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Archive for May, 2010

private finance of health care

Sunday, May 30th, 2010

A new report from the Toronto-Dominion Bank calls for radical reforms to curb the explosive growth of expenditure on health care, but rejects the notion of forcing residents of Ontario (Canada) to pay privately for a larger portion of the health services they consume.

[T]here is just one major reform prospect that is glaring by its omission [from our 10 proposals to restrain the growth of health care costs]. That is much more extensive use of private financing in health care, either on a general basis or as more of a side door entry, through delisting of fairly common treatments. This is not to be confused with use of private sector resources to deliver health care. We do call for that in the name of efficiency. ….

For sure more private financing and delistings would save money for the public purse. But if all they did was shift the cost from the public sector to the private sector then nothing would be accomplished. And they could have negative side effects. There are several reasons why we have not recommended this bolder course.

First, there is little compelling evidence internationally that private financing saves total costs as opposed to just divesting them from the public sector. Second, there are risks to quality if health care providers shift resources away from the public portion of the system toward the potentially more lucrative private parts. Third, there is so much public and political resistance to private financing that the controversy could throw off track any potential for other changes that would improve the efficiency of the system. ….

Toronto-Dominion Bank, “Charting a Path to Sustainable Health Care in Ontario”, TD Economics Special Reports, 27 May 2010, p. 7.

This superb 34-page document ought to be required reading for anyone who worries about the fiscal implications of rising health care costs. Residents of provinces other than Ontario – indeed, residents of countries other than Canada – should read it, since rising health care costs are a problem everywhere.

Tags: Canada
Posted in Health Economics | 1 Comment »

compensation of medical doctors

Friday, May 28th, 2010

The government of Ontario (Canada), in an effort to curb expenditure on healthcare, plans to put more of the province’s doctors on salary.

The majority of Ontario’s approximately 24,000 doctors are paid on a fee-for-service basis, meaning they bill the provincial health plan for each service they provide to a patient. But in recent years, some hospitals, particularly those in smaller, rural communities, have switched to a salary system for doctors in their emergency departments. As well, the 1,900 doctors who work in clinics as part of family health teams … are also paid a salary.

[Health Minister Deb] Matthews said she would like to see that compensation model expanded to include more doctors. She was responding to a report released this week by Toronto-Dominion Bank, which made eight proposals to wring more efficiencies out of the health-care system, including moving doctors away from the fee-for-service compensation model.

In a system where doctors are paid for each service, the report says, there is no incentive for them to measure the cost-effectiveness of their treatment decisions against the potential benefits.

Karen Howlett, “Ontario aims to put more physicians on salary”, The Globe and Mail (Toronto), 28 May 2010.

The TD Economics Report cited by Howlett was released yesterday (27 May), and can be downloaded here.

Tags: Canada
Posted in Health Economics | Comments Off

a call for austerity

Friday, May 28th, 2010

FT columnist Martin Wolf is not pleased with the OECD’s call for tightened fiscal and monetary policy.

The UK should tighten fiscal and monetary policy now, in the depths of a slump. That, in essence, is what the Organisation for Economic Co-operation and Development calls for in its latest Economic Outlook. I wonder what John Maynard Keynes would have written in response. It would have been savage, I imagine.

The OECD argues: “A weak fiscal position and the risk of significant increases in bond yields make further fiscal consolidation essential. The fragile state of the economy should be weighed against the need to maintain credibility when deciding the initial pace of consolidation, but a concrete and far-reaching consolidation plan needs to be announced upfront.” Furthermore, monetary tightening should begin no later than the fourth quarter of this year, with rates rising to 3.5 per cent by the end of 2011.

Let us translate this proposal into ordinary language: “If you are unwilling to starve yourself when desperately ill, nobody will believe you would adopt a sensible diet when well.” But might it not make sense to get better first?

Martin Wolf, “Spare Britain the policy hair shirt”, Financial Times, 28 May 2010.

The OECD’s May 2010 Economic Outlook can be downloaded here. Paul Krugman describes it as “a terrifying document”.

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the world’s most livable cities

Thursday, May 27th, 2010

[Austria's capital] recently beat out Zurich on the Mercer Human Resource Consulting list for the city with the best quality of life. This didn’t surprise the Viennese who are wont to say that Zurich is bigger than Vienna’s largest cemetery, but twice as boring. ….

[Mercer] seems to have a penchant for German-speaking towns, with Düsseldorf, Munich and Frankfurt joining Vienna and Zurich in its list of the top 10.

Mercer includes three English speaking cities in its top 10, Vancouver, Auckland and Sydney, with Geneva the only Francophone town.

