The Analogists


    

Viagra analogies have been in the news a lot lately, both in connection with contraceptive coverage and in connection with state laws restricting abortion. I love good analogies and I hate bad ones, so I’d like to take a little time to sort out the bad from the good.

Because there are several scattered points to be made here, I’m putting them in sections and labeling them with Roman numerals, to make it easier for commenters to tell us just which section(s) they’re responding to.

I.

My insurance policy covers Viagra. I would prefer that it didn’t. Given the costs and the probabilities, erectile dysfunction seems to me like a crazy thing to be insured against. There are a whole lot of other things I feel the same way about. I’d prefer not to be insured against losing my eyeglasses. On the other hand, I’m very glad to be insured against needing chemotherapy or kidney dialysis.

I am financially pretty comfortable. If I were less comfortable, I think I would be even more unhappy about having to pay for Viagra coverage. The poorer you are, the more likely you are to prioritize things like groceries and car repairs.

In a more competitive insurance market, I might be able to find a policy more suited to my preferences. But in the insurance market we’ve got, I’m forced to accept a policy that makes me unhappy in many ways. Nevertheless, I have not asked my elected officials to ban Viagra coverage. That’s at least partly because I realize that I’m not the only one affected by this policy, and I’d prefer not to use the power of the state to impose my preferences on others.

II.

Sandra Fluke (and others) are unhappy about having a policy that doesn’t cover contraceptives, just as I am unhappy about having a policy that covers Viagra. Unlike me, they seem to think that their dissatisfaction constitutes an argument for government intervention. I conclude that these people don’t understand (or are pretending not to understand) what an argument is.

I’ve even had a few emails from people trying to make the case that if the government does not require contraceptive coverage, then symmetry demands that the government prohibit Viagra coverage. I conclude that these people don’t understand (or are pretending not to understand) what symmetry is. For their benefit, here’s an example of an actual symmetry: If the government allows institutions to make their own decisions about Viagra coverage, then the government should allow institutions to make their own decisions about contraceptive coverage.

III.

Even that symmetry, though, can be imperfect because your specific reasons for supporting or opposing contraceptive coverage might not apply to Viagra. You might support (or oppose) contraceptive coverage because you think it reduces the birth rate. But Viagra does not reduce the birth rate; if anything, it might do the opposite. If you think it’s important to reduce the birth rate, you might favor contraceptive coverage and oppose Viagra coverage; if you think it’s important to increase the birth rate, you might take the opposite positions.

IV.

I conclude, then, that regarding contraceptive coverage, virtually every analogy with Viagra is a bad analogy. The analogies are bad partly because they fail to address the key question “What should be mandatory?”, and partly because they fail to observe that good arguments based on externalities might well apply to one drug and not the other, or even to both drugs but in opposite directions.

V.

On the other hand, Viagra analogies are in the news lately in a completely different way: Ohio State Senator Nina Turner (along with several of her counterparts in other states) has introduced legislation requiring men to undergo a series of humiliating procedures before they can fill their Viagra prescriptions. Here I am confident that Senator Turner is following in the admirable footsteps of Rush Limbaugh, by proposing a policy she doesn’t actually support in order to highlight its symmetry with a policy she finds appalling, namely recent legislation requiring women to undergo a series of humiliating procedures before they can have an abortion. I love analogies like this. They force people to face things they’d rather not face. Of course, no analogy is ever dispositive, but a good one can go a long way toward clearing the air.

VI.

But is Senator Turner’s analogy a good one? It depends, I think, on the intent of the Ohio abortion law.

There are two possible motivations for that law. Motivation One is paternalistic, proceeding from the assumption that women will make poor choices about abortion and that we do them a favor when we discourage them. If that’s indeed the motivation, then Senator Turner’s analogy is spot-on. If we’re going to assume (with no substantial evidence) that women make poor choices about abortion, why not assume that men make poor choices about erectile dysfunction drugs? If we’re going to arrogate the power to override women’s choices, why not do the same for men?

But Motivation Two is that the legislature believes abortion is ipso facto a bad thing and wants to discourage it in any way possible, without regard to what’s in the best interest of the pregnant woman. If that’s the motivation, then Senator Turner’s analogy becomes much weaker (unless you’re really prepared to argue that erections are ipso facto a bad thing). A perfectly consistent person might fervently oppose this legislation but still consider Senator Turner’s implicit argument a bad one.

VII.

Though I haven’t been paying close attention, I have the strong impression that Motivation One has been bandied about quite a bit by the proponents of these laws. So I think Senator Turner has got this right, and I admire both her logic and her gumption.

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167 Responses to “The Analogists”


  1. 1 1 Roger Schlafly

    Your boss already censured you for mocking a female grad student, and now you say that she doesn’t understand what an argument is?! She has an argument — she wants conceptive pill coverage for herself and her fellow students, and she wants someone else to pay for it.

    Turner said that her bill is in response to the “heartbeat bill” that bans abortion after a heartbeat is detected. If so, then I don’t see your Viagra analogy at all. The heartbeat bill does not help women make better choices. Maybe there would be a better analogy if her bill was to ban Viagra for any man over age 60.

  2. 2 2 Super-Fly

    I agree that Viagra probably shouldn’t be covered, (at least, I don’t want it covered) but it does raise the question: “why is it covered now in the first place?” Is it part of some larger prescription mandate? I really hope this whole debate leads to enthusiasm for more choices and competition in the healthcare market, but I kind of doubt it will.

    With regards to item “I.”, are you saying that if you were given the opportunity to speak before congress to give an argument for your ideal plan, you wouldn’t take it?

  3. 3 3 Advo

    One argument for covering birth control pills in health insurance has not been mentioned at all – markets are at their most efficient if they are transparent.
    The health insurance market is completely opaque. With hundreds (or more) parameters in such contracts, even experts have a hard time sizing up different insurance contracts and determining which one offers the better value.
    This is a major reason why the health insurance market is a such a disaster. A standardization of coverage (especially by establishing a minimum level of coverage) will improve market transparency drastically and increase market efficiency.

    It gets even worse when you tack the health insurance on a contract regarding education.

    It’s difficult enough to decide on which lawschool you should go to without having to factor in the relative value offered by the health coverage of one institution vs. another.

    Ms. Fluke’s plea is essentially nothing but a plea for a statutory standardization of a service.

  4. 4 4 Nickolaus

    Erections are only ipso facto a bad thing if you’re a high school student who has just woken up at the end of math class and need to proceed out into the hallway.

  5. 5 5 Nickolaus

    @Super-Fly
    “With regards to item “I.”, are you saying that if you were given the opportunity to speak before congress to give an argument for your ideal plan, you wouldn’t take it?”

    I am quite sure that Steven would not ask congress to use the strongarmed force of the state to get what he wants, just like he says. He may however, use that opportunity to point out the harm that has come from giving employers tax deductions for providing insurance.

  6. 6 6 Boria

    I respectfully disagree with you on the motivation for the Ohio legislature passing the law. Motivation 2 is a more probable reason.
    Why?
    If the legislature in Ohio is representative of the people who put its members in that body, the members are seeking ways to limit abortions because they consider it to be a “bad thing” as you put it, murder as I put it, and that has nothing to do with “paternalistic” reasons. Polls bear me out! Americans do not support abortions in the 2nd and 3rd trimester by 71% and 86% margins respectively. I suspect legislators are also attempting to curb the “liberal” interpretation abortionists have of the stage of the pregnancy before performing an abortion.
    Is not the use of the word “humiliating” subjective? Is there a procedure more humiliating to men than a prostate check? Many of us are willing to undergo that procedure for health reasons. Does a viable baby in the womb find the procedure a woman has to/would have to undergo humiliating if it saves his life?

  7. 7 7 m henner

    I think you are using the wrong analogy.

    Viagra is drug to cure or alleviate a medical condition, a dysfunction. Insurance tends to cover drugs that either cure an ailment, or will prevent or reduce the likelihood of an ailment occurring, as statins may reduce the risk of heart attacks.

    Birth control pills – or IUDs – do not cure or reduce the chance of illness. They prevent a natural condition, pregnancy, from occurring. But not an illness.

  8. 8 8 Ken B

    @Nickolaus: Were you studying osculating curves?

    @Roger Schlafly: If the president was wrong isn’t it admirable of Steve to do this. Plus you must have missed the earlier discussion entirely: Stev e had both a post and a myriad comments on just the exact point he repeated here. Were you dreaming of osculating curves and got distracted.

  9. 9 9 Ken B

    The linked article undercuts Roger’s contntion decisively.

    She told ABC News today that her legislation was meant to show men “that we care.”

    “I really believe that I’m learning something from my conservative, Republican male colleagues — the most important thing on our agenda should be regulation of the sexual health of women,” she said. “It’s time to show men some love in that regard.”

    The mockery is quite clear. Mockery supports Steve’s point one point.

  10. 10 10 Ken B

    @Advo:
    “One argument for covering birth control pills in health insurance has not been mentioned at all – markets are at their most efficient if they are transparent.”

    That’s not actually quite right. I made the case the pill should be OTC. That gives us the most transparent and competitive market.

  11. 11 11 Brandon Berg

    The thing I find most bizarre about all this is the assumption that birth control is something that benefits women and viagra is something that benefits men. Because men love using condoms, and women just can’t wait for that magical day when their husband’s erectile dysfunction kicks in.

  12. 12 12 vernon

    Come on now. There are a few facts that people around here seem hellbent on ignoring. To wit:

    1) EVERYONE with a health insurance plan “wants coverage for oneself, and wants someone else to pay for it.” That’s what health insurance is.

    2) Without government regulation, insurers, like all corporations, will ONLY do what enriches their investors. You can sit around waiting for their spontaneous benevolence to come like a bolt from the blue—at which point I guess they’ll voluntarily stop dumping waste in rivers and start feting their workforce—but you’ll be waiting a long time … and any benevolent corp would be promptly sued by its investors, and sued successfully, for not making profit its prime concern: history leaves no doubt of this.

    3) Likewise, we can wait around for the panacea of a “more competitive insurance market” to develop (which also means waiting forever), or we can try to actually get ourselves covered. As things stand, the average American has no more power to tailor the policies actually available to him than he does to stop the rotation of the Earth, and the idea of “firing” his insurer a la Mitt Romney is pure fantasy.

    4) The high cost of insurance and of drugs in the U.S. is due mainly to profiteering; comparison with any nationalized system reveals this abundantly. The case for government healthcare is not that the mechanism of “other people should pay for my coverage” works better when applied to the nation as a whole. It’s that when you remove the dividend drawer from the equation, and restore the enormous slice he takes off the top to the budget, you have a far cheaper and more efficient system. (And to keep the public from figuring out this general rule, the insurers will agree to any number of minor regulations.)

    5) By the way, what Ms Fluke was doing was giving testimony. Does all, or even most, testimony constitute Argument, and is it expected to? Mr Landsburg seems to assume so; that’s a new one to me.

  13. 13 13 Ken B

    That was a boner Brandon.

    Note added by SL: There was originally a typo in Brandon’s comment, which Brandon followed up with a correction. I corrected the typo and deleted the correction, thinking this was a favor to Brandon. Only later did I realize that this ruined Ken B’s joke.

  14. 14 14 Ken B
  15. 15 15 TooManyJens

    “But Motivation Two is that the legislature believes abortion is ipso facto a bad thing and wants to discourage it in any way possible, without regard to what’s in the best interest of the pregnant woman.”

    The legislature doesn’t want to discourage abortion in *any* way possible, or they would put much more effort into prevention of unintended pregnancy and supporting pregnant and parenting women so that there aren’t so many women who feel that abortion is their only choice. Those would be constructive ways to discourage abortion that would regard the mother as a full and respected person in her own right, not an enemy to be manipulated and controlled.

    My God, how do people think they can help unborn children “without regard to what’s in the best interest of the pregnant woman”? But they try it all the time.

    I actually think Motivation Three is the key here: “Do whatever scores points on anti-abortion groups’ scorecards so we get their endorsements and money, whether or not it actually does anything to reduce abortion.”

  16. 16 16 Pat T

    Roger, a demand is not an argument.

  17. 17 17 Ken B

    @TooManyJens:
    I think you are right about motivation 3. But the expressed motivation is closer to 1 than 2 or 3, and the mockery is directed at the proffered pretext. It’s funny in part because it reveals reason 1 AS a pretext.

  18. 18 18 Roger Schlafly

    The article says:

    She told ABC News that her measure, State Bill 307, was in response to one currently in the House called the “Heartbeat” bill as well as the slew of legislation limiting women’s health-care choices in the U.S.

    So she is not humiliating men because of proposed laws that would humiliate women, and she is not helping men make better choices because of proposed laws what would (supposedly) help women make better choices. She is proposing a bill to annoy men because of other proposals that would limit choices for women.

  19. 19 19 Ken B

    Roger
    First you are elevating a reporter’s characterization of Turner’s stance over her own remarks.
    President Licoln said that 87 years a failed experiment began.
    Second you are extracting from that inferior second hand source the inference that it is mostly about heartland, ignoring the fact it is a response to a ‘slew’.
    Could heartbeat be just the last straw not the sole casus belli?
    The bridge too far that goaded her into action?
    Third you are completely missing the irony in her quoted remarks, despite the fact it’s laid on with a trowel (are you really RPM?)

  20. 20 20 Mark Draughn

    “EVERYONE with a health insurance plan ‘wants coverage for oneself, and wants someone else to pay for it.’ That’s what health insurance is.”

    That’s what having a job is. My employer pays for my health insurance, and in return I do work for them. We made a deal. Asking Congress to require insurance coverage is asking Congress to override deals between employers and employees. By itself, that doesn’t make it wrong, but it’s not the same thing.

  21. 21 21 Ken

    vernon,

    EVERYONE with a health insurance plan “wants coverage for oneself, and wants someone else to pay for it.” That’s what health insurance is.

    I suspect many people believe that statement, which is the primary reason the health care system has been screwed up so badly by the distortions made through bad policy affecting health insurance. However, that is not what insurance is. Health insurance is a hedge against catastrophic damage that may or may not happen, like heart attacks, cancer, serious disease, etc. Anything that covers normal maintenance, like contraception and doctor visits is not insurance.

