Health Care and Complexity

Aaron Carroll:

That said, if you want to have a discussion on the merits of making the American Health Care system look like Singapore’s, I’m on board. Let’s do it. But what I’ll fight against – and call out – are the people who do that with lots of “buts”. You want Singapore, but you don’t want the mandated savings accounts. You want Singapore, but you don’t like government involved in purchasing decisions. You want Singapore, but you oppose centralized budgets. You want Singapore, but you oppose government subsidies.

This was partially in response to Tyler Cowen:

Now enter Aaron Carroll, who tries to argue Singapore is moving in an ACA-like direction.  His post has been cited numerous times, but it is not insightful nor does it show much curiosity about the new changes in Singapore.  It is mostly a polemic against Republicans.  In any case the new Singaporean emphasis on taking care of the elderly isn’t well understood by a comparison with ACA.

 In some ways I think they are both making very good points, albeit very different ones.  In Cowen's defense, health care has become so tightly bound to partisan politics in the United States that a strong pro-ACA line is going to look like an attack on Republicans, even if it is modeled on a Republican plan.  That's rather unfortunate but true. 

On the other hand, one of the ways to argue for a system is to find historical (or, even better, contemporary) examples of a particular approach working.  Innovation is likely to be tried by smaller groups first.  So Democracy works out so-so in Athens and people begin to tweak it.  Eventually you get the UK model and the US model of democracy, neither of which look like the original.

The problem with this approach is that it requires one to be extremely clear about what the effects of these tweaks will be.  The United States appears to be in an equilibrium where, at a population level, it costs a lot and delivers middle of the road outcomes.  Moving further into that space (and away from programs that are cheaper and deliver better results) requires a very clear argument for why we think there is a local (or perhaps even the global) maxima out there. 

So the problem with Singapore is that there seems to be real disagreement over whether specific pieces are essential or not.  You also have a very different economy -- only 5 million people with an unemployment rate running in the 2-3% range.  While they have no minimum wage, the government tends to be the largest shareholder in Singapore companies and thus excessive wage inequality can be handled at the ballot box.  These design features can make a mandated savings program work really well.  But we also have what looks a lot like a command economy (just one that is small enough and distributes decision-making enough that they are not overwhelmed by complexity).  In any case, much of the US problems would be well handled by a 2% unemployment rate where people would be able to reliably save against disaster and have a decent chance to get a new job (and notice that Singapore is a single city, so there are no relocation frictions if you lose your job in a part of it with few opportunities -- you just commute longer as a result). 

So the problem is trying to reduce the number of moving parts.  I suspect that, despite its huge flaws, this is why the Canadian system keeps coming up.  It is based in a nearby country with a similar type of economy, lots of immigrants, lots of regionalism, and delivers equivalent outcomes (overall) for less overall cost.  It also encourages economic risk taking by making the risk of being uninsured negligible which can also be a benefit. 

But trying to import external health care systems is tough -- they are complex and have lots of points where it is unclear if the piece is essential or merely nice to have. 

Owning a business in Russia can be tricky, it seems

This story cited by Tyler Cowen really shows the problem of private or corruptible police:

Most of the imprisoned are not there for any political reason. Their incarceration has to do with the nature of Russian corruption, said Elena Panfilova, the director of the Russian branch of Transparency International, a nonprofit group that studies corruption around the globe. Run-of-the-mill bribery schemes, practiced from China to Mexico, usually involve the police, fire inspectors or other regulators asking for payments on the side to allow a business to operate. In these instances, the interests of the business owners and corrupt officials are aligned — both ultimately want the enterprise to succeed.

But in Russia, the police benefit from arrests. They profit by soliciting a bribe from a rival to remove competition, by taking money from the family for release, or by selling seized goods. Promotion depends on an informal quota of arrests. Police officers who seize businesses became common enough to have earned the nickname “werewolves in epaulets.”

This type of problem really points out why you need a state that is strong and well functioning.  Because there is a bad equilibrium for a police force to shift into (see above), it is critical that there be an external check on the shift into these equilibrium.  It also tells us just how valuable a tradition of "good government" is and how deeply we should prize it. 

Bad grading idea

Via Tyler Cowen:

 I will submit your papers (blind) to external referees as well as myself for assessment, an A grade will be limited to those papers, and only those papers, that are recommended for acceptance or conditional acceptance, a B grade will be assigned to those papers that receive a recommendation of revise and resubmit, and a C grade will be assigned to those papers that are rejected by the external referees and myself.
 

