The Sovereign Mind

Free thought on politics and real life

Archive for the ‘society’ Category

Would You Rather Lose a Leg or a Mistress?

(Assuming you were of such a character as to take a mistress, that is.)

Adam Smith makes an interesting point:

The loss of a leg may generally be regarded as a more real calamity than the loss of a mistress. It would be a ridiculous tragedy, however, of which the catastrophe was to turn upon a loss of that kind. A misfortune of the other kind, how frivolous soever it may appear to be, has given occasion to many a fine one.

(In case it’s not clear, he is using the word “tragedy” here to mean a form of art depicting suffering, as in “Shakespearean tragedy”. I had to read it a few times before I got that, but maybe you’re smarter than me.)

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Written by Mike

January 16, 2010 at 9:31 pm

Posted in society

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Why Does Health Care Cost So Much in the US?

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Matthew Yglesias cites an NPR prodcast exploring the question: Why does an MRI cost 10 times as much in the US as it does in Japan? (Note: I haven’t listened to the podcast but the same question is explored by NPR in text form here).

This question is a variant of one that has been asked before many times: Why does health care cost so much in the US, compared to other nations? Many times the assumed answer is that the difference is because of waste and excess profits in the system. While I don’t dispute that there is some of that, there are also many other logical reasons why health care costs differ from country to country. The argument from those who propose a single-payer system, or at least that we move in that direction, are based on the implied assumption that our costs would be as low as other nations if we would just mimic their system. That is not true because there are factors that influence the price that are completely independent of the health care system itself.

The two main components of health care costs are technology and people. Let’s look at each one individually.

Technology

The CBO estimates that the adoption of new technology is the leading contributor to rising health care costs. However, rising costs isn’t the question here. The CBO also says that health care costs are rising in all nations. The question here is not the increase in costs, but why there is a difference between costs in the US and elsewhere.

There are a number of reasons for this, some of which were touched on in the NPR article above. I want to explore one of them that also applies to the pharmaceutical industry. When NPR asked US doctors and hospitals why MRI machines cost so much less in Japan than in the US (emphasis mine):

Japan sets the price they pay for MRIs super low. And so to get into the Japanese market, the manufacturers lower their prices. They charge more here in the U.S. because we will pay more. How come? Well, I called a number of American hospitals and doctors and I got basically two reactions. The first and most popular: a shrug. We could never get those prices.

So, MRI manufacturers are selling the machines in Japan at a lower price than they are selling them in the US. Why is this? Maybe it’s the same reason that drugs cost less in Canada:

They are engaging in what economists call “price discrimination”–that is, charging different prices to different buyers of the same product. Price discrimination works in the drug industry because drugs are very expensive to develop, but fairly cheap to manufacture. As long as companies can recoup their research and development costs by charging high prices in the United States, they can make a profit in Canada and elsewhere by merely covering the cost of making the pill (or tube of ointment or whatever).

To restate, developing a drug (and I imagine the same hold true of advanced medical equipment like an MRI machine) the cost to develop the product itself is high. Once you have a design that works, you can crank them out on the assembly line relatively cheaply. So, if there is a market that is only willing to pay a certain price you can still make a profit by selling to them, but only if you have another market that you can sell to for more in order to recoup the cost of R&D. In other words, if the US set price controls for MRI machines like Japan does, or if Americans were not as wealthy and could not afford the high cost of the machines, there wouldn’t be any MRI machines because manufacturers wouldn’t be able to recoup the cost of R&D and therefore they would not be profitable.

We should not expect technology to cost the same in different countries. There are many factors that play a role in the cost, and this is just one of them.

People

The second major component of health care costs is people: doctors, nurses, lab technicians, and many other high-skill professionals. Health care is inherently a labor-intensive industry, and not just any labor: high-skill labor. According to the International Average Salary Income Database, general physicians and nurses in the US make about 75% more than their Japanese counterparts. Although the numbers for more specialized physicians aren’t listed, we know that in the US they make much more than general physicians and so the gap is likely to be even larger.

So the solution to our cost problem is simple, right? As one commenter on Yglesias’ post said (I’m not sure if he or she was serious): “force nurses, doctors and teachers to work a lot longer for a lot less money.” Not so fast. First, we need to look at the reasons why health care professionals are paid so much more here. Are they just more greedy? Well, how about we compare them to similarly educated professionals in other industries. The US pays a much higher price for high-skill labor across all industries, while the price of low-skill labor is comparable to other nations. This should come as no surprise to those familiar with the high and rising income gap in the US.