    Insurance is about spreading risking, not having someone else pay for something. The best way to understand it is like this:

    Your a ship owner, but instead of owning one whole ship you own one tenth of ten ships. Owning the entirety of a single ship, while having a lot of reward, carries a very high risk: anything that stops the ship from working completely ends any revenue to you. Buying 0.1 ownership in 10 ships may not be as lucrative as owning the entirety of a single ship, but now you are protected. The only way the entirety of your income can be threatened is if ALL 10 ships are damaged to the point that they stop working.

    2) Without government regulations, insurers, like all corporations, will ONLY do what enriches their investors

    So? Free market transactions can only occur if the seller AND buyer think they are getting a good deal. For example, if you buy a can of soda for $.75, then you value the can of soda at a higher value than $.75, while the seller values the $.75 to be of higher value than the can of soda. It’s win win. People who think that government regulators to a better job of regulating products than the people who actually consume the products hasn’t actually thought too hard about economics.

    You use dumping as your example, but the reality is this is a government failure and a classic one at that: the failure of the commons. Since the government has abrogated its authority to properly define property rights on the river your talking about, the government has set up an incentive to pollute without bearing the full costs of that pollution.

    3) Likewise, we can wait around for the panacea of a “more competitive insurance market” to develop…, or we can actually get ourselves covered.”

    This sentence highlights your confusion about economics. Markets aren’t a panacea, nothing is. And thinking that using government to force exchanges that people wouldn’t voluntarily agree to MAKES THINGS WORSE, not better. With coverage comes a cost: higher premiums. If you as a buyer wouldn’t buy a policy covering X because it makes the policy too expensive, then how does forcing you to buy that policy make you better off? On the flip side, forcing insurance providers to cover something without allowing premiums to increase will simply drive more insurance companies out of business, reducing the overall coverage.

    4) The high cost of insurance and of drugs in the US is due mainly to profiteering; comparison with any nationalized system reveals this abundantly.

    No such thing is revealed. These nationalized systems can thrive and advance only because the US innovates. Almost 100% of ALL medical innovations occurs in the US because other countries have made it illegal to profit from something. Many of these other countries used to innovate like the US, but now that companies can’t profit from their innovation, they don’t. It’s a simple matter of incentives: they work, even bad ones.

    Profits are good. It means that a company is providing a product or service that people want to buy. If a company did not profit, they would go out of business and couldn’t provide anyone with any product or service.

    I suggest, vernon, that you educate yourself about economics and find out about trade offs, and stop thinking about what you want exclusively.

  22. 22 22 Al V.

    Re. @vernon’s #4, is the premium we pay for medicine in the U.S. at least partly due to tax deductability? I imagine that having prescriptions covered under insurance contributes, in that I’m much less sensitive to price if I’m only paying 10% of the cost. Reducing the cost of a drug is much more interesting to me if the cost is changing from $100 to $50 than if it’s changing from $10 to $5.

    But does tax deductability play into this at all? I think we could argue that the mortgage interest tax deduction raises housing prices, but I have a hard time following that logic to prescription drugs.

  23. 23 23 Roger Schlafly

    vernon: 1) EVERYONE with a health insurance plan “wants coverage for oneself, and wants someone else to pay for it.” That’s what health insurance is.

    No. I pay for my own coverage.

    I don’t necessarily need govt regulation or benevolence. I want a company to offer a policy that suits my needs. And yes, I do have some choice, so I can fire my insurer if I want to.

  24. 24 24 Ken B

    @Ken: Property is theft!

    :)
    Sorry. Couldn’t resist.

  25. 25 25 Ken B

    @Ken: Property is theft!

    :)
    Sorry. Couldn’t resist.

  26. 26 26 David Grayson

    Steve, I think you might be missing something here:

    Viagra treats an actual medical problem and you don’t know in advance if you are going to need it.

    Birth control alters the body in an unnatural way, and you pretty much do know in advance if you will need it.

    Based on these differences, it seems more logical to have Viagra covered by your insurance but I definitely don’t think either should be required.

  27. 27 27 Ken

    A company, doing ONLY what will enrich its investors, develops a product that costs consumer $7, replacing a $15,000 product.

    That’s how markets work vernon. You see, vernon, in order for investors to get rich, they have to invest in corporations that produce goods and services that makes people’s lives better. Thus when investors get rich in free markets, it means they’ve made people’s lives better.

  28. 28 28 Ken B

    “EVERYONE with a health insurance plan ‘wants coverage for oneself, and wants someone else to pay for it.’ ”

    Ken and others have dissected this well. Insurance is not getting paid when something bad happens. Insurance is accepting a high chance (even a 100% chance) of a relatively small loss in preference to the small chance of a very large loss.

    @David: That’s Steve’s answer btw: Viagara is a small cost even if you need it. The appropriate premium is probably so small the admistrative costs matter.

  29. 29 29 Joker

    good arguments based on externalities might well apply to one drug and not the other, or even to both drugs but in opposite directions.

    Viagra increases an externality so that it can be internalized.

  30. 30 30 Joe

    Thread over. Joker wins.

  31. 31 31 Ken B

    For once Joe is exactly right.

  32. 32 32 Ken B

    That was a boner Brandon.

    Note added by SL: There was originally a typo in Brandon’s comment, which Brandon followed up with a correction. I corrected the typo and deleted the correction, thinking this was a favor to Brandon. Only later did I realize that this ruined Ken B’s joke.

    No hard feelings.

  33. 33 33 Warren Jason Street

    “Viagra treats an actual medical problem and you don’t know in advance if you are going to need it.

    Birth control alters the body in an unnatural way, and you pretty much do know in advance if you will need it.”

    Hold the phone, there. Viagra treats impotence. You go and ask for a prescription for Viagra when you can’t get it up. Or when you can only keep it up for a little while. Or when you want to keep it up and enjoy a week of sex tourism–this is the Rush Limbaugh scenario so many seem to ignore.

    Birth Control regulates menstruation cycles and can actually increase the fertility of women; it is also prescribed to treat a number of conditions, such as endometriosis.

    See here for more info.

    http://www.mayoclinic.com/health/endometriosis/DS00289/DSECTION=treatments%2Dand%2Ddrugs

  34. 34 34 vernon

    Hey, arguing with free marketeers! Wahoo! I got my gun; thanks Mr Landsburg for providing the barrel…

    >>”…However, that is not what insurance is. Health insurance is a hedge against catastrophic damage that may or may not happen, like heart attacks, cancer, serious disease, etc. Anything that covers normal maintenance, like contraception and doctor visits is not insurance.”

    >>”…Insurance is not getting paid when something bad happens. Insurance is accepting a high chance (even a 100% chance) of a relatively small loss in preference to the small chance of a very large loss.”

    These are descriptions of the essential idea of Insurance, which unfortunately is about as close to the reality of modern health coverage as a horse and buggy is to Delta Airlines.

    Today, “normal maintenance like contraception and doctor visits” is prohibitively expensive. If coverage is a hedge against anything it’s a hedge against the catastrophe of not having coverage. Even absent a health emergency, going without coverage only works for the young, the childless, and/or the wealthy.

    To address this reality, modern insurance spreads the COST around, not just the RISK. That’s what it’s for. If you want to quibble about the word “insurance,” go quibble with Wellpoint, Kaiser, and Blue Shield. That’s the word they’re using for the thing they sell.

    >>”People who think that government regulators to a better job of regulating products than the people who actually consume the products hasn’t actually thought too hard about economics.”

    On the contrary—people who think private corporations provide healthcare more efficiently than governments do can’t have actually considered the FACTS regarding just about every developed country’s healthcare vs. the USA’s.

    >>”If you as a buyer wouldn’t buy a policy covering X because it makes the policy too expensive, then how does forcing you to buy that policy make you better off?”

    Yeah, well, I don’t like Romneycare either. But the government can definitely provide the same coverage more cheaply than a corporation can, simply by not having to pay off investors. Government-administered programs only have to deliver the care; they don’t have to fatten Paris Hilton’s trust fund in the process. That’s a huge advantage (for everyone except the investors), especially in this day and age, where everything is being turned into an investment vehicle and is therefore terribly overpriced.

    >>”These nationalized systems can thrive and advance only because the US innovates. Almost 100% of ALL medical innovations occurs in the US because other countries have made it illegal to profit from something.”

    That’s nonsense, for several reasons. (1) Ever heard of GlaxoSmithKline? Bayer? Novartis? La Roche? Sanofi? Boeringer Ingleheim? Guess what, they’re massively profitable pharmaceuticals and they’re all European.

    (2) Look at recent medical innovation for a second. The first embryonic stem cell line was derived by James Thomson of the University of Wisconsin—not a profit-taking outfit last time I checked. Similarly, the Human Genome Project was a worldwide undertaking, but it was mainly organized by the U.S. Department of Energy’s Office of Science, the National Institutes of Health, and the National Center for Biotechnology Information. All research is driven by profit?? Furthermore, telesurgery was first performed by Jacques Marescaux of the French Health and Medical Research National Institute, and the HPV vaccine depends on the research of Harald zur Hausen of the University of Heidelberg. All innovation comes from the U.S.??

    (3) It’s not as if the profits accrue to the innovators and researchers anyway. They accrue to the investors. I’m sure Big Pharma’s researchers are well-paid, but that’s not where the lion’s share of the money is going.

    But this is mostly moot anyway, because: (4) most of the care provided and needed the world over is basic care, not the latest hypogenetic remote nucleosurgery or whatever.

    Let’s see, someone else said this:

    >>”A company, doing ONLY what will enrich its investors, develops a product that costs consumer $7, replacing a $15,000 product.”

    Har har, yeah, that’s why the Pill costs $3,000 a year.

  35. 35 35 Steve Landsburg

    vernon: There’s much to reply to here; I’ll randomly pick and choose a few points.

    But the government can definitely provide the same coverage more cheaply than a corporation can, simply by not having to pay off investors.

    This is not correct; the opportunity cost of capital is what it is, independent of whether that capital is provided by private investors, commandeered by the government, or acquired in any other way.

    It’s not as if the profits accrue to the innovators and researchers anyway. They accrue to the investors.

    Yes—and those profits serve the social purpose of encouraging investors to direct capital to the firms with the best innovators and researchers.

    Let’s see, someone else said this:

    ”A company, doing ONLY what will enrich its investors, develops a product that costs consumer $7, replacing a $15,000 product.”

    Har har, yeah, that’s why the Pill costs $3,000 a year.

    As I said in another recent post, the pill is expensive partly because of monopoly power, which is to say that its price overstates the social cost of providing it — and that, unlike many other things that have been said in these threads, is actually a good argument for subsidizing it.

  36. 36 36 vernon

    “…the opportunity cost of capital is what it is, independent of whether that capital is provided by private investors, commandeered by the government, or acquired in any other way.”

    So what? A government-run program can operate without maximizing profits; a corporation cannot. It’s that simple. A government-run entity can sustain operation at a loss in hard times; a corporation cannot. A government-run program can consider something other than its own bottom line when you need an expensive procedure, and is ultimately answerable to its patients.

    “Yes—and those profits serve the social purpose of encouraging investors to direct capital to the firms with the best innovators and researchers.”

    Hmmm, which would I rather do without—the American research and innovation from the past century funded by private investment capital, or the research & innovation from the same period coming out of NASA, the Pentagon, and the universities? For that matter, which would The Market rather do without? I mean, come on.

  37. 37 37 Ken

    vernon

    These are descriptions of the essential idea of Insurance, which unfortunately is about as close to the reality of modern health coverage as a horse and buggy is to Delta Airlines.

    Uhh… yeah, that’s the point. Government intervention into the health insurance business has, unsurprisingly, screwed everything up.

    Today, “normal maintenance like contraception and doctor visits” is prohibitively expensive.

    Nonsense. A doctor’s visit is $140, which is less than phone and cable service, something most households in the country have. A blood work up costs about $300. Contraception is even cheaper.

    To address this reality, modern insurance spreads the COST around

    You can’t just “spread costs around” by requiring everyone to buy something. If it costs $X to buy A and you require everyone to buy A, it still costs $X for each purchase of A.

    On the contrary—people who think private corporations provide healthcare more efficiently than governments do can’t have actually considered the FACTS regarding just about every developed country’s healthcare vs. the USA’s.

    You mean like the hidden costs of enormous wait times, far higher rates of denial of service, and a general decline in quality of medical services in places not the US. How often do you hear about Americans going to Canada or Britain to get services vs. the number of Canadians and Brits coming to the US to get services. The stories most often told of Americans going elsewhere to get medical services are to places with even less government meddling into health care.

    Yeah, well, I don’t like Romneycare either.

    As if there’s a huge difference between Romneycare and Obamacare or even nationalized health care.

    But the government can definitely provide the same coverage more cheaply

    This is absolutely false. The government keeps its costs down by having a denial rate twice that of private insurances and refusing expensive, though less effective, treatment. By increasing the denial rate and refusing to cover many things, you can keep costs down, but this is hardly “the same coverage”.

    Ever heard of GlaxoSmithKline? Bayer? Novartis? La Roche? Sanofi? Boeringer Ingleheim? Guess what, they’re massively profitable pharmaceuticals and they’re all European.

    Yes with a massive presense in the US, particularly their research and development.

    Look at recent medical innovation for a second.

    Yes look at the recent medical innovation. You’ve cherry picked the data and have ignored the hundreds of new drugs private companies develop and the thousands of new technologies developed by private companies and the thousands of new procedures developed by private companies. No one denies that non profits and governments can develop some things, but it’s obvious they suck at it and are incredibly wasteful.

    It’s not as if the profits accrue to the innovators and researchers anyway.

    Of course this is false. The innovators are the primary people who accrue profits. As for researchers, they aren’t as economically as important as the innovators. While this isn’t a medical example, the main example I can think of is Steve Jobs and his legion of researchers. Jobs was far more economically important than those researchers.

    most of the care provided and needed the world over is basic care

    Contraception, nor most of what is mandated by governments for insurance to cover, is not basic care.

    that’s why the Pill costs $3,000 a year.

