Economics

Everybody wants growth but..

“Everyone wants growth but no one wants change.”

Paul Romer

Because you are not worth it.

by reestheskin on 21/08/2020

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I read about the QALY (quality adjusted life year) during my intercalated degree in 1980-81, when we were exposed to some health economics. It was considered new and interesting at the time. It took me about 10 minutes to sense that it was nonsense, even if I couldn’t quite put my feelings into words that quickly1. The goal was fine, but the methodology was metaphysical in nature, rather than grounded in the world that you could touch with your fingers. At least not if you look at the world through the prism of the natural sciences.

Economists have a disturbing habit of confusing how the world works with their own (strange) ideas of rationality. If only the world could be said to work in a way that was amenable to their methods. When physicists wanted to estimate the speed of light they recognised that they had to create some theory and some technology in order to obtain the correct answer. Embarrassingly — at least from the economists point of view — they had to do some experiments and see if their answer made sense when applied to new observations in the external world. Until they had done this, they stayed shtum.

Not so, for our economists. Their solution is effectively to agree some conventions, and then define what the speed of light should be. Whether their theory explains the way the world really works is neither here-nor-there. So QUALYs became a make-believe that suited both economists and the technocrats in government. The former, because the need for QUALYs became a job creation scheme for health economists (just as evidence based medicine (EBM) became a lifeline for all those epidemiologists who belatedly realised that much of their subject was methodologically deeply flawed). The technocratic governments liked what the economists brought them because it exiled judgement (and hence blame), allowing human suffering to be traded in arbitrage markets from which they could metaphorically wash their hands — ‘just following the science’, ‘just following the science’ (ring any bells?). Many politicians don’t want to do politics, but they do want to stay in power. As do economists2, who appear pathologically obsessed with rank and status3. The Economist had a nice line earlier this year germane to my doubts:

But unlike poets, economists prefer to quantify their analogies—to measure whether thou art 15% or 20% more lovely and more temperate.

But if you think that artificial models that cannot predict the world are still useful — useful in the way the philosophers trolley problems are — then the quote below should indeed make you sit up and stare.

If we’re willing to pay $150,000 for each quality-adjusted extra year of life (a commonly used estimate), then we ought to view a 10% increase in spending per capita as a good investment if it extended average life expectancy by 2.5 days. That number may give readers pause — hence the importance of clarifying our spending priorities and focusing on care that produces real value for patients. With such a focus, we could feel more confident that higher health care spending was worth it.

Do We Spend Too Much on Health Care? | NEJM

 

  1. A nice critical (and perhaps dated) introduction from a once QUALY-enthusiast who returned from the dark side is Erik Nord’s, Cost-Value analysis in Health Care: Making Sense out of QALYs, CUP, 1999. The rearguard action is still ongoing (advance proceeds one funeral at a time …(Max Planck)).
  2. Here is a revealing quote from Alan Maynard, a health economist: “… unless we tackle the doctors, health reforms will fail to deliver … processes of health care are dominated by clinicians, who merely represent their own vested interests, we must therefore strengthen the role of health managers and economists, who would speak for society at large.” Quoted in Julian Tudor-Hart, Lancet 2004. Well good luck with that!
  3. A strange quirk of economists is that they appear obsessed with proxies for their own self-doubts. US economists cannot help but focus on why you have to graduate from the top five schools with a PhD in order to obtain a faculty position at the same school, and how critical math scores are to being academically successful(‘I could have been a physicist — honest!’) It is quite a contrast with the lives of some of the greatest natural scientists. Natural science is much more open. 

(Image of NotGeld (emergency money) at top of page from here)

No Mercy / No Malice / Killer whales

The killer whales (cash cows) of high-tuition prestige universities are international students. We claim we let them in for diversity. This is bullshit. International students are the least diverse cohort on earth. They are all rich kids who pay full tuition, get jobs at multinational corporations, and often return to the family business. At NYU, they constitute 27% of our student body and likely half our cash flow, as they are ineligible for financial aid. We have a pandemic coupled with an administration committed to the demonization of foreigners, including severely limiting the prospects of highly skilled grad students. This means the whales may just not show up this fall, leaving us with otters and penguins — an enormous fiscal hole.

Post Corona: Higher Ed, Part Deux | No Mercy / No Malice

Straight talking from Scott Galloway of Stern, NYU.