So what would happen if we force doctors and nurses to accept lower wages? Fewer post-grad students would choose to go into medicine, and instead would choose other paths such as law or dentistry. That would quickly lead to shortages of medical professionals, something already being experienced by nursing staffs. I believe one of the best ways we can combat this problem is improving our education system so that we produce more highly educated graduates to compete for those jobs, but that is a different discussion. The point is that, at least with respect to this contributor to health care costs, it is not the health care system that is the problem. The labor cost is driven by factors outside of the health care system that cannot be adequately addressed by health care reform alone.

Conclusion

Again, let me reiterate that I do believe there are steps that can be taken to lower the high cost of health care. However, comparing the cost of health care in the US with the cost in other nations exaggerates the problem since it does not take into consideration factors that are beyond the scope of the health care system itself, and some of which are not necessarily bad things. We should focus on reducing the growth of health care costs, but let’s not fool ourselves into thinking we can cut it by a factor of 10, or even that we should.

(I should note that I am doing some research on the side regarding the rising cost of health care. I was going to do a post, or a series of posts, in the future. I wanted to response to Matthew’s post, however, so my arguments in this post are a work in progress. Critique, as always, is welcome.)

Written by Mike

November 23, 2009 at 11:23 pm

Old News: LDS Church Doesn’t Hate Gays

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Salt Lake City Temple

The LDS (Mormon) Church recently shocked almost everyone (except for Mormons) when they announced that they would support a Salt Lake City ordinance protecting housing and employment rights for homosexuals. After last year’s battle over Proposition 8 in California, some in the media are calling this a “huge change” and indicative of the church wanting to get Mitt Romney elected.

Let me be clear: As a member of the Church of Jesus Christ of Latter-day Saints, I support my church’s position on the matter. However, I wouldn’t necessarily be disappointed if this did really represent a change. But the truth is that this is not a change from any previous policy, and the fact that so many think it is indicates the success of the smear campaign that has been waged on the church since its involvement in Proposition 8.

At the time that the church was involved in Proposition 8, it issued a statement which included this:

The Church’s opposition to same-sex marriage neither constitutes nor condones any kind of hostility towards homosexual men and women. Protecting marriage between a man and a woman does not affect Church members’ Christian obligations of love, kindness and humanity toward all people.

In 1999, the late President of the church, Gordon B. Hinckley, said this to all the members of the church during its bi-yearly conference:

We believe that defending this sacred institution [of marriage] by working to preserve traditional marriage lies clearly within our religious and constitutional prerogatives. Indeed, we are compelled by our doctrine to speak out. Nevertheless, and I emphasize this, I wish to say that our opposition to attempts to legalize same-sex marriage should never be interpreted as justification for hatred, intolerance, or abuse of those who profess homosexual tendencies, either individually or as a group. As I said from this pulpit one year ago, our hearts reach out to those who refer to themselves as gays and lesbians.

Any opposition to gay rights expressed by the church has always been targeted specifically at gay marriage, not other protections. This has not changed. What has changed is that apparently some, swayed in some measure by the attempts to paint Mormons as the poster-children for bigotry, assumed these statements were just lip service. But they now are finding out that the church actually meant what it said. This comes as no surprise to most Mormons who were paying attention to the counsel of their church leaders.

I have to give credit to Andrew Sullivan. Although he has not been kind to the LDS Church in the past, he respects its (perceived changed) position:

They have made a distinction – and it is an admirable, intellectually honest distinction – between respecting the equal rights of other citizens in core civil respects, while insisting – with total justification – on the integrity of one’s own religious doctrines, and on a religious institution’s right to discriminate in any way with respect to its own rites and traditions….

And what I have long observed among Mormons – unlike some other denominations – is also an American decency that tends to win out in the end. I’ve never met a nasty Mormon. They put many Christians to shame in their practice of their faith and the civility and sincerity with which they live their lives. And this decision in Salt Lake City – not an easy or inevitable one – to make a clear distinction between civil marriage and other civil protections is one worthy of respect.

Gee thanks, Andrew.

Rare Disease Day 2009

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Saturday, February 28th, is Rare Disease Day 2009. Some might wonder why we need a day to recognize rare diseases. I would have wondered the same thing myself about two years ago. But as a parent of a child with Eosinophilic Esophagitis, I now understand that patients with rare diseases face a unique challenge. For more common diseases, research and investment dollars are much easier to come by. This is for good reason, because each dollar carries more bang for the buck because of the economy of scale. If you could help save 1000 kids for the same amount of money as it would take to save 1, which would you choose?