    The pill doesn’t cost that much. A monthly pack of the pill costs $20, i.e., $240 a year. That $3000 Fluke through out was a red herrin

  38. 38 38 Ken

    Edit: and refusing expensive, though more effective, treatment

  39. 39 39 Ken

    A government-run entity can sustain operation at a loss in hard times; a corporation cannot.

    I can’t believe you think this is a good think. Operating at a loss means that you are doing something wrong and need to change your ways. That this doesn’t affect government the primary problem with government. All the stupid, wasteful things they spend other people’s money on has no affect on the people being stupid and wasteful.

    which would I rather do without

    Right, so you impose your preferences on everyone else’s, no matter what other people think they can and can’t do without. No worries everyone, vernon doesn’t care, only his preferences matter.

  40. 40 40 vernon

    >>”A doctor’s visit is $140, which is less than phone and cable service, something most households in the country have.”

    For a family of four, that’s $560—a bit more than cable—but the actual costs go far beyond that. Ever have kids? A baby has to see the doctor roughly monthly. Kids need vaccinations and booster shots all the time; these cost anywhere from $50 to $150. Kids get sick all the time too, and prescriptions cost a fortune (I know, because my insurer randomly refuses to pay for some of them), but they’re “routine” enough: the kid needs them to get better & go back to school. My family has never sustained a medical emergency, or even a broken bone, but without health insurance we’d have long since gone bankrupt. And we are not poor.

    >>”You mean like the hidden costs of enormous wait times, far higher rates of denial of service, and a general decline in quality of medical services in places not the US.”

    Those wait times are very “hidden” indeed, so well hidden that I’ve never seen them cited anywhere except in the assertions of libertarians. And somehow, they never back their claims up with a link. So here, let me show you how it’s done.

    Here is a position paper from the Annals of Internal Medicine: http://www.annals.org/content/148/1/55.full?from_mr It is entitled “Achieving a High-Performance Health Care System with Universal Access: What the United States Can Learn from Other Countries.” It compares the U.S. to 12 other industrialized nations. Here is what it has to say:

    “Recent surveys of patient care experiences and patient ratings of various dimensions of care in the United States and 5 other countries (Australia, Canada, New Zealand, the United Kingdom, and Germany) show that patients rank the U.S. health care system lower than health systems of other countries on several key measures. People in these countries, whose physician workforces have a larger proportion of primary care physicians than the United States, see less need for a complete rebuilding of their health care systems, find their regular physicians’ advice to be helpful, and feel that they receive coordinated care. As Figure 5 shows, the United States had the poorest overall ranking and poorest rating on safe care, access, efficiency, equity, and healthy lives.”

    And the above paragraph (and much, much more) remains true no matter how many “stories” you hear about rich foreigners airlifted to the Mayo Clinic.

    >>”The government keeps its costs down by having a denial rate twice that of private insurances and refusing expensive, though less effective, treatment.”

    Per the report I linked to: “Measures of access include health insurance coverage, ability to see a physician and obtain needed medical attention, families spending less than 10% of income on out-of-pocket medical costs and premiums (5% if low income), ease of obtaining after-hours care, short waiting times for doctor appointments, and a minimal number of patients with problems with medical bills or high medical debts .. [T]he United States ranked last on access.”

    >>”You’ve cherry picked the data and have ignored the hundreds of new drugs private companies develop and the thousands of new technologies developed by private companies and the thousands of new procedures developed by private companies.”

    Ha ha! Yeah, I “cherry picked” a few little things … things like stem cell research, human genome mapping, and telesurgery! Nothing particularly groundbreaking or anything…

    Seriously, could you pick out a few cherries from your “thousands of new technologies developed by private companies” and give a couple examples? I’d be curious to see. You got something there from the last 2 decades that rivals the Genome Project?

    >>”Of course this is false. The innovators are the primary people who accrue profits.”

    This is my favorite specimen: the Capitalist who doesn’t understand how Capitalism works. No. Profits do not accrue to innovators. Not unless the innovators happen to be major shareholders in their own corporation. (Which sometimes happens … but I’ll leave it to you to decide which is a more truly meaningful innovation: isolating embryonic stem cells, or attaching a Web browser to an MP3 player in a toilet-white box, assembled at a sweatshop in New Taipei so you can still move it profitably.)

    >>”Operating at a loss means that you are doing something wrong and need to change your ways.”

    Not necessarily. It could mean that you’re weathering a downturn. For a health insurer, it could mean there’s been a sudden epidemic entailing an unexpected drain on revenues. It could mean that providing the best care available isn’t profitable given the current cost of technology.

    >>”Right, so you impose your preferences on everyone else’s, no matter what other people think they can and can’t do without. No worries everyone, vernon doesn’t care, only his preferences matter.”

    That’s ridiculous. My point was NOT AT ALL to impose my preferences. My point was to see if any of you Free Marketeers would actually say, would actually maintain, that the innovations of private capital over the last century are more impressive than those of the government and academia.

  41. 41 41 Ken

    Ever have kids?

    Most people have kids. Since having kids isn’t a low frequency event that affects only a small number of people at a time, insurance does nothing to make this more manageable. As I said before, if the cost of A is $X and most people have A, there is no way to spread around those costs. Providing an incentive to save for these expenses is the only real way to handle these costs.

    And if you think that non-parents should subsidize parents, then you are on morally shaky grounds. Wealth transfers are immoral acts, motivated by nothing but greed. If you think having a child is too expensive, don’t have them. Don’t expect others who don’t have kids to pitch in.

    Those wait times are very “hidden” indeed, so well hidden that I’ve never seen them cited

    Yep, so well hidden a google search pops up 47 million results.

    As for the study you cited, there are just as many showing that the US is the place to be for medical services.

    things like stem cell research, human genome mapping, and telesurgery

    The first two have promise, but to date has yet to deliver anything of importance on the market. Telesurgery is okay, but how many surgeries have you had? The reality is that the iPhone, developed by a private firm, is doing more for the typical consumer than the inventers of telesurgery. More and more apps get created by the private sector that add more medical value than what you’ve listed above. And as the technology and sensitivity of privately developed touch technology measure apps for things such diabetes are showing up. With the sensitivity and the unprecedented connectivity to larege of amounts data, all developed by the private sector, the iPhone and related products are poised to be the most important medical devices on the planet.

    Not unless the innovators happen to be major shareholders in their own corporation.

    Only large corporations with shareholders are profitable? Huh. So the half of the economy that is small business that are almost 100% family owned aren’t accruing profits? And you claim I don’t know how capitalism works? Ha!

    which is a more truly meaningful innovation

    Again, Ha! A dollars worth of mp3 is worth the same as a dollars worth of embryonic stem cells – $1. Claiming that one thing is more “meaningful” than another is simply a way to avoid talking about what actually matters to people: value.

    Not necessarily. It could mean that you’re weathering a downturn.

    And how did this downturn occur? The down turn in the housing market is a result of mortgage lenders acting on bad incentives. The same is true for finance. And not really shocking at all, lenders and financiers who stuck to tried and true principles did not and are not losing money.

    My point was to see if any of you Free Marketeers would actually say, would actually maintain, that the innovations of private capital over the last century are more impressive than those of the government and academia.

    The answer is clearly yes. Private innovation and use of capital vastly exceeds government and academia innovation and use of captial. People like you don’t notice because government and academia go for the next big thing, but end up failing almost always (Solyndra is what almost all government “innovation” and “investment” looks like). Sometimes it works and they look like a genius (radar). Other times it’s just happenstance (packet switching).

    In the private sector innovation is done with baby steps, incrementally and over time, and without a lot of waste. But over time, the advances are pretty much unimaginable. You are a prime example, thinking of the few big successes of government (and ignoring their collosal failures), while simply taking the things you get from the private sector for granted.

    The smart phone is the culmination of baby steps over decades in the private world and is the most transformative invention ever.

  42. 42 42 Mike H

    The situation seems to be this :

    Someone says “hey, I’ve got a great idea! It’s called ‘health insurance’”

    Someone else says “Hey, I’ve got another great idea! It’s called ‘free market libertarianism’”

    Some economists point out “Hey, here’s something interesting we just found out! It’s called ‘reasons for market failure’. A whole bunch of them apply to health insurance”

    The USA says “Hey! Lets rely on health insurance as the basis for health care in our strongly free market libertarian culture!”

    … and now we are wondering why things are going wacko…

    Don’t believe health insurance suffers market failures? Here’s just one example making the rounds : http://bit.ly/AiEhMV

  43. 43 43 Vald

    Ken,

    Your assertions seem to lack a basic understanding of the words “morality” and “meaningful.”

    Are you really trying to argue that a wealth transfer is immoral, but you cannot tell whether an mp3 or embryonic stems cells are more “meaningful”?

    Of course, I’m sure you don’t even see how these two are related, and I’m not going to be able to explain it to you. You understand a world in which the only form of value is monetary, which means you will never be able to truly speak to vernon’s points, because you are thinking in a completely different way than him.

  44. 44 44 Ken

    The USA says “Hey! Lets rely on health insurance as the basis for health care in our strongly free market libertarian culture!”

    … and now we are wondering why things are going wacko…

    Seriously?! The insurance markets in the US are free markets? When did this happen? Was it at the same time that the mortgage and banking industries were deregulated?

  45. 45 45 Mike H

    @”The innovators are the primary people who accrue profits”

    @”In the private sector innovation is done with baby steps, incrementally and over time, and without a lot of waste”

    You’ve clearly not read Tim Harford’s “Adapt” (http://amzn.to/AfnnJh), nor perhaps much else on how innovation actually happens. If you had, you would know that

    * profits from innovations primarily fall to people who copy the innovation, not to the innovators themselves. Apple Corporation is a classic example.

    * innovation in the private sector is as full of wastage, false starts and utter failures as it is anywhere else.

    therefore,

    * the act of attempting to innovate is an act with large positive externalities. It should therefore be heavily subsidized somehow.

    NB : The patent and copyright systems as they currently stand don’t work well in their goal of internalising the externality..

  46. 46 46 Ken

    Are you really trying to argue that a wealth transfer is immoral, but you cannot tell whether an mp3 or embryonic stems cells are more “meaningful”?

    Wealth transfers are theft using government bureacrats as middle men.

    The meaningfulness of anything is an individual preference. I haven’t used stem cells, nor has anyone I now of used them. They are meaningless in my life. Mp3′s on the other hand provide me with a compact way to carry around some of the most beautiful music humankind has ever produced and listen to them anywhere I can carry my iPhone. Mp3′s are very meaningful in my life.

    You understand a world in which the only form of value is monetary

    Absolutely not. Things have monetary meaning in a persons life in relation to other people. It’s the only real way to convey value. There are many things I have that I find very meaningful and would not part with for very large sums. These things have no value to anyone else, so the monetary value attached to them is negligible.

    The problem with people like you Vald, is that you think everyone else should find meaning in the same things you do, but when you find out that a dollars worth of an mp3 is worth the same as a dollars worth of stem cells, you get upset. You wish to condemn others for not finding meaningful, as expressed in money (value), the things you find meaningful.

  47. 47 47 Ken

    Mike H

    profits from innovations primarily fall to people who copy the innovation, not to the innovators themselves.

    In fact, even this is wrong. The profits fall mainly, as Steven points out, to the consumer. As rich as Jobs got by his innovations (I’m not sure where you got the idea Apple doesn’t innovate), his billions fall very short of the trillions in profits his customers gained.

    innovation in the private sector is as full of wastage, false starts and utter failures as it is anywhere else.

    That’s an excellent point, but government is even worse and politicians are wasting taxpayer money. At least in the private sector the waste and false start is financed by people who willingly finance these ventures. The government finances risky ventures by taking at the barrel of a gun.

  48. 48 48 Boris

    Mandatory coverage for contraceptive coverage does not necessarily constitute a tax for men. Insurance companies do not charge everyone same the rate for insurance: it depends on many factors including age, gender, health history, etc. So, it is likely that men will be simply charged less if contraceptive coverage is mandatory. Depending on the underwriting practices, the same argument might apply to unfertile women, but does not apply to fertile women who do not wish to use contraception.

    An objection that can levied against this argument is that in the case of a group insurance, the men have to pay for the contraception coverage that they do not use. It is the similar to the case of a group insurance where younger/healthier people pay part of the expense for the older/less healthier people. The answers are this: 1) being part of a group for bargaining purpose is (somewhat of a) voluntary decision, 2) monetarily the age/health difference costs far more than contraceptive coverage; if one is worried about these issues, solve the age/health cost division first, and do not get distracted by the lesser problems.

  49. 49 49 Ken B

    “To address this reality, modern insurance spreads the COST around, not just the RISK. ”

    This confusion is part of the problem. If you want to spread the COST use SUBSIDIES. If you want to spread the RISK use INSURANCE. The insistence that everything be done via one mechanism we misleadingly lable ‘health insurance’ forecloses better options and clouds debate.
    (I think the verb fot that last is “to vernon”).

    I as a free marketer want to spread BOTH. (Vernon’s head will explode, as he doesn’t understand free markets are a mechanism not a false god). So btw vernon did Milton Friedman. Ken as a free marketer wants no part of subsidies.

  50. 50 50 Ken B

    “innovation in the private sector is as full of wastage, false starts and utter failures as it is anywhere else.”

    Anywhere else? How many elses are there?

    However the comment misses a key point. In private markets these things get cut off and wither. Markets self-correct. In gov’t that is much less true.

  51. 51 51 vernon

    >>”As for the study you cited, there are just as many showing that the US is the place to be for medical services.”

    Hmmmm, where are these studies? So far you’ve been able to cite exactly none of them.

    >>”The reality is that the iPhone, developed by a private firm, is doing more for the typical consumer than the inventers of telesurgery.”

    It’s telling that the subject is medicine & medical innovation, and you’re driven to talking about iPhones.

    Without the research of the Pentagon, UCLA, and Stanford in the 60s and 70s that developed the Internet, those shiny Apple products would not exist.