…. The Economist Intelligence Unit picked Vancouver as its most livable city, with Vienna as No. 2. But the Economist clearly equates livability with speaking English. Vienna and Helsinki are the only two exceptions in the Economist’s top 10, the rest being Melbourne, Toronto, Calgary, Sydney, Perth, Adelaide and Auckland.

…. [N]either list has any cities in Asia, Africa, South America or the United States in the top 10. And no city in Britain made the grade either.

H.D.S. Greenway, “The Best Place to Live?”, International Herald Tribune, 27 May 2010.

Posted in Urban and Regional Economics | Comments Off

the best paragraph that I have read this morning

Wednesday, May 26th, 2010

Oxford economist Paul Collier has written a superb column on the ethics of environmentalism that contains this wonderful passage:

The valid moral insight in environmentalism is that natural assets are special: we did not create them, yet we are depleting them. But the romantic wing of the movement then wrongly infers that the exploitation of nature intrinsically infringes the rights of the future. Economists should be bringing the insight that natural assets matter not because of their intrinsic purity, but because they are valuable. Our obligation to the future is not to preserve purity but to pass on equivalent value for the natural assets we deplete. If, by converting natural assets into more productive assets, a poor society can escape poverty, then it should do so.

Paul Collier, “Towards a new ethics of nature”, Financial Times, 26 May 2010.

Access to the full column requires subscription.

Professor Collier is author of The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It (Oxford University Press, 2007) and was Director of the Development Research group at the World Bank from April 1998 to April 2003. Bill Easterly wrote a critical review of Collier’s book. For positive reviews, see Martin Wolf and Niall Ferguson . I expressed my own (very positive) opinion of the book long ago in a TdJ:

This is an amazing book that is a very good read–no footnotes, no bibliography, no charts, no tables–even though it was written by an academic economist. Everyone–economist or not–will learn something from it.

“Why poor countries should not emulate Cuba”, Thought du Jour, 31 August 2007.

Posted in Environment | Comments Off

the paternity of maize

Tuesday, May 25th, 2010

Nine millennia ago, Native Americans domesticated maize, a grain known as ‘corn’ in the USA. Thanks to the research of botanists led by John Doebley of the University of Wisconsin, we now know that all maize is derived from an unlikely parent: a Mexican grass called teosinte that resembles rice more than it resembles maize.

Teosinte and Maize

The most impressive aspect of the maize story is what it tells us about the capabilities of agriculturalists 9,000 years ago. These people were living in small groups and shifting their settlements seasonally. Yet they were able to transform a grass with many inconvenient, unwanted features into a high-yielding, easily harvested food crop. The domestication process must have occurred in many stages over a considerable length of time as many different, independent characteristics of the plant were modified.

Sean B. Carroll, “Remarkable Creatures: Tracking the Ancestry of Corn Back 9,000 Years”, New York Times, 25 May 2010.

Native Americans successfully domesticated not only maize, but other food crops as well, including potatoes, tomatoes, pepper, squash, cacao, manioc, and several varieties of bean. We owe a debt to these early agriculturists who laboured in what must have been difficult conditions.

Sean B. Carroll (1960-) is professor of genetics, medical genetics, and molecular biology at the University of Wisconsin–Madsion.

Posted in History | Comments Off

lifetime tenure

Tuesday, May 25th, 2010

Michael Mulgrew … took over last year as head of New York City’s United Federation of Teachers …. Over breakfast in March, we talked about a movement spreading across the country to hold public-school teachers accountable by compensating, promoting or even removing them according to the results they produce in class, as measured in part by student test scores. Mulgrew’s 165-page union contract takes the opposite approach. It not only specifies everything that teachers will do and will not do during a six-hour-57 ½-minute workday but also requires that teachers be paid based on how long they have been on the job. Once they’ve been teaching for three years and judged satisfactory in a process that invariably judges all but a few of them satisfactory, they are ensured lifetime tenure.

Next to Mulgrew was his press aide, Richard Riley. “Suppose you decide that Riley is lazy or incompetent,” I asked Mulgrew. “Should you be able to fire him?”

“He’s not a teacher,” Mulgrew responded. “And I need to be able to pick my own person for a job like that.” Then he grinned, adding: “I know where you’re going, but you don’t understand. Teachers are just different.”

Steven Brill, “The Teachers’ Unions’ Last Stand”, New York Times Sunday Magazine, 23 May 2010.

Posted in Education | Comments Off

Greek debt once again

Sunday, May 23rd, 2010

GMU economist Tyler Cowen provides a clear summary of the fiscal woes of Greece.

[I]t’s a moot point whether Greece is a poor country masquerading as a wealthy country or vice versa. The announced bailout requires that an ailing Greek economy borrow and repay even greater sums of money. If the old illusion was that Greece was a wealthy country, the new illusion is that Greece will, in short order, become wealthy enough to pay back ever-growing sums of debt.