Last year American Express hosted a competition, of sorts, between charitable initiatives. The idea was to have people present ideas that needed funding, and then narrow it down to 25, based partially on public voting. The project named “EE – Save Sick Children”, aimed to raise money for APFED, finished second in the overall vote count. However, American Express decided to exclude the project from the final 25 projects. Am I angry about that? No. I don’t really blame them. I don’t know that the project was really more deserving than other projects. Still, this illustrates the difficulty those with rare diseases have in getting the research attention needed to help them.

It’s important that our society does not forget about those of us who have the double-challenge of not only having a chronic disease, but one that is not well known, understood, or researched. That is why I’m grateful that organizations like The National Organization for Rare Disorders have fought for people like me long before I knew I would care. Please watch this video and take a moment this Saturday to think how you can help those who are sick for no fault of their own, especially those struggling not only with their disease, but fighting a lonely battle:

Thanks to The Moderate Voice for bring this day to my attention.

Cross posted to DaddEE

Written by Mike

February 25, 2009 at 10:32 pm

Old People Are Stupid

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… or so our society thinks.

When John McCain was running for president, he was criticized for not knowing how to use a computer. Al Gore was recently caught on tape telling a group of youth, “There are some things about our world that you know that older people don’t know.” And then there is this cartoon. The political viewpoints expressed here are not important to me for this subject, but what is important is that clearly old people are considered second class citizens in our society.

But isn’t that just the way society goes? One generation passes the baton to the next, and only the younger generation has the ability to look at problems with fresh perspectives and solve our problems. One might argue that this view is not intended to demean older people, only to reflect a shifting of responsibility from one generation to another. But before we jump to the conclusion that young people are always the answer to our problems, let us examine this question: Are young people always right?

In many cases, they are. One can point to the example of the equal rights movement in the United States, which is the favorite example of those who assume young people are right. However, there are also counter examples: Socialism and Nazism were movements led primarily by the younger generation. There is also the hippie movement, which arguably was a bad thing, or at the very least produced some very negative consequences.

Let’s contrast the view our society with the Hindu tradition of respect for the elderly. I don’t advocate we adopt the Hindu customs, but neither should we be so arrogant that we refuse to learn from other cultures. It may be just a dream, but there is definitely something attractive to me about the idea that our goal in life, when we are young, is to learn as much as we can about the world, and then, when we are old, we can impart that knowledge to the younger generation. There are obvious benefits to that situation, as opposed to the reverse. While of course I don’t think that is a plausible goal, it’s certainly worth thinking about.

We learned in kindergarten that there’s a reason we have ears and eyes in twos, but only one mouth. Maybe it’s not a coincidence that older people tend to lose their hearing and sight. Perhaps we should remember that, including me.

Starting… now…

Written by Mike

February 9, 2009 at 10:24 pm

Posted in society

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The Housing Crisis: Rethinking Rent vs. Buy

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sad-shack

A few years ago, when my wife and I were looking to buy our first home, we had a conversation with a seller’s realtor that went something like this:

Realtor: “Well you know, when your considering how much you can afford for your home, you should take into account that your mortgage interest will be tax deductible.”

Me: “Yeah, that’s true. But this home still seems like it might be out of our price range.”

Realtor: “Really? Well, that tax deduction will save you a couple hundred dollars on a house like this.”

Me: “Actually, I’ve looked at the numbers, and that assumes that we are currently itemizing. Since we’re not, a lot of that tax deduction will just go to getting us over the line where taking the itemized deduction is better than taking the standard deduction on our tax returns. In our case, I think it will only save us about a hundred dollars.”

Realtor: “Oh… well, you should really talk to a financial advisor about that… so, let’s take a look at the basement…”

During our home buying experience we were bombarded by anecdotes about how much money people make from their home. People would tell me that they sold their home for $50,000 more after 5 years, but completely ignored the fact that they paid almost that much in mortgage interest and property tax over that same amount of time.

We did end up buying a house (not from that realtor), but I didn’t think of it as an investment primarily. What we wanted was difficult to find in a rental, and we wanted our own space. We bought in a location that was not part of the bubble for the most part, we got a fixed rate loan, and made sure we could afford the payments. I can’t say we were completely responsible: we did get a zero down payment loan.

My personal story aside, let’s re-think the rent vs. buy assumptions:

Most of the angst regarding the current housing crisis is related to this common theme:

Why should the little guy suffer because banks and real-estate investors made bad decisions?

That seems like a reasonable question. If the real estate market tanks, it makes sense that the investors and banks should lose money. They are the ones that had the money to invest and were making the decisions. But I have bad news: If you own a home, you are a real-estate investor, and a pretty badly diversified and leveraged one at that. And you’re not only invested in the real estate market, but also in all of the financial system that decides how it is managed. So that’s why the little guy (or at least the little real-estate investor) suffers because of the housing crisis.