    >>”A dollars worth of mp3 is worth the same as a dollars worth of embryonic stem cells – $1. Claiming that one thing is more “meaningful” than another is simply a way to avoid talking about what actually matters to people: value.”

    You miss the point: Steve Jobs didn’t INVENT the mp3 player. Strictly speaking, Steve Jobs didn’t innovate anything at all. He combined pre-existing technologies in a slick package and found that, like chocolate & peanut butter, they taste good together. Real scientific breakthroughs are analogous to the discovery of chocolate itself. Dr Thomson’s innovation is in a whole different league.

    >>”Only large corporations with shareholders are profitable?”

    No, but we’re talking about American healthcare corporations, which are huge profit-driven enterprises on the Capitalist model. Their profits accordingly accrue to their investors. Their researchers, other things being equal, are mere employees—well compensated employees I imagine, but employees nonetheless. The purpose of the enterprise is to make the capital of the investors get bigger. This can be done via innovation; but also via graft, cronyism, price gouging, falsification of research, and any number of Time Honored Business Practices. The researcher-innovator is a cog in the machine. The machine itself exists to take the millionaires & billionaires who invest in it from shop to shop and party to party. That’s what it’s for.

    “Small business” is not capitalism. It’s just trade. Capitalism is that which exists in order to make capital grow. I know your books never told you this. Capitalist propagandists don’t like to talk about Capital and how it functions. (Reardon Steel didn’t even have shareholders, as I recall.)

    >>”(Solyndra is what almost all government “innovation” and “investment” looks like)

    But Solyndra—a for-profit startup venture—attracted & received huge amounts of private capital! How can you single it out as specifically a government failure when a long list of private capitalists made the same mistake the government did?

    >>”The smart phone is the culmination of baby steps over decades in the private world and is the most transformative invention ever.”

    The smart phone, as mentioned earlier, would not & could not exist without the work of the government and academic institutions that developed the Internet.

    I’m glad you like you smart phone, but—”the most transformative invention ever”? Oh, come on! Think about life before the radio. Seriously. Just think about it for 2 seconds. I mean it’s nice being able to type an argument like this over the net, but I doubt this is ANYTHING like what it meant to hear the voice of someone halfway around the world for the first time. I don’t think the “revolution” in telecommunications rivals the earlier revolution in transformative power. I don’t see how it could. It’s a mere elaboration of the earlier revolution.

    Not to mention indoor plumbing … the wheel … fire …

  52. 52 52 Ken B

    Here is one simple example of the kind of thing I just complained about. vernon wrote:
    “My family has never sustained a medical emergency, or even a broken bone, but without health insurance we’d have long since gone bankrupt. And we are not poor.”

    First, from his tale this is pretty clearly not true. And those of us who raised kids know it. So: clouding debate.
    Second, many free marketers on this board argue for subsidies for raising kids. Landsburg for example. Or Ken B. And it’s subsidies you are wanting here not insurance: you stipulated no serious medical problems just routine stuff.

  53. 53 53 vernon

    >>”First, from his tale this is pretty clearly not true.”

    It is true. Starting with the hospital birth fees. How many of you “who have raised kids” have done so without coverage? Any?

  54. 54 54 Ken B

    “How many of you “who have raised kids” have done so without coverage? Any?”

    My parents. More kids than I had. My grand parents. More kids than my parents had. My great grandparents. More kids than my grandparents had.

    Note I don’t say they didn’t have to sacrifice for it.

  55. 55 55 vernon

    >>”Landsburg for example. Or Ken B.”

    Uh … you ARE Ken B, correct?

    >>”And it’s subsidies you are wanting here not insurance: you stipulated no serious medical problems just routine stuff.”

    I “stipulated” …? No, I recounted what happened.

  56. 56 56 Ken B

    @vernon: Yes, on my good days I am.

    You wrote your family had no emergencies or problems as serious as a broken bone. Your *point* I think was that routine checkup like and delivery costs are high enough to bankrupt one, and that your family was such an example. That is logically a stipulation there were no sudden large unexpected costs.

  57. 57 57 vernon

    >>”My parents. More kids than I had. My grand parents. More kids than my parents had. My great grandparents. More kids than my grandparents had.”

    News flash: Healthcare costs have skyrocketed since a generation ago.

  58. 58 58 Ken B

    And incomes have dropped precipitously since the 1890s.

  59. 59 59 vernon

    Actually, incomes rose quite a bit from the 1890s thru the mid-1970s. After which they’ve pretty much stagnated.

  60. 60 60 Steve Landsburg

    vernon:

    Actually, incomes rose quite a bit from the 1890s thru the mid-1970s. After which they’ve pretty much stagnated.

    I take it you don’t remember the 1970s.

  61. 61 61 TeeJaw

    I have an analogy that I think is a good one, but there may be argument that it is a bad one. I’m haven’t considered anyone’s motive and don’t profess to know it.

    Abortion is defended as protecting a woman’s right to choose. When a woman chooses to have an abortion she is choosing not to carry the baby to term and have it born alive, which would make her a parent. Thus, a woman’s right to choose is in reality a right to choose whether to become a parent.

    I propose that a man should also have a right to choose whether to become a parent. Of course, men don’t get pregnant so some will say this is ridiculous because a man has no means of exercising such a right, or that he has made his choice when he chose to have sex with the woman. But unless he raped the woman, she also made a choice at that point. Now she gets a do-over. Is there a practical way for a man to get a do-over?

    Yes. This can be done by enacting a law requiring the woman to identify the father of her child on the child’s birth certificate (if it is a man to whom she is not married) and then offering the man a certain limited period of time, 30 days say, to indicate his choice not be become a parent by filing an affidavit to that effect in the county records where the child was born. In such a case the woman would be forever barred from suing the man to establish paternity, and the man would be forever free from any liability for child support. The man, likewise, would be forever barred from claiming any parental rights in the child.

    A man not named as the father on the birth certificate would be forever immune from a paternity suit (unless he was the unseparated husband of the mother, or unless he raped the mother).

    So now there is symmetry. Women have the right to choose, and so do men.

    I think this is a good analogy and I also think it would be good policy. I would want the new law to stipulate that the mother and father can override its effect by written agreement between them at any time.

  62. 62 62 Steve Landsburg

    TeeJaw: Thanks for these thought-provoking words.

  63. 63 63 Pat

    “Unlike me, they seem to think that their dissatisfaction constitutes an argument for government intervention.”

    “… a demand is not an argument.”

    Wow. I’ve probably said something like “economic conservatives wouldn’t know an argument if it bit them on the tucchus” before, but I always had assumed I was joking.

  64. 64 64 Ken B

    @TeeJaw: Interesting. Looks to me like a good analogy to the wrong thing: not abortion but putting up for adoption.
    Abortion is not just about being or not being a parent. It is about giving birth, which has attendant physical affects with no male analog. But after giving birth comes the choice, keep or put up for adoption. And your analogy fits that rather better. A woman can keep the child or pass it a long with no further obligation; under your scheme a man would have a similar option available.

  65. 65 65 Ken B

    Pat:

    Wow. I’ve probably said something like “economic conservatives wouldn’t know an argument if it bit them on the tucchus” before, but I always had assumed I was joking.

    I expect you have and I expect you did. The thing is, you clearly didn’t understand the joke.

  66. 66 66 Bob_Mac

    I think the challenge here is that there a number of issues intertwined and we need to separate them. Opposition to funding drugs is one thing, but what I think gets is this:

    Contraception is an extremely important medical treatment for women. It’s in a fuzzy area because while it is not medically necessary in an objective sense for the most part, it is nevertheless extremely important. Control over personal reproduction is a critical component of women’s equality, and by extension can be argued that it’s key to a ‘civilized’ prosperous society. It’s a freedom thing – quite a fundamental freedom thing – freedom to control when one reproduces. Sure, there’s alway’s abstinence, but let’s face it, that ain’t in ANYBODY’S best interest :-)

    So, when viewed in this lens, any gender-based double standard or religious BS influence over this is not received well by women, and I totally get that. Fine, keep the government out of it, no problem, but when any coverage of drugs is mentioned in any context, I strongly believe that the importance of contraceptives for women should always be high on the list, not low.

    Bob

  67. 67 67 iceman

    Here’s an analogy I thought seemed interesting: Many here have argued that insurance should cover even routine, predictable expenses because even if an individual could afford it (or make different choices), it’s in the insurers’ interest to do so. By similar logic one might expect auto insurance to cover oil changes, since insurers don’t want you to ruin your engine. But I’ve never seen an auto policy like that. One reason might be because insurers know that you know that servicing your oil is in your own interest too; not only because you don’t want to risk locking up while flying down the freeway, but because they have structured the contracts so that your copay is costlier than several years worth of oil changes. Perhaps a similar cost-benefit applies to many medical issues that are preventable at modest cost.

  68. 68 68 Ken B

    @iceman: You CAN buy such policies. Go to any dealer and ask for a maintenance plan.

    Of course your analysis of why insurers might not pay for routine preventative checks is right. Sometimes the checks aren’t cost effective, and sometimes you don’t need a subvention to pay for to get the consumer to pay for it himself.

    These kinds of things are easier to think about if you understand clearly what insurance really is. Which is why some here try to obfuscate that.

  69. 69 69 Steve Landsburg

    Pat:

    Wow. I’ve probably said something like “economic conservatives wouldn’t know an argument if it bit them on the tucchus” before, but I always had assumed I was joking.

    I’m a little behind on reading comments, so perhaps there’s some context I’m missing. But I suspect you are failing to distinguish between an argument for why contraceptive pills are a good thing from an argument about who should pay for them.

  70. 70 70 Bob_Mac

    Steve:

    I agree that this distinction is getting lost. My point is we also have the downplaying or lack of recognition of how truly important contraception is to the status of women – regardless of who pays for it. Women of all political leanings are likely to balk at double standards or an under appreciation of how important this is.

    Bob

  71. 71 71 Bob_Mac

    TeeJaw:

    Your argument assumes that we should have gender symmetry, or fairness.

    Well, we don’t have biological symmetry, or biological fairness when it comes to childbirth. If you’ve ever been through childbirth and even child rearing, ‘fair’, and ‘equal’ are not words that are found in any context.

    As much as the fairness or symmetry may be broken, we have a dependent third person who’s needs, perhaps even rights may be argued to trump symmetry or fairness. You need to place the rights/needs of the child into the symmetry.

    Bob

  72. 72 72 vernon

    >>”I take it you don’t remember the 1970s.”

    Oh, I do. My mama used to take me to Woolworth’s counter.

    But yeah, real income for average earners? Pretty stagnant since then.

  73. 73 73 Steve Landsburg

    vernon:

    But yeah, real income for average earners? Pretty stagnant since [the 1970s]

    It’s difficult to know where to begin responding to this. Health care outcomes in the 1970s in the US (after correcting for the effects of AIDS) were roughly the equivalent of what we see in the poorest parts of Africa today. That refers to life spans, infant mortality, etc., but also to countless sources of medical distress. An ulcer in the 1970s could ruin your life; today we cure it almost instantly; that’s one of many hundreds of specific examples I could mention. Do you have any memory of what communications were like in the 1970s? What it took, for example, to arrange to meet six people for dinner? As I’ve said on this blog before — if you pick a random movie from the 1970s, the odds are excellent that all of the characters’ problems could have been solved in the first five minutes if only somebody had had a cellphone. Remember cameras from the 1970s? Transistor radios? If I sent you back to the 1970s, do you think you could even manage to make people understand what the Internet is, let alone convince them that such a thing was possible? In the 1970s, one paid $700 (the equivalent of a few thousand today) for an IBM Selectric typewriter with a “delete” key that allowed you to erase the previous character you’d typed — but not any characters prior to that one. My black and white TV got six channels (color was for the rich).

    Had you actually forgotten all of this?

  74. 74 74 vernon

    >>”Had you actually forgotten all of this?

    Not at all, but there’s a whole flipside to it. What we call “organic” chicken was just chicken then; beef wasn’t fed full of corn, growth hormone, and, um, beef; cane sugar came standard instead of high fructose corn syrup, and diabetes was a relatively rare condition.

    I remember transistor radios of course, but I also remember hifi systems. People got into the sound of their music, and when they listened they paid attention. And when they bought music & a system to play it on they OWNED it—they weren’t renting the technology for $150 per month like the iPhone, via a device that’s disposable after a few years. Music wasn’t cheap, but you only paid for it once, and also, you didn’t treat it like it was cheap.

    Yeah, my black & white TV was pretty poor, but I didn’t care much. It didn’t make Mork less funny, you know? I have a bigger & much fancier TV today, and it just feels like a means of getting advertisements to my eyeballs. A half-hour show is like 18 minutes these days, and there are ad tickers onscreen half the time! There are more sports on to be sure; on the other hand you could go to Yankee Stadium for a just few bucks back then.

    As for the rest: I think you could make a similar same case for technological wonders in the 70s vs. the 40s, and yet somehow people’s incomes managed to rise in the interval.

  75. 75 75 iceman

    @Ken B: True, although I don’t really think of those service plans as insurance so much as a (modest) loyalty discount (from already inflated prices) to get you habituated to taking all your service there (one was recently sold to me as getting me “into the Toyota family”). And of course they’re not on the hook for any actual repairs if you don’t do the maintenance.

    @ vernon: If only we could get rid of these annoyingly expensive vaccines and fancy delivery rooms we wouldn’t have this “spending problem”. Alas, the fact that we’re entitled to every new treatment demands insurance reform.

    More seriously, on your study citations — patient satisfaction surveys can be a suspect methodology, especially for cross-country comparisons, since it’s all relative to how expectations are formed. For example a group in a worse system could still express less dissatisfaction if they are already accustomed to waiting in line for bread.

    And “measures of access include health insurance coverage” seems about as circular as it gets.

    Also the Genome Project might not be your best example, since as I recall a private company cracked the code much more quickly at a fraction of the cost (granted they were both using data generated by public research).