I would be quite annoyed to discover that I was putting in the hours to evalaute a paper only to discover that I was doing a professor's job of grading said paper.  Furthermore, it seems that the editor is also the professor for the course.  I would be reluctant to evaluate a student or peer at tmy institution.  The less distance, the more I would be reluctant to do so.  The professor in queestion is willing to blind the papers for the external reviewers, who can not possibly be as potentially biased as a professor with their own students. 

I am also wondering about the standards of a journal in which revise and resubmit is a B grade.  There cannot be many A's.  I have (once) had a paper accepted without revisions but it was definitely not the first time it was ever sent to a journal.  The idea that a paper done in a single semester course (in parallel with other classes) would be a paper so high quality that it was accepted without revisions less than 4 months of work would be incredible in Epidemiology. 

Prediction is difficult

There is a really thoughtful post in the Economist. The gist:

In a nutshell: I've become far less confident about our ability to accurately describe possible outcomes more than a decade out. Correspondingly, I've become increasingly sceptical of the value of analyses of decisions now that attempt to assess the costs and benefits of action over horizons any longer than a decade.

I think that this was a very good complement to yesterday's discussion of inference from observational medical research.  Models are hard.  The more complicated the model is, the more likely something is to go wrong.  Future predictions suffer from these sorts of complications -- we honestly do not know what the circumstances will be like in the future or how many unlikely events will actually happen.  Over the short run, predictions can bank on it being unlikely that a lot of "low event rate but high impact" events will happen.  We can also neglect the slow (but incremental variables) that are currently unnoticed but which will make a huge difference in the future.

In the same sense, looking at low event rate outcomes in incomplete data (most of pharmacovigilence), leads to a lot of innate uncertainty.  In both cases, I think it makes a lot of sense to be humble about what our models can tell us and to focus on policy that accepts that there is a lot of innate uncertainty in some forms of prediction.

Hat-tip: Marginal Revolutions

Statements that I violently disagree with

From Tyler Cowen via Scott Sumner:

Congratulations to Matt Yglesias on his new gig. He’s arguably the best progressive economist in the blogosphere, which isn’t bad given that he’s not an economist. I said “arguably” because Krugman’s a more talented macroeconomist. But Yglesias can address a much wider variety of policy issues in a very persuasive fashion. So he’s certainly in the top 5. His blog is the best argument for progressive policy that I’ve ever read. (But not quite persuasive enough to convince me.)

Now do not get me wrong: I post a lot about Matt Yglesias because I think that he is a fine thinker and has some really nice points to make. But there is now way he is competitive to be the top progressive economist in the blogosphere. I can't claim to be an expert but, off the top of my head, I have have:

Noah Smith
Paul Krugman
Bradford Delong
Mark Thoma

Plus the Worthwhile Canadian Initiative folks occasionally drift into progressive territory and are always worth reading. And this is just off the top of my head and including blogs I read regularly. Again: the provocative policy thinker with good ideas and a solid grasp of economists label definitely applies to Yglesias. But I find him a very odd choice for #1 given the alternatives. If anything, I find him awfully centrist on economic matters, at times (which, I suppose, could explain the appeal).

Social Justice

Tyler Cowen points out a great interview with the head of a major Slovakian political party on why Slovakia isn't necessarily thrilled about the plans in Europe:

SPIEGEL ONLINE: Nevertheless, banks could run into significant problems should they be forced to write down billions in sovereign bond holdings.

Sulik: So what? They took on too much risk. That one might go broke as a consequence of bad decisions is just part of the market economy. Of course, states have to protect the savings of their populations. But that's much cheaper than bailing banks out. And that, in turn, is much cheaper than bailing entire states out.

SPIEGEL ONLINE: Does one of your reasons for not wanting to help Greece have to do with the fact that Slovakia itself is one of the poorest countries in the EU?

Sulík: A few years back, we survived an economic crisis. With great effort and tough reforms, we put it behind us. Today, Slovakia has the lowest average salaries in the euro zone. How am I supposed to explain to people that they are going to have to pay a higher value-added tax (VAT) so that Greeks can get pensions three times as high as the ones in Slovakia

I think that this is becoming one of the real flashpoints in our economic discourse. I am a huge supporter of pensions. But I can see the potential moral hazard in the Eurozone where making reckless promises can result in being bailed out (and working through your problems can result in being billed for others failure to do so). That sort of "tragedy of the commons" is a much bigger threat to economic stability than I had previously suspected.