So how did that happen? You wouldn’t take out a loan at 7% to borrow $200,000 to invest in the stock market, would you? That would be very risky because even if the stock market drops 1%, you are now short $2,000, or more considering your interest is still added in good times and bad. Of course you wouldn’t do that unless you have money to burn, but that’s what you are doing when you buy a home. Some thought the real-estate market was a safe investment (it’s not as volatile as a stock), but that was foolish thinking. If it can go up fast (which it did in many markets), it can come down fast. That is a basic principle of investment: The more reward, the more risk.

Not only that, but home ownership also makes you less mobile, making it more difficult to find new jobs in new places during economic trouble.

This lesson comes too late for the 10% of home owners that find themselves upside down in their loans, and there’s no doubt that mortgage brokers who sold them on false hopes have their (big) share of blame as well. But what about the future? What should be done to prevent this from happening again?

I think the answer is simple:

The concept of home ownership should no longer be part of the American dream.

Apparently I’m not alone. Even Barney Frank, who has been one of the biggest proponent of the home ownership for all (otherwise known as the “everyone should be a highly-leveraged and badly diversified real-estate investor” policy), is now saying that perhaps home ownership for all was not the right policy to pursue:

One of the problems that we got into was we did way too much home ownership and way too little rental housing. And [we need to start] getting the federal government back in the business of rental housing. And passing legislation to restrict bad subprime loans will be high on our priority list.

I’m not sure I agree with his knee-jerk reaction that the government needs to provide said rental housing, but I agree that “we did way too much home ownership” as both a government and a society.

For years people have been saying that renting is “throwing your money away” and promoting home ownership as the basic status symbol of economic prosperity. Who has been saying this? Well, the same Barney Frank for one. His own website touts the benefits of the “Expanding American Homeownership Act of 2007”, some of which include lower down payments and more mortgages to higher risk borrowers.

But politics aside, I hope we will learn this lesson from this crisis: The American Dream cannot be purchased with a credit card. The American Dream is not about what you own; it is not about short-cuts or get rich quick schemes; it’s about what you do; it is about freedom: freedom to work, be smart, innovate, struggle, and succeed.

Written by Mike

February 6, 2009 at 9:19 pm

The iPhone Is So 2008

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As Christmas approaches, I was recently caught up in a wave of irrational consumerism. I craved a fancy smartphone to replace my PDA and pre-paid cell-phone (yes, I’m a cheapskate). Of course, the iPhone, being the coolest of the cool, and the status symbol of the day, was at the top of my list. But after seeing the price tag on both the device and the plan that you have to buy with it, I started to look for cheaper options. I did find some smartphones that are much cheaper and meet my needs, but the cell phone plans that come with them still seemed pricey. I didn’t really need a “data plan” for extra $30 a month since 95% of my time I’m within range of a WiFi signal that I already pay for, and most of the remaining time I’m driving, when I probably shouldn’t be checking eBay anyway. And I don’t even need 500 minutes when 95% of my calls are to my wife, which would be unlimited under the family plan anyway. But alas, there aren’t many options for cheapskates like me.

I pondered on the close-mindedness of cell phone companies to fail to provide a cheaper alternative to their expensive services. I wonder if they know that there are people like me who spent hours browsing their selection online, only to decide not to purchase. Or maybe I’m just weirder more unique than I think…

Anyway, I decided to do something about it. If the cell phone companies weren’t going to provide a cheaper alternative, then I would. Presenting the “iTape N3G” (N3G = “Not 3G”). The philosophy of the iTape is simple: the main idea of a smartphone is that you really shouldn’t need to carry around both your PDA and your cellphone separately. Seriously, if God intended you to need to carry two separate devices, he would have created us with two hands…

So for those who just want a PDA and a cell-phone combined, but don’t need all of the bells and whistles of an iPhone or some other fancy smartphone, then the iTape is for you. You can find a role of it at any hardware store for about $2.99. Some assembly is required, but this makes it very customizable. The standard version just requires putting your PDA and your cell-phone back-to-back, and then wrapping the iTape around a few times. Voila! Instant smartphone!

Since the end result is *virtually indistinguishable from the iPhone, both in features and in looks, you can look just as cool as those iPhone users for about $397 less, and you can still have your PDA and phone in the same device. Cool huh? Especially as everyone and their dog is losing their jobs, “MacGyver meets Steve Jobs” is sure to be the trend of 2009.

*virtually indistinguishable should be interpreted as “somewhat similar if you squint your eyes from a distance”.

Written by Mike

December 9, 2008 at 9:24 pm

Posted in society

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