    An honest assessment of various health systems can’t just conclude “US is worst”; there are significant trade-offs involved and your preferences will depend on how to weigh those at any particular time. My guess is if you needed quick access to an expensive new machine you might be quite glad you live here. There’s an OECD study from 9/30/09 that lays out these trade-offs and may have some surprising conclusions for you. I don’t have the link handy.

  76. 76 76 vernon

    OK, iceman, but the thing is I posted a link to an actual study from a respected journal in support of my position, and that is one more link than anyone arguing with me has posted, so when you do “have a link handy” it will be most welcome.

    BTW, insurance was only one of several criteria for “measures of access.” I can’t quite see the logic of excluding it. If you can, please elaborate.

  77. 77 77 JohnE

    @Vernon

    I don’t think that your examples are the “flip side” at all. As far as I know you can still buy organic chicken, grass-fed hormone-free beef, hi-fi stereo equipment, and vinyl albums. Also you can still watch Mork & Mindy. My guess is that if someone were to sell their iPhone and TV, cancel their cellphone plan, cancel their cable, and Internet, they would have more than enough leftover to shop at Wholefoods and buy a Yankees ticket every once in a while. If you are not doing these things then that tells me you are better off today than in the 1970′s.

    The broader point is that income has most certainly not been stagnant since the 1970′s, even if you net healthcare costs. Please not this is not a claim about whether income growth was greater before or after the 1970′s.

  78. 78 78 vernon

    Foodwise, you have to pay a premium today for what was standard in the 70s—that was my point. TV-wise and hifi-wise, I was just trying to say that I didn’t feel deprived and I don’t think most people did.

    My real point was my last sentence: I think you could make a similar same case for improvement in technological wonders in the 70s vs. the 40s, and yet somehow people’s incomes managed to rise in the interval.

  79. 79 79 JohnE

    Just because you have cheaper options today doesn’t mean you are paying a premium on the options from yesterday.

    Also just because you didn’t feel deprived in the 1970′s doesn’t mean you wouldn’t feel deprived today if someone took away your internet and cable TV.

    Finally, the point you originally made that was challenged by Steve was that income since 1970 has stagnated. Talking about income growth between 1940 and 1970 is just changing the subject.

  80. 80 80 Ken

    The smart phone, as mentioned earlier, would not & could not exist without the work of the government and academic institutions that developed the Internet.

    This is so utterly absurdly false.

    The history of the computer and computer networks is windy and hard to follow at times, but what’s not even controversial is that the private sector has driven computer development and is responsible for the vast majority of computers and networks. After the fact of establishing the usefulness of computers, government naturally got involved and wasted enormous sums of money to add somewhat to the development of computers.

    The computer: private innovation
    The vacuum tube: private innovation
    The transistor: private innovation
    The IC: private innovation
    The microprocessor: private innovation
    Wireless communication: private innovation
    Packet switching: government innovation
    Routers: private innovation
    Personal computer: private innovation
    The internet: private innovation

    In addition to packet switching government has made some improvements here and there, but the vast majority of computer and networking innovations has been done by the private sector.

    Your claim is pretty much that if DARPA hadn’t come up with packet switching, no one else would have. This is ridiculous as the private sector was interested in data networks as much as the government. The TCP/IP protocol may not have been invented without government, but another protocol suite, just as robust would have, and for probably much less money.

    The problems with you and the people who think like you is that you think if government didn’t do it, no one would. But this is provably false.

  81. 81 81 Ken

    Not at all, but there’s a whole flipside to it. What we call “organic” chicken was just chicken then [in the 1970s]; beef wasn’t fed full of corn, growth hormone, and, um, beef [in the 1970s];

    False. Industrial farming started in the 1950′s and 1960′s.

    cane sugar came standard instead of high fructose corn syrup

    Did you not even know that this change from cane to high fructose corn syrup came about because US federal policy made sugar expensive by maintaining a price floor, while at the same time driving down the consumer price of high fructose corn syrup through massive corn subsidies. Additionally, there is little difference between them on the Glycemic Index: table sugar is 80, while high fructose corn syrup is 87.

    and diabetes was a relatively rare condition.

    Diabetes began to rise just after government started it’s nutritional drive and developed the disastrous food pyramid. It’s base is made up of things high on the Glycemic index.

  82. 82 82 vernon

    >>”Also just because you didn’t feel deprived in the 1970’s doesn’t mean you wouldn’t feel deprived today if someone took away your internet and cable TV.”

    OK, look: Americans had access to cutting edge consumer technology in the 70s, including entertainment technology. Americans in 2012 also have access to cutting edge technology, which has changed. But non-rich Americans in the 70s also enjoyed an increase in income commensurate with GDP growth over the previous 3 decades; we do not.

    >>”Finally, the point you originally made that was challenged by Steve was that income since 1970 has stagnated. Talking about income growth between 1940 and 1970 is just changing the subject.”

    What I said was “[R]eal income for average earners? Pretty stagnant since [the 70s].” I didn’t think this was in dispute. The bottom 90 percent (!) of earners’ share of GDP has eroded markedly. http://www.washingtonpost.com/wp-srv/special/business/income-inequality/

  83. 83 83 JohnE

    @Vernon

    I see now. You are confusing absolute income levels with the income distribution.

    Let me illustrate. To say something like “median income has been stagnant since about 1970″ is different from saying something like “median income growth since 1970 has been less than GDP growth”. The former is a statement about the absolute level of median income. The latter is a statement about the relative level of median income vis a vis average income. Your most recent comment indicates that you are trying to say something like this second statement. However your previous comments only make sense if you are trying to say something like the first statement.

    By the way, I think the first statement is false while the second is true. This is not a contradiction.

  84. 84 84 Mike H

    @Ken,
    I didn’t say “the insurance markets in the US are free markets”. I said “The USA says “Hey! Lets rely on health insurance as the basis for health care in our strongly free market libertarian culture!””

    Would I would say is this :
    * I conjecture that the health insurance market is [i]more[/i] free in the US than in most other developed countries
    * Economists know that free markets and health insurance don’t mix
    * Hence the problem

  85. 85 85 Martin

    Regarding point VI

    I think the strength of Senator Turner’s analogy depends less on the intent of the Ohio bill and more on whether legislators fully understand the costs of the bill. Suppose the abortion committee reasons,
    “The ultrasound will take 30 minutes and cost the hospital 70$. Showing the woman her unborn child will unnerve her and prevent abortion 12% of the time.”
    These Senators would be overlooking an emotional cost. As men, they might best understand this cost as the feeling of undergoing an invasive medical procedure on one’s privates that is mandated by the Feminist movement as part of their moral agenda. (That’s my own spin. I know feminism wasn’t part of the original metaphor)

    I only hope that Senator Turner’s metaphor doesn’t INcrease support for the bill. After all, the whole point is to make abortions cumbersome and distressing. Some people probably see the extra insult as a bonus.

    Then again, recent events show the easiest way to incite protest is to tell people they’re not allowed to protest. Could this bill lead to an increase in the abortion rate out of retribution?

  86. 86 86 Martin

    @Mike H

    The health insurance debate shouldn’t be a contest of the free market vs state monopoly. It should be a matter of finding the right regulation to fix the known problems of free market health insurance and eliminating the destructive regulation we currently have in place. As has been said here, the European system isn’t much of an improvement over ours and they rely on our competitive system to produce health care innovations.

  87. 87 87 Ken

    Economists know that free markets and health insurance don’t mix

    Really? Is that why so many economists call for ending the ridiculous regulations surrounding health insurance and allowing for free markets to determine insurance? Wouldn’t that be odd if they “[knew] that free markets and health insurance don’t mix”?

  88. 88 88 Ken

    vernon,

    You miss the point: Steve Jobs didn’t INVENT the mp3 player.

    You miss the point: Beethoven didn’t invent the piano or symphony.

  89. 89 89 vernon

    >>”By the way, I think the first statement is false while the second is true.”

    Point taken.

    But the general case that, while U.S. economic growth has continued over the past generation, middle and lower earners have increasingly stopped partaking of it—can this really be denied?

    And if we turn from pastimes, food, and entertainment technology—the bread and circuses of the American empire—and look instead at more traditional indicators of middle and working class prosperity, the case is stronger still. The costs of EDUCATION and HOUSING, like HEALTH CARE, have skyrocketed since the 70s. I’m not sure the extent to which this is the cause of the explosion in personal debt over the same period, but it’s at least a contributing factor.

    What we’re left with is a slew of relatively cheap iPhones and big TVs augmenting lives spent in hock to mortgages and student loans. History will likely remember us as the best-entertained debt peons ever.

  90. 90 90 vernon

    >>”This is so utterly absurdly false.”

    You may not like it, but it happens to be the truth. The modern Internet began with the launch of NSFNET, not with a bunch of piddly private switching networks barely a cut above two soup cans and a length of twine that went nowhere.

    Moreover, do you honestly think the satellite network necessary for all mobile and smart phones could exist without NASA?

    As for the rest of it—I never denied there was such a thing as private innovation. No, but you—remember?—denied that innovation could come from outside the private sector; I begged to differ … and I think I’ve made my case.

    >>”You miss the point: Beethoven didn’t invent the piano or symphony.”

    I love Beethoven, but I would still humbly submit that his activity, like Steve Jobs’, comprised a discipline other than scientific research & innovation.

  91. 91 91 JohnE

    @vernon

    I agree that those on the low end of the income distribution have experienced less income growth than the economy as a whole. What I deny is the claim that low and middle income earners are worse off because of it. To use your examples, low and middle income households consume MORE education, housing, and healthcare today than they did in the 1970′s. Do you think this makes them worse off?

  92. 92 92 Steve Landsburg

    Martin:

    The health insurance debate shouldn’t be a contest of the free market vs state monopoly. It should be a matter of finding the right regulation to fix the known problems of free market health insurance and eliminating the destructive regulation we currently have in place.

    Extremely well said.

  93. 93 93 vernon

    >>”low and middle income households consume MORE education, housing, and healthcare today than they did in the 1970’s. Do you think this makes them worse off?”

    It depends what you mean. The three are so expensive today that, yes, “this makes them worse off” in the sense of giving them a negative net worth—but I don’t think that’s what you meant.

    I think you meant that since they enjoy the benefits of more education, better health care, and bigger houses, aren’t their lives commensurately better?

    On the education front, I’d answer No. Education, purportedly the middle/working class’s ticket to a bigger slice of the pie, has in reality led to no such thing: the non-rich have more tickets but less of the pie than before.

    On the healthcare front, let me first ask how the increase you refer to was quantified? No doubt there’s been a rise in consumption share of GDP, but that would obviously be attributable to the skyrocketing costs.

  94. 94 94 JohnE

    @vernon

    “I think you meant that since they enjoy the benefits of more education, better health care, and bigger houses, aren’t their lives commensurately better?”

    This is exactly what I mean.

    “On the education front, I’d answer No. Education, purportedly the middle/working class’s ticket to a bigger slice of the pie, has in reality led to no such thing…”

    So do you think the returns to education are negative for the non-rich but positive for the rich? After answering that question, please answer the appropriate follow up question: If yes, then do you think the non-rich should be discouraged from going to college while the rich should be encouraged? If no, then explain to me how the non-rich are worse off for getting more education (please don’t refer to relative income because that is not the issue here)?

    “On the healthcare front, let me first ask how the increase you refer to was quantified?”

    Let me refer you to Steve’s earlier comment:

    “Health care outcomes in the 1970s in the US (after correcting for the effects of AIDS) were roughly the equivalent of what we see in the poorest parts of Africa today. That refers to life spans, infant mortality, etc., but also to countless sources of medical distress. An ulcer in the 1970s could ruin your life; today we cure it almost instantly; that’s one of many hundreds of specific examples I could mention.”

  95. 95 95 David Johnson

    I’ll leave others to criticise vernon’s economics but as an insurance actuary I find his definition and description of insurance pretty frustrating.

    Believe it or not striking the right balance between providing policyholder protection and returns to shareholders is no easy thing. So is ensuring we can withstand extreme events.

    That’s what we spend our days doing you know. We’re not just cackling and throwing money in the air.

  96. 96 96 Ken B

    Vernon is very careful about costs: he is scrupulous in not distinguishing the costs for new treatments not available at some earlier date (say 16 mar 1972) and the rise in costs of the treatments, usually less effective than the newer ones, that were avaialable on that date. To take SL’s example of ulcers, the cure for the ulcer is a completely new cost since then. It is possible though that the cost of milk of magnesia has risen steeply. (The cost of tagamet has plummeted however.) He carefully counts the new costs as a rise in the burden on patient and wants to compare that to the costs my great grandparents paid for the samller range of useful medicine. His argument gets stronger the further you go back: consider the rising cost of leaches and ignore the cost of penicillin.

  97. 97 97 Steve Landsburg

    David Johnson: Thank you for this.

  98. 98 98 vernon

    >>”So do you think the returns to education are negative for the non-rich but positive for the rich?”

    Let’s not get ahead of ourselves. The lion’s share of GDP growth since the 70s has gone to the rich. Whether that’s due to their education, or some other factor, or a confluence of factors, remains an open question.

    >>”Let me refer you to Steve’s earlier comment:”

    Steve’s earlier comment didn’t assert that people today “consume more health care.” That was your assertion. I ask again, how is your increase in consumption quantified?

  99. 99 99 vernon

    >>”That’s what we spend our days doing you know. We’re not just cackling and throwing money in the air.”

    Of course you’re not. Nobody said profit accrued to the actuaries.

  100. 100 100 Ken B

    Maybe it’s just me but if a phranistulator told me I was confused about what phranistulators do I’d ask him to explain why he thought so. Maybe it IS just me. It’s certainly not vernon.

  101. 101 101 Ken B
  102. 102 102 Ken B

    Perhaps off topic but an interesting analogy, so perhaps not.
    http://www.thefreemanonline.org/headline/the-parable-of-the-broken-traffic-lights/

  103. 103 103 vernon

    >>”Maybe it’s just me but if a phranistulator told me I was confused about what phranistulators do I’d ask him to explain why he thought so.”

    I know what actuaries do. And what actuaries do was the subject of exactly zero percent of anything I’ve posted.

