $846 for removal of a bump on her neck; the total bill came to $1,451.”

Maxine looks forward to the day when her health insurance premium, copays, and deductible absorb the portion of her salary that doesn’t go to taxes. Of course, she’ll be able to comfort herself, knowing that even though she has no disposable income, at least it’s for a worthy cause: sustaining an inefficient private provider and an inefficient private insurer in the most inefficient and expensive quasi-private health non-system in the world. And she can comfort herself by walking over to the “good” neighborhood where all the docs and health executives live. It’s bound to be a nice neighborhood for a stroll. Repeat after Maxine: NOT the guvmint or any guvmint plan. Oh, no, that would be socialism. Better dead from a preventable, curable disease than Red.

WSJ: Hospitals find cheaper care is better care The ethics and the economics are aligned once the information asymmetry is reduced. Maxine always says, “Show me an ethical failure and 9 times out of 10 I’ll show you a market failure.”

WSJ: Insurers fight bid to ease penalties of non-enrollment

“Key industries bought into the measure -- and agreed to absorb cuts in reimbursements -- on the expectation that millions of new customers would be brought into the health-care system. The weaker the mandate to buy insurance, the fewer the new customers.”

Proof that hospitals and insurers understand that universal coverage is necessary to reduce overall costs. Most of those new customers will be young, healthy individuals who free-ride until they’re wheeled into an ED. At which point hospitals are legally and ethically obliged to provide treatment. And then we all pay for the higher cost ED care that in many cases could have been avoided with a little preventive or primary care (which, had they had insurance, they most likely would have gotten).

WSJ: Nanobees deliver bee venom to tumors Die, tumor, die!

WSJ: Supplying flu vaccine will be a challenge Reduced state and local budgets, coordination and targeting to vulnerable populations, supply chain challenges: the importance of public funding for public health infrastructure is clear. (Maxine says: Don’t forget to get the non-H1N1 vaccine while you’re at it.)

Commonwealth Fund: Karen Davis, PhD and girl economist, President of CMWF, provides a really excellent oveview of health reform options in her blog

Commonwealth Fund: Excellent Webinar on Options for Financing Health Reform

If you don’t want to watch it all, fast forward to “Show Me the Money” and listen to Uwe Reinhardt.

Commonwealth Fund: Quality Matters Newsletter, Sept-Oct 2009

Commonwealth Fund: The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way

Commonwealth Fund: Small Business Owners and Employees Would See Lower Costs, Better Health Coverage from Health Reform Proposals

whynotthebest.org: Find the top-performing hospitals in the country

Maxine's Links for October 6 2009

The Role of Television in Household Debt Maxine found a link to this on Brad Delong’s blog.

“The empirical results suggest that the greater access to television is associated with a greater tendency to maintain household debt and debt for household products. Results also suggest that greater access to television is associated with higher levels of debt for durable goods, though not for total debt levels. We provide suggestive evidence that greater labor force participation might drive our results. Taken together, the theoretical and empirical results suggest a role for new research into the relationship between mass media advertising and debt.”

If consumers deviate from homo economicus (rational, fully-informed, self-interested) then there is no reason that an advertising- or media-induced outward shift in demand reflects true utility maximization. Preference maximization, yes; utility maximization, no.

 The Nation: Dick Gephardt's Spectacular Sellout by Sebastian Jones

“Progressives would be fooling themselves to think the Gephardts of the Beltway are any different from their Republican predecessors. In fact, when it comes to cynically exploiting his reputation to profit his new employers, Gephardt is worse.”  Change we can believe in...

Calculated Risk: We're in the worst employment recession since WWII

Maybe this is why people don’t know they’re being helped by government. They aren’t.

Calculated Risk: Updated Problem Bank List, October 2, 2009

Bloomberg.com: Banks with 20% Unpaid Debt at 18 Year High amid Recovery Debt

“While regulators may not force firms on the list to close, requiring them to raise capital and curb loans may impede recovery in Florida, Illinois and seven other states. The banks are among the most vulnerable of a larger group of lenders whose failures the FDIC said could cost $100 billion by 2013.” It’s a lot like Night of the Living Dead, isn’t it?

American Bankruptcy Institute: Bankruptcy Filings up 24% on a year ago

No job, no health insurance, no home. Maxine wonders if this is another reason why people don’t know they’re being helped by government?

Science News: Remarkable cross-cultural consensus among the young on fairness and ethics

Universal concerns, not cultural values, may shape kids’ developing notions of right and wrong

New Yorker: Larry Summers & the White House Economics Team

Everything you always wanted to know about Larry Summers, but were afraid to ask.

New Yorker: The History of Scientific Management

Or you could just watch Desk Set starring Spencer Tracy and Katherine Hepburn.