We will have some of the same issues between generation here in the United States. There have been proposals to limit Medicare to people who are currently 55 plus. That will mean my generation (which began their careers with a terrible job market) will be playing taxes so that the generation ahead of it (which did comparatively well) can retire at a higher standard of living. These sorts of approaches can be toxic to any social contract.

But I can see Slovakia's position now, even if I am not necessarily in favor of it.

Medical Free Markets

This is a very interesting post by Karl Smith:

Lack of jobs is why everyone feels bad, not because they have less or are poorer or the country isn’t producing or consuming as much. And, not to get to meta – in what I hope is an easily readable post – but an economy that makes lots of people feel bad is by definition a bad economy.

Moreover, the feeling that you have now about the economy is not the feeling of lack of value creation. Its not the feeling of socialism.

I wish I had more time to go into this because “what socialism feels like” is an important concept. However, my more conservative readers will may readily get the following example.

Have you ever been pissed off at the fact that your neighborhood school doesn’t teach any of the stuff you want and it feels like your kid is just wasting her valuable time going to all of these pointless classes for no reason. THAT, is what socialism feels like. That is what the lack of value creation feels like.

Its not that you are afraid of losing what you have or that budget constraints are pinching. Its that the stuff which is available to you sucks. It – in extreme cases – is a world where everyone has a job but where no grocery store has fresh milk. It’s a world where everyone gets a pay check but no one can find shoes that fit.

That is what socialism feels like. That is what government getting in the way of the market feels like. In many ways it’s the exact opposite of the way this feels.

Because you know I can’t resist: When you are waiting in your doctor’s office and she is 50mins late and proceeds to be rude to you and not give you “permission” to go buy the drug that you are dying to buy because its finally been “approved.” That’s what socialism feels like.

It is an important insight that much of the current crisis is not caused by excessive government intervention. Now, it could be true that we could get to a bad place with the addition of excessive government oversight, but I think it is fair to accept that we are not there yet.

That being said, I think the argument about seeing medical doctors (and how familiar this experience is in the US) should give us pause when we argue that the current medical system is free market. It isn't. It's also one of our few areas of growth (which Tyler Cowen sees as rent seeking areas absorbing the unemployed) which is also worth thinking about.

I wonder if we are asking the right questions about the long term?

Tyler Cowen argues against more regulation with an example that calls for more regulation

Tyler Cowen has a piece in the New York Times on how regulation inhibits innovation in transportation using the example of driverless cars. I'm not sure he's made his general case (that's the subject for an upcoming post), but his specific case is particularly problematic.

In case you haven't been following this story, Google has been getting a lot of press for its experiments with self-driving cars, especially after statements like this from Stanford professor Sebastian Thrun:

"Think about the car as a medium of mass transit: So, what if our highway-train of the future meant you go on the highway, and there's a train of very close-driving cars with very low wind drag, fantastic capacity, is twice as efficient as possible as today, and so there is no congestion anymore?"

Cowen is clearly thinking along the same lines:

Furthermore, computer-driven cars could allow for tighter packing of vehicles on the road, which would speed traffic times and allow a given road or city to handle more cars. Trips to transport goods might dispense with drivers altogether, and rental cars could routinely pick up customers. And if you worry about the environmental consequences of packing our roads with cars, since we can’t do without them entirely, we still can make those we use as efficient — and as green — as possible.

Putting aside the question of the magnitude of these savings in time, road capacity and fuel effeiciency (which, given the level of technology we're talking about here, aren't that great), where exactly are these savings coming from?

Some can certainly be attributed to more optimal decision-making and near instantaneous reaction time, but that's not where the real pay-off is. To get the big savings, you need communication and cooperation. Your ideal driving strategy needs to take into account the destination, capabilities and strategies of all the vehicles around you. Every car on the road has got be talking with every other car on the road, all using the same language and rules of the road, to get anything near optimal results.

Throw just one vehicle that's not communicating (either because it has a human driver or because its communication system is down or is incompatible) into the mix and suddenly every other vehicle nearby will have to allow for unexpected acceleration and lane changes. Will driverless cars be able to deal with the challenge? Sure, but they will not be able to able to do it while achieving the results Thrun describes.