  104. 104 104 Steve Landsburg

    vernon:

    Steve’s earlier comment didn’t assert that people today “consume more health care.”

    Allow me to clarify: People today consume more health care.

  105. 105 105 JohnE

    @vernon

    “The lion’s share of GDP growth since the 70s has gone to the rich.”

    Again this fact has absolutely nothing to do with whether more education makes poor people better off. You say that more education has made poor people worse off. I say that this implies that less education would have made them better off. Do you agree that poor people should have received less education?

    “I ask again, how is your increase in consumption [in healthcare] quantified?”

    The increase in healthcare, as you mentioned, is due to better quality healthcare. This is difficult to quantify. But it is not difficult to see which direction healthcare quality has gone since 1970. Steve’s comment pointed to two ways it is better. First health outcomes like lifespan and infant mortality have dramatically increased (even for the poor). Do you think these increases are due to WORSE healthcare? I don’t. Second better quality healthcare reduces medical distress. People, even poor people, are taking advantage of these quality improvements more and more. This is the basis of my statement that non-rich people consume more healthcare today than in 1970.

  106. 106 106 Ken B

    vernon asks JohnE:“I ask again, how is your increase in consumption [in healthcare] quantified?”

    How is your alleged huge increase in cost quantified? Because you cannot sensibly compare apples to oranges here. Unless you can parse out to at least a first approximation new and improved healthcare from pre-1972 healthcare you cannot make your own argument sensibly.

    This is the point I made earlier: vernon is very careful indeed to always conflate and confuse these different effects.

  107. 107 107 Harold

    There is a lot of hyperbole above.

    The USA clearly has not been responsible for nearly 100% of medical innovation. It is responsible for a lot, and some of this is probably down to its very peculiar system of paying for it. The rest of the world probably does derive some benefit from this, and so the USA possibly to some extent subsidises the rest of the world.

    The USA system is currently absurdly overpriced. The medical outcomes may be slightly better, but the cost is at least 50% more. Government spending per capita on healthcare in the USA is higher than in countries with fully Government funded healthcare systems. That is not total spending – that is just Govt spending. For what the US Govt spends in healthcare, most coutries run their whole healthcare systems. The current system is obviously doing very badly.

    This is not surprising – at least in part. An insurance based system will spend considerable resources trying to filter out the expensive and avoid insuring them. One way to do this is to insure through work, since the employed tend to be generally healthy. But whatever way it is done, it is predictable that a highly beaurocratic and wasteful system will arise. Socialised systems avoid this by covering everyone.

    It may be possible to run an insurance based system better than a socialised one. The USA clearly does not do so at present.

    Back to the contraception issue -I have previously argued that systematic “mistakes” may provide a justification for subsidy. I heard of research recently where subjects were asked to estimate the risk of suffering from 100 possible medical problems, from alzheimers to broken leg. After each guess they were told the real risk. They were then asked to do them all again.

    The interesting finding was that in cases where the risk had been over-estimated, (good news) they remembered, and got it closer the second time. In cases where they had under-estimated the risk (bad news) they forgot, and were just as far off the second time.

    This shows a clear bias to under-estimate risk, even in the face of evidence. This means that subsidy could be justified since the regulator knows that the mistakes are mostly in one direction.

  108. 108 108 Ken B

    Harold:
    “There is a lot of hyperbole above.”

    More than in any thread we have ever had.

  109. 109 109 iceman

    @Harold: Yes a lot of hyperbole: “The USA system is absurdly overpriced…[and] obviously doing very badly.”

    This tends to happen when people want to ignore significant trade-offs and focus on one side of the ledger. Here’s the link vernon wanted which might help dress things down a little:

    http://www.oecd.org/dataoecd/5/34/43800977.pdf

    A few highlights: “[The US system] introduces new technology rapidly — at a price. It delivers (in some areas at least) high quality of care, together with greater innovation and choice…All other OECD countries have more mechanisms built into their health systems to restrict expenditures…including the dissemination of new technologies…Controlling volume often requires measures that restrict choice; occasionally limit access to care which someone insured under a typical US health plan would be able to access…By paying such a price, the result is that other countries are able to afford universal health care access at a lower cost…”

    Significant trade-offs indeed. Of course one would expect (or at least hope) that a system that focuses more of its resources on broad access to *primary* care would score better on those measures. But as many have pointed out, this is also a static assessment: today’s cutting-edge research becomes tomorrow’s basic care. Other systems clearly rely (i.e. free-ride), not 100% (not sure anyone said that) but to an important degree, on our “greater innovation” (OECD’s words) for improving standards of care over time. Many here have provided examples of things we hadn’t even conceived of a few years or decades ago, that we now take for granted — even to the point of saying they are “bankrupting” us.

    None of this means we can’t find ways to improve the current system.

  110. 110 110 iceman

    @Harold: Also this — “An insurance based system will spend considerable resources trying to filter out the expensive and avoid insuring them…Socialised systems avoid this by covering everyone.”

    More examples of how framing this in terms of “insurance” (just a financing mechanism) clouds the issues. “Expensive” = high pre-disposition / pre-existing conditions = not insurable in an economic sense = public moral obligation which we should deal with separately and honestly. (“Filter out” = require the same medical information as most applicants?) “Covering everyone” = lumping together those who could and could not afford basic coverage = just shifting costs around = some people end up unable to access some services they may have been freely willing to pay for (per the OECD). Those systems conserve administrative “resources” = can deny care with no recourse.

  111. 111 111 Ken B

    Some good thoughts on this whole healthcare and insurance thing. http://www.thebigquestions.com/2009/10/29/thoughts-on-health-care-reform/

  112. 112 112 Henri Hein

    @Harold:
    “The USA system is currently absurdly overpriced. The medical outcomes may be slightly better, but the cost is at least 50% more.”

    The latter may be true, but it does not follow that the system is absurdly overpriced. There are emperical reasons to believe that each incremental improvement in health — say, a year in life-expectancy — requires an exponential increase in expenditure.

    As the country becomes wealthier, we should not be surprised that its people choose to spend a higher percentage of its income on healthcare. Especially considering that its people are also getting older.

    For the record, I am personally proud to live in the country that spends the highest share of its income on healthcare.

  113. 113 113 vernon

    >>”Allow me to clarify: People today consume more health care.”

    Two things. (1) How’s that? In your “one specific example,” you mention that “An ulcer in the 1970s could ruin your life; today we cure it almost instantly”— wouldn’t this mean that the ulcer patient in the 70s needed long term treatment, hence consuming MORE care?

    (2) Then I ask you, and I ask for a third time: How is this increase in consumption quantified?

  114. 114 114 vernon

    @JohnE:

    >>”You say that more education has made poor people worse off.”

    I said no such thing. What I said was that the non-rich are no better off IN SPITE OF being more educated. They’re still better off than today’s uneducated non-rich.

    >>” First health outcomes like lifespan and infant mortality have dramatically increased (even for the poor). Do you think these increases are due to WORSE healthcare? I don’t. Second better quality healthcare reduces medical distress. People, even poor people, are taking advantage of these quality improvements more and more. This is the basis of my statement that non-rich people consume more healthcare today than in 1970.”

    That is the very definition of a qualitative, not quantitative, claim.

    If this is what you’re claiming, you’ve been abusing the English language. By your account, people today consume BETTER health care, not MORE health care.

  115. 115 115 JohnE

    @vernon

    “you’ve been abusing the English language.”

    Absolutely. I was very blunt with my words. Sorry for the confusion. (Though I thought we had come to an understanding on this earlier.) Let me rephrase my original point then and see if that makes things clearer:

    Low and middle income households get more education, have better housing, and receive better healthcare today than they did in the 1970’s. Do you think this makes them worse off?

    Regarding education, you seem to contradict yourself when you say “the non-rich are no better off IN SPITE OF being more educated. They’re still better off than today’s uneducated non-rich.” The first statement means that you think the returns to education are zero for the non-rich. The second statement means that you think the returns are strictly positive. Which is it?

    Regarding healthcare, I still don’t know whether you think the non-rich receive better healthcare or not. And whether that makes them better off or not.

  116. 116 116 vernon

    @JohnE:

    >>”you seem to contradict yourself when you say “the non-rich are no better off IN SPITE OF being more educated. They’re still better off than today’s uneducated non-rich.” The first statement means that you think the returns to education are zero for the non-rich. The second statement means that you think the returns are strictly positive. Which is it?”

    You’ve misunderstood me. The returns aren’t “zero”: A college education puts one at an advantage compared to one’s peers. Yet even with more college degrees, the non-rich have lost GDP share. I think the erosion would be even greater if fewer of them had gone to college.

    Maybe an analogy will clarify: When someone’s swimming and the current has turned against him, all his effort might enable him to do no more than tread water. You’re asking me if I want him to stop treading water. My answer, of course, is No.

    >>”Regarding healthcare, I still don’t know whether you think the non-rich receive better healthcare or not. And whether that makes them better off or not.”

    I think their healthcare should be judged in the context of the technology of the time (just as their income should be judged in the context of current GDP). Did they, in the 70s, have access to care that was high quality relative to the standard of the time? And do they today have comparable access to healthcare comparably high in quality relative to today’s standard?

    I know you, Mr L:andsburg, and others are fond of pointing to various examples of progress as a kind of counterbalance to the reduction in income share. On the one hand—so the argument goes—our slice of the pie is smaller; on the other hand we have mobile phones, hi-def TVs, and salubrious medical innovations … so who’s to say we’re worse off?

    I submit that this whole “counterbalance” argument is a red herring.

    Consider this: Why does it only balance for the non-rich? The non-rich have lost GDP share but gained technology—have the rich, who gained GDP share, lost this technology? Have they missed out on all this progress? OF COURSE NOT. The rich have enjoyed the exact same technological progress as the rest of us (except in greater measure commensurate with affluence), without their slice of pie shrinking at all (in fact it’s grown). But shouldn’t they be enjoying worse technology, if these things balance? To ask the question reveals the absurdity of the whole notion. These things don’t balance. They don’t balance because they shouldn’t balance. They don’t have that kind of relationship to each other.

    The fact is you’re conflating two very different things. You might as well tell people: “It was raining yesterday & it’s sunny today, therefore you should be happy with your pay rate.”

  117. 117 117 Ken

    There is a lot of hyperbole above.

    The USA clearly has not been responsible for nearly 100% of medical innovation.

    I wasn’t using hyperbole and that’s not what I said. And I didn’t say that the US is responsible for nearly 100% of all medical innovations. I said now (not always) the US is responsible for nearly 100% of medical innovations, meaning the medical innovations for the last few years has been done made almost entirely in the US. This is because the US is the only industrial country where it’s still legal to make a profit on these innovations.

    This isn’t anywhere near hyperbole. In country after country that has implemented socialized medicine, medical innovations have declined to nearly zero from what they were before socialized medicine. Many companies in those countries ship their R&D here, shifting innovation away from those countries to the US.

  118. 118 118 JohnE

    @vernon

    “I know you, Mr Landsburg, and others are fond of pointing to various examples of progress as a kind of counterbalance to the reduction in income share.”

    This does not represent my view and I can guarantee it does not represent Steve Landsburg’s view (see Steve’s blog posts on Frank Rich). I think a change in income share is completely irrelevant to a question about whether people are better or worse off today.

    I think this is the crux of our disagreement.

  119. 119 119 Ken

    Moreover, do you honestly think the satellite network necessary for all mobile and smart phones could exist without NASA?

    Yes. The drive for space was very strong in the private sector till the government clamped down on it and NASA crowded out the rest. Now that Obama has gotten at least one policy right by making NASA less important and scaling it back, we now see hundreds, if not thousands, of companies pushing for space; companies that would have been around for decades had the government not pushed the private sector out of space.

    I love Beethoven, but I would still humbly submit that his activity, like Steve Jobs’, comprised a discipline other than scientific research & innovation.

    Then you misunderstand what innovation is. Most innovation, like knowledge isn’t “scientific”. Claiming scientific knowledge or innovation is more important or valuable than other types of knowledge or innovation is provably false (and I think lies at the heart of most people’s misunderstanding of economics). Focusing on scientific knowledge and innovation means you focus very narrowly and miss all the other wonderful things in life that occur fleeting and situational, but are incredibly valuable.

    It’s not enough to create a piano; it’s just a big box with strings and keys if you don’t know how, when, and where to use it. In fact, knowing how, when, and where constitutes the bulk of the value of a piano, not just creating or building one. The same is true for the mp3 compression scheme and scientific knowledge.

  120. 120 120 Steve Landsburg

    vernon:

    “I know you, Mr Landsburg, and others are fond of pointing to various examples of progress as a kind of counterbalance to the reduction in income share.

    As JohnE points out, I am fond of no such thing.

  121. 121 121 Ken B

    “(2) Then I ask you, and I ask for a third time: How is this increase in consumption quantified?”

    I tell you, and I tell you for the second time: your own assertion depends on being able to make this very quantification. I cited examples of families who could pay their medical bills sans ‘coverage’. You want to dismiss those examples but cannot logically unless you can quantify how comparable levels of care have become unaffordable.

    I guess it’s ‘Talk like a Greek Chorus Day’ at TBQ.

  122. 122 122 Ken B

    vernon:”That’s what we spend our days doing you know. We’re not just cackling and throwing money in the air.”

    Of course you’re not. Nobody said profit accrued to the actuaries.

    Fallacy of composition. No member of the firm need share the motivation of the firm, nor it share the motivation of any of its members.

  123. 123 123 Ken B

    “I think their healthcare should be judged in the context of the technology of the time (just as their income should be judged in the context of current GDP). Did they, in the 70s, have access to care that was high quality relative to the standard of the time? And do they today have comparable access to healthcare comparably high in quality relative to today’s standard?”

    In other words, dying or not dying is only a positional good.

  124. 124 124 Ken B

    If I ask an electrician to fix my wiring and he sells me 12 tons of fuses with a shrug have I purchased ‘electrical repairs’? I ask because I think it obvious that the way to measure health-care consumption must be by the number of conditions cured or significantly palliated by that care. So curing an ulcer with a 5 dollar antibiotic is MORE medical care than telling the patient to swallow 12 tons of fuses, er milk of magnesia, for a few decades. THIS is the quantification of the amount of health care that everyone (save vernon) has described. Does medicine cure or significantly palliate more conditions more effectively than in 1972?

