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Archive for the ‘Healthcare’ Category

I’m pretty sceptical about our ability to understand something by way of empirical testing in things like medicine, nutrition and economics because it is extremely difficult to isolate the variable you are measuring. And then you’re often forced to engage in some heroic extrapolation to apply it to the problem you’re trying to solve. In fact, I think that much macroeconomics, at least when it is based on this process, is bunk.

So this bring me to an article in the NYT about organic food

One of the things that I mistrust about the organic food market is that it is exclusively based on intuition and branding:

The modern organic movement in the United States was started by a handful of counterculture farmers looking to grow food using methods that they believed were better for the land and produced healthier food. It was a culture built on purity and trust that emphasized the relationship between the farmer and the customer.

You haven’t gotten rid of this kind of risk:

Although the rules governing organic food require health inspections and pest-management plans, organic certification technically has nothing to do with food safety.

And…

Organics has grown from an $11 billion business in the United States in 2001 to one that now generates more than $20 billion in sales, so the stakes for farmers, processors and certifiers can be high. But the agency overseeing the certifying process has long been considered underfunded and understaffed. Critics have called the system dysfunctional.

All this sidesteps the main issue I have with organic food, which is this:

What reason do I have to believe it’s any different than non-organic food? Because it’s “natural”? What on earth makes me think that “natural” is somehow good? We “naturally” don’t have vaccines or antibiotics or life expectancies north of 30ish.

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Arnold Kling refers us to a post by Mark Perry, which refers to a chart showing the various costs of goods in real terms in 1950 and today.

Marks’ takeaway:

To what do we owe this significant 80% reduction in the time cost of household goods over time? It’s all part of the miracle of the market economy.

I’d like to get a bit more specific, because I think it’s a fault that economists seldom do (Kling is often a notable exception).

What’s really happening is that an incentive system is in place that rewards producers that can manufacture these products more cheaply than those who made them in the 1950s. They do so because of improved technology, improved skill (collectively, innovation) and, these days, lower wages paid to workers overseas.

One of the commenters complains that there is an offsetting effect from more expensive health care and education.

I’m willing to bet that health care costs have increased because health care has improved drastically since the 50s, which sounds fine to me.

I think that education is more expensive because it suffers from Baumol’s cost disease; basically, it takes just as many teachers to educate a student as it did two thousand years ago.  And because more students need education to participate actively in the economy, the total cost to the economy of education increases on a per person basis at something like the rate of economic growth.

My point is that with health care, we’re paying more and getting more and, with education, we need to pay more to continue increasing total education so that we can continue to innovate.

In any case, the result is that we’re healthier, we have more stuff and its getting harder to contribute productively to society.

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Private Healthcare

I heard something truly horrifying on a podcast I listen to each week. It’s about how the US healthcare system works.

Apparently much of the health care system is the US is subsidized. These group payers (government, some private insurers) pricing that individuals can’t match. In any normal business that I can think of, these kinds of deals are multually beneficial because since the supplier locks in a larger volume of its service it is willing to do so at a lower margin.

Somehow, though, these negotiated deals go too far (who forces this? Government?) and hospitals lose money on the subsidized patients. So what do they do? Supercharge the private patients’ bills to make up the margin.

My god, what a terrible system – talk about exploitation.

When you take your car into the garage you’re always suspicious about being ripped off. You need a hell of a lot of knowledge to verify for yourself whether you actually need all those hoses and insulating rings or whatever replaced. But if you really feel like the procedure isn’t worth the money, you can substitute other means of transportation for that car – buy a new one, rent one, borrow one, take the train, walk.

With healthcare, you have only one choice. Pony up.

People are at such a disadvantage with a lot of health procedures that they can be exploited very very easily. And exploited they are, it appears, to the benefit of those insured by large companies and the government.

Obviously the money has to come from somewhere and these people should just ally themselves with one of those insurance companies and I completely agree that free resources are abused. I just think it’s really ugly that the system relies on a subset of society (who may not have the means and are as a result dealt crippling financial blows) subsidizing the rest of it.

This is a classic example of a system that tries to get the efficiency of markets and the equality of subsidy and utterly fails at both. Disgusting.

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