A large number of driverless cars might improve speed and congestion slightly, but getting to the packed, efficient roads that Cowen mentions would mean draconian regulations requiring highly specific attributes for all vehicles driving on a major freeway. The manufacture and modification of vehicles would have to be tightly controlled. Motorcycles would almost certainly have to be banned from major roads. Severe limits would have to be put on when a car or truck could be driven manually.

This would seem to be another case of a libertarian endorsing a technology with less than libertarian implications.

Environment is complex

Via Tyler Cowen:

A case in point is provided by the recent study of regular tobacco use among SATSA's twins (24). Heritability was estimated as 60% for men, only 20% for women. Separate analyses were then performed for three distinct age cohorts. For men, the heritability estimates were nearly identical for each cohort. But for women, heritability increased from zero for those born between 1910 and 1924, to 21% for those in the 1925-39 birth cohort, to 64% for the 1940-58 cohort. The authors suggested that the most plausible explanation for this finding was that "a reduction in the social restrictions on smoking in women in Sweden as the 20th century progressed permitted genetic factors increasing the risk for regular tobacco use to express themselves." If purportedly genetic factors can be so readily suppressed by social restrictions, one must ask the question, "For what conceivable purpose is the phenotypic variance being allocated?" This question is not addressed seriously by MISTRA or SATSA. The numbers, and the associated modeling, appear to be ends in themselves.

The idea that culture, itself, is an environmental exposure does shed some serious doubt on twin studies as the gold standard to separate genetic and environmental influences on phenotypes. Tyler Cowen says it well here:

"Culture" and "genes" are two major factors determining individual outcomes, toss in parenting, and if you wish call parenting and culture two parts of "environment." It is obvious that culture matters a great deal, and this comes from knowledge which existed prior to rigorous behavioral genetic studies.

I say "soda" and people in Nebraska say "pop." Singapore vs. southern China. German musical tastes in 1780 vs. today. Rural Africa vs. urban Africa. Most concretely, if I meet someone I want to know what country he came from and grew up in; in fact that is the first thing I wish to know. "The culture word" may be overused and abused, but still the power of culture is evident.

I think that we should think carefully about how quick we are to ascribe behaviors to genetics (once we account for within culture variability) without considering between culture variability. Even worse, it is not clear that the modern world has a sufficient degree of cultural variation (given our connectivity in the modern world) to even measure this parameter properly.

Mark also has another insight as to a limitation of twin studies that I hope he posts at some point.

Incentives, the TSA, and a question for Tyler Cowen

Tyler Cowen has a post up looking at a Washington Post article on airports considering private options to the TSA. The underlying assumption here is that competition will improve service and satisfaction but neither Cowen nor the Post writer address the big question:

Why should market forces act differently on security than they did on the rest of the industry?

From the moment you miss the shuttle to the long wait for your bags to come down the conveyor belt, air travel may provide the worst customer experience of any major industry. It's true that introducing market-based incentives a few years helped give us cheap flights (though I don't know enough about the underlying economics to say whether they actually bent the curve), but it did nothing to improve a system that was inconvenient, poorly designed and indifferent to the needs (not to mention feelings) of passengers -- pretty much the same problems that market forces are supposed fix in airline security.

In most industries, competition forces players to maintain reasonable customer service and to come up with customer-facing innovations, but only because almost all of the customers can easily choose between different products offered by different sellers. Cars are a good example.

Three years ago, I bought my first new car, a Nissan Altima hybrid. It had been about a decade since I had bought a car and I was amazed by the innovations that were available in mid-priced autos. Some of the innovations were impressive from a technological standpoint like regenerative braking and continuously variable transmission (the first automatic transmission I actually enjoyed driving), others were just well designed like dual climate controls and cleverly arranged storage compartments, but all were indicative of tremendous effort and ingenuity focused on providing me with a car I would like to own.

Nissan invested all of this into my car because they knew that Toyota and Ford and Volkswagen and a number of other companies also made cars I would like to own, just as the dealers I bought the car from knew that other dealers also carried the make and model I wanted.

Market forces don't address every potential automotive concern. There are externalities and asymmetries of information to be taken into consideration but putting those aside, competition has done a great job. The auto industry has produced a stream of innovative, appealing products because the makers and the dealers both know that I have plenty of choices.

But what would happen if customers were frequently forced to buy one particular make and model and having a choice in dealers might mean going a hundred miles out of your way? Then the automotive industry would probably look a lot like the air travel industry.