    This is not grade 3. Sometimes we skip steps. There is nothing in my formalism above not already present in many comments supra.

  125. 125 125 Ken B

    “(just as their income should be judged in the context of current GDP)”

    Does this apply to sex? As far as I can tell I’ve enjoyed more copulatory opportunities that my father or grandfather did. But you’re telling me that I’ve actually suffered a loss if dear old grand-dad’s ranking in the boink count is higher than mine?

  126. 126 126 vernon

    @JohnE:

    >>”I think a change in income share is completely irrelevant to a question about whether people are better or worse off today.”

    In that case I find it strange that 2 statements of mine strictly on the subject of income prompted such eloquent paeans to the subject of Better Off/Worse Off from you & Mr Landsburg.

    (Those statements, again, were “incomes rose quite a bit from the 1890s thru the mid-1970s. After which they’ve pretty much stagnated”; and “real income for average earners? Pretty stagnant since then.”)

  127. 127 127 vernon

    @Ken:

    >>”Claiming scientific knowledge or innovation is more important or valuable than other types of knowledge or innovation…”

    But I never claimed that. Nor would I. I only pointed out that different types of innovation are different.

    >>”Focusing on scientific knowledge and innovation means you focus very narrowly and miss all the other wonderful things in life that occur fleeting and situational, but are incredibly valuable.”

    That is indisputable. However, in a discussion of innovation in the field of medicine, focusing on scientific knowledge etc. as applied thereto does have its uses.

    >>”It’s not enough to create a piano; it’s just a big box with strings and keys if you don’t know how, when, and where to use it. In fact, knowing how, when, and where constitutes the bulk of the value of a piano, not just creating or building one. The same is true for the mp3 compression scheme and scientific knowledge.”

    Another point I agree with. But I would dissent from the implication that Jobs is the Beethoven of phone-Web-MP3 thingies, and I’ll tell you why.

    First of all, although there’s a certain superficial similarity between, say, the iPhone and the romantic symphony (both combine previously disparate elements of their art, and do so in a way universally deemed an aesthetic triumph), the 2, seriously considered, are nothing like each other. People don’t really feel the same way in response to them. It may be possible to consider the iPhone as an objet d’art, but only for a moment; contemplating it, looking at it, isn’t a deeply emotional experience or a meditation that goes deeper than emotion. Consider the words of Tolstoy, recounting a response to Beethoven’s music:

    “Upon me, at least, this piece produced a terrible effect; it seemed as if new feelings were revealed to me, new possibilities unfolded to my gaze, of which I had never even dreamed before. ‘It is thus that I should live and think, and not as I have hitherto lived and thought,’ a voice seemed to whisper in my soul. What that new object of knowledge was, I could not satisfactorily explain to myself; but the consciousness of its existence was most delightful. All the people whom I knew … appeared to me in an entirely new light.”

    People like their iPhones, but no one feels THAT way about iPhones. (Tolstoy, ultimately, didn’t even approve of Beethoven—that’s his problem—but I think he bears valuable witness to the kind of work Beethoven did & how it affects people.) The iPhone is a cool gadget. It can be a VESSEL for Beethoven’s and others’ music of course—but any profound artistic experiences engendered that way are not the work of Steve Jobs.

    Second, if I’m not mistaken, Apple just came out with a new i-Something this week. They’ll come out with one next year, and the year after that, and 5 years from now. And chances are they’ll be really good. Do I need to point out the contrast? Beethoven’s works ended when he died. He was a great creative artist, and great creative artists are always solitary figures. He had no staff; he headed no department; there was no thought of “Beethoven Co.” carrying on and topping the Choral symphony or the c# minor quartet next year. But with Apple and their i-Products, it’s expected and completely normal that they’ll supersede Jobs; he was never doing it alone in the first place, or even pretending to.

    Third, the public performance of Beethoven’s works wasn’t predicated upon a terrible exploitation of workers. It’s not as if orchestral musicians were kept in sweatshops and forced to work 16 hours a day at starvation wages so people could experience Beethoven. The popularity of Jobs’ works—their affordability and abundant supply—depends directly upon real human suffering. Without the brutal Taiwanese mill, these products would be too expensive to market. And their only reason for existing is to be marketed.

    These are profound differences, IMHO.

  128. 128 128 Steve Landsburg

    vernon:

    People like their iPhones, but no one feels THAT way about iPhones.

    Would you rather live in a world without iPhones or a world without Beethoven? Me, I’d ditch Beethoven. And though I have no proof of this, I’m guessing that a substantial majority of modern Americans would make the same choice.

  129. 129 129 vernon

    It occurs to me, Ken, that I posted something earlier which may have led to confusion. I wrote:

    “I’ll leave it to you to decide which is a more truly meaningful innovation: isolating embryonic stem cells, or attaching a Web browser to an MP3 player…”

    What I SHOULD have written, for the sake of clarity and specificity, was:

    “I’ll leave it to you to decide which is a more truly meaningful innovation FOR THE FIELD OF MEDICINE: isolating embryonic stem cells, or attaching a Web browser to an MP3 player…”

  130. 130 130 vernon

    >>”Would you rather live in a world without iPhones or a world without Beethoven?”

    A world without iPhones, without question. I have lived in a world without iPhones. Until fairly recently, in fact. It was fine.

    I suppose I could say I lived in a world without Beethoven for 17 years or so, since I didn’t really listen to his music as a youngster. I know empirically that the world with Beethoven is incomparably bigger, better, more meaningful.

    I must say I’m happy, however, that we are in no way obligated to make such a choice.

  131. 131 131 Ken

    contemplating it, looking at it, isn’t a deeply emotional experience or a meditation that goes deeper than emotion.

    How many people contemplate Beethoven or even listen? The reality is that the artists take themselves way too seriously and most people don’t stop to contemplate what snobs consider to be great art because for most people it’s not that great. But these very same people artists look down upon, carry smart phones with them. No doubt this is very upsetting to people who want to think of music and other art as having “deep emotion”, but come to realize most people prefer having smart phones in their lives than “high art”.

    But even more than that you’re wrong. There are many people who consider the iPhone and most Apple products to be high art. There are just as many people who get all breathless thinking about the beauty of the iPhone as there are who get breathless about Beethoven; I know many more Apple fanatics than I do classical music fanatics, much less Beethoven fanatics. And to boot more people care about (not just fanatics) the iPhone than the music of Beethoven.

    I’ll leave it to you to decide which is a more truly meaningful innovation FOR THE FIELD OF MEDICINE: isolating embryonic stem cells, or attaching a Web browser to an MP3 player

    Is a web browser attached to an mp3 player all you think a smart phone is? Because, if so, you don’t know what you’re talking about, which gives a clue as to why you don’t understand why the smart phone is the most transformative device ever. Or maybe you do, but in your effort to disparage smart phones and elevate stem cells, you are being purposely obtuse.

    Just to reiterate: stem cells, for all the breathlessness of supporters, haven’t created any value to anyone anywhere; it might, but it remains to be seen. Smart phones on the other hand have all ready created value in the field of medicine.

    There are many more capabilities to a smart phone than listening to music and surfing the web (however, surfing the web on a portable device is all ready incredibly transforming, since you can be virtually anywhere and access virtually any piece of information). Smart phones have touch screens, enormous computation power, network capability, video capability, network capability, etc, and all this small enough that even people who have capability issues can carry them and use them by themselves.

    Not only are there informational apps about specific disease and other things, but there are diagnostic tools that will only get better as the technology becomes ever more sensitive. The app store has diabetes (to monitor blood glucose levels) and heart (to monitor the heart) apps. Since these two things are important to tens of millions of people, this all ready provides enormous value. This value will only increase as image technology and touch screen technology improve to the point that computers will be able to make diagnostics.

    Work is all ready under way to build a diagnostic tools using 20 question style probing. Asking 20 binary questions ends up at over 1,000,000 answers meaning most medical problems can be answered by machine diagnostics. This will result in better diagnostics and fewer errors than relying solely on doctors who are subject to basic human errors (would you trust even the most capable mathematician to add 1000 numbers by hand or a computer to add 1000?).

    But even further than that, I also suspect that you don’t understand that it’s just as valuable to provide $100 of value to 1000 people as it is to provide $100,000 to one person. You seem to focus on the expensive, but low frequency things, while ignoring the cheap, but high frequency things. Cheap high frequency things offer much greater value.

    Apple just came out with a new i-Something this week. They’ll come out with one next year, and the year after that, and 5 years from now.

    So? You say this like this somehow diminishes Apple’s impact on the world compared to Beethoven. But you’re wrong and there’s a saying for it. Something about standing on the shoulders of giants, so as to be able to see further.

    the public performance of Beethoven’s works wasn’t predicated upon a terrible exploitation of workers.

    Because as we all know all those Chinese people would be far better as peasants toiling away their lives on farms rather than earning more money and bettering their lives working in Apple factories. You may not like it, but the only way to get wealthy is to work. Calling offering someone work “exploitation” may make you feel better, but it does nothing to change the fact that it’s better to offer people work, rather than to smugly prevent that work. Since work, as noted above, is the only way to get wealthy, why do you feel so good about yourself by keeping people poor? Instead of feeling smug, you should feel ashamed.

  132. 132 132 vernon

    OK, Ken. Every attempt I make to clarify my position only results in you essentially saying “I HATE PEOPLE LIKE YOU SO THERE.” So, uh, sorry, I guess? And best wishes to you.

  133. 133 133 JohnE

    @vernon

    “In that case I find it strange that 2 statements of mine strictly on the subject of income prompted such eloquent paeans to the subject of Better Off/Worse Off from you & Mr Landsburg.”

    “(Those statements, again, were “incomes rose quite a bit from the 1890s thru the mid-1970s. After which they’ve pretty much stagnated”; and “real income for average earners? Pretty stagnant since then.”)”

    What is strange is that after all these exchanges we’ve had you STILL don’t understand the difference between statements about absolute income level and statements about the income distribution.

  134. 134 134 Steve Landsburg

    vernon:

    In that case I find it strange that 2 statements of mine strictly on the subject of income prompted such eloquent paeans to the subject of Better Off/Worse Off from you & Mr Landsburg.

    (Those statements, again, were “incomes rose quite a bit from the 1890s thru the mid-1970s. After which they’ve pretty much stagnated”; and “real income for average earners? Pretty stagnant since then.”)

    Right. You said that incomes have pretty much stagnated since the 1970′s, JohnE and I said they haven’t. Quite independent of who’s right, this was clearly directly relevant to your statement, which had nothing to do with the income distribution.

  135. 135 135 Ken

    Every attempt I make to clarify my position only results in you essentially saying “I HATE PEOPLE LIKE YOU SO THERE.”

    Because every clarification you make reveals further your misunderstanding of things because you don’t include all people in your analysis or that you focus on the things you want without taking into account things you find inconvenient, like calling hiring someone “exploitation”. It’s an easy, and lazy, charge to make. But what’s the alternative. Did you think at all about that before throwing “exploitation” charge?

    When you try to tear down Job’s contributions because they will be replaced soon, whereas Beethoven’s won’t, did you consider that the things that will replace Job’s contribution depend on Job’s contributions?

    When you talk about stem cells, did you think about what value it has brought or simply substitute the hoped for value it might bring? When you disparaged the medical value of the smart phone, did you even think at all about how much cheaper it is to have a smart phone connected to a network, thus far more widely available, than a doctor’s visit? Did you even think about the fact that using a smart phone, instead of a doctor, frees up the labor of a doctor to be used by someone else, thus increasing the amount of healthcare provided?

    Think! Think! Think! Think about secondary and tertiary effects of things, instead of the first order things. The first order things may have a much smaller effect than the others. When making a statement, ask yourself “so what?” or “as opposed to what alternative” and ask others too. Your imagination is limited compared to the combined imagination of two or three people.

    I used to miss or exclude many of the things you do. It takes time to think about all the effects of something. And even then, you miss much or even most of it, whatever “it” might be.

  136. 136 136 vernon

    @Steve Landsburg:

    >>”your statement, which had nothing to do with the income distribution.”

    IMHO, my statement had everything to do with income distribution. But it’s an easy fix. Allow me to amend what I said as follows:

    “income for the non-rich tracked the growth of the economy from the 1890s thru the mid-1970s. After which it didn’t.”

    “Share of GDP for average earners? Eroded since then.”

  137. 137 137 Ken B

    @vernon: Share of copulatory opportunities for average seeker, eroded since then. How does that prove the NUMBER of opportunities has declined?

  138. 138 138 Steve Landsburg

    vernon:

    Allow me to amend what I said as follows:… “Share of GDP for average earners? Eroded since then.”

    That’s not an amended statement; it’s a completely different statement. My response to this one is: So what?

  139. 139 139 vernon

    @Steve Landsburg:

    I can only make sense of your last several statements if I assume you believe something approximating the following statement: Access to advancing technology is a form of income.

    So, do you?

    In response to this:

    >>”So what?”

    Beats me. I was only responding to one of the Kens; he made reference to a post-1890 income boom. Where he was going with that, you’d have to ask him.

  140. 140 140 Steve Landsburg

    vernon:

    Access to advancing technology is a form of income.

    This is not exactly correct. Advancing technology makes it possible to *generate* more income with a given supply of inputs. E.g. with a production function of the form Af(k,l), we usual model advancing technology as a change in A over time.

    So for example, it’s not exactly correct to say that “access to modern antacids” is a form of income; it would be correct to say that the symptom relief provided by those antacids is a form of consumption, which in turn is a component of income. It’s not exactly correct to say that “access to cable television” is a form of income; it’s better to say that the flow of entertainment from cable TV is a component of income. Etc.

    (All of this, of course, is not a matter of belief; it’s just a matter of understanding the standard definitions.)

  141. 141 141 vernon

    @Steve Landsburg:

    Thank you for your elaboration, which I find compelling, to say the least. I’ll respond in more depth when I’ve thought it over a bit.