Since the Greek economy accounts for only about 2 percent of the euro zone gross domestic product, in theory it could be made a permanent recipient of largess. Yet that’s hardly an appealing solution, both because Portugal, Spain and others might want the same deal and because Europe doesn’t have much social solidarity across national boundaries.

Tyler Cowen, “Economic View: How will Greece get off the dole?”, New York Times, 23 May 2010.

So, what is an appealing solution? The author does not say, but elsewhere he recommends that Greece abandon the euro and default on its debt:

Greece with a default and a floating exchange rate could do OK (though not spectacularly well). The real question is how to get from here to there.

Tyler Cowen, “How will Greece get off the dole?”, Marginal Revolution, 23 May 2010.

It is a pity these two sentences did not make it into the column.

Tags: exchange rates
Posted in Finance | Comments Off

advances in synthetic biology

Friday, May 21st, 2010

Craig Venter, the US genomics pioneer, announced on Thursday that scientists at his laboratories … had succeeded in their 15-year project to make the world’s first “synthetic cells” – bacteria called Mycoplasma mycoides.

“We have passed through a critical psychological barrier,” Dr Venter told the FT. “It has changed my own thinking, both scientifically and philosophically, about life and how it works.” ….

“Venter is creaking open the most profound door in humanity’s history, potentially peeking into its destiny,” said Julian Savulescu, ethics professor at Oxford University. ….

Experts warn of the risks as well as the benefits of synthetic biology. “We need new standards of safety evaluation for this kind of radical research and protections from military or terrorist misuse and abuse,” said Prof Savulescu.

Clive Cookson, “Scientists create a living organism”, Financial Times, 21 May 2010.

M mycoides is a simple microbe with no immediate application. Researchers are now moving on to more useful targets, such as the design of synthetic algae to capture carbon dioxide from the air and produce biofuels.

Dr Venter claims to have created “the first self-replicating species we’ve had on the planet whose parent is a computer”. Not everyone is convinced

Dr. Venter’s assertion that he has created a “synthetic cell” has alarmed people who think that means he has created a new life form or an artificial cell. “Of course that’s not right — its ancestor is a biological life form,” said Dr. [Gerald] Joyce [a biologist at the Scripps Research Institute in La Jolla, California].

Dr. Venter copied the DNA from one species of bacteria and inserted it into another. The second bacteria made all the proteins and organelles in the so-called “synthetic cell,” by following the specifications implicit in the structure of the inserted DNA.

“My worry is that some people are going to draw the conclusion that they have created a new life form,” said Jim Collins, a bioengineer at Boston University. “What they have created is an organism with a synthesized natural genome. But it doesn’t represent the creation of life from scratch or the creation of a new life form,” he said.

Nicholas Wade, “Researchers Say They Created a ‘Synthetic Cell’”, New York Times, 21 May 2010.

Science Magazine has published the findings of Dr Venter and his co-researchers. The full text of their article can be downloaded here.

Posted in Environment | Comments Off

Ireland’s boom and bust

Thursday, May 20th, 2010

The problems of the eurozone are not limited to Greece, Spain and Portugal. Ireland’s problems are equally troublesome.

LSE economist Peter Boone and MIT economist Simon Johnson argue that Ireland’s impressive growth over past decades was a mirage, driven by easy credit and by “aggressive attempts to help major corporations in the United States reduce their tax bills”. This mirage contained the seeds of its own destruction.

Ireland’s politicians, rather than facing up to their problems, are making things ever worse. Simply put, the Irish miracle was a mirage driven by clever use of tax-haven rules and a huge credit boom that permitted real estate prices and construction to grow quickly before declining ever more rapidly. The biggest banks grew to have assets twice the size of official G.D.P. when they essentially failed in 2008. The government has now made a fateful choice: rather than make creditors pay some part of the losses, it is taking the bank debt onto the national balance sheet, effectively ballooning its already large sovereign debt. Irish taxpayers are set to be left with the risk of very large payments to make on someone else’s real estate deals gone bad.

There is no simple escape, but if the government hopes to avoid a sovereign default, the one overriding priority should be to stop bailing out the banks. Instead, the government should wind down existing banks in a “bad bank,” while moving their deposit base and profitable businesses into new, well-capitalized banks that can function without a taxpayer burden. This will be messy, but it is far better than a sovereign default.

Peter Boone and Simon Johnson, “Irish Miracle — or Mirage?”, Economix, 20 May 2010.

Simon Johnson is a former chief economist at the International Monetary Fund and co-author of 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (Pantheon, 2010).