There are major constraints on where you can build an airport. Even if you put aside safety and environmental concerns, there are limits to how many airports an area can support. At the risk of stating the obvious, every flight is associated with two of these airports and your flying options are based on the worse of the two. For example, I'm based in L.A. My co-blogger, Joseph, teaches in a college town in the Southeast. I have an unusually large selection of airports, including LAX which, as far as I know, is serviced by all the major carriers, but if I want to do a face to face collaboration with Joseph I have to fly Delta because that's the only major airline that services his airport.

For the majority of itineraries, passengers have little choice as to airports and often as to airlines (market forces exert enough pressure on airlines to give a reputation for good customer service some value -- look at Southwest -- but not enough to make it standard -- look at almost everybody else). This lack of choice greatly limits the pressure market forces can exert on airport-based services. How many people would drive an extra hour or two (we're talking about a round trip) to save a few minutes in the security line and to have access to a better food court?

If anything, competition will do less to improve customer satisfaction with security than it will with the rest of the services airports provide. Whether done by the TSA or private firms, the basic procedures remain the same and it's the procedures that have people upset.

Of course you might get people driving out of their way to avoid things like full body scans, but that's an entirely different discussion.

A quick note on tenure and the economics of deferred compensation

(Joseph may be through with this, but I'm just getting started.)

One of the many weird things about the exceedingly weird tenure debate is the way many (hell, most) of the participants talk about tenure as a gift to teachers rather than a form of compensation that's part of a highly competitive market. *

All forms of deferred compensation offer two attractive features to employers: they reduce the initial cost and they encourage retention. Both of these features are particularly attractive to school administrators who work in an incredibly labor-intensive industry, can't offer big salaries, often require employees to move to out-of-the-way towns and can't afford to have their best people move on the moment a better offer comes along.

If you eliminate tenure you will have to come up with an alternative compensation plan that accomplishes the same thing and with the possible exception of Tyler Cowen, no one seems to show any interest in what that alternative might be.




* Of course you can also talk about tenure as a way of protecting academic freedom and discouraging grade inflation, though no one does anymore.

Tyler Cowen has nerves of steel

With no apparent sign of fear or hesitation, he links to the following WSJ article:

Do Girls Speed More Than Boys?
Survey Says Girls Drive More Aggressively; Insurers Up Rates
By JOSEPH B. WHITE and ANJALI ATHAVALEY

Some big auto insurers are raising the rates they charge to cover teenage girls, reflecting the crumbling of conventional wisdom that young women are more responsible behind the wheel.

In a survey of teenage drivers, Allstate Insurance Co. found that 48% of girls said they are likely to drive 10 miles per hour over the speed limit. By comparison, 36% of the boys admitted to speeding. Of the girls, 16% characterized their own driving as aggressive, up from 9% in 2005. And just over half of the girls said they are likely to drive while talking on a phone or texting, compared to 38% of the boys..

The results were "a surprise to many people," says Meghann Dowd of the Allstate Foundation, an independent charitable organization funded by Allstate which sponsored the survey.

While teens fessed up about their own bad behavior, they also said their friends drive even worse. The study found that 65% of the respondents, male and female, said they are confident in their own driving skills, but 77% said they had felt unsafe when another teen was driving. Only 23% of teens agree that most teens are good drivers. This suggests teens recognize in their friends the dubious and dangerous behavior they won't admit to indulging in themselves.

The data was gleaned from online interviews with 1,063 teens across the country. It was conducted in May 2009 for the Allstate Foundation by the TRU division of TNS Custom Research Inc., a Chicago-based youth research and marketing firm. (For highlights of the study, see www.allstate.com/foundation/teen-driving/Shifting-Teen-Attitudes.aspx).

The survey relies on what teens report about themselves, and Allstate Foundation spokeswoman Meghann Dowd says that means the results could be affected by how forthcoming individuals are when answering the survey questions.

(read the rest here)

I don't know how he does it. I started to sweat when I hit the second paragraph and it just got worse from there. I'm not ashamed to admit that I get nervous around studies that:

1. assume that teenage boys and teenage girls are equally likely to tell the truth about their illegal driving habits;

2. assume that teenage boys and teenage girls are equally likely to be aware of their illegal driving habits;

3. have a spokesperson who talks about individuals not being forthcoming but doesn't mention the possibility that this effect might be more prevalent for one gender;

4. don't cross-check their findings against highly correlated hard data like highway patrol citation records;

5. contain at any point any variation of the phrase 'online interview.'

I have to sit down now. I'm getting dizzy...