    In the meantime, I have a book to recommend; you could read it on you i-Device, probably for free. It’s about a hypothetical paradise of the future. The people are nearly all contented and their lives are the very definition of high-tech consumerism. E.g., their entertainment media stimulate the tactile sense in addition to the visual and aural. Their pharmacology has achieved the miraculous combination of stimulant, sedative, and antidepressant in the form of a cheap non-addictive opiate. Their pastimes are devoted to vigorous physical recreation, which requires sophisticated and pricey apparatus, and to exotic holidays, throughout which a heightened experience of luxury predominates. The story is about the adventures of a Snob who enters this society and, by pursuing his marked preference of (as it were) Beethoven over iPhones, gets what the lousy Philistine has coming to him.

    I’m sure you’ll get a real bang out of it. It’s called Brave New World and it is by Aldous Huxley. (Good news: he considered it a prophecy that’s very likely to be fulfilled!)

  142. 142 142 JohnE

    @vernon

    Let me get this straight. Ken makes a statement about incomes. Your intended reply was about changes in income shares. Steve asks what that has to do with anything. And you reply by saying “beats me, ask Ken why his statement has nothing to do with my reply.”

  143. 143 143 Harold

    Henri Hein: You say “There are empirical reasons to believe that each incremental improvement in health — say, a year in life-expectancy — requires an exponential increase in expenditure.” In the case of the USA, it seems that a decrease in life expectancy costs an exponential increase in spending.
    http://en.wikipedia.org/wiki/File:Life_expectancy_vs_spending_OECD.png

    Ken. Even nit-picking the words won’t get you off this one. “I said now (not always) the US is responsible for nearly 100% of medical innovations, meaning the medical innovations for the last few years has been done made almost entirely in the US”

    As the Council for American Medical Innovation says: “Unfortunately, America is losing its competitive edge to countries that have made innovation a priority. Singapore, Sweden, Luxembourg, Denmark and South Korea now outrank the U.S.”
    http://www.americanmedicalinnovation.org/policy-platform-council-american-medical-innovation

    On a more general take on innovation, I thought number of patents per head was a reasonable measure of innovation, and the Heritage Foundation’s Freedom Index a reasonable guide to freedom. Plotting the top 20 patents per head against the Freedom Index, Ken’s proposition (that only in the USA are companies capable of capitalising on innovation) should lead to a strong correlation. In fact there is a very weak correlation – R squared only 0.14. China has a low number of patents – but I think that is largely because of its very low GDP compared to the rest. If you take out China, the correlation coefficient drops to 0.09. Three countries stand out with way more patents per head – S. Korea, Japan and Switzerland. The USA is very much in the middle of the pack.

    Insurance companies avoiding high risk is a well-known effect. The person taking out insurance knows more than the insurance company about their risk. The company must take steps to prevent only those with high risk taking insurance. It is inevitable that this will lead to inefficiencies and bureaucracy. These particular inefficiencies can be removed by socialising healthcare, so everyone pays and everyone is covered. Socialised healthcare will introduce different inefficiencies.

  144. 144 144 Ken B

    A deft bit of political comedy that seems on point: an official state shamer … http://althouse.blogspot.com/2012/03/rep-kelda-helen-roys-d-madison-proposed.html

  145. 145 145 Ken B

    @vernon: Proof by novel?

    This is a serious question, not just a snappy one liner. It is surely an important question, would people actually be like that, or might they react more like most readers do? if you want to take the happenings of that imaginary world as some sort of evidence.

  146. 146 146 vernon

    @JohnE / Steve Landsburg:

    >>And you reply by saying ‘beats me, ask Ken why his statement has nothing to do with my reply.’”

    Wow, income share has “nothing” to do with income now?

    I must say, you guys’s willingness to go all-in with the hyperbole is impressive.

    The identification of “the flow of” advancing technology with income is an interesting proposition. Mr Landsburg’s rhetorical device of treating it as an uncontroversial idea, even a tautology, is a nice trick, and like all his verbal exertions is executed with admirable deftness. JohnE’s a bit cruder (most of us would be), but still doubles down without blinking.

    I guess I’ll just begin with a question. Is this flow of advancing technology distinct from what we call “the common good,” and if so, in what way? And are all enjoyments of the common good—the sunshine, the smell of flowers, the beauty of architecture, etc.—a form of income, and if not, why not?

  147. 147 147 Steve Landsburg

    vernon:

    Wow, income share has “nothing” to do with income now?

    You’ve confused absolute income with share-of-income several times in this discussion, to the point where I can no longer figure out what you’re trying to say.

    Can you give me the one-paragraph summary of your claim, taking care to maintain this and other critical distinctions?

  148. 148 148 vernon

    >>”Can you give me the one-paragraph summary of your claim, taking care to maintain this and other critical distinctions?”

    Which claim are you referring to?

  149. 149 149 JohnE

    @vernon

    “Wow, income share has “nothing” to do with income now?”

    I wasn’t making this claim.

    Steve asked you what income shares had to do with the absolute level of income. Your reply was “beats me, ask Ken.” Why Ken would know what YOU meant by that statement was beyond me. My comment was just to point out your confusion about who is responsible to clarify statements that you make. If you think share-of-income is relevant to Ken’s comment, then please tell us. That is all Steve was asking when he said “So what?”

  150. 150 150 vernon

    @JohnE:

    >>”If you think share-of-income is relevant to Ken’s comment, then please tell us.”

    OK. First, I said: “News flash: Healthcare costs have skyrocketed since a generation ago.”

    KenB responded (I have assumed, sarcastically): “And incomes have dropped precipitously since the 1890s.”

    My amended reply: “Income for the non-rich tracked the growth of the economy from the 1890s thru the mid-1970s. After which it didn’t.”

    This statement’s relevance to Ken’s statement (in 1 paragraph):

    The average American earner’s income grew with the American economy since the (first) Gilded Age. But to say it occurred simply “post-1890″ is misleading because it ended during the 1970s. In fact its curtailment a generation ago has unfortunately coincided with a sharp rise in health care costs relative to GDP. This is compounded by the fact that doctors, unreasonable as it may sound, don’t accept people’s share in The Flow of Advancing Technology as payment in lieu of money. So it’s usually harder to raise a family without health coverage than it was for our dads & moms.

  151. 151 151 Steve Landsburg

    vernon:

    Income for the non-rich tracked the growth of the economy from the 1890s thru the mid-1970s. After which it didn’t.

    Okay. This is a very different statement from your earlier claim that income for the non-rich stopped growing altogether since the mid-70s.

    Unlike the earlier one, this one might be true, but I am skeptical. Public good consumption is way up (especially, I would guess, among the less affluent) and this won’t show up in the official income statistics.

    As for this:

    …coincided with a sharp rise in health care costs relative to GDP.

    If you’re saying that health care costs today are higher than in the 1970s, I think you must be using an extremely idiosyncratic measure. What is an example of a disease for which a given amount of amelioriation costs more today than in 1975?

  152. 152 152 Steve Landsburg

    vernon:

    Income for the non-rich tracked the growth of the economy from the 1890s thru the mid-1970s. After which it didn’t.

    Okay. This is a very different statement from your earlier claim that income for the non-rich stopped growing altogether since the mid-70s.

    Unlike the earlier one, this one might be true, but I am skeptical. Public good consumption is way up (especially, I would guess, among the less affluent) and this won’t show up in the official income statistics.

    As for this:

    …coincided with a sharp rise in health care costs relative to GDP.

    If you’re saying that health care costs today are higher than in the 1970s, I think you must be using an extremely idiosyncratic measure. What is an example of a disease for which a given amount of amelioriation costs more today than in 1975?

  153. 153 153 vernon

    >>”What is an example of a disease for which a given amount of amelioriation costs more today than in 1975?”

    How about a broken arm?

  154. 154 154 Steve Landsburg

    Vernon:

    How about a broken arm?

    Could be; I have no data on this (do you?), but it seems plausible as an instance of Baumol/Bowen.

  155. 155 155 vernon

    I can’t find any data on broken arms.

    However, this is interesting: http://www.ahrq.gov/research/ria19/expendria.htm It affirms two things: (1) Between 1980 and 2004, “health care costs grew faster than the economy as a whole”; and (2) a very small number of patients pays more of the total than any other group, but their share has decreased since the late 90s (see also this table: http://www.ahrq.gov/research/ria19/expriatab1.htm ).

    If we assume that middle- and working-class patients do not comprise the top 1 percent of healthcare spenders, their share of healthcare expenditure has risen while their share of national income has fallen.

  156. 156 156 vernon

    [edit:] their share of healthcare expenditure (measured as percentage of nat’l income) has risen while their share of national income has fallen.

  157. 157 157 Steve Landsburg

    vernon:

    “health care costs grew faster than the economy as a whole”; and (2) a very small number of patients pays more of the total than any other group, but their share has decreased since the late 90s

    I believe that you (and possibly those you are quoting) are confusing costs with expenditures.

    Expenditures on laptop computers have gone up a lot in the past 20 years, but nobody would want to say they’ve gotten costlier. It’s important to distinguish these things.

  158. 158 158 vernon

    @Steve Landsburg:

    >>”I believe that you (and possibly those you are quoting)”

    By the way, I’m quoting the U.S. Department of Health and Human Services’ “AHRQ,” the Agency for Healthcare Research and Quality.

    >>”I believe that you (and possibly those you are quoting) are confusing costs with expenditures.”

    Why?

  159. 159 159 Henri Hein

    @Harold: “In the case of the USA, it seems that a decrease in life expectancy costs an exponential increase in spending.”

    There is a line between being facetious and being silly, and I am pretty sure you crossed it. As health care expenditures have increased in the US, so has results, even by the crude measure of life expectancy.

    There is a paucity of data that makes it difficult to measure health-care outcomes. The chart showing the different countries’ life expectancies does not tell us that much about their respective health-care systems, since there are many inputs to the life expectancy measure, only some of which are health-care related. What data we do have does suggest the US system outperforms the others. For instance, Japanese men living in California live longer than Japanese men living in Japan.

  160. 160 160 Harold

    Henri Hein. I didn’t raise life expectancy. The striking thing about that graph is not just that USA scores not too well on life expectancy, but that it scores so very highly in costs. For most other countries there is an approximate correlation.

    “As health care expenditures have increased in the US, so has results, even by the crude measure of life expectancy.”
    This tells us nothing about the relative costs of USA healthcare.

    “there are many inputs to the life expectancy measure, only some of which are health-care related”. And most of these USA will score very well on, such as wealth etc.

    Do you seriously believe that USA health care is not overpriced compared to other countries?

  161. 161 161 Henri Hein

    @Harold: “I didn’t raise life expectancy”

    You posted a chart with health-care expenditures vs. life expectancies. If I ignore the life expectancy axis, there is only expenditures left. That sounds like you only care about how much the US spends, not on what the results are. I’m not sure that is what you intended, but I don’t know how else to interpret your comments.

    “This tells us nothing about the relative costs of USA healthcare”

    Relative to the past, Americans spend more and they live longer. You implied the inverse.

    “And most of these USA will score very well on”

    Incorrect.

    “Do you seriously believe that USA health care is not overpriced”

    How do you measure overpriced? The USA spends more and gets more. Other countries spend less and get less.

  162. 162 162 Ken

    Harold,

    As the Council for American Medical Innovation says: “Unfortunately, America is losing its competitive edge to countries that have made innovation a priority. Singapore, Sweden, Luxembourg, Denmark and South Korea now outrank the U.S.”

    So to clarify, you didn’t link to anything that gives you know actual numbers, but a policy platform dedicated to lining their own pockets using tax payer money (larger federal dollars stuffed into their pockets), increased monopoly power (strengthening “intellectual” property laws), failed policies (more funding more PreK-12 “education” system), and a LOT of empty platitudes? Ha!

  163. 163 163 Harold

    Henri Hein. I posted the life expectancy graph in response to a comment about life expectancy. I did not raise the issue, I responded to it. The graph shows a rough correlation between spending and life expectancy, except the USA, which is way out of line. This could be due to two broad reasons- anomalous spending, or anomalous life expectancy. Whilst either is possible, the spending seems the more likely candidate to me.

    Ken: My link may be partisan, but is stronger than your link showing that nearly 100% of medical innovation is from the USA.

  164. 164 164 iceman

    On your point about adverse selection, I first thought of the fairly simple, routine medical testing my life insurer periodically requires. I also noticed that Arrow’s concern about asymmetric information focused on the opposite direction: “Because medical knowledge is so complicated, the information possessed by the physician as to the consequences and possibilities of treatment is necessarily very much greater than that of the patient.”
    [Another interesting excerpt: “Hypothetically, insurance requires for its full social benefit a maximum possible discrimination of risks.”]

    On innovation and free-riding, not sure what the best measure is but to me the larger point isn’t necessarily where a company happens to be located, but that they’re able to sell profitably to the largest economy in the world. As someone else mentioned, the big Swiss pharma companies are not supporting their research with sales to the tiny and price-controlled Swiss market.

    And I know life expectancy wasn’t ‘your’ issue, but crude comparisons on measures like these can obscure the fact that the US is more heterogeneous than most other developed countries. E.g. I’ve heard the unfavorable infant mortality comparisons are entirely due to pockets of poverty in the southern states. I’m puzzled why amid all the data I never see comparisons made between, say, Canada and just northern states (which would seem to automatically control for many other potential factors).

  165. 165 165 Harold

    Iceman: I think some would say that pockets of poverty sufficiently large to reduce the average life expectancy by that amount, given at least 50% more healthcare spending, indicates a failure somewhere in the system. If it is not healthcare costs, there is a big failure somewhere else.

  166. 166 166 Henri Hein

    @Harold: I plead guilty to mentioning life expectancy first, but I still think you are too fixated on costs while ignoring the benefits.

  167. 167 167 iceman

    @Harold: The ‘50% extra’ isn’t being spent on primary care. But certainly poverty is a social problem, and typically the subject of its own system of transfer payments…er, maybe we should call this “income insurance” (and mandate that everyone buy a policy)?

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