The secret of how to get rich

Angus Deaton: Many people have said that there are two ways of getting rich: One way is by making things, and the other is by taking things. And one of the ways of taking things is to make the government give you special favors. Those special favors don’t create anything, but they can make you rich, at the expense of everybody else.

What’s Wrong With America?: “The Despair Is Smoldering in Society” – DER SPIEGEL

Graph of the day

by reestheskin on 26/06/2020

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Another telling figure from Thomas Piketty’s Capital and Ideology. The stiking thing about much of this book is how predicable and widespread so many social trends are.

 

Graph of the day.

by reestheskin on 08/06/2020

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From Capital and Ideology, by Thomas Piketty. Discuss…

Online link

On the Nanny State

by reestheskin on 26/05/2020

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We may be coming to realise that the people who complain about the nanny state are the people who had nannies.

Sarah Neville is the FT reviewing The Nanny State Made Me: A Story of Britain and How to Save It, by Stuart Maconie

What future?

by reestheskin on 16/03/2020

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But most of Case and Deaton’s ire focuses on the health care industry, which not only underperforms but is also wrecking the US economy. We [USA] spend twice per capita what France spends on health care, but our life expectancy is four years shorter, our rates of maternal and infant death are almost twice as high, and, unlike the French, we leave 30 million people uninsured. The amount Americans spend unnecessarily on health care weighs more heavily on our economy, Case and Deaton write, than the Versailles treaty reparations did on Germany’s in the 1920s. If, decades ago, we’d built a health system like Switzerland’s, which costs 30 percent less per capita than ours does, we’d now have an extra trillion dollars a year to spend, for example, on replacing the pipes in the nearly four thousand US counties where lead levels in drinking water exceed those of Flint, Michigan, and on rebuilding America’s bridges railroads, and highways—now so rundown that FedEx replaces delivery van tires twice as often as it did twenty years ago.

In the US, health insurance accounts for 60 percent of the cost of hiring a low-wage worker. Many employers opt instead to hire contract workers with no benefits, or illegal immigrants with no rights at all.

Helen Epstein in the NYRB. Review of ‘Deaths of Despair and the Future of Capitalism’ by Anne Case and Angus Deaton. 

We need more STEM (STEAM etc)

by reestheskin on 08/01/2020

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Perhaps, perhaps not. But when and where is even more important.

Hailed as a maths prodigy at school, Shields accepted a junior position at Merrill Lynch after studying engineering, economics and management at Oxford University because the trading room floor offered him a thrilling, dynamic environment. He was not alone: of 120 engineers in his year group at university, Shields added, only five went into engineering.

I think we should be much more cautious in attempting to direct young people’s choices beyond providing them with an education. We should feel proud of their independence of mind, remembering that supply side factors will likely win out over central planning. It is the supply side that we need to deal with, not least Putts Law. The same applies to medicine.

This personal story is worth a read for other lessons, too.

‘The men who plundered Europe’: bankers on trial for siphoning €60bn | Business | The Guardian

Mark Blyth on Goldman

Goldman [Sachs) are smart: they can rip your grandmother’s face off and make her feel good about it.

The Crash of 2008: 10 years on

Indulging our future(s)

by reestheskin on 25/11/2019

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Carbon offsetting is shaping up to be the greatest mis-selling scandal since the Dominican friar Johann Tetzel sold pardons to redeem the dead. Martin Luther attacked this practice in 1517, in his 95 theses.

Five hundred years later, those of us who seek planetary redemption should reduce our carbon footprint in ways that we control — rather than relying on middlemen who may or may not plant trees. The road to hell, I seem to remember, was paved with good intentions.

Well, the Catholic church usually got there first.

Carbon offset gold rush is distracting us from climate change | Financial Times

What every (good) fly half knows

by reestheskin on 24/10/2019

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“If I can predict what you are going to think of pretty much any problem, it is likely that you will be wrong on stuff. [speaking of certain other economists]….they are very predictable

Lunch with the FT: Esther Duflo | Financial Times

When capitalisms collide

by reestheskin on 22/10/2019

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The future of capitalism is out of the hands of those who spend their time thinking about it.

Not too dissimilar to medicine, either: discuss…..

When capitalisms collide

 Size matters

Pace my earlier post, The Economist writes about the increase in student numbers at many UK universities (and falls at others).

There is lots of variation, but in general elite institutions have been the biggest growers. Some, including Oxford and Cambridge, have chosen not to expand. But most prestigious universities have sucked up students, grateful for their fees, which subsidise research. The intake of British students at members of the Russell Group of older, research-focused universities has grown by 16% since restrictions were lifted. Some have ballooned. Bristol’s intake has shot up by 62%, Exeter’s by 61% and Newcastle’s by 43%.

Increases in intake do not automatically mean a worsening of what is on offer, but the difference between Oxbridge and the Russell group shout out at you: some are more equal than others.

The winners and losers of England’s great university free-for-all – Searching for students

Direct URL for this post.

Why Is Medicine So Expensive?

Not often I spot typos in the New York Review of Books, but here is one that matters. The article dealt with the price of prescription drugs, and there are of course plenty of villains to go around: crony capitalists; advertising spending being larger than research spending —because it works!; and sloppy thinking with regard to IPR and patents. The article on paper read:

In late October, however, just before the congressional elections, Azar declared to reporters that high prices constituted “the greatest possible barrier to patent access.” Democratic strategists gave prescription drug prices high priority in congressional campaigns. Yet leaders in both parties understood that curbing prices would be no easy task. The pharmaceutical industry, which has long deployed one of the most powerful lobbies in Washington, was increasing its representation in the capital.

Yes, should have read patient not patent, although no doubt pharma might not have agreed.

Why Is Medicine So Expensive? | by Daniel J. Kevles | The New York Review of Books

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The abusive debt

by reestheskin on 09/01/2019

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A beginner’s guide to student loans in the public accounts | Wonkhe | Analysis 

Bluntly, the main motive for replacing the teaching grant by loans is an accounting trick. There is an apparent decline in public spending, but at the cost of distorting higher education policy … Thus the changes look like a dodgy [Private] Finance Initiative” – Barr, 2012

Well written piece on the loan scandal in Wonkhe by Nicholas Barr. In the language of the laymen, the government is fiddling the books, and dumping the costs on future taxpayers. It fiddles because it wants to mislead, for gain.

He goes on:

higher education finance has elements of a bubble. If I were a Vice-Chancellor, this aspect would give me sleepless nights.

Guarded language — fair enough — but it is not just a financial bubble. Let us just see how this year pans out.

The academy and asymmetric information.

by reestheskin on 06/12/2018

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Paul Romer on the Unrivaled Joy of Scholarship (Ep. 55)

Great interview with Paul Romer over at Conversations with Tyler. Romer won the Nobel prize for economics this year, and has had a wonderfully varied career (academic; founder of a software company that produces computer assisted learning material (Aplia); and time at the World bank. There are some earlier statements by him about education  on my web page.

What caught my eye in this interview was:

“We should always remember that the education business is one of the ones that has the biggest problems with asymmetric information. A young person who pays somebody to educate them is very dependent on the decisions that the educator makes about “Study this, go in this direction.”

……

“I think that the problem in higher ed is that the institutional incentives don’t provide the kind of training that would maximize the opportunities for the students or, for that matter, maximize outcomes for the nation.”

Indeed:  in many ways, the situation is even worse than in medicine.

Money matters

by reestheskin on 31/10/2018

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This article and data on funding streams in higher ed is well worth exploring. It adds a necessary counterpoint to any consideration of what has happened to HE in the UK over recent decades. And, I see the time span maps closely to my own career as a Professor. I still struggle with the ‘why’ question. Some of the graphs are scary.

Now I never knew that

by reestheskin on 10/10/2018

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In 1903, Elizabeth Magie patented the Landlord’s Game, a property-based board game created with two sets of rules: a monopolist set in which the winner took all and an antimonopolist set in which all wealth was shared across society. It is revealing that only the former set of rules took off, giving birth to the bestselling game Monopoly. Radical Markets sketches a vision of how society might look if it adopted Magie’s second set of rules. Unlike playing with Monopoly money, the stakes in this societal game could scarcely be higher, and the importance of this book could scarcely be greater.”–Andrew G. Haldane, chief economist, Bank of England

Radical Markets: Uprooting Capitalism and Democracy for a Just Society: Amazon.co.uk: Eric A. Posner, E. Glen Weyl: 9780691177502: Books